International Marketing

Information communication technology has turned the whole globe into a village. This is because you can buy or sell anything from any part of the globe. Involvement in international marketing can also be a strategy for both individuals and corporate organizations to expand their businesses. It is in the light of this that you will be exposed to some fundamental knowledge of international marketing. International marketing may appear, at first glance, to be an impossibly complex subject involving all functional areas of management. In fact, there is surprisingly little extra knowledge or techniques required. International marketing differs very little from domestic marketing in that the objective of the marketer is the same to understand customer and market.needs and strive to meet them with the capabilities which the organization has at its disposal. Internationally, the organization must strive to understand its international marketing environment and then be able to adapt familiar techniques to possibly unfamiliar circumstances. In this article you will learn various international environmental variables, documentations in international marketing/trade or specific management

Meaning and reasons for International marketing

Meaning of international marketing

International marketing may be defined as the business activities geared towards penetrating and development of foreign market. It may also be defined as carrying out business activities and function beyond the boundary of a particular country. It is simply identified as marketing performed in foreign land.

Reasons for international marketing

There are several reasons why companies go international, among which are the following:

Profit Motives: The fundamental objective of any business is profit maximization. When a company has fully gained ground in the local market, it may intend to try and make more profit abroad. Although this may not be easy at first because of business limitation threats or barriers.

Local Market Competition: If the competition experienced at home is so intense, a company may determine to try another market internationally.

Foreign Opportunities: A company having conducted a thorough research of consumer needs abroad may venture to export to the market.

Inflation: Some companies may forcefully move abroad due to the economic shambles in the local area. In the late 80s and 90s in Nigeria, inflation reached its peak, and many companies folded up as a result of high cost of raw materials,

Concept of Product Life Cycle: In some geographical areas, some products might be heading towards their decline stage but if introduced into another country, it might just be its starting stage, for example, while the cathode-ray television has reached its decline stage in Japan, Europe and America it is still very much in use in Africa.

Foreign Exchange Earning: To establish a strong economic base, some government may encourage export rather than import In Nigeria, for example importation of some goods is totally banned. This act encourages local production for export so as to correct the economic deficit by caring more foreign exchange.

Technical Know-How: Some countries are experts in the production and servicing of some industrial goods. In order to gain more advantage of this technology, some companies move closer to the centre where they could achieve the technical ability.

Economies of Mass Production and Distribution: Due to expansion in production in the local market, the production in the local market cannot absorb the production and this might force the company to move to another country to create market of the goods produced, so that it may fully utilize her potential and measure its market shares.

• List any four reasons why you think organization may want to trade across border

• Profit Motives: Local Market Competition; Foreign Opportunities and Inflation

International marketing environment

Geographic Influence on Marketing

Climate as expressed in attitude, humidity and extreme temperature determine functions and uses of product and equipment Products that perform well in temperate region may deteriorate rapidly or require adaptation in tropical region. Extreme topographic and climatic variation force producers to apply unique distribution system and marketing mix, which add to cost of production and price.

Elements of culture

Culture is man-made environment including the sum total of knowledge, beliefs, art, morals, laws, language etc of a society. In order for a producer to breakthrough his marketing programme must fit into the culture of the consumers. Culture tempers, moulds and dictates the lifestyle of consumers. Elements of culture include the following:-

a. Material culture: as expressed in technology and economics, simple repair, preventive maintenance and a general understanding of how things work constitute a high level of technology. Economic culture is the way people use their capabilities in producing goods and services, their distribution, consumption, means of exchange and resulting income. Generally, material culture determines demand level, quality of product, types of product demanded, functional features and means of production and distribution of goods/services,

(b) Social institutions: Social organizations, educational and political structures show ways of interaction among people, how they organize their activities and pass acceptable behaviour to succeeding generation. The institutions dictate the roles and status of members in the society; so also are government, men, the family, social classes, age groups and group behaviour. High literacy level allows use of modern marketing communication in the society.

c. People’s Habits, their Outlook on Life, the Products they buy and how they buy them: It dictates types of products food, clothing and behaviour and promotional messages that are acceptable.

d. Soft culture: This relates to societal norms, values, opinions, belief, sentiments all of which influence people behaviour and affect their consumption patterns in the society.

Political Environment includes

Political parties. Political manifestoes of competing parties impair or support foreign operators. Therefore, marketers need to possess knowledge of philosophies of the major parties and their associated interest groups and factions.

Nationalism: Economic nationalism – an intense feeling of national pride and unity may take the form of anti-foreign company domination. The country may in this regard promote locally made goods, restrict imports, and impose high tariff and other trade barriers. The more nationalistic a country becomes the more it tends to protect itself against foreign firm intrusion.

Strategies for less Political Risk

• Joint ventures, expanding the investment base by including several investors and banks of the host company

• Marketing and distribution control outside the country so that the country can have access to the world market.

Licensing of production and marketing technology to nationals of the host country

Planned domestication by the producer

Political payoffs or bribing of top politicians to intervene on behalf of the company. This protects them from excess taxes, expulsion, etc.

Problems of marketing in international markets

In spite of the huge potentials of international marketing, it is still beset with the following problems:

Self-Reference Criterion (SRC): As explained earlier, it is the unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions. It is regarded as the primary obstacle to successful international operations. Unless international marketers accurately recognize and isolate this SRC, they are likely to commit costly errors in decision making.

Language: In many countries, there are differences in both the spoken and body languages and this restricts marketing across borders. Some expressions simply do not translate, others are sometimes imprecisely translated. For instance, Starcomms telecom uses the slogan- ‘WE SPEAK YOUR LANGUAGE’ can be interpreted as ‘the way Nigerian culture interact using traditional drums and musical instruments to communicate’ This is peculiar to Nigerian life and culture. Furthermore, basic body language lacks global acceptance, for example, in some parts of India shaking the head from left to right means ‘yes’, whereas in.most countries, it means ‘no’.

Culture: creates a quagmire of marketing problems. There is diversity across countries in such areas as religion, value, socialization, cating, greeting, role of women and lifestyles. For example, in some parts of Northern Nigeria, culture restricts the place of women to the home and prevents them from taking employment in Saudi Arabia and few Islamic countries, banks are prohibited from charging interest on loans and advances, they are rather allowed profit participation scheme.

Distance: This is another entical barrier to the conduct of smooth international marketing Unlike local marketing that have geographical proximity, exporting, and/or importing from the Far East, such as China, Japan, and Korea are both physically and psychologically distant. The length of time required to move products from these countries increases the risk international marketers are exposed to thereby reducing the attractiveness of International marketing.

Unstable Governments: High indebtedness, high inflation, corruption, and high unemployment in several countries have resulted in unstable governments that expose foreign firms to the risks of confiscations, expropriation, nationalization/domestication, and limits on profit repatriation. For instance, Burma and Egypt have nationalized International Trading Companies to rid themselves of foreign influence, Fidel Castro of Cuba confiscated U.S. assets in his country.

Foreign-Exchange Problems: Foreign exchange risks arise from the need to operate in more than onc currency. Many firms demand that payment is made in an acceptable foreign currency. However, they are exposed to the vagary of changing value of a foreign currency relative to the home or reported currency.

Foreign-Government Entry Requirements and Bureaucracy: Governments place many regulations on foreign firms. For example, they might require joint ventures with the majority share going to the domestic partner, a high number of nationals to be hired, transfer of technology know-how, limits on profit repatriation, and local content requirement. For instance, Nigerian government has been promoting local contents in products and services supplied in Nigeria. A minimum of 10% local content has been set. Five (5) flour mill companies found to have violated this requirement were shut down in the past. They were accused of not fortifying their products with a minimum of 10% cassava.

Tariffs and Other Trade Barriers: Governments often impose high tariffs, set quotas and impose, embargo to reduce or eliminate importation of certain products that can be produced locally and protect their industries. They also resort to invisible trade barriers such as slowing down important approvals and inspections, and requiring costly product adjustments

Technological Pirating: A company locating its plant abroad might be concerned about foreign managers learning how to make its product and breaking away to compete openly or clandestinely. This is the case when foreign firms engage in joint ventures, franchising or licensing in the local markets. This has happened in such diverse areas as machinery, electronics, chemicals, and pharmaceuticals.

High Cost of Product and Communication Adaptation: A company going abroad must

study each foreign market carefully and become sensitive to its economics, laws, politics, and culture, and adapt its products and communications to each market’s tastes.

Importation of goods and services

Imports are goods and services brought into the country from foreign countries. A country usually imports the things which it cannot produce legally or goods and services which are not available in sufficient quantities within the country. For instance, Nigeria may import motor cars from Japan or import the services of Pakistani doctors because of the shortage of doctors locally. Nigeria imports a lot of her goods and services from Europe. Most of these imports are machines and equipment which are used for economic development. Food items are also imported.

The importation of goods and services into Nigeria is controlled by many government departments viz, Federal Ministry of Trade and Industry, Federal Ministry of Commerce, Customs and Excise Department, Federal Ministry of Finance and the Central Bank of Nigeria. There is at present no registration of importers. This means that any individual, firm or company can freely import goods and services into the country. Before devaluation of Nigeria currency in 1988 and consequently the introduction of the foreign exchange auction market (SFEM) goods were imported into Nigeria on Open General License (OGL) or under specific license. Imports are usually valued C.LF (Cost Insurance Freight) meaning their value at the port of entry which includes not only the cost of the goods but also the charges for insuring them and transporting them to the importing country (but not including custom duties).

Restrictions on importation

There are some restrictions placed on importers by the government. Examples of these restrictions are import licensing and controlled allocation of imports.

Import licensing and controlled allocation of imports: Foreign exchange budgets are used by most developing countries to restrict imports for various economic and non-economic reasons. In some countries, import licenses are required for all imports, but in other countries import licenses may be freely obtained if the imports are financed by the importers’ own foreign exchange, obtained outside the official foreign exchange market.

However, if import licensing is considered necessary say, for balance of payments support, industrial protection, health, security, sanitary or social reasons, then the approach used is important in ensuring the operating efficiency of the import licensing system.

A quota is a direct restriction on the total quantity of a good or service that may be imported during a specified period. Quotas restrict total supply and therefore increase the domestic price of the good or service on which they are imposed. Quotas generally specify that an exporting country’s share of a domestic market may not exceed certain limit. An important distinction between quotas and tariffs is that quotas do not increase costs to foreign producers, tariff do. In short, a tariff will reduce the profits of foreign exporters of a good or services. Quotas, however, raise price but not costs of production. Because quotas imposed a limit on quantity, any profits it creates in other countries would not induce the entry of new firms. This ordinarily, eliminates profits in perfect competition.

Reasons for restriction on imports

The reasons are:

• The need to protect the infant industries (through the protectionist policy).

• In order to increase people’s patronage on home made goods.

• To prevent dumping.

• In order to provide foreign exchange for the nation.

• To strengthen the home country’s exchange rate.

• For job protection.

• In order to strengthen the nation’s security.

Import procedures and documentation

The steps that importers take in order to smoothen their transition consist the following procedures. The importer obtains information about the desired product from many sources of information, such as the Internet, Chambers of Commerce and Ministry of Trade, Commercial Attaché for foreign desk of bank, shipping and forwarding agencies.

Letter of Enquiry: Following the information obtained earlier, the importer sends a letter of enquiry to the exporter in another country.

Import Quotation: In response to the letter of enquiry from the importer, the exporter sends his quotations which consists his cost of production, including expenses on freight, packaging, insurance, handling, forwarding charges, custom duties/tariff etc.

Import License: The importer obtains license from the government or agencies concerned, particularly with the type of product intended to be imported. Additional information obtained from Customs and Excise Department. Order is placed by the importer after obtaining the license from the exporter.

Insurance: Insurance cover is obtained for the items from the producer to the buyers destination. Import and insurance documents used in the transaction include:

Exfactory: This implies that where the products are shipped from the exporter to the importers, the product bears the insurance cost from the factory of the exporter to the destination of the buyer.

Free on Board (FOB): The exporter pays the expenses on transport and handling from the factory until the cargo is on-board the ship/aircraft. The importer bears the remaning risk.

Cost Insurance & Freight: The exporter pays all expenses from the factory to the time that cargo is delivered at the specified destinations, the exporter incurs all these three expenses.

Cost % Freight (C&F): The exporter pays the freight while the importer settles the insurance cost.

Payment Terms: The exporter demands assurance from the importer that payment will be made within 30days on agreed date after delivery. In view of this, the exporters collect letter of credit from the importer’s bank.

Shipment: A consignment is passed to a carrier, who gives a bill of lading to the exporter. An exporter in turn passes the commercial invoice and consignment notes through the carrier to the importer.

Custom Clearance: In order to delivery of the goods at the entry point, the importer is expected to supply the following documents to the Customs and Excise Department:

• Suppliers Original Invoice.

• Certificate of Original

• Bill of Lading

• Custom’s declaration forms used to determine duties payable

• Treasury Duty Free License

• Packing list/Specification

• Insurance Policy Certificate.

• Freight Account

List any five reasons why countries restrict importation

• The need to protect the infant industries (through the protectionist policy).

• In order to increase people’s patronage on home made goods.

• To prevent dumping,

• In order to provide foreign exchange for the nation.

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