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International marketing – the global marketplace (The global market place,…
International marketing – the global marketplace
The global market place
TNC's
AKA MNCs
Def -
a firm that has the power to coordinate and
control operations in more than one country, even if it does not own them
Global firm
Def -
a firm that, by operating in more than one country, gains R&D, production, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors and sees the world as one market
Recognises the wider implications of the global context beyond a business’s international operations
Even organisations that only operate in their own
domestic markets are impacted by globalisation
Globalisation
Def -
greater permeability and interdependence across
national boundaries and is an economic, political and cultural phenomenon
While operating in a global marketplace offers
opportunities, there are also risks involved
Possible economic and government instability
Defferent legislative restrictions
Trade barriers
Diverse cultural preferences and practices
When considering whether to operate globally, an organisation goes through a decision process that is similar to that of the marketing process as when it identifies its marketing requirements
Analyse
The global marketing environments
Its own strengths and weaknesses
Evaluate the opportunities and threats facing iy
Taking account of the macro-environmental factors
Triggers for international expansion
Triggers that may prompt organisations to expand across
national boundaries Jobber and EllisChadwick (2013)
Saturated domestic markets
Where there are limited opportunities in an organisation’s domestic market
EG - Universities have expanded internationally owing to saturated domestic markets for students
Small domestic markets
Larger markets are necessary for survival where the scope of domestic markets is too small
EG - technology industries that involve large investments into research and development need large markets to cover their costs
Low growth domestic markets
Economic recession in an organisation’s domestic market can motivate it to seek growing markets overseas
Customer drivers
An organisation might extend its operations globally as a result of expectations by customers for the organisation to have a global presence or to serve customers who have themselves expanded globally
Competitive forces
Global expansion by an organisation’s competitors might provoke it to follow suit or to compete against global organisations encroaching on an organisation’s domestic market
Cost factors
To try to reduce its costs by taking advantage of lower labour, energy or raw material costs overseas or benefiting from economies of scale by serving a larger market
Portfolio balance
Operating in a variety of markets allows temporarily unfavourable conditions in one country to be offset by more favourable ones in others
The macro environment
Broadly STEEPLE however there are more specific factors
Trading systems
Individual governments and trading blocs may try to
Protect domestic companies
Control trade
Raise revenues through a variety of means
Types of trading systems
Imposing charges (traffis or duties) in foreign companies
Setting quotas on goods that can be imported or placing controls
on currency exchange
Regulations that place restrictions or requirements on foreign companies
Other trading bodies or groups may try to encourage trade across borders
EG theWTO
Negotiates trade agreements and settles disputes among its member states with the primary purpose of opening trade for the benefit of all and free trade zones, such as the EU, NAFTA and UNASUR
Socio cultural considerations
Can be easier for an organisation to operate, at least initially, in countries that are socially and culturally similar to its domestic market and also close geographically before expanding further afield
Understanding of a country’s language, history and religion and social conventions
Technological considerations
The level of technological development of a country can affect the viability of operating in it
The efficiency of coordinating its operations and its potential as a market for technology-enabled goods
Economic considerations
Organisations need to take account of a range of economic considerations in prospective foreign markets
Economic development
Income distribution
Employment level
Exchange rate differences and stability
Transport and communication infrastructure
Political and legal considerations
Some countries are more encouraging to international trade than others
Countries also vary in their political stability and level of regulation, which can affect their attractiveness to companies considering trading in them
Countries naturally seek to protect their own economic interests
EG - putting restrictions on exports enabling countries to
retain growing levels of manufacturing supply chain inside its borders
Ethical considerations
In a globally connected world, news spreads fast and revelations of any ethical issues arising from an organisation’s operations in less developed countries can be damaging to its reputation and business
While organisations may seek to minimise costs by operating in countries with lower costs, they also need to consider the potential risk of ethical issues that could arise
Subcontracting child labour
Poor working conditions
Pollutions
Less regulated safety conditions
The micro environment
In international marketing, organisations need to consider the micro environment and a particular market’s attractiveness in relation to the organisation’s capabilities
Factors in both an international market and an organisation that need to be taken into account
Market attractiveness includes assessment of
The market’s size and growth rate
Growth rate is particularly important for predicting future demand
Competition
The strength and volatility of competition
Cost of serving the market
Principal costs include distribution and control, which increase with distance, but other costs that may need to be considered are labour and marketing expenditure
Profit potential
Characteristics of the market may limit the potential
for profit
Market access
Existing links between suppliers, distributors and
customers may inhibit access to a market
The organisation’s capabilities include
Skills
Whether the organisation already has or can buy in the necessary
skills to market abroad
Resources
Whether the organisation has the necessary resources to
service the market to compete in it
Product adaptation
Whether the offering can be adapted to the needs of the market if required - either because of local preferences or regulations
Competitive advantage
Whether the organisation has a competitive advantage in the market
Advantages and disadvantages of globalisation for stakeholders in the micro environment
The organisation
+ve Potential for greater profitability
-ve Greater risk
Consumers
+ve Potential to meet needs
+ve Lower prices
-ve Erosion of own culture
-ve Seperation of product
Marketing intermediaries
+ve Opportunities for work
-ve Regulation by MNC
Suppliers
+ve Opportunities for orders
-ve Regulation by MNC
Competitors
+ve Some consumers will value individuality and authenticity
-ve Increased competition from MNCs
Publics
+ve Convergence of culture
-ve Erosion of national culture
Domestic markets
Marketing research and marketing intelligence should be gathered to understand customers and competitors
These can be more challenging in foreign markets owing to differences in language, literacy, culture, internet access and data reliability