Page 515 - Encyclopedia of Business and Finance

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Marketing

Promotion. The last variable in the marketing mix is pro- ment. Since cultural values regarding particular products
motion. Various promotional tools are used to communi- will vary considerably from one country to another
cate messages about products, ideas, or services from firms around the world, managers must take into account these
to their customers. The promotional tools available to differences in the planning process.
managers are advertising, personal selling, sales promo- Just as with domestic markets, managers must estab-
tion, and public relations. For the promotional program lish their international marketing objectives and policies
to be effective, managers use a blend of the four promo- before going overseas. For example, target countries will
tional tools that best reaches potential customers. This need to be identified and evaluated in terms of their
blending of promotional tools is sometimes referred to as potential sales and profits. After selecting a market and
the promotional mix. The goal of this promotional mix is establishing marketing objectives, the mode of entry into
to communicate to potential customers the features and the market must be determined. There are three major
benefits of goods, ideas, or services.
modes of entry into international markets: exporting,
joint venture, and direct investment.
INTERNATIONAL MARKETING
International business has been practiced for thousands of Exporting. Exporting is the simplest way to enter an
years. In modern times, advances in technology have international market. With exporting, firms enter interna-
improved transportation and communication methods; as tional markets by selling products internationally through
a result, more and more firms have set up shop at various the use of middlemen. This use of these middlemen is
locations around the globe. A natural component of inter- sometimes called indirect exporting.
national business is international marketing. International
marketing occurs when firms plan and conduct transac- Joint Venture. The second way to enter an international
tions across international borders in order to satisfy the market is by using the joint-venture approach. A joint
objectives of both consumers and the firm.
venture takes place when firms join forces with companies
International marketing is simply a strategy used by from the international market to produce or market a
firms to improve both market share and profits. While product. Joint ventures differ from direct investment in
firm managers may try to employ the same basic market-
that an association is formed between firms and businesses
ing strategies used in the domestic market when promot-
in the international market.
ing products in international locations, those strategies The four types of joint venture are licensing, contract
may not be appropriate or effective. Firm managers must
manufacturing, management contracting, and joint own-
adapt their strategies to fit the unique characteristics of
ership. Under licensing, firms allow other businesses in
each international market. Unique environmental factors
the international market to produce products under an
that need to be explored by firm managers before going
global include trade systems, economic conditions, agreement called a license. The licensee has the right to
political-legal systems, and cultural conditions. use the manufacturing process, trademark, patent, trade
secret, or other items of value for a fee or royalty. Firms
The first factor to consider in the international mar-
ketplace is each country’s trading system. All countries also use contract manufacturing, which arranges for the
have their own trade system regulations and restrictions. manufacture of products to enter international markets.
Common trade system regulations and restrictions In the third type of joint venture, management contract-
include tariffs, quotas, embargoes, exchange controls, and ing, the firms supply the capital to the local international
nontariff trade barriers. The second factor to review is the firm in exchange for the management know-how.
economic environment. Two economic factors reflect how The last category of joint venture is joint ownership.
attractive a particular market is in a selected country: Firms join with local international investors to establish a
industrial structure and income distribution. Industrial local business. Both groups share joint ownership and
structure refers to how well developed a country’s infra- control of the newly established business.
structure is, while income distribution refers to how
income is distributed among its citizens. Direct Investment. Direct investment is the last mode
Political-legal environment is the third factor to used by firms to enter international markets. With direct
investigate. For example, the individual and cultural atti- investment, a firm enters the market by establishing its
tudes regarding purchasing products from foreign coun- own base in international locations. Direct investment is
tries, political stability, monetary regulations, and advantageous because labor and raw materials may be
government bureaucracy all influence marketing practices cheaper in some countries. Firms can also improve their
and opportunities. Finally, the last factor to be considered images in international markets because of the employ-
before entering a global market is the cultural environ- ment opportunities they create.

492 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION