Marketing products in overseas markets presents both opportunities and threats for international marketing.
It is risky and expensive to produce and sell products in many countries around the world, especially for small-size businesses and medium-size with limited resources.
However, international marketing can help firms to grow to become a large-size organization. These firms, which have grown too large for their national markets, can take the advantage of freer international trade, better transportation links and improved communication.
Growth potential of new markets in other countries
Firstly, businesses use international marketing to enter into foreign markets when the market in their home country has reached maturity, saturation, or might even be in the decline stage of economic cycle.
That is why other developing countries can offer huge marketing opportunities to increased sales and sales revenue.
Secondly, globalization made it possible to increase international marketing activities. Mainly, it reduced barriers to entry into overseas markets thanks to faster transportation, less international trade restrictions and more convenient communication.
That is why businesses can benefit from cost reductions, and ultimately increasing profits.
Opportunities of international marketing
There are many benefits businesses can experience through international marketing. Main opportunities of entry into international markets include:
1. Increased customer base. By selling overseas, the business can enlarge the size of a market as the firm gains overseas buyers. This will lead to greater sales revenue and possibly higher market share for the business in the future. New foreign markets provide an extra source of customers and can be financially lucrative. These new markets which are not yet saturated with products as the domestic market may have done giving businesses the chance of achieving higher sales.
International trade opens up new markets giving domestic companies greater opportunity for selling goods and providing services in other countries. These new markets which are not yet saturated with products as the domestic market may have done, give businesses the chance of achieving higher sales and benefiting from economies of scale to improve profitability.
2. Benefits of economies of scale. By operating on a larger scale internationally, a business is likely to benefit from cost saving known as economies of scale. These cost-reducing benefits of larger scale operations come from lowering the average cost of production. Hence, it enables growing firms to gain higher profit margins. Ultimately, all the reasons above for international marketing can help to generate more sales and profits for the business. Additionally, after costs are reduced, the business can reduce prices thereby giving it a price advantage over rival businesses.
3. Increased brand recognition. Branding is integral to any international marketing strategy. Using standardized marketing strategy around the world, such as using identical product, pricing, packaging and promotion will lead to greater international recognition of a brand. Then, higher brand recognition will lead to increase brand loyalty which will result in increased sales.
4. Spread risks. Risk is spread by operating in different international markets. It happens as the business is being less exposed to only one country where it might face problems caused by economic recession, downturns in demand or changes in tastes and fashion. The more countries a firm operates in, the less vulnerable it is to changes in the business climate of any single country. Therefore, international marketing cal lower risk by reducing dependency on home markets and conditions in the home country.
5. Extended Product Life Cycle. When home markets become saturated, or are already in decline, and the growth slows down, it is very difficult to increase sales anymore because everybody already owns the product. Then, products enter into saturation stage of The Product Life Cycle. International marketing now becomes an opportunity to find new markets for existing products to rebound sales. Selling products to another country with less competition can increase sales rapidly. By marketing the product abroad, the firm can expand its life cycle to generate higher sales revenues.
Example 1: Mobile phone companies tend to sell older models of their phones in less developed countries.
6. Greater choice of products for customers. Freer international trade enables people to have a greater choice of products at more competitive prices. These overseas products would otherwise be unavailable because domestic producers cannot supply such products cost-effectively.
Example 2: Tropical fruits such as pineapples or mangoes can only grow in very specific geographical areas and cannot grow in cold countries.
Threats of international marketing
Despite there being lucrative rewards for a business entering an overseas market, there is also the potential for many problems as market conditions will be different to those in the domestic market. These issues surrounding international marketing can pose threats to businesses.
1. Higher competition. International marketing of products also increases the degree of competition in the marketplace. As more and more companies expand internationally, there will be increased competition base in the overseas markets. This will make attracting customers and selling products more challenging for the firm. Skilled workforce and advanced technology may be required to successfully compete with other businesses, especially multinational companies.
2. Cultural issues. Cultural differences include symbolism, local taste and preferences, religion, ethics, behaviors, business etiquette, language differences and translations, and cultural exports. Many factors of incompatibility of a foreign product with a foreign country’s culture may impact acceptability of the product in a foreign country. Additionally, the Promotional Mix, choice of product name, the way in which business is conducted, units of measurement, packaging such as colors and patterns used, also need to be considered to be culturally appropriate.
3. Social and demographic issues. Different countries have different socioeconomic and demographic conditions which businesses need to consider their international marketing. When exporting to less developed countries, the product and price will be different from that sold in more prosperous nations. Some countries such as Japan or China, expatriates account for less than 1% of the population while in highly multicultural societies such as Malaysia or USA marketing caters for a much wider audience of expats. With varied prosperity and income in different parts of the world, international marketers should target different customers with different products.
Example 3: Japan as one of the world’s oldest populations, so marketers need to take a different approach to pricing, product, place and promotion when targeting Japanese customers.
4. Legal issues. Different legal systems and legal restrictions on the sale of products can be a problem when entering into international markets. International marketers need to take legal factors into consideration when devising their marketing campaigns. Differences in legal systems will mainly include consumer protection laws, enforcement of commercial contracts, code of conduct on advertising and packaging information, etc. Additionally, Governments can set up international trade barriers to protect their domestic industries, there might be bureaucratic delays, or limits on currency exchange and currency transfers. Businesses also need to adhere to copyright laws, trademark and patent legislation that cover brand names, slogans, inventions, works of art and literature.
Example 4: The Advertising Standards Authority (ASA) requires that all advertisements must be ‘decent, truthful and accurate’.
5. Political issues. Businesses that market their products overseas need to consider political stability of different political systems abroad. Countries with stable political climate tend to be less risky and more receptive to foreign businesses selling products in their territory. So, attitude to foreign investment and profits as well as nationalism need to be taken into consideration. In some countries, there are very few political barriers, but in some other countries there are huge political hurdles to deal with. Activities of pressure groups and lobbying groups concerned about the impacts of business activity on the society can also create problems for marketers hoping to gain a foothold in foreign markets.
Example 5: Disney faced many from animal activist groups after it opened Disneyland in 2005.
Example 6: People for the Ethical Treatment of Animals (PETA), the world’s largest animal rights group, has been causing many problems for multinational fast food companies operating in overseas markets.
6. Economic issues. Economic growth. Transportation costs, exchange rate fluctuations, interest rates and communication costs are further Basic economic issues that need to be considered when marketing products overseas such as economic instability, economic trends, economic growth, level of inflation, exchange rate movements, interest rates, balance of payment, as well as market prospects and market size.
7. Distribution issues. When operating in many locations around the world, the business may face distribution issues such as problems with transportation caused by geographical factors such as size of markets and distance, communication issues, delays in receiving payments or communication issues with foreign agents. Other problems related to product distribution include poor infrastructure, legal barriers to trade such as TAXes, quotas or embargoes. All these issues prevent or increase the cost of entering that country.
International marketing is now a great opportunity not to remain based in just one country, but to expand sales. Members of free trade blocks around the world have now many chances to successfully sell products abroad, but need to be aware of increased competition from other countries.
Also, there are huge opportunities for international marketing in developing countries thanks to their rapid development. And businesses need to be prepared to sell their goods and services over there.
