In the face of globalization and an increasingly interconnected world, many companies attempt to expand their sales into foreign markets. International expansion provides new and potentially more profitable marketplaces. Moreover, it helps increase the company’s competitiveness. In addition, it facilitates access to new product ideas, manufacturing innovations and the latest technology.

International marketing combines multiple disciplines, but is mainly focused on marketing goods and services across geographical boundaries, of entering foreign markets, or sustaining marketing and sales efforts within foreign countries and of coordinating marketing activities in multiple countries and regions.

Each practitioner faces a hierarchy: global, international, regional, local and intriguing interplay between them. International marketing is one of the most problematic areas: striving for global, regional and local relevance and balance as well as economies of scale and brand.

Segmentation is particularly difficult: are customers to be segmented on a country-by-country basis, or are they more appropriately grouped across geographic boundaries based on their common needs and wants?

The nature and methods of international marketing will also vary greatly depending on whether the company is addressing industrial or consumer products or services.

Often international marketing moves by degrees to become global marketing, by tracking the space of international expansion of the overall company and its activities: this can begin with small scale exporting and develop into full overseas acquisitions. Indeed, the task of the marketer relative to international expansion has become even more complex, because as the level and scale of overseas expansion grows, the marketing becomes increasingly dependent upon a network of agents, alliances, collaborations, suppliers, sometimes joint venture partners, sometimes full acquisitions.

Once the company’s international strategy and goals are formulated, the process of international marketing planning begins. As always, a good starting point is to use dedicated market research to understand the geographical target. This is primarily a measure of market attractiveness: growth, size, GNP and general economic situation, strategic location, accessibility, experience in similar markets, social, legal, language and cultural understanding, risks of entering such as political volatility, friendliness of government (national or pan-regional) to business, business risk and competitive and currency risks.

The next stage is the evaluation of the costs of entry into these markets: investment, control, risk and return. Then the whole range of marketing planning begins in each country, with the appropriate level of marketing mix selected for each marketplace. Key decisions relate to adapting the right mix for the right country, which are:

Product – can it be used in standard form or does it need to be customized? Can they be standardized for international markets or do they need to be adapted to each geographical market?

Distribution – what level of coverage and density, type of channel for the specific country and the distribution logistics?

Prices – how are these to be determined for the local market and in what currency?

Promotion – what is the most appropriate media channel and type of direct promotion in the given culture?

It is also important for the marketing team to have a culturally diverse group with experience in international marketing rather than taking a team that have been successful in one geography and taking it to another.

Once the company has chosen foreign target markets the issue arises as to the best way to enter those markets. Exporting is the most common mode for initial entry into international market. It can be organized in various ways and depends on characteristics of the host market and the types of available intermediaries. With an export entry mode the company’s products are manufactured in the domestic market or the third country and then transferred to the host country either directly or indirectly.

Indirect exporting is when the manufacturing firm does not take direct care of exporting activities. Indirect exporting means working through independent middlemen such as agents and dealers. Little investment can be needed in case of indirect exporting. In fact, the company is not really engaging in global marketing, because its products are carried abroad by others. Such an approach of indirect exporting is most likely appropriate for a company which has limited international expansion objectives. And it may also be adopted by a company with minimal resources to devote to international expansion, which wants to enter international market gradually, testing them out before committing major resources and effort to developing an export organization. There can be some mistakes but they should not be too costly. But it is important for the company to recognize that the use of agents or export management companies carries a number of risks. In the first place the company has little or no control over the ways the product or service is marketed in other counties. Products can be sold through inappropriate channels, with poor servicing or sales support and inadequate promotion, or be under- or overpriced. This can damage the company’s reputation or product or service image in foreign markets. In addition, with indirect exporting, the company establishes little or no contact with markets abroad. Consequently, it has limited information about foreign market potential, and obtains little input to develop a plan for international expansion.

Direct exporting usually occurs when the producing firm takes care of exporting activities and is in direct contact with the first intermediary in the foreign target market. It occurs when a manufacturer or exporter sell directly to an importer or buyer located in a foreign market area. The company is typically involved in building up overseas contacts, undertaking marketing research, handling documentation, physical delivery and pricing policies, with the product being sold to agents and distributors. Direct exporting involves setting up an export department or even an overseas branch which actively uses the company’s own employees. This will give the seller more presence and control in the market but obviously means heavier investment.

The grater the perceived distance between the company’s home and host country due to differences in culture, economic systems and business practice, the more likely it is that the company will choose joint venture agreements. A joint venture provides way of sharing risks, financial exposure and the costs of establishing local distribution networks and hiring local employees. Moreover, a joint venture mode enhances the company’s flexibility to withdraw from the host market, if they will be unable to acclimatize themselves comfortably to the unfamiliar setting.

There can be defined three types of joint venture. Some companies can choose to use licensing strategy to brand their products. It is the way in which the company can establish local production in foreign markets without capital investment. In a licensing agreement a company (a licenser) gives another company (a licensee) the right to produce and market its product in a specific region in return for royalties. Licensing can quickly position a product for a certain target market and provide recognition and consumers’ interest in a new product. Moreover, as the licensee’s production is located in its home market, the licenser can avoid many of barriers-to-entry. However, it loses control over how the product is produced and marketed. In case of licensee’s poor job his can tarnish the company’s reputation.

Contract manufacturing is another option. It generally takes place when companies possessing some sort of competitive advantage are unable to exploit this advantage due to resource constraints, for instance, but are able to transfer the advantage to another party. Several factors may encourage the company to produce in foreign markets. They are:

• desirability of being close to foreign customers,
• low foreign production costs,
• transportation costs can render heavy or bulky products non-competitive,
• tariffs or quotas can prevent entry of an exporter’s products,
• there is government preference for national suppliers in some countries.

However, while contract manufacturing enables the company to develop and control R&D, marketing, distribution, sales and services, it has the drawback of less control over the manufacturing process and the loss of potential profits on manufacturing. Care needs to be exercised in negotiating the contract. Where the company loses direct control over the manufacturing function mechanisms need to be developed to ensure that the manufacturer meets the company’s quality and delivery standards.

Joint ownership ventures is the third type of joint venture. It means that the company joins with foreign investors to create a local business in which they share joint ownership and control. Joint ownership may make sense for political or economic reasons. Sometimes foreign governments make joint ownership a condition for entry. It also has certain disadvantages. There is the danger of disagreement over crucial issues such as investment and marketing. One firm may want to put money back into the company while the other wants to take it out.

In addition to exporting and joint ventures, there is also the option of direct investment. It means to develop foreign-based assembly or manufacturing facilities. If the foreign market is large enough, local production facilities provide many advantages. The company may have lower costs in the form of cheaper labor, raw materials and transport/distribution. The company will gain a better image in the host country because it creates jobs. Furthermore, it develops a deeper relationship with government, customers, suppliers and distributors. Finally, by direct investment, the company keeps full control over investment and marketing policies. Nevertheless, the company may face many risks such as devalued currencies, declining markets or even government takeover, which is the main drawback.

Foreign direct investment (FDI) is when companies put money into investment projects in other countries. With free cross-border capital flows, they may repatriate their profits to their own country, or withdraw the investment altogether. There is debate about whether governments should try to limit capital flows – inflows and out flows – with capital controls or whether they should follow the global trend towards liberalization.

Some economists say that too much liberalization of capital flows leads to instability in a country’s economy, with foreign exchange crises which lead to devaluation – its currency becomes worth less in terms of others. For example, some say that China’s growth has benefited from the fact that its currency is not freely convertible. This lack on convertibility prevents the capital outflows that some other Asian economies have suffered from at various times.