IM/U1 Topic 5 Influence of Physical, economic, Socio-Cultural on International Marketing
Influence of physical environment on International Marketing
Although the physical environment is not considered one of the core components of the SLEPT factors, it is an environment that can impact upon your success in exports and consequently needs to be considered.
A country’s territorial size, geographical location, natural resources, climate, rivers, lakes and forests constitute its physical environment. The physical environment influences political and economic activities, shapes cultural characteristics such as language and religion, and determines land usage, transportation, and commercial flows.
When planning international marketing activities, the possible impact of the physical environment should take into account. For example:
- Population distribution will be affected by topography (i.e. a country’s rivers, mountains, deserts, etc.) and climate – people tend to settle where the climate is temperate, and there is an adequate supply of water.
- Certain climatic conditions may dictate adaptations to the product – some glues and oils, for example, will not function in very cold climates.
- Climate should also influence the arrangements made in respect of packaging (in the marketing context) and protective packing for the purposes of safeguarding the product while it is in transit or in storage. Products which are particularly vulnerable to climatic conditions, are those that are adversely affected by extremes in temperature or excessive humidity changes (fruits being transported to hot climates or across the equator, for example).
- Abnormal weather conditions (e.g. typhoon season in Asia) can disrupt the transportation of export products while unforeseen changes in the weather can threaten companies which produce seasonal goods.
- Topography will influence the routing of goods and the choice of transport mode, which in turn will affect cost and thus impact on the price offered to the buyer.
The Impact of Economics on International Marketing
The economic situation of your market impacts what you offer and how you present it to your target customers. For international marketing, the economics of the target market as well as the international economy affect your marketing strategy. The local economy influences how you approach consumers, while the international economic framework limits your ability to produce, ship and distribute your products through cost and regulatory constraints. An effective international marketing strategy takes both local and international economic conditions into account.
Your international marketing of goods may be successful in western economies that have a similar economic structure to the United States, but it will fail in developing markets unless you make adjustments. You have to adapt your products to the local economies. A product you market as environmentally-friendly may not be relevant in a subsistence economy. A product that saves energy will not sell if energy is subsidized and inexpensive in the foreign market. You may offer the same products internationally as you do in the United States, but your global marketing has to change for your products to make economic sense in foreign economies.
Whether an international market is accessible to your company depends on whether you can offer your products at a competitive local price. International economic factors such as currency exchange rates, tariffs and shipping impact your costs and the prices of your goods. If the cost of offering your products in international markets is higher than that of locally-produced products, you may have to target luxury goods market segments. Sometimes mass-produced goods cost less than locally-made custom products, and your marketing strategy can price your products to achieve wide acceptance.
Carrying out production locally is one way to reduce costs and limit the influence of international economic factors on your operations. Instead of incurring costs through duties and transportation, you may be able to take advantage of lower production costs in the local economy with lower labor and facility expenses. Local production can impact your marketing by affecting both price and local acceptance. Marketing your products as locally-produced competitively-priced options can be an effective marketing strategy.
The international and local economic environments influence your channel marketing. If establishing a local presence is costly, you may opt for partnering with a local or international distributor who already has experience in the target market. For some markets, it makes economic sense to market your products via direct sales, either through local representatives or via online sales. Alternatively, a low-cost, open local economy may make it feasible to create your own local distribution network. The channel you choose for your marketing initiatives depends on the economics of delivering the goods to market and the local economic situation.
Socio-cultural influences on international marketing
According to Doole and Lowe (2004), the socio-cultural influences on international marketing are great. Social-cultural factors concern about demographics changes which organizations should be aware of. It involves age structure of the population, changing nature of occupations, improvement in education, and family size, and so on, which can have a great impact on demand of the products and services. Differences in social conditions, religion and culture can all affect consumers’ perceptions and patterns of buying behavior. In some countries, environment of the religion might be a source of opportunities or threats to companies doing the business in that particular location. Development and movement in populations around the world are crucial factors heralding social changes. It will affect the supply and demand of products and services within an economy. Cultural differences, especially language differences can have a significant impact on the way a product may be used in a market, its brand name and the advertising campaign. For example, there are culture gaps between Western and Asian countries where some companies simply do not find their way into a market or where their performance is less than successful.