International Markets Decision
The first few important questions a firm has to answer are should a company go for international market? Why should a company prefer to enter global market? Does company capable to transact in international markets? Obviously, answers come from company’s current domestic market position and types of opportunities available in the foreign markets. When international markets seem to more attractive and the company is capable to exploit these markets, the company decides to enter the international markets.
In short, a company prefers to enter the international market in following situations:
- When company’s has excess production capacity and there exists attractive opportunities outside, and/or
- When, compared to domestic markets, foreign markets seem more attractive or profitable, and/or
- When company has enough capabilities to deal with international markets, and/or
- When domestic governments insist, force, and/or encourage businessmen for international markets.
MARKET SELECTION DECISION
Once a firm has decided to enter the international market, the next important marketing decision is market selection. As per company’s present product mix, production capacity, and proposed expansion strategy, it selects one or more countries to operate in. In the same way, it has to decide on type of foreign buyers to be served.
Market segmentation and target market selection are two basic issues in the decision. Initially, a firm targets the most attractive and comparatively easy international markets. Global marketing research can help a company to study international consumer behaviour, segment international market, and select a few most profitable markets.
To assess international markets, following criteria may be used:
- Present market opportunities
- Future market opportunities
- Market share
- Uncertainties and challenges
- Cost-profit estimates
- Return on investment
MARKET ENTRY DECISION
A firm has selected international markets to operate in. Now, the next imperative marketing decision is market entry, i.e., how to enter the market; which of the options to be used for foreign market entry. There are several options to choose an appropriate entry strategy.
Exporting involves selling domestic products in foreign markets. It is easier and common entry option. Exporting consists of producing the products in home country and selling or exporting the same in the international market. There are two options in exporting, the first, company itself exports products in foreign markets, and, the second, company exports through intermediate agency or agent.
Some entry options in exporting, as suggested by Philip Kotler, include:
- Export Department
- Opening Branch in Foreign Market
- Appointing Traveling Salesmen
- Appointing Distributors
(ii) Direct Foreign Investment
A company sets up its own factory in other countries. Its carries out all production and marketing activities in foreign land. But, the option depends on a lot of factors such as market stability, costs of production and marketing, competition, government policies, and other factors determining favourableness of situation. Company should select this strategy carefully as there are considerable risk and uncertainties in some countries.
(iii) Joint Venture
The joint venture is jointly owned and managed by host and foreign companies, by two companies of two nations. A foreign company holds necessary equity to get voice in management but not enough to completely dominate the venture. Structure of joint venture depends on government policies and approach of host country.
In underdeveloped and developing countries, many multinational corporations are operating as joint ventures. For example, HMT represent joint venture with Swiss Machines and Tools, Proctor and Gamble has joint venture with Godrej, Suzuki of Japan has with Maruti Udyog, etc.
At present Indian governments and companies operate with more than 50 countries as joint ventures. When a giant company invests directly in many countries, it is called multinational companies (MNCc). There are several forms of joint venture, such as mixed companies, joint ownership companies, licensed companies, contract manufacturing, management contract, etc.
MARKETING MIX DECISION
Marketing mix decision involves preparing marketing mix (strategies) for international market. Marketing mix consists of 4P’s – product decisions, pricing decisions, promotion decisions, and place or distribution decisions.
Marketing mix decisions remain same as domestic market except the target market. Here, all marketing mix decisions are taken with reference to foreign customers and global marketing environment.
Organisation for global marketing is an important decision. In order to implement, direct, and control international marketing efforts, a company must adopt an appropriate organization structure. The organisation is responsible to regulate foreign trade.
It is same as domestic marketing organisation; the only difference is that it is prepared to administer international marketing operations and activities. Structure depends on a lot of factors such as type of products, number of countries, type of buyers, etc. Sometimes, it is treated as the department or part of main organisation, for example, foreign trade department.
There are different types of organisation structures suit with international marketing such as:
- Product-wise Organisation
- Country-wise Organisation,
- Customer-wise Organisation
- Place-wise organisation
- Matrix or Mix Organisation, etc.