Strategic Decisions in International Marketing

STRATEGIC DECISIONS IN INTERNATIONAL MARKETING When a company decides to enter international markets, it faces a series of important strategic choices that will shape its global marketing approach. This article examines the key decisions firms must make regarding internationalization, target market selection, entry strategies, marketing mix, and organizational structure for international operations. Should We Go Global? The first major decision is whether a company should internationalize at all. Factors to consider include:  Domestic vs overseas opportunities - How attractive are home markets compared to foreign markets now and in the future?  Company resources and capabilities - Does the firm have the skills, experience, personnel, and financing to succeed internationally?  Strategic objectives - How does global expansion fit with overall goals for growth, competitiveness, stability, etc.?  Risk appetite - What level of risk is the company comfortable accepting? Internationalization involves commercial, political, cultural and financial risks. If assessment suggests internationalization makes strategic sense for the firm, then potential target countries must be evaluated. Selecting Target Countries With over 195 countries worldwide, identifying priority international markets is crucial. Key considerations include:  Market size and growth - Value and growth rate of demand for the company's products. Large, rapidly expanding economies are attractive.  Competitive intensity - Number, size and aggressiveness of competitors in the market. Highly competitive markets may be less appealing.  Political and legal environment - Trade agreements, technical standards, investment regulations, etc. Open and transparent regimes are preferable.  Cultural compatibility - Differences/similarities with home market in language, tastes, customs, values, etc. More familiar cultures can be easier to operate in.  Economic development - Income levels, infrastructure, consumer purchasing power, credit availability, etc. Richer countries offer more sales potential.  Country risk - Political instability, exchange controls, nationalization risk, etc. Stable countries are less risky for investment.  Geographical proximity - Distance to home market. Nearby countries tend to have lower logistics costs.  Company objectives and resources - The best country options must align with the firm's goals and capabilities. Thorough market research and analysis are required to identify the most promising target countries based on these criteria. Entering Foreign Markets The main modes of entering international markets include:  Exporting - Selling home-country produced goods overseas through intermediaries or the company's own network. Low risk and investment but less control.  Licensing - Granting foreign companies rights to produce and market the firm's products in return for royalties. Low risk and investment.  Franchising - Similar to licensing but includes greater support and operational control from franchisor.  Contract manufacturing - Hiring overseas manufacturers to produce the company's products. Offshore production benefits but higher risk.  Joint ventures - Partnering with a local company to develop operations and share investment. Combines local knowledge and the company's capabilities.  Strategic alliances - Collaborative ventures with overseas firms for shared product development, marketing, distribution, etc. Flexible risk sharing.  Foreign direct investment - Establishing company-owned production and/or marketing subsidiaries in foreign countries. High control but requires a major resource commitment. Entry mode selection depends on factors like the desired level of control, country risk, investment required, competitive conditions, etc. Many companies use multiple modes across different international markets. Adapting the Marketing Mix A core principle of international marketing is tailoring the marketing mix to each local market. This may require varying:  Product - Formulation, design, brand name, pack sizes, etc. may need adapting to overseas customer preferences and technical standards.  Promotion - Messages and media should resonate with local culture. Translations must avoid the loss of meaning.  Distribution channels - Utilize established local consumer access points and business customs. Leverage importer expertise.  Pricing - Adjust for market characteristics, local costs, and competitive conditions. Price controls may dictate strategy. Standardization reaps economies of scale but adaptation is often needed to maximize market-by-market results. Firms typically standardize behind the scenes while customizing the customer-facing elements of the mix. Organizing for International Operations A strategic choice is how to structure the company's organization to support internationalization. Approaches include:  Export department - A special department handles exporting while domestic units focus on home sales. Suitable for initial international forays.  International division - Centralized division oversees worldwide marketing and operations from a global perspective. Allows greater focus and control.  Area structure - Regional sub-divisions manage clusters of neighboring countries. Balances global integration with local adaptation.  National subsidiaries - Self-contained units operate in each country. Maximizes local responsiveness but duplication risks.  Global functional structure - Centralized, world-wide functional departments (marketing, R&D etc.) drive standardization and coordination.  Matrix structure - Overlays functional departments with country units. Combines specialized expertise with local insight. Organizational format should suit the firm's strategy and orientation - from domestic export focus to globally integrated operations. Hybrid structures often evolve over time. In summary, strategic choices underpin successful international marketing. Assessing global opportunities, selecting markets astutely, entering via appropriate modes, fine-tuning the marketing mix locally, and organizing effectively are foundations for developing a profitable worldwide business.