The reason most companies use international marketing can be explained by looking into the following figures:
- About 90% of Coca Cola’s operating income and 73% of total revenue is generated outside United States.
- For Japanese companies, 85% of its potential is outside Japan.
- For German and EU companies, 94% of the potential consists outside Germany
- There are thousands of companies operating on the global markets such as Apple, Google, IBM, Microsoft, Walmart, Samsung, Vodafone, Amazon, ARLA Foods, LEGO, etc.
In today’s changing society, companies need to be competitive under many challenging environments. There are many reasons to adopt International marketing. One of them is off course, profit. Although profit is the most common, government policies (as in Germany, due to the new legislation, solar panels manufacturing companies were restricted from increasing their profits in the local market, thereby finding themselves in the need to consider international marketing in order to remain competitive), monopoly power (as TANESCO in Tanzania), domestic market constraints, spin of benefits and competition or market saturation.
Therefore, these companies need to look into new possibilities of maintaining and increasing their market share as well as their profits. In order to do that, most of the companies take an international marketing approach.
The concept of international marketing represents the performance of business activities designed to plan, price and promote as well as to direct the flow of a company’s goods or services to consumers or users in more than one nation, for profit. – Philip R cateora
In international marketing, marketers generally have to deal with at least two uncontrollable elements as domestic and international environments. The major forces from the international markets are represented by political, legal, economic, social/cultural, technological and environmental factors. All these factors can be analyzed through the PESTLE analysis.
Besides these main factors we can also include infrastructure, competition structure of distribution and geography. The major restraining forces in international marketing are represented by management myopia, organizational culture, national controls, international world order as well as fight against international terrorism.
If we were to look at some relevant examples, let’s start with the current situation of Russia, which based on their latest decisions the country got an interdiction of imports of European products. This measure not only affected Russia but also a lot of European companies which were exporting into Russia, therefore minimizing their profits. We can take this reference to understand the importance of political situations in a country and stability in international marketing.
One very important factor which can be considered a challenge while operating in international environment is known as the Self-Reference Criterion as well as ethnocentrism. The Self-Reference Criterion happens when unconsciously you take decisions as if it was your company and your culture you were operating in, instead of a culture based in a completely different environment.
Ethnocentrism on the other hand, happens when you know the culture of the other country, but still think that your way of doing things is right and that you will like to carry on with the way things are at home. These two factors have the potential of impeding the ability to assess a foreign market in its true meaning and purpose. Not taking into consideration these factors, can lead to unsuccessful international marketing campaign and what it is more important: international marketing strategies.
By having defined the business problem or goal in home-country cultural habits together with the business problem or goal in foreign country cultural ones, without any value judgements, managers are given the chance to isolate the Self Reference Criterion in the problem and examine to see how it complicates the problem. Through these steps, by redefining the problem without the Self-Reference criterion , managers can identify the optimum business goal situation.
The general driving forces in international marketing include: regional economic agreements, markets supplies and demands, technology, transportation and communication, product development costs, product quality as well as world economic trend in general.