Understanding the international marketing environment - Essay Example

?International Marketing Environment I. Introduction Marketing, in the olden days, was a phenomenon limited to or national boundaries with limited opportunities for the consumers and suppliers. With the extent of globalization, marketing has crossed all the state and national boundaries to market its products and services in the international arena. Global marketing has become a popular subject of research and analysis due to increasing number of companies starting their operations in various countries. The increasing trend of globalization of the world economy, international marketing has become an essentiality for survival of all organizations irrespective of being big or small as previously multinational companies used to enjoy the benefits of international business (Lee and Carter, 2009). The major trend today is growing internationalization of international business contrary to 1950’s when major form of international business was exporting by national firms (Terpstra, 1985). The essential elements of effective international marketing are the ability to interpret the business environment, recognize the foreign market opportunities and appreciate how the firm’s resources can best be used to match and develop patterns of market demand (Gilligan and Hird, 1986). International Marketing is the process of planning and conducting transactions across national borders to create exchanges that satisfy the objectives of individuals and organizations (Czinkota and Ronkainen, 2007). International marketing environment includes various factors like political, legal, environment and economic. However the present paper critically analyses the network theory model of internalization and evaluate the effects of climate differences and differing levels of disposable income on the business and how it influences the design of firms’ marketing campaign. II. Network Theory Model Consumer behavior, during 1960s, made a successful transition from domain to discipline while choosing products and services and quickly focused on only the buying behavior of consumers and attempted to provide explanation for the systematic preferences of consumers to choose a particular brand within a product class. Later during 1970s, transition of marketing strategy took place from domain to discipline which was propelled by Porter’s book on competitive strategy (Sheth and Parvatiyar, 2002). Network theory was initially developed in the context of industrial marketing to explain how firms connect to each other and develop long term relationships as opposed to conventional transaction-only approach dominant in marketing theory. This suggests that firms do not enter international markets as standalone actors but instead are part of network of other firms providing them the chance to internationalize their operations in various parts of the world (Baker and Hart, 2007). Gummesson (2006) mentioned that network theory has primarily attracted attention in business to business marketing which has been extended further to marketing in general. It is further stated that general network theory categorizes all of us as nodes in a network of relationships in which we interact and form clusters which further form organizations and corporations. Gummesson (2002) further states that total relationship marketing is a synthesis of contributions from several marketing and management theories and practices and network theory of business to business marketing has been an important source of inspiration from relationship marketing. Organizations in the present economy depend mostly of marketing their products and services. The successful organizations have been able to make it big because of their marketing ability to promote their products in the international arena. Companies marketing their products and services through hiring of public figures as brand ambassadors, providing opportunity for small businesses to sell their goods and services as freelancers and media are all part of a network which is interconnected to make profits for the organization. This phenomena is clearly opined by Leelapanyalert (2009) as network theory not only facilitates in building wider relationships which influence international activities of the firm but also has become the main marketing strategy and the network between companies, suppliers and customers is more important the marketing mix strategy. Leelapanyalert (2009) while analyzing the theory observed that company might focus only on short term benefits and ignore long term benefits apart from allowing sharing of information between the companies which was well acknowledge by Bell (Achrol, 1997) wherein he states that knowledge and information are replacing capital and energy as the primary wealth creating assets in postindustrial society. It is further stated that hierarchy and buffering mechanisms not only create unacceptable levels of organizational inertia for turbulent inertia but also are likely to prove hopelessly inadequate in the knowledge-rich environments. Drucker (Achrol, 1997) envisaged that future entities will be knowledge based, an organization composed largely of specialists who direct and discipline their own performance through organized feedback from colleagues, customers and headquarters. The network theory has created the necessity in business to business view marketing, sales, engineering, design, product development and manufacturing in a unified management context. Network theory comprised of internal market network which aimed at replacing the superior – subordinate relationship with more constitutional and democratic forms of administration and management. The key idea of internal market network was to eliminate hierarchical relationships within the boundaries of the conventional firm as far as possible replacing them with direct exchange networks among organizational units mediated by some type of market-like processes. This encourages alliance among ‘intrapreneurs’ wherein technologies, skills and individuals can move freely among units and be organized rapidly around problems and solutions. Internal market network allows efficient functioning of administration and management of the organization, vertical market network emphasizes on forming alliance with industry specific channel of suppliers, distributors, consumers, political and legal support (Achrol, 1997). Network theory has been proved successful in all types of business especially in building positive relationships with different organizations and people. Network theory not only builds trust but also enables sharing of information through varied channels from different sources which can be converted into an idea to build a product or service. Various researches on the topic have led to collective conclusion that network theory in marketing is successful in view of expanding the business horizons through partnering or forming an alliance with companies, distributors and providing the products to international audience. III. Effects of climate differences and differing levels of disposable income on marketing programme Marketing is an essential element for successful functioning of the organization. It has been argued that the worldwide marketplace has become so homogenized that multinational corporations can market standardized products and services all over the world, by identical strategies, with resultant lower costs and higher margins (Jain, 1989). According to Javalgi and White (2002) there is consensus that businesses are going global faster than ever, rising trade and investments are creating national wealth and consumer affluence, especially in developing countries, a convergence of tastes and preferences of consumers across the globe is increasing demand for global brands and services and technological advancement, especially information technology are making the world more and more borderless thus creating a new global marketplace. Globalization has created multiple opportunities to businesses to enter the international market and sell their products. It must be noted that entering new markets not only gives an opportunity to increase the business but also provides enormous challenges for the companies in terms of various factors like political, legal, technological, economic, social and environment. This section looks into the effects of climatic differences and economic factors like differing levels of disposable income on the design of firms’ marketing program. A) Influence of Climate on Marketing Program Climate is a natural feature that has profound impact on the economic activity within a place. Different climatic conditions provide opportunities for growth of different industries like tourism is influenced by pleasant climates, agricultural industry and other industries like aircraft like in United States where the climate is warmer facilitated with drier areas conducive for test flights. Climate also affects the length of the work day and the length of economic seasons facilitating the growth of construction industry. The international marketing professional seeking to take advantage of the different climate conditions in different places learns not to view each place separately (Czinkota and Ronkainen, 2007). Organizations should adapt the marketing program which conforms to physical realities such as regional variations in climate and infrastructure (Gillespie, Jeannet and Hennessey, 2009). It is necessary that the companies produce goods that can be delivered and function in the climatic condition of that particular country where it is to be sold. Different climatic conditions demand change in marketing design which includes product design, technology, packaging and marketing campaign. According to Dewan and Sudarshan (2003) the physical environment of a country may also require product adaptation like products such as air conditioners may require additional features for satisfactory performance in hot climate as in the Middle East, paint must be adapted to various climatic conditions, automobile manufacturers must consider driving standards of the country to set the steering wheel, etc. (Gillespie et al 2003). Gillespie et al (2003) mentioned that differences in marketing environment may require special adaptations in product packaging as different climate conditions often demand a change in the packaging to ensure sufficient protection and safer delivery of the goods as in vogue according to the specifications and requirements of the country and its distributors. Products may also need to be adapted to different use conditions in various markets. Jalal and Bisht (2007) stated that business organizations may get a taste of differences between the regions by setting up foreign offices because close familiarity and prior knowledge of the local conditions is of utmost importance to successful marketing programmes as design differences exist. The climatic differences existing in different countries force the management to change its design of marketing approach in accordance to the tastes and preferences of the consumers. It only influences the marketing approach but overall look of the product from design, packaging and labeling so as to promote the product among locales in the country of business. B) Effects of differing levels of disposable income Organizations entering the foreign markets need to evolve effective pricing strategy so as to make their products available to consumers with different levels of income. Pricing is a particularly critical and complex variable in international marketing strategy which affects the organization’s ability to stay in the market (Dewan and Sudarhsan, 2003). The marketing professionals look into this factor while designing their marketing program which influences product demanding change in design with less features, quality of materials and pricing (Pickton and Masterson, 2010). The income level of a country’s population determines the amount and type of goods and services bought which makes it easier for the organizations to analyze the purchasing power of majority of people in the country (Gillespie et al, 2003). Income level determines the ability of consumers to participate in market exchange. It is further stated that if two consumers have similar income levels, each may own different brands depending on their lifestyle, attitudes and values which provides opportunities for the companies to serve the requirements of different income classes. For instance, Nirma washing powder was launched as the lowest priced washing detergent in India primarily targeting the middle income segment of the market which led to an explosive growth of the detergent market in the country (Kotler et al, 1972). Some studies suggest the judicious use of pricing to penetrate the foreign markets due to high elasticity of demand for consumer products and highly skewed income distribution in developing countries (Dewan and Sudarshan, 2003). The differing level of disposable income in different countries compels the marketing professional to change their pricing strategy in accordance to the purchasing power of the consumers thereby increasing the market. The marketing design gets affected due to uneven income distribution, low purchasing power and dynamic nature of emerging economies thus making it difficult for international marketing professional to design a standard marketing design (Hollensen and Banerjee, 2009). Conclusion Organizations, in the era of globalization need to focus on all the aspects of international marketing like political, legal, socio-cultural, technological, economic and environmental factors so as to design the marketing plan to accommodate and benefit both the consumers and organization. Differences in climate and income levels will be existent in all the nations and organizations will have to formulate the strategy to tackle these challenges. References 1. Achrol, Ravi S (1997) Changes in the theory of interorganizational relations in marketing: Toward a Network Paradigm, Marketing in the 21st Century, Academy of Marketing Science. Journal; Winter 1997; 25, 1; ABI/INFORM Global, pp. 56 – 71 2. Baker, M.J and Hart, S (2007) The Marketing Book, 6th Ed., Butterworth – Heinemann, UK 3. Czinkota M.R. and Ronkainen I.A. (2007) International Marketing, 8th Ed., Cengage Learning, US. 4. Dewan J.M. and Sudarshan K.M. 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