Government's role in Marketing - Research Paper Example

? Question Governments play a crucial role in the international trade arena and can impact the viability of a business in many ways. Governments can facilitate a business by relaxing taxes and providing infrastructure etc or they can hinder a firm’s efforts to enter a market by imposing law designed to favor domestic firms. Due to economic integration international business these days is not just restricted to buying and selling between firms of two countries but also involves mobility of capital, establishment of trading centers and manufacturing facilities, and movement across borders of business managers and technicians. The various levels of economic integration include:1 Economic integration can sometimes be a help a sometimes be a hindrance to international trade. For example Economic integration in Europe has allowed European firms to grow bigger and more competitive. But on the other hand economic integration has also created thicker outside walls for non-European firms to enter the European market. Question 2: The two most important economic factors that affect international marketing are: 1. The industrial structure of a country 2. The income distribution of a country. The product and service needs of a country are shaped by the country’s industrial structure. There are 4 main types of industrial structures. They are as follows: 1. Subsistence economies: People consume what they grow and such an economy offers very few market opportunities. 2. Raw material exporting economies: Economies wealthy in one or more than one natural resources but poor otherwise. Such countries are excellent markets for large equipment etc and for luxury goods if a wealthy upper class is present. 3. Industrializing economies: Manufacturing accounts for 10-20% of the country’s economy. These countries are a good market for raw textile materials, heavy machinery, steel etc. A new affluent class and a small middle class are usually created by the on going industrialization, both of which require new types of imported foreign goods. 4. Industrial economies: Services and manufactured goods are the chief exports of industrial economies.. A large middle class usually exists making industrial economies an ideal market for all sorts of goods. The second important economic factor is the country’s income distribution. Low, medium and high income households may exist in industrialized economies whereas a subsistence economy may exist of mostly very low income households. However, developing or even poor economies may be attractive markets for all kinds of goods. The best example in this case is China. Even though China has only 0.2 millionaires per 1000 residents it trails only the US, Germany and the UK in the total number of millionaires because of its large population. (Kotler, 2008) The cultural elements that affect international marketing include: The different ways in which potential customers in different countries use and think about certain goods e.g. an average Frenchman uses twice as many grooming aids and cosmetics as his wife (Kotler, 2008). Cultural norms and regulations of each country e.g. Nike inadvertently offended Arabs and Muslims when it released shoes with a stylized “Air” logo which resembled Allah in Arabic script (National Geographic, 1999). Business norms and behaviors also play a very important role in international trade. Question 3: The political risks in international marketing involve: 1. Negative attitude of host government towards foreign firms. For e.g. Currency restrictions, import quotas etc might be imposed on the foreign to make life difficult for them. 2. Monetary regulations. Buyer’s government might impose restrictions on removal of a currency from the country leaving the seller no option but to receive payment in the blocked currency and getting their profits stuck. 3. Political instability is another risk associated with international trade. A major example of this phenomenon is the Dell Brazil case. Dell chose the Brazilian state of Rio Grande Do Sul as the site for its first Brazilian plant on the basis of the promises of facilitation made by the state government. A few months later, a new state government was elected and the new government went back on the promises of the previous government leaving Dell with a major problem to solve (Nelson, 2003). The financial risks involve: 1. Having to go through complex countertrade cycles to get profits in desired currency. For e.g. DaimlerChrysler in exchange for 150 Romanian jeeps sold 30 of its trucks to the government of Romania. It then sold the Romanian jeeps to Ecuador for bananas and finally sold the bananas to a German supermarket chain to obtain its profits in desired German currency. 2. Investing huge amounts of money in a country and then being unable to pull out in case of bad results. Question 4: In the strategic marketing planning process must answer several questions and weigh several risks about its capability to operate internationally. Can the company learn to function in a new, different environment? Can the company adapt to the new choices and preferences of the new customers? Does the company boast the necessary international experience in its ranks as managers who will run the new business? Once a company has considered all these questions it must then decide which markets to enter. It must delineate its global marketing objectives and policies. It should also decide the volume of foreign sales it wants. Another important decision is to choose that in how many countries the company wants to market. Possible international markets should be ranked on a number of factors including size of the market, the cost of doing business, growth of the market, competitive advantage and the level of risk involved. Once a decision has been made on which market to enter, there are several ways of entering it and expanding once the company has found its feet in that market. 1. Exporting: Goods produced in the home country are exported to other countries. Companies willing to enter other markets using this method can also set up a domestic export department or an overseas sales branch and move into direct exporting as well. 2. Joint Venturing: Starting a joint venture with a foreign company to produce or market a service or product. 3. Licensing: An agreement is entered into with a foreign licensee. 4. Contract Manufacturing: Foreign market manufacturer and the company enter a joint venture contract to provide its service or produce its product in the foreign market. 5. Management Contracting: A foreign company supplies the capital and the domestic firm provides the management know-how. 6. Joint Ownership: The foreign and the domestic firm start a joint venture in which both companies enjoy joint control and ownership. 7. Direct Investment: foreign markets are entered by developing foreign-based assembling or manufacturing facilities. Works cited: Kotler, P.,Armstrong, G. Principles of Marketing. Pearson Education (2008). Nelson, Roy. Dell’s Dilemma in Brazil: Negotiating at the State Level (2003) A03-03-0021. National Geographic. “The power of writing”, pg128-129. August 1999 Read More