International Marketing Environment - Assignment Example

International Marketing Environment Explain the role of government in international trade, the various levels of economic integration, and the impact on international marketing. The local government’s policies can have determinant implications on any business. First, transactions carried out by international businesses are normally faced with more taxes in comparison to those faced by domestic businesses. Other than taxes, these businesses are also encounter quantitative restrictions such as licenses and quotas. The import-export policies are however not the only means by which international businesses are affected by government policies. International business encompasses movement of labor across borders, establishment of trading and manufacturing centers, and mobility of capital. The actions of the governments on either side of the border can either obstruct or facilitate all these (Vasudeva, 2007). The first of the 5 levels of economic integration is the formation of free trade agreements (FTAs). FTAs remove import tariffs plus import quotas between the signatory countries. The second stage is Customs Union (CU) whereby two or more countries come to an agreement to eliminate tariffs between them and set an external tariff that is common on imports from countries which are not members. Every country keeps its own external tariffs against non-member countries and sets its own barriers. The third stage is known as Common Market where two or more countries eliminate every barrier to trade and allow for free movement of labor and capital across the member countries. Trade policies are harmonized by holding common external tariffs against non-member countries. The fourth stage is known as Economic Union whereby two or more countries agree to similar economic policies, allow free flow of labor and capital and remove barriers to trade. Member countries are necessitated to harmonize their fiscal, monetary and tax policies and also create a common tariff. The fifth and last stage is Political Union where two or more countries agree to coordinate their political, monetary and economic systems. Member countries are required to consent to a common position on political and economic policies against non-members (Gilligan & Hird, 1986). The major reason for the development of global economic integration is the positive effects it has on various economies. The improvement of economic efficiency is the chief effect of economic globalization. The market sizes of different countries become larger hence increase their production and production efficiency by trading with other nations as a result of economies of scale. Different countries can specialize based on comparative advantage hence raising production efficiency. 2. Describe the economic and cultural elements of the international marketing environment and explain how these factors affect marketing operations. Culture involves a broad spectrum of considerations which can adversely affect a business’s efforts at marketing if they are unanticipated or misunderstood. They include among them social organization, social values, ethics, religion, language and general levels of education. A country’s people ability to write and read directly influences the economy’s development and hence affects marketing strategy planning. Also, the marketing choices of a firm are profoundly shaped by attitudes of a society based on cultural norms or religious beliefs. Different cultures have different attitudes and values towards success, food, clothing, work, social status, the rights of others, honesty, music, among other things. Business practices can also vary greatly from society to society (Doole & Lowe, R. 2008). The factors that make up the economic elements in international marketing include among them: currency stability, Gross National Product (GNP), per capita income and distribution, disposable income and expenditure patterns, level of acceptance of foreign businesses in economy, industrial and technological development, general economic growth and available channels of distribution. It is obvious that it is more likely for a new service or product to be successfully introduced and flourish where a nation’s wealth is great. Similarly, a country with lesser wealth provides fewer chances for a product or service to be launched. 3. Summarize the major political and financial risks associated with international marketing. When an organization ventures into international marketing, it not only takes up additional opportunities but also risks. Political risk comes about when a particular country’s government changes its policies unexpectedly negatively impacting the foreign company. Some of these policy changes may include things like trade barriers which tend to prevent or limit international trade. Quotas and tariffs imposed by government hugely affect an organization’s profits because they limit the revenue amount that can possibly be earned. Also, political instability and actions can make it hard for companies to run in some countries as a result of negative impact and publicity brought about by people in top government (Brady, 2011). Financial risks are brought about by the currency exchange rate and the government’s flexibility in letting firms send some funds or profits back to their country. When there is an appreciation of the domestic currency against a foreign currency, there will be a decrease in returns or profits earned in the foreign country after being converted to the domestic currency. Given that the exchange rate is volatile in nature, protection against such risk is hard and can hence harm revenues and sales. Inflation and the devaluation will also affect a company’s ability to be stable and operate at a capacity that is efficient. A firm’s assets may at times be seized hence leading to financial losses (Vasudeva, 2007). 4. Explain the strategic marketing planning process, strategies for entering foreign markets, and considerations for subsequent market expansion. There are five steps involved in strategic marketing: mission identification, situation analysis, objectives setting, strategy development and evaluation. Mission identification involves articulation of why the business is in existence and how it can be beneficial to the target customer group in the long run. A situation analysis is then carried out to prioritize and assess the strengths, weaknesses, opportunities and threats. Measurable and clear goals which are achievable within a set time period are then set. Strategy development involves picking out a target market and choosing efficient ways of utilizing the marketing mix tools. Evaluation involves specification of how, when and by whom the plans are to be supervised and evaluated over time. There are a number of strategic options that can be used by a firm when venturing into international marketing. A licensing strategy is beneficial when the firm has a patented commodity or knowledge that is valuable but does not have international capacities. It doesn’t involve capital investment. An exporting strategy best serves when a firm has a cost advantage and can leverage the necessary shipping costs. It could be a great first strategy as it requires a small capital investment. A franchising strategy works for firms looking at global expansion in retailing and service. Most of the risks and costs related to the initial investment are borne by the holder of the franchise. A global strategy entails similar competition in all countries. A firm organizes strategic moves around the world and sells in many countries with a market for its commodity (Gilligan & Hird, 1986). Entrepreneurs are faced with new chances to expand their businesses to international levels. Some of the considerations before such an undertaking are: risk management, financing, location and strategy. There are a number of risks associated with the global business environment and this ought to be considered. It is therefore crucial to recognize that in such environments, a firm must apply a risk management strategy that is effective. Regarding financing, it is essential to test your revenue targets and financial models to make sure you can service debt of any kind. Location is the most critical consideration as it involves a firm making a decision on the best fitting location considering the present economic climate (Doole & Lowe, R. 2008). Businesses should choose countries that offer incentives for startup and where they can be able to handle the risk related to the investment. As regards strategy, a firm ought to have a clear idea of their aspirations before expanding internationally. References Brady, D. L. (2011). Essentials of International Marketing. Armonk, NY: M.E.Sharpe. Doole, I., & Lowe, R. (2008). International marketing strategy: Analysis, development and implementation. (5th ed.). New York: Cengage. Gilligan, C., & Hird, M. (1986). International Marketing: Strategy and Management. London: Routledge Kegan & Paul. Vasudeva, P. K. (2007). International Marketing (3rd Ed.). New Delhi: Excel Books. Read More