International and Global Marketing - Coursework Example

International and global marketing Contents Introduction 3 Discussion 3 Issues in international and global marketing 3 Economic issues 4 Scar ofcheap labour in emerging countries 5 Spill over risk and global financial crisis 6 Cultural issues 6 Ethical practices 7 Cross culture marketing communications 7 Conclusion 8 Reference List 9 Introduction International marketing many be defined as the process of incorporating marketing principles into more than one country. It involves cross border trade whereas global marketing involves the total process of marketing starting from planning of the product, production, placing and promotion in the worldwide market. In case of international marketing, the decisions on trade and business expansion in targeted markets are made in one individual country whereas global marketing poses the whole world as a single market place and create products which are acceptable worldwide. In other words, global marketing is selling products internationally. With the improvement of technologies, better supply chain management and up gradation of logistics systems, international and global marketing have become successful in infusing shared benefit in the global village, eliminating geographical barriers. Rapid expansion of international global marketing has compelled a domestic company to face competition from foreign companies even if the company is not willing to enter into international market (Arouri, Boubaker and Nguyen, 2013). Discussion Issues in international and global marketing International and global marketing has initiated economic and business interdependence among countries by accelerating flows of goods and services across borders. Global acceptance of the applications of e commerce and introduction of virtual superstores have drastically reduced establishment and transportation costs. This in turn leads to standardization of products. However, global companies also put emphasis on customizations of products and services as tastes and preferences varies according to climate and culture of the nation. However, in spite of having such warm acceptance of the benefits of international and global marketing, the system still suffers from country wise formal or informal trade barriers, strict regulations and tariff rules and other socio political risks and many more. Multinational corporations (MNCs) are imposed different business governance as compared to domestic companies. Hence, in order to establish a global market with minimum hassles, it is important to adapt a global mind set first, which is not influenced by the criteria of a single country or continent (Hollensen, 2013). International and global market players are also facing challenges due to changes in international business dynamics followed by political instability. Fluctuating exchange rates, unethical trade practices in the parent country, changing norms for technology transfer, environment regulations, setting standards along with the changing political environment makes it difficult for the companies for smooth expansion of business. Though international trade theory of Adam Smith inspires nations to utilize comparative advantage, those factors drags the countries behind and restricts their limit of international trade. Size of the two countries involved in trade determines volume of trade between the countries. Hence, countries with sound economy and market size are better off from international and global marketing, depriving the small countries (Mühlbacher, Leihs and Dahringer, 2006). Differences in accounting standards followed by different countries make it complex for the organizations to maintain their accounts effectively. Currency difference, difference in inflation and growth rate etc. largely affects proper management of accounts (Banherjee, Shukla and Adidam, 2013). Hence, a no. of economic and cultural issues can be put forward to analyze their effects on organizations involved in international and global marketing. For the requirement of the project, two economic and cultural aspects will be discussed in details. Economic issues Economic issues such that credit crunch, banking crisis, global supply shock, fluctuating market rates and inflation affects international and global marketing to a great extend in short run. Though these factors are self correcting, problems like global warming, global poverty and inequality, exhaustion of non renewable resources, economic change and development are beyond control and are bound to affect international and global business (Mooij, 2011). The two major issues expected to put significant effects on the firms engaging in international and global marketing may be attributed as: Scarcity of cheap labour in emerging countries Increasing economic growth rate in developing countries have significant effects on international and global marketing. In 2000, developing economies have accounted for only 30% the global GDP whereas in 2013, their contribution rose to as much as 50% of the total Gross Domestic Product (GDP) (PwC, 2013). Naturally, global marketing is experiencing both positive and negative effects of the development. Rapid economic growth in emerging countries has resulted in and incremental disposable income as well as purchasing power of individuals. Improved labour productivity leads to expansion of cities and rapid urbanization. Expansion of investment avenues and decreasing rate of unemployment initiates health consciousness and better quality of education (Lee and Carter, 2012). According to the forecast report of July, 2014 the disposable income of lower middle class will reach to 30 million by 2030 (PwC, 2013). This development in the emerging economy will affect the global and international marketing in two ways. On one hand, such expansions will create huge demand for goods and services in coming future as more and more people will be willing to aspire for branded global products but the major problem will be experienced in terms of scarcity of cheap labour that was easily available in the developing countries. Economic growth accelerated the provision for technical and formal education across the developing nations. For instance, China’s economic rebalancing has resulted in shrink in the availability of cheap labour and low level of migration for work, starting from 2013. The trend is showing a shift in labour market towards employee oriented service sector as a result of improved quality of education. Experiencing such labour trend in China, in September, 2014, economy of Brazil has also decided to adopt China’s full employment policy for betterment of their labour market. This may act as a potential threat for global marketing. Firms engaged in international marketing tend to use cheap labour and raw material available at emerging markets. Hence, unavailability of such cheap labour will increase their production cost and increase in national disposable income will expand investment avenues within the country. This will lead to increase in establishment cost for foreign countries. Increment in the requirement of raw material in domestic market will lead to increase in price of raw material especially for foreign entities due limited supply (Lee and Carter, 2012). Spill over risk and global financial crisis Another economic issue that may affect international and global marketing in the next decade is the after effect of global financial crisis. Recession and economic down turn during 2008-2009 caused many wealthy nations collapse. The reason behind this was their ignorance towards taking corrective measures according to the economic need (Kotabe and Helsen, 2011). In spite of receiving of extensive bail out from countries strong economies, many countries are not been able to cope up with the loss till date. So, before involving in international global marketing, enterprises should consider potential threats prevailing in the economy as such recession may occur in the next business cycle as well. Many companies are suffering substantial financial losses that also hinder further global business expansion. Hence, trails of the economic turmoil in the last decade will continue to affect the international and global marketing in the next decade. Spill over effect arises as a result of monetary tightening. This also restricts inflow of foreign capital. Further, constant hike in inflation rate will prompt the central banks to keep interest rate high. This will in turn increase the cost of financing. Therefore, poor financial health of the companies from giant economies as well as incremental cost of financing will act as hindrance in the path of expansion for international and global marketing. Hence, global marketing players should take corrective measures well in advance in order to control these economic issues (Kotabe and Helsen, 2011). Cultural issues In the last decade, various cultural issues have been raised in the field of international and global market that may influence the structure of marketing in the next decade. Generally, multinational companies have to deal with cross cultural issues such that language barriers, difference in time and effective time management, dissimilarities (Mooij, 2011) in values and traditions. When a western company is coming to operate in Asia, they will have to adopt the work culture, values and ethics of the host country first. This may lead to slowdown of their productivity in initial days, but successful adaptation of culture is very important for the company for running their operation sustainably in the long run (Rao, 2006). For instance, American work culture puts stress in individual work but statistics says that around 70% of the global work force put emphasis on collective working (ICEF Monitor, 2014). Hence, in case of an America based MNC operating in Asian countries such that China or Japan, the company will have to adapt collectivism and motivated their existing employees as well in order to achieve required level of output. From global and international marketing perspective, certain cultural issues that may affect global marketing activities are: Ethical practices Difference in ethical practices, to be more précised, incidents of unethical trade practices can restrict potential issues that may affect international and global marketing in the next decade. The most common example of unethical practices is to provide small amount of money mainly to the governmental departments or foreign officials for violating some regulations. These practices can be seen anywhere but operating in the countries where monetary transactions are involved at a larger scale to influence policy formulations and the like, may prove to be poisonous for the parent organization. Apart from that, pricing can also be manipulated. Unfair differentiation in prices, using faulty invoices where buyer puts a price that is different from actual price paid to survive in local competition, dumping i.e. charging lower price for a product in home country and a higher price for the same product in foreign market can prove to be harmful for the organization. Organizations involved in international business takes strategies that may lead to tax evasion mainly in case of transfer pricing. The confusion regarding tax payment arises due to difference in culture of financial practices or to escape double taxation (Johansson, 2009). Finally, unsafe working condition, polluting environment, excessive use of scarce resources will lead to destruction of organization’s goodwill. These issues are already affecting global marketing to a great extend. Therefore, if not managed properly it will continue to hamper global marketing activities in next decade as well (Mühlbacher, et al., 2006). Cross culture marketing communications Cross culture marketing communication involves discovering potential markets which are viable for expanding business. This includes indentifying of the work culture of the company intending to do business and scope for bringing changes in support of marketing communication in the proposed country (Nakata, 2009). Chinese luxury market is a perfect example of the scope of cross culture marketing communication. Though this is a booming market, there is still enough room for giant market players to capture opportunities. It is expected that, by 2050, economies like Brazil, India, Mexico and Russia will flourish at such a fast rate that they will have the potential to outnumber today’s big economy such that Germany and the United Kingdom. Reformation policies taken by economies of Malaysia and Poland are also showing long term growth potential. Hence, firms engaged in global and international marketing must identify such potential markets to tap lucrative opportunities in the next decade (PwC, 2013). Conclusion As a result of a rapid expansion of the economies in developing countries, international marketing will experience a huge scope in terms of global business spread. Estimates are showing that economies of India, Brazil, Russia, India and China (BRIC) will account for 34% of the global GDP in aggregate by the next decade (ICEF Monitor, 2014). Their economies will be double in size and by 2020, it is expected that these developing countries will become so powerful that their economy can be compared to top ten largest economies in the world. Their total population is also expected to grow at three time faster rate by the period of time. Hence, there will be immense opportunities for international and global marketing to expand in the upcoming decade. Economic growth for any country can be accelerated only if the country successfully participates in international trade. This ensures the viability of global marketing in the next decade. Economic expansion enhances per capita income, purchasing power and improves standard of living which leads to increase in disposable income. These factors will drive to boost up global marketing. Rate of increase in population will also ensure constant availability in labour market. Therefore, if the organizations involved in global and international marketing can manage and control some basic economic and socio cultural issues as discussed earlier, they will experience huge expansion and growth potential in the next decade (PwC, 2013). Reference List Arouri, M., Boubaker, S. and Nguyen, D.K., 2013. Emerging Markets and the Global Economy: A Handbook. New York: Academic Press. Banherjee, M., Shukla, P. and Adidam, P.T., 2013. India: Culture and consumer behaviour influences on sales promotion practices in India. London: Routledge. Hollensen, S., 2013. Global marketing. Harlow: FT Prentice Hall. ICEF Monitor, 2014. The growing role of emerging markets in shaping global demand. [Online] Available at: [Accessed 4 Decemeber 2014] Johansson, J. K., 2009. Global marketing: foreign entry, local marketing, & global management. Boston: McGraw-Hill Irwin. Kotabe, M. and Helsen. K., 2011. Global marketing management. London: Edward Elgar Publishing. Lee, K. and Carter, S., 2012. Global marketing management: changes, new challenges, and strategies. Oxford: Oxford University Press. Mooij, M., 2011. Consumer Behaviour and Culture: Consequences for Global Marketing and Advertising. New York: Sage Publications Inc. Mühlbacher, H., Leihs, H. and Dahringer, L., 2006. International marketing: a global perspective. London: Thomson. Nakata, C., 2009. Beyond Hofstede: Culture Frameworks for Global Marketing and Management. London: Palgrave Macmillan. PwC, 2013. World in 2050: The BRICS and beyond: Prospects, challenges and opportunities. [Online] Available at: [Accessed 4 December 2014]. Rao, C.P., 2006. Marketing and Multicultural Diversity. Farnham: Ashgate Publishing Ltd. Read More