International Marketing

An auto-parts maker in Pune finds orders flat at home, while a buyer in Germany asks for a quote. Selling abroad looks like easy growth, but it brings a new currency, new rules and customers who want different things.

It applies the same marketing principles across national borders. Global leaders such as Coca-Cola, Samsung, Honda and Sony draw on advantages in R&D, scale, global logistics, marketing expertise and finance. Supply chains are global too. Kotler and Keller's example is Otis Elevator, which drew door systems from France, gears from Spain, electronics from Germany and motors from Japan, with systems integration in the United States.

Going abroad in stages. Most firms do not start by building a factory abroad. They move step by step, and commitment and risk rise at each step.

This stepwise pattern follows the Uppsala studies of Swedish firms (Jan Johanson and Finn Wiedersheim-Paul, 1975). For the Pune firm, an illustration: it first ships through an export agent (stage 2). As orders grow, it sets up an export department and a sales office in Germany (stage 3). Years later it may build a plant there (stage 4).

The global marketing process runs in five steps, whatever the stage.

In step 3 the firm decides how far to standardise its marketing mix, keeping it the same in every country, or to adapt it to each one. Standardising saves cost; adapting fits local tastes, rules and incomes.

Don't confuse international marketing with exporting. Exporting is one way to enter a market. International marketing is the whole job: choosing markets, choosing how to enter, and adapting the product, price, promotion and distribution for each.

Where it breaks. The stages describe many firms, not all. Software and online businesses often sell abroad from their first years; researchers call them born globals. Other firms skip stages by buying a foreign company outright.

For exams. Know the four stages in order, the Uppsala link (Johanson and Wiedersheim-Paul, 1975), and the five steps of the global marketing process.

Go deeper for practitioners

Why stages happen. The Uppsala model explains the steps by learning. A firm knows little about a foreign market, so it commits a little. As it learns, uncertainty falls and it commits more. Jan Johanson and Jan-Erik Vahlne set this out as a model in 1977, and later revised it to stress business networks.

A decision. The Pune firm's German buyer wants a supplier with local stock and service. An agent cannot give that. The firm must judge whether German orders are steady enough to pay for a sales office, or whether it should wait a year and learn more through the agent.

Links. International strategies, such as multidomestic, global and transnational, are covered in Cooperative, international and retrenchment strategies (Unit 6).

Domestic, agents, subsidiaries, production abroad.

A Kolhapur footwear maker can afford to enter one or two countries this year, not twenty. Which ones, and in what order?

Firms weigh four things: product suitability, geographic proximity, economic potential and political stability. Many prefer psychic proximity: countries with a similar language, culture and legal system. US firms, for example, have often entered Canada, the UK and Australia first.

Scoring the choices. A simple way to compare markets is to score each from 1 to 5 on the four criteria and weight them. An illustration with three unnamed countries:

Country A: 4 × 0.3 + 5 × 0.2 + 3 × 0.3 + 4 × 0.2 = 1.2 + 1.0 + 0.9 + 0.8 = 3.9. Country B: 0.9 + 0.4 + 1.5 + 0.6 = 3.4. Country C: 1.5 + 0.6 + 1.2 + 0.4 = 3.7. The near, familiar market A wins, although B has the largest economic potential.

In what order. Once the list is chosen, the firm decides whether to enter one country at a time or many at once.

Waterfall one country after another

Sprinkler many countries at once

Emerging markets, notably the BRICS economies, offer untapped demand, high growth and an expanding middle class. The acronym stands for Brazil, Russia, India, China and South Africa; the group has since admitted more members. Winning there calls for affordable prices, adapted products and local marketing. Unilever's small, affordable sachets and Colgate-Palmolive's video vans touring rural India are the textbook examples.

Don't confuse psychic distance with geographic distance. Geographic distance is kilometres. Psychic distance is how different the market feels. A far country can be psychically close, as the UK and Australia are for US firms, and a neighbour can be psychically distant.

Where it breaks. Scores and weights are judgements, and changing a weight can change the winner. Psychic proximity can also mislead. A market that feels similar can lead a firm to underestimate the real differences; researchers have called this the psychic distance paradox. A sprinkler launch works only when the firm can afford to support every market at once.

For exams. Know the four criteria, psychic proximity, and the waterfall and sprinkler approaches with their examples.

Similar markets first, or many at once.

The Pune auto-parts maker now has steady buyers in Germany. It can ship through an export house, run its own exports, license its design, form a joint venture, or build a plant. Each option puts more at stake and gives more say.

Kotler and Keller arrange entry modes in order of increasing commitment, risk, control and profit potential.

Licensing against a plant, in rupees (illustrative numbers). Suppose a German licensee sells ₹10 crore a year of parts made to the Pune firm's design and pays a 5% royalty. The firm earns ₹10 crore × 5% = ₹50 lakh a year, with almost no investment. Alternatively, the firm builds its own plant for ₹20 crore. If the plant makes a profit of ₹2 crore a year on the same sales, the firm earns four times as much (₹2 crore ÷ ₹50 lakh = 4). But it needs ten years of profit to get its ₹20 crore back (₹20 crore ÷ ₹2 crore), and it carries all the risk.

Joint ventures bring local expertise, shared resources and easier government approval, and have been common in China and India. FDI gives full control, lower production cost in some markets, a strong local image and better market access.

Don't confuse licensing with franchising. A licence gives the right to use one asset, such as a patent, process or trademark. A franchise is a fuller form of licensing: the franchisee gets the brand and the whole way of running the business, and must follow it.

Where it breaks. The order is a broad rule, and licensing breaks it: it sits third, yet the table shows low investment and low control. Joint ventures often run into disputes between partners over control, profits and strategy. Direct investment exposes the firm to political and currency risk in a country it cannot leave cheaply.

For exams. Know the five modes in order, and the trade-off: more control and profit potential come with more investment and risk.

Go deeper for practitioners

A decision. The Pune firm's design is its main advantage. Licensing earns money fast but teaches a German firm how to make the part; in a few years that firm could compete. A joint venture with a German distributor gives local knowledge and shares the cost, but the partners must agree on prices and profits. A plant gives full control at the highest risk. The first question is how easily the design could be copied: the easier, the stronger the case for keeping control.

Links. The stages of internationalisation in Going international follow the same rising order of commitment. Franchising in retail is covered in Retail marketing (this unit).

Export, license, joint venture, invest: more commitment, more control.