What make markets are the differences in the marketing environment. Such strategic decisions as whether a company should enter a given foreign market or not, what market entry strategy should it employ, what strategy it should adopt in respect of product, promotion, pricing and distribution, etc. are based on two sets of factors, viz., the company related factors and the foreign market related factors. The decision as to whether to go international or not is based, in addition to the above two, on yet another set of factors, viz., the domestic marketing environment.
The company related factors refer to such factors as the company objectives, resources, and international orientation. The domestic marketing environment consist of factors like growth prospects including the competition, government policies etc.
The foreign market related factors which are relevant to the international business strategy formulation or which affect the international business are often described as the international business environment.
What makes a business strategy which is successful in one market a failure in another market is often the differences in the business environment. In other words, the differences in the business environment may call for changes in the business strategies, i.e., there should be adaptation of the business strategy to suit the environment of the market.
In short, it is the differences in the marketing environment which may make the international business strategy different from the domestic one.
It may be noted that significant differences in the business environment may exist even within a country, particularly if the country is geographically very vast, very populous and multi-cultural. The differences in the level and nature of industrialization between different states and different regions within the states and preferences, beliefs and customs etc. of the different cultures may vary. Dissimilar weather and climatic conditions, topographical factors etc. could also be decisive factors.
In short, the basic thing is not whether the market is domestic or international but whether the business environment of the different markets is similar or dissimilar.
However, in many cases the differences in business environment between nations are often more substantial than within a country. A detailed analysis of the business environment of the foreign countries is, therefore, an essential pre requisite for formulating international business strategies.
There are hundred of cases of market failures emanating from the failure to properly understand the market characteristics and their implications for marketing and the resultant ill conceived marketing efforts. An analysis of the experience of leading American firms in the major markets of the world has identified that â€œthe outstanding marketer is keenly aware of the variations from one market to another. He never thinks solely in terms of â€˜the common marketâ€™. He knows that countries, and even sections of countries, differ enormously in almost every factor critical to his market planning.
The key to successfully international business is adaptation to the differences in the environment that usually exist from one market to international marketer to anticipate the influences of both the foreign and domestic uncontrollable environments on a marketing mix and then to adjust the marketing mix to minimize their effects.
The root cause of most international business problems is the self reference criterion (SRC) in making decisions, that is, an unconscious reference to oneâ€™s own cultural values, experiences and knowledge as the basis for decisions. The SRC is one of the most difficult to break.
There are a number of examples of even mighty multinationals tasting bitter failure because of their failure to adapt to the idiosyncrasies of the foreign markets. For example Procter and Gamble (P&G) stormed into the Japanese market with American products, American managers, American sales methods and promotion strategies. The result was disastrous until the company learnt how to adopt products and marketing style to Japanese culture. P and G which entered Japan in 1973 lost money until 1987 but by 1991 Japan became its second largest foreign market. Similarly, the American company Texas instruments which started making semiconductors in Japan in 1961 took American approach to hiring, pay and benefits, dismissing the Japanese system of offering bonuses two times a year as impractical. The workers disagreed. Morale crumbled and the company had trouble recruiting employees. Later, when the company adopted the Japanese methods of recruiting and reward including bonuses and a promotion system based on seniority, the situation vastly changed and in 1985 it won the Deming prize for quality control, in Japan.