The opportunities affordable by the various overseas markets must be carefully evaluated, keeping in view the resources, distinctive capabilities and constraints of the firm. Market segmentation and market targeting are concepts as useful in international marketing as they are in domestic marketing. Through careful market selection, the opportunities can be fully exploited and the risk involved in International business minimized.
Product selection is as important as market selection. Quite often, the sheer desire for expansion pushes some firmsâ€™ international marketing. These firms try to somehow push the products they already have into some foreign markets. Sometimes, a feeble attempt is made to adapt the product to the market, but in most cases, even that feeble attempt is dispensed with. Even the well-established multinational corporations sometimes commit such â€˜product mistakesâ€™ and simply transfer products developed for home markets to overseas markets. They forget that products, especially consumer products such as foods, soft drinks, cosmetics and personal care items require some degree of product adaptation, since these products are extremely sensitive to cultural differences. In fact, all aspects of the product such as the basic product constituents, the secondary features, brand names, packaging, package protection, package aesthetics, package size, labeling, and usage instructions may need adaptation, depending on the situation; they have to be matched with the needs of the specific overseas markets.
Selection of Distribution Channels:
Choice of the right distribution channel in the selected foreign markets is the next task. Some of the possible alternatives in this regard are:
* Appointing an importing house of the buying country as the sole dealer/marketing agency.
* Appointing a few selected importers instead of a sole importer.
* Going through an export house of oneâ€™s own country.
* Operating oneâ€™s own branches in the foreign countries.
* Operating subsidiary companies in foreign countries.
* Tie-up with a multinational marketing firm.
Each of the alternatives has its associated advantages and limitations. The choice mainly depends on the scope and scale of the marketing operations envisaged by the firm.
In actual practice, international marketers are often required to cope with a wide range of problem in the matter of distribution. As the producer and the foreign consumer are separated by a vast distance, efficiency of distribution channel becomes all the more essential in the international marketing context. Efficient distribution alone can mitigate the effect of geographical separation. So, selection of distribution channel becomes an important decision area in International marketing.
In addition to channels which formally do the distribution job, there are several agencies which play a role in facilitating the process of international distribution. These agencies include finance and credit institutions, insurance agencies, shipping agencies, freight forwarders, customs expeditors and warehousing agencies. These agencies provide services in areas like physical distribution, handling, storage, communications, finance, insurance, etc.
Basically the principles and techniques of pricing are the same in domestic and international marketing. Firms, which have only a short-term interest in the foreign markets, may opt for a â€˜cost plusâ€™ pricing strategy. But firms with long term interests cannot blindly follow this strategy. Instead, they have to necessarily adopt a market-oriented pricing policy.
Many Japanese firms have built markets worldwide, starting with a low price-low margin strategy, with the sole intention of penetrating the market and building up volumes and market shares. They establish their products/brands through such a strategy and only later they use them to bring home profits. For instance, Sony of Japan while launching the portable stereo Walkman consciously priced it very low to ensure that it was affordable to the youth worldwide. In some other cases, pricing is used to counter a formidable global competitor. Komatsu, the Japanese earthmover equipment firm used price and all other marketing mix elements to attack the US major, Caterpillar Tractor. The whole strategy of Komatsu was woven around the mission: surround Caterpillar. In yet other cases, while entering new markets, many established MNCs find that quite contrary to their assessment, their high priced ,high image brands just will not sell. Brands like Nike and Reebok faced this situation in the Indian market. These companies had to stretch down and introduce products to suit the mid-price segment. In fact, as a firm grows and establishes in several nation markets, it gains more flexibility in pricing; it can cross-subsidize markets, leveraging the strength in one market to support its entry and development in the new markets.
Mastering the procedural complexity:
The international businessman is required to master a variety of procedural complexities covering a variety of areas like export-import licenses, customs, foreign exchange, modes of payment, documentation (invoices and other documents), shipping / air freight procedure, insurance regulation, quality regulations and packaging regulations.
The point is that the firms have to take into account the conditions in each country and in each distinct market segment and formulate appropriate pricing policies. Though for a vast spectrum of products, market mechanism decides the price, there are several countries where the state administers the price foe selected commodities. In some other countries, government agencies function as sole buying and distributing agents. In yet other countries, multinational price agreements are operating for selected items. The international marketer has to adjust his pricing policies to all such factors.