4.6 International marketing

Full video class on YouTube, summary and notes on Instagram, class extracts on TikTok, text below. Have fun!

The main point of this class is to understand how international marketing can be an opportunity and a threat at the same time.

International marketing refers to marketing across the borders. There are many ways how to enter international markets and operate in them. Some of the ways that we will learn in this class are exports, e-commerce, external growth and foreign direct investment (FDI). We are going to discuss the pros and cons of different ways to enter international markets and of operating internationally, but overall, international marketing is a chance to earn more and to diversify risks: if sales in country A are not high enough, perhaps sales in country B might compensate for that. However, the “price” that businesses have to pay for international marketing is having to deal with and rely on foreign partners, be it governments, or domestic businesses, or distributors, or other stakeholders.

International marketing is something that is concerned with external business environment (factors outside the business, including operating in international markets). STEEPLE analysis from the Toolkit is a business tool that might come in handy while examining the opportunities and threats of international marketing.

In order to achieve the objective of this class (to discuss the opportunities and threats posed by international marketing), I am going to tell you about the four ways to enter and operate in international markets and you are going to fill in the table below.

Exports refer to sending products to another country for sale. It means that something is produced in country A and sold in country B. For example, Saudi Arabia is the largest oil exporter. One of the opportunities that exports provide is not having to rely on foreign partners too much. Besides, there is no need to invest in a foreign country. Exports is simply sending products for sale abroad. The ties with foreign economies are not too close. With regards to threats, exports mean that the exporter has to deal with distribution and is very much likely to face protectionism, for example, quotas and tariffs. In addition, exports highly rely on and are affected by currency exchange rates that might work in favour of exports as well as against them.

E-commerce means buying and selling products online. Some if the e-commerce platforms in different countries are Taobao (China), Shopee (Southeast Asia), Wildberries (Russia), Amazon (USA). On the one hand, e-commerce is cost-efficient because the costs of developing an e-commerce platform are relatively low compared to external growth methods and FDI (see below) but the outcomes might be extremely fruitful despite relatively low costs. Additionally, businesses might be able to use established distribution channels in other countries, so there is not necessarily a need to build distribution channels from scratch. On the other hand, intense competition, language and culture barriers, and payment methods are some of the threats that are associated with e-commerce. For example, in Western countries, Visa and Mastercard are the most common payment methods. However, in China, Weixin (WeChat) and Alipay are the two most commonly accepted ways of cashless payments and people use Visa and Mastercard only when they travel to the western countries. I’m sure most Chinese people don’t even know what Visa and Mastercard is.

External growth is something that we have already learnt in Unit 1. External growth methods that we learn in class 1.5 are mergers and acquisitions (M&As), joint ventures, strategic alliances, and franchising. Please check out that class if you have no idea what these things are. Some examples of external growth methods that also refer to international marketing are BMW Brilliance Auto (joint venture), Sky Team (strategic alliance), and Subway (franchising). Some of the opportunities that external growth offers are access to larger markets in other countries, economies of scale, “friendlier” legislation that might allow to cut some costs, avoiding protectionism and access to cheaper labour. What’s important here is that through external growth to international markets, organisations are basically registering their business in a different state. So the main threat that comes with all the benefits I mentioned above is actually having to run a business in a foreign state. To be more specific, it comes with new legal constraints, reliance on foreign partners, and potential cultural clash.

External growth is a quite a nuanced concept. In addition to overall opportunities and threats above, I highly recommend you to review 1.5 and see the individual pros and cons per external growth method: M&As, joint venture, strategic alliance and franchising.

Foreign direct investment (FDI) is purchase of an asset (e.g. factory) in another country. The top recipients of FDI over the past several years have been the US and China (no surprise here, haha). On the one hand, FDI is a long-term way of entering international markets, so benefits of international marketing are long-term if FDI is the way to go. Additionally, similar to external growth, FDI helps to avoid protectionism. On the other hand, FDI is relatively expensive and time-consuming, if we are talking about building a factory from scratch in a different country, for example. In addition to that, from the host country perspective, repatriation of profits is one of the major threats: whatever profits are made, they are usually sent back to the country where the organisation originates from.

As a summary of different ways to operate internationally, let me point out that the more involvement with foreign markets different organisations experience, the higher the risks and costs are but also the higher the chances to reap the benefits in the long term are. And vice versa, the less involved in international markets organisations are, the lower their risks and costs are, as well as the long-term benefits. Usually, FDI and external growth are “expensive” long-term strategies to enter and operate internationally, and e-commerce and exports are short-term and “cheap”, compared to the former. Thus, one of the most important factors in deciding how to enter international markets and operate in them is the extent to which organisation may rely of foreign stakeholders in the long term.

In the previous class, we talked about international marketing a little bit and learnt that organisations have to adjust their marketing strategies in different countries because of the cultural differences. Businesses often try to “think globally and act locally”. This process is sometimes called “glocalisation” (globalisation and localisation put together).

Make sure you can define all of these:

1. International marketing
2. Exports
3. Protectionism
4. E-commerce
5. External growth
6. Foreign direct investment (FDI)
7. “Glocalisation”