Introduction
Marketing entails making products that are desired by a certain section of the target population or consumer. Marketing in special fields include the marketing of services, agricultural marketing and international marketing.
International marketing which entails marketing across political boundaries, as well as the marketing activities of an enterprise that sells and/or manufactures goods and services within a given country when that organization is a subsidiary or is affiliated to another firm which is located in another nation (Kotler, 2006).
Multinational enterprises are involved in international trade since the business represents a major share of gross domestic product (GDP). This implies that these international corporations have multiple operation points that report to one headquarter, thus powerful enterprises that have an influence in the domestic economies.
Going multinational is deemed to bring some diversification gain to the corporation, and these can be elaborated as the company diversifies across “product space” and geographical space (Caves, 2007). This paper discusses the international marketing environment in relation to factors such as the cultural, political-legal, and economic forces that affect the selection of a potential market for foreign direct investments. The main concern of this analysis is in reference to Zimbabwe as a non western country.
Market Research
Market research involves identifying or analyzing opportunities that are available in the marketing environment. This research is performed in a view to identify customer’s needs and taste which forms a foundation for the production of an optimum marketing mix. In an international perspective, when analyzing the market there are some issues to be considered in relation to the marketing environment.
Forces both internal and external to the organization can affect its performance. The environments for international marketing include the political-legal, economic, social-cultural and technological environments; also known as PEST Analysis (Bogozzi, 1991).
According to Perner (2009), before entering international marketing, a firm needs to take into consideration the following decisions:
- whether to go abroad – does the firm possess the economic and marketing power? The marketing managers should be well informed of the opportunities in abroad markets.
- Which markets to enter – this requires proper market research on the current growing industries in the target market, competitors and culture.
- How to penetrate the market – a firm can opt to enter the market through exporting, joint venturing or direct investment. This depends on the knowledge about the local market and control over it.
- On an appropriate marketing mix – this phase involves implementing the correct marketing mix including straight extension, communication adaptation, product adaptation, dual adaptation and product invention.
- On a suitable marketing organization – a firm can be an export department, international division or a multinational organization.
Through exercising research, information about consumer behavior in the target country can be obtained in several ways. Kotler (2006) asserts that the study of consumer behavior enables a firm to determine how consumers make decisions to spend their resources.
Information about consumers is gathered through observation and interviews with them on an official (use of structured questionnaire) or informal (guided interview) arrangement. Such information includes customer perceptions about their needs and the likely future purchases. This can be intensive in case of international market analysis.
Another method is the focus group, in which a group of customers in a certain culture, region, age group or education level are analyzed to come up with information about their preferences and buying behavior. However, a firm may opt to perform an observation of the target market; how the consumers behave in relation to their buying decisions. Thus, a company can be able to enter the international market after a systematic market research.
International Marketing Environment
The marketing environment of an organization consists of the elements that affect the way the marketing functions are carried out. These forces also influence the domestic and international marketing decisions made by marketing managers in regards to making products that are desired by consumers in the targeted countries. In reference to Zimbabwe, forces that affect direct foreign investment include social-cultural, political-legal, economic, demographic, and technological.
Economic Environment
Since markets involve the purchasing power of buyers and sellers, the economic conditions must be analyzed in a view to make the right marketing decisions. Economic circumstances influence the way in which a firm performs its marketing operations; bad economy leads to negative impacts on the organizational strategy.
Marketers should be able to forecast on the economic conditions in the domestic and international markets in the nearby future. The issues to consider here are the levels of new industrial growth, impact of fluctuations on exchange rates and the major economic indicators of a country; for instance the Gross Domestic Product (GDP), inflation and employment levels, global economic interdependence and trade agreements (Bennett and Blythe, 2002).
The level and distribution of income and industrial structure varies among nations. Income distribution of a country can be considered as very low, mostly low, medium, high, or very high. In the case of Zimbabwe, the rate of economy is very and there is a high inflation rate. Investing in Zimbabwe requires a larger profit that can sustain the business uncertainties.
Knowing the income distribution enables companies to produce goods and services that can be affordable in various market segments. Consequently, companies need to know the consumer expenditures and their spending patterns. Consumers spending are influenced by funds, debt, and credit accessibility.
For instance, the saving rate for the Japanese consumers is over 10% as compared to that of the U.S consumers, which is less than 10%. This implies that banks in Japan can offer loans to companies at a lower interest rate as compared to U.S, hence faster business expansion. Thus, marketers must take into consideration the main changes in cost of living, interest rate, incomes, and savings patterns because they can help in positioning products according to the level of income.
Furthermore, the global economic interdependence enables companies to have access to markets of different countries. This is due to the regional trade agreements that are set by organizations such as Word Trade Organization (WTO). Trade agreements like the European Union (EU) and the Asian-Pacific Economic Cooperation (APEC) ensure that companies falling under the member countries are able to enjoy free trade. In this regard, companies are forced to produce and market products that satisfy the conditions set by the agreements. It is essential for companies to realize that the world is moving towards a global economy, thus there is need to take advantage of global economy through international marketing (Peter & Donnelly, 2008).
Exchange rate influences the flow of investment across different nations (Carbaugh, 2004). Investment flows or rather foreign direct investment (FDI) has become an important source of investment in countries involved in international trade. Thus, FDI is sensitive to the exchange rate of countries. The link between the dollar’s exchange rate and investment flows, and the effect of these investments occur when there are changes in the domestic costs and asset prices.
The investment flows of a country like Zimbabwe is beginning to rise due to belief that its current economic instability will not last for long (Childress, 2007). It means that there is depreciation in exchange rate. This suggests that the cost of domestic production and assets in the host country shall be low, making such investment in the local economies more attractive to the multinational enterprises.
Consequently, decrease in exchange rate also increases the aggregate wealth of foreign firms, making it simple for foreign enterprises to use the much affordable financing to acquire domestic assets. Furthermore, the investment inflows may not only depreciate the exchange rate, but also bring about variability in the dollar’s exchange rate.
Demographic Environment
Population size and distribution patterns are the major elements in demographic environment. In Zimbabwe, many people live in rural areas with few people having large portions of land. Most employment opportunities are in urban areas like Harare and thus income from small scale farmers represent a smaller percentage in the economy.
Demography is normally important to a marketing manager because people with purchasing power constitute the market. Marketers need to analyze the age mix, gender, educational levels, and population distribution of different cities, regions, and nations in order to come up with marketing strategies that favor all the human generation.
More so, the population distribution is influenced by the physical infrastructure such as telecommunications, roads, railway lines, and airstrips. These capabilities enhance the way business is carried out and thus a company can be able to reach out to many consumers in various regions or nations (Perner, 2009).
Moreover, understanding demography enables marketers to formulate segmentation strategies in line with population distribution. Bennett and Blythe (2002) comment that, “Some foreign customers will be more interested in purchasing the firm’s product than others, so it is convenient to discover the type of consumer most likely to purchase the firm’s output in terms of such variables as consumer age, sex, income, family size, living standards, buying habits…” (p.190).
Social-Cultural Environment
Society and culture vary across various marketing environment. People have different beliefs and values that guide their day to day consumption. “People absorb a worldview that defines their relationships to themselves, to others, to organizations, to society, and to the universe” (Kotler, 2006, p.176).
Thus, marketing managers may be challenged with the different cultural norms, language, aesthetics, attitudes and values, the religion of major importance, and socialism. These cultural variables imply that different commodities are required to satisfy the customer needs.
Additionally, in ensuring that their products and services are well received by customers, firms ought to consider the ethical norms that direct various cultures (FAO, 1997). For instance, in Zimbabwe, elderly people are cared for by adult children. In distribution policy decisions, one organization within the channel may be holding the highest degree of control.
Producers may sideline small retailers, or even the powerful retail chains might take advantage of manufacturers. For instance, the slotting allowances are in favor of retailers due to their purchasing power in demanding the allowance from the manufacturers.
From an ethical view, this allowance has been heavily criticized as ‘ransom’ or ‘extortion allowances’ as it transfers ownership of the product. Another aspect of distribution that presents ethical issues is direct marketing. The increase of electronic media usage, such as on-line information systems and direct mails leads to the questions regarding privacy, confidentiality, and intrusion.
Also the grey markets, selling through unauthorized distribution channels or rather parallel importing violates the marketing code of conduct. This can induce a consumer to make purchase for non- essential commodity because of the availability. Therefore, both legal and ethical issues associated with marketing decisions must be examined by the marketing managers.
Political-Legal Environment
The political environment comprises laws, government bureaus and pressure groups. Legislation of international government policy exerts much influence on the marketing activities of a firm and thus calls for a relationship between the countries.
However, if there is any bad relationship between the countries involved, then problems may arise in setting up the market. Like in Zimbabwe, the current political imbalance may be a barrier to negotiations. The communities and unions for trading also influence the analysis of the market in several political boundaries, considering the varied nature of politics in the targeted countries.
For example, the EU and its power in European laws and regulation influence the way business is conducted in the member countries. Subsequently, the imposition of trade tariffs and quotas faces marketing managers with additional dimension of international development as they need to concur with the policies set by different regions or nations (Bogozzi, 1991).
For instance, the Foreign Corrupt Practices Act established in 1997, with a view of eliminating bribery in business enhances fairness in the market. In this regard, companies are free to engage in open dealership and could improve the overall organizational image (Berck, n.d). Therefore, companies must operate within the many laws regulating business practices and with different market segments.
Technological Environment
Technology has remarkable impact on consumer lifestyle, expenditure, and well being. Technologies like the computer hardware enable companies to start industries dealing with computer systems. More so, the internet has made it possible for the world to be seen as a global village.
Moreover, technological laws may be different in the targeted country and thus there is need to ensure that the firm’s technology conforms to the local laws: for instance, the version of the software to be incorporated in business. Companies need to take advantage of the internet technology to market their products and implement strategies that bring value to the firm, hence gaining a competitive advantage.
Marketing firms and research institutions also play an important role in technological advancement. Many have their own study programme or support research through academic institutions, leading to development of new equipment and novel application productions. In essence, marketers should take into consideration the rapidly changing technology, opportunities for innovation, and increased government regulations brought about by advancement in technology (Kotler, 2006).
Diversity of Multinational Enterprises
There are several ways in which organizations venturing in direct foreign investment use or can use to diversify their operations . First, multinational corporations have been able to diversify their operations through market penetration. Multinational enterprises use the strategy of segmenting markets so as to meet the requirements of their customers in regard to products and services across nations. The major segmentation strategies used by these businesses include:
- Demographic segmentation – this strategy arranges the market according to demographic variables such as age, education, gender and income. It is viewed that consumer needs changes with age, thus there is a need to adapt the marketing mix that caters for this. Also there are different product lines based on sex.
- Geographic Segmentation – categorizes market according to cities, regions, or countries. Factors such as language, climate and culture are taken into consideration in implementing this strategy.
It is commonly used by global businesses. 3. Psychographic segmentation – people in a particular demographic class have a variety of attitudes. This challenging strategy as it requires a measure on the motivations leading to a behavior. 4. Behavioral group segmentation – the variables here include brand loyalty and income. Business need to establish the time, period and ways in which a certain segment of customers consume products. Understanding the buying practice helps marketers segment their business (Kotler, 2006).
Second, multinational corporations have desirable brand names that enable them to diversify their operations. Branding is important in international marketing, for instance Nike, Adidas, Tommy Hilfiger, Nivea and Toyota are some of the international brand names that act as trademarks of the manufactures of their respective products. Brand name is also viewed as a means of gaining a competitive niche in marketing.
Thus the benefits of branding for different markets can be experienced in various perspectives. To the seller: the brand name enable the company to process orders and track down problems easily, it provides lawful security of unique product features which can be imitated by competitor, it offers a chance to attract a loyal and profitable set of customers and it enhances the company’s corporate image.
To the distributor: it makes the product easier to handle, it helps in supplier identification, helps in holding production to certain quality and increases buyer preferences. To consumers: it helps them identify product, for example Puma can be easily identified as a sport ware product, the brand name also help them identify quality differences and hence shop effectively.
Third, having reputable international relations with the partnering countries like Zimbabwe, enable multinational corporations to expand their operations. Recently, Zimbabwe has been able to offer tax breaks and assistance to investors. This is a sign that should be considered when investing in such nations. These good relations enable international corporations to invest in many nations (Caves, 2007). The fourth way in which multinational corporations diversify their operations is through encouraging local capacity building.
This involves co-operation with the domestic society, such as business interests, and creating enterprise’s operations in local and foreign markets, in line with the need for good business conduct. Fifth, multinational corporations encourage business partners and mergers which include suppliers and sub-contractors. This enables the corporations to sustain and apply effective management principles, thus diversification. In essence, investing in the Zimbabwe’s economy requires taking risks.
Conclusion
In venturing into foreign direct investment, marketers must be conversant with the marketing elements in international marketing. Starting with market research as the basis for entering into an international market, companies need to make proper decisions on whether to go abroad, how to enter markets, appropriate marketing mix and a suitable marketing organization. There is also the need to appreciate consumer behavior in various markets.
For the purpose of targeting strategies, proper analysis of the target country’s market opportunity must be put in place to ensure the right market segmentation and proper product branding is followed. In light of this, there is also the adaptability of ethical norms in the marketing perspective; this enables marketers to gain a competitive advantage in their marketing mix. Looking at nations like Zimbabwe, as a third world country with economic and political instability, marketers should critically consider the forces that affect their venture.
The various environmental forces that affect marketing decisions include economic, demographic, social-cultural, political-legal, and technological. Economic forces are brought about by the purchasing power of consumers and the global economy. Demographic factors include population distribution and people categorization.
On the other hand, social and cultural forces are influenced by the values, norms, and lifestyle of different societies. The political-legal environment includes government policies, regulations, and acts set by different nations. In technological arena, the advancement of internet and computer technology enables marketers to rethink on their marketing strategies.
References
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