Describe about the concept of internationalisation?
The study is done to understand the concept of internationalisation. Thought the concept of internationalisation is huge and it contains various elements the study is interesting and intensive. The main component of internationalisation is international marketing. All the elements that revolve around international marketing are discussed thoroughly. The importance of internationalisation is revealed with proper understanding. The study also leaves scope for further discussion on the topic. The nature of the topic is wide and it gives a proper understanding of business and its conduct at world arena.
The process of Internationalisation of firms and their export development is a widely accepted concept. Internationalisation is the basic concept of taking a business on a global platform. A lot of challenges and insecurities surround the pathway of internationalisation. Internationalisation is a wider concept that includes many attributes. International marketing is one of them. International marketing is a very important concept of internationalisation that takes into account all the steps that helps a business firm to expand globally. International marketing is actually the appliance of marketing principles globally. It is based on the expansion of a company`s local marketing strategies. The companies pay special attention to identify, target and take decisions globally. International marketing executes the conception, pricing, promotions and all the strategies that are needed to make a business stand globally. It aims to sell and distribute products and services all over the globe successfully.
1. Profit Maximization: The basic motive of every company that goes international is to maximize its profit. The markets that are profitable for the company are selected and then ventured.
2. Expansion: The companies always have a motive to expand their business and acquire the global arena.
3. Government Policies: The policies in some countries encourage their business houses to expand globally and bring home foreign currencies. In many developing countries the cost of production is low and companies try build up their production units there because of low cost of labour and raw materials. In this case, both the countries are benefitted (Erratum, 2014).
4. Monopoly: In some international market the importance of some products are huge. For example if any product has a new technology or the idea is new or the raw materials used are unavailable anywhere in the world the importance of such goods are very high and the company can sell them at a very profitable rate and become a monopolist (Dolnicar and Lazarevski, 2009).
The technology is advancing at a very speedy rate and the cultural and geographical barriers are fading away. The small business this days aim to spread them and go worldwide. The organizations this days concentrate a lot on Supply chain management with a strong supply chain management the companies can sell their products anywhere anytime. The distribution channel is the most important source to carry out a business globally. The basic concept of international marketing is exchanging goods and services in the international market involving international buyers and sellers. Organisations have to accept the differences in the international barriers like languages, religions etc. The companies can make their products globalized before selling them on the global markets. The customers in the foreign markets are unknown people so knowing their tastes and preferences is a huge task. Prior to venture into a foreign market, the companies always take up an intensive marketing research task. There are various other relevant information that a company can seek to like the potential market size, type of competition existing in the market, prices, promotional differences and all the cost that would be incurred. Companies need to consider both short-term and long-term plans and target the markets accordingly (Clifton, Comín and Díaz-Fuentes, 2011).
When a company tries to enter a market in foreign market it has many options and opportunities to explore. The opportunities vary from costs and degree of control and risk. In the riskier markets, the companies try to expand less and invest less. The easiest way to enter foreign markets is by exporting. Exporting can be done by direct or by indirect method. The complexities of venturing into foreign market arise with joint ventures (Journal of International Marketing, volume 19 / number 3 / 2011, 2011).
The key focus area of international marketing:
1. Marketing: the company needs to decide its target country or countries where it wants to expand its market.
2. Segmentation: the company has segment the market and differentiate its potential customers from others.
3. Channels of distribution: Entering a foreign market is not an easy task. The company has to decide its route to the market. Either direct or indirect entrance i.e. with the help of intermediaries or directly or with the support of the government.
4. Sourcing: Where to get the products? Whether to buy or to make?
5. Control over the business and investment: venturing into the foreign market requires to make a decision on investments, partners, total control on the company etc.
Marketing mix comprises of the 4P`s. This 4P`s are product, price, place and promotion. After the company has decided the place of expanding its business it has to estimate many other factors included in product, price, promotion (Cadogan, 2012).
Product: Before venturing into the market the company has to understand few things about product support. These elements are labelling, packaging, manufacturing, product management, product specification, market information. These are relevant things about a product that should be significantly estimated before venturing. The value of the product must be very good in the new market or else there is no point in selling them as the buyers would not find anything new or interesting (Clifton, Comín and Díaz-Fuentes, 2011).
Price: Price is an important factor because customer always seeks a product high in value and less in price. The companies have to be very conscious about the pricing strategy. The pricing strategy depends on the nature of the product. If a product is newly introduced or the technology is new, then the company can play in the monopoly market. If the product is already existent in the market, then the company must give extra value to the product so that the customers can differentiate it from the regular ones. The company can estimate the various pricing strategies before establishing price of the product (Chen, 2011).
Promotion: To establish a product in the market the companies will have to promote the products. An extensive market campaigning would be necessary to make the product liked by the foreign market. The various tools of promotion are advertising in the electronic media, exhibitions, trade shows, agent commissions, literature, direct mails etc. If the customer could see the extra factor in the product because of the promotion, then the chances are that it will boom in the market. Promotion is a vital tool of marketing. Promotion actually takes a full-fledged product to its customers (Cateora, Gilly and Graham, 2011).
There are other elements too, which are equally important like the marketing mix. These elements are like inventory support, Distribution support, Service support, and financial support. The points are discussed in the explanations below.
Inventory management: Inventory management in a foreign location is an important factor. The company supplies its products to the markets and their ware housing is a huge cost.
Adaptation and standardization of marketing strategies: Before going global, the companies should standardize their marketing strategies, which would help them to acclimatize in the foreign market. The buying behavior in the international market varies very frequently. For example, a market may take a pair of denim jeans as a commonplace but the other market may take it as a luxury. Hence, the seller has to be very profound in selling his goods. The strategies have to be planned in such a manner that the consumer tastes and preferences are met in every market. Adaptation may be referred as being acclimatized to a particular market whether niche or lower. The companies have to adopt strategies as per the need of the market. If the market is niche the company will have to spend a lot in its quality of production and standard of marketing but in a lower segment of market it does not have to do spend much. Standardization refers to standardizing the product and marketing strategies to gain customers from a niche market. Here the tastes and preferences of customers are very high. In order to meet the needs and demands of these customers the companies have to strategically standardize its products and quality. Adaptation enables the companies to succeed in all the market it is operating. It is very necessary to understand the buying behavior of the customer. The local needs of the customers can only be met by doing proper surveys and marketing research (Bothma and Burgess, 2011).
The selection of a market and analyzing the opportunities threats included in the market determine the strategies that would further be needed by a company to survive in that market. It is very necessary for the companies to do an analysis of the environment and analysis of the market. The competitors of the market have to be analyzed who sell the same products and services. Other important factor is the selection of distribution channels.
The dominant logic of marketing of marketing in which there exists a co-creation of values by both the company and the customer is service dominant logic. It mainly focuses on service providing and building relationship with the customer. International marketing is a very critical issue these days. A foreign marketer has to keep a lot of social and environmental issues in mind before taking the decision of expanding globally. Companies are undertaking a lot of environmental issue in the foreign market and serving them as friends. This is the creation of value. This helps creating relationship with the foreign market. Many software companies look into the matter of social and environmental issues and help the local people to live in prosperity. This days business houses believe more in creation of values than just earning money in the foreign market. It is a very positive aspect of international marketing that helps them acquire markets in many countries. This has become an international marketing concern (Bianchi, 2011).
1. Political and Legal Variations:
The legal and political background of foreign markets is dissimilar. The intricacy generally increases as the numeral of countries in which a company does business increases. The political and legal surrounding is not the same in all states of many home markets.
2. Cultural variations:
Cultural difference cause one of the most complicated problems in international marketing. It is vital to recognize cultural differences to invent successful marketing strategies. However, many domestic markets are also not free from cultural miscellany.
3. Currency unit differences:
The exchange unit fluctuates from country to country. This may sometimes arise problems of currency convertibility, besides the issues of swap rate fluctuations. There may be differences also in the monetary system and regulations.
4. Language disparity:
An international marketer often sees problems due to language variation. Even when the same language is used in different countries, the same language or language may have various meanings. However, the language problem is not something strange to international marketing.
5. Marketing communications Differences:
The ease of use and nature of marketing services available in different countries may vary broadly. For example, an advertising intermediate very successful in one market may not be accessible, or may be immature, in any other market.
6. High Costs of Distance:
When the markets are divided by distance, the transfer cost becomes sky scraping and the time required for the delivery lean to become longer. Distance leans to increase certain other costs too.
In an International market, a marketer approaches a customer in two ways. He establishes relationship with his customer and for this; he has to prepare a good relationship management system. In this after the customer has made a purchase the customer tries to maintain relationship with the customer by contacting him. A customer relationship manager is assigned to maintain relationship with customers. The next approach is transactional marketing, transactional marketing is a method of old school that used to focus on increasing sales and maximizing profit. This is an old concept now. Now a day’s businesses try to focus more on building relationship and then build a good book of potential customers (Andriopoulos, 2013).
Businesses are selling goods around the globe. Partnerships are formed with communities from varied cultures as business associations are shaped. Each nation and cultures inside a nation bring communication challenges to businesses. Excellent communication practices help preserve these complex business transactions. Bad communication executes can cause loss of business and even global tension among countries. Since cultures differ so extensively across the world, understanding the differences in culture is vital to the business environment. A person’s culture affects the means he converse. For example, Japanese do not like to deny anything straightforwardly. In a business meeting, a Japanese businessperson may indicate refusal, but in no way directly utter it. This can cause confusion. Other cultural example is in Saudi Arabia. Never converse with women, ask about a female family member’s wellbeing. In Saudi Arabia, one may be have a business convention and the person may leave the room for 20 minutes. The Saudi man may have gone to offer prayers as he considers the business conference more of a conversation than meeting.
The awareness creation amongst a population and converting them into actual customers, who would buy a product, involves both proper marketing and proper sales. The integration of sales and marketing is very necessary in order to sell a product. The techniques of marketing would help promoting the product and a proper selling to the prospect claims good sales in a year. During internationalization the companies has to go through an extensive marketing of the product. The promotion is a quint essential part. Both the teams of marketing and sales have to work together to achieve sales. The job of the marketing team is to generate leads and passing them over to the sales team. The sales team would then take care of the prospect and try to convert them into potential customers. A company is said to be working in integration when both the sales and marketing are working together.
Conclusion
The concept of internationalization is very huge. Going global and selling goods on a global scale is a dream of every company. However, the process passes through a lot of challenges and competition. The world market needs new concepts, new fashion and prefers new tastes always. The business houses have to be precise in understanding the needs of the customers. The process of internationalization depends on many factors. A firm has to undergo a lot of research before venturing into a foreign market. The analysis of the competitors, the analysis of the market demands, the consumer`s buying behavior, government policies and many other factors. The companies dwell in a state of insecurities of doubts of success before they gain some potential customers in that market. It is suggested to take the help of the domestic importers to expand the business in foreign markets.
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