LITERATURE REVIEW (Opportunities and Challenges in International Marketing)

Preface

Business is global. Large corporations no longer operate within the confines of a single nation. They routinely cross borders in search of resources, labor, and markets. For example American multinational corporations are American in origin and in central control, but truly international as functioning enterprises. The development of international and global business has proceeded faster than traditional institutions have been able to keep up with. The ordinary restraints of law that keep competition fair have national roots. As domestic firms become more and more involved in international business, international economic conditions and trade policies of other countries begin to impact more and more on the lives and fortunes of individual home residents. Failure to participate in the global marketplace assures a nation of declining economic capability and its citizen of a decrease in their standard of living.

International marketing is one of many alternatives to participate in global marketplace. International marketing is necessary because, from a national standpoint, economic isolationism has become impossible. Successful international marketing holds the promise of an improved quality of life, a better society, and more efficient business transactions.

Definition

In brief, international marketing consists of the activity, institutions, and processes across national borders that create, communicate, deliver, and exchange offerings that have value for stakeholders and society (Czinkota and Ronkainen, 2010). International marketing has forms ranging from export-import trade to licensing, joint ventures, wholly owned subsidiaries, turnkey operations, and management contracts. The basic principles of marketing still apply, but their applications, complexity and intensity may vary substantially.

International marketing also focuses on the need to create, communicate, and deliver value internationally. These dimensions indicate that marketing internationally is an activity that needs to be pursued, often aggressively. To achieve success in the art of international marketing, it is necessary to be firmly grounded in its scientific aspects. Only then will individual consumers, policymakers, and business executives be able to incorporate international marketing considerations into their thingking and planning ((Czinkota and Ronkainen, 2010).

The Importance of World Trade

Economies of the world are deeply linked in a number of ways. First, a tremendous quantity of goods and services produced in one country are purchased by residents of other countries, as when Americans purchase shirts produced in Hongkong. Second, billions of dollars of financial assets that are issued by one nation are purchased by residents of other nations. Third, corporations headquartered in one country often establish subsidiaries in a foreign country. Fourth, the domestic economic policies of one nation often affect, either directly or indirectly, the economies of another nation (Hodgson and Herander, 1983).

International trade of goods, services and assets represent one of the most powerful linkages among the various economies of the world. Many nations are heavily dependent on foreign countries for supplies of important commodities. These commodities range from manufactured products that can be obtained abroad at lower prices than domestic producers can offer, to natural resources such as petroleum, with which the importing countries are simply not well endowed.

Opportunities and Challenges in International Marketing

Increasing numbers of firms from every country will have to become adept at selling products and services in international markets rather than just concentrating on domestic markets (Cateora, 1990; Keegan, 1989; Rosenbloom and Larsen, 1991; and Tung, 1990). Many of these firms, lack the proficiency and strategic contacts for starting the process of global marketing expansion. Furthermore, this problem becomes even more critical when one considers that some sectors of the business community have weak marketing capabilities (Weinrauch et al., 1991).

One business sector that needs significant additional marketing support is small manufacturing firms. Even in domestic markets these firms often lack the resources and expertise for developing effective marketing plans and when one includes the global marketing arena, this problem becomes even more acute. In an original report of the Commission of the European Communities it was concluded, for example, that small- and medium-sized manufacturing firms were weak in marketing and failed to use effective channels of distribution (Commission of the European Communities, 1993). This conclusion, moreover, is not unique to European manufacturing firms.

Many businesses throughout the world will need marketing assistance for successful ventures into world markets. According to Keegan (1990), the overriding challenge facing firms seeking foreign market entry is that of establishing and maintaining strong international channels of distribution. To accomplish this, strategic alliances are encouraged and recognized as an effective method for global marketing development. One goal of this paper is to analyze the role that existing organizations-especially manufacturers' representatives-might play in creating new venture opportunities in global markets.

One channel member that has been a strong marketing catalyst for many business firms is the manufacturers' representative. They basically are firms which contractually operate as sales agents for all or part of a manufacturer's products and services within a predetermined territory. Representatives are usually paid on a straight commission and must cover their own expenses out of the agreed percentage commission from sales. Once the manufacturer receives payment from a sale, the representative receives the commission. To meet revenue goals and for the strategic reason of maintaining independence, representatives will usually sell multiple product lines from other manufacturing firms.

In some domestic markets, manufacturers' representatives currently provide a major service by providing the marketing and selling function of many manufacturers. Their contributions are even greater within certain industries (Taylor, 1981), for small manufacturers, and for those firms which frequently lack financial resources (Weinrauch et al., 1991b; 1992). Without the representatives' contributions it would be hard for many manufacturers to get adequate global market exposure. Despite their large number and their major contributions to the marketing profession, there has been little academic research on manufacturers' representatives (Taylor, 1981; Weinrauch et al., 1992). Moreover, the global marketing literature shows virtually no research on manufacturers' representatives and their potential role in international expansion.

In addition, some major questions are now being asked about the future role of manufacturing representatives in global marketing. These questions centre not only on their future opportunities but the threats to the "representative profession" from foreign expansion (IPA Conference, 1994). The emergence of strategic global alliances among manufacturing firms has affected the selection and use of representative firms. In some cases, established agency/principal relationships have been terminated as a result. While these representatives might have done a good job representing principals, the new manufacturing alliances, mergers and/or acquisitions have caused the break-ups. Consequently, some of the leaders in the profession's associations are advising representatives to be more proactive in developing global marketing relationships. For example, representative firms are increasing their experiences in multiple-product markets, and they are forming their own strategic alliances with foreign representative firms. These partnerships should provide better synergism in the global marketing arena (Viewpoint, 1991).

Despite the urgency for global marketing felt within the profession, the globalization process is still in its development with many challenges to address. First, many manufacturing executives are unaware of the representative system which can sell products for straight commissions and lower the potentially high fixed selling costs of manufacturers (Eyerman, 1992). Second, the representative system is sometimes different in various parts of the world. Third, the requirement of immediate letters of credit when products are shipped to a foreign destination makes the representative more of a distributor (Pickett, 1994). Finally, developing foreign markets take time and patience. In the past, some foreign manufacturing firms have closed their branch office and/or aftermarket warehouse when international sales did not meet expectations. These firms then expected the representatives and the customers to do business half way across the world without any overseas support (IPA Conference, 1994). Although the above challenges make expansion into global marketing more complex for manufacturers' representatives, the strategic window is open. They have the expertise and knowledge for selling and marketing in world markets, and they can save money for manufacturing firms which may not have the resources.

Conclusions

Over the last few decades, international trade in merchandise has expanded at astounding rates to reach over $15.1 trillion in 2008. In addition, trade in services has grown at particularly high rates within the last decade to reach almost $3.3 trillion in 2008 (Czinkota and Ronkainen, 2010). As a result, nations are much more affected by international business than in the past. Global linkage has made possible investment strategies and marketing alternatives that offer tremendous opportunities. Yet these changes and the speed of change also can represent threats to nations and firms.

On the policy front, decision makers have come to realize that is very difficult to isolate domestic economic activity from international market events. Factors such as currency exchange rates, financial flows, and foreign economic actions increasingly render the policymaker powerless to implement a domestic agenda. International interdependence, which has contributed to greater affluence, has also increased vulnerability.

Both firms and individuals are greatly affected by international trade. Whether willing or not, they are participating in global business affairs. Entire industries have been threatened in their survival as a result of international trade flows and have either adjusted to new market realities or left the market. Some individuals have lost their workplace and experienced reduced salaries. At the same time, global business changes have increased the opportunites available. Firms can now reach many more customers, product life cycles have been lengthened, sourcing policies have become variable, new jobs have been created, and consumers all over the world can find greater varieties of products at lower prices.

To benefit from the opportunities and deal with the adversities of international trade, business needs to adopt the international marketing concept. The new set of macroenvironmental factors has to be understood and responded to in order to let international markets become a source of growth, profit, and needs satisfaction.