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INTERNATIONAL MARKETING.
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Examines factors affecting internationalization of companies. Multinationals vs. global firms, examples, labor, communications, trading blocs, public relations, politics.... More...
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Paper Abstract:
Examines factors affecting internationalization of companies. Multinationals vs. global firms, examples, labor, communications, trading blocs, public relations, politics.
Paper Introduction:
Introduction
International marketing is the process of bringing goods and services to markets outside of the country where such goods and services are produced, or where the company is located. This sometimes convoluted process is possible through innovations in technology and communication which have occurred during this century and which make it possible for labor and technology to stretch beyond a single border. International companies compete for labor and other resources on a global scale, not merely a local basis, and are also dependent on the global economy to provide them with their market opportunities. These companies must be able to deal with the various government regulations and policies that may well be in conflict with one another, and must also be willing to demonstrate an ability to overcome challenges such as fluctuations in cu
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The differences in the currencies betweenthe various countries involved must also be considered, and barriers totrade (both tariff and nontariff) also need to be evaluated since thebarriers which the company needs to overcome may determine whether aparticular venture will be profitable or unprofitable. [9]Ibid., 1 . The resultis that multinational companies have higher relative costs associated withtheir international operations than their global counterparts. To begin with, companies and countries can no longer operate as if therest of the world did not exist. "Shifting Ground." Maclean's, 2 March 1995, 28-3 .Nusbaum, David. Principles of Macroeconomics. Because of the increased competition that globalizationbrings with it, failure to take all of these constituencies into accountcan result in an overall loss to the organization by increasing "hidden"costs to the company and shifting both the supply and demand curves.[6] Behrman and Grosse developed a bargaining model that can be used toexplain how and where multinational corporations choose to locate. This researchconsiders the economic factors which motivate companies tointernationalize. "Global Work Force 2 ." Harvard Business Review, March-April 1991, 115-127.McMurdy, Deirdre and Andrew Willis. Multinationalcompanies therefore approach their markets on a market-by-market levelconsidering each market's unique supply and demand curves. A nation's relative poweris increased if there are a large number of companies vying for access tothe host country's raw materials or labor force.[8] The second variable in the bargaining model is that of the stake ofthe company. The increase in a true global economy means that companies will nolonger be able to sell goods of lesser quality in poorer countries; thecommunication network and distribution network will result in demand for ahigher-quality good. [11]David Nusbaum, "Trading the Wide World of Foreign Exchange,"Futures, April 1995, 63. Strategic Management in a Global Economy. Thereare domestic regulations to consider, regulations in the destinationcountry, the logistics of moving the product to the destination country andsuccessfully building a marketing program there, and problems with foreignexchange.[11] Conclusion Despite these difficulties, an increasing number of companiesthroughout the world are marketing on an international basis. Countries such as Egypt and Pakistan, which have a high level ofeducation but not a high level of jobs for their population will have tofind ways to build up their domestic economies or they risk losing thesetalented individuals to other countries that are more economicallyappealing. Regardless of theoriginating countries, and even in today's high technology environment,expanding into the international arena is fraught with difficulty. Internationalcompanies compete for labor and other resources on a global scale, notmerely a local basis, and are also dependent on the global economy toprovide them with their market opportunities. Market opportunity and growth iscertainly present in foreign countries, although purchasing power can varygreatly. By marketing to avariety of nations, a company is not so severely affected by a downturn inany one country's economy. Grosse. These companies must be ableto deal with the various government regulations and policies that may wellbe in conflict with one another, and must also be willing to demonstrate anability to overcome challenges such as fluctuations in currency valuation.The reasons that companies participate in internationalization is that theybelieve that global markets offer greater economic benefit. Thismodel uses three variables and is presented in a three-dimensional formatrather than in the traditional two-dimensional format. Not only must a company relocate its operations and take on theconsiderable resource burden of operating in a foreign country, butretraining of local workers may well have to be undertaken. Aside from being able to take advantage of a highly educated workforce, these companies can also build up demand for products withoutsignificant competition. Boston: Houghton-Mifflin, 1998.Vernon-Wortzel, Heidi and Laurence Wortzel. Instead, corporations need toconsider all of their stakeholders: customers, employees, vendors andshareholders. This offers a greater aggregate benefit to society asa whole. In a freetrade environment lacking any barriers, the most efficient companies wouldbe those who succeed. The three variablesare: relative power of the government, relative stakes of the company andcongruence of interests.[7] The relative power of the government may be based solely on the factthat it has the ultimate right to declare how the company will conductbusiness in the host country. Global companies are companies which operate witha high degree of consistency regardless of the country in which theoperation occurs, and which are thus able to operate with greaterconsistency and long-term strategic direction across the company as awhole.[1] At multinational companies internal practices are also changedto reflect the environment of the various countries. By building operations in these countries usinglocal workers, global companies can help build the infrastructure necessaryto build long-term opportunities for workers in these countries. This sometimes convolutedprocess is possible through innovations in technology and communicationwhich have occurred during this century and which make it possible forlabor and technology to stretch beyond a single border. International companies also recognize the situation and also move totake advantage of it. The company wantsthis because of the lower labor force cost, and the host country wants itin order to boost employment. It controls access to the host countrymarket, and also to the factors of production within that host country. According to some analysts, employers will seek outworkers from across borders. The other major reason that companies consider the internationaleconomy is the availability of markets. "World Integration." Canadian Journal of Economics, May 1994, 458-483.Behrman, Jack N. Internationaltrade would be impossible if companies were not willing to take on theexpense and difficulties associated with the process. Analysis Multinational corporations are those companies which offer products orservices in different countries throughout the world, adapting theirproducts to the unique environmental characteristics of the countries inwhich they are selling. This is the situation in the United States where immigrants fromCentral and Latin America migrate north in search of better wages. Grosse, International Business andGovernments: Issues and Institutions, Columbia, SC: University of SouthCarolina Press, 199 , 8. Aside from the increase in transportation capabilities that makes suchglobalization possible, better communications mean that companies andcountries no longer exist in remote sites. The mobile work force demonstrates the most fundamental principles ofsupply and demand. [3]John B. If the company cannot supply the good, anothercompany is likely to step into the gap. Such aninfrastructure is needed if individuals who take advantage of theeducational opportunities are to remain or return to their home countriesin order to make a living; without improved infrastructures, workers aremore likely to remain in the countries which provide them with training,producing a lack of workers in their home countries. Behrman and Robert E. New trading blocs, based onregional, not national, interests have formed with the European Union (EU)and the North American Free Trade Agreement (NAFTA). and Robert E. This is, however, a long-term consequence which hasyet to be realized on a large scale. The costs ofsuch a move are more extensive than those facing individual workers,however. Introducing and marketing products abroadincreases the company's overall market share, and is thus a competitive aswell as economic decision. Insome cases, the government not only sets the rules under which themultinational corporation will operate, but also is the chief customer ofthat operation through state owned enterprises. There aretwo primary reasons why they do this: competition and markets. Long-term, this type of operation shifts the demand curve for goods outward sothat consumers are able to "afford" higher prices for goods and services. [5]Deirdre McMurdy and Andrew Willis, "Shifting Ground," Maclean's, 2 March 1995, 29. Workers thus move to where the wages arehigher. As nations seek to protect theirindustries, however, the trade barriers may well remain in place andartificially drive up costs. There will beincreased pressure on these trading blocs to produce results for themembers as a whole, not merely for individual countries or companies. It can be in the best long-term interest of global companies toassist in this effort despite driving up costs in the short-term. Countries which have pursuedprotectionist strategies in the past are moving away from these strategiesto take a broader view of their environment. Laborproductivity in countries without an exhaustive labor supply will have toincrease in order for these countries to avoid a slowdown in economicgrowth; such productivity can be increased through education and trainingprograms. Workers in Country A where wages are low now have theability to relocate, at relatively low cost, to Country B where wages arehigher. Johnston, "Global Work Force 2 ," Harvard BusinessReview, March-April 1991, 118. [7]Jack N. Americans, for example, purchase cars and electronics made inJapan, ham and golf carts from Poland and shoes from Brazil. Taylor, Principles of Macroeconomics, Boston: Houghton-Mifflin, 1998, 47. International companies are coming torecognize that work forces outside of their traditional markets can providehigh quality workers at lower cost than they are currently paying in theirdomestic markets. As a result, there will be continuedshortages of products in some countries, and surpluses in other countries,both of which are hallmarks of an inefficient economy.[5] This increased globalization is likely to lead to new ways of doingbusiness; certainly the traditional business strategies that resulted inlarge multinational organizations that ignore the different environments inwhich they operate will no longer suffice. [4]Joshua Aizenman, "World Integration," Canadian Journal ofEconomics, May 1994, 463. [8]Ibid., 9. A company may have high stakes in entering a country if itperceives that the market represented by that country will be lost if entryis deferred or awarded to a competitor. Today's work force is highly mobile, and workers are no longerconstrained by national boundaries. International Business and Governments: Issues and Institutions, Columbia, SC: University of South Carolina Press, 199 .Garten, Jeffrey. "Big Emerging Markets." World Traders, December 1994, 14- 18.Johnston, William B. A company's stakes fall when itsown resources are strong, and when the country in question does notrepresent a significant share of the market when measured on a globalscale.[9] The third variable is the extent to which the company's interests andthe country's interests (as represented by the government) are common.This is the case when offshore assembly projects are being considered inhighly labor intensive industries, such as textiles or electronics. Nonetheless,there are numerous situations in which the aggregate costs of all of theseactivities are still well below what the company would pay in its originallocation.[3] One of the long-range ramifications that Johnston postulates is astandardization in the global work force. New York: John Wiley, 1997.----------------------- [1]Heidi Vernon-Wortzel and Laurence Wortzel, Strategic Management ina Global Economy, New York: John Wiley, 1997, 23. This will occur both in thequality of the worker, and in the standards by which employers operate.Thus Johnston foresees a move toward more liberal vacation leave in theUnited States, to bring it in line with European standards, and workstandards governing safety on the job taking on global dimensions asworkers come to press for international standards in benefits. Thecompetition facing companies domestically is increasingly from foreignfirms. When this congruence runs high, there isless need for regulation on the part of the government in order to achieveits goals.[1 ] Corporate policy, government intervention and the emergence ofregional economic groupings greatly affect trade patterns. Such trading blocs are a hindrance to internationalization and preventcompanies from realizing the full benefit that internationalization has tooffer.[4] Countries assume that trading blocs offer benefit to regionalcompanies by removing trade barriers among members of the bloc, and"protect" companies and industries from predatory foreign competition.However, trading blocs may offer greater benefit within the closedenvironment of the local region, but only for the short-term. BibliographyAizenman, Joshua. Background When considering international marketing, companies must take intoaccount their own internal structure, the role of the governments of thecountries considered, and the way in which the company would operate in theforeign nation (whether directly, as part of a joint venture, or throughsome licensing effort). Consumers would benefit from low cost goods(regardless of their country of origin) and companies which could notcompete successfully in one industry could turn their resources to adifferent industry. Inthis case, both the company and the potential host countries have a highstake in seeing the business moved to the host country. Introduction International marketing is the process of bringing goods and servicesto markets outside of the country where such goods and services areproduced, or where the company is located. For many products and services, companies are turning to thediversification that international marketing brings. In this regard, the jet airplane can becompared to the automobile in relation to its ability to move workers notacross the country, but around the world.[2] Workers who are highlyeducated but who live in countries where there are no jobs are likely torelocate to countries with a demand for a highly educated work force.Immigration policies are likely to be reviewed, according to Johnston, ascountries compete to attract the best and brightest workers. [6]Jeffrey Garten, "Big Emerging Markets," World Traders, December1994, 15. In Country B, demand outstripssupply so wages are driven up. Just as workers in Country A can move to Country Bwhere wages are higher, companies with production facilities in Country Bcan move operations to Country A where labor costs are lower. [1 ]Ibid., 13. General Motors is an example of anAmerican multinational company (different products are produced in and fordifferent markets); Coca-Cola is an example of an American global company(the same products are produced and sold throughout the world). In economic terms, demand for workers in Country A (number ofjobs) is lower than the supply (number of workers), so there is a laborsurplus and prices (wages) are driven down. Competitioncomes not only from recognized industrial nations, but also from developingnations and the former Soviet Union. This has long-termramifications for multinational and global companies. "Trading the Wide World of Foreign Exchange." Futures, April 1995, 62-65.Taylor, John B. Political situations must be considered, and thelabor situation in the foreign country (as well as in the domestic country)must also be taken into account. [2]William B. Globalcompanies, on the other hand, are likely to use a supply and demandschedule for their product as a whole. Each of these constituents has a stake in the organization,and the corporation must be responsive to all of them, not merely to theshareholders. As suchstandardization occurs, the cost benefit of operating in one location overanother will decline and prices (wages) for labor will also stabilizethroughout the world. Telephones, FAXes and computersmean that companies and employers around the world have access toinformation and employees in far-off locations.
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