International marketing mix
The four underlying components of the marketing mix are commonly called the 4 Ps: Product, Place, Price, and Promotion. MNEs use the same tools and techniques to reach customers domestically and internationally, but tend to apply them differently in each case.
Product
Products are merchandised goods or services. As discussed, firms operating at an international level are concerned with the level of standardisation or adaptation of their offerings in different markets. Theodore Levitt opined, in his seminal article “The Globalisation of Markets" (1983), that standardisation is a good marketing strategy for products such as watches or Hollywood movies when exploiting advantages of scales. However, attempts to market unchanged products/services overseas may fall flat, with the ethnocentric and even arrogant belief that “one size fits all” being a prime factor in some of the costly international marketing errors that MNEs have historically committed. Having said that, it bears repeating product adaptation is easier said than done, due to the cost incurred when adapting a product to a foreign market and because many companies have limited financial capacity for engaging in such changes.
Another alternative can be found in the development of a portfolio of local brands to match the needs and purchasing behaviours of local customers. In this case, international marketers pay particular attention to local market segmentation and ignore their company’s own origins. Of course, the ideal at this level is to delineate market segments (e.g. male/female, urban/rural, age, etc.) that can be generalised in a variety of foreign markets.
Overall, many customers worldwide share similar purchasing habits, interests, needs and preferences. But many others do not. As a rule of thumb, products embedded in culture, such as food, education, and cosmetics, typically require more adaptation than computers, tennis rackets, and chemical processes. Some of these changes will be required to match host country market standards (regulations, physical realities). Others will reflect the MNE’s own appraisal of the situation. It is in this latter area that the greatest international business successes but also failures are experienced.
Place
Place commonly refers to the location where a product is sold, either physically or digitally. In international marketing, distribution channels refer to the different ways in which a firm may bring their product to customers in foreign markets. This is a key decision, closely related to the mode of entry selected by a firm entering a foreign market, including exporting, licencing/franchising, turnkey projects, wholly owned subsidiaries, joint ventures, and mergers and acquisitions (see Chapter 6). Also, international marketers must consider local infrastructure, internet penetration and online channels to adjust their strategy without undermining traditional distribution network (e.g. “bricks and mortar”).
Price
Price refers to the expense that customers are inclined to pay for a product or service. Undeniably, firms incur additional costs when going international, in terms of either logistics (when the market entry mode involves exports) or FDI. Consequently, goods are often a more expensive overseas than at home. To justify these higher prices, international marketers may position goods to align them with stereotypes about and attitudes towards equivalent foreign products in the host country. Yet concerns can still arise if consumers in one country become aware that a product being sold to them as top-of-the-line is sold elsewhere as midrange or even a basic commodity.
A variety of factors affect the suitability of international pricing choices. One is foreign exchange (see Chapter 10), with problems arising if the currency in which sales are made falls compared to the currency in which production costs are incurred. Another is government regulations. In some countries, minimum and maximum prices to customers are imposed on international firms. Governments may also prohibit dumping (see Chapter 3), which is widely considered an unfair competitive practice (and one that is the source of a number trade wars currently being waged between countries like the USA and China).
Otherwise, price elasticity is also a key factor in international marketing, being the relationship between price changes and demand. A leading task for many international marketing managers is estimating overseas customers’ familiarity with their products and reckon how demand for their products will vary as incomes evolve (a particularly important issue in Global South countries undergoing rapid development). A frequent problem here is the generally tendency towards over-pricing, with managers assuming that foreign consumers are more interested in their products than they really are. Wrong decisions made in this area often reflect over-confidence, pride, or even arrogance of some decision-makers in MNEs’ global headquarters. In marketing as in other areas of international business, personal psychology can be just as important as business strategy.
Promotion
Promotion encompasses all communication delivered by a firm to reach potential customers. It includes advertising, TV, radio, social media, direct mail, billboards, direct marketing (personal selling) and public relations. International marketers also face a standardisation vs adaptation dilemma here in terms of the messages they choose to send to a global and/or local audience. On the one hand, standardisation enables the transmission of a constant message supporting global branding strategy while limiting advertising agency costs. However, numerous MNEs have learned the hard way that advertising is highly embedded in the local culture, customs and language. Semiotics, the study of signs, symbols and their meaning in a particular context, may prove essential for international marketers. There are myriad examples of a mistranslation of brands or products creating confusion and rejection among local customers. The end result is that a local approach to advertising is often necessary when entering foreign markets, despite the considerable expense to MNEs.
It remains that international advertising is huge business, with global spending exceeding half a trillion dollars by the start of the 2020s, up more than 40% from the decade before. With such large sums to play, it becomes an immensely strategic issue for MNEs to decide who within their organisation is responsible for designing advertising campaigns and if the money saved on showing the same advertisement in different countries compensates for the risk of its being less effective with a
International downstream operations 111 particular target market. At this level like so many others in international business, the key is the arbitrage that the MNE makes between its internal interests and external stakeholders’ preference for diversity.
Bibliography
Crawford, R. (ed.) et al (2017). Global Advertising Practice in a Borderless World. Routledge
Fontana R., Girod S. J. G., & Kralik M.. (24/05/2019) "How Luxury Brands Can Beat Counterfeiters”, Harvard Business Review, available at https://hbr. org/2019/05/how-luxury-brands-can-beat-counterfeiters, last accessed: 04/03/2020
Klein. N. (1999), No Logo. Picador.
Levitt, T. (1983), The Globalization of Markets, Harvard Business Review.
