International marketing is process of conducting business activities that is creating, understanding, designing, delivering and communicating the goods and services to the end consumer of more than one nation (Cavusgil & Knight,2014). In case of international marketing the activities are conducted in more than one country which is different from domestic marketing. Marketing concepts are universally accepted everywhere. But what sets aside international marketing from domestic marketing is that in former, the environment within which marketing plans are implemented has huge impact and are difficult to understand. There are multiple uncontrollable elements in international marketing such as political, economic, social, technological, legal and environmental(Anton,2015). A business which is conducted in home country feels more comfortable in understanding the uncontrollable aspects of the country. But a business which operates in foreign land might find extremes in evaluating these critical elements. It is necessary to put all these elements into consideration in order to put effective strategies in international marketing.
One key element is the economic environment of the host country. It comprises of countries GDP, GNP and per capita income. It provides information about consumer buying power, their income level and wealth which are essential market indicators. It is also necessary to understand the dynamic nature of economy of the foreign land. This shift can have significant effect on various strategic decisions. Therefore, before a company designs or executes its international market plan, it should understand home country’s economics. This essay establishes the point that the economic environment of a country is the most important consideration for an enterprise.
Argument 1: The enterprises would be benefited only when the nation has good GDP growth as growth provides the platform for organizations to grow
The economy of local nation influences how the enterprise reach to customers. International economic framework limits the ability to manufacture the goods as per local customers’ requirement and then deliver goods efficiently. The economic environment of country impacts the marketing design for different nations (Eteokleous & Katsikeas, 2016). Some economies are closed so enterprise has to enter through strategic alliances like joint venture etc. A country has strong economic position relative to other countries when it has higher GDP, free market, high FDIs and diverse economy. The factors like unemployment rates, labor cost, inflation rates, currency exchange rates, tariffs and many others are part of economic aspect of the country.
Unemployment rate is one of the significant factor that is linked with the GDP. The higher the nation’s unemployment rates the less money is generated in economy (Christiano & Eichenbaum, 2016). The consumer thus has less income and less money to spend.
Counter Argument 1: Enterprises would not be able to grow their business if they do not have the understanding of local political, cultural and social environment
In the end, the businesses are run for the people and business would not be successful if it lacks and in-depth consumer understanding.
Refutation: The knowledge of local cultural and political environment can be gained and partnership with a local vendor is always an option. For example, Walmart (US retail giant) partnered with Bharti (Indian player) to enter the Indian market. The tools like PESTLE analysis and Porter 5 forces analysis can be used to get an understanding about the local business environment (Rietveld, 2017).
Argument 2: Organizations should expand in the countries where per head disposable income is high and exchange rate has less fluctuation.
Another consideration in International Market is currency exchange rate. It is expressed as the ratio of price of one currency against the price of other. For example, when United States’ dollar strengthen against another currency, that currency of other nation (lets’ say India) is worth less dollars. Imports in United states will increase (Neely, 2015). Foreign market in United states will increase as investors’ gets attracted by market. However, it will decrease United States’ exports to other nations because in this case, United states’ exports will be more expensive to other nations. Changing exchange rates determines how much company has to pay to its suppliers to satisfy them (Gabaix & Maggiori, 2015).
The disposable income of consumers is also linked with consumers’ confidence. It indicates the optimism that a consumer has in the state of economy. If consumers are confident about economy than they are willing to spend more money (Benhabib & Spiegel, 2017). These periods of higher consumer confidence are a good sign for businesses.
Counter Argument 2: Cultural and especially the religion values are the hindrances for organizations to scale their business in local market.
Religion values and the understanding of consumers sentiments can be a game changer for organizations as they enter the developing and emerging economies.
Refutation: The local knowledge can be gained with time. For example, the restaurants giants like KFC and McDonald changed their menu for Indian market as consumers prefer chicken meals over beef and pork meat.
The main objective of every business is to maximize its profit or its bottom line. The economic elements impact the sales, production, procurement and distribution of a business. These changing factors in economy describes the importance of having foolproof strategy and its implementation to deal with these dynamic scenarios. It is necessary to come out with favorable steps which act as win-win situation to businesses as well as to the people of host countries. For example: take calculated risk, expand business when demand is high and interest rates are low. Therefore, a company who wants to expand globally, they need to do extensive market research. They need to be aware about inter relatedness of one country’s economic practices on other. They need to select a market which can give them maximum benefit. It requires understanding their own capabilities. International business needs to explore concepts like international finance and leverage trade relations practices like free trade agreements etc
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Benhabib, J., & Spiegel, M. M. (2017). Sentiments and economic activity: Evidence from US states. The Economic Journal.
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.
Christiano, L. J., Eichenbaum, M. S., & Trabandt, M. (2016). Unemployment and business cycles. Econometrica, 84(4), 1523-1569.
Eteokleous, P. P., Katsikeas, C. S., & Leonidou, L. C. (2016). Review of research on csr in international marketing: 1993–2013. In Let’s Get Engaged! Crossing the Threshold of Marketing’s Engagement Era (pp. 683-684). Springer, Cham.
Gabaix, X., & Maggiori, M. (2015). International liquidity and exchange rate dynamics. The Quarterly Journal of Economics, 130(3), 1369-1420.
Neely, C. J. (2015). Unconventional monetary policy had large international effects. Journal of Banking & Finance, 52, 101-111.
Rietveld, P. (2017). Obstacles to openness of border regions in Europe. In Gaining Advantage from Open Borders (pp. 95-112). Routledge