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International Marketing

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Why companies engage in international business:

Companies engage in international business for a variety of reasons. Identifying these reasons for any
firm is important to understand the nature and direction of its motivation to engage I international
Some of the major reasons why companies engage in international marketing are as follows:
To expand sales of the firm
To acquire resources / technology / skills from foreign countries
To diversify their sources of sales and supplies
To capitalize on incentives from governments, local and foreign
To follow existing customers who have moved overseas
Reasons for recent growth of business in international markets:

International business has increase on a rapid pace, especially after the 2nd world war of 1940’s. This
expansion in international business has been due to host of reasons. Some of the key reasons for
expansion of international business are as follows;

Expansion of technology

• Quicker and cheaper transportation
• Communications enable controls from afar

Liberalization of cross-border movements of goods, services and factors of production, such
as labor, capital and technology etc

Development of supporting institutional arrangements for international exchange of goods
and funds

Increase in global competition forcing firms to expand in international markets

Convergence of world markets in terms of tastes, distribution infrastructure, technologies
and trade regulations.

Support from national governments for internationalization of local firms and for
attracting foreign direct investments.

Growth of resources available to mnc’s and with large pool of funds ands and other
resources firms could easily expand businesses in world markets.
Benefits of doing business in international markets:

A country and its people benefit from selling to or even buying from international markets.


Propel country’s economic growth as its firms increase sales and profits
Exports of quality products and services support or create better jobs (average export-related
job pays more than average national job)

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Selling to international markets diversifies a country’s economy and hence hedges against
economic downturns


Consumers gain from lower costs, better quality and greater variety products on the shelves
Also create essential competition for local companies which then improve their products and
Keep levels of prices and hence inflation low as with open imports prices of products in
domestic markets would depend on the lower prices of the products in international markets

Means of engaging in international markets:

A company may engage in international markets in a number of ways. These are categorized in the

Merchandize export and import

Services export and import

• Travel, tourism and transportation
• Performance of services
– Fees in banking, insurance, rentals etc., turnkey operations, management contracts etc.
• Use of assets for royalties
– Licensing
• Use of assets such as trademarks, patents, copyrights, or expertise under contracts
– Franchising
• Franchiser sells/leases the use of assets and also assists the franchisee on a continuing
basis in operations


Direct investment - with controlling interest (at least 10% of voting or ownership control)
– Wholly owned
– Joint venture
– Mixed venture (when a government joins as a partner)
Portfolio investment - non-controlling interest
– Equity investment
– Stock market investment - funds
– Bonds & loans
– Money market investment

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