The Advantages and Disadvantages of International Marketing (+benefits)

International marketing is the execution of marketing ideas in more than one country. 

For example, if you own a manufacturing company in the USA, you can decide to open another branch in Brazil, and start your test marketing in this new local market as you roll out your full international marketing strategy. 

But, as you start your international plan and marketing strategy, it is important to first review the advantages and disadvantages. 

So, if you have ever asked yourself, “What Are the Advantages and Disadvantages of International Marketing?”, this is exactly what we are going to answer.

The advantages of international marketing include: 1. Market expansion, 2. Protection against economic recessions, 3. The exploitation of surplus capacity, 4. International markets give your business a competitive edge. Alternatively, the disadvantages of international marketing include:  1. Higher foreign debt in the host country, 2. Exchange rate volatility, 3. Foreign government policies, 4. Increased competition, 5. Other risks such as cultural differences.

International markets have pros and cons depending on various factors influencing the target market.  What are those pros and cons of going global? 

Keep reading to find out. But first, let’s review some of the big goals of International  business and marketing.

What Are the Goals of International Business?

Before developing the international marketing strategy, every international business has goals and objectives, mainly to improve business performance using the new market. These goals include:

1. Attracting foreign demand to sell more products and service

Fierce competition within your niche can prevent your company from increasing its market share. Alternatively, altering the current products may reduce demand for your goods because customers are already familiar with the taste. What do you do? 

Move to a new international market that may have potential demand for your product.

The general idea is that a company’s economic growth varies between countries. If you are savvy enough to flood the market in your native country with clients in your target market who have already used your product, hence creating minimal growth in demand. 

Thanks to the big conversations around the globalization vs the deglobalization trend, breaking into a new market can increase demand and create business growth.

2. Use of technology to boost business growth

In developing countries, technological equipment and know-how are scarce, increasing the chances of success. International businesses take advantage of this situation to sell technical equipment and services.

Many companies have used upcoming technologies to establish new business ventures.

An international telecommunication company can take advantage of the situation to make a profit. For instance, some countries have low coverage of cellular networks. Other opportunities include road construction, power generation, communication technologies, manufacturing, and military technologies.

3. Utilization of economic resources

Another goal of international businesses is using factors of production to create growth and profitability. The value of economic resources like land and labor varies widely. However, the general agreement is that these economic resources are pretty affordable in the international market.

For instance, a piece of land to set up a company here in the USA is quite expensive. The same cannot be said about other developing countries. Labor costs can be lower in areas of the international market. For instance, a Chinese motor assembly line worker may earn $20 per day while their USA counterparts make $300.

4. International diversification

The final goal of international businesses is to seek diversity in global markets. 

Company profits can sometimes be volatile if all the resources are used to sell a specific product in the native country. Changes within the economy or industry are responsible for the instability of profit margins.

To mitigate this risk, you can sell your products in other countries. 

For example, the economic conditions in a neighboring country may be different from your own country. International marketing may enable you to stabilize profits. For instance, if the demand for products in your country falls due to a weak economy, it may increase overseas where business may be more robust.

4 Advantages of International Marketing

What are the benefits of international marketing? Certainly that’s the only reason you want to even bring a product or service to another country, for the benefits, that is.

There are several key benefits your company can reap from international marketing. 

Here are four big benefits of marketing your product or service internationally:

1. International marketing provides market expansion

You must be yearning to enlarge your market share and increase your sales. International marketing gives you opportunities to explore and expand within a new market. 

Don't mind your position in the previous market because the new one is a different ballgame.

2. International marketing provides protection against economic recessions

Moving to a different country exposes you to a different kind of economy. Slow economic growth in your country can point to a looming recession. In case of an economic downturn, your international subsidiaries can shield you.

You can diversify the market as you do with products for the benefit of the corporation. Certainly you’ve seen auto companies like Toyota marketing their products in African markets.

3. The exploitation of the surplus capacity selling to international markets

Large corporations tend to have ultra-large manufacturing capacities, and many times this capacity is not operating at maximum utility.  

Since the extra production exceeds current demand, you can channel the surplus to international markets. 

For instance, it is common to find a particular brand of clothes in most markets globally. Many clothing manufacturers produce brands that are not their own, maximizing their manufacturing capacity.

This happens frequently in the food and supplement manufacturing business.

4. Gaining customers in international markets give your business a competitive edge

The competitive advantage comes in the form of cost advantages. 

For instance, you can exploit low labor costs in your country to offer quality goods and services for exports. 

This way, you can compete with most companies since you can offer affordable prices.

What Are the Disadvantages of International Marketing?

Just as there are benefits to international marketing, there are risks and disadvantages. As long as the rewards outweigh the risks, you might have a green light on the next phase of building your international marketing plan.

The cons of international marketing include:

1. Increased foreign debt in the host country

Countries that borrow heavily tend to increase local taxes to raise cash for repayment. 

As a result, the local population cannot afford necessities, let alone a new product.

Unemployment and low wages mean that your target market may not afford to buy your goods or services.

This is also another reason why the Eurodollar market is important, giving business access to capital. And, this is another reason why LIBOR has been an equally important topic of discussion for the discussion focused on the globalization and de-globalization trends.

2. Exchange Rate Volatility

The value of currencies varies widely among countries. 

Devaluation of the host countries’ currencies may lower the revenues when exchanged with your native currency. 

You should carefully carry out a risk assessment before venturing into new markets.

One of the resources we watch closely when reviewing major currency and exchange rates is TradingView.com:

3. Foreign government policies

Each country has rules on what to allow or block from its territories. 

Some countries have a policy of restricting the entry of foreign players into the local market. 

The hostile business environment may make it hard for your corporation to break into and succeed in the new market.

4. Increased competition

Remember that your company isn't the only one trying to break new ground.

Many others and perhaps more prominent corporations are fighting for the same spot. Add to that the local companies the host government prioritizes, and you can begin to see things won't be easy.

5. Other risks

Many other local factors work against international marketing. 

An example is cultural differences where your product may go against the local traditions. 

Corruption, ethnic clashes, and terrorism are hurdles you may also encounter in international marketing.

References

  • https://online.lasalle.edu/degrees/business/mba/marketing/how-to-do-international-marketing/
  • https://pressbooks.lib.vt.edu/strategicmanagement/chapter/9-2-advantages-and-disadvantages-of-competing-in-international-markets/#:~:text=Competing%20in%20international%20markets%20involves,economic%20risk%2C%20and%20cultural%20risk.
  • https://www.emerald.com/insight/content/doi/10.1108/IMR-05-2019-0144/full/html

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