by International Marketing environment refers to the controllable and uncontrollable forces that influence upon the marketing decision making of a firm globally. International Marketing environment is comprised of those components which shape policies, programmes and strategies of an international marketer. An international firm must resort to systematic study of international marketing environment to collect the inputs of marketing decision making.
To serve the international markets effectively, a firm is in need of understanding international marketing environment properly. The needs, preferences and expectations of buyers in different overseas markets are not necessarily similar. The environmental differences influence the international marketing decisions of a firm.
Such strategic decisions as whether a company should enter a given foreign market or not, what market entry strategy should it employ, what strategy it should adopt in respect of product, promotion, pricing and distribution, etc. are based on two sets of factors, viz., the company related factors and the foreign market related factors. The decision as to whether to go international or not is based, in addition to the above two, on yet another set of factors, viz., the domestic marketing environment.
The company related factors refer to such factors as the company objectives, resources, and international orientation. The domestic marketing environment consist of factors like growth prospects including the competition, government policies etc. The foreign market related factors which are relevant to the international business strategy formulation or which affect the international business are often described as the international business environment.
Two components of international marketing environment:
Internal Environment:
Internal environment refers to the firm related factors. The firm related factors are referred to as controllable variables because the firm has control over them and can (relatively easily) change them as may be thought appropriate as its personnel, physical facilities, organisation and functional means such as marketing mix, to suit the environment.
The internal environment of the company includes all departments, such as management, finance, research and development, purchasing, operations and accounting. Each of these departments has an impact on international marketing decisions. For example, research and development have input as to the features a product can perform and accounting approves the financial side of marketing plans.
The ability of a firm to do international business depends on a number of internal factors like the mission and objectives of the firm; the organisational and management structure and nature; internal relationship between employees, shareholders and Board of Directors, etc.; company image and brand equity; physical assets and facilities; R&D and technological capabilities; personnel factors like skill, quality, morale, commitment, attitude, etc.; marketing factors like the organisation for marketing, quality of the marketing men and distribution network; and financial factors like financial policies, financial position and capital structure.
Let’s look at an example of how the internal environment would impact a company such as Wal-Mart. In this case the immediate local influences which might include its marketing plans, how it implements customer relationship management, the influence of other functions such as strategy from its top management, research and development into new logistics solutions, how it makes sure that it purchases high-quality product at the lowest possible price, that accounting is undertaken efficiently and effectively, and of course its local supply chain management and logistics for which Wal-Mart is famous.
A useful tool for quickly auditing the internal environment is known as the Five Ms which are Men, Money, Machinery, Materials and Markets. Some might include a sixth M, which is minutes, since time is a valuable internal resource. All these factors are company related factors which are fully controllable. All these have to be considered while entering in the international market.
External Environment:
External environment refers to the factors outside the firm. These factors are uncontrollable or we can say that these are beyond the control of a company. The external environmental factors such as the economic factors, socio-cultural factors, government and legal factors, demographic factors, geographical factors etc. are generally regarded as uncontrollable factors.
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Micro Environment:
The micro environment is made from individuals and organisations that are close to the company and directly impact the customer experience. They can be defined as the actors in the firm’s immediate environment which directly influence the firm’s decisions and operations. These include, suppliers, various market intermediaries and service organisations, competitors, customers, and publics. The micro environment is relatively controllable since the actions of the business may influence such stakeholders.
Wal-Mart’s micro environment would be very much focused on immediate local issues. It would consider how to recruit, retain and extend products and services to customers. It would pay close attention to the actions and reactions of direct competitors. Wal-Mart would build and nurture close relationships with key suppliers. The business would need to communicate and liaise with its publics such as neighbours which are close to its stores, or other road users. There will be other intermediaries as well including advertising agencies and trade unions amongst others.
Macro Economic Environment:
The macro environment of a country can be studied by taking a vast perspective. It includes the study of population, national income, economic advancement of a country and the study of consumption patterns etc. It is pertinent to mention here that a clear cut idea of the economic environment of a particular host country is always useful to form an appropriate marketing strategy in the international business.
Importance
The various components of the international marketing environment are the major determinants of marketing opportunities. As such, it is the responsibility of an international firm to have clear grasp of international marketing environment to formulate effective marketing decisions regarding Marketing Mix variables.
The following points highlight the importance of understanding international marketing environment:
- International Marketing environment opportunities vary among the nations. Some economies have enormous potentials of growth while other has not. The knowledge of economic environment helps an international marketer to understand which market to select for reaping lasting benefits.
- Culture is a basic determinant of human behaviour. The cultural norms and values may vary among the countries. That’s why knowledge of cultural environment is utmost important to the international marketer.
- Political environment has a major influence on creating sound investment climate. The law-and-order situations influence business operations. International marketing operations can be smoothly conducted in a country having political stability and healthy political situation.
- International marketing is affected by legal environment of a foreign country in which a firm intends to operate. International marketing transactions need compliance with legal provisions. So international marketer should be familiar with the legal environment of foreign countries where marketing efforts will be made.
- The state of competition prevailing in an international market has great importance upon the strategic plan of the international marketer.
- Technological changes have also great importance because of its direct impact on product obsolescence issue. Up-to-date knowledge about the state of technological environment is essential for the firms associated with international marketing.
