IB Docs (2) Team
Opportunities & threats posed by entry into international markets
International marketing refers to the marketing of an organization’s goods and services in overseas markets. It includes anticipating and identifying the needs of the target market in foreign nations, and meeting these needs in a profitable way. It typically involves marketers designing an appropriate marketing mix to use worldwide and customizing this to suit local preferences of different people based in other countries.
By operating beyond their national borders, multinational companies that engage in international marketing can earn significantly more sales revenue from international trade or having foreign direct investments in overseas markets. Globalization has created many marketing opportunities for businesses.
Entry into international markets can provide many opportunities for businesses. Opportunities are a set of factors in the external business environment that create prospects or openings for a firm’s growth and development. However, international marketing can also pose threats to an organization. Threats are the external factors that create challenges for organizations wishing to expand in overseas markets.
Opportunities are the positive factors in the external environment that create commercial prospects or openings for a firm’s growth and development. Entry into international markets can provide many opportunities for businesses. Examples include:
Lower costs of production – International marketers can benefit from lower production costs in foreign countries, such as cheaper labour costs by operating in low-income countries.
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Many multinational companies have benefited from offshoring to China
Greater economies of scale – Businesses can gain greater economies of scale (see Unit 1.5) by catering for a larger customer base across different international markets.
Financial incentives – Multinational companies may be enticed by foreign governments that offer financial incentives for them to locate in their country. Examples of such incentives include subsidies and tax allowances (discounts).
Spreading risks – International marketers can reduce risks by having operations in overseas markets. This is because the business is less exposed to changes in the business environment (such as declining income levels) in a particular country or region, as it can rely on sales in other part of the world. For example, BMW sales fell drastically in Germany during the global financial crisis of 2008, but its overall profits were positive due to phenomenal sales in China during the same time period.
Laws and regulations – Businesses can benefit from more less stringent laws and regulations in other countries. For example, well-established labour union powers and minimum wage legislation in Europe have escalated costs of production for many firms, which has resulted in them offshoring some of their operations in overseas markets.
Competitiveness – International marketers can gain competitive advantages by having a strong presence in overseas markets. Many global brands focus on brand development strategies as part of their overall growth strategy.
Higher profits – Ultimately, entering international markets create many opportunities for a business to increase its sales and profits. This is mainly due to the larger customer base by catering for customers from all around the world.
With an increasing number of multinational companies operating throughout the world, international marketing has become a strategic priority for many more businesses. Each year up to 2020, the World Bank published its annual report of the ease of doing business in overseas markets. The table shows the top and bottom countries based on these rankings. This was discontinued in 2021 due to the prolonged impacts of the COVID-19 pandemic. Click the icon below to see read more about the Ease of Doing Business Index.
Table 1 – Top and bottom 10 countries for Ease of Doing Business, 2020
Country | Rank | Country | Rank | |
New Zealand | 1 | Timor-Leste | 181 | |
Singapore | 2 | Chad | 182 | |
Hong Kong SAR, China | 3 | Congo, Dem. Rep. | 183 | |
Denmark | 4 | Central African Republic | 184 | |
South Korea | 5 | South Sudan | 185 | |
United States of America | 6 | Libya | 186 | |
Georgia | 7 | Yemen | 187 | |
United Kingdom | 8 | Venezuela | 188 | |
Norway | 9 | Eritrea | 189 | |
Sweden | 10 | Somalia | 190 |
Source: Adapted from World Bank Ease of Doing Business Report, 2020 (https://www.doingbusiness.org/en/rankings)
Threats are the negative external factors that create challenges for organizations wishing to enter and/or expand their operations in overseas markets. The external environment (see STEEPLE analysis in the Business Management Toolkit) in different countries or regions of the world can create threats for international marketers. For example, many countries impose tariffs (taxes on imported products), which raises costs and hence the price of the product. This can make it more challenging for businesses to compete in overseas markets.
It is not uncommon for international marketers to change their marketing mix to better suit the different demands and preferences of their overseas customers. This is due to differences in social, cultural and demographic factors. A lack of understanding of these differences can be a natural barrier to international trade and exchange. For example, marketing campaigns do not always translate well in different parts of the world.
Business Management Toolkit - Hofstede's cultural dimensions
International marketers need to be aware of different international cultural dimensions and business etiquette. Business etiquette refers to the mannerisms and customs by which business is conducted in different parts of the world. Having local knowledge and a good level of understanding of differences in business etiquette can help international marketers to succeed in overseas markets. By contrast, a lack of understanding can lead to marketing errors for organizations trying to sell their goods and services abroad.
Watch this interesting TEDx video about the importance of business etiquette and cultural difference in business, focusing on Europe and China:
Discuss how knowledge of Hofstede's cultural dimensions can improve the chances of success for businesses entering or expanding in international markets.
Extension tasks
Read more about the importance of business etiquette for international marketer here (15 Vital Business Etiquette Rules).
See The role of cultural differences in international marketing for more information on this important issue.
Differences in legal systems in other countries can also be a threat for international marketers. Organizations need to take account of different laws and regulations when marketing overseas. Legal constraints on international marketing include rules and regulations about issues such as:
intellectual property rights, i.e., copyrights, patents, and trademarks
health and safety laws
competition law
consumer protection
employment law
codes of conduct on advertising
international trade, such as tariffs (import taxes), quotas (quantitative limits), and embargoes (trade bans).
Legal barriers can be a threat to businesses
Legal and political barriers mean that international marketers need to make sure they understand and abide by the different laws and regulations of the countries in which they operate.
Other barriers or threats to international marketers operating in overseas markets include:
The additional costs of operating in foreign countries. For instance, there may be additional costs for market research, as well as workforce planning and training.
Established competition may already exist in overseas markets. Competing with well-established firms with a loyal customer base can create challenges for international marketers. The increasing presence of large multinational companies in global markets has also made international marketing more challenging.
Exchange rate fluctuations can affect the price competitiveness of a business. A higher exchange rate means that the price of exports will be higher for foreign buyers. This can reduce the firm’s sales and profitability.
Cultural differences can also cause challenges for international marketers. This can be done by gaining a better knowledge of local cultures (perhaps through market research). In addition, there are major difference in business etiquette in different parts of the world. However, the use of a differentiated international marketing mix to meet local tastes and cultures is known as glocalization.
Business Management Toolkit - Hofstede's cultural dimensions
Culture refers to the shared beliefs, attitudes, values, and practices that characterises an organization. International marketers may encounter major cultural differences when marketing their products in different countries and parts of the world. Cultural differences exist because customers around the world have different beliefs, outlooks and values. Their preferences, habits and tastes may also differ. For example, McDonald’s does not sell beef products at its restaurants in India as cows are regarded as a sacred animal.
Watch this short video on how McDonald’s caters for differences in different preferences and tastes around the world:
Marketers need to be aware of cultural differences when marketing their products in different countries. Although the marketing mix for the product might be successful in one country, the same strategy may not necessarily succeed in other countries. Marketers also need to be aware of cultural sensitivities in different regions of the world in order to avoid offending their overseas customers and to prevent damaging their brand name and sales.
Using real-world examples, discuss the importance of Hofstede's cultural dimensions for international marketers operating in overseas markets.
Teacher only boxOrganizations need to be aware of cultural differences when marketing their products internationally. What works well as a marketing mix or marketing strategy in one country does not necessarily work well in other countries or parts of the world.
Possible areas for discussions could include:
As more businesses grow internationally, they need to be increasing aware of the cultural sensitivities in different countries and regions in order to avoid major damage to their reputation, sales, and credentials.
Cultural difference exist because people have different perceptions, beliefs and values. Habits and taste also vary in different parts of the world.
Cultural differences also require firms to be fully aware of international business etiquette (the mannerisms and customs or traditions by which business is conducted in different countries). It also helps to prevent businesses from making marketing blunders.
Cultural differences can have a significant impact on marketing practices and strategies, especially for multinational businesses using international marketing techniques (discussed in this unit of the syllabus).
The marketing practices and strategies of successful firms in the domestic market do not necessarily work in international markets due to societal and cultural differences.
Cultural factors have a large and direct impact on the demand for certain goods and services in different parts of the world, e.g., KFC includes rice products on its menu in China, whilst there are no beef products sold in McDonald’s restaurants in India.
Cultural differences have provided many opportunities businesses and industries to exploit cultural exports, e.g., the widespread use and availability of American products overseas, such as Coca-Cola drinks, McDonald’s fast food, and Hollywood movies.
Hence, marketing is only successful if international marketers truly understand and cater for differences in cultural values.
Top tip!
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"If we want peace in this world, we need to educate our students acceptance of diversity, respect the opinions of others, and be prepared to disagree and seek consensus."
- Dr. Shazia Iqbal Khan, Principal and educational leader
As with any strategy to expand overseas, even if a business carries extensive market research to ensure its products sell well internationally, there can still be problems due to a lack of local knowledge, local laws and regulations, and awareness of local business etiquette. Something as simple as the brand name or even the location name can create problems for local businesses attempting to market their products in international markets.
Case Study 1 - BMW's huge advertising mishap
BMW, the German luxury car manufacturer, made the mistake of improperly using the United Arab Emirates's national anthem in a television commercial in 2016. The TV advert showed the players from Al Ain Football Club singing the National Anthem before a match, but after hearing the sound of a BMW engine they all stop singing and rush out of the stadium towards several BMW cars.
Although BMW was trying to arouse intense emotion and passion, it caused offence to the Emirati people in the UAE instead. They argued the advert was incredibly offensive, suggesting that the German car company tried to portray that their cars were more important than the UAE's National Anthem. BMW explained its intent was never to offend anyone. The company apologised and replaced the advert after locals and legal experts described BMW's TV commercial as culturally offensive.
Case Study 2 - Language and culture
Are the following rather strange names for British foods? Due to differences in language and customs, not everyone will necessarily understand these food names in British culture, but here goes... Do you know what these twelve products are?
| Product | Meaning |
| 1. Baby Gaga ice cream | Human breast milk ice cream! |
| 2. Bangers and mash | Sausages with mashed potatoes |
| 3. Black pudding | Pork blood sausage, associated with Lancashire, the West Midlands, the North West of England, and Scotland |
| 4. Bubble and squeak | A traditional British breakfast dish made from fried potatoes and cabbage - although carrots, peas, or any other leftover vegetables are also used |
| 5. Dead man’s arm | Also known as "Roly Poly", this is a jam pudding, similar to a Swiss roll |
| 6. Eton mess | Traditional English dessert consisting of strawberries, meringue, and whipped cream; believed to originate from Eton College back in 1893 |
| 7. Lancashire hotpot | Originating from Lancashire in the North West of England, this is a lamb stew, cooked with onions, carrots and potatoes |
| 8. Lucky Tatties | Traditional Scottish cinnamon coated sweets |
| 9. Pigs in blankets | Sausages wrapped in bacon (the US version has sausages wrapped in pastry) |
| 10. Rumbledethumps | Baked cabbage dish with cheese, often with potatoes and onions added |
| 11. Spotted dick | Maybe the strangest of the 12 listed products here, a spotted dick is a traditional steamed pudding with fruit filling, usually served with custard. The spotted dick is also known as the "spotted dog" or a "railway cake". |
| 12. Toad in the hole | Sausages in Yorkshire pudding batter, usually served with onion gravy and garden vegetables |
ATL Activity 1 - The world's top brands
Take a look at the world’s top 100 brands, from Forbes magazine. You may notice that only 3 of the top 10 featured brands are not American brands. To read the article, click the hyperlink here. After reading the article, have a go at the exam practice question below.
Case Study 3 - Branding mishaps?
Language is rooted in culture, yet the ignorance of language and how it is used in different parts of the world can cause major havoc for marketers. This lack of understanding can lead to branding errors for businesses trying to market their products on an international scale.
These brands are unlikely to success in overseas / international markets, due to language and cultural reasons:
100% Discount Store - Taiwanese supermarket chain
Big Nuts – chocolate bar from Cote D'or
Bimbo Sandwich – brand of bread from France
Complicated cake - a brand of Chinese cookies
Fartfull - one of IKEA’s branded table desks
Fifth Third Bank - American banking corporation
Krapp - a Swedish brand of toilet paper
Looza - a soft drinks brand commonly found in vending machines in Luxembourg
Nightmare - a brand of pillows found in India
Pee Cola - a brand of cola sold in Ghana (an English-speaking nation)
Pocari Sweat - a Japanese energy drink
Topcon - a Japanese electronics manufacturer
WeePee - a Japanese child care centre
Zit - an ice cream brand in France, and also a Greek soft drink.
ATL Activity 2 (Research and Thinking skills) - Epic global branding fails
Read this article about "20 Epic Fails in Global Branding".
Another entertaining article is titled "15 Brand Failures: Advertising Mistakes & Cultural Blunders", which is also worth a read.
Read some sound advice here about how businesses can go about avoiding making global branding mistakes.
Extension Task
Investigate other branding mishaps due to a lack of cultural awareness in international markets.
Case study 4 - Marketing mishaps galore
Culture and language can also present problems for international marketers trying to use international corporate slogans. Some examples of such mishaps include:
Brazil - Ford, the American car manufacturer, made a rather large marketing mistake when the Ford Pinto was launched and flopped. The Ford Motor Company found out that "Pinto" was Brazilian slang for “small male genitals’. Ford pried the entire nameplate off and substituted it with "Corcel", which means horse.
China - KFC's international advertising slogan "We do chicken right" as a literal translation in Chinese slang which means "it is right for us to be prostitutes"(!) - not exactly the best slogan for a family-orientated fast food restaurant.
France - Toyota’s MR2 sports car is pronounced “merdé” and written as 'merdeux'; both terms are slang for dung.
Germany - In Italian, the word Latte means milk, whilst in Chinese the word is translated to milk coffee. However, in Germany, Latte is a recognized term for an erection.
Italy - A marketing campaign for Schweppes Tonic Water translated the brand name as “Schweppes Toilet Water.”
Italy - German car maker Volkswagen’s Jetta is pronounced “Ietta” since the letter “J” doesn't really exist in the Italian language (few words have a ‘J’ and it is not pronounced anyway – such as Juventus Football Club). Letta means ‘misfortune’.
Italy - Italian mineral water producers Traficante Group (acquired by Coca-Cola in 2006) found that the name meant “drug dealer” in parts of Italy.
Mexico - When the Parker Pens Company marketed its ballpoint luxury pens in Mexico, the American company's adverts were supposed to say, “It won’t leak into your pocket and embarrass you.” However, the company’s mistakenly thought the Spanish word “embarazer” meant embarrass. Instead the advert translated to “It won’t leak in your pocket and make you pregnant."
Nordic region - The Honda Jazz originally called the “Fitta” when introduced to Sweden, Norway and Denmark back in 2001. At the time, Honda's executives did not realise that “fitta” is an old slang term used to refer to female genitals.
Spain - American brewing company Coors used the slogan, “Turn it loose,” which was mistranslated as “Suffer from diarrhoea.”
Spain - General Motors, another US car maker,launched the Opel Vauxhall Nova car in Spain but sales were not too good. The company later found out the Spanish customers did not want to buy a car (the Nova) that “does not go” – the meaning of 'nova' in Spanish.
Spain - Perdue Farms’ slogan, “It takes a strong man to make a tender chicken” was translated as “It takes an aroused man to make a chicken affectionate.”
Sweden - Electrolux, the Swedish multinational electronics company, goes down in corporate history for devising one of the worst global advertising slogans, used to promote its vacuum cleaners - “Nothing sucks like an Electrolux”.
Taiwan - Pepsi’s slogan “Come alive with the Pepsi Generation” was translated as “Pepsi will bring your ancestors back from the dead."
Case Study 5 - Why Dunkin' Donuts failed in India
Dunkin' Donuts has become synonymous with breakfast in the USA and many other parts of the world. The company, established in 1950, has around 12,900 restaurants in 42 countries. In the United States, Dunkin' Donuts continues to enjoy steady growth in its sales revenue but has struggled to do so in India.
Despite Dunkin' Donuts selling its most popular products alongside more regional menu items to cater to local tastes, the company has faced ongoing issues in India. It even tried to diversify to other other products such as burgers.
Watch this short CNBC video and note the possible reasons for Dunkin' Donut's lack of success in India.
Case Study 6 - Culture and international marketing: getting it right
HSBC are experts are international marketing. Watch a short series of their “The World’s Local Bank” television adverts here to get a flavour of the importance of knowing your local markets:
ATL Activity 3 (Thinking skills) - Cultural differences when marketing in China
According to Dragon Social, a social media marketing (SMM) company based in China, foreign firms often fall short of effective marketing in China as they lack understanding of the market. These companies include Burberry, D&G, Dior, Fendi, Mercedes-Benz, Pepsi, Prada, and Victoria’s Secret. The company attributes the lack of understanding of cultural differences to five common marketing mishaps.
Read the article "Top 5 Big Mistakes Foreigners Make When Marketing in China" to discover what these attributes are. Click the link here to access the article, or use the QR code here:
The article does include examples of companies that have succeeded with their international marketing campaigns in China, such as Coca-Cola and Mabelline.
ATL Activity 4 (Research skills) - Cultural differences and business etiquette
Investigate the importance of business etiquette for international marketers for two countries of your choice. Be prepared to share your findings with the rest of the class.
ATL Activity 5 (Thinking skills) - Global marketing mistakes
Read this article titled ‘The most common mistakes companies make with global-marketing’ from the Harvard Business Review. After reading the article, discuss how businesses might tackle this problem.
Click the hyperlink for another great article, from Business News Daily, where you can read about some interesting case studies about international marketing mishaps. The article also provides advice about how businesses can avoid making such mistakes when marketing to a global market.
Top tip!
International marketers must understand the business etiquette, culture and language of their clients; otherwise it can be a very costly oversight. Such ignorance can mean the business is disadvantaged unintentionally.
| (a) | Define the term multinational company (MNC). | [2 marks] |
| (b) | Define the term international marketing. | [2 marks] |
| (c) | Explain the importance of branding for a multinational company (MNC). | [6 marks] |
Teacher only boxAnswers
(a) Define the term multinational company (MNC). [2 marks]
A multinational company (MNC) is a business that has operations overseas, i.e., it operates in two or more countries. Although the MNC has its headquarters in one country, it has operations and premises in other countries.
Award [1 mark] for a definition that shows limited understanding of multinational company.
Award [2 marks] for a definition that shows good understanding of multinational company, similar to the example above.
(b) Define the term international marketing. [2 marks]
International marketing refers to the marketing of an organization’s goods and/or services in overseas markets. It includes anticipating and identifying the needs of the target market based in foreign nations, and meeting these needs in a profitable way.
Award [1 mark] for a definition that shows limited understanding of international marketing.
Award [2 marks] for a definition that shows good understanding of international marketing, similar to the example above.
(c) Explain the importance of branding for a multinational company (MNC). [6 marks]
Possible reasons that could be explained could include:
An appropriate brand is needed to meet the expectations of the target market in different international markets.
Brand association can have a direct impact on sales, especially in overseas markets where particular brand may/may not be known.
International branding helps to differentiate a product from rival ones on the market, and can give a business a unique identity.
Brand recognition can help to increase sales, especially in international/overseas markets.
Branding can enhance a firm’s unique selling point (USP).
It can help businesses operating in new/overseas markets to attract customers, especially in well-established markets with existing market leaders.
A well-developed and respected brand can help the MNC to set premium prices, thereby helping to improve its profit margins.
An effective international branding strategy can help the MNC to encourage repeat purchases (due to brand loyalty).
Effective international brand management helps to lengthen the product life cycle of the MNC's goods.
Award a maximum of [2 marks] if the response shows limited understanding of the demands of the question or if there is minimal, if any, application to a MNC.
Award a maximum of [4 marks] if the response shows good understanding of the importance of branding but parts of the explanation lack depth or if the application is weak in some areas.
Award up to [6 marks] if there is a thorough explanation of the importance of branding for a MNC. The response is explained with effective use of terminology throughout the answer, which is applied well to the chosen MNC.
German car manufacturer BMW faced huge criticism for the inappropriate use of the national anthem of the United Arab Emirates (UAE) in one of its car commercials. The advert featured Al Ain Football Club’s players, based in based in Abu Dhabi, UAE, singing the anthem but then running towards BMW cars upon hearing the engine sound. Instead of evoking passion for the cars, the advert created as part of an international marketing campaign caused anger among Emiratis because it implied that the German cars were more significant than the national anthem of the UAE.
BMW apologized and quickly replaced the offensive advert. BMW is a market leader in the premium car segment in the Middle East. Although there is scope to grow the BMW brand even further, competition in the region is intense.
| (a) | Define the term market leader. | [2 marks] |
| (b) | Explain two opportunities for BMW of operating internationally. | [4 marks] |
| (c) | Explain two threats for BMW of operating internationally. | [4 marks] |
Teacher only boxAnswers
(a) Define the term market leader. [2 marks]
The term "market leader" refers to a business that has the largest market share within a specific industry or market segment. The market leader is generally recognized as the most influential and dominant firm in the industry, as measured by metrics such as sales value, sales volume, size of the customer base, brand recognition, and overall market influence.
Award [1 mark] for a definition that shows some understanding of market leader.
Award [2 marks] for a definition that shows good understanding of market leader, similar to the example above.
(b) Explain two opportunities for BMW of operating internationally. [4 marks]
Possible opportunities could include an explanation of:
Market growth – Despite the criticism faced due to the inappropriate commercial, BMW has a significant market share in the premium car segment in the Middle East. This indicates an opportunity for BMW to further expand its presence and increase its market share in the region. With its existing customer base and brand recognition, BMW can leverage its strengths to tap into new markets or segments within the Middle East and capture a larger share of the premium car market.
Brand development – As there is scope for BMW to grow its brand even further in the Middle East, this presents an opportunity for BMW to focus on brand development strategies such as increasing brand awareness and enhancing its brand image through more culturally appropriate market strategies to improve customer perceptions. By effectively positioning itself as a premium and desirable brand, BMW can differentiate itself from competitors and attract more customers in the UAE and Middle East. This can be achieved through targeted marketing campaigns, delivering exceptional customer experiences, and emphasizing the unique features and benefits of BMW cars.
Opportunities to engage with the local community and partner with local organizations – These opportunities enable BMW to build stronger relationships, gain trust, and establish itself as a premium brand that respects and values regional cultures and traditions. Cultural sensitivity and localization are crucial aspects of effective international marketing, as exemplified by the criticisms of BMW’s inappropriate commercial in the UAE. Instead, BMW can localize its marketing campaigns in the Middle East and align its marketing mix with the target market’s cultural values.
Award as a 2 + 2.
For each point, award [1 mark] for an appropriate advantage and a further [1 mark] for a suitable explanation, up to the maximum of [4 marks].
(c) Explain two threats for BMW of operating internationally. [4 marks]
Possible threats could include an explanation of:
Damage to BMW’s brand reputation – The inappropriate use of the national anthem in BMW’s car commercial led to significant criticism and anger among Emiratis. This incident can damage BMW’s brand reputation not only in the UAE but also in other regional and international markets. Negative perceptions and backlash can lead to a loss of trust and credibility of the brand, making it challenging for BMW to maintain a positive image and attract new customers in international markets.
Risk of cultural misunderstandings and causing offense – Similarly, the incident highlights the importance of cultural sensitivity and understanding in international marketing. BMW’s failure to recognize and respect cultural nuances in the UAE can lead to offensive or inappropriate advertisements, causing anger and backlash from local communities. This threatens BMW’s overseas operations and international competitiveness as it can result in reputational damage, boycotts, and loss of market share in affected regions.
Intense market competition – Competition in the premium car segment in the Middle East is intense. This presents a threat to BMW’s international operations as the company needs to compete against other well-established luxury car brands. The intense competition can lead to price wars, aggressive marketing tactics, and challenges in capturing and retaining market share. BMW must continuously innovate, differentiate itself, and effectively address customer needs to withstand the competition and maintain its position in the market. However, the cost of this can be extremely high, such as the costs of research and development (R&D).
Award as a 2 + 2.
For each point, award [1 mark] for an appropriate disadvantage and a further [1 mark] for a suitable explanation, up to the maximum of [4 marks].
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