Regulations Guiding International Marketing – SS3 Marketing Lesson Note (First Term)

International marketing is the sale of a company’s products in foreign countries, and the firm must obey the rules and regulations of each country it enters.

Behavioural objectives

By the end of the lesson, students should be able to:

1. explain why a firm needs careful preparation before entering international markets;
2. list the five basic approaches to entering international markets;
3. describe each of the five approaches;
4. state the rules and regulations that guide a company engaged in international marketing;
5. explain what happens when a company breaks these rules.

What is international marketing?

International marketing is the planning and selling of a company’s goods and services in one or more foreign countries.

• Home country: the country where the company is based, for example Nigeria.
• Foreign country (host country): the country where the company wants to sell its products.
• Export: goods sent out of the home country to be sold abroad.
• Regulation: a rule or law made by a government that businesses must obey.

Why does a firm need preparation before entering international markets?

A firm needs preparation because no firm, individual, business establishment or organisation can easily step into global markets.

• Analysis: the firm studies the foreign market, its customers and its competitors.
• Planning: the firm sets goals and decides how it will enter the market.
• Preparation: the firm gets its products ready and researches the export process and potential markets.
• Evaluation: the firm checks its results and corrects mistakes.

Once the research is complete, the marketer chooses one of five basic approaches.

What are the five approaches to entering international markets?

There are five basic approaches: indirect exporting, direct exporting, joint venture, wholly owned subsidiary and creating a website.

1. Indirect exporting

• Meaning: individuals or organisations in the home country sell the company’s product abroad.
• Who sells: an outside agent or export firm, not the company itself.

2. Direct exporting

• Meaning: the company sells its product abroad by itself.
• Who sells: the company’s own staff or its own export department.

3. Joint venture

• Meaning: the company enters into partnership with a foreign company or individuals to manufacture and market products.
• Who shares: both partners share the work, cost and profit.

4. Wholly owned subsidiary (direct investment)

• Meaning: the company sets up its own factory in the foreign country to manufacture and market the products.
• Who owns: the company alone owns the business abroad.

5. Creating a website

• Meaning: the company uses the internet to market its products to foreign buyers.
• How it works: buyers in other countries see the products online and place orders.

What is the difference between indirect exporting and direct exporting?

Indirect exporting uses a middleman in the home country to sell abroad. Direct exporting means the company does the selling itself.

What rules and regulations guide international marketing?

A company engaged in international marketing must follow the laws of the foreign country and the rules of fair business.

1. Pay all taxes: the company pays every tax and duty the foreign country requires.
2. No contraband: the company must not export any product that is contraband into any country.
3. Obey business laws: the company obeys all laws on setting up a business in the foreign country.
4. Stay politically neutral: the company does not take sides in the politics of the foreign country.
5. Use the local currency: business transactions within the foreign country are based on that country’s local currency.
6. Include local partners in a joint venture: the citizens or government of the foreign country must be a party to the business.
7. Avoid fraud: the company must not be involved in fraudulent activity.

What is contraband?

Contraband is any good that the law forbids people to bring into or take out of a country.

• Examples: illegal drugs and weapons brought in without permission.
• Effect on the firm: goods can be seized and the firm can be punished.

What happens when a company breaks the rules?

A company that breaks the rules can lose its right to do business in the foreign country.

• Ban: fraudulent activity could lead to the foreign country banning the company.
• Loss of goods: contraband can be taken away by the authorities.
• Loss of trust: buyers and governments stop dealing with the firm.

Evaluation

1. Why can a firm not easily step into global markets?
2. List the five basic approaches to entering international markets.
3. Differentiate between indirect exporting and direct exporting.
4. What is a wholly owned subsidiary?
5. State four rules that a company should follow when engaging in international marketing.

Assignment

1. Describe the joint venture approach to entering an international market.
2. Explain any three rules and regulations that guide a company engaged in international marketing.