The scope of an international marketing plan was indicated in Chapter 1, and there is no need to repeat what was said there. To design a marketing plan, managers must make decisions, both individually and collectively, on policies relating to the product, pricing, channels, promotion, and logistics. These policy areas (commonly referred to as the marketing mix) are defined in Table 4 in Chapter 1. The international marketing effort, then, is the sum total of a company’s resources committed to marketing mix policies in the target market.
1. International Marketing Concept
In designing international marketing plans, managers should be guided by the international marketing concept. This concept is a philosophy asserting that the long-run profitability and ultimate survival of a company in world markets depends on its capacity to provide a continuing stream of benefits to customers at a competitive price. To apply this concept, managers need to (1) find out what foreign customers want, (2) try to give them what they want by adapting old products or developing new products, (3) try to formulate other marketing policies (such as distribution channels) that satisfy customer wants, and (4) ascertain the costs of adapting products and marketing policies to a particular target market, so as to ensure that those policies arc cost-cffcctivc.
In sum, application of the international marketing concept requires managers to make trade-offs between the consumer/user benefits of adaptation (enhancing marketing effectiveness) and the costs of adaptation. But the fundamental contribution of this concept to a company lies in its stimulation of an outward orientation to world markets. Animated by this philosophy, managers are more likely than otherwise to design cost-effective international marketing plans.
2. Determining the International Marketing Mix
Managers should determine the marketing mix for a target country over a strategic planning period of three to five years. They need to decide, there* – fore, not only the initial mix but also changes in its aggegate level and t composition over time. Apart from the difficulties inherent in all strategic planning, determining the marketing mix for a target country poses particular difficulties for managers.
The several mix elements are highly interdependent: no single element can be fully effective in generating sales or accomplishing other marketing objectives without the support of other elements. Hence managers need to make joint decisions on mix polices in order to design an integrated marketing plan. This means, for example, that they should not decide on pricing policy without taking into account other mix policies. Unfortunately, this joint decision making can seldom be based on precise knowl-edge of the relationship between any single mix element and sales in the target market and of the relationships among the mix elements. One must rely mainly on informed judgments for answers to such questions as, What will happen to sales if we raise advertising expenditures by 10 percent? Will it be more cost-effective to join a high price with heavy promotion or to join a low price with modest promotion?
Figure 17 is intended to help managers improve their decisions on the international marketing mix. Each mix element is appraised by reference to factors in the target country/market that can influence its effectiveness or cost. A vertical appraisal of each marketing mix element represents management’s judgment of the most appropriate policy for that element without regard to other mix elements. The resulting individual summary profile may be a compromise policy, because some of the country/market factors may point toward different policies. The next step is a horizontal appraisal across all the mix elements. This appraisal spots inconsistencies (such as a high-quality-product policy and a low-price policy) that need to be removed and indicates other changes that will improve the cost-effectiveness of the marketing plan. The result of this second appraisal is an aggregate summary profile. Profile appraisal should consider not only the initial marketing mix but also mixes over the entire strategic planning period.
The optimum international marketing plan is the one that maximizes profit contribution over the planning period. Optimality requires that the level of total marketing effort be increased up to the point where its incremental cost equals its incremental revenue, but not beyond the point where its incremental cost exceeds its incremental revenue. As a corollary, optimality also requires that incremental costs and revenues be equal for each element of the marketing mix; otherwise, the profit contribution can be increased by reallocating effort among the several elements.1 It follows that the optimum mix may not be achieved because total marketing effort falls short of the optimum level and/or the allocation of marketing effort among the mix elements is suboptimum.
Evidently, to say that managers should design the optimum foreign marketing plan is a counsel of perfection.2 But by trying to move toward optimality, managers can reasonably anticipate a more cost-effective plan than otherwise. And this can give them a decisive advantage over competitors whose plans are grounded on tradition, wishful thinking, or short-run prospects rather than on market knowledge coupled with a strategic approach to foreign market entry. Managers can move toward optimality by raising two questions about the marketing mix for a target market: (1) If we increase the overall level of our marketing effort, will it add more to revenues than to costs? (2) Given our overall level, can we increase the profit contribution by shifting resources from one element to another?
No one should pretend that factual answers to these questions are easy to come by. Even the acquisition of comprehensive information on the target country/market is not likely to give managers precise, reliable estimates of the market’s responses to the various mix elements. The design of an international marketing plan, therefore, always carries a heavy load of judgment and risk. But even approximate answers to these questions are better than none at all, and they are possible only if the questions are raised in the first place.
Source: Root Franklin R. (1998), Entry Strategies for International Markets, Jossey-Bass; 2nd edition.