Why are international markets so important to U.S companies such as Starbucks, Mc Donald’s and Coca-Cola, as well as to European companies such as Nestle, Unliver, and Nokia? Discuss the role of advertising and other forms of promotion in these companies’ international marketing programs.
The most obvious reasons are:
1. Huge production capacity of thse MNCs means that domestic markets alone cannot sustain sales at the required levels - hence the need to export/set up branches/plants/outlets in other countries.
2. Greater output in turn enables the companies concerned to achieve technical, marketing and financial economies of scale - i.e. lower unit costs.
3. This in turn makes their products more price competitive against rival local companies, thus increasing market share.
4. Increases in sales and profits generate additional funds for new investment, enabling such companies to produce more efficiently and to introduce new products/services, this strengthening market position.
5. Where companies actually locate plants abroad (rather than simply exporting their products) it is to be take advantage of lower land or labour costs, more benign tax regimes, fewer planning restrictions, easier access to capital, etc. This trend has accelerated with the advent of globalisation.
6. The strategy also allows the spreading of risk - poor sales in one country can be offset by strong sales in another. It is also a hedge against adverse exchange rate fluctuations, which can adversely affect sales and profits. So, for example, companies confined to the EU at present would find it harder to export goods since the euro is so strong - hence the ned for diversification.
I hope this is helpful.