Foreign Market Place- Uncontrollable Environmental Variables

Foreign Market Place- Uncontrollable Environmental Variables

A number of aspect need to be well thought-out by a firm before trading in a foreign market. An example of a firm that has penetrated in most foreign markets is General Motors marketing its products all over the world. It is essential for a firm to strategise before venturing into a foreign market so as to weigh the risk benefit ratio. As discussed by Murray and Walter (1988), a marketing strategy involves selection of a target market as well as offering a marketing mix. Marketing-mix variables are termed as uncontrolled variables or those that are manipulated or influenced by internal managerial decisions. It is therefore the responsibility of the management to control the characteristics of the product by setting the market price, choice of distributors and the media through which they advertise. Uncontrollable variables can not be influence by the firm so it has to be contending with them at least in the short run. These variables include; cultural and social factors, political and legal factors, and economic factors.

Cultural and social factors are the most limiting uncontrollable variables when it comes to international marketing. Culture is shared and affects the boundaries between different groups of people having a profound effect on the other uncontrollable variables (Murray and Walter, 1988). Generally the survival of a company in a foreign market depends on how the company interrelates with the environmental conditions. The cultural setting in any given foreign market includes different areas such as language, religion, education, technology and material culture, law, politics as well as local values and attitudes. It is therefore important to get the guidelines and learn the culture of a country before introducing a product in that market so as to know its receptivity by the foreign culture.

Political environment is the other uncontrollable variable associated with international marketing and it involves interactions between domestic, international and foreign policies. International business as explored by Murray and Walter (1988) includes minor exports as well as total market control by a firm in the foreign country. A stable government with ample business influence will act as a boost to the stock exchange. Any firm in the trading in the international market has to be concerned about the political stability, nationalism and government orientation. Political stability is the most important because it determines the success or collapse of a firm.

Before locating the production facilities in a country, the firm should be well aware of the balance of payment. A country with balance of payment pressures may not be suitable for business since the firm may experience challenges with flow of foreign exchange. International trade is greatly influenced by income, outputs ad expenditure of industrialized countries and therefore, it is important to analyse these variables to understand the trade patterns (Srinivasan 2010).

In this time of globalisation as explored by Srinivasan (2010), international competition is not an option. The expansion of a domestic firm into the international market could be the only survival tactic due to the acquisition of a competitive edge. A firm like General motors has survived in the industry for a long time due to its understanding of buyers and markets in a foreign country. This has been the reason for its continuous in a very competitive industry.

Foreign markets contribute a large share of revenue by many firms including General Motors, Coca Cola and IBM. In fact, most of the international firms sell more in foreign countries as compared to the mother-country. The firm can therefore realize maximum profit even when incurring looses in others acting as a balancing out system.

Once a company has adhered to all the necessary factors involved in setting up of a production firm in a foreign market, then the firm is bound to expand beyond national borders. The exports benefits are obvious bring in higher profits to the firm. The realization of higher profits in foreign markets helps to combat inflation in the mother country (Srinivasan 2010).

References

Murray, T., Walter, I. (1988). Handbook of International Management. Canada: John Wiley and Sons, Inc. Print.

Srinivasan, R. (2005). International Marketing. New Delhi: Prince Hall of India Private Limited. Print.