614 The Marketing Book
Where then is theory?
The benefits of international marketing are
many and dissipate risk, and provide almost an
insurance of a foreign market alongside the
domestic market. There are advantages not
only in extended sales volume, but also in a
possible price premium offered by the foreign
market over the domestic market. Access to
sought-after commodities or inputs into the
production process provide a further rationale,
particularly where costs may be lower. Over
time, different arguments have been made, and
some have lost their relevance as our econo-
mies modernize and our national companies
integrate with foreign competitors. Michael
Thomas pointed to the following as concepts,
though, which remain yet to be proved:
Product life cycle.
Wheel of retailing.
Hierarchy of advertising effects.
The Boston box (BCG matrix).
Information processing paradigms of consumer
behaviour.
Stages in internationalization process models.
Not all of these will be explored in this chapter,
but what emerges is that we are seeking laws,
regularity and predictability.
1 Product life cycle effects are often cited but
seldom proved. Where a product on the home
market enters a mature phase, theory argues
that the company concerned may then be able
to find new export markets abroad where
product markets have not reached the same
stage of development. This argument, however,
becomes increasingly less relevant with the
passage of time as a result of two trends. First,
competition today, being international rather
than domestic for all goods and services, has
reduced the time lag between product
research, development and production, leading
to the simultaneous appearance of a
standardized product in all major world
markets, as with Microsoft and the launch of
their XP operating system or Iomega with
their zip drives. Second, it is not production in
the highly labour-intensive industries that is
moving to the low labour cost countries with
freeport advantages, such as Taiwan, but the
capital-intensive industries, such as electronics,
creating the anomalous situation of basing
production for high-value, high-technology
goods, in the countries least able to afford but
best able to produce and export. Competition
in a chosen target market may be less intense
than at home or there may be the promise of
tariff barriers to exclude potential competitors
in return for a substantial foreign investment in
plant machinery and know-how.
2 Excess capacity utilization. When the domestic
market experiences a downturn or reaches
saturation, companies may turn to export
markets to make good the shortfall. For
companies in industries requiring long
production runs to ensure commercial viability,
foreign orders may make the crucial difference
between profit and loss. However, there is no
commitment to exporting or to foreign
markets at this stage.
3 Another feature which may also appear is that
low prices are often quoted to ensure sales
success in order to secure long production
runs or to sell off high inventory levels. It is
indeed possible for a company which has a
mature product line to regard its original
investment in product research and
development to have been long since
recouped, and therefore to price on the basis
of actual production costs plus overheads. This
is profitable exporting, but means that a
company will be charging a different price in
foreign markets from that which it charges in
its own domestic market. This invites charges
of ‘dumping’, which in the case of the USA and
also the EU is assessed on two criteria: the
basis of injury to local industry and whether
the price being charged is lower than the price
charged in the producer’s own domestic
market. This strategy may succeed in the short
term, solving the need for near-capacity
production runs. Finding foreign customers on