Introduction
According to Anderson (2010, p. 28), “internationalization is one of the most important and pervasive forces that reshape the competitiveness of business environments”. It has largely shifted the basis of competitiveness in companies and makes it necessary to understand global regions as one vast market (Forsgren, 1999). Internalization has made it possible for companies to expand the scope of their activities and has also brought more competition to the home countries of the companies (Forsgren, 1999). According to Welch (2000, p 555), internationalization can be defined as “the process of increasing involvement in international markets”. The author continues to explain that this process cannot be considered as a separate feature of a company’s strategy, but should always be considered as a part of its overall competitive strategy.
Competitive strategy and intelligence are very vital tools in this process. “Competitive strategy can be defined as a set of actions put in place by a company to reach the company’s objectives, which should be in-line with the company’s vision and mission” (Ball, 2004, p. 18). Competitive intelligence on the other hand refers to the action of “defining, gathering, analyzing and distributing intelligence about customers, products, competitors and every other aspect needed to support managers, executives and the whole management team in making strategic decisions” (Rouach, 2002, p. 555). The key thing to note in both these aspects is the fact that they are ethical and legal business practices. Their focus is on the external business environment and there is a process involved to gather information, convert it into knowledge and then utilize it in decision making. Competitive intelligence and a business’ marketing mix work together to identify opportunities and risks in foreign markets (Zanasi, 2001).
In the Uppsala model, which is what this paper will focus on, a basic assumption is that “lack of knowledge about foreign markets is a major obstacle to international operations but then such knowledge can be easily acquired” (Campbell and George, 2004, p. 99). Due to the nature of market knowledge, the main source of knowledge must be the firm’s own operations (Drolshammer and Michael, 2001). Acquisition of knowledge happens more easily and more effectively by participation in the market rather than mere collection and analysis of knowledge. By participating in the market, an organization is not only able to collect the information more easily but is also able to connect and relate well with the information.
Internationalization theories
The Uppsala model
“In this model, a basic assumption is that lack of knowledge about foreign markets is a major obstacle to international operations but then such knowledge can be easily acquired” (Ball, 2004, p. 18). Due to the nature of market knowledge, the main source of knowledge must be the firm’s own operations (Dunning, 2007). Acquisition of knowledge happens more easily and more effectively by participation in the market rather than mere collection and analysis of knowledge. By participating in the market, an organization is not only able to collect the information more easily but is also able to connect and relate well with the information.
The second assumption is that “decisions and implementations that concern foreign investments can only be made incrementally if there is market uncertainty” (Dicken, 1999, p. 196). Incrementalism in this context is looked at as a process by which management is learned by doing. The more an organization participates in the foreign market, the more they learn about it, the lower their risk will be and the bigger the foreign investments are available to them. “A firm must learn to postpone each successive step in an international market until the perceived risk associated with that market is at a level lower than the organization can tolerate” (Dicken, 1999, p. 196).
The third assumption is that “knowledge is hard to transfer to other individuals and contexts since it is highly dependent on individuals” (Margardt, 2007, p. 117). Experience cannot be transferred and therefore every organization needs to undergo its own experiences in the market. Only those working in a market will be able to identify its opportunities and problems, and cannot be able to transfer those experiences fully to others. For those people who have been on the front-line, it becomes easier for them to adapt and to them, and present challenges become solutions to future problems.
The Uppsala model influences an organization’s marketing mix in different ways. They include market commitment, market knowledge, commitment decisions and current activities. At certain points in time, market knowledge and market commitment are assumed to affect the commitment decisions and also affect how certain activities are carried out in the subsequent periods, which in turn influence market knowledge and market commitment at later stages (Nigh, 2000). Assuming the theory of incrementalism, and taking these four concepts into consideration, “this model predicts that the step of internationalization would have to start with initiation and continuation of investments in a few neighboring countries, rather than huge investments in various countries at the same time” (Anderson, 2010, p. 28).
“The main emphasis of this model is the experimental type of learning through ongoing activities in the organization” (Anderson, 2010, p. 28). However, learning does not only involve doing but is also considerate of several other dimensions in the company that has consequences on the firm’s behaviors. These include business relations which can help an organization acquire information from other companies without necessarily going through the same process. The other type of learning is imitative learning where organizations learn by observation of other organizations, doing this so closely and following in their steps but doing so diligently to ensure they duplicate all the steps followed by those they are observing. Other forms of learning include hiring people with the type of information an organization is looking for and including them in the concept of organizational learning. Finally, an organization can learn through conducting specific and well focused research rather than having to go through the experience themselves.
Requirements for successful international marketing
For the process of international marketing to be successful and effective, it is important for the management to support the internationalization process and have a clear and shared vision for the process. When this support is not available, the process seizes to be viewed as important and priority is no longer placed on it. It is important for the management to be open and appreciate new tools of decision-making. It is also paramount that the business embraces international marketing as
necessary support for the business landscape. Every organization should always maintain a healthy level of pressure for change and growth to allow implementation of the process.
The management should then find or appoint the most suitable person to oversee and drive the process. Apart from having extensive and professional knowledge on the concept of international marketing and globalization, the person must be well conversant with the business and have healthy relations with the rest of the employees. The person’s access and relationship with the senior management and especially the chief executive is equally important as his skills and character. The issue in choosing a driver for the process is the amount of support the top management is ready to accord to them.
Timing and readiness are important elements when doing international marketing in any industry. Since most organizations are normally overloaded with other core operations in process, timing is an important consideration in adding another operation to the already existing load. The plan and timing must make it easy to integrate the process with other initiatives in the company. It should also be easy to integrate it to the organization’s culture and decision-making which automatically becomes bigger and more challenging.
The requirements needed to fulfill the entire process are more important than where the process is positioned. “A company’s international marketing mix should be positioned in a way that it is on the lookout for significant changes and opportunities that may impact the competitive future and market size of the organization” (Nordstrom, 2003, p. 15). According to Peng (2009, p. 200) “the process is more effective when positioned as high up in the organization as possible where it will have direct and unfiltered access to the Chief Executive”. For such access to be achieved, it is therefore only reasonable that the process is hosted by the organizations’ strategy function.
Soon after the process is conceived, the second wave includes adding operational value. This is for the purpose of delivering products and proving that the process can add value in the shortest time possible (Shenkar and Yadon, 2008). The products and results will then sell it to the management and prove their value to anyone who doubted the process. The eventual success of the process is determined by the accuracy with which the key global needs are identified and analyzed (Marinov, 2000). This basically amounts up to laying the foundation of process. Key intelligent needs are supposed to focus on issues held critical to the success of the company. These needs will often change with the company’s strategy and therefore should be updated regularly if they have to remain critical and actual.
Core elements of the international marketing cycle include planning, collecting, analyzing and disseminating information. In most organizations, the globalization cycle will guide the process. Internal and external networks then serve as suppliers for information to the company. Continuous training and sensitizing programs on employees are important to ensure that the process receives the much needed cultural support. It is only if the employees understand the concept that they will be willing to share contacts, skills and knowledge. Employees in different established regions are also needed to serve as the sensors of the organization and feed the process with new information when it is mature. A relationship between the two will then start having an impact on the organization’s strategy. Based on identified globalized needs, a structured process should be in place to develop networks.
Factors that encourage internationalization
Different scholars and theories offer different interpretations of why and how internationalization occurs. One thing that these explanations have in common is that they agree on their role as an engine for many multi-national organizations. Internationalization is a product of more rational global markets, culture, and regulations. As more countries open up to global trade, the world is today one vast market that allows suppliers, consumers, and manufacturers from every part of the world to interact.
Among the factors identified, technology has been the most influential. Technological innovations have provided an infrastructure that allows global communication, transportation, payment and data processing systems. Sending and receiving feedback about different markets is easier, faster, more affordable, and most importantly, reliable. Innovations such as jet engines, the internet and paperless payment methods allow an organization to trade in any part of the world today.
Another significant factor behind international marketing is regulation. Regulations play a major role in enabling different roles of an organization. According to Hill (2009, p. 189), “Inter-territorial links would not be possible in the absence of various facilitating rules, procedures, norms, and institutions”. Every enabling element of internationalization is heavily dependent on the liberalization of rules and regulations governing it. For example, trade has been largely promoted by removal or state-imposed restrictions such as tariffs. Trade and tax laws in many regions today offer an environment that encourages global trade interactions and investments.
Other impulses to internationalization include rationalized modes of knowledge. Faith in science, technology and other innovations has been instrumental in overcoming traditional barriers to solve cultural, socio-economic, and technical problems. Business thinking is today centered around issues that spur global developments.
As some scholars argue, capitalism has played a significant role in developing internationalization. Karl Marx, a famous philosopher, was once quoted as saying “capitalism by its nature drives beyond every spatial barrier to conquer the whole earth for its market” (Jones et al., 2009, p. 455). In capitalism, global markets are viewed as prospects of increased revenues through more diversified markets and sources of income. In addition, businesses benefit from economies of scale through larger production volumes.
Factors to consider before doing international marketing
Size
There have been different driving forces behind internationalization. Size is among the factors that can be used to explain the likelihood that an organization will diversify abroad. Size affects internationalization in various ways. A firm’s size determines income and expenditure changes that will follow internationalization. Size affects a business’ ability to benefit from economies of scale and market dominance after internationalization.
Leverage
A business’ accounting choices are largely dependent on its leverage. Leverage in many organizations is considered a risk factor. As a result, leverage is directly proportional to the level of risk and inversely proportional to a business’ likelihood to go international. Businesses with high leverage are, therefore, not likely to pursue internationalization.
Penetration
As competition levels grow in a market, a business may be forced to seek overseas growth opportunities. Many developed nations are currently experiencing saturation in a majority of their industries. This has forced much business to diversify in less saturated markets abroad. As it becomes harder to penetrate domestic markets, so do more organizations go international. According to Larimo and Tiia (2009, p. 117), “penetration is measured by a firm’s annual domestic sales over annual industry domestic sales, reasonably describing the extent to which a firm has penetrated the domestic market”.
Annual domestic earnings growth
According to Margaret (2007, p. 117) “In the arena of strategic management, growth and profitability of international firms has been extensively documented”. Looking at organizations that have sought internationalization as an option, there is a clear relationship between their diversification and growth in their production efficiency. By diversifying their markets, businesses are able to stabilize their profits. Annual domestic earnings are a significant consideration when a business is contemplating internationalization. When a business is not experiencing any growth in their domestic market, it is more likely to seek alternative markets overseas. The opposite is also true, especially because internationalization increases risks.
Case study: Anheuser-Busch InBeV
The Anheuser-Busch has its origin from as far back as 1852 as a Bavarian brewery. The founder acquired the Bavarian brewery in 1860 and renamed it E.Anheuser & Co. The company later became Anheuser-Busch. The company had a bold and keen vision right from its inception and this has kept it going to date. “It has a legacy of marketing savvy and a passionate commitment to quality which remains one if its firm legacy to date” (Anheuser-Busch InBev, 2010, p.2). Today, the company has two of the bestselling beers in the world, the Budweiser and the Bud Light.
The company’s internationalization process started more than two decades away, as early as 1981 when the company started expanding to other markets and purchasing companies from other industries like the BARI and Busch Industrial Products. In 1989, the company purchased SeaWorld and in 1993, the company invested in Corona beer in Group Modelo in Mexico. In 1995, the company purchased the majority interest in the Chinese brewer, the Budweiser Wuhan International Brewing Company.
Interbrew on the other hand, was founded as early as the 14th century in Belgium. “In 1717, it was renamed as Brasseries Artois and in 1987, in a bid to consolidate its presence in the market, the company merged with Belgium largest brewers then, the Brasseries Piedboeuf” (Anheuser-Busch InBev, 2010, p.3). This is how Interbrew was created. By 2004, the company’s operations were dispersed across five regions including America, Western Europe, Eastern and Central Europe and the Asian Pacific. AmBev on the other hand was founded as early as 1885 and its presence started taking shape in 1999 when two leading Brazilian brewers, the Comphania Antarctica and the Companhia Cervejaria Brahma merged to create AmBev (ICMR Center for Management Research, 2004). By 2004, the company had more than 65% share in the Brazilian beer market and more markets like Uruguay, Peru and different other regions.
“In 2004, two of the world’s largest world breweries the Interbrew and AmBev announced a merge, creating the world’s largest brewing company in terms of volume and resulting in command for 14% market share in the global beer market” (Anheuser-Busch InBev, 2010). The resulting company came to be known as InBev. Interbrew was then the third largest brewery company in the world and the Brazilian based AmBev was at the time the fifth largest brewery company in the world. “Interbrew at the time had a presence in more than140 countries, with most dominance in Europe and North America, while AmBeV had a two-third share in the Brazilian market and had a dominating presence in the Latin American region” (Anheuser-Busch InBev, 2010, p.3). This meant that the merger would give the newly formed company a presence in Latin America, Europe, North America giving it one of the largest beer markets in the world. In 2008, Anheuser-Busch and InBeV combined to form Anheuser-Busch InBeV. This case study illustrates how mergers can be used as an effective strategy when a business wants to market itself internationally.
Conclusion
“Internationalization has largely shifted the basis of competitiveness in companies and has made it necessary to understand global regions as one vast market” (Forsgren, 1999, p. 188). It has made it possible for companies to expand the scope of their activities and has also brought more competition to the home countries of the companies (Forsgren, 1999). According to Welch (2000, p 555), internationalization can be defined as “the process of increasing involvement in international markets”. The author continues to explain that this process cannot be considered as a separate feature of a company’s strategy, but should always be considered as a part of its overall competitive strategy.
To understand its influence on a company’s marketing mix, it is important to look at factors that encourage and support the process. This paper identified globalization, technology, regulation and liberalization of trade as some of the factors. Technology is considered the most influential because of its role in developing infrastructure that allows global communication, transportation, payment and data processing systems.
Another significant factor identified by the paper is regulation. Regulations play a major role in enabling different roles of an organization. Trade and tax laws in many regions today offer an environment that encourages global trade interactions and investments. Other drivers include rationalized modes of knowledge and capitalism. Factors that a business needs to consider before venturing into international marketing include size, leverage, domestic income and penetration. This paper has used Anheuser-Busch InBev to illustrate how businesses can move from operating in a small domestic market to dominating global markets through international marketing. The businesses use mergers and acquisitions of small players in different markets as an international marketing strategy.
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