Environment Analysis for International Marketing
Before entering international markets, one of the most essential steps is conducting an environmental analysis. This process helps businesses understand the external conditions that may impact their operations abroad. A number of strategic tools such as PEST Analysis, SWOT Analysis, POWER SWOT, and Porter’s Five Forces are particularly valuable at this stage. However, because each country has unique characteristics, it is important to analyze the specific international environment carefully.
Below, we explore the role of an International PEST Analysis and the influence of tariff and non-tariff barriers on global marketing activities.
International PEST Analysis
- How easily can the business expand from domestic to international markets?
- Could inward foreign investment benefit your business?
- What is the competitive landscape in each market, and how will foreign companies compete head-to-head?
- What additional factors, unique to your industry or organization, must be addressed?
1. Political Factors
- Are there historical ties between nations that could either support or hinder trade?
- How influential are trade blocs or unions (e.g., the European Union) in shaping regulations?
- What international and domestic laws will affect your operations?
- What is the political climate of the target country, and how open is it to foreign competition?
2. Economic Factors
- What is the level of industrial growth? (e.g., China’s rapid industrial expansion).
- How do currency fluctuations and exchange rates affect profitability? Do both markets share a common currency (e.g., Polish firms trading in Ireland using the Euro)?
- Consider key economic indicators such as GDP, inflation, employment rates, national income, consumer spending habits, and credit usage.
3. Socio-Cultural Factors
- How do culture, religion, and social norms shape business practices?
- Are there specific ways of conducting business, such as barter systems?
- Will language or cultural differences create barriers? (e.g., the difficulty of learning Putonghua for many Western professionals).
4. Technological Factors
- Are intellectual property rights, patents, and copyright laws enforced in the target country? (e.g., weaker enforcement in some markets).
- Does your technology comply with local safety and regulatory requirements? (e.g., electrical items must adapt to local voltage standards).
- At what stage of the Product Life Cycle (PLC) is the technology in each market? (e.g., older software versions may still dominate certain regions).
Tariff and Non-Tariff Barriers
- Tariff Barriers: These are taxes imposed on imports. While they may reduce profit margins, they are usually transparent and can be factored into pricing and planning.
- Non-Tariff Barriers: These are often less visible and more challenging. Governments may protect domestic industries through excessive bureaucracy, complex regulations, quotas, or unnecessary red tape. Quotas, for example, limit the quantity of goods that can be imported, creating additional hurdles for foreign businesses.
FAQ's
What is the international marketing environment?
The international marketing environment refers to the external factors political, economic, socio-cultural, and technological that influence how a business operates in global markets.
Why is environmental analysis important in international marketing?
Environmental analysis helps businesses understand risks, opportunities, and challenges in foreign markets. It ensures better decision-making and reduces chances of failure when entering new countries.
What is an International PEST Analysis?
PEST stands for Political, Economic, Socio-Cultural, and Technological factors. An International PEST Analysis assesses these factors in a global context to evaluate how they might affect a company’s marketing strategy abroad.
How do tariff barriers affect international trade?
Tariff barriers are taxes on imports. They raise the cost of foreign goods, which can reduce profit margins for exporters. However, they are usually predictable and can be factored into business planning.
What are non-tariff barriers in international marketing?
non-tariff barriers include quotas, excessive bureaucracy, complex regulations, and other restrictions that governments use to protect domestic industries. Unlike tariffs, these are often harder to detect and navigate.
