When a company begins formulating its international marketing strategy, or when it evaluates a current international marketing program, it must take into account the characteristics of the destination country (including demographics, purchasing power and political considerations). A manufacturer of high technology equipment is unlikely to market to areas which have little or no infrastructure to support that equipment, for example.
Companies which decide to participate in international marketing must determine the strategy that they will follow. They may choose to operate through indirect exporting, in which the company sells to foreign companies that then resell the product. These are basically domestic sales for the manufacturer. Or, the company can engage in direct exporting, which is the most common form of international marketing. This involves the firm taking responsibility for selling its products abroad. In this case, the company sells its products through distributors or agents in foreign markets. The company may opt to license its products in which case it receives a royalty on sales, but has less control than if it were directly involved. Or, the company may choose to operate through a foreign marketing subsidiary. These are sales or marketing offices in a foreign country rather than an independent distributor. The theory behind having a foreign subsidiary is much the same as having an internal sales force domestically: there is more aggressive marketing and ideally a larger market share when the company's own employees are responsible for the marketing effort (Vernon-Wortzel & Wortzel 144).
In some countries, foreign companies have no choice but to operate through subsidiaries because of government regulations in the destination country. This level of government intervention is one form of protectionism. In other cases, companies choose to use foreign agents or joint ventures in order to gain fast access ...