IB DP Business Management: International marketing (HL only) – Revision Notes

These notes condense section 4.6, International marketing (HL only), of the IB Business management guide (first assessment 2024). For full explanations and worked examples, read the study guide first. Then test yourself with the practice questions.

Other pages: the IB DP Business Management hub, the syllabus checklist, the Unit 4 revision notes, the Unit 4 study guide, the multinational companies guide and the free diagnostics. All businesses and figures here are invented.

The one content point

Guide wording	Depth in the guide	Label
The opportunities and threats posed by entering and operating internationally	AO3	HL only

AO3 means synthesis and evaluation. The guide defines “evaluate” as weighing up strengths and limitations, and “recommend” as presenting an advisable course of action with reasons. Expect to judge, not only list.

The guide’s assessment outline says paper 1 excludes HL extension topics, while HL paper 2 and paper 3 include them.

Key terms

Term	Short meaning (standard textbook form)
Entering	The decision to go abroad, and by what route
Operating	Running the marketing mix and supply chain in the foreign market over time
Opportunity	A possible benefit that a foreign market offers
Threat	A possible cost or harm that foreign trading adds
Tariff	A tax on imported goods
Exchange rate	How much of one currency is needed to obtain a unit of another
Standardization	Using the same marketing mix in every market
Adaptation	Changing parts of the mix to suit each market

Opportunities at a glance

• Bigger customer base without a new product.
• Risk spread across economies, so one weak market hurts less.
• Economies of scale as output rises.
• Lower costs for labour, materials or premises.
• Longer product life when the product is mature at home but new abroad.
• Brand strength and prestige.
• New ideas from new customers, rivals and suppliers.
• Helpful exchange rate moves.

Threats at a glance

• Culture and language: names, colors, humour and customs can mislead.
• Exchange rate movements.
• Tariffs and other trade barriers.
• Legal and regulatory differences (describe in general terms; use the case).
• Strong local competitors.
• Logistics: distance, delay, damage and cost.
• Political or economic instability.
• Higher set-up and marketing costs.
• Ethical and reputation risk, linked to CSR in section 1.3.
• Loss of control when using partners or distributors.

Same factor, two sides

Factor	Opportunity	Threat
Weaker home currency	Exports look cheaper abroad; foreign revenue converts to more	Imported inputs cost more
Stronger home currency	Imported inputs cost less	Exports look dearer abroad; foreign revenue converts to less
Large population	Many potential buyers	Many rivals may already serve them
Local partner	Knowledge and contacts	Less control, shared profit
Low-cost production site	Lower unit cost	Possible ethical criticism; longer supply lines
Adapting the mix	Better fit	Higher cost, mixed brand image

Routes abroad (background, not a guide list)

Exporting; online selling; franchising or licensing; joint venture or alliance; own subsidiary or acquisition. More control usually means more commitment and more money at risk. Sections 1.5 and 1.6 of the guide cover joint ventures, strategic alliances, franchising and multinational companies.

Standardize or adapt?

Standardization	Adaptation
Lower cost	Better local fit
One global image	Can reduce legal and cultural mistakes
Easier to manage	More cost and management
Risk of poor local fit	Brand image may become mixed

Many firms adapt only some of the seven Ps. A typical split: adapt promotion and price, keep the brand name and core design. Say which Ps matter most in the case and why.

Calculation reminders

These are standard working forms.

Item	Method
Tariff	Tariff rate x value of the imported item
Landed cost	Price + tariff + shipping and handling
Foreign price	Landed cost x exchange rate (foreign currency per unit of home currency)
Converting revenue back home	Foreign revenue / exchange rate
Percentage change	(new - old) / old x 100
Units to recover an adaptation cost	One-off cost / contribution per unit

Method in steps: price in a foreign market

1. Work out the tariff on the price the firm charges.
2. Add the tariff and shipping to get the landed cost in home currency.
3. Multiply by the exchange rate to get the price in the foreign currency.
4. Compare with local rivals’ prices.
5. State what the firm could do: cut margin, absorb the tariff, adapt the product, or choose a different route.

Small worked reminder

Gallowby Bakery sells a hamper at USD 20.00. The target country charges a 10% tariff and shipping is USD 3.00 a hamper.

• Tariff = 10% x 20.00 = USD 2.00.
• Landed cost = 20.00 + 2.00 + 3.00 = USD 25.00.

If the exchange rate is USD 1 = EUR 0.90, the euro price is 25.00 multiplied by 0.90, which gives EUR 22.50.

Small worked reminder: currency effect

Gallowby earns EUR 36,000 in a year. At USD 1 = EUR 0.90 this is 36,000 / 0.90 = USD 40,000. If the rate becomes USD 1 = EUR 0.80, it is 36,000 / 0.80 = USD 45,000. That is a rise of 12.5%, which helps Gallowby. The direction is reversed if the dollar strengthens.

Must-know distinctions

• Tariff and quota. A tariff is a tax on imports. A quota limits the quantity.
• Entering and operating. Entry decisions look at the route and set-up costs. Operating decisions look at running costs, rivals, currency and customer response over time.
• Standardize and adapt. The question is rarely all or nothing.
• Host country view and business view. Section 1.6 asks about the impact of multinationals on host countries. Section 4.6 asks about the opportunities and threats for the business.
• Contribution and profit. Contribution per unit covers fixed costs first. Only the part above the break-even level is profit.

Evaluation checklist for AO3 answers

For “evaluate”, “discuss”, “justify” or “recommend” on an international move, check that you have:

• Opportunities and threats, each tied to the case.
• A figure or fact from the case for at least one point on each side.
• A short-run and long-run comparison.
• A criterion, such as profit, risk, brand image or cash.
• A judgment that says what the decision depends on.

Quick self-test

1. State whether 4.6 is examined at SL, and give the depth label the guide gives it.
2. State two opportunities of operating internationally.
3. State two threats of operating internationally.
4. Define a tariff.
5. A hamper costs USD 20.00. The tariff is 10% and shipping is USD 3.00. Calculate the landed cost.
6. A firm earns EUR 36,000. The exchange rate moves from USD 1 = EUR 0.90 to USD 1 = EUR 0.80. Calculate the percentage change in the dollar value of the revenue.
7. Adapting a pack costs USD 14,000 once. Contribution is USD 4.00 a unit. Calculate the units needed to recover the cost.
8. A firm earns USD 120,000 at home, USD 80,000 in market A and USD 40,000 in market B. Calculate the share of revenue from abroad.
9. Distinguish standardization from adaptation.
10. Explain why a weaker home currency can be both an opportunity and a threat.
11. A foreign price rises from EUR 4.50 to EUR 5.40. Calculate the percentage rise.
12. State which HL paper or papers include 4.6, according to the guide’s assessment outline.

Answers

1. Not examined at SL: the section is HL only. Depth label: AO3.
2. For example a larger customer base and spreading risk.
3. For example exchange rate movements and cultural differences.
4. A tax on imported goods.
5. 20.00 + 2.00 + 3.00 = USD 25.00.
6. At 0.90: USD 40,000. At 0.80: USD 45,000. Change = 5,000 / 40,000 x 100 = 12.5% rise.
7. 14,000 / 4.00 = 3,500 units.
8. Abroad = 80,000 + 40,000 = 120,000 out of 240,000 total = 50%.
9. Standardization uses the same marketing mix everywhere; adaptation changes parts of it to suit each market.
10. It makes exports cheaper abroad and raises foreign revenue when converted back, but raises the cost of imported inputs.
11. (5.40 - 4.50) / 4.50 x 100 = 20%.
12. Paper 2 and paper 3 include HL extension topics; paper 1 excludes them.

Where marks are usually lost

• Writing a generic list of pros and cons with no link to the case business.
• Assuming a bigger market always means more profit.
• Treating a currency move as always good or always bad, with no direction stated.
• Leaving out shipping or the tariff in a landed-price calculation.
• Mixing up which way an exchange rate is quoted before converting.
• Confusing a tariff with a quota.
• Naming specific laws the case does not mention.
• Recommending adaptation or standardization with no reason tied to cost or fit.
• Ending an evaluation without a judgment or without saying what the decision depends on.

Frequently asked questions

What is the difference between a tariff and a quota? A tariff is a tax on imported goods, which raises the final price or cuts the exporter’s margin. A quota limits the quantity of a good that can be imported.

How does a weaker home currency affect a business that trades internationally? A weaker home currency makes exports cheaper for buyers abroad and raises foreign revenue when it is converted back, which is an opportunity. It also raises the cost of imported inputs, which is a threat.

What is the difference between standardization and adaptation? Standardization uses the same marketing mix in every country, which keeps costs low and builds one global image. Adaptation changes parts of the mix to suit each market, improving local fit at a higher cost; many firms adapt only some of the seven Ps.

What depth of answer does section 4.6 require? The single content point in 4.6 is tagged AO3, so questions can ask you to evaluate, discuss, justify or recommend. You need opportunities and threats tied to the case, a criterion such as profit or risk, and a judgement that says what the decision depends on.

Official syllabus

IB Diploma Programme Business management guide (first assessment 2024), International Baccalaureate Organization, Unit 4, section 4.6 International marketing (HL only).