Before understanding the significance of foreignness in international marketing, it is crucial to understand its underlying meaning and definition to acquire a clearer picture of the concept. So let us have a look as what is the liability and asset of foreignness actually stands for. Liability of foreignness refers to the benefits that are not offered and are denied to the global firms and are provided exclusively to local firms in the market. There can be several factors when foreignness can become a liability in international marketing. In contrast, it is also important o understand as when the same factor becomes an asset for any firm. Hence, it generally refers to an asset when an international firm enjoys certain benefits and advantages that are not granted to local firm. Now, let us have a look as what are the primary sources that makes the same underlying term an asset and liability at the same time.
At first, let us understand the sources that make foreignness a liability for any firm in international marketing. Researchers and studies have highlighted four primary sources responsible for making it a liability and that are geographical distance, lack of cultural understanding, country’s hostile environment, and domestic regulations. Spatial distances give rise to increased travel and transportation cost that can increase the cost of production and is expected to be borne by ultimate customers. This problem is further triggered by time zone differences, which is very common among different nations and making it a barrier while entering into the different region. However, researchers believe that these barriers will be acute if the company prefers to tap a nearby border. Next, come the cultural differences that serve as the primary reason for making foreignness a liability. It is a fact that even companies sharing borders may have different cultures and related preferences. These cross-cultural factors may lead to some negative and unfavorable factors over time as a few companies fail to understand local tastes and preferences and are highly prone to adopt practices and campaigns that are unfruitful to them. All these aforementioned cultural factors play a critical role in determining the success and failure of any firm entering into new market. Thus if these cultural factors are not taken into consideration while penetrating into new markets globally, it can turn the element of foreignness into a liability depriving the parent company from certain rights and benefits that could have eased up the process of entrance.