1) What are the various ways of getting into (market entry strategy ) the international
markets? Explain in details all the ways
Ans 1)
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EXPORTING
Why Exporting (Direct or indirect Exporting)
The volume of foreign business is not large enough to justify production in the foreign
market.
Cost of production in foreign market is high.
The foreign market is characterised by production bottle necks like infrastructural
problems, problems with material supplies,etc.
There are political or other risks of investment in the foreign country.
The company has no permanent interest in foreign market concerned, or there is no
guarantee of the market available for a long period.
Foreign investment is not favoured by the foreign country concerned.
Licensing or contract manufacturing is not a better alternative.
Under utilised capacity exists.
Why not exporting
Policies of some governments discriminate against imports.
Foreign production economical
Licensing and franchising
Under International Licensing , a firm in one country (the licensor ) permits a firm in
another country (The licensee) to use its intellectual property (such as patents,
trademarks, copyrights, technology, technical know how, marketing skill or some other
specific skill) –Walt Disney, KMG, Nike
Franchising
It is a form of licensing in which a parent company (the franchiser) grants another
independent entity (the franchisee) the right to do business in prescribed manner. This
right can take the form of selling the franchisors products, using its name, production and
marketing techniques, or general business approach. E.g. Coca Cola supplying syrup to
the bottlers.
Forms of franchising
Manufacturer – Retailer systems (Automobile dealerships).
Manufacturer- Wholesaler systems. (Soft drink companies)
Service firm –Retailer systems (Lodging services and fast food outlets)
Contract Manufacturing
Advantages
The company does not have to commit resources for setting up production facilities.
It frees the company from the risks of investing in foreign countries.
If idle production capacity is readily available in the foreign market, it enables the
marketer to get started immediately.
The cost of product obtained by contract manufacturing is lower than if it were
manufactured by the international firm.
Risk involved is less.
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It may enable the international firm to enlist national support.
Disadvantages
Loss of potential profits from manufacturing
Less control over manufacturing process
Risk of developing potential competitors.
Not suitable for high tech products involving technical secrets.
Foreign Direct Investment (FDI)
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Countries may be classified in terms of their FDI potential and performance. According
to United Nations Conference on Trade and Development (UNCTAD) , there are four
groups:
– Front runners (Australia, Bahamas) that have high FDI potential/ high FDI
performance
– Above Potential (Albania , Angola) due to low FDI potential/ high FDI
performance
– Below potential (Algeria , Argentina) due to high FDI potential/ low FDI
performance
– Under Achievers (Bangladesh, Benin) that have low FDI potential / low FDI
performances.
Joint Venture
A joint venture is simply a partnership at corporate level, and it can be domestic or
International. JV is an enterprise formed for a specific business purpose by two or more
investors sharing ownership and control.
Eg Time Warner Entertainment and Taiwan Pan Asia Investment Company have
formed a joint venture called Tai Hua International Enterprise Co. Ltd for purpose of
providing products and services to Taiwan’s emerging cable TV industry.
Manufacturing Facility
The process may be employed as a strategy involving all or some in foreign country. The
success of Ford Motor Co. in Russia has to do with the company’s major commitment to
the market. In 1999, ford spent $150 million on the first foreign owned automobile
factory. The plant opened in 2002 . Production has been climbing as Russian consumers
step up purchases of automobiles. Local manufacturing has made it possible for Ford to
keep prices down.
Reasons for choosing manufacturing facilities abroad :
– Gaining access either to raw material or to take advantage of resources for its
manufacturing operations. (Backward Vertical Integration)
– To take advantage of labour costs or other abundant factors of production. eg
labour, energy and other inputs
– Competition
– Type of product
– Taxation
– Investment climate
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Assembly Operations
“ Fitting or joining together of fabricated components.” The methods used to join or fit
together solid components may be welding, soldering , riveting, gluing, laminating and
sewing.
In this strategy , parts or components are produced in various countries in order to gain
each country’s comparative advantage. Capital –intensive parts may be produced in
advanced nations, and labor –intensive assemblies may be produced in a less developed
country, where labour is abundant and labour costs are low. This strategy is common
amongst manufacturer of consumer electronics.
Acquisition
When a manufacturer wants to enter a foreign market rapidly and yet retain
maximum control , direct investment through acquisition should be considered..
The reason for acquiring foreign company could be :
– Product/ geographical diversification
– Acquisition of expertise (technology, marketing and management), and
rapid entry.
Free Trade Zones (FTZs)
FTZ is a secured domestic area in International commerce, considered to be legally
outside a country’s customs territory . It is an area designated by government for
duty –free entry of goods. It is also a location where imports can be handled with
few regulations, and little or no customs duties and excise taxes are collected.
Variation of FTZs includes Freeports, tariff –free trade zones, airport duty-free
arcades , export processing zones and other foreign Grade zones.
Strategic Alliances
Alliance may be in the areas of production, distribution, marketing and research
and development. Eg Sony and Philips ally to compete with another alliance led by
Toshiba in developing DVDs
Almost all major Airlines have joined one of the three strategic groups: Star, Sky
team and One World.
Turnkey contracts
These are common in international business in the supply, erection and commissioning of
plants, as in the case of refineries, steel mills, cement and fertilizer plants, etc.
construction projects as well as franchising agreements.
It is an agreement by the seller to supply a buyer with a facility fully equipped and ready
to be operated by the buyer’s personnel, who will be trained by the seller. There term is
sometimes used in fast food franchising when franchiser agrees to select a store site,
build the store, equip it, train the franchisee and employees, and sometimes even arrange
for the financing.
Third Country Locations
Counter Trade
2) What do you mean by country barometer? How does it work and is it important?
Ans 2)
Gordon Wu’s Economic Barometer
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People start to eat out.
They buy new clothes
Consumers start accumulating new appliances
They buy a motorcycle, a car ,or apartment
People start traveling overseas
A composite indicator that provides a reliable reading on the direction of GDP growth for the
Swiss economy compared with the year-earlier quarter. The KOF Economic Barometer is based
on a multi-sectoral design with three modules: core GDP, construction and banking. The
barometer has a complex structure, as it bundles as many as 20 individual indicators in several
steps. It is published monthly by the KOF Swiss Economic Institute.
Although the KOF Institute cautions that no conclusions can be drawn about the level of the
GDP growth rate on the basis of the KOF Economic Barometer, the barometer is closely
followed by participants in the financial markets. Barometer readings that are higher than
expected may have the effect of strengthening the Swiss franc, while lower than anticipated
readings may weaken it.
How would you look into International marketing from Marketing, product and
promotion mix perspective?
Ans 3)
Marketing
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Marketing
It is a social and managerial process by which individuals and groups obtain what they
need or want through creating , offering , and exchanging products of value with others
Human Need is a state of deprivation of basic satisfaction
Wants are desires for specific satisfiers of those needs.
Demands are wants for specific products that are backed by willingness and ability to buy
them.
International Marketing
• The marketing of goods and services across national frontiers and
• The Marketing- operations of an organisation that sells and / or produces within a given
country when :
:that organisation is part of, or associated with, an enterprise which also operates
in other countries ; and
:there is some degree of influence on or control of the organisation’s marketing
activities from outside the country in which it sells and /or produces.
“The key to successful international business is adaptation to the differences in
the environment that usually exist from one market to another. Adaptation is a passive
process but a conscious effort on the part of the international marketer to anticipate the
influences of both the foreign and domestic uncontrollable environments on a marketing
mix and then adjust the marketing mix and then to adjust the marketing mix to minimize
their effects”
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Benefits of international marketing
Survival
Growth of overseas markets
Sales and Profits
Diversifications’
Inflation and Price Moderation
Employment
Standards of living
Understanding of Marketing Process
Reasons for International Marketing
• Pull Factor
Profit motive
Growth opportunities
Domestic market constraint
Competition
Government policies and regulation
Monopoly power
Strategic Vision
• Push Factor
Compulsion
Saturation
• Future Prospects/Planning
Market Coverage Strategies
• Concentrated Marketing Strategies
• It is based on decision to achieve a maximum penetration in one or more segments to the
exclusion of the rest of market. Instead of spreading thinly across many parts of the
world, a corporate decides to concentrates its forces on a few clearly defined areas.
• Niche Marketing (Precautions)
1. The niche should be of sufficient size to be profitable , and that it has growth potential.
2. There is not much competition and that it is not of interest to major competitors.
3. The firm has the capabilities to serve the segment so well that it will have an edge over
other firms.
4. The firm will be capable of defending its domain.
Differentiated Marketing
5. It is based on the appreciation of the heterogeneity of the market, I.e., income
,tastes,preferences,usage conditions purposes and other consumer characteristics relevant
to marketing between different groups of consumers.
6. Differentiation should be Measurable,Substantial,Differentiable,Accessible and
Actionable
International Product Decision
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Product Mix (Product Assortment)
It is a set of all products and items that a particular seller offers for a sale to buyers.
Product Width-Detergents,toothpaste,bar soap,diapers,paper tissue
Product Length –Total number of items in product mix.
Product Depth- how many variants are offered in each product in the line.
Consistency- How closely are the products related in end use.
New Product Development
Innovative Product
A product which is entirely original and new to the market.(Mobile Phones)
Significantly modified product
A significant modification to existing product (Cease Fire)
Copy of the existing product
Exactly or almost the same type of product currently marketed by other
companies.(Vacuum cleaners post launch of eureka forbes)
Steps in New Product Development
Idea Generation-Market research, company sales force,customers,competitors,research
and educational institutions ,etc.
Evaluation and Selection-Select Ideas worth pursuing further-Xerox and IBM.
Concept testingBusiness analysis-Commercial feasibility, estimating production and marketing costs,
sales and potential profits.
Product Development
Technical aspects of product development.
Market testing/Pilot test
Commercialisation
When to launch the product
Where, I.e. in which market(s) to launch the product.
Whom to target the product first
How to market the product.
Promotion Mix
Personal selling
Publicity
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Sales promotion
Advertising
Elaborate on above with Global perspective.
3) Explain the distribution channels from international marketing perspective.
Ans 4)
Selling Channels & Intermediaries
Channels
Direct (Overseas)
Foreign Distributor
Foreign Retailer
State –controlled trading company
End –user
Indirect (Domestic)
Domestic Agent
For Manufacturer
Export Broker
Manufacturers export agent
EMC
Cooperative Exporter
Domestic Merchant
Export Merchant
Export Drop shipper
Export distributor
Trading Company
For buyer
Purchasing or
buying agent/office
Country controlled
buying agent
Resident buyer
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Direct Channel
It is employed when a manufacturer develops an overseas channel. This channel requires
that the manufacturer deals with a foreign party without going through an intermediary in
the home country.
Positive
– Active market exploration
– Greater control
– Improved Communication
Negative
– Difficult to manage if manufacturer is unfamiliar with the foreign market.
– Channel is time consuming and expensive.
– Too costly to manage the channel
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In Direct Channel
Also known as local or domestic channel , is employed when a manufacturer in India (as
an example), markets its products through another Indian firm that acts as the
manufacturer’s sales intermediary.
Positive
– No need to set up an International department.
– Channel is simple and Inexpensive.
Negative
– Manufacturer gives up control over the marketing of its products to another firm.
– If intermediary not aggressive, manufacturer may become vulnerable
– It is not permanent and hence the channel may discontinue if he does not see any
profits
He could be domestic agent, if he does not take title to the goods
He could be domestic merchant if it does take the title of goods.
Types of Intermediaries : Direct Channel
Foreign distributor
It is a foreign firm that has exclusive rights to carry out distribution for a manufacturer in
a foreign country or specific area
Foreign retailer
Here the retailer will merchandise and promote the products. Most suitable for consumer
products.
State- controlled trading company These are companies that have a complete monopoly
in the buying and selling of goods. Hungary has about 100 state trading organisations for
a variety of products, ranging from poultry to telecommunication equipment and for both
imported and exported products.
End user: Sometimes, a manufacturer is able to sell directly to foreign end users with no
intermediary involved in the process.eg local tourism, 7- eleven outlets allowing
customers to inspect merchandise shipped before making payments.
Types of Indirect Channel
Domestic Agent :For Manufacturer
Export Broker:
– Basic function is to get buyer and seller together for a fee.
– He negotiates the best term for seller ie manufacturer.
– He can operate under his own name or that of the manufacturer, for any action
performed he receives a commission or fees.
– His services can be utilised by small manufacturers with limited financial
resources who are selling in broad markets
Manufacturer’s export agent or sales representative
– An export agent pays for his own expenses and may represent manufacturers of
related and noncompeting products.
– The Person may operate on either an exclusive or non exclusive basis.
– Relationship with manufacturer is continuous and more permanent
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Export Management Company
– It manages under contract, the entire export program of a manufacturer, he can
also be termed as Combination Export Manager.
– Has greater freedom and authority compared to export broker and agent.
– It may function as an export department for several allied but non competing
manufacturers.
– EMC handles everything from promotion to shipping arrangements &
documentations, if need be, can also use manufacturers letter head.
Cooperative exporter
– He is a manufacturer with its own export organisation that is retailed by other
manufacturers to sell in some or all foreign markets.
– By representing several clients , the cooperative exporter is also known as a form
of EMC.
– Relationship between the cooperative exporter and its principal is a long-term
one.
– Eg GE, Singer
Domestic Agent :For Buyer
Purchasing/buying agent:
– He represents a foreign buyer.
– By residing and conducting business in the exporter’s country . The purchasing
agent is in favourable position to seek a product that matches the foreign
principal’s preferences and requirements.
– Also commonly known as commission agent, buyer for export , export
commission house, and export buying agent
Country –controlled buying agent
– It is a variation on purchasing agent, except here it is controlled by country as
foreign government’s agency or quasi governmental firm.
– It is empowered to locate and purchase goods for its country.
– This agent may have a permanent office location in countries that are major
suppliers, or the countries representative may make a formal visits to supplier
countries when the purchasing need arises.
Resident Buyer
– Retained by principal on continuos basis to maintain a search for new products
that may be suitable.
– As name indicates it is an independent agent that is located in highly centralised
production industries.
– It provides a visibility for a company who does not have time to send someone to
visit production sites or firms, or which cannot wait to examine samples
Domestic Merchant :
Export Merchant
They are in business of making profits rather than to receive a fee.
Generally handle staple goods, undifferentiated products or the cases where the brands
are generally unimportant.
Generally packs and resells the goods in its own name in foreign markets.
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Export Drop Shipper
Also known as desk jobber or cable merchant, it is virtually dropping of ship directly to
the overseas customer.
Based on this operational method, the shippers ownership of the goods may only last for
a few hours.
Upon receipt of the order from overseas , the export drop shipper in turn places an order
with a manufacturer, requesting the manufacturer to deliver the product directly to the
foreign buyer. The manufacturer collects payment from drop shipper , who in turn is paid
by the foreign buyer.
Applicable for coal. Lumber, construction materials.
Export Distributor
Here export distributor deals with the manufacturer on a continuos basis as against export
merchant and drop shippers.
Export distributor is located in the manufacturer’s country and is authorised to sell in one
or more markets abroad.
He usually sells the manufacturer’s product abroad at the manufacturers list price and
receives an agreed percentage of the list price as remuneration.
Trading Company
It has more diverse product lines
It offers more services
Is larger and better financed
Takes title to merchandise
Is not exclusively restricted to engaging in export trade
Goes beyond the role of an intermediary by engaging directly in production, physical
distribution channel development , financing and resource development
Channel Decision
• Channel Length: No. of times the product changes its hands among intermediaries before
it reaches the final consumer.
• Channel Width: No. of middlemen at a particular point or step in the distribution channel.
Selective (Seiko), Intensive (Timex) and exclusive (Patek Phillippe).
• Number of distribution channels: Use of more than one channel for distribution.eg Seiko,
lasalle sold through distributor and Jean lasalle sold by manufacturer directly to retailer
(jewelers) although all three belongs to one company.
4) Explain briefly following terms Sales and Marketing, Product and Brand,
International PLC, Inco terms. Integrated marketing communication, Product mix,
marketing mix, promotion mix, Ansoff’s model, BCG model, EPRG framework,
International Trade, international Marketing, Conglomerate, MNC, Transnational
companies
Ans 5)
Sales and Marketing
Marketing
It is a social and managerial process by which individuals and groups obtain what they
need or want through creating , offering , and exchanging products of value with others
• Human Need is a state of deprivation of basic satisfaction
• Wants are desires for specific satisfiers of those needs.
• Demands are wants for specific products that are backed by willingness and ability to buy
them.
The Five Competing Concepts
The Production Concept
• It holds that consumers will favour those products that are widely available and low in
cost. Managers of production- oriented organisations concentrate on achieving high
production efficiency and wide distribution.
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The Product Concept
• It holds that consumers will favour those products that offer the most quality,
performance, or innovative features: Managers in product –oriented organisations focus
their energy on making superior products and improving over time.
The Selling Concept
• It holds that consumers , if left alone ,will ordinarily not buy enough of the organisation's
products. The organisations must therefore undertake an aggressive selling and
promotion effort.
(Most firms practice the selling concept when they have over capacity. Their aim is to sell
what they make rather make what the market wants.)
The Marketing Concept
• It holds that the key to achieving organisational goals consists of being more effective
than competitors in integrating marketing activities toward determining and satisfying
needs and wants of target markets.
The Societal Marketing Concept
• It holds that organisation’s task is to determine the needs, wants , and interests of target
markets and to deliver the desired satisfactions more effectively and efficiently than
competitors in a way that preserves or enhances the consumer’s and the society’s well
being.
Product and Brand
Product:
1. It is anything that can be offered to a market to satisfy a want or need.
2. Products that are marketed include: Physical goods (automobiles,
books),services(haircut, plays),persons
( Amitabh Bachhan),places (Kerala ,
Goa),organisations (Companies) and ideas(family planning ,safe driving)
Five levels of products
• Core benefit-A hotel guest will buy rest and sleep.A purchaser of drill machine will buy
hole.
• Basic Product- Hotel room should include bed,bathroom,towels,desk,dresser etc.
• Expected product- A clean room, bed etc.
• Augmented product- A TV, Fresh flowers, fruits etc.
• Potential product-Customer delight
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Product Extension-Extending the same product in the foreign market without any
significant product modification.
Product Adaptation-Product is properly modified to suit the environment of foreign
market.
Product Development
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Brand
The word Brand actually means Burnt….
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The marketing battle will be a battle of brands , a competition for brand
dominance. Business and investors will recognise brands as the most valuable assets. It
will be more important to own markets than to own factories. The only way to own
markets is to own market dominant brands
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The brand is a sign (therefore external) whose function is to disclose the hidden qualities
of product which are inaccessible to contact (sight, touch, hearing , smell) and possibly
those which are accessible through experience but where the consumer does not want to
take the risk of buying the product.
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A brand is not a product, it is the product’s source, its meaning and its direction and it
defines its identity in time and space.
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The consumer’s idea of the product
International PLC
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Stage Zero: Local Innovation
Stage One: Overseas Innovation
Stage Two: Maturity
Stage Three: Worldwide Imitation
Stage Four : Reversal
Incoterms
International Commercial terms are a series of international sales with terms, published by
International Chamber of Commerce (ICC) and widely used in international commercial
transactions. These are accepted by governments, legal authorities and practitioners worldwide
for the interpretation of most commonly used terms in international trade. This reduces or
removes altogether uncertainties arising from different interpretation of such terms in different
countries. Scope of this is limited to matters relating to rights and obligations of the parties to the
contract of sale with respect to the delivery of goods sold. They are used to divide transaction
costs and responsibilities between buyer and seller and reflect state-of-the-art transportation
practices. They closely correspond to the U.N. Convention on Contracts for the International
Sale of Goods. The first version was introduced in 1936 and the present dates from 2000.
As of January 1, 2011 the eighth edition, Incoterms 2010,[1][2] have effect. The changes therein
affect all of the five terms previously listed in section D, which are now obsolete and have been
replaced with these three:
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DAT (Delivered at Terminal)
DAP (Delivered at Place)
DDP (Delivered Duty Paid)
The new terms apply to all modes of transport.
Group F – Main carriage unpaid
FCA – Free Carrier (named places)
The seller hands over the goods, cleared for export, into the custody of the first carrier
(named by the buyer) at the named place. This term is suitable for all modes of transport,
including carriage by air, rail, road, and containerised / multi-modal sea transport. This is
the correct "freight collect" term to use for sea shipments in containers, whether LCL
(less than container load) or FCL (full container load).
FAS – Free Alongside Ship (named loading port)
The seller must place the goods alongside the ship at the named port. The seller must
clear the goods for export. Suitable only for maritime transport but NOT for multimodal
sea transport in containers (see Incoterms 2010, ICC publication 715). This term is
typically used for heavy-lift or bulk cargo.
FOB – Free on board (named loading port)
The seller must themself load the goods on board the ship nominated by the buyer, cost
and risk being divided at ship's rail. The seller must clear the goods for export. Maritime
transport only but NOT for multimodal sea transport in containers (see Incoterms 2010,
ICC publication 715). The buyer must instruct the seller the details of the vessel and port
where the goods are to be loaded, and there is no reference to, or provision for, the use of
a carrier or forwarder. It does not include Air transport. This term has been greatly
misused over the last three decades ever since Incoterms 1980 explained that FCA should
be used for container shipments.
[edit] Group C – Main carriage paid
CFR – Cost and Freight (named destination port)
Seller must pay the costs and freight to bring the goods to the port of destination.
However, risk is transferred to the buyer once the goods are loaded on the ship (this rule
is new since 2010!). Maritime transport only and Insurance for the goods is NOT
included. Insurance is at the Cost of the Buyer.
CIF – Cost, Insurance and Freight (named destination port)
Exactly the same as CFR except that the seller must in addition procure and pay for
insurance for the buyer. Maritime transport only.
CPT – Carriage Paid To (named place of destination)
The general/containerised/multimodal equivalent of CFR. The seller pays for carriage to
the named point of destination, but risk passes when the goods are handed over to the
first carrier.
CIP – Carriage and Insurance Paid (To) (named place of destination)
The containerised transport/multimodal equivalent of CIF. Seller pays for carriage and
insurance to the named destination point, but risk passes when the goods are handed over
to the first carrier.
[edit] Group D – Arrival
This section is outdated. Please update this section to reflect recent events or newly
available information. Please see the talk page for more information. (December 2010)
The number of Incoterms® rules has been reduced from 13 to 11. This has been achieved by
substituting two new rules that may be used irrespective of the agreed mode of transport – DAT,
Delivered at Terminal, and DAP, Delivered at Place – for the Incoterms® 2000 rules DAF, DES,
DEQ and DDU.
Under both new rules, delivery occurs at a named destination: in DAT, at the buyer’s disposal
unloaded from the arriving vehicle (as under the former DEQ rule); in DAP, likewise at the
buyer’s disposal, but ready for unloading (as under the former DAF, DES and DDU rules).
The new rules make the Incoterms® 2000 rules DES and DEQ superfluous. The named terminal
in DAT may well be in a port, and DAT can therefore safely be used in cases where the
Incoterms® 2000 rule DEQ once was. Likewise, the arriving “vehicle” under DAP may well be a
ship and the named place of destination may well be a port: consequently, DAP can safely be
used in cases where the Incoterms® 2000 rule DES once was. These new rules, like their
predecessors, are “delivered”, with the seller bearing all the costs (other than those related to
import clearance, where applicable) and risks involved in bringing the goods to the named place
of destination.
DAF – Delivered At Frontier (Deliveplace)
This term can be used when the goods are transported by rail and road. The seller pays
for transportation to the named place of delivery at the frontier. The buyer arranges for
customs clearance and pays for transportation from the frontier to his factory. The
passing of risk occurs at the frontier.
DES – Delivered Ex Ship (named port)
Where goods are delivered ex ship, the passing of risk does not occur until the ship has
arrived at the named port of destination and the goods made available for unloading to
the buyer. The seller pays the same freight and insurance costs as he would under a CIF
arrangement. Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but
also Risk and Title up to the arrival of the vessel at the named port. Costs for unloading
the goods and any duties, taxes, etc… are for the Buyer. A commonly used term in
shipping bulk commodities, such as coal, grain, dry chemicals - - - and where the seller
either owns or has chartered, their own vessel.
DEQ – Delivered Ex Quay (named port)
This is similar to DES, but the passing of risk does not occur until the goods have been
unloaded at the port of destination.
DDU – Delivered Duty Unpaid (named destination place)
This term means that the seller delivers the goods to the buyer to the named place of
destination in the contract of sale. The goods are not cleared for import or unloaded from
any form of transport at the place of destination. The buyer is responsible for the costs
and risks for the unloading, duty and any subsequent delivery beyond the place of
destination. However, if the buyer wishes the seller to bear cost and risks associated with
the import clearance, duty, unloading and subsequent delivery beyond the place of
destination, then this all needs to be explicitly agreed upon in the contract of sale.
DAP - Delivered At Place (named destination place)
This term means that the seller delivers when the goods are placed at the disposal of the
buyer on the arriving means of transport ready for unloading at the named place of
destination. This is exactly what the old Incoterm DDU stipulated.
DDP – Delivered Duty Paid (named destination place)
This term means that the seller pays for all transportation costs and bears all risk until the
goods have been delivered and pays the duty. Also used interchangeably with the term
"Free Domicile". The most comprehensive term for the buyer. In most of the importing
countries, taxes such as (but not limited to) VAT and excises should not be considered
prepaid being handled as a "refundable" tax. Therefore VAT and excises usually are not
representing a direct cost for the importer since they will be recovered against the sales
on the local (domestic) market.
Product Mix
Product Assortment
• It is a set of all products and items that a particular seller offers for a sale to buyers.
• Product Width-Detergents,toothpaste,bar soap,diapers,paper tissue
• Product Length –Total number of items in product mix.
• Product Depth- how many variants are offered in each product in the line.
• Consistency- How closely are the products related in end use.
Marketing Mix
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Product Decision
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Channels of Distribution
Promotion strategies
Pricing Strategies
Financial
Financing and currencies
Promotion Mix
Personal selling: It is an oral presentation in a conversation with one or more prospective
purchasers for the purpose of making sales. Eg in SAP America a sales person can earn
commission as high as USD 2 million a year- more than what the company’s top German
executives make. In South Korea personal reference is very much important. Also there
are missionary sales person whose basic job is to educate the potential buyer
Publicity: Publicity is the non personal stimulation that is not paid for by a sponsor which
has released news to the media. Company however has a less control over message.
Sales promotion: It consists of those promotional activities other than advertising ,
personal selling , and publicity. Eg coupons, games, contest, price offs, demonstrations,
premiums, samples , money refund offers , and trading stamps
 Advertising: It relies on non personal means of contact and sales representation .
Advertising investments vary widely from industry to industry . Mars Allocate 5%,
manufacturer of dolls and stuffed toys maintain an advertising to sales ratio of more than
15%.
Advertising could be done through Radio, Newspapers, Magazines, Direct Mail,
Outdoor, Internet, Screen (Cinema), Directories , Rural Media , Stadiums
Three School of thoughts in advertising
• Standardisation: This school of thought assumes that better and faster communication has
forged a convergence of art , literature, media availability, tastes, thoughts religious
beliefs , culture , living conditions, language, and therefore , advertising. Even when
people are different , their basic physiological and psychological needs are still presumed
to remain the same.
• Localisation: Also known as non standardisation , adaptation, or customisation approach.
This school of thought holds that advertisers should take particular note of the differences
among countries. These differences make it necessary to develop specific advertising
programs to achieve impact in the local markets
• Compromise: It combines the two school of thoughts. It recognises difference and
cautioning wholesale or automatic use of standardisation , which middle of the road
school holds that it may be possible , and in certain case even desirable , to use US
marketing techniques everywhere under certain conditions.
International Trade
Trading Environment
•
•
It includes trade Barriers, trade agreements, trading blocs, cartels and multinational trade
negotiations.
Why Trade Barriers
To protect country’s development.
To promote indigenous R & D
To conserve the forex resource of the country.
To make the balance of payments positions favourable
To curb conspicuous consumption
To mobilise revenue for the government and to discriminate against certain countries.
Trade Barriers
• Artificial barrier or restrictions imposed by countries on imports and exports of goods
from other countries. These are man made obstacles/restrictions imposed on free
movement of goods in between different countries.
• Classification of trade barriers
• Tariff Barrier
1 On the basis of goods crossing national boundaries
(Import Duties, Export Duties and Transit Duties)
2 On the basis of qualification of tariff
(Specific Duty, Ad-valorem Duty and Compound Duty)
3 On the basis of purpose they serve
(Revenue Tariff, Protective Tariff,Anti Dumping Duties, Counter Vailing Tariffs or
duties)
4 On the basis of trade relations between importing and exporting countries
(Single ,double or triple column tariff)
• Non Tariff Barrier
1 Quotas (Unilateral/Bilateral/Mixing)
2 Licensing Quotas
3 Voluntary Export Restraints (MFA)
4 Administered protections (Safeguards, Health Standards, Customs Procedures, Consular
Formalities, Government Procurements, Monetary controls, environmental protection laws,
foreign exchange regulation, miscellaneous)
Benefits/Advantages of Tariffs
1 Imports from abroad are discouraged.
2 Protection is given to home industries and manufacturing activities.
3 Consumption of foreign good reduces.
4 Tariffs gives substantial revenue.
5 It reduces or removes the deficit (Balance of trade and payment)
6 Encourages R&D ,avoids competition from foreign countries.
7 Favourable impact on the economy.
International Marketing
•
•
The marketing of goods and services across national frontiers and
The Marketing- operations of an organisation that sells and / or produces within a given
country when :
:that organisation is part of, or associated with, an enterprise which also operates
in other countries ; and
:there is some degree of influence on or control of the organisation’s marketing
activities from outside the country in which it sells and /or produces.
“The key to successful international business is adaptation to the differences in
the environment that usually exist from one market to another. Adaptation is a passive
process but a conscious effort on the part of the international marketer to anticipate the
influences of both the foreign and domestic uncontrollable environments on a marketing
mix and then adjust the marketing mix and then to adjust the marketing mix to minimize
their effects”
Benefits of international marketing
9) Survival
10) Growth of overseas markets
11) Sales and Profits
12) Diversifications’
13) Inflation and Price Moderation
14) Employment
15) Standards of living
16) Understanding of Marketing Process
Reasons for International Marketing
• Pull Factor
Profit motive
Growth opportunities
Domestic market constraint
Competition
Government policies and regulation
Monopoly power
Strategic Vision
• Push Factor
Compulsion
Saturation
• Future Prospects/Planning
Conglomerate
A conglomerate is a combination of two or more corporations engaged in entirely different
businesses together into one corporate structure, usually involving a parent company and several
(or many) subsidiaries. Often, a conglomerate is a multi-industry company. Conglomerates are
often large and multinational.
conglomerates are formed for genuine interests of diversification rather than manipulation of
paper ROI. Companies with this orientation would only make acquisitions or start new branches
in other sectors when they believe this will increase profitability or stability.
Advantages
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

Diversification results in a reduction of investment risk. A downturn suffered by one
subsidiary, for instance, can be counterbalanced by stability, or even expansion, in
another division. In other words, if Berkshire Hathaway's construction materials business
has a bad year, the loss might be offset by a good year in its insurance business. This
advantage is enhanced by the fact that the business cycle affects industries in different
ways. Financial Conglomerates have very different compliance requirements from
insurance or reinsurance solo entities or groups. There are very important opportunities
that can be exploited, to increase shareholder value.
A conglomerate creates an internal capital market if the external one is not developed
enough. Through the internal market, different parts of conglomerate allocate capital
more effectively.
A conglomerate can show earnings growth, by acquiring companies whose shares are
more discounted than its own. In fact, Teledyne, GE, and Berkshire Hathaway have
delivered high earnings growth for a time.[2]
[edit] Disadvantages
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The extra layers of management increase costs.[3]
Accounting disclosure is less useful information, many numbers are disclosed grouped,
rather than separately for each business. The complexity of a conglomerate's accounts
make them harder for managers, investors and regulators to analyse, and makes it easier
for management to hide things.
Conglomerates can trade at a discount to the overall individual value of their businesses
because investors can achieve diversification on their own simply by purchasing multiple
stocks. The whole is often worth less than the sum of its parts.
Culture clashes can destroy value.[4][5]
Inertia prevents development of innovation.[6]
Lack of focus, and inability to manage unrelated businesses equally well.[7]
Some cite the decreased cost of conglomerate stock (a phenomenon known as conglomerate
discount) as evidential of these disadvantages, while other traders believe this tendency to be a
market inefficiency, which undervalues the true strength of these stocks.[8]
MNC
Characteristics:
• It elicits mix reactions. On one hand, MNCs are associated with exploitation and
ruthlessness. They are often criticized of moving resources in and out of a country , as
they strive for profit, without much regard for country’s social welfare.
• MNCs have power and prestige; additionally they create social benefit by facilitating
economic balance.
• Companies with sale less than 100 million USD in sales can be safely ignored.(United
Nations Department of Economic and Social Affairs) However IBM did not become
MNC because it Was large, rather, it became large as a result of going International.
•
MNC has at least three significant dimensions: Structural, Performance and Behavioural
1)
Structural: It includes the number of countries in which the firm does business
and the citizenship of corporate owners and top managers. Eg Singer has presence in over
180 countries, Coca –Cola from citizenship perspective.
2)
Performance: It depends on characteristics like earnings, sales and assets. Eg:
Parker Pen, with 80% of its sales coming from overseas , is more multinational than AT
Cross , whose overseas sales account for only 20% of over all sales.
3)
Behaviour: It is less reliable method, but no less Important. This requirement
concerns the behavioural characteristics of top management. Eg Ethnocentricity,
Polycentrocity & Geocentricity
Ethnocentricity : Strong orientation towards home country. Markets and consumers
abroad are viewed as unfamiliar and even inferior in taste, sophistication, and
opportunity.
2)
Polycentricity : Opposite of ethnocentricity , is a strong orientation towards host
country. The attitude places emphasis on differences between markets that are caused by
variations within, such as in Income ,Culture, laws and politics. In this case corporate
pursue separate strategies in each of its foreign markets while viewing the corporate
challenge independently from market to market
3)
Geocentricity: It is compromise between the two extremes of ethnocentricity and
polycentricity . It considers the whole world rather than any particular country as the
target market. These company do not identify themselves as from any particular country.
Transnational Companies
Transnational Corporation as define by UN is globally intergrated organisation with entitites in
two or more countries, decision making system permitting coherent policies and common
startegy through decision making center and entities are so linked by ownership so as to
excercise influence over others and share knowledge.
What are the different ways of arriving at pricing decision? How does it differ in
international markets?
Ans 6)
•
•
•
Pricing Stratergy
Pricing is an integral part of the product- a product cannot exist without a price.
It affects demand, and an inverse relationship between the two usually prevails.
Price should be lower than the perceived value or exactly reflect the perceived value
Pricing methodology
Selecting the pricing objective
Determining demand
Estimating costs
Analyzing competitors costs, prices and offers.
Selecting a pricing method
Selecting the final price
Setting Pricing Policy
•
•
•
•
Selecting the pricing objective
Survival, maximum current profit, Maximum current revenue, maximum sales
growth, Maximum market skimming, product quality leadership, other pricing objectives
Determining Demand
Elastic and Inelastic demand
Estimating cost- Fixed and variable cost
Analysing Competitor’s costs, prices and offers.
Selecting price method
Markup pricing, Target return pricing, Perceived value pricing, Value pricing,
Going rate pricing, sealed bid pricing.
• Selecting the Final price
• Adapting the price-Geographical pricing (Cash, counter trade, and Barter), price
discounts and allowances, cash discounts, Quantity discounts, functional(trade),
discounts, seasonal discount, allowances.
•
•
•
•
•
•
•
Types of Pricing
Product mix pricing
Product line pricing (Range of products)
Optional feature pricing (Liquor and food pricing)
Captive –product pricing (Camera and film pricing)
Two part pricing (telephone pricing)
Byproduct pricing (Trains and advertisements)
Product-bundling pricing(5 at the cost of 3)
•
Role of pricing in International Market
Price Standardisation
•
•
•
•
•
•
•
•
•
•
•
Pricing Decisions
Supply and demand
Cost
Elasticity and cross elasticity of demand
Exchange rate
Market share
Dumping
Price Distortion
Price Fixing
Inflation
Transfer Pricing
5) What is the importance of branding in international markets, should there always be
branding explain from both perspective.
Ans 7)
•
•
•
•
•
•
•
•
Global Brand
Smooth entry in the market –Well known brands like Coke,Pepsi,Mc Donalds,KFC etc.
Low promotional expenditure
It helps good sales business from the time of launch.
It provides competitive edge over other firms.
Branding Problems in International Marketing
Difficult for small brand for the reason of heavy promotional activities cost.
Prefer sale of their own brand rather than exporters brand. Use their own brand name.
Name already registered by some organisation in that country.
Restriction of use of foreign brand name-Swaraj Mazda, Lehar Pepsi,LML Vespa
Brand Characteristics
• Bandname should be short, distinctive,easy to pronounce, able to suggest product benefits
without negative connotations.
• Japans Daihatsu Motors Co. Ltd probably did not succeed in USA due to feeling that it’s
a korean company.
• France is known for its French perfumes and hence in perfume category the french
sounding names may prove benefecial
•
International product should have international brand name , and this name should be
chosen with International market in mind. Eg Emery Air Freight changed its name to
Emery Worldwide, Aptech Ltd has its international division Aptech Worldwide.
•
Spanish audience do not include the letter w, and the italian language has no j, k w or y.
eg Bajaj in Latin america is called as baha
6) Explain the entire process of International marketing right from the product to enter
to the product launch with a justification for at least three countries and reason for
short listing them.
Ans 7)
Your own Project done in class
7) Explain the role of advertising and also explain what do you mean by Globalization
and its importance
Ans 9)
 Advertising: It relies on non personal means of contact and sales representation .
Advertising investments vary widely from industry to industry . Mars Allocate 5%,
manufacturer of dolls and stuffed toys maintain an advertising to sales ratio of more than
15%.
Advertising could be done through Radio, Newspapers, Magazines, Direct Mail,
Outdoor, Internet, Screen (Cinema), Directories , Rural Media , Stadiums
Three School of thoughts in advertising
• Standardisation: This school of thought assumes that better and faster communication has
forged a convergence of art , literature, media availability, tastes, thoughts religious
beliefs , culture , living conditions, language, and therefore , advertising. Even when
people are different , their basic physiological and psychological needs are still presumed
to remain the same.
• Localisation: Also known as non standardisation , adaptation, or customisation approach.
This school of thought holds that advertisers should take particular note of the differences
among countries. These differences make it necessary to develop specific advertising
programs to achieve impact in the local markets
• Compromise: It combines the two school of thoughts. It recognises difference and
cautioning wholesale or automatic use of standardisation , which middle of the road
school holds that it may be possible , and in certain case even desirable , to use US
marketing techniques everywhere under certain conditions.
Globalisation (or globalization) describes the process by which regional economies, societies,
and cultures have become integrated through a global network of political ideas through
communication, transportation, and trade. The term is most closely associated with the term
economic globalization: the integration of national economies into the international economy
through trade, foreign direct investment, capital flows, migration, the spread of technology, and
military presence.[1] However, globalization is usually recognized as being driven by a
combination of economic, technological, sociocultural, political, and biological factors.[2] The
term can also refer to the transnational circulation of ideas, languages, or popular culture through
acculturation. An aspect of the world which has gone through the process can be said to be
globalized.
Globalization has various aspects which affect the world in several different ways



Industrial - emergence of worldwide production markets and broader access to a range of
foreign products for consumers and companies. Particularly movement of material and
goods between and within national boundaries. International trade in manufactured goods
increased more than 100 times (from $95 billion to $12 trillion) in the 50 years since
1955.[13] China's trade with Africa rose sevenfold during 2000-07 alone.[14][15]
Financial - emergence of worldwide financial markets and better access to external
financing for borrowers. By the early part of the 21st century more than $1.5 trillion in
national currencies were traded daily to support the expanded levels of trade and
investment.[16] As these worldwide structures grew more quickly than any transnational
regulatory regime, the instability of the global financial infrastructure dramatically
increased, as evidenced by the Financial crisis of 2007–2010.[17]
Economic - realization of a global common market, based on the freedom of exchange of
goods and capital.[21] The interconnectedness of these markets, however, meant that an
economic collapse in one area could impact other areas.[citation needed] With globalization,
companies can produce goods and services in the lowest cost location. This may cause
jobs to be moved to locations that have the lowest wages, least worker protection and
lowest health benefits. For Industrial activities this may cause production to move to
areas with the least pollution regulations or worker safety regulations.
8) Give examples of companies that have successfully forayed into international market
and reason for their success
Ans 10)
1) Toyota
2) 3M
3) Infosysis
Use Google for success of these companies