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Prepared By
Manoj Kumar.T B.Tech,MBA,NET
Assistant Professor
International marketing
International marketing
Unit-1
Definition: International Marketing
According to American Marketing Association (AMA),
international marketing is the multinational process of
planning and executing the conception, pricing, promotion,
and distribution of ideal goods and services to create
exchanges that satisfy individual and organisational objectives
International marketing
Unit-1`
Motives or Reasons of International Marketing
There are numerous reasons why to proceed internationally, however the objective of every company for
going international is to expend its business, searching new market and expend its customer base. The factors
motivate or provoke firms to go international may be broadly divided into proactive reasons and reactive
reasons
Reactive Reasons
i) Competition
II) Governmental Reasons
iii) Economic & Political Changes
iv) Strategic Vision
Proactive Reasons
i) Growth and Profitability
ii) Sales Expansion
iii) Market Opportunities
iv) Risk diversification
Unit-1
• Management Orientation
The form and substance of a company’s response to global business opportunities depend greatly on management’s
assumptions or beliefs – both conscious and unconscious – about the nature ofthe world. The worldview of a company’s
personnel can be described as ethnocentric, polycentric, regiocentric and geocentric. Management at a company with a
prevailing ethnocentric orientation may consciously make a decision to move in the direction of geocentricism. The
orientations collectively known as the EPRG framework
Unit-1
(i) Ethnocentric
A person who assumes his or her home country is superior compared to the rest of the world issaid to have
an ethnocentric orientation. The ethnocentric orientation means company personnel see only similarities in
markets and assume the products and practices that succeed in the homecountry will, due to their
demonstrated superiority, be successful anywhere. At some companies, the ethnocentric orientation means
the opportunities outside the home country are ignored.
(ii) Polycentric
• In contrast, polycentric organizations or managers see each country as unique, and consider that businesses
are best run locally. Polycentric management means that the head office places little control on the activities
in each market, and there is little attempt to make use of any good ideas or best practices from other
markets
(iii) Regiocentric
• A regiocentric organization sees similarities and differences in a world region, and designs strategies around
this.In regiocentric approach, the firm accepts a regional marketing policy covering a group of countries
which have comparable market characteristics such as economic, cultural or political similarities and
formulates operational strategies based on region instead of countries.
Unit-1
(iv)Geocentric
Geocentric companies, as truly global players, view the world as a
potential market, and seek to serve this effectively. Geocentric
management can recognize the similarities and differences between
the home country and the international markets. It combines
ethnocentric and polycentric views; in other words, it displays the
“think global, act local” ideology.
Unit-1
• International Marketing environment
It refers to all those internal (firm related) and external (market related)
forces which are relevant to marketing strategy formulation. These factors can be
classified into (1) Controllable factors(2) Uncontrollable factors.
The controllable factors refer to those variables which are under the control of
company’s management. It includes the control and design of elements of
marketing mix.
The Company is in a position to control and design product, price, place and
promotion. All marketing activities relating to these factors can be well controlled
and managed by the company’s management
Unit-1
Unit-1
Transitional Stages in International Market
• A firm which is entirely domestic in its activities normally passes through different stages of
internationalization before it truly becomes a global one. In short in many firms overseas business initially
starts with the low degree of commitment or involvement; but they gradually develop a global outlook and
embark upon overseas business in a big way
Domestic Company
Domestic
Company
International
Company
Multinational
Company
Global
Company
Transnational
Company
Benefits of International Marketing
Endurance:
_ Progress of overseas markets
_ Sales promotion
_ Diversification
Inflation and wholesale price index
_ Employment and placements:
_ Standard of living/style:
_ Marketing process:
Unit-1
Unit-1
INTERNATIONAL MARKETING DECISIONS or REQUIREMENTS OF
GLOBAL MARKETING PLAN
• A firm which plans to go international has to make a series of strategic decisions. They are broadly the following
i) International Business Decision: The first decision a company has to make, of course, is whether to take up international business or not.
This decision is based on a serious consideration of a number of important factors, such as the present and future overseas opportunities,
present and future domestic market opportunities, the resources of the company (particularly skill, experience, production and marketing
capabilities and finance), company objectives, etc.
(ii) Market Selection Decision: Once it has been decided to go international, the next important step is the selection of the most appropriate
market. For this purpose, a thorough analysis of the potentials of the various overseas markets and their respective marketing
environments is essential. Company resources and objectives may not permit a company to do business in all the overseas markets.
(iii) Entry and Operating Decisions: Once the market selection decision has been made, the next important task is to determine the
appropriate mode of entering the foreign market
(iv) Marketing Mix Decision: The foreign market is characterised by a number of uncontrollable variables. The marketing mix consists of
internal factors which are controllable. The success of international marketing, therefore, depends to a large extent on the appropriateness
of the marketing mix. The elements of the marketing mix — product, promotion, price and physical distribution — should be suitably
designed so that they may be adapted to the characteristics of the overseas market.
(v) International Organisation Decision: A company which wants to do direct exporting has also to decide about its organisational structure, so
that the exporting function may be properly performed. This decision should necessarily be based on a careful consideration of such factors
asthe expected volume of export business, the nature of the overseas market, the nature of the product, the size and resources of the
company, and the length of its export experience. The nature of the organisation structure of the company will depend on a number of
factors like its international orientation, nature of business, size of business, future plans etc.
Unit-1
1. Globalisation of supply chain and operations management
2. International investments
3. Information surge and consumer choice
4. World growth
5. Domination of the world economy
6. Trade cycle decision rule.
7. Pervasiveness of free markets
8. Accelerating growth of global markets.
9. The rise of the Internet and information technology
Unit-1
FUTURE OF INTERNATIONAL MARKETING
Unit-1
Determination
of Marketing
Objective
Determination
parameters for
market
selection
Preliminary
screening
Detailed
Investigation
and
Shortlisting
Evaluation and
Selection
MARKET SELECTION PROCESS or Identifying the market Opportunities
The important steps involved in the market selection process are.
Unit-1
Determinants of Market Selection
Unit-1
Determinants
Of Market
Selection
Market
Related
Factors
General
Factors
Specific
Factors
Firm Related
Factors
Unit-1
Market Related Factors
There are a number of market related factors which need to be carefully evaluated for
market selection. The market related factors may be broadly grouped into general factors
and specific factors.
General Factors
Economic Factors
(ii) Economic Policy
(iii) Business Regulations
(iv) Currency Stability
(v) Political Factors
(vi) Ethnic Factors:
(vii) Infrastructure:
(viii) Bureaucracy and Procedures:
(ix) Market Hub:
Unit-1
Specific Factors
Besides the general factors, there are a number of factors specific to
the industry which need to be analysed for evaluating the market.
Important specific factors are:
(i) Trends in domestic production and consumption and estimates for
the future of the product(s) concerned.
(ii) Trends in imports and exports and estimates for the future.
(iii) Nature of competition.
(iv) Government policy and regulations pertaining to the industry.
(v) Infrastructure relevant to the industry.
Unit-2
Unit-2
International Marketing Entry –Modes of Entry
Various modes used for taking entry in international markets
constitute scope of international marketing.
These modes are 1. Direct Export 2. FDI 3. Mergers & Acquisition
4.Contract 5.Counter Trade 6.Franchising and Licensing 7. Joint
Ventures 8. Strategic Alliance
Unit-2
Exporting
Exporting is the essence of international marketing. Initially, a domestic business
unit starts its international business by exporting to one nation.
Exporting is the appropriate strategy when one or more of the following conditions
prevail:
1. The volume of foreign business is not large enough to justify production in the
foreign market.
2. Cost of production in the foreign market is high
3. The foreign market is characterised by production bottlenecks like infrastructural
problems, problems with materials supplies etc.
4. There are political or other risks of investment in the foreign country.
5. The company has no permanent interest in the foreign market concerned or that
there is no guarantee of the market available for a long period.
Unit-2
Licensing and Franchising
Licensor (allows to use)
Licensee (patents, trademarks, copyrights, etc)
Technical Factors
Royalty
Ex: The US multinational General Electric (GE) has licensed its patented technology to a small scale
unit in India, established for the manufacture of high intensity discharge (HID) fittings
Nike,the world’s largest sports shoe and apparel company, finally decided in 1995 to enter the
Indian market by licensing
Unit-2
Franchising
• Franchiser (Grants right)
• Franchisee
• Brand Name, logo, Store layout, Mode of operation etc
The major forms of franchising are manufacturer-retailer systems (such
as automobile dealership),manufacturer-wholesaler systems (such as
soft drink companies), and service firm-retailer systems
Example, McDonald provides its brand name, logo, store-layout,
method of operation, etc. to its franchisee stores. The franchisees have
their own stores but they sell the products under the brand name of
franchiser.
Unit-2
MERGERS AND ACQUISITIONS
• Mergers and acquisitions (M&A) have been a very important market entry strategy as well as expansion strategy. As
one of the most difficult areas in international marketing is the distribution, this is often a very important
consideration for M&A. Mergers and acquisitions provides instant access to markets and distribution network.
M&A addresses the challenges of starting a ‘greenfield’ operation in another country by building a new factory and
hiring the people needed.
• Another important objective of M&A is to obtain access to new technology or a patent right.M&A also has the
advantage of reducing the competition.
• Mergers and acquisitions may also give rise to some problems which arise mostly because of the deficiencies of the
evaluation of the case for acquisition. Sometimes, the cost of acquisition may be unrealistically high
• Ex :The General Electric (GE), USA, took over Hungary’s light bulb maker Tungsram.
Unit-2
Strategic Alliance
This strategy seeks to enhance the long-term competitive advantage of the firm by forming
alliance with its competitor in existing or potential critical areas.
Instead of competing with each other. “The goals are to leverage critical capabilities, increase
the `flow of innovation and increase flexibility in responding to market and technological
changes
Ex :Tata Tea has entered into an alliance with Tetley so that the marketing expertise of Tetley is
available to market tea abroad
Unit-2
Advantages of Strategic Alliances
1) Spread and Reduce Costs
2) Specialize in Competencies
3) Avoid or Counter Competition
4) Secure Vertical and Horizontal Links
Unit-2
5) Gain Location-Specific Assets
6) Overcome Governmental Constraints
7) Diversify Geographically
8) Minimize Exposure in Risky Environments:
Unit-2
COUNTERTRADE
Countertrade is a form of international trade in which certain export
and import transactions are directly linked with each other and in
which import of goods are paid for by export of goods, instead of
money payments.
Forms of Countertrade
Barter
Buyback
Compensation Deal
Counter purchase
Unit-2
Joint Ventures:. In joint venture, foreign partner makes an arrangement with
local unit of other country in which ownership and management are shared
between local unit and foreign partner
Reasons for joint Venture
1) Cost Savings:
2) Risk Sharing
3) Access to Technology:
4) Expansion of Customer Base:
5) Entry into Emerging Economies:
6) Entry into New Technical Markets:
Unit-2
Advantages of Joint Ventures:
1) Joint ventures provide large capital funds. Joint ventures are suitable for major projects.
2) Joint ventures spread the risk between or among partners.
3) Different parties to the joint venture bring different kinds of skills like technical skills,
technology, human skills, expertise, marketing skills or marketing networks.
4) Joint ventures make large projects and turn key projects feasible and possible.
5) Joint ventures provide synergy due to combined efforts of varied parties
6) They have more direct participation in the local market and thus gain a better
understanding of
how it works
7) Companies entering joint ventures are able to exert greater control over the operation
of the joint
venture.
Unit-2
CONTRACT MANUFACTURING
• Under contract manufacturing, a company doing international
marketing contracts with firms in foreign countries to manufacture or
assemble the products while retaining the responsibility of marketing
the product.
• This is a common practice in international business. There are a
number of multinationals and affiliates of multinationals which
employ this strategy in India in respect of some of the products they
market, like Park Davis, Hindustan Lever, etc.
• For example, Godrej soaps manufactured Dettol for Reckitt and
Coleman; Clearton for Nicholas Laboratories; Johnson’s Baby Soap for
Johnson and Johnson
Unit-2
Advantages of Contract manufacturing :
1. The company does not have to commit resource for setting up
production facilities.
2. It frees the company from the risks of investing in foreign countries.
3. If idle production capacity is readily available in the foreign country,
it enables the marketer to get started immediately.
4. In many cases, the cost of the product obtained by contract
manufacturing is lower than if it were manufactured by the
international firm.
Unit-1
Management Contract
A management contract is an arrangement under which operational control of an enterprise is
vested by contract in a separate enterprise that performs the necessary managerial functions in
return for a fee. Management contracts involve not just selling a method of doing things (as with
franchising or licensing) but involve actually doing them. A management contract can involve a wide
range of functions, such as technical operation and of a production facility, management of
personnel, accounting, marketing services and training
They can provide organisational skills not available locally, expertise that is immediately available
rather than built up, and management assistance in the form of support services that would be
difficult and costly to replicate locally
Recent examples of management contracts can be found in industries like hotels
(e.g. Accor or Marriott), hospitals, airports, seaports and public utilities.
Tata Tea, Harrisons Malayalam and AVT — have contracts to manage a number of plantations in Sri
Lanka
Unit-2
TurnKey Operations
• Turnkey contracts are common in international
business in the supply, erection and commissioning
of plants, as in the case of oil refineries, steel mills,
cement and fertiliser plants etc.; construction
projects and franchising agreements.
• “A turnkey operation 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.
• Many turnkey contracts involve government/public
sector as buyer (or seller in some cases).
• A turnkey contractor may subcontract different
phases/parts of the project
Unit-2
Foreign Direct Investment
A foreign direct investment (FDI) is an investment in the
form of a controlling ownership in a business in one
country by an entity based in another country. FDI is
characterized by a notion of direct control and is not
simply the transfer of monetary funds. The direct
investment made to create the buildings, machinery, and
equipment is not in sync with making a portfolio
investment.
Unit-2
• Horizontal − In case of horizontal FDI, the company does all the same activities abroad as
at home. For example, Toyota assembles motor cars in Japan and the UK.
• Vertical − In vertical assignments, different types of activities are carried out abroad. In
case of forward vertical FDI, the FDI brings the company nearer to a market (for example,
Toyota buying a car distributorship in America). In case of backward Vertical FDI, the
international integration goes back towards raw materials (for example, Toyota getting
majority stake in a tyre manufacturer or a rubber plantation).
• Conglomerate − In this type of investment, the investment is made to acquire an
unrelated business abroad. It is the most surprising form of FDI, as it requires overcoming
two barriers simultaneously – one, entering a foreign country and two, working in a new
industry.
Unit-2
International marketing research-Definition
International marketing research is a complete analysis of the market, information regarding the
nature, size, organisation, profitability of different markets, changes in the market and various
factors — economic, social and political — affecting those changes.
The following activities are included in international market research:
1. Analysis of the market size according to age, sex, income, profession and standard of
living of customers.
2. Estimating the regional or territorial demand of different markets.
3. Collecting information about the existing and prospective customers of the company’s
products and their attributes and various competitors’ share in the market.
4. Studying the market changes and conditions affecting market changes such as customers’
preferences, shift in brand loyalty and so on.
5. Analyzing the working of various channels of distribution and their role in creating
market demand of the product.
6. Forecasting the profitability of different markets and marketing segme
Global Marketing Information System
Unit-2
Unit-2
SOURCES OF MARKET INFORMATION
There are broadly two sources of information, viz., internal sources and external
sources. Internal sources include sales and cost records, accumulated knowledge of
the company personnel and any other data available with the company.
Experienced companies may have a great deal of available information internally,
but companies new to international business may have to rely much on external
sources.
External sources include sources of both primary and secondary data. A company
will have to collect primary data when secondary data are not available, not
adequate, or reliable.
Unit-2
GENEARL SOURCES OF INFORMATION
1.Environmental scanning is a vital source of information.
Environmental scanning meaning is the gathering of information from
an organizations internal and external environment, and careful
monitoring of these environments to identify future threats and
opportunities
2.Personal sources. A great deal of external information comes from
executives based abroad in company subsidiaries, affiliates, and
branches
3. Direct sensory perception provides a vital background for the
information that comes from human and documentary sources. Direct
perception gets all the senses involved
Unit-2
Organisation within India
• India Trade Promotion Organisation (ITPO), State Trading Corporations
Chambers of Commerce, Confederation of Indian Industry (CII), and Export
Promotion Councils ,Commodity Boards/Export Development Authorities
. Indian Institute of Packaging,Export Inspection Council
• Exim Bank
• Indian Institute of Foreign Trade, Management Schools/Departments of
Universities
Unit-2
Organisations Outside India
• The International Trade Centre
• Offices of the Indian embassies abroad and concerned department
• The Japan External Trade Organisation (JETRO
• There are also certain international organisations related to specific
products (like the Infofish,Kaula Lumpur, for Seafood, for example).
• World Bank
• The World Trade Organisation (WTO)
Unit-2
Unit-2
Unit-2
International marketing research has a broader scope than domestic research: Managers
will need additional information to compensate for lack of familiarity with the foreign
environment
Scope of International
Marketing Research
Buyer Behaviour Research
Product Research
Distribution Research
Promotion Research
Pricing Research
Research of Industry, Market Characteristics
and Market Trends
Unit-2
Characteristic or Nature of International Marketing Research
Broader market is available
Involves at least two set of uncontrollable variables
Requires broader competence
Competition is intense
Large-scale operation
Domination of multinationals and developed countries
International restrictions
Importance of Advanced Technology
Need for specialized institutions
Need for long term planning
Lengthy & Time Consuming
Unit-2
International Marketing
Research Process
1 Defining the Research Problem and Research Objectives
2 Developing the Research Plan
3 Identifying Information Sources
•Secondary Data
•Primary Data
4 Data Collection
•The Marketing Sample:
5 Data Evaluation
6 Interpreting the Data
7 Report Preparation
Unit-2
PROBLEMS IN INTERNATIONAL RESEARCH
1. The cultural differences make foreign market research a difficult task.
2. It is often very expensive.
3. The research methodology suitable for one market may not be suitable for another
market
Other Important issues
Multiplicity of markets
 Problems with secondary data:
 Problems in collecting primary data:
 Problems of communication
 Infrastructure problems
International marketing
Unit-3
Product-Definition
Philip Kotler defines a product as anything that can be offered
to a market for attention, acquisition, use or consumption
that might satisfy a want or need. It includes physical objects,
services, persons, places, organisations and ideas
Unit-3
Basic Product Concepts
• Product Strategy involves the managerial decisions about the product mix
and the positioning and communication.
• Product Planning, used in a broad sense, involves not only the product
strategy described above but also the product development measures.
Some people, however, confine the use of the term
• product planning to the different aspects and functions of product
development and exclude the product strategy.
• Product Management refers to the managerial decisions pertaining to
product development and the product strategies through the different
stages of the product life cycle.
Unit-2
Product Decision
1. Market segment
decision.
2. Product
mix
decision.
3. Product
specifications.
4. Positioning
and
communicati
ons
decisions.
Unit-2
Market Segment Decision
The first product decision to be made is the market segment decision because all other decisions —
product mix decision, product specifications, and positioning and communications decisions —
depend upon the target market selection.
Product Mix Decision
Product mix decision pertains to the type of products and product variants to be offered to the
target market.
Product Specifications
This involves specification of the details of each product item in the product mix. This includes
factors like styling, shape, size and other attributes and factors like packaging and labelling.
Positioning and Communications Decisions
Positioning is the image projected for the product. For example, a toilet soap may be positioned as a
baby soap, a beauty soap, a deodorant soap, a freshness soap or a skin-care soap.
Unit-3
Product Positioning
Positioning, a process whereby a company establishes an image for its
product in the minds of consumers relative to the image of
competitors’ product offerings.
In today’s global market environment, many companies use deifferent
global positioning strategies to establish its image among the target
customer.
Unit-3
Types of Positioning in International Market
1) High Tech Positioning:
Such products are frequently purchased on the basis of concrete product features, although image may also be
important. Buyers typically already possess or wish to acquire considerable technical information. High-tech
products may be divided into three categories: technical products, special-interest products, and demonstrable
products.
i) Technical Products:
Computers, chemicals, tires, and financial services are just a sample of the product categories whose buyers
have specialized needs; require a great deal of product information and who share a common “language.”
ii) Special-Interest Products
While less technical and more leisure or recreation oriented, special-interest products also are characterized by
a shared experience and high involvement among users. Again, the common language and symbols associated
with such products can transcend language and cultural barriers.
Fuji bicycles, Adidas sports equipment, and Canon cameras are examples of successful global special- interest
product
Unit-3
2) User group
• This type of positioning targets a particular group of users and
explains why the company’s offerings are directly applicable and
relevant to this group.
• For instance, Johnson’s vs. Axe. While Johnson’s baby shampoo
positions itself as gentle for children, Axe body spray targets men
Unit-3
3) Pricing :For example, Gillette vs. Dollar Shave Club.
4) Quality : Example : Chipotle vs. Taco Bell
6) Differentiation :
For example, Toyota vs. Tesla. Tesla entered the electric vehicle market
with a luxury sports model, rapidly sidestepping economy cars like the
Toyota Prius. Tesla actually targeted the high-end market with the
Model S.
Unit-3
7) Convenience
• Convenience creates an easier life for customers. From location to usability,
convenience could incorporate something like free returns and E-
commerce.
• For example, Simple vs. Bank of America
8) Customer service
• Customer service emphasizes creating helpful and friendly interactions.
This can be especially critical in specific industries, such as restaurants and
banking areas.
Example, ICICI and AXIS Banks
Unit-3
Definition of Product design
The term designing the product refers
to the determination of shape, standard
and pattern of the product. It includes
• Specification,
• Experimental and development work
for the production of desired product,
• Calculation of estimates
• Issuing necessary instructions to the
production department for production
Unit-3
CHARACTERISTICS OF A GOOD PRODUCT DESIGN or PRODUCT DESIGN
CONSIDERATION
A good product design should posses the following characteristics:
1. FUNCTION
2. RELIABILITY
3. MAINTAINABILITY
4. PRODUCIBILITY
5. SIMPLIFICATION
6. PRODUCT STANDARDIZATION AND VARIETY REDUCTION
7. QUALITY
8. MINIMUM COST
9. WARRANTIES
10. MODULAR DESIGN
Unit-3
Extend, Adapt, Create: Strategic Alternatives in Global Marketing
A company that has developed a successful local product or brand can implement an
extension strategy that calls for offering a product virtually unchanged (i.e., “extending” it) in
markets outside the home country.
This is possible when certain significant factors like consumer tastes, product use conditions
etc. are the same in both the home and foreign markets
Legal Requirements
Ex: Currypowder,Pickel, Sumit Mixie
Unit-3
Product Adaptation
A second option is an adaptation strategy; this involves
changing elements of design, function, or packaging in
response to needs or conditions in particular country
markets.
This can be applied during the following conditions apply:
Difference in the consumer tastes, consuming habits etc.
Differences in the conditions of use of the product.
Differences in the use facility characteristics.
Differences in the purpose of use or need satisfaction.
Differences in the cultural environment.
Unit-3
Differences in the natural environment like geo-physical characteristics,
weather/climatic conditions etc.
Differences in the regulatory environment.
Differences in income levels and standard of living.
Differences in the competitive environment.
Unit-3
The product invention strategy involves the development of new
product suitable for tapping a foreign market, for example, low cost
products may have to be developed for low income countries.
Inventing Backward
Inventing Forward
Pure Invention
Unit-3
There are four strategic alternatives available to any company seeking
to expand from its domestic base into new geographic markets
Unit-3
Product Communication Extension Strategy
Companies pursuing this strategy sell the same product with virtually no
adaptation, using the same advertising and promotional appeals used
domestically, in two or more country markets or segments.
For this strategy to be effective, the advertiser’s message must be understood
across different cultures, including those in emerging markets
.
EX : Microsoft’s Windows 7 operating system was launched in 2009
Unit-3
Product Extension, Communications Adaptation Strategy
Under this strategy, the firm markets the same product but employs modified communication about the product
in foreign markets
When this strategy is employed, the communication appeal used in the foreign markets would be quite different,
depending upon the particular product use that is promoted.
In effect, the same physical product ends up serving a different function or use from that for which it was
originally designed.
. This strategy assumes that the product will serve the same function in foreign markets under different use
conditions.
Ex: Lawn and Gardening machine in U.S.A & Less Developed Country
: Sony Bravia in U.S.A and Europe
Unit-3
Dual Adoption Strategy
The dual adaptation strategy involves a modification of both the product and
communication to meet the foreign needs and considerations of the foreign
market.
This strategy is called for when differences exist in the environmental
conditions of use and in the function which a product serves.
For example: Unilever’s Rexona deodorant once had 30 different package
designs and 48 different formulations.
WPP Group’s to J. Walter Thompson ad agency
Unit-3
Product Adaptation-Communication Extension
• A third approach to global product planning is to adapt the product to
local use or preference conditions while extending, with minimal
change, the basic home-market communications strategy or brand
name.
• Ex: Kraft Foods-Oreo-In China
Unit-3
The choice of product and communications strategy in international
marketing is a function of three key factors:
(i) The product itself defined in terms of the function or need it serves;
(ii) The market defined in terms of the conditions under which the product is
used, including
the preferences of potential customers and their ability to buy the products
in question;
and
(iii) The costs of adaptation and manufacture to the company considering
these product communications approaches.
Stages in the Process of New
Product Development
• Concept 1: an affordably priced mid-size car designed
as a second family car to be used around town for
visiting friends and doing shopping.
• Concept 2: a mid-priced sporty compact car appealing
to young singles and couples.
• Concept 3: a high-end midsize utility vehicle appealing
to those who like the space SUVs provide but also
want an economical car.
Concept testing helps companies avoid investing in bad
ideas and at the same time helps them catch and keep
outstanding product ideas.
Unit-3
PRICING OBJECTIVES
Price is a strategic marketing tool to achieve certain objective(s). The pricing objective, naturally, is one of the very important determinants of
price. A firm’s pricing policy may be guided by any one or more of the following objectives:
Financial Objectives
Price can be used as a strategic variable to achieve specific financial goals, including return on investment, profit, and rapid recovery of product
development costs. When financial criteria such as profit and maintenance of margins are the objectives, the product must be part of a
superior value proposition for buyers; price is integral to the total positioning strategy.
Non- Financial Objectives
Some companies are pursuing nonfinancial objectives with their pricing strategy. Price can be used as a competitive weapon to gain or
maintain market position. Market share or other sales based objectives are frequently set by companies that enjoy cost-leadership positions in
their industry
(i) Market Penetration: Market penetration may be a very important objective, particularly for new exporters. A firm may attempt to penetrate
the market with a low price.
(ii) Market Share: The price may be manipulated to increase the market share. In many cases, it is a corollary of market penetration.
(iii) Market Skimming: This is often the case with innovative products. The product is introduced with a high initial price to skim the cream of
the market. The price may be subsequently reduced to achieve greater market penetration.
(iv) Fighting Competition: Sometimes, price is a tool to fight competition. A price reduction by the competitor may have to be countered by
price cuts. Sometimes, price cuts may be affected to discipline the competitor or to compel the competitor to reduce prices so that his cash
flows will be affected.
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(v) Preventing New Entry: A firm may charge a low price even when there is
scope for high price so that the industry does not look very attractive to new
entrants.
(vi) Shorten Payback Period: When the market is uncertain and risky
because of factors like swift technological changes, short product life cycles,
political reasons, threat of potential competition etc., recouping the
investment as early as possible would be an important objective.
(vii) Early Cash Recovery: A firm with liquidity problem might give priority to
generate a better cash flow. Hence, it would adopt a pricing that might help
it to liquidate the stock and/or encourage prompt payment by the channel
members or buyers.
(viii) Meeting Export Obligation: A company with specific export obligation
may be compelled to adopt a pricing policy that enables it to discharge its
export obligation. Sometimes it may even imply a price lower than the cost.
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(ix) Disposal of Surplus: A company confronted with a surplus stock
may resort to exporting to dispose off the surplus. In such cases,
exports sometimes takes the form of dumping.
(x) Optimum Capacity Utilisation: Exporting is sometimes resorted to
enable the firm to achieve optimum capacity utilisation so as to
minimize the unit cost of production. In such a case, achieving the
required quantity of exports could be the objective of export pricing.
(xi) Return on Investment: Achieving the target rate of return is the
most important pricing objective in a number of cases.
(xii) Profit Maximisation: In many cases, the primary pricing objective
is maximisation of profits
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Pricing Strategies or approaches
The export price quotations may not be the same for all markets. Prices
may differ from market to market due to various reasons viz. political
influence, buying capacity, financial and import facilities, total market
turnover and other pricing and non-pricing factors etc. in order to make
the local price of the product competitive.
The profitability will also be affected to a great extent and may be
different in different markets.
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1. Market Penetration Strategy: Under this strategy, exporters offer a
very low introductory price to speed up their sales and, therefore,
widening the market base. It aims at capturing the products in the
market especially if the quality of the product is proved with its
wide acceptance
Example: When Sony was developing the Walkman in the late 1970s,it
distributed its first 60000 units with a loss of 35$
Advantages
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2. Cost Based Pricing
Cost based pricing, also known as cost plus pricing, is a common method of
pricing. Under this method, the price includes a certain percentage of profit
margin on the sum total of the full =cost of production, marketing costs and
an allocation of the overheads. That is, Price = [fixed costs + variable costs +
overheads +marketing costs] + specified percentage of the total costs.
Advantages
Advantages of the cost plus approach are:
(i) It covers all the costs.
(ii) It is designed to provide the target rate of margin.
(iii) It is, generally, a rational and widely accepted method.
(iv) It is an easy to comprehend and simple method.
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Disadvantages
The cost based pricing, however, has several disadvantages:
(i) The cost calculations are based on a predetermined level of activity. If the
actual level of activity varies from this estimated level, the costs may vary,
rendering this method unrealistic.
(ii) If the costs of the firm are higher than its competitors, this method would
render the firm
uncompetitive in relation to price.
(iii) Another drawback of the cost plus method is that sometimes the
opportunity to charge a high price is foregone.
(iv) It ignores the price elasticity of demand.
(v) The cost based pricing would not be helpful for some of the objectives or
tasks like market penetration, fighting competition etc.
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3. Skimming Pricing Strategy: Under this
strategy, a very high introductory price is fixed
to skim the cream of the demand at the very
outset. This policy is generally introduced
when there is no competition in the market.
Such prices continue to be high till
competitors enter the foreign market.
As soon as competitors enter the market, the
exporter reduces the price.
Example: when Sony introduced the first
consumer VCRs in the 1970s, the retail price
exceeded $1,000. The same was true when
compact disc players were launched in the
early 1980s. Within a few years, prices for
these products dropped well below $500
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Advantages
• Price skimming covers the costs of innovation and provides money for
product development.
• Early-adopters naturally become the word of mouth marketing
channels.
• It allows you to segment the market and target all at different price
levels. Higher Return on Investment.
• It Helps Create and Maintain Your Brand Image.
• It Segments the Marke
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Companion Product Pricing
The Captive Product Pricing is the pricing strategy adopted by the marketers wherein, the price of
the core product is generally kept low, whereas the captive products are highly priced.
Example: Companion products pricing has long been the preferred strategy of Vodaphone, AT&T,
and other cellular service providers. They buy handsets at prices set by Motorola, Nokia, and other
manufacturers, and then subsidize the cost by offering significant discounts on (or even giving
away) handsets to subscribers who sign long-term contracts. The carriers make up the price
difference by charging additional fees for extras such as roaming, text messaging, and so on.
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4.Following Competitors pricing strategy
Many firms follow the dominant competitors, particularly the price
leader, in setting the price. The price leader is the firm which initiates
the price trends.
The important alternative ways of following the competitor are:
(i) Setting the price at the same level as that of the competitor.
(ii) Setting the price below that of the competitor.
(iii) Pricing higher than that of the competitor’s.
The choice of the alternative has to be based on such factors as the
comparative quality of the product, the image and reputation of the
firm, the uniqueness or similarity of the product etc.
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Advantages
The main advantages of this method are:
(i) It is a very simple method.
(ii) It follows the main market trend.
(iii) It has relevance to the competitive standing of the firm.
Disadvantages
The major disadvantages and limitations of following the competitors are:
(i) If the competitor’s price decisions are unrealistic, the follower will also be going wrong
on
the price.
(ii) The cost factors of the follower may not be similar to that of the competitor’s.
(iii) The pricing objective of the firm could be different from that of the competitor’s.
(iv) Sometimes the competitor may initiate price change for wrong reasons.
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Customer Determined Price
In a number of cases, the foreign buyer specifies the price at which he is prepared to buy
the product. Whether a price quotation given by the buyer will be acceptable to seller or
not will depend on factors like his cost structure, conditions of business, objectives etc.
Probe Pricing Strategy: Fixing low price for its product may have an adverse effect on the
image of the firm and of the product. It may raise doubts in the minds of the buyers about
the quality of the product if it is lower than the price of competitors or if it is reduced
subsequently. When no information is available on the extent of the competition or the
likely preferences of the buyers, sufficiently higher prices may be quoted on the first few
offers. No business is really expected to grow except feedback information. Hence, the
prices may be adjusted accordingly.
Follow the Leader Pricing Strategy: In a competitive world market or where adequate
market information is not available, it may be useful to follow the leader in the market
comparing its product with that of the leader the exporter may then fix the price of its
product. In such cases the price of the product is lower than the leader’s product. However,
this price has no rational or scientific base for fixing the price.
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Differential Trade Margins Strategy:
Variation in trade margins may be adopted by the exporter as the
pricing strategy in foreign market. This strategy allows various types of
discounts on the list price. Quantity discounts encourage procuring
huge orders. It may be based on the value or on the quantity
purchased or on the size of the package purchase.
Special discounts may be allowed while introducing the product. These
are given on all the purchases. Seasonal discount aims at shifting the
storing function in the channels
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Transfer pricing or intracompany pricing
refers to the pricing of goods transferred
from operations or sales units in one
country to the company’s unit
elsewhere.
The appropriate basis for intracompany
transfers often depends on the nature of
the subsidiaries, the market conditions
and government policies and
regulations. Some studies show that, in
most cases, setting up transfer prices
remains the absolute prerogative of the
parent company executives regardless of
the firm’s nationality.
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The following strategies are, therefore, often associated with transfer pricing:
(i) When goods are shipped to high-tariff countries, minimal transfer prices
are quoted to reduce the effect of duty.
(ii) To reduce income tax, goods are overpriced when transferred to units in
high-tax countries.
(iii) When dividend repatriation is curtailed by government policy, income
may be taken out in the form of high prices for products or components
shipped to units in that country.
Companies, thus, tend to manipulate transfer prices to circumvent tax and
dividend regulations to maximise their profits
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The important general objectives of the intracompany pricing system
are:
(i) To maximise the total profits of the company
(ii) To facilitate parent-company control; and
(iii) To offer management at all levels, both in the product divisions and
in the international divisions, an adequate basis for maintaining,
developing, and receiving credit for their own profitability.
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International Marketing Channel Objectives
• Marketing channels exist to create utility for customers.
• The major categories of channel utility are place utility (the availability of a
product or service in a location that is convenient to a potential customer)
• Time utility is to make sure the availability of a product or service when
desired by a customer)
• Marketing Channels ensures Form utility (the availability of the product
processed, prepared, in proper condition and/or ready to use
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• Marketing channels helps to provide information or information utility
which means the availability of answers to questions and general
communication about useful product features and benefits.
• Because these utilities can be a basic source of competitive advantage and
comprise an important element of the firm’s overall value proposition.
• Just as with the other elements of the firm’s marketing program, the
objective of distribution activities are undertaken to facilitate the exchange
between marketers and consumers.
• There are two basic functions performed between the manufacturer and
the ultimate consumer. The first called the exchange function, involves
sales of the product to the various members of the channel of distribution.
• The second, the physical distribution function, moves products through
the exchange channel, simultaneously with title and ownership
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Channel Terminology or Types of Foreign Intermediaries
Importers
Although all the foreign customers who buy directly from the exporter are
technically importers, here the term importer refers to one who imports the
product in large quantities either as an agent for a foreign buyer or for resale.
Such importers include, among others, large import houses and trading
houses like the Japanese trading companies mentioned earlier.
The importers who buy on their own account may sell the product to the
distributors, industrial and other institutional customers, wholesalers etc.
Distributors
A distributor who buys directly from the exporter and holds large stocks of a
product has an exclusive right to sell the product in a particular area or to a
particular type of customer. The distributor may resell the product to the
wholesalers, retailer or consumers.
Wholesalers
Although wholesalers often buy from the importers or distributors, there are
also wholesalers who buy directly from the exporters.
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Retailers
Large retailers may buy directly from the exporters. Department stores, supermarkets or other
types of chain stores are among the most important direct retail buyers. Other retailers may depend
on distributors or wholesalers.
Multiple Channels
In some cases, an exporter may use multiple channels, i.e., more than one channel for a product.
For example, an exporter may sell directly to the wholesalers, large retailers and institutional
consumers, even while having dustributors.
Government Departments
In some countries, government departments buy large quantities of certain goods, often on a long-
term basis. These are generally essential goods of mass consumption or for use in government
departments.
State Buying Organisations
In some countries, the imports of goods are done by the government organisations, like state
trading organisations. This was the case until recently in the centrally planned economies. In India,
imports of several commodities are canalised, i.e., only designated government agencies can import
these goods.
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Types of Channel Structure or Types of Intermediaries
Distribution channels are systems that link manufacturers to customers.
There are two types of channel structure one is for consumer products and
the other industrial products are similar,
In business-to-consumer marketing (b-to-c or B2C), consumer channels are
designed to put products in the hands of people for their own use.
By contrast, business-to-business marketing (b-to-b or B2B) involves
industrial channels that deliver products to manufacturers or other
organizations that use them as inputs in the production process or in day-to-
day operations.
Business to Consumer Channel Types
Business-to-business Channel Structure (b-to-b or
B2B)
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Factors Influencing Channel Selection
The important factors influencing the choice of channel(s) are the following:
(i) Product Characteristics: Product characteristics, like unit value, perishability, bulk,
degree of product standardization, complexity and service requirements, determine,
to some extent, the way the product should be distributed.
(ii) Market and Customer Characteristics: Market and customer characteristics, such as the
size and location of the market, the number and geographical dispersal of the customers,
the frequency of purchase and the typical size of the purchase, customers’ buying habits
and susceptibility to different selling methods are important factors to be considered in the
choice of the channel.
(iii) Middlemen Characteristics: Middlemen differ in their ability and willingness to carry
out promotional activities and to push the product. The margin or commission for the
middlemen is another important issue. The type of products dealt with by a particular
intermediary should also be an important consideration. Further, the marketer may be
restricted in his choice of channel by the non-availability of particular middlemen.
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(iv) Company Characteristics and Objectives: The choice of the channel is also
influenced by such factors as the company’s size, financial strength, product mix,
past channel experience, overall marketing policies and channel objectives.
(v) Competitors’ Characteristics: Like any other marketing decision, the channel
decision is influenced by the nature of the competitors. Sometimes, it may be
appropriate to adopt a channel policy similar to that of the competitor, but
sometimes it may be more profitable to design quite a different channel policy.
(vi) Environmental Characteristics: The channel design is also influenced by such
environmental factors as the economic situation, social and cultural factors, the
physical environment and government policies and regulations
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INTERNATIONAL LOGISTICS
International logistics is defined as “the designing and managing of a
system that contracts the flow of materials into, through, and out of
the international corporation. It encompasses the total movement
concept by covering the entire range of operations concerned with
product movement.
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Components of Logistics Management
Logistics management comprises of five major interdependent areas.
Fixed Facilities Location: The major consideration is the location of fixed facilities
like production and warehousing in such a way as to maximise the total efficiency
of the logistics system. Factors like future potentials of the markets, future plans of
the company, competitive factors, political stability etc. are also import
considerations.
Transportation: The modes of transportation, frequency of shipping etc. are
determined on consideration of several factors such as the cost, speed, safety, lead
time, transit time, type of product, natural environmental factors etc.
Inventory Management: The main objective of inventory management is to
minimise the cost of the inventory while ensuring smooth supplies. Developments
in inventory management by the customers, order processing and in the total
logistics system have made inventory management both challenging and efficient.
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Order Processing: The efficiency of order processing by the client as well as
the company have important implications for inventory levels and other
aspects of the logistics. Rapid order processing shorten the order cycle and
allows for lower safety stocks on the part of the client. Exporters from
developing countries like India face the challenge of coping up with such
situations.
Materials Handling and Warehousing: Materials handling and warehousing
are also an important part of the logistics management. The technologies in
use in materials handling and transportation may be different in different
countries. Differences in natural factors like climatic and weather conditions
may also make warehousing requirements varied.
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Global advertising may be defined as messages whose art, copy,
headlines, photographs, taglines, and other elements have been
developed expressly for their worldwide suitability. Companies that
have used global themes include McDonald’s (“I’m lovin’ it”), IBM
(“Solutions for a small planet”)
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brand equity, which represents the total value that accrues to a product as a
result of a company’s cumulative investments in the marketing of the brand.
The benefits of strong brand equity include:
_ Greater loyalty
_ Less vulnerability to marketing actions
_ Less vulnerability to marketing crises
_ Larger margins
_ More inelastic consumer response to price increases
_ More elastic consumer response to price decreases
_ Increased marketing communicatio
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Elements of Branding
Elements used to express/represent and identify/differentiate
the brand.
The consistent use of Brand Elements in all marketing programs helps
communicate the Brand Character to the marketplace.
The brand name, logo, slogan, jingle, and packaging style are all
examples of Brand Elements
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Brand name refers to the word, phrases or words used to identify the
company, product, service or concept and other core values of the
brand
LOGO
To simply explain, a logo is a visual trademark that identifies the brand
with its design elements.
The Nike swoosh has become so well known that the word “Nike”
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Tagline quickly state the brand position memorably in the minds of the
customers. Great theme or taglines have a long run rather than being
changed every year. Ex Apple-Think Differently
Jingles are Sound or a unique set of notes or tones can also assist in
forming a brand’s identity as the crucial Brand Elements. Ex: Britania
Doing the packaging of a product is not a simple task. Here every little
attribute should be considered carefully. The fonts, colors, logos, and
sizes. The composition of these many factors creates perfect packaging.
Advertising Appeal
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Advertising Appeal
Definition
Advertising appeal is defined as strategies for grabbing the attention of people to persuade them to purchase your product or service.
The approach can be a marketing or advertising strategy.
Brand appeal
Brand appeal is for the customers or people who are brand conscious and have an individual inclination towards a particular brand.
The primary objective of the brand appeal is to motivate people to buy a product because the product has an excellent brand. It gives
the feeling of differentiation to the customers. Apple is an example whose products have brand appeal to its customers.
Adventure Appeal
Some advertisements appeal to the sense of adventure and excitement of a person. The primary objective of these advertisements is
to appeal to people that enthusiasm will be enhanced after they buy or use the product or service.
The advertisements of energy drink use adventure appeal in them. It is often shown that the protagonist of the ad who is tired drinks
the energy drink and achieves something almost impossible
Bandwagon Appeal
This appeal involves making people feel that since everyone is buying the product, so they should too. The objective of bandwagon
appeal is to ensure that the customer joins the bandwagon and starts using the product because everybody else is using it. It is
known as persuasion by masses technique
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Fear Appeal
The fear appeal shows that adverse outcomes can happen because a particular action is not taken.
Advertisements often use fear as a motivator to promote change. The fear tactic also involves
isolation. With this technique, many kinds of toothpaste, deodorants, and anti-dandruff shampoos
are advertised. It is shown that if people do not brush with their toothpaste, it will result in bad
hygiene and foul mouth odor, which would lead to social isolation for the person
Humorous Appeal
Some advertisements appeal to a person’s sense of humor. Human beings like to laugh and what
can be a better type of attention-grabbing tool than humor, because humor helps people to
remember a particular product or an idea. The marketing or advertising strategies often try to build
a positive association with their product or service.
Gender Appeal
Gender appeals are used to create an ideal man or woman. It is expected that the target audience
will buy the product; it may be clothing, beauty products, or any other product. Buying that product
will increase the masculine or feminine appeal of the user, and it will make them more attractive or
stronger, which is commonly associated with genders.
Gender appeal is used by the apparel industry as well as the makeup industry. Watches, bikes,
luxury goods, all use gender appeal by showing a stereotypical male or female.
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Music Appeal
Music appeal is used to appeal to the taste of music and the sound of a person. The primary
objective of music Appeal is to encourage people to feel and emotion and associate their product
after hearing a particular tune, song, or sound.
Microsoft has often used its opening piece of music to relate to Microsoft products. Windows XP
had a famous theme when the product turned on, and any Microsoft product is recognized because
of this tune.
Social Appeal
Social appeal strategies target the sense of belongingness in the people. The need for inclusion Is
present in every human being, and that is explored in social appeal. This strategy appeals to people
that, when they buy the product or use their service or take action as directed, it would make them
feel respected, recognized and accepted, or even affiliated with society or a particular group of
people
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Scarcity Appeal
This marketing strategy appeals to the customers that something will
run out of stock or exhaust soon, which is why they should purchase
the product or take action immediately. The primary objective of this
appeal is to make people hurry to choose the desired effect. Special
offers and discounts or sales are often with the aim of scarcity appeal.
Limited stocks, sale till stocks available are few of the terms which are
used to motivate the buyer to purchase the product or service
immediately. Special offers and discounts or deals are often with the
objective of scarcity appeals.
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Global Advertising Content: Standardization Versus Adaptation
• Standardization
• Companies can either adopt the same promotion strategy they used in the
home market or change it for each local market. Some global companies
use a standardized advertising theme around the world. For example, IBM
runs virtually identical ads in dozens of countries around the world. Of
course, even in highly standardized promotion campaigns, some small
change might be required to adjust for language and minor cultural
differences. Colours also are changed sometimes to avoid taboos in some
countries. Purple is associated with death in most of Latin America. White
is bridal dress of Christians but in Japan and India it is a mourning colour.
Green is considered favorite of Muslims but it is associated with jungle
sickness in Malaysia.
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Characteristic of Standardisation
The following arguments support standardization
(i) Standardized advertising lowers the costs of value creation by spreading the
fixed costs of developing the advertisements over many countries. For example
Levi-Strauss paid an ad agency $550000 to produce a series of TV commercials. By
reusing these ads in many countries, the company saved lot of money.
(ii) There is the concern that creative talent is scarce and so one large effort to
develop a campaign will produce better results than 40 or 50 smaller efforts.
(iii) Many brand names are global and with the substantial amount of international
travel today and the considerable overlap in media across national borders, many
international firms want to project a single brand image to avoid confusion caused
by local campaigns
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Adaptation
Some companies follow a strategy of communication adaptation, fully adapting their
advertising messages to local markets. Kellogg’s ads in USA promote the taste and nutrition
of its cereals whereas in India, where many consumers eat heavy, fried breakfast, it
convinces the buyers to switch to a lighter, more nutritious breakfast diet.
Media also need to be adapted internationally because media availability varies from
country to country. TV advertising time is very limited in Europe, ranging from 4 hours a
day in France to none in Scandinavian countries. Advertisers must buy time months
in advance and they have little control over airtimes. Magazines also vary in effectiveness.
For example, magazines are a major medium in Italy and a minor one in Austria.
Characteristic and Advantages of Adoption
(i) Cultural differences between nations force adaptation in advertising and other
promotions. A message that works in one nation can fail miserably in another. Due to
cultural diversity, it is extremely difficult to develop a single advertising theme that is
effective worldwide.
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(ii) Advertising regulations may also block implementation of standardized
advertising. For example, Kellogg could not use a TV commercial it produced
in UK to promote its cornflakes in many
other European countries. A reference to the iron and vitamin content of its
cornflakes was not permissible in the Netherlands, where claims relating to
health and medical benefits are outlawed.
A child wearing a Kellogg T-shirt had to be edited out of the commercial
before it could be used in France, because French law forbids the use of
children in product endorsements. The key line, “Kellogg’s makes their
cornflakes the best they have ever been”, was disallowed in Germany
because of a prohibition against use of superlative degrees in ads.
(iii) Consumer response patterns are also not homogeneous among different
markets. If the difference is more among various classes and segments in a
market then responses to add will also vary.
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iv) If the desired media are not available in a market, a standardized
message is not transmittable. In some countries certain kinds of mass
media does not exist, like TV does not exist in Guyana.
Some companies are experimenting with capturing some benefits of
global standardization while recognizing differences in countries’
cultural and legal environments. A firm may select some features to
include in all its advertising campaigns and localize other features. By
doing so, they may be able to save on some costs and build
international brand recognition and yet customize its advertisements to
different cultures.
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Creating Global Advertising
`The following are the important factors for creating a global advertising
a) Message: The message is at the heart of advertising. The particular message and the
way it is presented will depend on the advertiser’s objective. Is the ad designed to inform,
entertain, remind, or persuade? Moreover, in a world characterized by information
overload, ads must break through the clutter, grab the audience’s attention, and linger in
their minds. This requires developing an original and effective creative strategy to generate
a big idea. The Big Idea is easier to illustrate than define, and easier to illustrate by what it
is not than by what it is.
b) The advertising appeal is the communications approach that relates to the motives of
the target audience. For example, ads based on a rational appeal depend on logic and
speak to the audience’s intellect. Rational appeals are based on consumers’ needs for
information. Ads using an emotional appeal may tug at the heartstrings or tickle the funny
bone of the intended audience and evoke a feeling response that will direct purchase
behavior. For example, a recent global campaign for IKEA, the Swedish home furnishings
retailer, positioned houses as homes: “It’s a place for love . . . a place for memories . . . a
place for laughter. Home is the most important place in the world
c) The selling proposition is the promise or claim that captures the reason for buying the
product or the benefit that ownership confers. Because products are frequently at different
stages in their life cycle in various national markets
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d) The way an appeal or proposition is presented is called the creative execution. In
other words, there can be differences between what one says and how one says it.
Ad agency personnel can choose from a variety of executions, including straight
sell,scientific evidence, demonstration, comparison, testimonial, slice of life,
animation, fantasy, and dramatization. The responsibility for deciding on the
appeal, the selling proposition, and the appropriate execution lies with creatives, a
term that applies to art directors and copywriters.
e) The visual presentation of an advertisement—the “body language”—is a matter
of art direction.The individual with general responsibility for the overall look of an
ad is known as an art director. This person chooses graphics, pictures, type styles,
and other visual elements that appear in an ad.
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f) The words that are the spoken or written communication elements in
advertisements are known as copy. Copywriters are language specialists who
develop the headlines, subheads, and bodycopy used in print advertising and
the scripts containing the words that are delivered by spokespeople, actors,
or hired voice talents in broadcast ads.
As a general rule, copy should be relatively short and avoid slang or idioms.
Languages vary in terms of the number of words required to convey a given
message; thus the increased use of pictures and illustrations. Some global
ads feature visual appeals that convey a specific message with minimal use
of copy
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Characteristic or Importance & Function of Public Relation
Public Relations (PR) is the department or function responsible for
evaluating public opinion about, and attitudes toward, the organization
and its products and brands.
Public relations personnel also are responsible for fostering goodwill,
understanding, and acceptance among a company’s various
constituents and publics
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• Public relations include a variety of programmes designed to improve, maintain, or project a
company or product image.An important form of public relations is getting positive news and
reports about the product or company released through media. This is of particular significance to
new products.
• Like advertising, public relations is one of the four variables in the promotion mix. One of the
tasks of the PR practitioner is to generate favorable publicity.
• By definition, publicity is communication about a company or product for which the company
does not pay.
• The Tools that are generally used under Public Relations can be News releases, Media kits, Press
conferences Public relations professionals who are responsible for international business
operations should serve as more than a company mouthpiece.
• They should be able to simultaneously build consensus and understanding, create trust and
harmony, articulate and influence public opinion, anticipate conflicts, and resolve disputes.
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As companies become more involved in global marketing and the
globalization of industries continues, company management must
recognize the value of international public relations. Public relations
practices can be affected by:
_ Cultural traditions
_ Social and political contexts
_ Economic environment
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Direct Marketing: Although direct marketing has several forms – direct mail,
telemarketing, electronic marketing,and so on.
Direct marketing is a promotional method that involves presenting
information about your company, product, or service to your target
customer without the use of an advertising middleman. It is a targeted form
of marketing that presents information of potential interest to a consumer
that has been determined to be a likely buyer. – it has a few distinctive
characteristics:
Non-public: The message is normally addressed to a specific person and does
not reach others.
Customized: The message can be customized to appeal to the addressed
individual.
Up-to-date: A message can be prepared very quickly for delivery to an
individual
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Common forms or Types of direct marketing include
• Brochures
• Catalogs
• Fliers
• Newsletters
• Post cards
• Coupons
• Emails
• Targeted online display ads
• Phone calls
• Text messages
Unit-4
Advantages of Direct Marketing
• Targeting
• Database segmentation
• Tracking responses
• Targeted advertising
• Budget marketing
• Boosts sales to existing and lapsed customers
• Improves customer loyalty
• Helps in pushing new business
• Allows to measure product performance
Unit-4
Definition:Personal Selling
As Stanton says, “personal selling is the personal communication of information
to persuade prospective customer to buy something — a product, service, idea
or something else.
This is in contrast to the mass, impersonal communication of advertising, sales
promotion and other promotional tools.”
Unit-4
Ways of Personal Selling
1. Meeting the Prospects in the Foreign Markets
a) Company’s Travelling Salesmen Attached to the Headquarters
(b) Company’s Salesmen Attached to the Company’s Office in the
Foreign Market
(c) People Temporarily Hired:
Unit-4
2. Meeting Prospects at Trade Fairs and Exhibitions
Trade fairs and exhibitions are regarded as very effective method of export promotion
because they enable a firm to meet many prospective customers at one place without
incurring much expenditure. There are broadly two categories of fairs and exhibitions.
(a) International fairs/exhibitions held in India, like the Indian Seafood Trade Fair held every
alternate year in India which attracts a large number of foreign customers from different
countries.
(b) International fairs/exhibitions held in foreign countries like the Anuga Food Fair at
Cologne, Hannover Engineering Fair etc., which attract very large number of prospective
customers from a number of countries.
3. Visiting Foreign Buyers
Many foreign buyers visit India and other sources of supply of the goods they are
interested in. Sometimes, such visits are at the initiative of the foreign buyer who wants to
understand well the supply conditions and to enlarge his sourcing. Sometimes, foreign
buyers visit at the invitation of the exporter. Export promotion organisations like ITO, EPCs
etc., may also arrange buyer-seller meets. An exporter may seize such opportunities to
meet the visiting foreign buyers
Unit-4
II. MANAGEMENT OF SALES FORCE
• Management of sales force encompasses various steps from selection
of the sales force to evaluation of their performance.
Selection
Induction and
Training
Supervising
Compensating
and Motivating
Evaluation and
Control
Unit-4
III. PERSONAL SELLING PROCESS
These 5Ps are the following
Pre-sale
Preparation
Prospecting
Preapproach
Presentation
Post-sale
Activities
Unit-4
TRADE FAIRS AND EXHIBITIONS
Trade fairs and exhibitions, by bringing potential buyers and suppliers in contact
and imparting information about the relevant development around the world, play
an important role in international marketing. In certain cases, they have a special
significance.
For example, in Libiya, where media advertisement for products is not permitted,
the annual Tripoli International Trade Fair is very important means to promote
business. Friendly countries are also permitted to hold single country/single
product =exhibition and trade fair.
A trade fair, as its name implies, is target directed. It is staged for the purpose of
selling goods or demonstrating new ideas and techniques. An exhibition, on the
other hand, is not specifically for trade but for the public.
There are two type fairs, viz.,
(i) General fairs, also known as horizontal fairs; and
(ii) Specialised fairs, also known as vertical fairs and solo fairs.
Unit-4
General Fair
At a general fair, the goods displayed cover many different fields.
The general fairs attract visitors of all ages, tastes and types and, therefore, is
a good place to show consumer goods or new products that needs to be
seen and accepted.
National pavilions are often built for general fairs and in them the
government organises an exhibition that gives the visitors a good idea of
country’s industry, agriculture, way of life and tourist attraction as well as
products it wishes to sell abroad. In other words, the purpose is largely to
build up an image of the country in the public mind.
Unit-4
Specialised Fair
A specialised fair concentrates on products of a particular industry or group of industries.
Within that industry or group, a large number of products may be on display.
If the product that an exporter, actual or potential, wishes to display is one that interests a
specific group of buyers and especially if it is technical in nature, the specialised fair is
probably the better choice.
Many prefer the specialised fair because it is not open to general public (or open only at
specific times) and people who come have both an interest and some knowledge of the
product.
There are many well-known international trade fairs held at regular intervals like the Anuga
Food Fair at Cologne, Hannover Engineering Fair, Sport Goods Fair held in USA etc.
Unit-5
Unit-5
EXPORT PROMOTION
Export development is important to the firm and to
the economy as a whole.
Government measures aim, normally at the general
improvement of the export performance of the
nation for the general benefit of the economy.
Such measures help exporting firms in several ways.
Unit-5
i)The Ministry of Commerce, Government of India, is the
most important organ concerned with the promotion and
regulation of the foreign trade of the country Matters
related to foreign trade are dealt with by eight divisions in
the Department of Commerce, namely, (i) Administrative
and General Division, (ii) Finance Division, (iii) Economic
Division, (iv) Trade Policy Division, (v) Foreign Trade
Territorial Division, (vi) Exports Products Division, (vii)
Services Division, and (viii) Industries Division
Unit-5
Other Autonomous Bodies
1. Commodity Boards: There are five statutory Commodity Boards responsible for production, development
and export of tea, coffee, rubber, spices and tobacco.
2. Export Inspection Council: The Export Inspection Council, a statutory body, is responsible for the
enforcement of quality control and compulsory pre-shipment inspection of various exportable commodities.
3. Indian Institute of Foreign Trade: The Indian Institute of Foreign Trade, registered under the Societies
Registration Act, is engaged in the following activities.
(i) Training of personnel in modern techniques of international trade;
(ii) Organisation of research in problems of foreign trade;
(iii) Organisation of marketing research, area surveys, commodity surveys and market surveys
Unit-5
4. Indian Institute of Packaging: The Indian Institute of Packaging is registered under the Societies
Registration Act. The main aims of the Institute are to undertake research on raw materials for the
packaging industry, to organise training programmes on packaging technology, to stimulate consciousness
of the need for goods packaging technology,etc.
5. Export Promotion Councils: There are a number of Export Promotion Councils under the administrative
control of Ministry of Commerce. These Councils are registered as non-profit organisations under the
Companies Act. The Councils perform both advisory and executive functions
6. Federation of Indian Export Organisations: The Federation of Indian Export Organisations is an apex
body of various export promotion organisations and institutions
7. Indian Council of Arbitration: The Indian Council of Arbitration, set up under the Societies Registration
Act, promotes arbitration as a means of settling commercial disputes and popularizes arbitration among
the traders, particularly those engaged in international trade
Unit-5
8. Marine Products Export Development Authority: The Marine Products Export Development Authority (MPEDA) is responsible for
development of the marine products industry with special reference to exports.
9. Agricultural and Processed Food Products Export Development Authority (APEDA): The Agricultural and Processed Food
Products Export Development Authority, set up in 1986, serves as the focal point for agricultural exports, particularly the marketing
of processed foods in value added forms.
10. India Trade Promotion Organisation: The ITPO was bought into being in 1992 by merging together the erstwhile Trade Fair
Authority of India (TFAI) and the erstwhile Trade Development
Authority of India (TDA). The functions of the ITPO are to:
1. Develop and promote exports, imports and upgrade technology through fairs in India andabroad
2. Compile and disseminate trade related information
3. Undertake publicity through the print and electronic media
Unit-5
Balance of Payments is the systematic summary of the economic
transactions of the residents of a country with the rest of the world during a
specified time period, normally a year.
Features of Balance of Payments
1. Economic Transactions
i. Movement of goods in the form of Exports and Imports
ii. Rendering of services abroad and using foreign services
iii. Gifts/Grants from one country to another
iv. Investments made abroad or received from abroad
v. Income on investments received from abroad or remitted abroad
vi. Increase or decrease in the international reserves of the country
Unit-5
2. Residents with Non-residents
Residents mean individuals, institutions, corporate bodies and
government departments
3. Flow statement
A BoP is the flow of economic transactions and not a statement
of the position as on a date. (Changing position)
4. Periodicity
One year
Unit-5
Balance of Payments
Current Account (Deficit)
1. Trade Account (Export and Import of Only Visible Goods) (Deficit)
Export is maximum - Surplus
Import is maximum - Deficit
2. Invisible Account (no physical goods but Service)
Non Factor Income
BPO, Service Industries (Foreign exchange comes in) (Surplus)
Investment Income (Deficit)
Transfer (remittance) (Surplus)
Capital Account (Surplus)
1. Foreign Investment (Surplus) FDI (Share capital 51% is by Foreign Company) and FPI
2. External Assistant (IMF, WTO – gives loans at minimum interest) Interest rate is less than the Market rate
3. External Commercial Borrowing – Interest rate is equal to Market rate
4. NRI Investment (Opening an account in SBI by NRI - Investment) (Surplus)
Unit-5
1. Balance of Trade
Balance of Trade = Value of Export of Goods – Value of Import of Goods (Visible)
The Balance of Trade could be Favourable (Trade Surplus) Value of Export > Value of Import
The Balance of Trade could be Unfavourable (Trade Deficit) Value of Import > Value of Export
2. Current Account Position
Transactions in Services (Invisible) relate to payment and receipt for services such as
Shipping, Insurance, Travel, Tourism, Transfer of Interest, Migrant remittances, Interest and Dividend
payments etc
Current Account Position = Balance of Trade + Receipts for Services – Payments for Services
Balance of Trade and Current Account Position cover Current Account Transactions
Unit-5
Capital Account Transactions
There are capital transactions in the form of receipts and
payments due to transfer of funds, creation of assets, extension of
credits, loans and investments etc
3. Balance of Payment
Balance of Payment = Current Account Position + Capital Receipts –
Capital Payments
Unit-5
EXPORT
INCENTIVES
• Export incentives are a widely
employed strategy of export
promotion.
• The main aim of these
incentives is to increase the
profitability of export business.
Important export incentives in
India include rebate of duties,
cash compensatory support,
income tax concession, interest
subsidies, freight subsidy etc. It
has been common to describe
these as incentives.
Unit-5
1) Duty Exemption/Drawback
The scheme of duty exemption is designed to avoid the incidence of commodity taxes like excise duty and
customs duties on the exports so as to make the exports more price competitive. “This is a worldwide practice
and the rationale is straight forward.
2) Income Tax Concession
Besides the exemption/rebate of indirect taxes, a special fiscal treatment granted to exports is the income tax
concession according to which earnings from exports are either partially exempted from income tax, or taxed
at a lower rate
Other Incentives
3) The Cash Compensatory Support (CCS) was a cash subsidy scheme designed to compensate the exporters
for unrebated indirect taxes and to provide resources for product/market development.
4) System of Import Replenishment (REP) licenses, which were related to the f.o.b. value of exports. The REP
was, for the most part, a facility insofar as it enabled exporters to import inputs where the domestic
substitutes were not adequate in terms of price, quality or delivery rates
Unit-5
5) The International Price Reimbursement Scheme (IPRS) was
designed to make available specified inputs to exporters at
international prices. The scheme which was initially available to steel
was later extended to aluminium also and there was a proposal to
extend to other items.
6) Awards are given on the basis of certain specified criteria such as
development of market for products which has not been exported
previously, substantial increase in exports, successful introduction of
new products, product development, successful breakthrough in
foreign markets where conditions have been especially difficult etc
Unit-5
Export Procedure
In Export there are two parties involved one is Buyer or client and
Seller or Exporter. The buyer and seller may be individual or companies.
Export procedures involves series of steps from enquiry,confirming the
order, payment terms ,shipment and dispatching the goods to client in
a agreed conditions.
This includes series of steps which are as follows.
Unit-5
This includes series of steps which are as follows.
1) Enquiry
2) Quotation
3) Order Receipt and Acceptance
4) Finance, Production and Packing
5) Excise Clearance
6) Export Documents
7) Cargo Insurance and Shipping Space Reservation
8) Customs Clearance
Unit-5
9) Preventive Officer
10) Mate’s Receipt’
11) Receipt of Shipment Documents from C&F Agent
12) Shipment Advice to Buyer
13) Presentation of Shipment Documents to the Negotiating Bank
14) Presentation of Documents for Payment to Foreign Bank by the Negotiating Bank
15) Export Incentives
Unit-5
Major Documents Needed in Export
Some of the major documents in international business are discussed
in following sub-sections
1) Documents for Transportation of Goods
The following documents are connected with the transportation of
goods
• Airway bill/air consignment note
• Bill of lading
• Mate receipt
Unit-5
2) Document for Customs Clearance of Goods
Shipping bill is the main document required by the customs authorities
for allowing shipment
• Shipping Bill
• Commercial invoice
• Consular invoice
• Customs invoice
• Certified invoice
• Bill of exchange
Unit-5
• Proforma invoice
• Packing list
• Letter of credit
• Marine insurance
• Certificate of inspection
• Certificate of origin
• Generalised System of Preferences (GSP
• Certificate of chemical analysis
158

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International marketing

  • 1. Prepared By Manoj Kumar.T B.Tech,MBA,NET Assistant Professor
  • 4. Unit-1 Definition: International Marketing According to American Marketing Association (AMA), international marketing is the multinational process of planning and executing the conception, pricing, promotion, and distribution of ideal goods and services to create exchanges that satisfy individual and organisational objectives
  • 6. Unit-1` Motives or Reasons of International Marketing There are numerous reasons why to proceed internationally, however the objective of every company for going international is to expend its business, searching new market and expend its customer base. The factors motivate or provoke firms to go international may be broadly divided into proactive reasons and reactive reasons Reactive Reasons i) Competition II) Governmental Reasons iii) Economic & Political Changes iv) Strategic Vision Proactive Reasons i) Growth and Profitability ii) Sales Expansion iii) Market Opportunities iv) Risk diversification
  • 7. Unit-1 • Management Orientation The form and substance of a company’s response to global business opportunities depend greatly on management’s assumptions or beliefs – both conscious and unconscious – about the nature ofthe world. The worldview of a company’s personnel can be described as ethnocentric, polycentric, regiocentric and geocentric. Management at a company with a prevailing ethnocentric orientation may consciously make a decision to move in the direction of geocentricism. The orientations collectively known as the EPRG framework
  • 8. Unit-1 (i) Ethnocentric A person who assumes his or her home country is superior compared to the rest of the world issaid to have an ethnocentric orientation. The ethnocentric orientation means company personnel see only similarities in markets and assume the products and practices that succeed in the homecountry will, due to their demonstrated superiority, be successful anywhere. At some companies, the ethnocentric orientation means the opportunities outside the home country are ignored. (ii) Polycentric • In contrast, polycentric organizations or managers see each country as unique, and consider that businesses are best run locally. Polycentric management means that the head office places little control on the activities in each market, and there is little attempt to make use of any good ideas or best practices from other markets (iii) Regiocentric • A regiocentric organization sees similarities and differences in a world region, and designs strategies around this.In regiocentric approach, the firm accepts a regional marketing policy covering a group of countries which have comparable market characteristics such as economic, cultural or political similarities and formulates operational strategies based on region instead of countries.
  • 9. Unit-1 (iv)Geocentric Geocentric companies, as truly global players, view the world as a potential market, and seek to serve this effectively. Geocentric management can recognize the similarities and differences between the home country and the international markets. It combines ethnocentric and polycentric views; in other words, it displays the “think global, act local” ideology.
  • 10. Unit-1 • International Marketing environment It refers to all those internal (firm related) and external (market related) forces which are relevant to marketing strategy formulation. These factors can be classified into (1) Controllable factors(2) Uncontrollable factors. The controllable factors refer to those variables which are under the control of company’s management. It includes the control and design of elements of marketing mix. The Company is in a position to control and design product, price, place and promotion. All marketing activities relating to these factors can be well controlled and managed by the company’s management
  • 12. Unit-1 Transitional Stages in International Market • A firm which is entirely domestic in its activities normally passes through different stages of internationalization before it truly becomes a global one. In short in many firms overseas business initially starts with the low degree of commitment or involvement; but they gradually develop a global outlook and embark upon overseas business in a big way Domestic Company Domestic Company International Company Multinational Company Global Company Transnational Company
  • 13. Benefits of International Marketing Endurance: _ Progress of overseas markets _ Sales promotion _ Diversification Inflation and wholesale price index _ Employment and placements: _ Standard of living/style: _ Marketing process: Unit-1
  • 14. Unit-1 INTERNATIONAL MARKETING DECISIONS or REQUIREMENTS OF GLOBAL MARKETING PLAN • A firm which plans to go international has to make a series of strategic decisions. They are broadly the following
  • 15. i) International Business Decision: The first decision a company has to make, of course, is whether to take up international business or not. This decision is based on a serious consideration of a number of important factors, such as the present and future overseas opportunities, present and future domestic market opportunities, the resources of the company (particularly skill, experience, production and marketing capabilities and finance), company objectives, etc. (ii) Market Selection Decision: Once it has been decided to go international, the next important step is the selection of the most appropriate market. For this purpose, a thorough analysis of the potentials of the various overseas markets and their respective marketing environments is essential. Company resources and objectives may not permit a company to do business in all the overseas markets. (iii) Entry and Operating Decisions: Once the market selection decision has been made, the next important task is to determine the appropriate mode of entering the foreign market (iv) Marketing Mix Decision: The foreign market is characterised by a number of uncontrollable variables. The marketing mix consists of internal factors which are controllable. The success of international marketing, therefore, depends to a large extent on the appropriateness of the marketing mix. The elements of the marketing mix — product, promotion, price and physical distribution — should be suitably designed so that they may be adapted to the characteristics of the overseas market. (v) International Organisation Decision: A company which wants to do direct exporting has also to decide about its organisational structure, so that the exporting function may be properly performed. This decision should necessarily be based on a careful consideration of such factors asthe expected volume of export business, the nature of the overseas market, the nature of the product, the size and resources of the company, and the length of its export experience. The nature of the organisation structure of the company will depend on a number of factors like its international orientation, nature of business, size of business, future plans etc. Unit-1
  • 16. 1. Globalisation of supply chain and operations management 2. International investments 3. Information surge and consumer choice 4. World growth 5. Domination of the world economy 6. Trade cycle decision rule. 7. Pervasiveness of free markets 8. Accelerating growth of global markets. 9. The rise of the Internet and information technology Unit-1 FUTURE OF INTERNATIONAL MARKETING
  • 17. Unit-1 Determination of Marketing Objective Determination parameters for market selection Preliminary screening Detailed Investigation and Shortlisting Evaluation and Selection MARKET SELECTION PROCESS or Identifying the market Opportunities The important steps involved in the market selection process are.
  • 20. Unit-1 Market Related Factors There are a number of market related factors which need to be carefully evaluated for market selection. The market related factors may be broadly grouped into general factors and specific factors. General Factors Economic Factors (ii) Economic Policy (iii) Business Regulations (iv) Currency Stability (v) Political Factors (vi) Ethnic Factors: (vii) Infrastructure: (viii) Bureaucracy and Procedures: (ix) Market Hub:
  • 21. Unit-1 Specific Factors Besides the general factors, there are a number of factors specific to the industry which need to be analysed for evaluating the market. Important specific factors are: (i) Trends in domestic production and consumption and estimates for the future of the product(s) concerned. (ii) Trends in imports and exports and estimates for the future. (iii) Nature of competition. (iv) Government policy and regulations pertaining to the industry. (v) Infrastructure relevant to the industry.
  • 23. Unit-2 International Marketing Entry –Modes of Entry Various modes used for taking entry in international markets constitute scope of international marketing. These modes are 1. Direct Export 2. FDI 3. Mergers & Acquisition 4.Contract 5.Counter Trade 6.Franchising and Licensing 7. Joint Ventures 8. Strategic Alliance
  • 24. Unit-2 Exporting Exporting is the essence of international marketing. Initially, a domestic business unit starts its international business by exporting to one nation. Exporting is the appropriate strategy when one or more of the following conditions prevail: 1. The volume of foreign business is not large enough to justify production in the foreign market. 2. Cost of production in the foreign market is high 3. The foreign market is characterised by production bottlenecks like infrastructural problems, problems with materials supplies etc. 4. There are political or other risks of investment in the foreign country. 5. The company has no permanent interest in the foreign market concerned or that there is no guarantee of the market available for a long period.
  • 25. Unit-2 Licensing and Franchising Licensor (allows to use) Licensee (patents, trademarks, copyrights, etc) Technical Factors Royalty Ex: The US multinational General Electric (GE) has licensed its patented technology to a small scale unit in India, established for the manufacture of high intensity discharge (HID) fittings Nike,the world’s largest sports shoe and apparel company, finally decided in 1995 to enter the Indian market by licensing
  • 26. Unit-2 Franchising • Franchiser (Grants right) • Franchisee • Brand Name, logo, Store layout, Mode of operation etc The major forms of franchising are manufacturer-retailer systems (such as automobile dealership),manufacturer-wholesaler systems (such as soft drink companies), and service firm-retailer systems Example, McDonald provides its brand name, logo, store-layout, method of operation, etc. to its franchisee stores. The franchisees have their own stores but they sell the products under the brand name of franchiser.
  • 27. Unit-2 MERGERS AND ACQUISITIONS • Mergers and acquisitions (M&A) have been a very important market entry strategy as well as expansion strategy. As one of the most difficult areas in international marketing is the distribution, this is often a very important consideration for M&A. Mergers and acquisitions provides instant access to markets and distribution network. M&A addresses the challenges of starting a ‘greenfield’ operation in another country by building a new factory and hiring the people needed. • Another important objective of M&A is to obtain access to new technology or a patent right.M&A also has the advantage of reducing the competition. • Mergers and acquisitions may also give rise to some problems which arise mostly because of the deficiencies of the evaluation of the case for acquisition. Sometimes, the cost of acquisition may be unrealistically high • Ex :The General Electric (GE), USA, took over Hungary’s light bulb maker Tungsram.
  • 28. Unit-2 Strategic Alliance This strategy seeks to enhance the long-term competitive advantage of the firm by forming alliance with its competitor in existing or potential critical areas. Instead of competing with each other. “The goals are to leverage critical capabilities, increase the `flow of innovation and increase flexibility in responding to market and technological changes Ex :Tata Tea has entered into an alliance with Tetley so that the marketing expertise of Tetley is available to market tea abroad
  • 29. Unit-2 Advantages of Strategic Alliances 1) Spread and Reduce Costs 2) Specialize in Competencies 3) Avoid or Counter Competition 4) Secure Vertical and Horizontal Links
  • 30. Unit-2 5) Gain Location-Specific Assets 6) Overcome Governmental Constraints 7) Diversify Geographically 8) Minimize Exposure in Risky Environments:
  • 31. Unit-2 COUNTERTRADE Countertrade is a form of international trade in which certain export and import transactions are directly linked with each other and in which import of goods are paid for by export of goods, instead of money payments. Forms of Countertrade Barter Buyback Compensation Deal Counter purchase
  • 32. Unit-2 Joint Ventures:. In joint venture, foreign partner makes an arrangement with local unit of other country in which ownership and management are shared between local unit and foreign partner Reasons for joint Venture 1) Cost Savings: 2) Risk Sharing 3) Access to Technology: 4) Expansion of Customer Base: 5) Entry into Emerging Economies: 6) Entry into New Technical Markets:
  • 33. Unit-2 Advantages of Joint Ventures: 1) Joint ventures provide large capital funds. Joint ventures are suitable for major projects. 2) Joint ventures spread the risk between or among partners. 3) Different parties to the joint venture bring different kinds of skills like technical skills, technology, human skills, expertise, marketing skills or marketing networks. 4) Joint ventures make large projects and turn key projects feasible and possible. 5) Joint ventures provide synergy due to combined efforts of varied parties 6) They have more direct participation in the local market and thus gain a better understanding of how it works 7) Companies entering joint ventures are able to exert greater control over the operation of the joint venture.
  • 34. Unit-2 CONTRACT MANUFACTURING • Under contract manufacturing, a company doing international marketing contracts with firms in foreign countries to manufacture or assemble the products while retaining the responsibility of marketing the product. • This is a common practice in international business. There are a number of multinationals and affiliates of multinationals which employ this strategy in India in respect of some of the products they market, like Park Davis, Hindustan Lever, etc. • For example, Godrej soaps manufactured Dettol for Reckitt and Coleman; Clearton for Nicholas Laboratories; Johnson’s Baby Soap for Johnson and Johnson
  • 35. Unit-2 Advantages of Contract manufacturing : 1. The company does not have to commit resource for setting up production facilities. 2. It frees the company from the risks of investing in foreign countries. 3. If idle production capacity is readily available in the foreign country, it enables the marketer to get started immediately. 4. In many cases, the cost of the product obtained by contract manufacturing is lower than if it were manufactured by the international firm.
  • 36. Unit-1 Management Contract A management contract is an arrangement under which operational control of an enterprise is vested by contract in a separate enterprise that performs the necessary managerial functions in return for a fee. Management contracts involve not just selling a method of doing things (as with franchising or licensing) but involve actually doing them. A management contract can involve a wide range of functions, such as technical operation and of a production facility, management of personnel, accounting, marketing services and training They can provide organisational skills not available locally, expertise that is immediately available rather than built up, and management assistance in the form of support services that would be difficult and costly to replicate locally Recent examples of management contracts can be found in industries like hotels (e.g. Accor or Marriott), hospitals, airports, seaports and public utilities. Tata Tea, Harrisons Malayalam and AVT — have contracts to manage a number of plantations in Sri Lanka
  • 37. Unit-2 TurnKey Operations • Turnkey contracts are common in international business in the supply, erection and commissioning of plants, as in the case of oil refineries, steel mills, cement and fertiliser plants etc.; construction projects and franchising agreements. • “A turnkey operation 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. • Many turnkey contracts involve government/public sector as buyer (or seller in some cases). • A turnkey contractor may subcontract different phases/parts of the project
  • 38. Unit-2 Foreign Direct Investment A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. FDI is characterized by a notion of direct control and is not simply the transfer of monetary funds. The direct investment made to create the buildings, machinery, and equipment is not in sync with making a portfolio investment.
  • 39. Unit-2 • Horizontal − In case of horizontal FDI, the company does all the same activities abroad as at home. For example, Toyota assembles motor cars in Japan and the UK. • Vertical − In vertical assignments, different types of activities are carried out abroad. In case of forward vertical FDI, the FDI brings the company nearer to a market (for example, Toyota buying a car distributorship in America). In case of backward Vertical FDI, the international integration goes back towards raw materials (for example, Toyota getting majority stake in a tyre manufacturer or a rubber plantation). • Conglomerate − In this type of investment, the investment is made to acquire an unrelated business abroad. It is the most surprising form of FDI, as it requires overcoming two barriers simultaneously – one, entering a foreign country and two, working in a new industry.
  • 40. Unit-2 International marketing research-Definition International marketing research is a complete analysis of the market, information regarding the nature, size, organisation, profitability of different markets, changes in the market and various factors — economic, social and political — affecting those changes. The following activities are included in international market research: 1. Analysis of the market size according to age, sex, income, profession and standard of living of customers. 2. Estimating the regional or territorial demand of different markets. 3. Collecting information about the existing and prospective customers of the company’s products and their attributes and various competitors’ share in the market. 4. Studying the market changes and conditions affecting market changes such as customers’ preferences, shift in brand loyalty and so on. 5. Analyzing the working of various channels of distribution and their role in creating market demand of the product. 6. Forecasting the profitability of different markets and marketing segme
  • 42. Unit-2 SOURCES OF MARKET INFORMATION There are broadly two sources of information, viz., internal sources and external sources. Internal sources include sales and cost records, accumulated knowledge of the company personnel and any other data available with the company. Experienced companies may have a great deal of available information internally, but companies new to international business may have to rely much on external sources. External sources include sources of both primary and secondary data. A company will have to collect primary data when secondary data are not available, not adequate, or reliable.
  • 43. Unit-2 GENEARL SOURCES OF INFORMATION 1.Environmental scanning is a vital source of information. Environmental scanning meaning is the gathering of information from an organizations internal and external environment, and careful monitoring of these environments to identify future threats and opportunities 2.Personal sources. A great deal of external information comes from executives based abroad in company subsidiaries, affiliates, and branches 3. Direct sensory perception provides a vital background for the information that comes from human and documentary sources. Direct perception gets all the senses involved
  • 44. Unit-2 Organisation within India • India Trade Promotion Organisation (ITPO), State Trading Corporations Chambers of Commerce, Confederation of Indian Industry (CII), and Export Promotion Councils ,Commodity Boards/Export Development Authorities . Indian Institute of Packaging,Export Inspection Council • Exim Bank • Indian Institute of Foreign Trade, Management Schools/Departments of Universities
  • 45. Unit-2 Organisations Outside India • The International Trade Centre • Offices of the Indian embassies abroad and concerned department • The Japan External Trade Organisation (JETRO • There are also certain international organisations related to specific products (like the Infofish,Kaula Lumpur, for Seafood, for example). • World Bank • The World Trade Organisation (WTO)
  • 48. Unit-2 International marketing research has a broader scope than domestic research: Managers will need additional information to compensate for lack of familiarity with the foreign environment Scope of International Marketing Research Buyer Behaviour Research Product Research Distribution Research Promotion Research Pricing Research Research of Industry, Market Characteristics and Market Trends
  • 49. Unit-2 Characteristic or Nature of International Marketing Research Broader market is available Involves at least two set of uncontrollable variables Requires broader competence Competition is intense Large-scale operation Domination of multinationals and developed countries International restrictions Importance of Advanced Technology Need for specialized institutions Need for long term planning Lengthy & Time Consuming
  • 50. Unit-2 International Marketing Research Process 1 Defining the Research Problem and Research Objectives 2 Developing the Research Plan 3 Identifying Information Sources •Secondary Data •Primary Data 4 Data Collection •The Marketing Sample: 5 Data Evaluation 6 Interpreting the Data 7 Report Preparation
  • 51. Unit-2 PROBLEMS IN INTERNATIONAL RESEARCH 1. The cultural differences make foreign market research a difficult task. 2. It is often very expensive. 3. The research methodology suitable for one market may not be suitable for another market Other Important issues Multiplicity of markets  Problems with secondary data:  Problems in collecting primary data:  Problems of communication  Infrastructure problems
  • 53. Unit-3 Product-Definition Philip Kotler defines a product as anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organisations and ideas
  • 54. Unit-3 Basic Product Concepts • Product Strategy involves the managerial decisions about the product mix and the positioning and communication. • Product Planning, used in a broad sense, involves not only the product strategy described above but also the product development measures. Some people, however, confine the use of the term • product planning to the different aspects and functions of product development and exclude the product strategy. • Product Management refers to the managerial decisions pertaining to product development and the product strategies through the different stages of the product life cycle.
  • 55. Unit-2 Product Decision 1. Market segment decision. 2. Product mix decision. 3. Product specifications. 4. Positioning and communicati ons decisions.
  • 56. Unit-2 Market Segment Decision The first product decision to be made is the market segment decision because all other decisions — product mix decision, product specifications, and positioning and communications decisions — depend upon the target market selection. Product Mix Decision Product mix decision pertains to the type of products and product variants to be offered to the target market. Product Specifications This involves specification of the details of each product item in the product mix. This includes factors like styling, shape, size and other attributes and factors like packaging and labelling. Positioning and Communications Decisions Positioning is the image projected for the product. For example, a toilet soap may be positioned as a baby soap, a beauty soap, a deodorant soap, a freshness soap or a skin-care soap.
  • 57. Unit-3 Product Positioning Positioning, a process whereby a company establishes an image for its product in the minds of consumers relative to the image of competitors’ product offerings. In today’s global market environment, many companies use deifferent global positioning strategies to establish its image among the target customer.
  • 58. Unit-3 Types of Positioning in International Market 1) High Tech Positioning: Such products are frequently purchased on the basis of concrete product features, although image may also be important. Buyers typically already possess or wish to acquire considerable technical information. High-tech products may be divided into three categories: technical products, special-interest products, and demonstrable products. i) Technical Products: Computers, chemicals, tires, and financial services are just a sample of the product categories whose buyers have specialized needs; require a great deal of product information and who share a common “language.” ii) Special-Interest Products While less technical and more leisure or recreation oriented, special-interest products also are characterized by a shared experience and high involvement among users. Again, the common language and symbols associated with such products can transcend language and cultural barriers. Fuji bicycles, Adidas sports equipment, and Canon cameras are examples of successful global special- interest product
  • 59. Unit-3 2) User group • This type of positioning targets a particular group of users and explains why the company’s offerings are directly applicable and relevant to this group. • For instance, Johnson’s vs. Axe. While Johnson’s baby shampoo positions itself as gentle for children, Axe body spray targets men
  • 60. Unit-3 3) Pricing :For example, Gillette vs. Dollar Shave Club. 4) Quality : Example : Chipotle vs. Taco Bell 6) Differentiation : For example, Toyota vs. Tesla. Tesla entered the electric vehicle market with a luxury sports model, rapidly sidestepping economy cars like the Toyota Prius. Tesla actually targeted the high-end market with the Model S.
  • 61. Unit-3 7) Convenience • Convenience creates an easier life for customers. From location to usability, convenience could incorporate something like free returns and E- commerce. • For example, Simple vs. Bank of America 8) Customer service • Customer service emphasizes creating helpful and friendly interactions. This can be especially critical in specific industries, such as restaurants and banking areas. Example, ICICI and AXIS Banks
  • 62. Unit-3 Definition of Product design The term designing the product refers to the determination of shape, standard and pattern of the product. It includes • Specification, • Experimental and development work for the production of desired product, • Calculation of estimates • Issuing necessary instructions to the production department for production
  • 63. Unit-3 CHARACTERISTICS OF A GOOD PRODUCT DESIGN or PRODUCT DESIGN CONSIDERATION A good product design should posses the following characteristics: 1. FUNCTION 2. RELIABILITY 3. MAINTAINABILITY 4. PRODUCIBILITY 5. SIMPLIFICATION
  • 64. 6. PRODUCT STANDARDIZATION AND VARIETY REDUCTION 7. QUALITY 8. MINIMUM COST 9. WARRANTIES 10. MODULAR DESIGN
  • 65. Unit-3 Extend, Adapt, Create: Strategic Alternatives in Global Marketing A company that has developed a successful local product or brand can implement an extension strategy that calls for offering a product virtually unchanged (i.e., “extending” it) in markets outside the home country. This is possible when certain significant factors like consumer tastes, product use conditions etc. are the same in both the home and foreign markets Legal Requirements Ex: Currypowder,Pickel, Sumit Mixie
  • 66. Unit-3 Product Adaptation A second option is an adaptation strategy; this involves changing elements of design, function, or packaging in response to needs or conditions in particular country markets. This can be applied during the following conditions apply: Difference in the consumer tastes, consuming habits etc. Differences in the conditions of use of the product. Differences in the use facility characteristics. Differences in the purpose of use or need satisfaction. Differences in the cultural environment.
  • 67. Unit-3 Differences in the natural environment like geo-physical characteristics, weather/climatic conditions etc. Differences in the regulatory environment. Differences in income levels and standard of living. Differences in the competitive environment.
  • 68. Unit-3 The product invention strategy involves the development of new product suitable for tapping a foreign market, for example, low cost products may have to be developed for low income countries. Inventing Backward Inventing Forward Pure Invention
  • 69. Unit-3 There are four strategic alternatives available to any company seeking to expand from its domestic base into new geographic markets
  • 70. Unit-3 Product Communication Extension Strategy Companies pursuing this strategy sell the same product with virtually no adaptation, using the same advertising and promotional appeals used domestically, in two or more country markets or segments. For this strategy to be effective, the advertiser’s message must be understood across different cultures, including those in emerging markets . EX : Microsoft’s Windows 7 operating system was launched in 2009
  • 71. Unit-3 Product Extension, Communications Adaptation Strategy Under this strategy, the firm markets the same product but employs modified communication about the product in foreign markets When this strategy is employed, the communication appeal used in the foreign markets would be quite different, depending upon the particular product use that is promoted. In effect, the same physical product ends up serving a different function or use from that for which it was originally designed. . This strategy assumes that the product will serve the same function in foreign markets under different use conditions. Ex: Lawn and Gardening machine in U.S.A & Less Developed Country : Sony Bravia in U.S.A and Europe
  • 72. Unit-3 Dual Adoption Strategy The dual adaptation strategy involves a modification of both the product and communication to meet the foreign needs and considerations of the foreign market. This strategy is called for when differences exist in the environmental conditions of use and in the function which a product serves. For example: Unilever’s Rexona deodorant once had 30 different package designs and 48 different formulations. WPP Group’s to J. Walter Thompson ad agency
  • 73. Unit-3 Product Adaptation-Communication Extension • A third approach to global product planning is to adapt the product to local use or preference conditions while extending, with minimal change, the basic home-market communications strategy or brand name. • Ex: Kraft Foods-Oreo-In China
  • 74. Unit-3 The choice of product and communications strategy in international marketing is a function of three key factors: (i) The product itself defined in terms of the function or need it serves; (ii) The market defined in terms of the conditions under which the product is used, including the preferences of potential customers and their ability to buy the products in question; and (iii) The costs of adaptation and manufacture to the company considering these product communications approaches.
  • 75. Stages in the Process of New Product Development • Concept 1: an affordably priced mid-size car designed as a second family car to be used around town for visiting friends and doing shopping. • Concept 2: a mid-priced sporty compact car appealing to young singles and couples. • Concept 3: a high-end midsize utility vehicle appealing to those who like the space SUVs provide but also want an economical car. Concept testing helps companies avoid investing in bad ideas and at the same time helps them catch and keep outstanding product ideas.
  • 76. Unit-3 PRICING OBJECTIVES Price is a strategic marketing tool to achieve certain objective(s). The pricing objective, naturally, is one of the very important determinants of price. A firm’s pricing policy may be guided by any one or more of the following objectives: Financial Objectives Price can be used as a strategic variable to achieve specific financial goals, including return on investment, profit, and rapid recovery of product development costs. When financial criteria such as profit and maintenance of margins are the objectives, the product must be part of a superior value proposition for buyers; price is integral to the total positioning strategy. Non- Financial Objectives Some companies are pursuing nonfinancial objectives with their pricing strategy. Price can be used as a competitive weapon to gain or maintain market position. Market share or other sales based objectives are frequently set by companies that enjoy cost-leadership positions in their industry (i) Market Penetration: Market penetration may be a very important objective, particularly for new exporters. A firm may attempt to penetrate the market with a low price. (ii) Market Share: The price may be manipulated to increase the market share. In many cases, it is a corollary of market penetration. (iii) Market Skimming: This is often the case with innovative products. The product is introduced with a high initial price to skim the cream of the market. The price may be subsequently reduced to achieve greater market penetration. (iv) Fighting Competition: Sometimes, price is a tool to fight competition. A price reduction by the competitor may have to be countered by price cuts. Sometimes, price cuts may be affected to discipline the competitor or to compel the competitor to reduce prices so that his cash flows will be affected.
  • 77. Unit-3 (v) Preventing New Entry: A firm may charge a low price even when there is scope for high price so that the industry does not look very attractive to new entrants. (vi) Shorten Payback Period: When the market is uncertain and risky because of factors like swift technological changes, short product life cycles, political reasons, threat of potential competition etc., recouping the investment as early as possible would be an important objective. (vii) Early Cash Recovery: A firm with liquidity problem might give priority to generate a better cash flow. Hence, it would adopt a pricing that might help it to liquidate the stock and/or encourage prompt payment by the channel members or buyers. (viii) Meeting Export Obligation: A company with specific export obligation may be compelled to adopt a pricing policy that enables it to discharge its export obligation. Sometimes it may even imply a price lower than the cost.
  • 78. Unit-3 (ix) Disposal of Surplus: A company confronted with a surplus stock may resort to exporting to dispose off the surplus. In such cases, exports sometimes takes the form of dumping. (x) Optimum Capacity Utilisation: Exporting is sometimes resorted to enable the firm to achieve optimum capacity utilisation so as to minimize the unit cost of production. In such a case, achieving the required quantity of exports could be the objective of export pricing. (xi) Return on Investment: Achieving the target rate of return is the most important pricing objective in a number of cases. (xii) Profit Maximisation: In many cases, the primary pricing objective is maximisation of profits
  • 79. Unit-3 Pricing Strategies or approaches The export price quotations may not be the same for all markets. Prices may differ from market to market due to various reasons viz. political influence, buying capacity, financial and import facilities, total market turnover and other pricing and non-pricing factors etc. in order to make the local price of the product competitive. The profitability will also be affected to a great extent and may be different in different markets.
  • 80. Unit-3 1. Market Penetration Strategy: Under this strategy, exporters offer a very low introductory price to speed up their sales and, therefore, widening the market base. It aims at capturing the products in the market especially if the quality of the product is proved with its wide acceptance Example: When Sony was developing the Walkman in the late 1970s,it distributed its first 60000 units with a loss of 35$ Advantages
  • 81. Unit-3 2. Cost Based Pricing Cost based pricing, also known as cost plus pricing, is a common method of pricing. Under this method, the price includes a certain percentage of profit margin on the sum total of the full =cost of production, marketing costs and an allocation of the overheads. That is, Price = [fixed costs + variable costs + overheads +marketing costs] + specified percentage of the total costs. Advantages Advantages of the cost plus approach are: (i) It covers all the costs. (ii) It is designed to provide the target rate of margin. (iii) It is, generally, a rational and widely accepted method. (iv) It is an easy to comprehend and simple method.
  • 82. Unit-3 Disadvantages The cost based pricing, however, has several disadvantages: (i) The cost calculations are based on a predetermined level of activity. If the actual level of activity varies from this estimated level, the costs may vary, rendering this method unrealistic. (ii) If the costs of the firm are higher than its competitors, this method would render the firm uncompetitive in relation to price. (iii) Another drawback of the cost plus method is that sometimes the opportunity to charge a high price is foregone. (iv) It ignores the price elasticity of demand. (v) The cost based pricing would not be helpful for some of the objectives or tasks like market penetration, fighting competition etc.
  • 83. Unit-3 3. Skimming Pricing Strategy: Under this strategy, a very high introductory price is fixed to skim the cream of the demand at the very outset. This policy is generally introduced when there is no competition in the market. Such prices continue to be high till competitors enter the foreign market. As soon as competitors enter the market, the exporter reduces the price. Example: when Sony introduced the first consumer VCRs in the 1970s, the retail price exceeded $1,000. The same was true when compact disc players were launched in the early 1980s. Within a few years, prices for these products dropped well below $500
  • 84. Unit-3 Advantages • Price skimming covers the costs of innovation and provides money for product development. • Early-adopters naturally become the word of mouth marketing channels. • It allows you to segment the market and target all at different price levels. Higher Return on Investment. • It Helps Create and Maintain Your Brand Image. • It Segments the Marke
  • 85. Unit-3 Companion Product Pricing The Captive Product Pricing is the pricing strategy adopted by the marketers wherein, the price of the core product is generally kept low, whereas the captive products are highly priced. Example: Companion products pricing has long been the preferred strategy of Vodaphone, AT&T, and other cellular service providers. They buy handsets at prices set by Motorola, Nokia, and other manufacturers, and then subsidize the cost by offering significant discounts on (or even giving away) handsets to subscribers who sign long-term contracts. The carriers make up the price difference by charging additional fees for extras such as roaming, text messaging, and so on.
  • 86. Unit-3 4.Following Competitors pricing strategy Many firms follow the dominant competitors, particularly the price leader, in setting the price. The price leader is the firm which initiates the price trends. The important alternative ways of following the competitor are: (i) Setting the price at the same level as that of the competitor. (ii) Setting the price below that of the competitor. (iii) Pricing higher than that of the competitor’s. The choice of the alternative has to be based on such factors as the comparative quality of the product, the image and reputation of the firm, the uniqueness or similarity of the product etc.
  • 87. Unit-3 Advantages The main advantages of this method are: (i) It is a very simple method. (ii) It follows the main market trend. (iii) It has relevance to the competitive standing of the firm. Disadvantages The major disadvantages and limitations of following the competitors are: (i) If the competitor’s price decisions are unrealistic, the follower will also be going wrong on the price. (ii) The cost factors of the follower may not be similar to that of the competitor’s. (iii) The pricing objective of the firm could be different from that of the competitor’s. (iv) Sometimes the competitor may initiate price change for wrong reasons.
  • 88. Unit-3 Customer Determined Price In a number of cases, the foreign buyer specifies the price at which he is prepared to buy the product. Whether a price quotation given by the buyer will be acceptable to seller or not will depend on factors like his cost structure, conditions of business, objectives etc. Probe Pricing Strategy: Fixing low price for its product may have an adverse effect on the image of the firm and of the product. It may raise doubts in the minds of the buyers about the quality of the product if it is lower than the price of competitors or if it is reduced subsequently. When no information is available on the extent of the competition or the likely preferences of the buyers, sufficiently higher prices may be quoted on the first few offers. No business is really expected to grow except feedback information. Hence, the prices may be adjusted accordingly. Follow the Leader Pricing Strategy: In a competitive world market or where adequate market information is not available, it may be useful to follow the leader in the market comparing its product with that of the leader the exporter may then fix the price of its product. In such cases the price of the product is lower than the leader’s product. However, this price has no rational or scientific base for fixing the price.
  • 89. Unit-3 Differential Trade Margins Strategy: Variation in trade margins may be adopted by the exporter as the pricing strategy in foreign market. This strategy allows various types of discounts on the list price. Quantity discounts encourage procuring huge orders. It may be based on the value or on the quantity purchased or on the size of the package purchase. Special discounts may be allowed while introducing the product. These are given on all the purchases. Seasonal discount aims at shifting the storing function in the channels
  • 90. Unit-3 Transfer pricing or intracompany pricing refers to the pricing of goods transferred from operations or sales units in one country to the company’s unit elsewhere. The appropriate basis for intracompany transfers often depends on the nature of the subsidiaries, the market conditions and government policies and regulations. Some studies show that, in most cases, setting up transfer prices remains the absolute prerogative of the parent company executives regardless of the firm’s nationality.
  • 91. Unit-3 The following strategies are, therefore, often associated with transfer pricing: (i) When goods are shipped to high-tariff countries, minimal transfer prices are quoted to reduce the effect of duty. (ii) To reduce income tax, goods are overpriced when transferred to units in high-tax countries. (iii) When dividend repatriation is curtailed by government policy, income may be taken out in the form of high prices for products or components shipped to units in that country. Companies, thus, tend to manipulate transfer prices to circumvent tax and dividend regulations to maximise their profits
  • 92. Unit-3 The important general objectives of the intracompany pricing system are: (i) To maximise the total profits of the company (ii) To facilitate parent-company control; and (iii) To offer management at all levels, both in the product divisions and in the international divisions, an adequate basis for maintaining, developing, and receiving credit for their own profitability.
  • 93. Unit-4 International Marketing Channel Objectives • Marketing channels exist to create utility for customers. • The major categories of channel utility are place utility (the availability of a product or service in a location that is convenient to a potential customer) • Time utility is to make sure the availability of a product or service when desired by a customer) • Marketing Channels ensures Form utility (the availability of the product processed, prepared, in proper condition and/or ready to use
  • 94. Unit-4 • Marketing channels helps to provide information or information utility which means the availability of answers to questions and general communication about useful product features and benefits. • Because these utilities can be a basic source of competitive advantage and comprise an important element of the firm’s overall value proposition. • Just as with the other elements of the firm’s marketing program, the objective of distribution activities are undertaken to facilitate the exchange between marketers and consumers. • There are two basic functions performed between the manufacturer and the ultimate consumer. The first called the exchange function, involves sales of the product to the various members of the channel of distribution. • The second, the physical distribution function, moves products through the exchange channel, simultaneously with title and ownership
  • 95. Unit-4 Channel Terminology or Types of Foreign Intermediaries Importers Although all the foreign customers who buy directly from the exporter are technically importers, here the term importer refers to one who imports the product in large quantities either as an agent for a foreign buyer or for resale. Such importers include, among others, large import houses and trading houses like the Japanese trading companies mentioned earlier. The importers who buy on their own account may sell the product to the distributors, industrial and other institutional customers, wholesalers etc. Distributors A distributor who buys directly from the exporter and holds large stocks of a product has an exclusive right to sell the product in a particular area or to a particular type of customer. The distributor may resell the product to the wholesalers, retailer or consumers. Wholesalers Although wholesalers often buy from the importers or distributors, there are also wholesalers who buy directly from the exporters.
  • 96. Unit-4 Retailers Large retailers may buy directly from the exporters. Department stores, supermarkets or other types of chain stores are among the most important direct retail buyers. Other retailers may depend on distributors or wholesalers. Multiple Channels In some cases, an exporter may use multiple channels, i.e., more than one channel for a product. For example, an exporter may sell directly to the wholesalers, large retailers and institutional consumers, even while having dustributors. Government Departments In some countries, government departments buy large quantities of certain goods, often on a long- term basis. These are generally essential goods of mass consumption or for use in government departments. State Buying Organisations In some countries, the imports of goods are done by the government organisations, like state trading organisations. This was the case until recently in the centrally planned economies. In India, imports of several commodities are canalised, i.e., only designated government agencies can import these goods.
  • 97. Unit-4 Types of Channel Structure or Types of Intermediaries Distribution channels are systems that link manufacturers to customers. There are two types of channel structure one is for consumer products and the other industrial products are similar, In business-to-consumer marketing (b-to-c or B2C), consumer channels are designed to put products in the hands of people for their own use. By contrast, business-to-business marketing (b-to-b or B2B) involves industrial channels that deliver products to manufacturers or other organizations that use them as inputs in the production process or in day-to- day operations.
  • 98. Business to Consumer Channel Types
  • 100. Unit-4 Factors Influencing Channel Selection The important factors influencing the choice of channel(s) are the following: (i) Product Characteristics: Product characteristics, like unit value, perishability, bulk, degree of product standardization, complexity and service requirements, determine, to some extent, the way the product should be distributed. (ii) Market and Customer Characteristics: Market and customer characteristics, such as the size and location of the market, the number and geographical dispersal of the customers, the frequency of purchase and the typical size of the purchase, customers’ buying habits and susceptibility to different selling methods are important factors to be considered in the choice of the channel. (iii) Middlemen Characteristics: Middlemen differ in their ability and willingness to carry out promotional activities and to push the product. The margin or commission for the middlemen is another important issue. The type of products dealt with by a particular intermediary should also be an important consideration. Further, the marketer may be restricted in his choice of channel by the non-availability of particular middlemen.
  • 101. Unit-4 (iv) Company Characteristics and Objectives: The choice of the channel is also influenced by such factors as the company’s size, financial strength, product mix, past channel experience, overall marketing policies and channel objectives. (v) Competitors’ Characteristics: Like any other marketing decision, the channel decision is influenced by the nature of the competitors. Sometimes, it may be appropriate to adopt a channel policy similar to that of the competitor, but sometimes it may be more profitable to design quite a different channel policy. (vi) Environmental Characteristics: The channel design is also influenced by such environmental factors as the economic situation, social and cultural factors, the physical environment and government policies and regulations
  • 102. Unit-4 INTERNATIONAL LOGISTICS International logistics is defined as “the designing and managing of a system that contracts the flow of materials into, through, and out of the international corporation. It encompasses the total movement concept by covering the entire range of operations concerned with product movement.
  • 103. Unit-4 Components of Logistics Management Logistics management comprises of five major interdependent areas. Fixed Facilities Location: The major consideration is the location of fixed facilities like production and warehousing in such a way as to maximise the total efficiency of the logistics system. Factors like future potentials of the markets, future plans of the company, competitive factors, political stability etc. are also import considerations. Transportation: The modes of transportation, frequency of shipping etc. are determined on consideration of several factors such as the cost, speed, safety, lead time, transit time, type of product, natural environmental factors etc. Inventory Management: The main objective of inventory management is to minimise the cost of the inventory while ensuring smooth supplies. Developments in inventory management by the customers, order processing and in the total logistics system have made inventory management both challenging and efficient.
  • 104. Unit-4 Order Processing: The efficiency of order processing by the client as well as the company have important implications for inventory levels and other aspects of the logistics. Rapid order processing shorten the order cycle and allows for lower safety stocks on the part of the client. Exporters from developing countries like India face the challenge of coping up with such situations. Materials Handling and Warehousing: Materials handling and warehousing are also an important part of the logistics management. The technologies in use in materials handling and transportation may be different in different countries. Differences in natural factors like climatic and weather conditions may also make warehousing requirements varied.
  • 105. Unit-4 Global advertising may be defined as messages whose art, copy, headlines, photographs, taglines, and other elements have been developed expressly for their worldwide suitability. Companies that have used global themes include McDonald’s (“I’m lovin’ it”), IBM (“Solutions for a small planet”)
  • 106. Unit-4 brand equity, which represents the total value that accrues to a product as a result of a company’s cumulative investments in the marketing of the brand. The benefits of strong brand equity include: _ Greater loyalty _ Less vulnerability to marketing actions _ Less vulnerability to marketing crises _ Larger margins _ More inelastic consumer response to price increases _ More elastic consumer response to price decreases _ Increased marketing communicatio
  • 107. Unit-4 Elements of Branding Elements used to express/represent and identify/differentiate the brand. The consistent use of Brand Elements in all marketing programs helps communicate the Brand Character to the marketplace. The brand name, logo, slogan, jingle, and packaging style are all examples of Brand Elements
  • 108. Unit-4 Brand name refers to the word, phrases or words used to identify the company, product, service or concept and other core values of the brand LOGO To simply explain, a logo is a visual trademark that identifies the brand with its design elements. The Nike swoosh has become so well known that the word “Nike”
  • 109. Unit-4 Tagline quickly state the brand position memorably in the minds of the customers. Great theme or taglines have a long run rather than being changed every year. Ex Apple-Think Differently Jingles are Sound or a unique set of notes or tones can also assist in forming a brand’s identity as the crucial Brand Elements. Ex: Britania Doing the packaging of a product is not a simple task. Here every little attribute should be considered carefully. The fonts, colors, logos, and sizes. The composition of these many factors creates perfect packaging.
  • 111. Unit-4 Advertising Appeal Definition Advertising appeal is defined as strategies for grabbing the attention of people to persuade them to purchase your product or service. The approach can be a marketing or advertising strategy. Brand appeal Brand appeal is for the customers or people who are brand conscious and have an individual inclination towards a particular brand. The primary objective of the brand appeal is to motivate people to buy a product because the product has an excellent brand. It gives the feeling of differentiation to the customers. Apple is an example whose products have brand appeal to its customers. Adventure Appeal Some advertisements appeal to the sense of adventure and excitement of a person. The primary objective of these advertisements is to appeal to people that enthusiasm will be enhanced after they buy or use the product or service. The advertisements of energy drink use adventure appeal in them. It is often shown that the protagonist of the ad who is tired drinks the energy drink and achieves something almost impossible Bandwagon Appeal This appeal involves making people feel that since everyone is buying the product, so they should too. The objective of bandwagon appeal is to ensure that the customer joins the bandwagon and starts using the product because everybody else is using it. It is known as persuasion by masses technique
  • 112. Unit-4 Fear Appeal The fear appeal shows that adverse outcomes can happen because a particular action is not taken. Advertisements often use fear as a motivator to promote change. The fear tactic also involves isolation. With this technique, many kinds of toothpaste, deodorants, and anti-dandruff shampoos are advertised. It is shown that if people do not brush with their toothpaste, it will result in bad hygiene and foul mouth odor, which would lead to social isolation for the person Humorous Appeal Some advertisements appeal to a person’s sense of humor. Human beings like to laugh and what can be a better type of attention-grabbing tool than humor, because humor helps people to remember a particular product or an idea. The marketing or advertising strategies often try to build a positive association with their product or service. Gender Appeal Gender appeals are used to create an ideal man or woman. It is expected that the target audience will buy the product; it may be clothing, beauty products, or any other product. Buying that product will increase the masculine or feminine appeal of the user, and it will make them more attractive or stronger, which is commonly associated with genders. Gender appeal is used by the apparel industry as well as the makeup industry. Watches, bikes, luxury goods, all use gender appeal by showing a stereotypical male or female.
  • 113. Unit-4 Music Appeal Music appeal is used to appeal to the taste of music and the sound of a person. The primary objective of music Appeal is to encourage people to feel and emotion and associate their product after hearing a particular tune, song, or sound. Microsoft has often used its opening piece of music to relate to Microsoft products. Windows XP had a famous theme when the product turned on, and any Microsoft product is recognized because of this tune. Social Appeal Social appeal strategies target the sense of belongingness in the people. The need for inclusion Is present in every human being, and that is explored in social appeal. This strategy appeals to people that, when they buy the product or use their service or take action as directed, it would make them feel respected, recognized and accepted, or even affiliated with society or a particular group of people
  • 114. Unit-4 Scarcity Appeal This marketing strategy appeals to the customers that something will run out of stock or exhaust soon, which is why they should purchase the product or take action immediately. The primary objective of this appeal is to make people hurry to choose the desired effect. Special offers and discounts or sales are often with the aim of scarcity appeal. Limited stocks, sale till stocks available are few of the terms which are used to motivate the buyer to purchase the product or service immediately. Special offers and discounts or deals are often with the objective of scarcity appeals.
  • 115. Unit-4 Global Advertising Content: Standardization Versus Adaptation • Standardization • Companies can either adopt the same promotion strategy they used in the home market or change it for each local market. Some global companies use a standardized advertising theme around the world. For example, IBM runs virtually identical ads in dozens of countries around the world. Of course, even in highly standardized promotion campaigns, some small change might be required to adjust for language and minor cultural differences. Colours also are changed sometimes to avoid taboos in some countries. Purple is associated with death in most of Latin America. White is bridal dress of Christians but in Japan and India it is a mourning colour. Green is considered favorite of Muslims but it is associated with jungle sickness in Malaysia.
  • 116. Unit-4 Characteristic of Standardisation The following arguments support standardization (i) Standardized advertising lowers the costs of value creation by spreading the fixed costs of developing the advertisements over many countries. For example Levi-Strauss paid an ad agency $550000 to produce a series of TV commercials. By reusing these ads in many countries, the company saved lot of money. (ii) There is the concern that creative talent is scarce and so one large effort to develop a campaign will produce better results than 40 or 50 smaller efforts. (iii) Many brand names are global and with the substantial amount of international travel today and the considerable overlap in media across national borders, many international firms want to project a single brand image to avoid confusion caused by local campaigns
  • 117. Unit-4 Adaptation Some companies follow a strategy of communication adaptation, fully adapting their advertising messages to local markets. Kellogg’s ads in USA promote the taste and nutrition of its cereals whereas in India, where many consumers eat heavy, fried breakfast, it convinces the buyers to switch to a lighter, more nutritious breakfast diet. Media also need to be adapted internationally because media availability varies from country to country. TV advertising time is very limited in Europe, ranging from 4 hours a day in France to none in Scandinavian countries. Advertisers must buy time months in advance and they have little control over airtimes. Magazines also vary in effectiveness. For example, magazines are a major medium in Italy and a minor one in Austria. Characteristic and Advantages of Adoption (i) Cultural differences between nations force adaptation in advertising and other promotions. A message that works in one nation can fail miserably in another. Due to cultural diversity, it is extremely difficult to develop a single advertising theme that is effective worldwide.
  • 118. Unit-4 (ii) Advertising regulations may also block implementation of standardized advertising. For example, Kellogg could not use a TV commercial it produced in UK to promote its cornflakes in many other European countries. A reference to the iron and vitamin content of its cornflakes was not permissible in the Netherlands, where claims relating to health and medical benefits are outlawed. A child wearing a Kellogg T-shirt had to be edited out of the commercial before it could be used in France, because French law forbids the use of children in product endorsements. The key line, “Kellogg’s makes their cornflakes the best they have ever been”, was disallowed in Germany because of a prohibition against use of superlative degrees in ads. (iii) Consumer response patterns are also not homogeneous among different markets. If the difference is more among various classes and segments in a market then responses to add will also vary.
  • 119. Unit-4 iv) If the desired media are not available in a market, a standardized message is not transmittable. In some countries certain kinds of mass media does not exist, like TV does not exist in Guyana. Some companies are experimenting with capturing some benefits of global standardization while recognizing differences in countries’ cultural and legal environments. A firm may select some features to include in all its advertising campaigns and localize other features. By doing so, they may be able to save on some costs and build international brand recognition and yet customize its advertisements to different cultures.
  • 120. Unit-4 Creating Global Advertising `The following are the important factors for creating a global advertising a) Message: The message is at the heart of advertising. The particular message and the way it is presented will depend on the advertiser’s objective. Is the ad designed to inform, entertain, remind, or persuade? Moreover, in a world characterized by information overload, ads must break through the clutter, grab the audience’s attention, and linger in their minds. This requires developing an original and effective creative strategy to generate a big idea. The Big Idea is easier to illustrate than define, and easier to illustrate by what it is not than by what it is. b) The advertising appeal is the communications approach that relates to the motives of the target audience. For example, ads based on a rational appeal depend on logic and speak to the audience’s intellect. Rational appeals are based on consumers’ needs for information. Ads using an emotional appeal may tug at the heartstrings or tickle the funny bone of the intended audience and evoke a feeling response that will direct purchase behavior. For example, a recent global campaign for IKEA, the Swedish home furnishings retailer, positioned houses as homes: “It’s a place for love . . . a place for memories . . . a place for laughter. Home is the most important place in the world c) The selling proposition is the promise or claim that captures the reason for buying the product or the benefit that ownership confers. Because products are frequently at different stages in their life cycle in various national markets
  • 121. Unit-4 d) The way an appeal or proposition is presented is called the creative execution. In other words, there can be differences between what one says and how one says it. Ad agency personnel can choose from a variety of executions, including straight sell,scientific evidence, demonstration, comparison, testimonial, slice of life, animation, fantasy, and dramatization. The responsibility for deciding on the appeal, the selling proposition, and the appropriate execution lies with creatives, a term that applies to art directors and copywriters. e) The visual presentation of an advertisement—the “body language”—is a matter of art direction.The individual with general responsibility for the overall look of an ad is known as an art director. This person chooses graphics, pictures, type styles, and other visual elements that appear in an ad.
  • 122. Unit-4 f) The words that are the spoken or written communication elements in advertisements are known as copy. Copywriters are language specialists who develop the headlines, subheads, and bodycopy used in print advertising and the scripts containing the words that are delivered by spokespeople, actors, or hired voice talents in broadcast ads. As a general rule, copy should be relatively short and avoid slang or idioms. Languages vary in terms of the number of words required to convey a given message; thus the increased use of pictures and illustrations. Some global ads feature visual appeals that convey a specific message with minimal use of copy
  • 123. Unit-4
  • 124. Unit-4 Characteristic or Importance & Function of Public Relation Public Relations (PR) is the department or function responsible for evaluating public opinion about, and attitudes toward, the organization and its products and brands. Public relations personnel also are responsible for fostering goodwill, understanding, and acceptance among a company’s various constituents and publics
  • 125. Unit-4 • Public relations include a variety of programmes designed to improve, maintain, or project a company or product image.An important form of public relations is getting positive news and reports about the product or company released through media. This is of particular significance to new products. • Like advertising, public relations is one of the four variables in the promotion mix. One of the tasks of the PR practitioner is to generate favorable publicity. • By definition, publicity is communication about a company or product for which the company does not pay. • The Tools that are generally used under Public Relations can be News releases, Media kits, Press conferences Public relations professionals who are responsible for international business operations should serve as more than a company mouthpiece. • They should be able to simultaneously build consensus and understanding, create trust and harmony, articulate and influence public opinion, anticipate conflicts, and resolve disputes.
  • 126. Unit-4 As companies become more involved in global marketing and the globalization of industries continues, company management must recognize the value of international public relations. Public relations practices can be affected by: _ Cultural traditions _ Social and political contexts _ Economic environment
  • 127. Unit-4 Direct Marketing: Although direct marketing has several forms – direct mail, telemarketing, electronic marketing,and so on. Direct marketing is a promotional method that involves presenting information about your company, product, or service to your target customer without the use of an advertising middleman. It is a targeted form of marketing that presents information of potential interest to a consumer that has been determined to be a likely buyer. – it has a few distinctive characteristics: Non-public: The message is normally addressed to a specific person and does not reach others. Customized: The message can be customized to appeal to the addressed individual. Up-to-date: A message can be prepared very quickly for delivery to an individual
  • 128. Unit-4 Common forms or Types of direct marketing include • Brochures • Catalogs • Fliers • Newsletters • Post cards • Coupons • Emails • Targeted online display ads • Phone calls • Text messages
  • 129. Unit-4 Advantages of Direct Marketing • Targeting • Database segmentation • Tracking responses • Targeted advertising • Budget marketing • Boosts sales to existing and lapsed customers • Improves customer loyalty • Helps in pushing new business • Allows to measure product performance
  • 130. Unit-4 Definition:Personal Selling As Stanton says, “personal selling is the personal communication of information to persuade prospective customer to buy something — a product, service, idea or something else. This is in contrast to the mass, impersonal communication of advertising, sales promotion and other promotional tools.”
  • 131. Unit-4 Ways of Personal Selling 1. Meeting the Prospects in the Foreign Markets a) Company’s Travelling Salesmen Attached to the Headquarters (b) Company’s Salesmen Attached to the Company’s Office in the Foreign Market (c) People Temporarily Hired:
  • 132. Unit-4 2. Meeting Prospects at Trade Fairs and Exhibitions Trade fairs and exhibitions are regarded as very effective method of export promotion because they enable a firm to meet many prospective customers at one place without incurring much expenditure. There are broadly two categories of fairs and exhibitions. (a) International fairs/exhibitions held in India, like the Indian Seafood Trade Fair held every alternate year in India which attracts a large number of foreign customers from different countries. (b) International fairs/exhibitions held in foreign countries like the Anuga Food Fair at Cologne, Hannover Engineering Fair etc., which attract very large number of prospective customers from a number of countries. 3. Visiting Foreign Buyers Many foreign buyers visit India and other sources of supply of the goods they are interested in. Sometimes, such visits are at the initiative of the foreign buyer who wants to understand well the supply conditions and to enlarge his sourcing. Sometimes, foreign buyers visit at the invitation of the exporter. Export promotion organisations like ITO, EPCs etc., may also arrange buyer-seller meets. An exporter may seize such opportunities to meet the visiting foreign buyers
  • 133. Unit-4 II. MANAGEMENT OF SALES FORCE • Management of sales force encompasses various steps from selection of the sales force to evaluation of their performance. Selection Induction and Training Supervising Compensating and Motivating Evaluation and Control
  • 134. Unit-4 III. PERSONAL SELLING PROCESS These 5Ps are the following Pre-sale Preparation Prospecting Preapproach Presentation Post-sale Activities
  • 135. Unit-4 TRADE FAIRS AND EXHIBITIONS Trade fairs and exhibitions, by bringing potential buyers and suppliers in contact and imparting information about the relevant development around the world, play an important role in international marketing. In certain cases, they have a special significance. For example, in Libiya, where media advertisement for products is not permitted, the annual Tripoli International Trade Fair is very important means to promote business. Friendly countries are also permitted to hold single country/single product =exhibition and trade fair. A trade fair, as its name implies, is target directed. It is staged for the purpose of selling goods or demonstrating new ideas and techniques. An exhibition, on the other hand, is not specifically for trade but for the public. There are two type fairs, viz., (i) General fairs, also known as horizontal fairs; and (ii) Specialised fairs, also known as vertical fairs and solo fairs.
  • 136. Unit-4 General Fair At a general fair, the goods displayed cover many different fields. The general fairs attract visitors of all ages, tastes and types and, therefore, is a good place to show consumer goods or new products that needs to be seen and accepted. National pavilions are often built for general fairs and in them the government organises an exhibition that gives the visitors a good idea of country’s industry, agriculture, way of life and tourist attraction as well as products it wishes to sell abroad. In other words, the purpose is largely to build up an image of the country in the public mind.
  • 137. Unit-4 Specialised Fair A specialised fair concentrates on products of a particular industry or group of industries. Within that industry or group, a large number of products may be on display. If the product that an exporter, actual or potential, wishes to display is one that interests a specific group of buyers and especially if it is technical in nature, the specialised fair is probably the better choice. Many prefer the specialised fair because it is not open to general public (or open only at specific times) and people who come have both an interest and some knowledge of the product. There are many well-known international trade fairs held at regular intervals like the Anuga Food Fair at Cologne, Hannover Engineering Fair, Sport Goods Fair held in USA etc.
  • 138. Unit-5
  • 139. Unit-5 EXPORT PROMOTION Export development is important to the firm and to the economy as a whole. Government measures aim, normally at the general improvement of the export performance of the nation for the general benefit of the economy. Such measures help exporting firms in several ways.
  • 140. Unit-5 i)The Ministry of Commerce, Government of India, is the most important organ concerned with the promotion and regulation of the foreign trade of the country Matters related to foreign trade are dealt with by eight divisions in the Department of Commerce, namely, (i) Administrative and General Division, (ii) Finance Division, (iii) Economic Division, (iv) Trade Policy Division, (v) Foreign Trade Territorial Division, (vi) Exports Products Division, (vii) Services Division, and (viii) Industries Division
  • 141. Unit-5 Other Autonomous Bodies 1. Commodity Boards: There are five statutory Commodity Boards responsible for production, development and export of tea, coffee, rubber, spices and tobacco. 2. Export Inspection Council: The Export Inspection Council, a statutory body, is responsible for the enforcement of quality control and compulsory pre-shipment inspection of various exportable commodities. 3. Indian Institute of Foreign Trade: The Indian Institute of Foreign Trade, registered under the Societies Registration Act, is engaged in the following activities. (i) Training of personnel in modern techniques of international trade; (ii) Organisation of research in problems of foreign trade; (iii) Organisation of marketing research, area surveys, commodity surveys and market surveys
  • 142. Unit-5 4. Indian Institute of Packaging: The Indian Institute of Packaging is registered under the Societies Registration Act. The main aims of the Institute are to undertake research on raw materials for the packaging industry, to organise training programmes on packaging technology, to stimulate consciousness of the need for goods packaging technology,etc. 5. Export Promotion Councils: There are a number of Export Promotion Councils under the administrative control of Ministry of Commerce. These Councils are registered as non-profit organisations under the Companies Act. The Councils perform both advisory and executive functions 6. Federation of Indian Export Organisations: The Federation of Indian Export Organisations is an apex body of various export promotion organisations and institutions 7. Indian Council of Arbitration: The Indian Council of Arbitration, set up under the Societies Registration Act, promotes arbitration as a means of settling commercial disputes and popularizes arbitration among the traders, particularly those engaged in international trade
  • 143. Unit-5 8. Marine Products Export Development Authority: The Marine Products Export Development Authority (MPEDA) is responsible for development of the marine products industry with special reference to exports. 9. Agricultural and Processed Food Products Export Development Authority (APEDA): The Agricultural and Processed Food Products Export Development Authority, set up in 1986, serves as the focal point for agricultural exports, particularly the marketing of processed foods in value added forms. 10. India Trade Promotion Organisation: The ITPO was bought into being in 1992 by merging together the erstwhile Trade Fair Authority of India (TFAI) and the erstwhile Trade Development Authority of India (TDA). The functions of the ITPO are to: 1. Develop and promote exports, imports and upgrade technology through fairs in India andabroad 2. Compile and disseminate trade related information 3. Undertake publicity through the print and electronic media
  • 144. Unit-5 Balance of Payments is the systematic summary of the economic transactions of the residents of a country with the rest of the world during a specified time period, normally a year. Features of Balance of Payments 1. Economic Transactions i. Movement of goods in the form of Exports and Imports ii. Rendering of services abroad and using foreign services iii. Gifts/Grants from one country to another iv. Investments made abroad or received from abroad v. Income on investments received from abroad or remitted abroad vi. Increase or decrease in the international reserves of the country
  • 145. Unit-5 2. Residents with Non-residents Residents mean individuals, institutions, corporate bodies and government departments 3. Flow statement A BoP is the flow of economic transactions and not a statement of the position as on a date. (Changing position) 4. Periodicity One year
  • 146. Unit-5 Balance of Payments Current Account (Deficit) 1. Trade Account (Export and Import of Only Visible Goods) (Deficit) Export is maximum - Surplus Import is maximum - Deficit 2. Invisible Account (no physical goods but Service) Non Factor Income BPO, Service Industries (Foreign exchange comes in) (Surplus) Investment Income (Deficit) Transfer (remittance) (Surplus) Capital Account (Surplus) 1. Foreign Investment (Surplus) FDI (Share capital 51% is by Foreign Company) and FPI 2. External Assistant (IMF, WTO – gives loans at minimum interest) Interest rate is less than the Market rate 3. External Commercial Borrowing – Interest rate is equal to Market rate 4. NRI Investment (Opening an account in SBI by NRI - Investment) (Surplus)
  • 147. Unit-5 1. Balance of Trade Balance of Trade = Value of Export of Goods – Value of Import of Goods (Visible) The Balance of Trade could be Favourable (Trade Surplus) Value of Export > Value of Import The Balance of Trade could be Unfavourable (Trade Deficit) Value of Import > Value of Export 2. Current Account Position Transactions in Services (Invisible) relate to payment and receipt for services such as Shipping, Insurance, Travel, Tourism, Transfer of Interest, Migrant remittances, Interest and Dividend payments etc Current Account Position = Balance of Trade + Receipts for Services – Payments for Services Balance of Trade and Current Account Position cover Current Account Transactions
  • 148. Unit-5 Capital Account Transactions There are capital transactions in the form of receipts and payments due to transfer of funds, creation of assets, extension of credits, loans and investments etc 3. Balance of Payment Balance of Payment = Current Account Position + Capital Receipts – Capital Payments
  • 149. Unit-5 EXPORT INCENTIVES • Export incentives are a widely employed strategy of export promotion. • The main aim of these incentives is to increase the profitability of export business. Important export incentives in India include rebate of duties, cash compensatory support, income tax concession, interest subsidies, freight subsidy etc. It has been common to describe these as incentives.
  • 150. Unit-5 1) Duty Exemption/Drawback The scheme of duty exemption is designed to avoid the incidence of commodity taxes like excise duty and customs duties on the exports so as to make the exports more price competitive. “This is a worldwide practice and the rationale is straight forward. 2) Income Tax Concession Besides the exemption/rebate of indirect taxes, a special fiscal treatment granted to exports is the income tax concession according to which earnings from exports are either partially exempted from income tax, or taxed at a lower rate Other Incentives 3) The Cash Compensatory Support (CCS) was a cash subsidy scheme designed to compensate the exporters for unrebated indirect taxes and to provide resources for product/market development. 4) System of Import Replenishment (REP) licenses, which were related to the f.o.b. value of exports. The REP was, for the most part, a facility insofar as it enabled exporters to import inputs where the domestic substitutes were not adequate in terms of price, quality or delivery rates
  • 151. Unit-5 5) The International Price Reimbursement Scheme (IPRS) was designed to make available specified inputs to exporters at international prices. The scheme which was initially available to steel was later extended to aluminium also and there was a proposal to extend to other items. 6) Awards are given on the basis of certain specified criteria such as development of market for products which has not been exported previously, substantial increase in exports, successful introduction of new products, product development, successful breakthrough in foreign markets where conditions have been especially difficult etc
  • 152. Unit-5 Export Procedure In Export there are two parties involved one is Buyer or client and Seller or Exporter. The buyer and seller may be individual or companies. Export procedures involves series of steps from enquiry,confirming the order, payment terms ,shipment and dispatching the goods to client in a agreed conditions. This includes series of steps which are as follows.
  • 153. Unit-5 This includes series of steps which are as follows. 1) Enquiry 2) Quotation 3) Order Receipt and Acceptance 4) Finance, Production and Packing 5) Excise Clearance 6) Export Documents 7) Cargo Insurance and Shipping Space Reservation 8) Customs Clearance
  • 154. Unit-5 9) Preventive Officer 10) Mate’s Receipt’ 11) Receipt of Shipment Documents from C&F Agent 12) Shipment Advice to Buyer 13) Presentation of Shipment Documents to the Negotiating Bank 14) Presentation of Documents for Payment to Foreign Bank by the Negotiating Bank 15) Export Incentives
  • 155. Unit-5 Major Documents Needed in Export Some of the major documents in international business are discussed in following sub-sections 1) Documents for Transportation of Goods The following documents are connected with the transportation of goods • Airway bill/air consignment note • Bill of lading • Mate receipt
  • 156. Unit-5 2) Document for Customs Clearance of Goods Shipping bill is the main document required by the customs authorities for allowing shipment • Shipping Bill • Commercial invoice • Consular invoice • Customs invoice • Certified invoice • Bill of exchange
  • 157. Unit-5 • Proforma invoice • Packing list • Letter of credit • Marine insurance • Certificate of inspection • Certificate of origin • Generalised System of Preferences (GSP • Certificate of chemical analysis
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