18926113 International Marketing Ppt Vivek Kumar

Amity Business School

DEFINITION OF INTERNATIONAL BUSINESS

• International business is the activity of engaging in business operations across national boundaries/borders.

• International business is the field of study that concerns itself with the development, strategy and management of multinational enterprises in the global context of complex and dynamic business environments.

Actually the complete gamut of the whole context and interest in international business lies in multinational enterprises, culture and communications-as also the special skills that are required to operate in global business environment.


DEFINITION OF MULTINATIONAL ENTERPRISES

• A corporation that has production operations in more than one country, (e.g.:- Toyota having manufacturing facility in India as also other parts of the world.) for various reasons such as- securing supplies of raw materials, utilizing cheap labor sources, servicing local markets and bypassing protectionist barriers.

• Important critical comment on multinationals and its gravity in the light of marketing products in the ‘Third World’ market.


DEFINITION OF FOREIGN INVESTMENT

• Investment in the domestic economy by foreign individuals or companies is called foreign investment in generic terms.

• Foreign investment takes the form of:-– Direct investment in productive enterprises– Investment in financial instrument such as portfolio of

shares.• Important critical comment on foreign investment in

the light of ‘societal marketing concept’ under the principles of marketing management concepts.

• Foreign investment is increasingly important in the economy of the modern business world-explanation as to how?


FOREIGN DIRECT INVESTMENT(FDI)

• The acquisition abroad of physical assets such as plant and equipment, with operating control residing in the parent co-operation.


DOMESTIC MARKET

• Part of a nation’s internal market representing the mechanism for issuing and trading securities of entities domiciled within that nations.

Amity Business SchoolContinued..

• Brief Historical Background of International Business/Trade relations-

-- International business and trade has been there from times immemorial,

-- Man is a social animal– wants different kinds of goods/ commodities- required for the standard of living.

-- The country is not self-sufficient in developing all the products/ commodities etc.

-- Hence dependent on other country--- Thus international business and trade exists-

International trade is between nations, business is between companies.


Fundamental Questions that companies tackle:

-- What market presence should be achieved in own country/ continent.

-- Globally presence – yes/ no

-- Knowledge of Competitors.

-- What strategies to be adopted?

-- What resources to deploy?


• Factors that reinforces to take interest in International Marketing in Modern Times

-- Income growth of the consumers

-- Lower trade barriers

-- Desire for new products, around the world

-- Search for new markets/new avenues/new segments


-- Demand for new styled goods/ services– innovative goods.

-- Integration of telecommunication facilities/communication

-- Faster means of travel, transport, technology.

-- Move towards reduction of international marketing barriers.


Definition of Global Industry:

A global industry is an industry, where the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions.


Definition of Global Firm:

A global firm is one that is operating in more than one country- captures research and development, production, logistical, marketing and financial advantages in its costs and reputation that are not available to purely domestic competitors.

-- They rely on technological innovation.

-- Enhance their capabilities through technology.


Need/Factors for International Marketing:

1. Business Factors

2. Competitive Factors


BUSINESS FACTORS:-- Profitability-- Achieving Economies of Scale-- Growth Factors-- Marketing due to life-cycle-- Uniqueness of Product / Services-- Access to imported inputs-- Spreading R and D cost


In Continuance:Competitive Factors/ Other Factors:-- The company’s domestic market might be attacked by

global firm’s offering better products or at lower prices.-- Counterattack by the domestic firm in the competitors

home market.-- Company discovering, some markets presenting higher

profit opportunities than the domestic market.-- Company wanting larger customer base in order to

achieve economies of scale.


In Continuance:

-- Company wanting to reduce dependence on anyone market.

-- Reducing risk


Major decisions in International Marketing:

The Major decisions are encircled as a step by step calibrated process:

1. Deciding whether to go abroad?

2. Deciding which market to enter?

3. Deciding how to enter?

4. Deciding on the marketing program?

5. Deciding on the marketing organization?


Major Concerns while Entering Foreign Market:

1. Unstable Government, if any.2. Foreign Exchange problems.3. Foreign government entry requirements/

entry barriers. 4. Trade / Tariff barriers.5. Corruption in the respective country

government, if any.


6. Technological pirating.

(Explanation: A company locating its plant abroad worries about foreign managers learning how to make its product and breaking away to compete openly or clandestinely- for example in the diverse area such as machinery, electronics, chemicals, pharmaceuticals etc.)

7. High cost of product manufacturing and communication adaptation.


Environmental Differences when marketing overseas:

1.Language2. Tastes and Fashions3. Religion4. Physical Environment (temperature/ humidity

etc)5. Power sources6. Security arrangements7. Family structure and size


In Continuance:8. Times at which business is done9. What is polite and impolite10. Social priorities11. Literacy levels12. Communication infrastructure13. Distribution facilities14. Methods of transaction


In Continuance:15. Political differences16. Legal differences17. Regulatory differences18. Different technical standards (may be

operating in the country)19. Different taxation policy20. Economic complications/situations – at a

particular time


What to study finally – when company’s going abroad:

1. Study each foreign market carefully2. Study about the economic laws of

targeted countries 3. Know about the politics of that country4. Know about the culture5. Adapt that country’s products and

communication to foreign tastes


Domestic VS International Marketing

-- Definition of Domestic Marketing-- Definition of International MarketingNB: Basic tenets of marketing concepts is applied

whether it is domestic or international marketing. It revolves around the controllable and uncontrollable factors that governs the pragmatic marketing scenario.

Continued….


In Continuance:Uncontrollable Factors:

1. Macro Environment- Uncontrollable Factors are:

-- Economic-- Political-- Logistics (controllable to a certain extent only, especially in the

domestic market )-- Competition-- Legal Affairs-- Socio-cultural-- Geography


In Continuance:Micro Environment-the Controllable Factors:

-- Product

-- Price (subject to certain limitations, taking competitors offer prices into consideration)

-- Place

-- Promotion

Amity Business SchoolManagement’s Orientation

Management’s orientation towards international marketing- EPRG Concept:

E---- Ethnocentric

P---- Polycentric

R---- Regiocentric

G--- Geocentric


Importance of Global Marketing and the EPRG Concept:

The importance of global marketing can be gauged from the fact that:

-- Maximum growth potential opportunities to be tapped.

-- Companies should go global/ motivation required to go global.


Management’s orientation- the EPRG concept revolves around the grand fact that any company’s response to global market opportunities depend greatly on the management’s assumptions and beliefs, as to how it views the new market opportunity, how it plans to enter the foreign market, how it views the culture, preferences of consumers in a foreign market etc…..


In Continuance: The Ethnocentric Orientation:-- It is a belief which considers- one’s own country/ culture,

products as superior -- It views similarities in all markets/ foreign country market.-- Product’s/ services/ management practices/ methods that

is being offered/ followed in one’s own country/ successful in one’s own country will be acceptable in other world markets, anywhere.

-- Adaptation of the product is not required.-- Shades of egoism encircled herewith


In Continuation:Criticism of Ethnocentrism -- Ethnocentric oriented companies ignore foreign market

and therefore loose great opportunities.-- the product of the ethnocentric oriented company might

be of a very high quality, and might be accepted in other world markets- (this is accepted in the first instance, subject to certain limitation), but will the marketing methods/ practices that is being followed in the home country does not need any adaptation in any form? For example if a- Benz Car or a Lincoln or a Ferrari or a BMW is to be marketed in a ‘Third World’ country. A critical examination is required.


In Continuation: The Polycentric Orientation:-- Opposite of Ethnocentrism .-- It views each country as unique.-- Each subsidiary is to develop its own

unique business.-- Each subsidiary to develop its own

marketing strategies to succeed in its own right.


In Continuation:The Regiocentric Orientation:-- Management views regions as unique.-- Management seeks to develop an integrated

regional strategy, to market product/services- in the particular identified region.

-- Regions are considered to be one- i.e. consumers having one taste, choices, preferences, one regional identity etc.

-- NAFTA, EU, SAARC etc are examples.


In Continuation:The Geocentric Orientation:-- The Company views the entire world as a

potential market.-- Company strives to develop integrated world

market strategies.-- It views similarities and differences in markets

and countries.-- It seeks to create a global strategy- responsive

to local needs and wants.


Definition of Global Localization:

The concept of global localization refers to the explicit fact that – a successful global marketer should have the ability to think ‘globally’ and act ‘locally’.


Drivers for Global Integration (in the light of Globalization)

-- Technology-- Culture-- Market Needs-- Cost-- Free Markets-- Economic Integration-- Management’s vision-- Strategic Intent-- Global Strategy and Action

Amity Business SchoolInternational Trade

“Of all sorts of luggage man is the most difficult to be transported”. – Adam Smith


In Continuation:International trade defined:Simply explained international trade refers to trade

between countries/nations/state’s. It is always compared with inter-regional trade- meaning trade between different regions within the same country.

NB: Here little attention is given to the company level marketing methods and strategies

Amity Business SchoolInternational trade contd..

In continuation:The Fundamental basis of International Trade:

It lies on the fact that different countries of the world are endowed by nature with different elements of productive powers. Factor endowments are unevenly distributed among the countries of the world. For example- West Bengal in India for the production of Jute, Arab countries for oil resources etc.


In continuation:Is International Trade Inevitable?

International trade is inevitable when there are marked differences in the countries regarding materials, natural resources, natural vegetation, climate, soil etc.


In Continuation:Other Factors affecting International Trade:1. Stage of economic development2. Accumulation of capital by a nation3. Foreign investments by a nation4. Technological progress5. Trade6. Finance regulations7. Political affiliations- etc.

Amity Business SchoolInternational Trade Theories

The Theories are:

A. Theory of ‘Mercantilism

B. Theory of Absolute advantage (of Adam Smith)

C. Theory of Comparative advantage/ comparative cost (of David Ricardo)

D. Modern theory of international trade or Factor Endowment theory

E. Theory of International Product life-cycle

F. Theory of Competitive Advantage


A. Theory of Mercantilism:

-- An economic doctrine that flourished in the 17th and 18th centuries.-- It sought to maximize national wealth- in the form of nation’s bullion

reserves - especially in gold.-- To this end tariff’s were applied to imports in the hope of creating a

‘balance of trade’ surplus, and adding to bullion reserves.-- Exports were viewed favorably so long as they brought in gold for the

country. GIST: Nations should accumulate financial wealth in the form of gold by

encouraging exports and discouraging imports.


B. Theory of Absolute Advantage:-- Forwarded by the great classical

economist, Adam Smith.-- Repudiated the mercantile notions of

international trade.-- Advocated the theory of Free Trade.-- Advocated that the real wealth of a nation

is measured by the level of improvement in the quality of living of a nation’s people.


Gist of the Absolute advantage theory:

If one country has an absolute advantage over another in one line of production and the other country has an absolute advantage over the first country in another line of production, then both countries would gain by trading.

NB: A country’s advantage can be:- A. Natural AdvantageB. Acquired Advantage


C. Theory of Comparative Advantage-- Forwarded by David Ricardo./-- Extension of the theory of Absolute advantage-- Also known as the theory of comparative cost.-- The theory forwards that- a country tends to

specialize in the production of those commodities in which it possesses a comparative advantage by virtue of its climate, natural resources, skill of its people, capital equipment etc.


Gist of the comparative advantage theory

Any two countries can very well gain by trading even if one of the countries is having an absolute advantage in both the goods over another, provided the extent of absolute advantage is different in the two commodities in question.


D. Modern theory of International Trade

-- Also called Factor Endowment Theory or factor proportions theory.

-- Forwarded by Heckscher and Bertil Ohlin.

-- The immediate cause of International trade is the difference in commodity prices, which in turn is due to the differences in factor prices.

-- Thus goods are purchased from outside because it is cheaper to buy them outside.


Gist of the Modern theory of International trade:

A nation will export that commodity whose production requires intensive use of the nation’s abundant and cheap factors, and import the commodity whose production requires intensive use of the nation’s scarce and expensive factors.


E. Theory of International Product Life Cycle

-- Revolves around the concept of international marketing of product/services

-- Two paradigms on which the theory is based:--

A. Shifting of market in the light of the size of the market

B. Reaching the economies of scale by location of production facilities.


F. Theory of Competitive Advantage:

-- Forwarded by ‘Michael Porter’

-- Concentrates on a firm’s home country environment as the main source of competencies and innovations.

-- Forwarded the famous ‘Diamond Model’


The Diamond ModelAttributes of the Diamond model revolves around:A. Factor / Input conditionsB. Demand ConditionsC. Firm’s supporting industriesD. Firm’s Strategy, structure and rivalryE. Chance i.e. occurrences that are beyond the

control of firmF. Government- its policies regarding trade etc.

Amity Business SchoolModule --2

The World Economy – An Overview- Brief Historical background of the World Economya. World Economic scenario has undergone a drastic

change, if we look it critically from the economic paradigm’s point of view.

b. The development of economies of the different regions/ countries of the world, has a strategic effect from the angle of international business scenario.

c. Finally we reach the year– 1945 (End of the second World War)


Year – 1945 and after (till late 1991)

--Signaled the end of ‘The Second World War’.

-- The World divided into bi-polar world.

-- Start of the Cold War, meaning silent war

-- Cold war was but a silent war among the two economic systems – Capitalism and Socialism, led by USA and erstwhile USSR.

-- Fall of Socialism by 1991

-- Mixed Economic System


Changes found in the World Economy-- Emergence of global markets-- New opportunities for the marketer’s -- Global Competitors in the market place-- Heavy Competitive environment-- New players in the product line-- Integration of the world economy-- Globalization effects in the macro environment

of business.-- Increased volume of capital movements


The World Economy– The Macro Dimensions of the Environment

-- Economic Environment-- Social Environment-- Cultural Environment-- Political Environment-- Legal Environment-- Technological EnvironmentNB:Most important of all, is the Economic Environment

from a global marketer’s point of view. The Economic environment has the shades of opportunity. And opportunity is business. Business is for profit, and profit is successful marketing.


-- Relationship between productivity and employment

-- The greatest economic change is the end of the Cold War

NB: The success of the capitalist market system has caused the overthrow of communism as an economic and political system, and the role of ‘Mixed Economic’ system has a role to play in the current business scenario/ trade relations.


The Economic Systems

The economic systems criteria has been divided into three forces:

A. The Capitalist market allocation economic system.

B. Socialist pattern of command allocation economic system

C. Mixed economic system.


Brief Explanations of the economic systems:

The Capitalist Economic system:--The capitalist economic system, believed in the fundamental fact of

free market allocation system, where the role of the state in a market economy is to promote competition and ensure consumer protection.

-- It is the capitalist who will decide – What to produce? How to produce? and For whom to produce?

NB:-- Basically the whole concept of ‘Capitalism’ is designed around the concept of ‘Laissez Faire’- meaning ‘Leave us alone’

Amity Business SchoolContinued..Capitalism continued:--Under capitalism, all farms, factories and other

means of production are the property of private individuals and firms. They are free to use them, with a view to making profit or not to use them, if it so suits them.

-- Desire for profit is the main motive behind the capitalist economy system.

-- In a capitalist economy everyone is free to take up any line of production he likes and is free to enter into any contract with other fellow citizens for his profit.


Socialism Defined:Based on the command allocation system or the

so called Central Plan allocation system, socialism is an alternative to capitalism. In a nutshell, it implies social ownership of means of production. Here the major instruments of production is under the state control, so that the economy is run for social benefit rather than private profit.

Continued-----


Under Socialism as an economic system it is the State that decides:

-- Which products are required

-- Which products are not required

-- How to make these required products


Mixed Economic System:It is neither pure capitalism nor pure socialism, but a

mixture of the previous two economic systems.-- The characteristics of both capitalism and socialism is

found in this economic system.-- It is operated both by private enterprise as well as public

enterprise.-- The private enterprise is not permitted to function freely

and uncontrolled through price mechanism’s– the government intervens to regulate and control private enterprise in several ways.


How Mixed Economy?-- Control and regulation of the government over

the private enterprise through its monetary and fiscal policies.

-- The government institutes:a. Price Controlb. Licensing Systemc. Import controld. Exchange controle. Control over capital issues.


Stages of Economic Development/ Market development:

In brief, the importance of the stages of economic and subsequent market development, rests on the fact that it provides a useful basis for global market segmentation and target marketing. It is a first hand knowledge for a global marketer towards meeting the desired goals.


FOUR STAGES of Economic/Market Development:

-- Stage 1. Low Income Countries-- Stage 2. Lower Middle Income Countries or Lesser Developed Countries.-- Stage 3. Upper – Middle Income Countries or the Industrializing Countries.-- Stage 4. High Income Countries.

Amity Business SchoolContinued…

Characteristics of LOW- INCOME countries :1. Political instability2. Heavy reliance on foreign aids3. High birth rates4. Limited industrialization5. High population growth6. Low literacy levels7. Very limited markets for productsNB: Importance of chief characteristics from

purchasing power point of view, as also the probable growth in the market place.


The BEM Concept :BEM refers to “big emerging markets”- an

international marketing concept forwarded by Jeffrey E. Carten, in his famous treatise- ‘The Big Ten’. BEM’s are those markets that are growing at a faster rate than the world average market growth, from the current stage where it is at present. And here the marketers sees a wonderful opportunity for growth in their profitability and related issues. The BEM’S are well positioned to move towards the next stage of development – economic as well as market.


Income and purchasing power parity

-- The chief role of the income from consumerism/ consumer buying behavior.

-- Explanation of the concept


Balance of Payments :-- Balance of Payment or BOP, is a

comprehensive record of economic transactions of the residents of a country with the rest of the world during a given period of time.

-- The system generally adopted for recording transactions is the ‘Double Entry Book- Keeping System’


Importance of BOP:

Every nation carrying out economic transactions with foreign countries prepare its BOP accounts periodically :

-- To know/taking stock of its assets and liabilities.

-- To know its receipts from and payment obligations to the rest of the world.


Main Purpose of BOP:

The main purpose of BOP is to present an account of all receipts and payments on account of goods exported, services rendered, and capital received by residents of a country – and goods imported, services received and capitals transferred by the residents of the country.


Division of BOP :-- Into two categories:

A. CURRENT ACCOUNT

B. CAPITAL ACCOUNT


CURRENT ACCOUNT : (what is recorded)- Imports- Exports- Expenses on travel- Transportation- Insurance- Investment incomeNB: All these are related to current

transactions


CAPITAL ACCOUNT: (What is recorded)

- Borrowing and lending of capital - Repayment of capital- Sale and purchase of securities and other assets

to and from foreigners – individuals and governments

NB: Export of commodities to foreign countries adds to the foreign receipts, while imports adds to the payments, that a resident have to make to the foreigners.


IF, EXPORT > IMPORT it is favorable balance of trade

IF, IMPORT> EXPORT it is unfavorable balance of trade.

Balance of Trade : The difference between the value of commodity exports and imports is known as the Balance of Trade.


TRADE PATTERNS :

• Merchandise trade. i.e. trade in commodities- a visible trade

• Services trade, i.e. intangible items for example human resources skills etc, is an invisible trade.


DEGREE OF ECONOMIC COOPERATION: (Four degrees)

a. FTA,(Free Trade Association) meaning to remove all internal barriers to trade among the member nations

b. Customs Union, meaning establishing a common external barriers.

c. Common Market, meaning eliminating the barriers to the flow of factors of production such as labor and capital within the market.

d. Economic Union, meaning fulfilling the all the chief characteristics of an economic union.


Chief Characteristics of an ECONOMIC UNION1. Unified central bank.2. Common policies on agriculture.3. Social services and welfare.4. Transport services requirement.5. Regional development.6. Taxation policy.7. Single currency8. Construction and building infrastructure.9. Political unity requirements.


Importance of Stages of Economic Development :-- For a global marketer or a multinational company, when

interested to enter a new foreign market, the stage in which that targeted region/country is matters most- in designing a marketing plan and strategy.

-- The stage of economic development of a particular country is directly related to the stage of market development in that country.

-- The reference is towards the Income and the purchasing power parity, context – revolving round the international marketing opportunities.


International Trade Alliances :-- GATT and WTO-- IBRD (The World Bank) and IMF-- EU (The European Union)-- NAFTA -- SAFTA-- G8-- G10 and GAB i.e. General Agreement to

Borrow-- OPEC


The Autonomous and Accommodating items in Balance of Payment :

--The autonomous items include all visible or invisible items such as exports, imports, remittances, reparations etc which enter the balance of payments regardless of its position or with motives quite other than to put balance of payments into positive balance. …..Continued…. next slide.


They are in both current and capital accounts.

NB:-- Accommodating items are meant to offset balance of payments deficit or surplus. They include movement of monetary gold from the central bank or sale of foreign currency or increase in foreign liabilities to meet import bill or taking foreign loan to finance deficit etc. Continued…………..


-- Accommodating movements may be made by private or public authorities and may be automatic, unplanned or unforeseen. However, they take place only when other items in the Balance of Payments are such as to leave a gap to be filled.

Amity Business SchoolSDR and Its Importance

SDR Defined :-- --Special Drawing Right’s or SDR’s were created

as a new and additional form of international reserves/liquidity in 1970, under the International Monetary Fund.

-- Countries receive SDR’s as per their share in reserve assets, and have an automatic right to draw them from the IMF- over and above other drawing facilities.

Continued…..


-- A deficit country uses SDR’s for settling deficit by exchanging SDR’s for whatever currency it requires.

-- Other countries accept SDR’s as gold or convertible currencies. Its value is based on the values of a ‘Standard Basket’ of five major currencies.

Amity Business SchoolSDR Continued..

Basket Value of SDR—A group of five currencies namely – US

Dollar, Deutsche Mark, Japanese Yen, French Franc and Pound Sterling- included proportionally on the basis of Country’s size of exports of goods and services during the previous five years. It is used by IMF to determine the vale of SDR’s.


GATT- General Agreement on Tariff’s and Trade

-- A trade treaty that operated from 1948 until 1995, when it was replaced by World Trade Organization (WTO).

-- GATT was technically an agreement, rather than an organization, among various countries called contracting parties.

-- Secretariat at Geneva.------- Continued…


Objectives of GATT:A. Establishing Standards for the non-

discriminatory commercial policies of the contracting parties.

B. Settling trade disputes and encouraging mutual consultation between nations.

C. Discouraging non-tariff barriers and sponsoring tariff reductions.

D. Meeting the above through a series of multilateral negotiations and rounds.

Amity Business SchoolTHE WTO

-- Set up in 1995, following the conclusion of the long-running URUGUAY round of trade negotiations and talk.

-- A body of organizing framework for the smooth application of free trade rules among the interested member nations.

--


Primary functions of WTO:-- A. Administering WTO agreements.B. Act as a forum for trade negotiations.C. Handling trade disputes between member

nations.D. Monitoring the national trade policies of its

members.E. Providing technical assistance and training for

developing member countries.F. To act in coordination with other international

organizations.


Of Particular Importance-- WTO

--- As far as the dispute settlement process of WTO is concerned , countries may complain to the WTO about the behavior of another member, and a disputes panel will then adjudicate. A country that does not abide by the findings of the panel can be subject to countermeasures.


IMPORTANT It should never be forgotten that

companies/firms/corporations/business enterprises are not allowed to make complaints to the WTO. They must persuade a government to do so, for it falls under the world trade laws of WTO, to be accepted by one and all, and the international economic protocol so desires, to be respected in toto. NB: WTO is also charged with advancing the agenda of free-trade with new trade rounds.


IBRD-International Bank for reconstruction and Development

-- A specialized agency of the United Nations, known as the World Bank, with headquarters in Washington DC, its function is to finance development in member countries by making loans to governments or under government guarantee.

-- Set up in 1944 under Bretton Woods agreement to facilitate reconstruction after world war II.

-- All members of World Bank should belong to the IMF.


IMF- The International Monetary Fund

-- Established in 1945, to promote international monetary harmony, monitor exchange rates and monetary policies and to provide credit for countries experiencing problems in terms of deficits in their ‘balance of payments’.

-- The members of IMF have a quota, known as the SDR or the special drawing rights.

-- IMF is funded through quotas paid by members.


GAB and G-10Refers to ‘General Agreement to Borrow’ . Members of GAB are:1. Belgium2. Canada3. France4. Germany5. Italy6. Japan7. The Netherlands8. Sweden9. Switzerland10. The United Kingdom and the US

Amity Business SchoolSAARC

SAARC: ---- South Asian Association for Regional

Cooperation. The first South Asian summit held in Dhaka, Bangladesh in December 1985, culminated in the formation of the South Asian Association for Regional Co-operation.

-- Members of SAARC are: India, Bangladesh, Pakistan,Sri Lanka, Bhutan, Nepal and Maldives.


-- The charter of SAARC provides for annual meetings of the Heads of State and of Governments, and a six monthly meeting of a Council, of Ministers, which is the organizations highest policy making body.

-- A permanent secretariat of the state has been set up at Kathmandu in Nepal.

-- The chairmanship of the organization remains with the country which had hosted the last summit and is transferred to the new host at the time of the next summit.

Amity Business SchoolThe EEC

EEC or the European Economic Community :

--Created under separate treaties signed on March 25, 1957– it became effective from January 1, 1958.

-- EEC is currently a bloc of 15 west European industrial nations, which through a network of agreements are seeking to pool their economies, while retaining their separate national identities. …. Continued….


-- The ultimate goal is a complete customs union, with free flow of goods, service and labor- among all members.

-- Members of EEC currently are- Belgium, France, Germany, Italy,

Luxembourg, Netherlands, Denmark, Ireland, United Kingdom, Greece, Portugal

-- Headquarters of EEC is located in Brussels, Belgium.

Amity Business SchoolASEAN

ASEAN Association of South East Asian Nations : The ASEAN was formed on August 8, 1967 by Indonesia, Thailand, the Philippines, Malaysia and Singapore- to promote active collaboration and mutual assistance in matters of common interest in the economic, social, cultural, technical, scientific and development fields.

-- Currently under ASEAN, there are 10 members.

Amity Business SchoolOPEC

OPEC Organization of Petroleum Exporting Countries :

--OPEC was formed on November14, 1960, to control production and pricing of crude oil. It has been successful in determining world oil prices and in advancing member’s interest in trade and development dealings with industrialized oil consuming nations. …. Continued..


-- Membership of OPEC is open to any country having a substantial net exports of crude petroleum, which has fundamentally similar interests to those of member countries.

-- Members are– Algeria, Indonesia, Iran, Kuwait, Libya, Nigeria, Iraq, Qatar, Saudi Arabia, United Arab Emirates (UAE), Venezuela.

-- Headquarters located at Vienna, Austria.

Amity Business SchoolOAPEC

OAPEC- Organization of Arab Petroleum Exporting Countries

-- The OAPEC was established in 1968, to safeguard the interests of its members and encourage co-operation in economic activity within the petroleum industry. Its members are --- Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, Syria and the UAE.

-- Headquarters at Kuwait.

Amity Business SchoolGroup of Eight/G-8

G-8- Group of Eight originally consisted of the seven wealthiest nations of the world- The USA, UK, Japan, Germany, France, Italy and Canada. However with the admission of Russia at G-7 summit at (DENVER – June 21, 1997) the group was renamed as G-8 in May, 1998.

-- The heads of governments of G-8 countries meet annually at different venues to discuss economic matters and world problems.

Amity Business SchoolNAFTA

NAFTA- North American Free Trade Agreement :

-- A trade agreement between US, Canada and Mexico. The objectives of NAFTA is to promote economic growth and expand trade and investment among member nations.

-- To meet economic challenges in the decades to come.

-- Gradual elimination of trade barriers.

-- Protection of the Intellectual Property Rights.


Social and Cultural Environment:--Culture has a major influence, in international

marketing/ global business environment. -- In global marketing scenario the concept of

consumer buying behavior has a definite role to play.

-- Society and culture affects the consumers decision making process

-- Trend conscious consumers, dictates global marketing of products and services.


Examples of affects of culture in global marketing: (The American Culture)

-- Eating breakfast or sand-witch while moving in a train.

-- Drinking coffee in public places etc.NB: Marketing industrial or consumer goods in

targeted foreign markets is looked from the angle of the stage of economic development - the targeted county is in.

Reference is here to Stage 1 to Stage 4, where the targeted market falls.

Amity Business SchoolMODULE - 3

International Entry and Expansion

Strategies


Decision Criteria for entry :

-- Major decisions in International Marketing

-- Decision criteria for international business


Major Decisions in International Marketing

1. Deciding whether to go abroad or not?

2. Deciding which market to enter?

3. Deciding how to enter the market?

4. Deciding on the marketing program.

5. Deciding on the marketing organization.


Decision Criteria for International Business

This rests on the following specific questions:

-- Importance of the international macro environment. The importance and scope.

-- Advantages and Disadvantages that have to gained/lost, opportunities to be tapped.


The Decision criteria’s are as follows :1. Political Risk2. Market Access3. Factor Cost and Conditions4. Shipping Consideration5. Country Infrastructure6. Foreign Exchange7. Creating a Product Market Profile (The Nine W’s)8. Market Selection Criteria


The NINE W’s of creating a Product Market Profile :1. Who buys our Product?2. Who does not buy our product?3. What need or function does our product serve?4. What problem does our product solve?5. What are customer’s currently buying to satisfy the

need/problem?6. What price are they paying?7. When is our product purchased?8. Where is our product purchased?9. Why is our product purchased?


Strategies for Entering foreign market:

-- It refers to the different routes that is undertaken to enter a foreign market

OR-- The Modes of Entry OR-- Stages of Foreign Market entry


Different routes to enter a foreign market are the following:

1. EXPORTING – A. Indirect Exporting -- B. Direct Exporting2. FOREIGN PRODUCTION -- A. Licensing -- B. Contract Manufacturing/Management Contract -- C. Local Assembly/Investment


Indirect Exporting is one when a third party arranges the documentation, shipping and selling of an organization’s goods abroad.

-- Refers to the lowest level of commitment to international marketing

(The third party refers to independent middlemen – of four types )


Indirect Export through four routes:

1. Domestic-based export merchant– here the middlemen buys the manufacturers products and sells them abroad on its own account.

2. Domestic-based export agent– here the agent seeks and negotiates foreign purchases for a commission. Agents can be in the form of individuals or a group of people involved or trading companies


3. Co-operative Organization– exporting on behalf of several producers and is partly under administrative controls.

4. Export Management Company– manages export for its client for a fee.


Advantages of Indirect Export : 1. Involves less investment2. No spending on export department3. No foreign/overseas sales force required4. No foreign contacts required5. Less risk6. First hand knowledge of the foreign market,

through the middlemen7. Fewer mistake by the seller.


Direct Export:

As foreign sales grow, an organization often begins to make a limited commitment, frequently documenting itself/ deciding to handle their own exports.


Methods of Direct Export :

1. Domestic based export department.

2. Setting up an overseas sales branch office/depot/subsidiary.

3. Appointing and utilizing the service of export sales representatives.

4. Foreign brand distributors or agent


Foreign Production:A. Licensing represents a simple way for a

manufacturer to become involved in international marketing. Here the licensor licenses a foreign company to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty.The licensor gains entry into the foreign market at little risk; the licensee gains production expertise or a well-known product or name without having to start from scratch.


B. Management Contract -- A company can enter a particular foreign market through the management contract route. Here a company can sell a management contract to a party to manage a foreign business such as hotel, hospital etc for a fee. It is a low-risk method of getting into a foreign market, since it yields income from the beginning.


C. Contract Manufacturing : An entry method, where the firm engages local manufacturers to produce the product.

Contract manufacturing’s disadvantage is that there is less control over the manufacturing process. Finally it offers the company a chance to start faster, with less risk, and with the opportunity to form a partnership or buy out the local manufacturer later.


D. Joint Ventures: Joint ventures are a part of foreign investment. It represents an extensive form of participation and commitment towards international marketing. Here foreign investors may join with local investors to create a joint venture in which they share ownership and control. Forming a joint venture might be necessary or desirable for economic or political reasons. The foreign firm might lack the financial, physical, or managerial resources to undertake the venture alone or the particular foreign government might require joint ownership as a condition for entry.


E. Direct Investment --(Ownership and Control /Manufacturing Facilities)

The foreign investment is another route through ownership or through a manufacturing facilities presence.The foreign company can buy part or full interest in a local company or build its own facilities. As a company gains experience in export, and if the foreign market appears large enough, foreign production facilities offer distinct advantages- by securing cost economies, gaining a better image in the host country, developing deeper relationship with the government, customers, local suppliers etc.

Foreign investments are undertaken in the light of long term strategic goals and ambitions of the company.


Investment in Developing Countries:

--Rapidly growing economies, Expanding purchasing power and Expanding markets etc of the developing countries, provides opportunities for the foreign companies to enter a new market. It is linked with the basic tenets of the need of international marketing and the opportunities that any developing country offers.

-- Foreign investments in the developing country can be through joint ventures, through equity stakes in another company, mergers and acquisitions etc.


Market Expansion Strategies

1. Targeting few segments in few countries.

2. Country concentration and segment diversification.

3. Country Diversification and market segmentation concentration.

4. Country and segment diversification.


Stages of Development Models

It refers to the stages in the evolution of the global corporation from a domestic player to international player to multinational player to a global player to transnational player.

Amity Business SchoolModule- 5

Developing product for International

Market


BASIC CONCEPTS

Product Defined :

-- A product is often considered in a marketing sense that can be offered to a market for attention, acquisition, use or consumption – that may satisfy a want or need. Continued……

Amity Business SchoolContinued …

-- A product is something tangible that can be described in terms of physical attributes, such as shape of the product, dimensions of the given product, important components in making of the product, form color and so on.

-- A product is also intangible, which cannot be touched and felt, only experienced of its benefits, for example- engineering services, restaurant services, hotel services etc.


Marketing of ProductsProducts that are marketed include:-- Physical Goods such as automobiles, books

etc.-- Services such as engineering services,

marketing services.-- Persons such as Amitabh Bacchan, Aishwarya

Rai, Sachin Tendulkar etc.-- Places such as Delhi, Agra, Jodhpur etc.-- Organizations such as AIIMS, Escort Heart

Research Institute, NGO’s etc.


The best way to define a product is to describe it as a bundle of UTILITIES or SATISFACTION

A PRODUCT OFFER GIVES -- Status Symbol- in the case with highly

niche product category-- Benefits– whether it is any generic

product or any niche product


FIVE LEVELS OF A PRODUCT

1. Core Benefits– The fundamental benefit or service that the consumer is actually buying.

2. Generic Product– The basic version of the product. For example a ‘car’, a solution for easy transportation. A car can be of many designs and models, and from different manufacturers and of different brand names.


3.Expected Product– what the buyers expect from a product offer, in terms of a set of attributes and conditions.

4. Augmented Products– Expectation of additional services and benefits by the consumer, that distinguishes a company’s offer from the competitors product.

5. Potential Product– meaning all the changes and transformations that the product may undergo in future. It is nothing but a possible evolution of the product. It is distinguishing the market offer.


-- Focus is the Product offer.-- Product is the most crucial element of the

marketing program.-- A company’s product defines its business.-- Pricing, quality, promotion, communication

and distribution policies has importance in product offering.

-- Firm’s competitors and customers are determined by the products it offers.

--Research and Development


Important: Whenever, we as a consumer buy any product, to satisfy our need or want, we are actually looking for a solution. We thus end up buying a solution and return with a brand. Brand is always associated with any product offering – tangible and intangible. This is a generic fundamental fact enshrined with any particular product being marketed or sold in any part of the world.


Brand Defined:

A particular product, or a line of products, offered for sale by a single producer or manufacturer and made easily distinguishable from other similar products by a unique identifying name and or a symbol or term.


Brand Image :The perception of a product formed in the

mind of the consumer which is the result of the symbols and meanings associated with a particular brand. Advertising is often employed to create brand image: e.g. automobile advertising on television commonly sells a lifestyle rather than a mode of transportation.


Brand Marketing :

A strategy in which each of a firm’s product’s is marketed independently, generally under the direction of a brand manager.


Brand Name :

That part of a brand consisting of the actual letters or words; i.e. that part which can actually be vocalized, which comprises the name of the product or service as distinct from other identifying signs, symbols, and designs incorporated into the overall design.


Brand Position :

A products niche in the marketplace. The term ‘position’ refers to the products relationship to competing brands and is generally measured in terms of how the consumer perceives the various attributes attached with the brand.


Brand Positioning / Positioning :Efforts aimed at establishing a product or service

in a particular niche or segment of the market place.

Brand positioning is also referred to as market positioning- where the strategy usually includes those promotional strategies which differentiate the product from competitors and which vividly establish the products image in the minds of the potential customers. Also known as Positioning, product positioning or target positioning.


Products – Local, National, International and Global

The concept of products, when taken from an international marketing perspective rests on the fact that any product, whether it is a national product of one country for use in the same country– can it be marketed into another foreign market? Can it be modified into as per the requirements of the now target country or for…. Continued….


any other world market? These enigmatic questions revolves around the EPRG concept of global marketing management, as also the stage of economic development / market development the particular targeted country is in, at the particular period of time.

-- Should the company focus on the production of products for each particular market ?


LOCAL PRODUCTS :

-- Products available in the portion of the national market

--Sometimes hailed under the category of regional products

-- These products may be new products that the company is introducing.

-- Local products are products exclusively distributed in a particular region.


National products

-- Product that is offered in a single national market

-- Product specially developed for a particular country.

-- Products that are not sold outside the home country.


International Products :-- Offered in multinational and regional markets.-- A multiregional product can become an

international product.[The Gist is that initially a product can be a great

player in a regional market, and having the quality to become an international player, it can come out of the regional market, and can also be a player and thus marketed into other targeted world markets- through the route of acquisition or joint venture or any other specific route.]


Global Products and Global Brands

-- The global products are offered in global markets and in every part of the world – and in every economic development stage country.

-- Some products are specially designed to target all the world market.

-- Some products specially made for a particular national market, can also be marketed in other country market.


Important:

The concept of Global Products revolves around the concept of Global Brands.

Please Note:

A product is not a brand. Any Global brand like the generic concept of brand has a general perception and image.


Examples of Global Brand: VOLVO MERCEDES BENZ AUDI BMW VOLKSWAGEN TOYOTA HONDA MARLBORO COKE


A Global brand has :

-- SIMILAR IMAGE

-- SIMILAR POSITIONING

-- GUIDED BY THE SAME STRATEGIC PRINCIPLES

-- MARKETING MIX MAY VARY FROM COUNTRY TO COUNTRY


Only Difference between a global product and global brand is that --- it does not carry the same name and image from country to country.

-- A great global product can be sold in the home country by a different name and the similar product can be sold in other world market by a different name.


Should a global product be turned into a global brand?

For this:-- Name should be standardized-- Image should be standardized

Please Note: The definition of standardized product follows in the slides concerning ‘IPLC’ segment, later


International Product Life cycle


IPLC Theory

The international product life cycle theory (IPLC) describes the ‘diffusion process of an innovation’ across national boundaries.


The Whole game of IPLC, has the following characteristics:

--The International product life cycle begins when a developed country, having a new product to satisfy consumer needs, wants to exploit its technological breakthrough by selling abroad.

-- Other advanced nations soon start up their own production facilities, and before long less developed countries do the same.


Continued from last slide…

-- Efficiency/comparative advantage, thus shifts from developed countries to developing nations.

-- Finally, advanced nations, no longer cost effective, import products from their former customers.


The understandingThe entire result of the great game of the

stages encircled with its particular characteristics- is governed by the fact that in the end the initiating country and the advanced nations become a victim of its own creation.

NB: The IPLC is examined from the marketing perspective, and marketing implications for both innovators and initiators are taken from the paradoxical angle of marketing only.


Stages of IPLCThe stages of international product life cycle

begins from Stage 0 to Stage 4.STAGE 0 --- Local InnovationSTAGE 1 --- Overseas InnovationSTAGE 2 --- MaturitySTAGE 3 --- Worldwide ImitationSTAGE 4 --- Reversal


The generic diagram concerning the IPLC may be referred.

NB: The curves in the IPLC shows curves for the same innovation: one for the initiating country, one for other advanced nations, and one for the Less developed countries.

-- For each curve, net export results when the curve is above the horizontal line, and when the curve is under the horizontal line, net import results from that country.


Why USA as a initiating country?As far as the curves related to the international

product life cycle is concerned, it has been universally accepted that a developed nation having all the technical knowhow, expertise etc that is required to develop a product--- after identifying the need and demands of a particular product a company in a particular country, initiates that product in its home market initially. This is the beginning of the diffusion of the innovation process concerning the international product life-cycle. Continued……………


Why USA…….?

Since many of the products found in the world’s markets were originally created in the USA, before being introduced and refined in other countries and in most instances, regardless of whether a product is intended for later export or not, an innovation is initially designed with an eye to capture the US market, the largest consumer nation in the world.


Stages of International Product Life

Cycle (IPLC) and their Characteristics


Stage 0 – Local Innovation

-- Represents a life cycle stage when any initiating country takes the first leap in manufacturing the product for the first time in the world, thereby beginning the story of the familiar life-cycle stage, in operation within its original market.

-- Innovations are most likely to occur in a highly developed countries because consumers in such countries are affluent and have relatively unlimited wants.


Stage 0 …………….

-- At this stage firms in advanced nations have both the technical know-how as well as abundant capital to develop new products.


Stage 1 : Overseas InnovationAs soon as the new product is developed and

initiated by the initiating country following syndromes will happen:

-- Original market will get well cultivated.-- there will be demand for the all new offering.-- Local demands of the product will be adequately

supplied.-- Many prospective consumers/user of the product

will come to learn about the utilities and satisfaction to be derived from the product.


Important:

It is at this stage only that, the innovating firm will look to overseas market in order to expand its sales and profit.

-- Stage 1 is also called as the ‘Pioneering Stage’ or ‘International introduction’ stage.


In the Stage 1, the technological gap is first noticed in other Advanced nations due to their similar needs and high income levels.

(Concept of the Stages of Economic

Development runs here)


Competition in Stage 1

--Competition at this stage usually comes from US firms, since firms in other countries may not have much knowledge about the innovation.

-- Production costs tend to decrease at this stage for the competitive firms, because by this time the innovating firm will normally have improved the production process.


-- Aggressive overseas sales also help decline the production costs.

-- The scenario gives the intangible feeling of the ‘Economies of Scale’.

-- the price of the product at this stage is high, since because of the technological breakthrough, costs need to be recovered, in addition to the recovering of the price incurred in marketing efforts.


The final word for Stage 1 is that– there will be more exports from the USA, and increase in imports by other developed nations.


Stage 2 – Maturity

-- Growing demand in advanced nations, will lead firms to conceptualize the product, and learn to make it in their home country.

-- Local production will start in advanced nations


Stage 2 …… continued..-- Competition grows more at this stage.-- More players in the market place.-- Innovating firm’s sales see the light of the start

of suffering, at the cost of advanced nations products, but still the export level remains stable.

-- The LDC’s now enter the imitation field.-- Introduction of the product in LDC’s helps offset

any reduction in export sales to advanced nations.


Stage 3 – World Wide imitation

-- This stage is generally considered as the beginning of heavy competition among the advanced nations firms.

-- This is the stage where copy cats work, in the form of re-engineering, me-too products, made in different forms and styles, having the same USP’s, differentiation is tried at every angle of the product make……


-- Tough times for the initiating nation.

-- Loss of market share for the initiating firm- to products from other advanced nations and LDC’s.

-- No more new demand anywhere for the initiating country to cultivate.

-- Effect on the economies of scale for the initiating nation.


-- Now the production cost for the initiating nation rises, on account of the new players using the comparative advantage philosophy.

-- Firms in other advanced nations use their lower prices, coupled with product differentiation techniques in place.

-- Worldwide imitation is faster at this stage.


-- The initiating country’s export declines very fastly and rapidly reaching nil.

The Final word for Stage 3--- At this stage US production or the initiating nation production still remaining, is basically cornered from the world market- and is left for the local consumption only. Once an initiating country, now only a small player in its national market – facing competition from products from other advanced nations. A great paradox of the business macro environmental scenario.


A great paradox of the business macro environmental scenario. The greatest Example for stage 3:

Among the 30 different companies selling cars in the U.S.A., with several more on the rise, of these only two players – General Motors and Ford are US firms. The rest are from Western Europe, Japan, South Korea, and others/


Stage 4– Reversal

-- In this stage two functional characteristics makes appearance

A. Product Standardization

B. Comparative Disadvantage


-- The innovating country’s comparative advantage becomes country’s disadvantage.

-- The product is no longer capital –intensive or technology – intensive.

-- The above becomes a comparative advantage for LDC’s, for they possess those advantage – looking from all point of scale in the development of international business, married to the ‘Economies of Scale’.


The final word for Stage 4:The Less Developed countries are the

last IMITATORS. They establish sufficient productive facilities to satisfy their own domestic needs as well as to produce for the biggest market in the world, USA. And also targeting other advanced nations market. Finally targeting world market.


STANDARDIZED PRODUCT Defined

A product developed for one national market and then exported with no change to international markets.


The Moral of the Whole Game of

International Product Life Cycle

The initiating nation becomes a victim of

its own creation


PRODUCT POSITIONING


Positioning defined

A marketing strategy that will position a company’s products and services against those of its competitors in the mind of the consumers.


Achieving Positioning Success

To achieve positioning success, three generic competitive strategies are employed which a particular company can follow.

The three winning strategies are:

1. Cost Leadership-- the company tries to achieve lowest costs of production and distribution.


2. Differentiation--- making use of specific marketing mixes.

3. Focus--- paying attention to a few market segments.

Differentiation defined- Differentiation is the act of designing a set of meaningful differences to distinguish the company’s offer from competitor’s offer.


Criteria for different positioning1. Important- Product delivers a highly

valued benefit to a sufficient number of buyers.

2. Distinctive: The difference is either isn’t offered by others or is offered in more distinctive way by the company.

3. Superior: The difference is superior in other ways to obtain the same benefit.


4. Communicable: The difference is communicable and visible to buyers.

5. Pre-emptive: The difference cannot be easily copied by competitors.

6. Affordable: The buyer can afford to pay the price for the difference.

7. Profitable : The product is profitable for the company.


International Market positioning

The above criteria for differential positioning is summed up in the context of international marketing management also. Thus the general strategies for product positioning in international marketing / global business are:

Continued….


1. ATTRIBUTE OR BENEFIT2. QUALITY / PRICE3. USE / USER4. HIGH-TECH POSITIONING5. HIGH-TOUCH POSITIONINGNB: 1,2 and 3 are considered to be general

product positioning tenets, whereas 4 and 5 are two special positioning that is considered for international product.


Attributes in the form of a. Featuresb. Performancec. Durabilityd. Reliabilitye. Reparabilityf. Styleg. Design.


Importance of high-tech positioning High tech positioning can be applied under

two categories of product offers.1. Technical Products such as

Computers, Chemical, Technical Financial products requiring special; care and expertise while selling, etc.

2. Special Interest Products such as bicycles, Adidas Shoes etc.


High-Touch Positioning

Here more emphasis is given on IMAGE.

Examples:

A. Products solving a common problem, such as thirst problem solved by a cola drink, coffee drink, etc. a birthday cake, a birthday card etc. This category actually uses ‘products important’ from day to day particular important moments / special moments of life.


B. Global Village Products – i.e. those products that enhance the consumers all over the world. Examples can be: Levis Jeans or other Jeans brands, Marlboro , Mc Donald, Ferrari, Harley-Davidson etc.

NB: Global Village products are mostly those products that has a cosmopolitan touch, in its essence, and the users have mostly cosmopolitan nature/culture outlook.


C. Products with a universal theme- those product category that have a universal acceptance such as:

--- Photographic Cameras- Yashika, Canon, Sony, Panasonic

--- Electronic Gadgets etc – Casio Calculating instruments, defence related electronic gadgets,


Product Design Considerations:Product design is a key factor in determining

success in global marketing.Questions that arise concerning product

design decisions:1. Should there be an adaptation of the

product for various national markets?2. Should a company offer a single

design for the global market?


Important factors to be considered in product design:

1. PREFERENCES and TASTES / CHOICES.2. COST – (talking about the economies of

scale)3. LAWS and REGULATIONS – (i.e. compliance

with laws and regulations in different countries, where the product is to be made)

4. COMPATABILITY – (i.e. understanding the products compatibility with the environment)


Geographic Expansion in International

Marketing

(THE STARTEGIES)


Introduction Companies can pursue three generic basic global

strategies to penetrate foreign markets:1. STRAIGHT EXTENSION i.e. adapting the same

product or communication policy used in their home market.

2. ADAPTATION STRATEGY i.e. adapting as per the market situation. This enables the firm to cater to the needs and wants of its foreign customers.

3. INVENTION STRATEGY i.e. products are designed from scratch for the global market place.


Please Note--- The three basic strategies above are further clubbed into five distinguished strategic options:

A. Strategy 1– Product and Communication Extension- Dual Extension.

B. Strategy 2 – Product Extension and Communications Adaptation.

C. Strategy 3– Product Adaptation- Communication Extension.

D. Strategy 4 – Product Adaptation and Communication Adaptation (Dual Adaptation)

E. Strategy 5 – Product Invention


Strategy 1. Product and Communication Extension – Chief Characteristics

A. Marketing a standardized product using a uniform communications strategy- i.e. companies pursuing this strategy sell exactly the same product with the same advertising and promotional appeals as used in the home country.

Continued……


B. Best strategy for the new entrants in the global arena.C. Best strategy for the small companies with limited / few

resources.D. Dual Extension also works when company targets a

‘global segment’ with similar needs.Important: Generally speaking, a standardized product

policy coupled with a uniform communication strategy offers substantial savings coming from economies of scale.

NB: This strategy is basically product driven rather than market driven.


Strategy 2- Product Extension and Communications adaptation

Chief Characteristics: Due to differences in the cultural or competitive environment:

A. Same product is often used to offer benefits or functions, that dramatically differ from those in the home market.

B. Gaps between the foreign and home market drive companies to market the same product using customized advertising campaigns.


D. Customized advertising campaigns is adopted for this strategy for different country market.

E. This strategy entails ‘the economies of scale’ on the manufacturing side.

F. Potential savings of the firm is spent on advertising front.


Strategy 3 – Product Adaptation- Communications Extension

Chief Characteristics:

A. Firms adapt their product, but market it using a standardized communications strategy.

B. Local market circumstances favour the case of product adaptation.

C. Company’s expansion strategy is also the reason for strategy 3. Continued………..


Strategy 4- Product adaptation and communications adaptation (Dual Adaptation)

Important: Demand for a dual adaptation strategy. Why?

Because of:

1. Difference in cultural environment

2. Differences in physical environments


Strategy 5– Product InventionProduct invention means creating something

new. It can take two forms:1. Backward Invention, reintroducing

earlier product offers that are well adapted to a foreign country’s need.

2. Forward Invention, creating new products to meet a need in another country.


Standardization versus Customization

A recurrent theme in global marketing is whether companies should aim for a standardized product offer or customized or country tailored product strategy.


• Standardization means:--- Offering a uniform product on a regional

or world wide basis.--- Minor alternations are usually made to

meet local regulations or market conditions

-- A standardized / uniform product capitalizes on the common platform requirements across countries.


Customization means

Under customization process management focuses on cross-border differences in the needs and wants of the firms target customers. Under customization, appropriate changes are made to match local market conditions.


New Product DevelopmentDefinition of New Product– Any product offer that consumers regard as an addition to

their available choice can be regarded as a ‘new product’. A new product can be:

-- an original invention.-- a modification of an existing item.-- the firm’s own version of a product already supplied by a

competitor or-- merely a change in how an item is packaged and

presented.


Process of product developmentThe process begins with the ‘Idea Generation’--- In considering the feasibility of an idea it is

necessary to define the concept of the intended new item such as :

a. What it will do?b. The benefits it will provide to customersc. Its market position.d. How will it differ from current or possible future

products offered by competing businesses.


International Test Marketing/Testing in national market

Introduction: Prior to committing itself to marketing a new consumer product on a global scale, a company will usually select a number of areas in different parts of the world where it can test its entire marketing program.


Factors calling for testing new product

1. Testing lowers the risk of subsequent failures.

2. Establishes or refutes the validity of the basic concept of the new product.

3. Provides a basis for forecasting future sales.


Most important:

Each group of companies in which the item is to be sold, the company needs to identify towns, cities, or rural locations that possess characteristics as near as possible to the averages for the region as a whole.

Amity Business SchoolDUMPING

Dumping takes place when a firm or an industry sells products in the world market at prices below the cost of production.

REASONS Generally a company dumps when it wants to

dominate a world market. After the lower prices of the dumped goods have succeeded in driving out all the competition, the dumping company can exploit its position by raising the prices of its product.


Important: Whatever the motivation for dumping may be –

A. Disposal of surplus stock orB. Penetration of markets etc. Dumping is basically an unfair trading

practice under WTO regulations. Hence the governments of affected countries are allowed to impose special import taxes on offending products.

Amity Business SchoolGray Market

Important characteristics-- Gray market channels refer to the legal export / import

transactions involving genuine products into a country by intermediaries other than the authorized distributors.

-- From the importers side it is known as ‘Parallel Imports’.

-- Distributors, wholesalers and retailers in a foreign market obtain the exporters product from other business entity. Thus the exporters legitimate distributors and dealers face competition from others who sell the product at reduced prices in that foreign market.


Conditions necessary for Gray Market:Three Conditions are required:1. Products must be available in other markets.2. Trade barriers such as tariff, transportation

costs and legal restrictions must be low enough for parallel importers to move the products from one market to another.

3. Price differentials among various markets must be great enough to provide the basic motivation for gray markets.


Role of Services in global economy

SERVICE DEFINED– A service is an act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical products

Examples: Restaurant / Hotel services, Engineering services, services required for manufacturing a product etc.


Outsourcing of Service activities: It refers to service procurement activities on a global basis in the same way they procure components and finished products.

-- Because the production and consumption of some services do not need to take place at the same location or at the same time, global sourcing of services is a viable strategy.


Outsourcing of service activities relates to:-- Reducing costs and improving the corporate

focus, that is concentrating on the core activities of the firm.

-- Reducing time to implement internal processes. -- Sharing risk in an increasingly uncertain

business environment.-- Improving customer service.-- Improving access to expertise not available in-

house.

Amity Business SchoolAPPENDIX--a

Important Comment on ‘New’ ProductInventing and bringing to the market a completely new

product can be enormously expensive, and the risk of failure is high. For it has been seen that the majority of new inventions with a commercial application are financially unsuccessful. Hence there is a strong incentive for firms to develop current product offerings, introduce complimentary products, diversify product lines and duplicate competitors best selling items rather than invest in basic technical research leading to completely new product concepts.

Amity Business SchoolAPPENDIX-- b

Standardization versus Customization

While the standardization has a product driven orientation– lower your costs via mass production- customization is inspired by a market driven orientation- increase customer satisfaction by adapting the product to local needs.

Documents

18926113 International Marketing Ppt Vivek Kumar