International Market[1]

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International MarketingOxford University Press,

All rights reserved

Chapter 1

The Concept of

International Marketing


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All rights reserved

Globalization

Globalization of production

Globalization of markets


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Globalization index

economic integration: trade, portfolio, foreign directinvestment, and investment income

personal integration: telephone, travel, remittances,

and personal transfers

technology integration: internet users, internet hosts,

and secure internet services

political integration: international organization, UN

peacekeeping, treaties, and government transfers


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Globalization index (contd)

Rank Country

1 Ireland2 Singapore3 Switzerland4 Netherlands

5 Finland6 Canada7 United States8 New Zealand9 Austria

10 Denmark61 India


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Competition

Consumer

MarketingChallengesin country Z

MarketingChallengesin country Y

MarketingChallengesin country X

Place

Promotion

Price

(Controllables)

Product

Legal

SocioCultural

Competition

Political

Economic

Infrastructure

Domestic EnvironmentalChallenges

(Uncontrollables)

Political

Overseas EnvironmentalChallenges (Uncontrollables)

Legal

LogisticsGeography

Political

Economic

Domestic marketing and international marketing decisions


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Reasons for entering international markets

growth profitability

achieving economies of scale

risk spread access to imported inputs

uniqueness of product or servies

marketing opportunities due to life cycle spreading R&D cost


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Evolutionary process of global marketing

Domestic marketing:

Marketing Focus domestic

Orientation ethnocentric

Marketing Mix Decisions focussed on domestic

customers


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Evolutionary process (contd)

Export marketing:

Marketing Focus overseas (targeting and entering

foreign markets)

Orientation ethnocentric

Marketing Mix Decisions focussed mainly on domestic

customers

overseas marketing-generally anextension of domestic marketing

decisions made at headquarters


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Evolutionary process (contd)

Multinational marketing:

Marketing Focus consolidation of operations on

regional basis

gains from economies of scale

Orientation regiocentric

Marketing Mix Decisions product standardization withinregions but not across the region


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Adaptation

Strategy to isolate self-reference criteria

Step 1: define the business problem or goal in terms ofthe home-country traits, habits or norms

Step 2: define the business problem or goal in terms ofthe foreign country cultural traits, habits, or

normsStep 3: isolate the SRC influence in the problem and

examine it carefully to see how it complicates theproblem

Step 4: redefine the problem without the SRC influenceand solve for the optimum business goal situation


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EPRG concept

ethnocentric orientation polycentric orientation

regiocentric orientation

geocentric orientation


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Theories of international trade

theory of mercantilism

theory of absolute advantage

theory of comparative advantage factor endowment theory

theory of international product life cycle

theory of competitive advantage


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Chapter 2

Emerging Opportunities

inInternational Markets


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Trends in world trade

0

100

200

300

400

500600

700

Value

(Billion

US$)

Un

ited

Sta

tes

Ja

pan

China

Can

ada

Netherla

nds

India

Exporting Country


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Trends in world trade (contd)

0

20 0

40 0

60 0

80 0

1000

1200

1400

Value(BillionUS

$)

UnitedStates

G

ermany

UnitedKingdom

Japan

France

China

Italy

Canada

Neth

erlands

HongKong,China

India

Importing Coun t


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0

50

10 0

15 0

20 0

25 0

30 0

Valu

e(Billion

US$)

Leading exporters in world trade in commercial Services2002


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Leading importers in world trade in commercial

services 2002

Source : World Trade Organization.

0

50

100

150

200

250

Value(BillionUS$)

Unit

ed

Stat

es

Jap

an

Fran

ce

Netherlan

ds

Cana

da

India

Importing Country


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0%

20%40%60%

80%100%

Percentag

e

1965 1970 1980 1995 2000 2001

Years

Food Agricultural raw material

Ores and metals Fuels

Manufactured goods

Composition of world merchandise exports


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0

1000000

2000000

3000000

4000000

5000000

(F.O.B.

US$

Million)

1980 1990 1995 2000 2001 2002

Years

Developed Market Economy C ountries

Developing Countries & Territories

Countries in Central and Eastern Europe

Direction of world exports


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World Trade OutlookProjections

2002 2004 2005

A World Output

Other emerging market and developingeconomies

Commonwealth of Independent States(CIS)

3.04.6

5.1

4.6

6.0

6.0

4.4

5.9

5.2

B World Trade Volume (goods and services) 3.1 6.8 6.6

C World Trade Prices (in US$ terms)

Manufactures

Oil

Non-fuel primary commodities

2.4

2.5

0.5

7.7

3.8

7.6

1.4

-10.0

-0.8

D Emerging Market and Developingcountries; Private capital flows (net) inUS$ billion)

47.0162.9 100.9

World Economic Outlook


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An overview of Indias foreign trade

India's Foreign Trade

0

20000

40000

60000

80000

19

51-52

19

55-56

19

59-60

19

63-64

19

67-68

19

71-72

19

75-76

19

79-80

19

83-84

19

87-88

19

91-92

19

95-96

1999-

20

03-04

Years

US$(Million)

Exports Imports


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Composition of Indias trade

0%10%20%30%40%50%60%70%80%90%

100%

Percenta

1999-

2000

2000-01

2001-02

2002-03

2003-04

(Apr.-

Jan.)

Years

Composition of India's Trade : Export

Agriculture & allied Ores and minerals

Manufactured goods Crude & petroleumproducts

Others & unclassified items


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Composition (contd)

0%20%40%60%80%100%

Percent

age

1999-2000

2000-01

2001-02

2002-03

2003-04

(Apr.-Jan.)

Years

Composition of India's Trade : Import

Food and allied products Fe rtilize rs

Pape r board, manufacture s & ne ws print Capital goo ds

Others Unclassified items


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Direction of Indias trade : exports

0%10%20%30%40%50%60%70%80%90%

100%

Percentag

1960-61

1970-71

1980-81

1990-91

1995-96

1998-99

1999-00

2000-01

2001-02

2002-03

Years

OECD OPEC Eastern Europe Others LDCs** Others


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Direction imports (contd)

0%

10%

20%

30%

40%

50%

60%

70%80%

90%

100%

Percentage

1960-6

1

1970-7

1

1980-8

1

1990-9

1

1995-9

6

1998-9

9

1999-0

0

2000-0

1

2001-0

2

2002-0

3

Years

OECD OPEC Eastern Europe Others LDCs** Others


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Balance of trade

Source : Based on

DGCI&S data

-16000

-14000

-12000

-10000

-8000

-6000

-4000

-2000

0

2000

1950-51

1953-54

1956-57

1959-60

1962-63

1965-66

1968-69

1971-72

1974-75

1977-78

1980-81

1983-84

1986-87

1989-90

1992-93

1995-96

1998-99

20

01-02

Years

US$(Million)

Trade Balance


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Gains from international markets

to measure the benefits derived by a nation fromexports, terms of tradeis a widely used instrument

terms of trade : a measure of relative changes in import

and export prices of a nation expressed as the ratio ofprice index of its exports to price index of its imports


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Terms of Trade

Net Terms of Trade : Unit value index of exportsexpressed as a percentage of unit value index ofimports

Gross Terms of Trade: Volume index of imports

expressed as a percentage of volume index of exportsIncome Terms of Trade: Product of net terms of tradeand volume index of exports expressed as apercentage


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Terms of Trade (base year 1995= 100)

0

20

40

60

80

100

120

140

160

1995=10

1980 1990 1998 1999 2000 2001

Years

Developed Countries Developing Countries


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Indias Terms of Trade (base year 1978-79= 100)

Source : DGCI&S

0

100

200

300

400

500

600

700

800

900

(Base1978-79=1

1970-71 1980-81 1990-91 2000-01 2001-02 2002-03

Years

Gross Net Income


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Key issues in Indias export growth

Developing a proactive approach to international

trade

Promoting Foreign Direct Investments

Promoting Competitiveness

Simplification of procedures

Encouraging large-scale manufacturers

Reducing transaction costs

Infrastructure development


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Key issues (contd)

Entrepreneurship facilitation Strengthening SEZs

Encouraging SMEs

Devolution of power to states

Abolition of indirect taxes for certain sectors

Strategy for promoting services export


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International MarketingOxford University Press, All rights reserved

Identifying opportunities in international

markets

Extreme focus product strategy

Products-country matrix strategy

Growth-share matrix of exports

Market focus strategies


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Chapter 3

World Trade Organization:

international marketing implications


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Major implications of WTOs multilateral

trade regime

Security of access of international markets

Stability of access to international markets

Implications for importers of raw materials and

other inputs


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From GATT to WTO

Year Round/Name Countries Average Tariff

Cut (%)

1947 Geneva 23 35

1949 Annecy 13 NA

1951 Torquay 38 251956 Geneva 26 NA

1960-61 Dillon 26 NA

1964-67 Kennedy 62 35

1973-79 Tokyo 102 33

1986-94 Uruguay 123 36


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Functions of WTO

Facilitates the implementation, administration, andoperation of the trade agreements

Provides a forum for further negotiations among

member countries on matters covered by theagreements as well as on new issues falling within its

mandate

Responsible for the settlement of differences and

disputes among its member countries


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Functions (contd)

Responsible for carrying out periodic review of the

trade policies of its member countries

Assists developing countries in trade policy issues

through technical assistance and training programmes

Encourages cooperation within the international

organization


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Principles of multilateral trading systemunder WTO

Trade without discrimination Most-Favoured Nation (MFN) treatment

National treatment

Gradual move towards freer markets through

negotiations

Increased predictability of international

marketing environment

Promoting fair competition in international

markets


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WTO agreements

An umbrella agreement (the agreement establishing

WTO)

Agreements for each of the broad areas of trade

covered by WTO

goods

services

intellectual Property

Dispute settlement

Review of governments trade policies

G l A t T iff d T d


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General Agreement on Tariffs and Trade(GATT)

Increasing opportunities for goods in international markets

Creating marketing opportunities in the industrial section

Reduction in Tariffs

Tariffs Bindings

Creating fairer markets in agriculture sector

Elimination of non-tariff measures through the ratifications

process

Binding against further increase of tariffs

Domestic support Export subsidies

Opening up marketing opportunities in textiles


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Standards and safety measures forinternational markets

Agreement on Sanitary and Phytosanitary (SPS)

Measure sets out the basic rules on food safety and

plant health standards

Agreement on Technical Barriers to Trade (TBT)

ensures that regulations, standards, testing, and

certification procedures do not create unnecessary

obstacles to trade


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General elements of GATS

General Agreement on Trade in Services (GATS) are first

and only set of multilateral rules governing international

trade in services

The main text containing general obligations and

disciplines Annexes dealing with rules for specific sectors

Individual countries specific commitments to provide

access to their markets and also indicting sectors where

countries are temporarily not applying the Most-

Favoured-Nation principle of non-discrimination


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Trade in services is much more diverse compared totrade in goods and GATS address this diversity throughrules governing:

movement of natural persons

financial services

telecommunications

air transport services

Complexity of international trade in services


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Agreement on Trade Related Aspects of

Intellectual Property Rights (TRIPS)

Lays down minimum standards for the protection of

intellectual property rights as well as the procedures

and remedies for their enforcement. It establishes amechanism for consultations and surveillance at the

international level to ensure compliance with these

standards by member countries at the national level.


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Top ten users of anti-dumping measures 1995-2003

379 329 274180 166 163 122 109 73 72

2416

0

500

1000

1500

2000

2500

India

Europ

ean

Union

So

uth

Af

rica

Canada

Mexico

Al

l

countries

Country


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Emergency protection from imports

A WTO member may restrict imports of a producttemporarily (take safeguard actions) if its domestic

industry is seriously injured or threatened with injury

caused by a surge in imports

The WTO agreements on safeguards prohibit grey-

area measures, and it sets time limits ( a sunset clause)

on all safeguard actions


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Procedure of settlement of international trade

disputes

Consultation

Panel established

Terms of reference composition

Panel examination

Interim review stage


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60 days Consultations, mediation, etc.45 days Panel set up and panelists appointed

6 months Final panel report to parties

3 weeks Final panel report to WTO members

60 days Dispute settlement body adoptsreport (if no appeal)

Total One Year (without appeal)

60-90 days Appeal resort

30 days Dispute settlement body adoptsappeals report

Total 15 months (with appeal)

Time frame for settlement of internationaltrade disputes

Th i li ti f WTO i t ti l


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The implications of WTO on internationalmarketing

Binding of concessions and commitments

Valuation of goods for customs purposes (Agreementon Customs Valuation)

Use of pre-shipment inspection services (Agreementon Pre-shipment Inspection)

Import licensing precedures (Agreement on ImprotLicensing Procedures)

Rules applicable to exports

Anti-dumping and countervailing action


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Chapter 4

Scanning the International Economic

Environment

I t ti l i i tit ti


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International economic institutions

World Bank Group

International Bank for Reconstruction and

Development (IBRD)

International Development Association (IDA)

International Finance Corporation (IFC)

Multilateral Investment Guarantee Agency (MIGA)

International Centre for Settlement of Investment

Disputes (ICSID)

International Monetary Fund (IMF)


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Special Drawing Right (SDR)

An international reserve asset introduced by the IMF in

1969 SDR are allocated to members countries (as

book-keeping entries) as a percentage of their quotas

Th U it d N ti C f T d d


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The United Nations Conference on Trade andDevelopment (UNCTAD)

Established in 1964 UNCTAD aimed at integratingdeveloping countries into the world economy

Basic functions includes:

serve as the focal point within the United Nations for

the integrated treatment of trade and developmentissues

undertake research, policy analysis, and data collection

in order to provide substantive inputs to experts

facilitate cooperation with other organisations anddonor countries and provide technical assistance

to member countries


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Common Fund for Commodities (CFC)

Established in 1989 with the following objectives: To serve as a key instrument in attaining the agreed

objectives for the integrated programme for

commodities adopted by UNCTAD To facilitate the conclusion and functioning of ICAs

(international commodity agreements), particularly

concerning commodities of special interests to

developing countries


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GSP is a non-contractual instrument by whichindustrialized countries unilaterally and on the basis ofnon-reciprocity extend tariff concessions to developingcountries

EU GSP Scheme:

Special Incentive Scheme

US GSP Scheme

Generalized System of Preferences (GSP)


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World Intellectual Property Organization(WIPO)

Established in 1970 as an international organisation toprotect the rights of creators and owners of intellectualproperty the worldover

Main functions:

Advice and expertise in the drafting and revision ofnational legislation important for whose WIPO

member states with obligations under TRIPS

agreement Comprehensive education and training programmes

at national and regional levels

i C ( C)


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International Trade Centre (ITC)

Created by GATT in 1964 ITC works in six areas:

Product and market development

Development of trade support services

Trade information

Human resource development

International purchasing and supply management

Needs assessment and programme design for tradepromotion

I t ti l i i t ti


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International economic integration

Major reasons for economic integration are:

Neighbouring countries generally have a common

history and interest and they are more willing to

cooperate in each others policies

Consumer tastes are likely t o be similar and

distribution channels can easily be established in

adjacent countries

The distances that goods need to travel between

such countries are shortened

T pes


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Preferential Trading Agreement (PTA)

Member countries reduce import tariffs on identifiedproducts from one another

Free Trade Area (FTA)

Member countries remove all tariffs and non-tariff barriersamong themselves but are free to maintain their own tariffs

and non-tariff barriers with non-member countries.

Customs Union

In addition to eliminating trade barriers among membercountries, a common external trade policy is adopted fornon-members

Types


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Common MarketAll restrictions on cross-border investment, movement of

labour, technology transfer, management, and sharing of

capital resources are eliminated to form a common market

Economic Union

The member countries in an economic union maintain a

fiscal discipline, stability in exchange rates, and stability

in interest rates by way of unified monetary and fiscalpolicy

Types (contd)


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Major regional trade blocks (RTAs)

High-income and low and middle-income

economies Asia-Pacific Economic Cooperation (APEC)

European Union (EU)

North American Free Trade Area (NAFTA)

Latin America and the Caribbean

Association of Caribbean States (ACS)

Andean Group

Group of Three Latin American Integration Association (LAIA)

Southern Cone Common Market (MERCOSUR)

Major RTAs


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Africa

Common Market for Eastern and Southern Africa (COMESA)

Economic Community of West African States (ECOWAS)

Southern African Development Community (SADC

Middle East and Asia

Association of south-East Asian Nations (ASEAN)

Bangkok Agreement

East Asian Economic Caucus (EAEC) Gulf Cooperation Council (GCC)

South Asian Association for Regional Cooperation (SAARC)

Major RTA s(contd)

Indias participation in RTAs


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Indias participation in RTAs

Framework Agreement on comprehensive economic

cooperation between ASEAN and India

Bangladesh-India-Myanmar-Sri Lanka-Thailand

economic cooperation (BIMST-EC)

Indo-Sri Lanka Free Trade Agreement Bangkok Agreement

Framework Agreement for establishing free trade

between India and Thailand

SAARC preferential trading agreement (SAPTA)South Asian Free Trade Agreement (SAFTA)


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Chapter 5

International Marketing Research


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International marketing research

a study conducted to assist decision-making in more

than one country

research that crosses national borders and involvesrespondents and researchers from different countries

and cultures

Ch ll


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Challenges

overlooking cross-cultural market behaviour employing standardized research methodologies

across the international markets

using English as a standard language for marketcommunication

inappropriate sample selection

misinterpretation of cross-country data

failure to use locals to conduct field surveys


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Cross-cultural marketing behaviour and

research

The collective programming of the mind whichdistinguishes the members of one group or category

from the other

Comparison of cross-cultural behaviour


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Comparison of cross-cultural behaviourPower distance

the degree of inequality among the people that are viewed

equitably

Individualism vs. collectivism the tendency of people to look after themselves and their

immediate familys interests alone

Masculinity vs. femininity

masculine societies, the dominant values emphasize work

goals such as earnings, advancement, and success

feminine society are achievement of personal goals such as

quality of life, care for others, and friendly atmosphere

Uncertainty avoidance

lack of tolerance of ambiguity and the need for formal rules

Comparison of cross cultural behaviour


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Cultural context

The context of a culture has crucial implications in

communicating and interpreting verbal and non-verbal

messages

Cultural homogeneity

homophilous culture: countries where people share the

same beliefs, language, and religion

heterophilous culture: countries that have a fair amount

of differentiation in language, beliefs, and religion

Comparison of cross-cultural behaviour

Process


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Process

Problem dentification

Decide ResearchMethodology

Workout InformationRequirement

Identify Sources of Information(Both Primary and Secondary)

Prepare ResearchDesign

Collect Primary Information

Analyse Information

Evaluation and Interpretation

International marketing research and


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International marketing research andmarketing decisions

Marketing mix decision product policy

Type of research

focus groups and qualitative research to generate ideas

for new product

survey research to evaluate new product ideas

concept tasting, test marketing

product benefit and attitude research

product formulation and feature testing

I t ti l k ti h


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Marketing mix decision

Pricing distribution

Type of research

pricing sensitivity studies

Marketing mix decision

Distribution

Type of research

survey of shopping patterns and behaviour

consumer attitudes toward different store types survey of distributor attitudes and policies

International marketing research (contd)

International marketing research


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Marketing mix decisionAdvertising

Type of research

advertising pre-testingMarketing mix decision

Advertising post-testing, recall scores

Type of research

surveys of media habits

International marketing research (contd)


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Emic vs Etic dilemma


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Emic vs. Etic dilemma

EMIC

Holds that attitudes, interests, and behaviour areunique to a culture and best understood in their ownterms, and emphasizes studying the research problemin each countrys specific context

ETIC

Emphasizes identifying and assessing universalattitudinal and behavioural concepts and developing

pan-cultural measures


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Chapter 6

Decision-making Process for

International Markets

Segmentation of international markets


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Segmentation of international marketsdivision of the market of potential customers into

homogeneous sub-groups

a small firm can compete more effectively in specific

market segments as it concentrates its resources on

the target segment

for a market segment to be effective, it must be:- measurable

- substantial

- accessible

- differentiable

- actionable

T


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Types

geographic segmentation: dividing markets into

geographical subsets

demographic segmentation: dividing markets on the

basis of demographic characteristics (age, gender,

family size, education, etc.)

Country segmentation on the basis of income


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World Banks classification on the basis of 2002 per capita

gross national income (GNI)

Low-income countries : US$ 735 or less

Lower middle-income countries: US$ 736-2935

Upper middle-income countries : US$ 2936-9075

High-income countries : US$ 9076 or more

Country segmentation on the basis of income

S t ti f I di k t th b i


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Segmentation of Indian market on the basis

of household income

Group Annual

Income

Rich : Above Rs. 2,15,000

Consuming : Rs.45,000 2,15,000

Climbers : Rs. 22,000 45,000

Aspirants : Rs. 16,000 22,000

Destitutes : Less than Rs. 16,000

Segmentation of international markets on the


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gbasis of core values

Strivers (12%): place higher emphasis on material and

professional goals

Devouts (22%): place more value on traditions and duty

Altruists (18%): more interested in social issues and socialwelfare

Intimates (15%): place more value on close personalrelationships and family above all

Fun Seekers (12%): pays more emphasis on fun and

enjoyment in lifeCreatives (10%): this market segment has strong interest ineducation, knowledge, and technology

Segmentation on the basis of international


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Segmentation on the basis of international

marketing opportunity

Existing markets

Latent markets

Incipient markets

Segmentation on the basis of market


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Segmentation on the basis of market

attractiveness

Platform countries

Emerging markets

Growth markets

Maturing markets

Established markets

Selection of international markets


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Selection of international markets

preliminary screening of international markets

- market size

- accessibility to international markets

tariff barriers

- on the basis direction of trade

tariff

- on the basis of purpose: protective vs. revenue tariffs

- on the basis of time length: tariff surcharge vs.

countervailing duty

Selection (contd)


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-on the basis of tariff rates : specific, ad valorem,

and combined

- on the basis of production and distribution points:

(i) single stage sales tax

(ii) value added tax (VAT)

(iv) cascade tax

(v) excise tax

(vi) turnover tax

Selection (contd)

Selection (contd)


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Non-tariff marketing barriers

- government participation in trade

- customs and entry procedure

- product requirements

Quotas

- absolute quota

- tariff quota

- voluntary quota

Selection (contd)

Selection and targeting international


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Selection and targeting international

markets

Trade analysis method

Analogy method

Tools for international market analysis


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Tools for international market analysis

Growth-share (Boston Consulting Group) matrix

Market attractiveness / company strength matrix


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Chapter 7

Entering International Markets

Concept of international market entry


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Concept of international market entry

mode of entry: an institutional mechanism by which a

firm makes its products or services available

consumers in international markets.

mode of entry determined by:

- the ability and willingness of the firm to commit

resources

- the firms desire to have a level of control over

international operations

- the level of risk the firm is willing to take

Modes of international market entry


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Oxford University Press, All rights reserved

y

Production in home country

exports: production is carried out in home country andfinished goods are shipped to the overseas markets forsale

indirect exports: process of selling products to an

export intermediary in the companys home country whoin turn sells the products in the overseas markets

direct exports: process of selling the firms productsdirectly to an importer in the overseas market

M d


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Modes (contd)

complementary exporting: use of distribution channels

of an overseas firm to make the product available in the

overseas market

provide offshore services: to overseas clients with the

help of information and communication technology

Modes (contd)


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Production in a foreign country

contractual entry modes

international licensing: process by which a domestic

company allows a foreign company to use its intellectual

property and specific business skills for a compensation

(royalty)

international franchising: transfer of intellectual property

and other assistance over an extended period of time withgreater control compared to licensing

Modes ( td)


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overseas turnkey projects: conceptualize, design, install,construct, and carry out primary testing of manufacturingfacilities or engineering structures for an overseas clientorganisation

types : built and transfer (BT), built, operate, and transfer(BOT), built, operate, own (BOO)

international management contracts: a companyprovides its technical and managerial expertise for a

specific duration to an overseas firm

Modes (contd)

Modes (contd)


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international strategic alliance: the relationship betweentwo or more firms that cooperate with each other t o

achieve common strategic goals but do not form a

separate company

international contract manufacturing: a contractual

arrangement under which a firms manufacturing

operations are carried out in a foreign countries

( )

Modes ( td)


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Investment entry modes

assembly in overseas markets: refers to exporting various

components of the product in completely knocked down

(CKD) condition and assembles them overseas

international joint ventures: equity participation of two or

more firms resulting into formation of a new entity

Modes (contd)


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Factors (contd)


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Wholly owned foreign subsidiaries

to have complete control and ownership of

international operations a firm opts for foreign

direct investment through:

1. acquiring a foreign company and all its resources in

a foreign market (acquistion)

2. the establishment of production and marketing

facilities by a firm on its own from scratch (green field)

( )

Factors affecting the selection of entryd


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mode

External factors

Market size

Market growth

Government regulations

Level of competition

Level of risk

political

economic

operational

Production and shipping costs

Factors affecting the selection of entryd


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Internal factors

ompany objectives

availability of company resources

level of commitment

international experience

flexibility

mode (contd)


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Chapter 8

Product Strategy for InternationalMarkets


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Identification of products for


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international markets

a firm has to carry out preliminary screening for

markets and products by conducting market research

poorly conceived product often leads to marketing

failures

Developing products for internationalk t


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markets

ethnocentric approach

polycentric approach

regiocentric approach geocentric approach

Product standardization


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product standardization : the process of marketing a

product in overseas markets with little change

except for some cosmetic changes such as modified

packaging and labelling

benefits

- projecting a global product image- catering to customers globally- cost savings in terms of economies of scale in

production- designing and monitoring various components of

marketing mix economically- facilitating the development of a product as a global

brand

Factors favouring product standardisation


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g p

in international markets

high level of technology intensity

formidable adaptation costs

convergence of customer needs worldwide

country of origin impact

Product adaptation


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product adaptation:making changes in a product in

response to the needs of the target market is termedproduct adaptation or customization

benefits

enables a firm to tap markets, which are not

accessible due to mandatory requirements

fulfills the needs and expectations of customers in

varied cultures and environments

helps in gaining market share

increases sales leading to economies of scale

Factors influencing product


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Factors influencing productadaptation in international markets

Mandatory factors

government regulations

standards for electric current

operating systems

measurement systems

packaging and labelling regulations

Factors (contd)


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Voluntary consumer demographics

culture

local customs and traditions condition of use

price

New product launch


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New product launch

waterfall approach: the launch of a new product in

international markets in a phased manner

sprinkler approach: simultaneous product launch in

various international markets

International product strategy


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International product strategy

International competitive posture matrix

kings

barons

crusaders

commoners


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Oxford University Press,All rights reserved

Chapter 9

Building Brands inInternational Markets

Benefits of branding


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provides a marketing edge to the brands so as to

maintain their prices at relatively higher levels than the

competitors

secure better margins

facilitate coping with market competition increase the life of a product

serve as an important tool in international marketing as

the image of the brand crosses national boundaries

facilitates the forging of an emotional relationship

between consumers and products

Brands in international marketing


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it is important to understand the cultural traits of the

target markets

the failure to recognize the repercussions of the

brand name in international markets proved

detrimental to brand image.

a firm should carefully research the linguistic and

cultural repercussions while taking a decision on ext

ending its brand name in international markets

Strategies for building brands


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brand based on a tangible product component

brand based on an intangible product component

- feature based

- user imagery based

balance brand based on tangible-intangibleproduct component

Strategy for building global brands


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dominates the domestic market, which generatescash flow to enter new markets

meets a universal consumer need

demonstrates balanced country-market coverage reflects a consistent positioning worldwide

benefits from positive country of origin effect

focus is on the product category

The World's 10 Most ValuableBrands (2004)


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67.4

61.4

53.8

44.1

33.5

27.125.0 24.0

22.7 22.1

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

US$(Billions)

Coca-Cola

Microsoft

IBM G

E

Intel

Disney

McDonald's

Nokia

Toyota

Marlboro

Brands

pP. Chase & Co. of the Morgan Stanley Group

a ds ( 00 )

International brand building strategy


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B

rand

Develo

pme

nt

In

dex

High

Low

BuildCategory

Maintainleadership

Secure trial Build marketshare

HighLow

Category Development Index


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Chapter 10

Pricing Decision for

International Markets


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Factors influencing pricing decisions ininternational markets


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international markets

cost

competition

irregular or unaccounted payments in exports-

imports

purchasing power of customers

buyers behaviour

foreign exchange fluctuations

Terms of payment in internationaltransactions


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transactions

advance payment open account

consignment

documentary credit

documentary credit without letter of credit

- sight draft (documents against payment)

- usance or time draft (documents against

acceptance)

Terms of payment (contd)


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documentary credit with letter of credit

- revocable

- confirmed

- unconfirmed

Types of credit


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sight

term credits

-acceptance credit

- deferred payment credit

revolving

back to back

Important terms of delivery


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EXW (Ex Works) named place

FCA (Free Carriers) named place

FAS (Free Alongside Ship) named port of shipment

FOB (Free on Board) named port of shipment

CFR (Cost and Freight) named port of destination CIF (cost, Insurance, and Freight) named port of

destination

CIP (Carriage and Insurance Paid to) named place ofdestination

Terms of delivery (contd)


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CPT (carriage Paid To) named place of destination

DAF (Delivered at Frontier) named place

DES (Delivered Ex Ship) named port of destination

DEQ (Delivered Quay) named port of destination

DDU (Delivered Duty Unpaid) named place of

destination

DDP (Delivered Duty Paid) named place of

destination

Dumping


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selling a product or commodity below the cost ofproduction or at a lower price in overseas markets as

compared to its price in domestic markets.

types of dumping

- sporadic dumping

- predatory dumping

- persistent dumping

p g


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Types of counter trade


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barter

simple Barter

clearing Arrangement

switch Trading

counter Purchased

buy-back (compensation)

offset

Transfer pricing


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price of an international transaction between relatedparties

market based (Arms Length) transfer pricing

non-market pricing

pricing at direct manufacturing cost


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Chapter 11

International Logistics and

Distribution

International logistics


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conceptulization, design, and implementation of a

system to direct flow of goods and services across

national border

components

- materials management

- physical distribution

Channels of international distribution


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Oxford University Press,

All rights reserved

a set of interdependent organisations networked

together to make the products or services available to

the end consumers in international markets

International marketing channels


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All rights reserved

agents

- broker/commission agent- importers buying agent- country controlled buying agent- buying office

merchant intermediaries- merchant exporter- international trading companies- export / trading house

Criteria for selection of internationaldistribution channels


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international marketing objectives of the firm

financial resources

organisational structure

experience in international Markets

firms marketing image

existing marketing channels of the firm

channel availability in the target market

speed of market entry required legal implications

International retailing


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All rights reserved

Top 200 retailers : by country of origin

0.07

0.125

0.035

0.055

0.065

0.0950.13

0.425

Retail outlets in international markets


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department stores

supermarkets

convenience stores

specialty stores

discount stores

superstores

hypermarkets

Cross-country comparison of organized retailsector


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Country Size

(US$Billion)

Traditionalchannel

(In percentage)

Modern channel

(In percentage)

US 2325 15 85

Taiwan 115 19 81

Malaysia 20 45 55

Thailand 22 60 40

Brazil 100 64 36

Indonesia 75 70 30

Poland 55 80 20China 325 80 20

India 180 98 2

Managing international logistics


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managing logistics in international markets is

complex due to:

- physical distance

- differences in logistics systems

- compatibility of logistics systems

- differences in legal systems

- number of intermediaries involved

Constituents of physical distribution


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warehousing

inventory

packing and unitisation

information and communication technology

transportation

Transportation


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modes of transport

- air transportation

- road transportation

- rail transportation

- ocean transportation

Ocean transportation


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types of ocean cargo

- bulk

- break bulk

- neo-bulk

- containerized

Types of commercial vessels


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on the basis of decks

- single deck vessel- tween-deck vessel

- shelter deck vessels

- container vessels

on the basis of vessel size

- handy-size

- handy-max

- panamax- cape-size

Types of commercial vessels (contd)


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on the basis of type of cargo

- tankers

- bulk carriers

- neo-bulk carriers

- general cargo vessels- barges

- combination carriers

Charter shipping


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charter vessels do not have any fixed itinerary or fixed

sailing schedule

these can be hired or engaged to ship a firms cargo on

charter basis as per the terms and conditions of thecharter party

the contract made between the charterer and the ship

owner is known as charter party that contains details of

the ship, routes, met hods of cargo handling, port of

call

Forms of chartering


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voyage charter time charter

bare boat charter

back-to-back charter

trip time charter

contract of affreightment

Contract terms used in vessel chartering

gross terms: the ship owner is responsible for the cost of


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All rights reserved

loading, stowing, trimming, and unloading of the vessel

net terms: The ship owner is not responsible for cost of

loading and discharge

free in and out: the charterer has to arrange the

stevedores and to load/discharge the cargo on his ownaccount

liner shipping: regular scheduled vessel services between

two ports

container: transport equipment to facilitate handling and

carriage of goods by one or more modes of transport


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Consumer response hierarchy models

AIDA model


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modification in the advertisement message

Communication adaptation


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All rights reserved

modification in the advertisement message,

copy or content helps to reduce difference in cultural values

among the countries

difficulties in language translation

variations in the level of education of the target

groups

media availability

social attitudes towards advertising

regulatory framework of the target market

di t k ti lli d t d i t th

Tools of international marketingcommunication


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All rights reserved

direct marketing:selling products and services to the

customers without using any market intermediary direct mailing:sending letters, brochures or catalogues, e-

mails, faxes, or even product samples directly to the

consumers, who may, in turn, purchase the product

through mail door-to-door marketing:selling door to door

multi-level marketing: involves a revolutionary

distribution system with little spending on advertising and

infrastructurepersonal selling: involves personal meeting of a firms

representatives with the customer

Tools (contd)


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international trade fairs are organized gatherings where

the buyers and the sellers meet and establish

communication

types

- general trade fairs

- specialized trade fairs

- consumer fairs

- minor trade fairs- solo exhibitions


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Factors influencinginternational communication decisions


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All rights reserved

provides a good insight into marketing

decisions

offers adapation alternatives:

- straight adaptation- product extension-promotionadaptation

- product adaptation-promotion

extension- dual adaptation


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Indias Export-Import (EXIM) Policy


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All rights reserved

formulated and implemented by the Ministry of

Commerce and Industry,Government of India

other concerned ministries include Finance,

Agriculture, and Textiles, and Reserve Bank of

India

Principal objectives of Indias Exim policy

to facilitate sustained growth in exports in order to


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All rights reserved

to facilitate sustained growth in exports in order to

attain a share of at least 1% of global merchandise

trade

to stimulate sustained economic growth by providing

firms an access to essential raw materials,intermediates, components, consumables, and capital

goods required for augmenting production and

providing services

Principal objectives (contd)

t h th t h l i l t th d ffi i f


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Oxford University Press

All rights reserved

to enhance the technological strength and efficiency of

the Indian agriculture sector, industry, and services, toimprove their competitive strength while generating

new employment opportunities, and to encourage the

attainment of internationally accepted standards of

quality

to provide consumers with good quality products and

services at internationally competitive prices while at

the same time create a level playing field for the

domestic producers

Items prohibited for imports

tallow fat and / or oils rendered or unrendered of any


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tallow, fat, and / or oils, rendered or unrendered of any

animal origin

animal rennet

wild animals, including their body parts and products

and ivory

beef and products containing beef in any form

Items prohibited for exports

wild animals


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birds

tallow wood products

beef

sandalwood products

certain species of sea shells

peacock feathers including handicrafts and other

articles made from the feathers

manufactured articles

shavings of shed antlers of deer

human skeleton

Export promotion schemes and incentives

h f i l i t i d t


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All rights reserved

schemes for concessional imports are aimed at

removing the anti-export bias inherent in the system

of indirect taxation and to encourage exports

several schemes have been established which allow

importers to benefit from tariff exemptions,

especially on inputs


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Types


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All rights reserved

all industry rate: average industry drawback ratesfixed by Ministry of Finance from time to time

brand rates: drawback incentive for exporters of

manufactured goods determined on case to case

basis for individual exporters on particular brands

duty exemption passbook scheme (DEPB) grant

Duty remission schemes


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duty exemption passbook scheme (DEPB) grant

credit on post-export basis as specified percentageof freight on board value of exports made in freely

convertible currency

duty-free replenishment certificate (DFRC) provides

post-export remission of duty (basic and special

additional duty, which is equal to excise duty) on

imported inputs used for the manufacture of export

products

Schemes to promote export production andrelated infrastructure


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All rights reserved

assistance to states for infrastructure development for

exports and other allied activities (ASIDE)

export promotion industrial park (EPIP) scheme

gives assistance to the states to create infrastructure

facilities for export-oriented production (export

promotion industrial park)

critical infrastructure balance (CIB) scheme

provides assistance to states to facilitate balancing of

capital investments for relieving bottlenecks ininfrastructure for export production and conveyance

Creation of enclaves for export productionand promotion


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All rights reserved

Free Trade Zones (FTZ) and Export Processing Zones

(EPZs develop infrastructure for export production at

internationally competitive prices and environment

EPZs are set up at Kandla, Santacruz, Falta, Noida, Cochin,

Chennai, Vishakhapatnam


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market development assistance (MDA)isassistance

i t t d t ti i ti f

Other export schemes


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All rights reserved

given to exporters and export promotion organizations for

market exploration and export promotion on cost sharing

basis

market access initiative (MAI) scheme to support

market promotion efforts to exporters and exportpromotion organisations based on focus product-focus

country approach

India brand equity fund (IBEF Trust) offers financial

assistance by way of medium-term loans for promotion ofgeneric products and Indian brands

Ch t 14


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international markets are becoming increasingly

competitive and overseas buyers often demandcredits from the exporters

exporting firms require finance right from the time of

procuring inputs or raw materials for export

production to the time they receive the final payment

from the overseas buyers

countries around the world offer export credit atconcessional terms

Types of export credit


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pre-shipment credit is a loan or advance granted bya bank for financing the purchase, processing,

manufacturing, or packing of goods prior to

shipment

Export credit in foreign currency


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All rights reserved

in order to make the credit available to the exporters

at internationally competitive rates, banks

(authorized dealers) also extend credit in foreign

currency at LIBOR/ EURO Libor / EURIBOR related

rates of interest

Pre-shipment credit in foreign currency(PCFC) scheme


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All rights reserved

exporters procure export finance as pre-shipment

credit in rupees and post-shipment credit either in

rupees or discounting/rediscounting of export bills

under Export Bills Abroad (EBR) scheme

pre-shipment credit in foreign currency and

discounting or rediscounting of the export bills in

foreign currency under the EBR scheme

exporters have the option to avail of post-shipment export

Post-shipment export credit in foreigncurrency


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exporters have the option to avail of post-shipment export

credit in either foreign currency or domestic currency

post-shipment credit has to be in foreign currency if the

pre-shipment credit has already been availed of in foreign

currency in order to liquidate the pre-shipment credit

the scheme covers bills with usance period upto 180 days

from the date of shipment


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Financing to overseas importers

buyers credit is extended by a bank in India to an


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All rights reserved

buyers credit is extended by a bank in India to an

overseas buyer enabling him to pay for machinery or

equipment that he may be importing from India for a

specific project

line of credit is extended by a bank in India to an

overseas organization for facilitating imports from

India

Risks in international transactions

i t ti l t ti i l b f


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an international transaction involves a number of

risks that adversely affect a firms smooth operation

managers operating in international markets

need to develop a thorough understanding of these

risks and the various options available to minimize

them


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Types of risks(contd)

political risk


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p

- confiscation- expropriation

- nationalization

- domestication

transit risks- maritime

- extraneous

- war

- strike

total loss

- actual total loss occurs when goods are

Types of cargo losses


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All rights reserved

gcompletely damaged or destroyed or undergo

such a marked change that they no longerremain marketable

- constructive total loss (CTL) the cost of saving,repairing, or reconditioning of insured goods is

greater than the value of goods partial loss

- general average (GA) is a loss specific tomarine cargo insurance

- particular average is partial losses or damagethat is not covered by general average andparticular charges

International business risks

measuring international business risk


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measuring international business risk

- Business Environment Risk Intelligence(BERI) Index

- EIUs Business Environment Ranking

managing international business risk

- Credit Risk Insurance

- Marine Cargo Insurance


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export procedures and documentation are crucial to

international marketing, as both exporters and

importers are situated in two different countries and

are governed by different legislative frameworks export documentation facilitates international

transactions and protects the interest of the

exporters and importers

commercial documents are used by custom of trade

Types of export documents


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commercial documents are used by custom of trade

in international commerce by exporters and importers

in discharge of their respective legal and other

incidental responsibilities under sales contract.

regulatory documents are prescribed by different

government departments / bodies for compliance of

formalities under relevant laws

commercial invoice is a document of content that

provides:

Commercial documents


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p

- identification of shipment- detailed description of goods

- description of quantity

a packing list provides details of how the goods are

packed, the contents of different boxes, cartons, or

bales, and details of the weights and measurement of

each package in the consignment

transport documents documents that evidence

shipment of goods, such as bill of lading, combined

transport document, waybill, or consignment note

marine bill of lading (B/L)

t t d t i d b th hi i

Bill of lading


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- a transport document issued by the shipping

company to the shipper for accepting the goods for

the carriage of merchandise

airway bill (AWB)

- issued by the carrier as an evidence of contract ofcarriage

a bill of lading serves three purposes:

- it is the receipt of cargo by the shipping company

- a contract of carriage (or transport)- a document of title

on board or shipped bill of lading

Types of bill of lading


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on board or shipped bill of lading

received for shipment bill of lading

clean bill of lading

dirty (clause) bill of lading

stale bill of lading

through bill of lading

trans-shipment bill of lading

used as an evidence of the origin of goods in the

Certificate oforigin


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importing country includes the details of the goods covered and the

country where the goods are grown, produced or

manufactured

inspection certificate is related to quality of goods

insurance certificate provides protection to the

Types of certificates of origin


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All rights reserved

cargo-owner, an insurance cover is necessary whilethe cargo is in transit from the consignor to the

consignee

mates receipt is a cargo receipt issued by the master

of the vessel for every shipment taken on board

bill of exchange is an unconditional order in

writing prepared and signed by the exporter addressed

to the importer requiring the importer to pay a certain

sum of money to the exporter or his / her nominee

shipment advice advice is sent to the importer

informing of the details of the shipment

Regulatory documents


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shipping bill / bill of export is the principaldocument required by customs authority

mentioning details of shipment for exports

bill of entry is a document needed for customs

clearance of imported cargo


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Functions of export promotion programmes


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to create awareness about exporting as an instrument of

growth and market expansion

to reduce and remove barriers to exporting

to create promotional incentives

to provide various forms of assistance to potential and

actual exporters

Institutional framework for export promotion in India

Tier level Bodies Responsibilities

Tier I Department of Commerce frames trade policy


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Tier II Advisory Bodies coordinating discussionbetween industry & govt.for bringing in requiredchanges

Tier III Commodity Organisations assist the export effort of a

specific product groupTier IV Service Organisations facilitate and assist

exporters to expandmarkets

Tier V Government Trading

Organisations

handle export import of

specific commodityTier VI State Export Promotion

Agenciesfacilitate export promotionfrom the states


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Advisory bodies

provide an effective mechanism for continued

interaction with trade and industry and increased


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All rights reserved

interaction with trade and industry and increased

coordination among various departments and

ministries concerned with export promotion

Board of trade

Export promotion board

Commodity organizations


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these organisations look at sector-specificexports and perform a wide range of functions

right from product development to export

marketing

engineering

project

Export Promotion Councils

Documents

International Market[1]