international marketing logistics

An ISO 9001:2008 Certified Organization

International Marketing Logistics

IBO-05


International Marketing & Logistics System

BLOCK - 1

© Copyright PCTI Group 2009 | | <document classification>

Session 1

I. The nature of international marketing1. Introduction to international marketing

2. Reasons for marketing abroad

3. Exporting

II. Strategic thinking in international marketing1. Competitive advantage

2. The competitive environment

3. Competition between nations

4. The value chain


Session 1

III. International marketing strategy

1. The five-stage model

2. International marketing planning

3. ‘What if’ analysis

4. Control and coordination


I. The nature of international marketing

1. Introduction to international marketing

« International marketing consists in identifying and satisfying consumer needs abroad; better than the national and international competitors, under the constraints of the internationalization stage of the firm and the global environment. » (Nathalie Prime)


Key elements of the international marketing mix

Product Price Place Promotion

-Product adaptationpackaging and labelingtranslation of technical literature-Quality management-Licensing and contract manufacturing

-choice of pricing strategy-Competitor analysis-Discount structures-Credit management-Delivery terms-costing and budgeting

-International distribution-Control of agents-Export documentation-cargo insurance-Joint-ventures and subsidiaries

-Advertising, public relations and sales promotion-Direct marketing-Control of salespeople-Translation of sales literature-Exhibiting-Marketing research


Differences between domestic and international marketing

Domestic InternationalResearch data is available in a single language and is usually easily accessed

Research data is generally in foreign languages and may be extremely difficult to obtain and interpret

Business is transacted in a single currency

Many currencies are involved, with wide exchange rate fluctuations

Head office employees will normally possess detailed knowledge of the home market

Head office employees might only possess and outline knowledge of the characteristic foreign markets

Promotional messages need to consider just a single national culture

Numerous cultural differences must be taken into account

Market segmentation occurs within a single country

Market segments might be defined across the same type of consumer in many different countries.


Differences between domestic and international marketing (continued)

Domestic InternationalCommunication and control are immediate and direct

International communication and control might be difficult

Business laws and regulations are clearly understood

Foreign laws and regulations might not be clear

Business is conducted in a single language

Multilingual communication is requires

Business risks can usually identified and assessed

Environments may be so unstable that it is extremely difficult to identify and assess risks

Planning and organizational control systems can be simple and direct

The complexity of international trade often necessitates the adoption of complex and sophisticated planning, organization and control systems


Differences between domestic and international marketing (continued)

Domestic InternationalFunctional specialization within a marketing department is possible

International marketing managers require a wide range of marketing skills

Distribution and credit control are straightforward

Distribution and credit control may be extremely complex

Selling and delivery documentation is routine and easy to understand

Documentation is often diverse and complicated due to meeting different border regulations

Distribution channels are easy to monitor and control

Distribution is often carried out by intermediaries, so is much harder to monitor

Competitors’ behavior is easily predicted

Competitors’ behavior is harder to observe, therefore less predictable

New product development can be geared to the needs of the home

New product development must take account of all the markets the product is sold in.


International marketing and exporting

International marketing is more than exporting, because it involves:

• Marketing products that have been manufactured or assembled in the target country

• Establishing a permanents presence in the foreign country

• Licensing and franchising• Sourcing components from foreign states.


International and multinational marketing

International marketing means marketing across national frontiers.

Multinational marketing means the integrated coordination of the firm’s marketing activities throughout the world.


2. Reasons for marketing abroad

Economies of scale and scopeExistence of lucrative markets in foreign

countriesSaturated markets in the home countryHigh R&D costsInternational opportunitiesLess competitionNew trade agreements…


3. Exporting

Exporting means the sale in a foreign market of an item produced, stored or processed in the supplying firm’s home country.

Two kinds of exporting: passive and active


3. Exporting (continued)

Sources of foreign demand (passive exporting):

• Non-availability of appropriate products from domestic producers

• Price differentials between imported and locally supplied items;

• Exotic images attaching to foreign products;• Inefficiency of local distribution systems, political

disruptions, industrial action, or other factors that prevent local firms from supplying goods.


Exporting (continued)

Reasons for active exporting:• The product has reached the end of its life

cycle at home• Less competition • Easy access to major customers• Export increases turnover.


Example: Manchester United

MUFC has more fans abroad than at home

Merchandising: clothing, shoes, sports equipment

Manchester United Magazine, Manchester United on Video

TV Channel - MUTV

…


II. Strategic considerations in international marketing

Strategy means choosing a general direction for the firm, together with organizational designs, policies, systems and a style of management best suited for beating the competition in the field.

Tactics concern practical methods for implementing strategic decisions.


1. Competitive advantage

The elements of competitive advantage are the critical offer, the significant operating factors and the firm’s strategic resources.

Critical offer features

Strategic resources Competitive advantage

Significant operating factors


Porter’s model of competitive advantage

• Cost leadership Differentiation Specialization


2. The competitive environment

Factors:

Ease of entry by competitors into the market

The bargaining power of customersThe bargaining power of suppliersAvailability of substitutesLevel of existing competitive pressure


The Porter ModelThe Porter Model

Availability of substitutes Bargaining power of

Customers and suppliers

Ease of entry Extent of inter-firm

competition

Competitive situation

Profitability Market power

Nature of competitive advantage


4. The value chain

Primary activities:Inbound logisticsOperations - the conversion of inputs into

productsOutbound logistics - which concern

distribution Marketing and salesService activities


III. International marketing strategy

1. The five stage model

Stage 1: Decision to internationalize

Stage 2: Analysis of international marketing environment

Stage 3: Entering international markets

Stage 4: International marketing programme

Stage 5: Implementing the international marketing programme


2. International marketing planning

Planning means looking into the future and deciding today what to do in the future given predicted or intended circumstances.


‘What if’ analysis

Management asks the question ‘what will we need to do if it happens?’ and makes sure that the firm is adequately prepared for the environmental change.

‘What if’ analysis recognizes complexities, discontinuities and uncertainties of the real world.


4.Control and coordination

Control:

Establishing standards and targetsMonitoring activities and comparing actual

with target performanceImplementing measures to remedy

differences


4. Coordination and control

Coordination means the unification of effort, i.e. ensuring that everyone within the enterprise is working towards a common goal. Effective coordination requires efficient control.


Mechanistic systems of control

Standardization of administrative procedures

Feedback systems (reports)Face-to-face meetingsAppointment of a full-time liaison manager


Cultural systems of control

Clear corporate vision and mission;Free-following communication between

the workforce and managementGood internal PR and internal marketingGood induction procedures for new staff to

adopt the corporate culture at an early stage


Learning Objectives

• Describe the major similarities and differences between domestic and global logistics.

• Discuss the reasons for the increase in global business activity.

• Define a global company.

• Explain Porter’s dynamic diamond theory of global competitive advantage.


Learning Objectives

• Describe the critical changes affecting global logistics.

• Explain the effect of the changing legal and political environment in Europe, Asia, North America, and South America.

• Discuss North American Free Trade Agreement and its effect on logistics.


Learning Objectives

• Explain the major transportation systems available for global logistics.

• Distinguish among the global logistics intermediaries, freight forwarders, customs house brokers, non-vessel operating common carriers, and export management companies.


Learning Objectives

• Explain the criteria used to select a port for global shipments.

• Discuss warehousing and packaging requirements for global shipments.

• Define the role of customs duties and free trade zones.


Global Business Logistics

• Important issues to consider:– To gain a competitive advantage, global

sourcing is a given for companies engaging in global marketing strategies.

– The longer the supply chain, the more cooperation and coordination is required between production, marketing, purchasing and the logistics management group.


The Magnitude of Global Logistics Activity

• World trade is growing as fast logistics systems have had the effect of shrinking the world, empowering competitive trade.

• Foreign trade has grown in tonnage and in value for the United States and other nations.

• Lower labor costs from international outsourcing is a critical component of the supply chain.

• Focused manufacturing fits well into an international logistics strategy.


Top U.S. Trading Partners


Global Markets and Global Corporations

• Trade barriers continue to fall, accelerating global business activity.

• Global markets result from the general homogenization of global needs and wants.– Local needs suborned to lower-priced, higher-

quality products.– Preferences for international products can

also be related to attempts to copy other more prosperous cultures.


Global Competitive Strategy

• To effectively serve global markets, firms should consider adopting integrated worldwide strategies.

• These firms are more likely to search for global sourcing for materials and components, depots, assembly, distribution centers, and logistics.

• Global firms typically design synchronous strategies around technology, marketing, manufacturing, and logistics.


Customer Service Strategies for Global Markets: Four Characteristics

1. Marketing becomes standardized yet customized.

2. Product life cycles shorten, sometimes to less than one year.

3. Outsourcing and offshore manufacturing are becoming more prevalent.

4. Marketing and manufacturing activities and strategies tend to converge and be better coordinated in firms operating globally.4


Customer Service Strategies for Global Markets

• Logistics networks tend to become more expansive and complex.

• Thus, lead times and inventory may rise.• Logistics activities must be operated as a

system to provide a countervailing force.• Most importantly, the service needs of

internationally-dispersed customers must drive the design and implementation of the logistics system.


Critical Factors and Key Trends: Importance of Competitive Environment

• Michael Porter’s study concludes that “a nation’s ability to upgrade its existing advantages to the next level of technology and productivity is the key to international (global) success.”

• Porter feels that the US loss of global market share in advanced fields of transportation and technology shows the US slipping recently in international trade.


Critical Factors and Key Trends: Porter’s Model

• Factor conditions– Ability to transform basic factors into

competitive advantage

• Demand conditions– Market size, buyer sophistication, exposure

• Related and supporting industries– Partners in supply chain, manufacturers

• Company strategy, structure, and rivalry– Market structure and nature of competition


Marketing Logistics

Process of physical flows of materials and final product from the point of origin to the point of use. It involves activities such as order processing , warehousing, inventory control and transportation.


Objectives of Logistics to be in compliance with marketing situation

• Improve the customer service

• Reduce total distribution costs

• Generate additional sales create time and space utilities

• Stabilize prices of products.


Strategic Logistic Planning

It refers to the identification of business goals in terms of customer service level to be achieved and building up an integrated framework of strategies for each link of the logistics system.


Approaches for effective logistic management.

• The cost trade offs

• The total cost concept

• The total system concept.


Warehousing

Protected enclosure for storing goods on behalf of the depositors.

Elements of warehouse

• Space

• Equipment

• People


Functions of Warehousing

• Stockpiling

• Product Mixing

• Consolidation

• Distribution


INVENTORY MANAGEMENT

• Raw Materials

• Stores And Spares

• Work in progress

• Finished goods


Selective Inventory Control

• A-B-C Classification

• Material Requirement Planning

• Distribution Requirements Planning


International Transport System

BLOCK-2


Air Transport

• AIR India

• Indian Airlines

• Pawan Hans

• AAI

• DGCA

• BCAS

• IGRAU

• HCI


Ocean Transport

• Types of Ships

• Classification of Ships

• Liner shipping

• Tramp shipping


Multimodalisation

• Utilization

• Containerization

• Land Bridging


Stages of Development in Indian Shipping

• Ist –awakening & struggle 1919-1946

• 2nd –foundation laying phase 1947-1961

• 3rd –expansion & diversification1961-1984

• 4th --consolidation 1984-1985

• 5th --struggling 1985-1992

• 6th --liberalization 1993 onwards


Critical Factors and Key Trends: Changes in Logistics and Transportation

• Deregulation of the U.S. Ocean Liner Industry– Shipping Act of 1984 and Ocean Shipping

Reform Act of 1998 gave freedom to set rates, establish service and capacity on shipping lanes.

– Ocean rates now more flexible to move in response to the laws of supply and demand.



• Intermodalism– Joint use of two or more transportation

modes.– Micro bridge moves logistics capabilities from

port-to-port through port-to-point directly to point-to-point.

• Shipment Control– High tech permits tracking & diversion of

shipments.


Types of International Intermodalism



• Free Trade Agreements– NAFTA is the most current.– EU is the 15 country European equivalent.– APEC is the Pacific equivalent.

• Remaining customs barriers can impair logistics activities where they remain.

• Cultural differences can result in shipment delays where they are not understood.



• Currency Fluctuations– The exchange rate of dollars to other

international currencies affects both the volume and direction of global trade.

– The effects of weak or strong dollar positions carry through to marketing and logistics.


Effect of Currency Fluctuations on Exports and Imports

Scenario

U.S. $ Value

In Japanese

Yen

U.S. $ Cost of 5000-Yen Item

Yen Cost of U.S. $1,000

Item

A 100 $ 50.00100,000

yen

B 120 $ 41.67120,000

yen

C 130 $ 38.46130,000

yen


International Freighting Practices

BLOCK-3


Changing Political and Legal Environments

• A Single European Market

• Eastern Europe

• North American Free Trade Agreement

• Asian Emergence

• New Directions


Changing Political and Legal Environments: European Market

• 230 million consumers were established as one market thru the 1987 Single European Act

• EU has eliminated:– Physical barriers like

customs.– Technical barriers like

health & safety issues.– Fiscal barriers like value-

added tax and excise taxes.


Changing Political and Legal Environments Eastern Europe

• Currently restructuring but generally working to improve from former communist-style governmental restrictions.

• Older infrastructure is holding these nations back from full participation in global markets.

• Governments have been selling assets to use for capital investment.

• Future is uncertain, but markets are large enough to attract foreign capital if political environment is seen as stable.


Changing Political and Legal Environments: The North American Free Trade Agreement (NAFTA) of

1994

• 360 million people market• $6.6 trillion market• Phasing out tariffs on more than 10,000

commodities over the next 10 to 15 years• Poor transportation infrastructure remains

in Mexico.• Labeling inconsistencies are problematic.• NAFTA will mature eventually.


Changing Political and Legal Environments: Asian Emergence

• The Pacific Rim nations have emerged as key players in the global business environment.

• In the first three months of 2000, imports from Pacific Rim countries accounted for 32.9 percent of total U.S. imports.

• Japan, Korea, Taiwan, and Singapore purchased 24.7 percent of U.S. exports in this same period.

• Japan is the leading regional supplier, followed by China, Taiwan, and Korea.

• Low labor and high quality characterizes these Asian nation’s raw materials and finished goods.


Changing Political and Legal Environments: New Directions

• Offshore plants and logistics facilities

• Focus production plants often require complex logistics facilities.

• General expansion of worldwide markets

• Worldwide growth of affluence

• Growth of Caribbean, Australian, African, Russian, and Eastern European markets


On the Line: Holiday May Be Hazardous to International Logistics Systems

• Workers not on the job…logistics activities come to a halt.

• Holidays vary by country and must be known to international logistics managers.

• By scheduling pickup and delivery around a country’s holidays, the logistics manager can: – Prevent disruptions in the international supply

chain;– Maintain desired logistics service levels.


On the Line: 2001 Holidays for the United States and Its Top Six Trading Partners


Global Transportation Options

• More complex than domestic due to distance and number of parties involved

• Major international transportation modes– Ocean– Air– Motor– Rail


Global Transportation Options: Ocean

• Ocean structure– Liner – scheduled service; regular routes– Charter – contract service; no set routes– Private – service firm’s own logistics needs

• Include bulk, container, RO-RO

• Most pervasive and important global mode

• Revenues are substantial


Top Ten Ocean Carriers


Global Transportation Options: Air

• Speed allows large compression of transit times.

• Linkages with package delivery and courier services provide true point-to-point service.

• Rates have traditionally restricted cargo to low density, high value goods.

• Volume is approximately 1% of movements, but nearly 20% of the value.

• New air freighters can carry up to 13 TEUs (20 foot containers).


Major International Cargo Air Carriers


Global Transportation Options: Motor

• Global motor characteristics of speed, safety, reliability, and accessibility basically the same as for domestic transportation.

• Container sizes are largely standardized into 20, 40, 45, 48, and 53 foot boxes.

• Paperwork can be streamlined by having a bonded warehouse seal the container at point of shipment and not opened until it reaches its destination country.


Global Transportation Options: Rail

• International rail movements are problematic.

• Rail gauges often vary.

• Containers maybe transloaded from rail to ocean to rail and/or motor if standard international sizes are used.

• Maritime bridge movements gain speed by using an intermodal strategy.


Strategic Channel Intermediaries

• Foreign Freight Forwarders

• Non-Vessel-Operating Common Carriers

• Export Management Companies

• Export Trading Companies

• Customs House Brokers

• Ship Brokers• Ship Agents• Export Packers• Ports


Strategic Channel Intermediaries: Foreign Freight Forwarders

• Consolidate small shipments into economical container or larger-sized lots.

• Used by small or inexperienced shippers.

• Consolidators and agents regulated by the Federal Maritime Commission.

• Fee for service and/or commission from shipping companies.

• Use ocean and air modes.


Strategic Channel Intermediaries: Non-Vessel Operating Common Carriers

• These carriers are used to disperse traffic moving to and from an inland port.

• These NVOCCs then collect traffic from inland ports back to the ocean port cities.

• This service saves the shippers from having to pay to return empty containers to the ocean carriers.

• NVOCC service widens markets of the ocean carriers and provides expertise to the smaller inland shippers.


Strategic Channel Intermediaries: Export Management Companies

• Export Management Companies (EMCs) act as a knowledgeable shippers agent in a foreign country.

• Act as the sellers agent in getting orders, and arranging for distribution, promotion, and dealing with the foreign government.

• Exclusive arrangements are possible and the EMC may sell with or without taking title to the goods.


Strategic Channel Intermediaries: Export Trading Companies

• Similar to the Elms, the Export Trading Companies (ETCs) export goods and services.

• The ETC locates buyers, arranges for inland and international transportation, and meeting foreign government requirements.

• Allows small and medium-sized firms the ability to compete globally.


Strategic Channel Intermediaries: Customs House Brokers

• Oversee the movement of goods through customs and ensures that paperwork accompanying a shipment is in order.

• Operate under power of attorney from the shipper and can pay any duty on freight.

• Much of the paperwork is done ahead of the shipment using integrated computer systems, greatly reducing the time it takes to clear customs, thereby reducing transit times.


Strategic Channel Intermediaries: Ship Brokers/Ship Agents/Export Packers

• Ship brokers act as agents in securing the charter of a ship.

• Ship agents are the local (port) agent of the ship operator when the ship is in port.

• Export packers supply a shipper specialized export packing services to help with customs and to protect the goods.


Strategic Channel Intermediaries: Ports

• Port selection is a very important part of the international logistics strategy.

• Different ports often specialize in different types of shipments.

• Selecting the wrong port can add miles, time, and therefore cost to a shipment not appropriately routed.

• Overall door-to-door transit time and variability most important factors.


Port Evaluation Factors


Ranking of U.S. Ports by Containers, Tons, and Cargo Value

By Containers By Tons By Cargo Value

Long Beach Houston Long Beach

Los Angeles New Orleans Los Angeles

NY & NJ South Louisiana NY & NJ

San Juan NY & NJ Houston

Oakland Corpus Christi Seattle

Seattle Hampton Roads Charleston

Charleston Beaumont Hampton Roads

Hampton Roads Long Beach Oakland

Tacoma Philadelphia New Orleans

Houston Morgan City Baltimore


Storage Facilities

• Storage may be necessary for containers, bulk, or finished goods.

• This may require different types of in transit facilities depending upon the method of shipment and cargo type.

• Longer term storage may require a public or bonded warehouse.


Basic Information, Documents & Duties• Modes of Transportation• Import Through Courier• Approved Places• Import General Manifest (IGM)• Customs House Agents• Entry Inward Permission• Appeals• Documents

– Bill of Entry• Home consumption• Warehousing• Ex-Bond Bill of entry

• Duties Rate of Duty Exchange Rate• Types of duty

• Basic duty• Special duty• Additional duty• Anti Dumping Duty


Stages of Custom Clearance • Presentation of Bill of Entry & Relevant documents• Bill of entry & IGM is submitted by carrier & checked by concerned official.• Documents & information are checked & scrutinized.• Assessment & Appraisement is done.• Examination order is given.• Customs assessed BOE is returned to the importer for depositing duty

within a period of 7 Days.• Duty is deposited in cash & original BOE is detached.• Documents are given to the exporter for physical examination of goods & for

presentation to Dock Superintendent.• Report is made on back of BOE & send back to superintendent for counter

signature & “out of charge “ order is given.• CHA present the documents to the Port Manager who ensures about any

charge to be paid by the Importer.• Thereafter the Port Manager issues release order on the the basis of which

goods are taken out of the Customs Area.


Procedure of Custom Clearance

• Unloading of Imported Goods

• Presentation & Noting of B/E

• Processing of B/E

• Physical Examination of Goods

• Check Second

• Check First

• Confiscation of Goods


Packaging

• Export shipments generally require a higher level of protection than domestic shipments because of extra handling and the motion of the ocean and its effect on cargo.

• Shippers expect to pay more for more protection, as settling liability claims can be very difficult due to the large number of firms that may be handling the goods.


Some Symbols Used for Packing Export Shipments


Governmental Influences

• Customs Regulation

• Other Customs Functions

• Foreign Trade Zones


Export-Import Flowchart


Governmental Influences: Customs Regulation

• Customs regulations of the importing country have the greatest effect on the international movement of goods.

• In place to protect domestic industries from unfair or predatory competition, these barriers to trade are handled differently in various countries.

• Duties are expressed either as a percent of value, a fixed amount, or in combination.


Governmental Influences: Other Customs Functions

• Determine that the goods value is as stated.

• Ensure that the goods are properly marked.

• Ensure that the items are permitted for entry.

• Ensure correct price and quantity.

• Control quota amounts.


Governmental Influences: Foreign Trade Zones (FTZs)

• Goods enter without customs formalities, duty or bond.

• Shippers can break bulk before entry.• Goods can be processed, repacked, or

remarked to avoid fines before entry.• FTZs can hold excess goods until the next

quota window.• Buyer can test or sample before entry.• Goods can be stored indefinitely and/or re-

exported without paying duty.


Port System & Institutional Arrangement

BLOCK-4


Port Systems

• Port is an interface between sea transport and inland transport and as such is considered to be an important sub-system within the total transport system.

• DCT-Dredging Corporation of India, created in 1976 to provide integrated dredging services to the major ports minor ports, etc.


Maritime Frauds and Unethical Arrangement

• Fraud relating to transportation of goods from seller to buyer by sea route and financial and documentary transactions involved therein.

• IMB-International Maritime Bureau• Covers all types of frauds and malpractices in

trading and transport


Thanks