international mktg all

8/14/2019 International Mktg All

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International trade- need for trade All countries are not gifted with same production

facilities, there are differences in resource base,

geographic location, labor supply etc.

International trade helps more effective use of global

resources ( buyers find foreign markets cheaper to buy

and sellers find it more profitable to export their produce

outside domestic market).

Trade allows a country to specialize in production and

export of a commodity-leads to higher efficiency and

price drop( gains from trade) .

Domestic demand may be limited in a year, while

production increases-leading to high stock. This stock can

be exported to enhance export balance & foreign

exchange.

No single nation can produce all for its survival, trade is

the only solution.

Japan exports cars to U S, US exports bulldozers to

Saudi and Saudi exports oil to Japan-this is multilateral

trade.

Scope of international marketingSeveral reasons to seek business opportunity elsewhere in the

world.1.Market saturation: consumer goods (TVs,cars, freeze. w/mc)

already outnumber u.s. households. Slow growth of US.

population. Hence co. must develop new markets to operate

successfully. International market where market saturation

is a distant threat is only alternative.


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Cigarette sale in USA third world (Indonesia/ Kenya)

lesser restriction in LDC , no restriction on TV. / Radio /

paper ad.

2. US. trade deficit : US. business face regular trade deficit,declining exports and BOP problem .

- For US marketers, rising pacific power holds a threat and

promise . Threat-- increased competition for sales and

market share at home / abroad. Promise --as wealth grows

for agrarian LDCs and Asian , they expand business

possibilities for us goods . (KFC, Coca cola, PepsiCo ,Kodak,levis) in Asia and Latin America . Population of third world

of growing, adding more to potential buyers .

Few new industries are global at birth - robotics, videodisks,

fiber optics, satellite network ,artificial diamonds , computer

hardware .

5. Opportunity via foreign aid : us foreign aid program for

developing countries during 1960s provided billions of

dollars to undertake program of economic build-up , but

aid recipients spend us money on goods and services from

us corporations . Thus foreign aid money created new

markets in LDCs .

6. Other reasons : (a) in industries where economics of scale

are feasible , a large market is essential . if home market is

not large , then international mktg is only alternative .

Advantages of international. mktg


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(a) International business provides a safety net during

recessions. During US recession , multinationals shifted

marketing focus to middle east .

(b) Lesser labor cost in third world countries. So it iseconomically attractive to expand foreign operation . labor

cost account for half of cost of TV & computer sets (young

ladies do this ) assembling . So HP, Intel, ITT had gone as

far as Malaysia to save labor cost and earn higher

profits .

(c) For developing and testing new products outside us to

avoid exposure , keep secrecy .

(d) Many international markets are less competitive than us

market .

(e) Finally international presence gives higher access to

advance in technology frontier , access to raw material ,

R&D, international economic groups linkage.

Absolute advantageAdam smith observed the need for trade in his book wealth of

nations.

A country should export a commodity that can be produced at

a lower cost than can other nations converse is the case of

import.

Consider the case of USA and Japan for PCs and cars(Given

L&K).

US can produce 20 computers but 10 cars. In contrast

Japan can produces 10 computers but 20 cars.

So USA is more efficient in producing computers with better

skills.

It has absolute adv in making computers. Oppositely it has

absolute disadvantage in making car.


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Japans case is just the reverse.

If both can now specialize in the product it has absolute adv,

then both are gainer

Since US can make computers with less resources, so it will

only specialize in PCs for home and export to japan but importcars from japan. Japan will do the reverse.

Relative advantage

The earlier theory never tells if trade will take place if one

country(say USA) has absolute adv in both products. And the

other having disadvantage in both.

Apparently it appears that USA has nothing to gain from

trade.

product USA JAPAN

PC 20 10

car 30 20

Ricardo observed that relative costs are more important, not

absolute costs. This is called comparative adv.

This is done by ratio of PCs to cars. For USAThe adv ratio of PCs is 2:1(20:10) in favor of USA, but

This adv ratio is less for cars 1.5:1(30:20).

These ratios indicate USA has 100% adv over Japan for PCs

but only 50% adv in cars.

Political & Legal Environment-3 Dimensions

Home country environment.

Host country environment.

General international environment.


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Home country environment: example is South Africa (Home

countrys political pressures forced US / German firms to

leave South Africa). When Japan became South Africa's

leading trading partner then Japanese Govt. was extremely

embarrassed.Third country marketing :A firm having no problem with

home Govt. or South African Govt. , could be bothered /

boycotted due to their South African operation in a third

country (USA/ Germany ). European firms face same

problem in USA if they do trading in Cuba.

Bribery / Kick Back / Corruption: Some Govts may restrict

global marketing due to bribery and corruption. In many

countries favors are a way of life, in others it is unethicaleven criminal offence. Global Marketers must carefully

distinguish between reasonable ways of doing business

internationally- including adaptation with foreign

expectation and bribery & corruption.

General and political environment

Political Risk: Applicable to all the countries. Risk lowest in

countries with a history of stability & consistency. 3 types

risks -

1. Ownership risk - Exposes life & property.

2. Operating risk Interference with companys existing

operation.

3. Transfer risk - Interference while transferring capital.

General International (Political) Environment: Apart from

home country & host country relation, international firmbecomes somewhat involved with host countrys

international relation (in spite of its neutrality ). So apart

from bilateral relations even multilateral agreements

influencing relations among groups is important.


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Regional group: When country is a member of regional group

SAARC, EU, OPEC. This influences firms evaluation of the

host country. There may be a particular friend/enemy even

within the group.

International Group: Other factor is membership of

international organization like IMF/World bank who may

provide loan but puts restrictions on countrys trade /

marketing (patent, transport, payment, communications).

General and political environment

More membership of international body - more acceptances ofregulations.

Political risk analysis method - ratio of the return to risk.

1. Assess issues of relevance and the magnitude of their

importance to the firm (for one firm shifting profits and

policies relating to that, tax law etc. may be important. For

other, product quality and policies & changes relating to

labor law, technology, pollution that may be highest

concern).

2. Assess political instability & effects of severe depression-

Try to assess sequence of political events not a single event.

Instability in Russia replacement of Yeltsin comes Putin

,Treaty with India - effect on trade/tax/visa.

Entry strategies

Different strategies 1) Exporting-a. co. can minimize the risk of dealing

internationally by exporting domestically manufactured

items.

Adv- capital requirement minimum, easy to initiate and

good for gaining experience.


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2) Contractual agreement :

a) Patent licensing agreement : based on either a fixed fee or

a royalty basis and includes managerial training.

b) Turnkey operations: based on a fixed fee or cost plus

arrangement and include plant construction, training and

production trial run.

c) Co-production agreement: followed in socialist nations.

Plants are built and then paid for with (part) of output.

d) Management contracts : used in middle east . An MNCprovides key personnel to operate foreign co for a fee till

local people gain the ability to manage independently.

e) Licensing:it encompasses a variety of contractual

agreement whereby a multinational marketer makes

available tangible assets like patents, trade know-how,

trademark, co. name etc. to foreign cos in return for

royalties.

Advantages

i) Needs little capital but gives easy and quick entry.

ii) In communist countries licensing is only way of entry.

Gives life extension for products on maturity stage.

It is good alternative to foreign production and mktg. when

there is global inflation, skilled labour shortage, growing

govt. regulation and international though competition.

v) Licensing royalties are guaranteed and periodic.vi)Domestically based firms benefit from product

development abroad without research expense.

vii) When export not profitable due to competition, then it is

alternative.


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viii) Help overcome high transport cost.

ix) Licensing is immune to expropriation.

Disadvantages :-

i) Licensor has no control over prodn / mktg by licensee.ii) Licensing royalties are low (less than 5% due to govt.

restrictions) .

iii) Licensee may lose interest in renewing contract unless

there is new tech / innovation .

iv) To all are licensees a firm must have distinctive brand

name, tech , trade mark etc .

3) Joint venture :

Represents a higher risk alternative because it needs

various levels of direct investment . when a firms moves

beyond the exporting stage to a more regular overseas

involvement then jv is most common form of entry . these

are designed to take advantage of strong functions

(management , R&D ,Mktg ) .

Major problem of j.v. is there is more than one partner and one of

the partners should play a key role .

Advantages

Saving tech helps devloping nations by j.v.

Saving risk risk saved by partners (good for politically

sensitive areas) .

preferred treatment presented by govt. since locally

controlled .

Easier access to mkt &mkt information .

raw material use - countries with oil / mining do not allow

foreign firms but allows j. v.

4) Manufacturing :

An MNC can establish itself in overseas mkt by direct

investment in mafg / assembly subsidary . due to volatility


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of social / econ / political condition it is risky . cull in

Bhopal suggested that an mnc should not manufacture

overseas where risk of a mishap may jeopardize the

survival of total enterprise . factory risk relates to 5

factors

a) Type of product .

b) Econ / political factors (business in pakistan)

c) Firms competitive position , products life cycle .

d) Dynamic capital budgeting - cost and availability.

e) Distance between firms decision makers and target

customers .

Contract manufacturingOnly possible only when firm can locate a foreign produce

with capacity to produce

the product in satisfactory quantity &quality.

Enables firm to avoid labor& legal problems in an unknown

country.

Firm can advertise its products being locally made.

If mktg is too small/risky it is easier to terminate contract than

to shutdown plant.

Saving transportation costs& lower prodn Cost outside.

It is profitable if firm is strong in mktg than manufac.

Disadv :

Difficult to find good manufacturer.

Quality control difficult due to distance.

Manufacturing profit goes to a local firm.


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International marketing segmentationMarket segment: it refers to a group of countries that are

alike in respect of their responsiveness to some aspect of

marketing strategy. hence marketing segmentation may

be defined as a technique of dividing different countriesinto homogeneous groups. a firm can not serve the entire

world with a single set of policies because there are

disparities among nations economic and cultural. an

international marketer therefore should pick out one or

more countries as target markets .

Due to severe global competition many firms are learning to

operate or dominate niche markets ( niche is a relatively

small segment of market that major competitors mayoverlook, ignore or have difficulty in serving ).

Segmentation process :

Develop a market formula for classifying the world markets.

Segment all countries into homogeneous group having

common characteristics.

Determine theoretically the most efficient method of serving

each group.

* Choose the group in which marketers

product/service/strength is in live with the requirement of

the group.

* Adjust this ideal classification to the real constraints (legal,

political, practical etc.).

Computer co. ( hp ) 3 segments based on need.

1. Very simple (first generation m/c).2. Medium sized computers ( second generation m/c ).

Large sophisticated computers ( third generation m/c ).

HP now selects second segment and finds it welled placed for

that.


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Countries in this segment brazil, south Korea ,Taiwan,

Singapore, Mexico, Hong Kong and Nigeria.

HP establish 3 assembly plants Nigeria, brazil and south

Korea.

But computer industry often face lack of scientific

personnel, HP may consider establishing a plant in india,

not in south Korea ,since India has a large pool of

scientists.

INTERNATIONAL MKT. SEGMENTATION

The Firm The environment

Criteria Selection of relevant Segmentation criteriaStep-1

1. Measurability

2. Accessibility Development of appropriateStep-2

Segments

3. Substantiality screening of segments to narrow downStep-3

list of choice of target markets/ countries

Micro segmentation, develop segments in

Step-4

each qualified country /countries

4. Actionability

Market entry

How many markets?

When?

Sequence?


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Measurability - Degree to which size/purchasing power of

resulting segments can be measured.

Accessibility The degree to which resulting segments can

be effectively reached / served.

Substantiality/Profitability The degree to which segments

are efficiently large and profitable.

Actionability - The degree to which organization has

sufficient resources to effectively formulate marketing

programme(make things happen).

The basis of international marketing segmentation.

General characteristics.1. Geographic High degree of

measurability, Accessibility& Action ability

2. Language

3. Political factor

4. Demography

5. Economy

6. Industrial Structure

7. Technology

8. Social organization

9. Religion

10. Education

11. Cultural factor

12. Life style Low degree ofmeasurability

13. Personality Accessibility &

Actionability

14. Test / Attitude


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1. Geographic location Market location is critical for

segmenting. Middle eastern countries, far eastern countries-

high degree of similarity.

2. Language Mirror of the culture. Advertisement brand

names. In local language for acceptability. Negotiation

without interpreter.

3. Political factors Countries may be grouped & markets

segmented according to political factors a company

producing good quality textiles may find many markets

difficult to enter govt. regulation.

4. Demography Critical factor for segmentation . Proportion

of old / infant important.Europe infant rate in falling

baby food & toy game company will not enter there.

5. Economy Econ development critical factor.Electric

dishwashers require a certain level of economic development

in India no marketing but in western Europe basic need

societies with high income spend more in service recreation /

health.

6. Industrial structure One country may rely on many small

retailers, others depend on departmental store. Similarly,

small manufacturers & large retail activities may have

critical role for international marketer.

7. Technology Technological advancement may be a basis ofsegmentation. Software companies may segment markets on

the basis of PC/ thousand . Pakistan/Iran unsuitable.

8. Social organization - Nuclear family or extended family of 3

generations. In USA socio economic grouping 6 important


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for mkt. Segmentation. Upper- Upper, Lower Upper, Upper

Middle, Lower Middle, Upper lower&Lower Lower.

9. Religion Religion is important for segmentation. Gift

exchange at Christmas in Europe. Islamic laws & econ.Activity can not be ignored in middle east.

10. Education Main- aspects potential of youth mkt. & level

of literacy. Industrialized nations- literacy is near 100% and

all communication media is open to international marketers.

In LDC with 20% literacy, visual media (TV) or radio may

be more relevant promotional tool.

Int. mkt. Entry.- Factors influencing- Firms choice ofentry mode for a given product/target country is

net result of several conflicting forces.Anticipation of strength / direction of three forces leads to

several trade off among alternative entry mode.

Internal factors

Firm sizeProduct

International experience

1. Firm size Size is indicators of firms resource availability

small & medium enterprises(SMEs)because of their low

resources, enter through export mode. As the firm goes it

will use gradually hierarchical mode and will desire high

level of control over international operations and wish tomake heavy resource commitments to foreign markets.

2. Product -Physical quality of the product/service such as

value, weight(ratio), perish ability, composition are

important factors. Products with high value (weight ratio)


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like costly watches are not directly exported similarly soft

drinks/Beer companies.Try to establish licensing agreements

or local bottling arrangement.

Products distinguished by physical valuation, brand

name, advertisement & strong after sales service(warranty,repair,replacement) promote preference for one product

over another and may help price rise exceeding costs by

more than normal profits. These help develop entry barriers

and limit, competition. These product differentiation

advantage create natural monopoly.

3. International experience Here influencing factor is

experience of managers/firm.To what extent firm is involved

internationally in one country or in general internationalenvironment is important. International experience reduces

cost & uncertainty in such cases. Direct experience with

foreign markets will increase extra resource commitments to

foreign markets.

Economic union

Integration of economic policy + Free movement of goodservices, factors of production, harmony in taxation &

monetary policy, common currency- fixed exchange rates.

Group of economics. Low income-GNP per capita < $

725

(1994 study) Middle income- < $

8955

High income - >

$8956

International marketing & cultural environment.

Language - It is is a mirror of the culture. 1) Verbal language

(vocal sound in pattern) 2) nonverbal language (more


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powerful, body language, silences, social distance).

Pronunciation /accent of language important. Language is

key to culture,4 key roles

* Information gathering (Mkt. Related)* Comfort in dealing-without interpreter.

Guess politics & risk analysis

Access to local society Pop in local language(serious

MNC )

Explicit Communication- Say what you mean and mean

what you say (No vague directives/instructions). Burden

of effective communication is on the speaker.

Implicit communication (High context language culture)-

Speaker & listener both share burden of effective

communication can avoid unpleasant or direct

confrontation.

Manners & customers Extremely vital in negotiation and

knowledge about manners & customs may narrow

cultural differences. In some cultures managers &subordinates are separated, in others they work together.

Ad in close touch in perfume ad for Europe, Low touch in

Saudi Arabia.

International Mktg. & Economic environment

Market size/growth/buying capacity/infrastructure.

Classification by national income & degree of

industrialization.

Less developed country (LDC)

- Low GDP per capita (Less than $ 3000). Limited

manufacturing

- Poor infrastructure. Reliance on one product / one partner.


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Newly industrialized countries (NICS)

- High growth(Tigers of S.E.Asia-

S.Korea,Taiwan,Singapore,Hong Kong)

- Developed infrastructure DD>SS, Ever growing demand,

Diffi.to match.Advanced industrialized countries

High gdp. Solid industrial base. Developed service

sector(Tourism, Insurance, health care).- Developed

infrastructure.

Regional economic integration

- Economic cooperation. More effective use of resources.

Provide larger markets

Free trade area- No barrier for members. Least respectiveand loosest form of economical integration. EFTA-

European free trade area. EU-European union.NAFTA-

North American free trade agreement.

Custom Union. Goods & services are freely traded among

members. Common trade policy to non-members.

Common market Same as customs union.Mobility of

factors of production (L,K,Tech).Restrictions on

immigration & cross border investment abolished.

Entry strategies

different strategies

1)exporting : a. co. can minimise the risk of dealing

internationally by exporting domestically manufactured

items.

adv- capital requirement minimum, easy to initiate and good

for gaining experience.

2)contractual agreement :

a)patent licencing agreement : based on either a fixed fee or a

royalty basis and include managerial training.


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b) turnkey operations : based on a fixed fee or cost plus

arrangement and include plant construction, training and

production trial run.

c)co-production agreement : followed in socialist nations.

plants are built and then paid for with (part) of output.d) management contracts : used in middle east a. mnc

provides key personnel to operate foreign co for a fee till

local people gain the ability to manage independently.

advantages e) licencing : it encompasses a variety of

contractual agreement whereby a multinational marketer

makes available tangible assets like patents, trade

knowhow, trademark, co. name etc. to foreign cos in returnfor royalties.

i) needs little capital but gives easy and quick entry.

ii) in communist countries licencing is only way of entry.

gives life extension for products on maturity stage.

iii) it is good alternative to foreign production and kmtg.

when there is global inflation, skilled labour shortage,

growing ovt. regulation and international though

competition.

v) licencing royalties are guranteed and periodic.

vi) domestically based firms benefit from product development

abroad without research expense.

vii) when export not profitable due to competation , then it is

alternative .

viii) help overcome high transport cost .

ix) licencing is immune to expropritation .


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disadvantages :-

i) licensor has no control over prodn / mktg by licensee .

ii) licensing royalities are low (less than 5% due to govt.

restrictions ) .

iii) licensee may lose interest in renewing contract unless thereis new tech / innovation .

iv) to all are licensees a firm must have distinctive brand

name , tech , trade mark egc .

3) joint venture :

represents a higher risk alternative because it needs various

levels of direct investment . when a firms moves beyond the

exporting stage to a more regular overseas involvement then

jv is most common form of entry . these are designed to takeadvantage of strong functions (management ,r & d ,mktg ) .

major problem of j.v. is there is more than one partner and one of

the partners should play a key role .

advantages

saving tech helps devloping nations by j.v.

saving risk risk saved by partners (good for politically

sensitive areas) .

prefered treatment presented by govt. since locally controlled

.

easier access to mkt &mkt information .

raw material use - countries with oil / mining do not allow

foreign firms but allows j. v.

4) manufacturing :

an mnc can establish itself in overseas mkt by direct

investment in mafg / assembly subsidary . due to volatility of

social / econ / political condition it is risky . ucil in bhopalsuggested that an mnc should not manufacture overseas

where risk of a mislap may jeopardise the survival of total

enterprise . factory risk relates to 5 factors

a)type of product .

b)econ / political factors (business in pakistan)


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c)firms competitive positioon , products life cycle .

d)dynamic capital budgeting - cost and availibility.

e) distance between firms decision makers and target

customers .

international marketing segmentation ---market segment: it refers to a group of countries that are alike

in respect of their responsivences to some aspect of

marketing strategy. hence marketing segmentation may be

defined as a technique of dividing different countries into

homogeneous groups. a firm can not serve the entire world

with a single set of policies because there are dispasities

among nations economic and cultural. an international

marketer therefore should pick out one or more countriesas target markets .

due to severe global competition many firms are learning to

operate or dominate niche markets ( niche is a relatively

small segment of market that major competitors may

overlook, ignore or have difficultym in serving ).

segmentation process :

devlop a market formula for classifying the world markets.

segment all countries into homogeneous group having common

characteristics.

determine theoritically the most efficient method of seving each

group.

* Choose the group in which marketers

product/service/strength is in live with the requirement of

the group.

* adjust this ideal classification to the real countraints (legal,

political, practical etc.).* Computer co. ( hp ) 3 segments based on need.

1. very simple (first generation m/c).

2. medium sized computers ( seccond gneration m/c ).

3. large sophisticated computers ( third generation m/c ).


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* hp now selects second segment and finds it welled placed for

that.

countries in this segment brazil, south corea ,taiwan,

singapore, mexico, hong kong and nigeria.

hp establish 3 assembly plants nigeria, brazil and south corea.but computer industry often face lack of scientific personel, hp

may consider establishing a plant in india, not in south

corea ,since india has a large pool of scientists.

Contract manufacturingonly possible only when firm

can locate a foreign produce with capacity to produce

the product in satisfactory quantity &quality.

Enables firm to avoid labor& legal problems in an unknown

country.

Firm can advertise its products being locally made.

If mktg is too small/risky it is easier to terminate contract

than to shutdown plant.

Saving transportation costs& lower prodn Cost outside.

It is profitable if firm is strong in mktg than manufac.

Disadv :difficult to find good manufacturer.

quality control difficult due to distance.

manufacturing profit goes to a local firm.

Firms choice of market-Market selection

Basically two determinants 1) Environmental 2) Firm

characteristics.

1)International mkt may consist a country or group of

countries. OR

2) International mkt may be a group of customers with

nearly same characteristics. So a market can consist ofcustomers from several countries, since, -i)International data

are more easily available on a nation by nation basis ii)

Distribution magt. and media have been organized on a

nation by nation basis. Most of the agents / distributors still


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represent their manufacturers only in one country. Only a

few sell their products on cross-border basis.

However boundary lines are in many cases result of

political arrangement/war and do not reflect a similar

separation in buyer characteristics among people on eitherside of border.

Determinants of a firms choice of foreign mkt.

FIRM LEVEL

-Degree of internationalization & overseas experience

-Size/amount of resourses

- Type of industry/Nature of business

-Goals of internationalization

- Existing network

ENVIRONMENT LEVEL

-International Industry structure

-Degree of internationalization of market

-Host country market potential

-Host country competition

-Host country geographic distance.

- Host country market similarity

International market segmentation

International market selection(IMS)

Product policy & planningMust be made on careful analysis and review. The nature,

depth and breadth of the product line, possibilities of new

product development & product innovation, the importanceattached to product design (to suit local need). The decision

on foreign R&D and a planned screening & elimination of

unsuccessful products bear heavily on success in foreign

mkt.-Subhas Jain.


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Def A product can be defined as a bundle of attributes that

satisfies a customer demand.

International product involves determining which products to

introduce into which countries, what modifications to make,

what new products to add, what brand names to use, whatpackage design to use, what guarantee/ warranty to give,

what after sales service to offer and finally when to enter the

market.

Product objective : Product objectives emerge from host

country & corporate objectives combined. Cos goals goals

usually are stability, growth, profits, & ROI. It is a

combination of various stake holders interests for which it isaccountable.Oppositely host country objective depends on its

economic, political & cultural environment.(for LDC-faster

growth, balanced industrial sector, more

employment,earning more foreign exchange etc.).

Generally these two objectives are poles apart, however no

company can hope to succeed without aligning itself with

national concern of host country.

Foreign exchange shortage (host country) help export promotion(MNC objective).

Product design strategy1) Standardization Means offering common product on

national ,and world wide basis.

2) Customerisation Means making appropriate changes in a

product to match local perspectives (also called adaptation).

The goals of reducing costs and complexity lead firms toconsider standardization, while a customer orientation sways

them towards customerisation.

Factors encouraging standardization :


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A) Economies of scale- If a product has only one production

source, by standardizing it gains economics of high vol.

Production.

B) Economies in R & D Less research need will be there

uniformity yield a similar advantage in product developmentexpenses.

C) Economies of mktg. Sales literature, training needs, AD.

Plans are similar when product is uniform.

D) Consumer mobility If product is same, consumers may

purchase when traveling (Gillette blade, Kodak film,

etc.)product standardization is necessary here to retain

their loyalty.

E) Home country image Items considered typically of acountry gets, advantage from standardization.

US character - Coca cola, French character - Perfumes,

wines

Japan character - Electronic goods, small cars

F) Industrial products Product for which technical

specifications are critical tend to be uniform internationally.

Product PolicyProduct policy goes, beyond the product itself, Attributes suchas

Brands,

Trademarks,

Origin,

Packaging,

Labeling,

Warranty & service policies represent key decision areas.1) Extension of domestic line- The extension of domestic

product to foreign markets follows the logic of the concept of

international PLC. A firm may initially export a few

products overseas. As those mkts. Grow or change, an

opportunity may emerge to expand the line by selecting


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additional products from domestic line for overseas

distribution. Coca cola began mktg in 1958 in Japan. Fanta

was added in 1968, Sprite in 1970.

2) Additional products to international line- Two reasons-

To serve unfulfilled customer need in a particular market or to

optimize the existing mktg capacity. A chemical/pesticide

company selling overseas in developing countries may

discover a high demand for quality seed and then may add

seed to its line.

. A good distribution system to serve rural customers overseas.

The co. then start distributing to its rural customers. Suchproducts may or may not be related to cos business. Coca

cola markets potato chips in Japan but not at home.

The decision to add a product to the line is influenced by mktg

compatibility, finances, organization & environment. The

closer the proposed product to the current mktg perspective,

it is easier to market the product successfully.

A low compatibility financial risk analysis necessary to secureprofitability & cash flow. Similarly environmental

compatibility includes competition, legal & political

problems.

3) Introduction of a new product to a host country Here new

product is defined as a new product to the host country but

not to international mkt. Kodak started selling pocketcamera to Sri lanka, Pakistan, Thailand in 1982, which was

new to the region but not in western countries. The main

points are which products? About timing & sequence of

introduction and whether in standardized form or to adapt

peculiar changes.


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4) Alternative ways of seeking new products for overseas -Co

can develop a new product internally (by R & D) or by

acquisition from another co. Colgate-Palmolive developed in

USA a manual washing device- an all plastic, hand poweredwashers for LDCs. On the other hand Gillatte acquired

Braun AG of Germany to add electric shavers to its line.

5) Operating via exports If a firm reaches foreign mkt. Only

through exports, it will be selling uniform products only.

Factors encouraging adaptation A) Profit max Economies referred above are cost

minimization not profit maximization.

B) Differing use conditions The conditions under which a

product is used vary greatly from country to country. For

cars, trucks, tyres different road & traffic conditions may

product changes.

C) Other mkt factors Consumer tastes are not identical

around the world- food, fashion etc differ in neighboringcountries. French prefer 4 door car, Germans 2 door cars.

D) Influence of Govt. Nation may forbid few goods to be

imported/ manufactured. Govt. regulation on product,

packaging & labeling are an important cause for product

variation among nations-mainly food/drugs.

E) Co history & operations Some firms have foreign

operations before world war-II. These self- containedsubsidiaries developed products for their mkts without

regard to global product uniformity.Product policy goes, beyond the product

itself, Attributes such as brands, trademarks, origin,


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packaging, labeling, warranty & service policiesrepresent key decision areas

A perspective on branding

Advantages Disadvantages

Single brand(in one mkt) Mktg homogeneity assumed

Mktg efficiency. Exiting brands image hurt

More focused mktg. Limited shelf space

Brand confusion eliminated.

Local brands Higher mktg cost

Meaningful name Higher inventory cost

Local identification Loss of economics of scale

Avoid tax on international brand Diffused image

Easy mkt penetration

Variations in quality across mkts

allowed

World wide brands Mkt homogeneity assumed

Max mktg efficiency Problem with black/gray mkts

Reduction in ad cost Danger of negative meaning

No brand confusion Quality consistency needed

Advantage for culture free product LDCs opposition

Adv for prestigious product Legal complication.

Product revitalization-

If profits, sales, vol, mkt share all fall below expectation, theneither revitalize or drop the product. Strategic alternatives

1) Maintain the product& its mktg strategy in present

form.

2) ,, ,, & change mktg strategy.

3) Change the product & change the strategy.

4) Drop the product/ product line.

5) Add new products or product lines.


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Perceptual mapping to study strength/weakness of a

product vis a vis competitors.

Product elimination check listCorporate image

Sales of other products

Customer relationship

Effect on profitability

Any product to replace

Employee relationship

Profitability of other products (tyer /tube)

8)Competitors move.

International pricing strategies (price sensitivity)

Pricing strategy-Gain mkt share.

Short run gain(milk the business).

Discourage competitors.

Forestall others entry.

Hold high price(to keep less efficient active for antitrust).

Price sensitivity depends on-Whether buyer can pass on cost of purchase to the customers.

Uncertainty in switching to low priced item.

Value performance over cost-high quality, good service, timely

delivery will pay premium.


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A) Skimming Pricing

1. Skim the cream from the top end of the market.

2. Realise highest profit in short run.

3. Unique product feature, extra comfort, ease of operation.4. Designed to appeal affluent & demanding.

5. Trade off between low mkt share against high profit.

Drawbacks

Small mkt share High vulnerability to local competition.

High quality product needs huge resources(for

promotion/service)

Difficulty to keep visible presence in distant markets.

If P is very low in home country/another country grey

mktg.

Ultimately success of skimming depends on ability seed of

competition.

B) Penetration Pricing

1. To stimulate mkt growth and capture mkt share.

2. Successful for mass mkt P sensitive customers & cost

reduction economies of scale.3. Lower income levels of local customers

4. R & D and overhead cost covered by home sales, export

represents marginal activity.

5. Japanese firms use this to gain mkt share leadership ( cars,

TV, W/M, electronic goods ).

Pricing policy

Cash discount-given for prompt payment(7/10

days),applicable on gross amt(basic+taxes) and given in bill.

For bad paymaster give CN after payment release.

Geographic pricing-


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1)ex factory-prices prevailing at factory gate, buyer pays

transport + freight.

2)FOB(free on board)/ FOR(free on road)destination. Freight

costs are absorbed by seller& included in quotation. Nominaltransit insurance is borne by seller. If open insurance policy of

buyer then damage/ theft in transit is settled by buyer with

GIC.

Direct payment-goods dispatched directly to the customers

and invoice sent with gate pass/challan/consignee copy of

LR/RR.sometimes for safety ,seller sends consignee copy of

LR/RR to branch rep who collects DD and hands overconsignee copy to collect material.

The experience curve-

Cost (variable)declines as production vol

increases(Boeing exp in 1950)

No of hours needed to build Boeing decreases 20%,

each time cumulative prodn doubled.

GM, GE,IBM also found vol related cost factors

(procurement cost, defective parts, down time,

distribution cost, mkt cost) all decline.

Impact of improvement is due to learning process.

Diff between learning curve &economies of scale-LC

deals with accumulation of quantity over time and isindependent of rate of production. On the other hand

economics of scale shows the impact that diff levels of

prodn have on unit costs at a specific time.

Promotional strategies for int mktg


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Sales promotion is defined as those selling activities that do not

fall directly into the advertisement/personal selling category.

It relates below the line activities display, demonstration,

leaflets, free trials, contests, premium (buy one get one) etc.

factors contributing to the expansion of sales promotioninclude ---

# Greater competition among retailers ( increasingly

sophisticated relating method).

# Improved retail technology (instant coupon redemption

electronically).

# Consumer higher brand awareness (need to defend brandshare).

# Greater integration of sales promotion / public relation and

traditional media campaign.

# Mkts where due to media limitation it is hard to reach, there

sales promotion budget is high.

* Price discounts Price reduction technique.

* Catalogue/brochures Foreign catalogue for a far off

customers.

* Coupons Door to door, on pack, in news paper(for FMCG).

* Samples Samples gives foreign customer idea of size, model,

style etc.

* Gift Some countries have limitation / restrictions on gift

value.

* Competition on pack, in store via leaflet or by media.


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It is impossible to know specific laws of each and every country

so international marketer must consult local lawyers and

authorities before launching.

Direct Marketing:For soliciting direct response from customers by direct mail

(through database ), telephone selling and via internet,

reasons of expansion

Development of mailing technology has reduced time/cost.

Cost escalation of media / sales promotion.

Ready availability of good quality prospective customer list.

Development of it solid data base and desk top publishing for

even small firms.

Increasing use of interactive TV facility customers can order

through teletext system from remote country.

Mode of payment-direct&

through bank

Direct payment-goods dispatched directly to

consumer & invoice sent with gate pass/

challan/consignee copy of LR/RR. Credit offered

30/60 days for good payment master.

Throuhg bank-letter of credit(LC), doc against

payment(DP)


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Supplier sends bill,LR/RR, inspection certificate via

bank.

LC may be with credit or at sight(without credit). It

is safest if no mistake is there.

Next safe is DP, doc is sent to customers bank

(without credit). Only if customer pays, doc is

given. Suppliers transporter should be honest

(otherwise they will handover goods without

consignee copy)

North American Free Trade Agreement

Implementation of the North American Free Trade Agreement

(NAFTA) began on Jan. 1, 1994. This agreement will remove most

barriers to trade and investment among the United States, Canada, and

Mexico.

Under NAFTA, all non-tariff barriers to agricultural trade between the

United States and Mexico were eliminated. In addition, many tariffs

were eliminated immediately, with others being phased out over periods

of 5 to 15 years.

All agricultural provisions will be implemented by the year 2008. For

import-sensitive industries, long transition periods and special

safeguards will allow for an orderly adjustment to free trade with

Mexico.

The agricultural provisions of the U.S.-Canada Free Trade Agreement

(CFTA), in effect since 1989, were incorporated into the NAFTA. Under

these provisions, all tariffs affecting agricultural trade between the

United States and Canada, with a few exceptions for items covered by

tariff-rate quotas (TRQ's), were removed before Jan. 1, 1998.


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Mexico and Canada reached a separate bilateral NAFTA agreement on

market access for agricultural products. The Mexican-Canadian

agreement eliminated most tariffs either immediately or over 5, 10, or

15 years. Tariffs between the two countries affecting trade in dairy,

poultry, eggs, and sugar are maintained.

Under NAFTA, all non-tariff measures affecting agricultural trade

between the United States and Mexico were eliminated on Jan. 1, 1994.

These barriers, including Mexico's import licensing system (which had

been the largest single barrier to U.S. agricultural sales), were converted

to either tariff-rate quotas or ordinary tariffs.

All agricultural tariffs between Mexico and the United States will be

eliminated. Many were immediately eliminated and others will be

phased out over transition periods of 5, 10, or 15 years. The immediatetariff eliminations applied to a broad range of agricultural products. In

fact, more than half the value of agricultural trade became duty free

when the agreement went into effect. Tariff reductions between the

United States and Canada had already been implemented under the

CFTA.

Both Mexico and the United States protected their import-sensitive

sectors with longer transition periods, tariff-rate quotas, and, for

certain products, special safeguard provisions. However, once the 15-

year transition period has passed, free trade with Mexico will prevailfor all agricultural products. NAFTA also provides for tough rules of

origin to ensure that maximum benefits accrue only to those items

produced in North America.

Other Key NAFTA Provisions

Sanitary and Phytosanitary Measures: The NAFTA imposes disciplines

on the development, adoption, and enforcement of sanitary and

phytosanitary (SPS) measures. These are measures taken to protect

human, animal, or plant life or health from risks that may arise from

animal or plant pests or diseases, or from food additives or

contaminants. Disciplines contained in NAFTA are designed to prevent

the use of SPS measures as disguised restrictions on trade, while still

safeguarding each country's right to protect consumers from unsafe


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products, or to protect domestic crops and livestock from the

introduction of imported pests and diseases.

Although NAFTA encourages trading partners to adopt international

and regional standards, the agreement explicitly recog-nizes each

country's right to determine the necessary level of protection. Such

flexibil-ity permits each country to set more strin-gent standards, as

long as they are scientific-ally based. NAFTA also allows state and local

governments to enact standards more stringent than those adopted at

the national level, so long as these standards are scientif-ically

defensible and are administered in a forthright, expeditious manner.

Export Subsidies: The three NAFTA countries will work toward the

elimination of export subsidies in North America, in pursuit of the

broader objective of eliminating such subsidies worldwide. The UnitedStates and Canada will be allowed to provide export subsidies into the

Mexican market to counter subsidized exports from other countries.

Neither Canada nor the United States is allowed to use direct export

subsidies for agricultural products being sold to the other, and both

countries are required to consider the export interests of the other

whenever subsidizing agricultural exports to third countries.

Internal Support: Under NAFTA, the parties should endeavor to move

toward domestic support policies that have minimal trade or production

distorting effects, or toward policies exempt from domestic supportreduction commitments under the World Trade Organization.

Grade and Quality Standards: The United States and Mexico agreed that

when either country applies a measure regarding the classification,

grading, or marketing of a domestic product destined for processing, it

will provide no less favorable treatment for like products imported for

processing.

United Nations Conference on Trade andDevelopment

The United Nations Conference on Trade and Development (UNCTAD)

was established in 1964 as a permanent intergovernmental body,
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UNCTAD is the principal organ of the United Nations General

Assembly dealing with trade, investment and development issues.

The organizations goals are to "maximize the trade, investment and

development opportunities ofdeveloping countries and assist them in

their efforts to integrate into the world economy on an equitable basis."

(from official website).

Currently, UNCTAD has 191 member States and is headquartered in

Geneva, Switzerland. UNCTAD has 400 staff members and an annual

regular budget of approximately US$50 million and US$25 million of

extrabudgetary technical assistance funds.

The Secretary-General of UNCTAD is Dr. Supachai Panitchpakdi

(Thailand), who took office on 1 September 2005.

The inter-governmental work is done at 4 levels of meetings [1]:

The UNCTAD Conference - held every 4 years, the last one was

UNCTAD XI in Sao Paulo in June 2004 [2];

The UNCTAD Trade and Development Board - the Board

manages the work of UNCTAD in between two Conferences and

meets up to three times every year;

Four UNCTAD Commissions and one Working Party - these meet

more often than the Board in order to take up policy, programmeand budgetary issues;

Expert Meetings - the Commissions will convene expert meetings

on selected topics in order to provide substantive and expert input

for Commission policy discussions.

UNCTAD produces a number of topical reports, including:

The Trade and Development Report

The World Investment Report

The Economic Development in Africa Report The Least Developed Countries Report

UNCTAD Statistics

The Information Economy Report

The Review of Maritime Transport

UNCTAD also conducts various technical cooperation programmes.
http://en.wikipedia.org/wiki/United_Nations_General_Assemblyhttp://en.wikipedia.org/wiki/United_Nations_General_Assemblyhttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Developing_countrieshttp://en.wikipedia.org/wiki/Genevahttp://en.wikipedia.org/wiki/Switzerlandhttp://www.unctad.org/Templates/meeting.asp?intItemID=1942&lang=1&m=4289http://en.wikipedia.org/wiki/Sao_Paulohttp://www.unctadxi.org/http://en.wikipedia.org/wiki/United_Nations_General_Assemblyhttp://en.wikipedia.org/wiki/United_Nations_General_Assemblyhttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Developing_countrieshttp://en.wikipedia.org/wiki/Genevahttp://en.wikipedia.org/wiki/Switzerlandhttp://www.unctad.org/Templates/meeting.asp?intItemID=1942&lang=1&m=4289http://en.wikipedia.org/wiki/Sao_Paulohttp://www.unctadxi.org/


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World Trade Organization

History

The Bretton Woods Conference of1944 proposed the creation of an

International Trade Organization (ITO) to establish rules and

regulations for trade between countries. The ITO charter was agreed at

the UN Conference on Trade and Employment in Havana in March

1948, but was blocked by the U.S. Senate (WTO, 2004b). Some

historians have argued that the failure may have resulted from fears

within the Americanbusinesscommunity that the International Trade

Organization could be used to regulate, rather than liberate, big

business (Lisa Wilkins, 1997).

Only one element of the ITO survived: the General Agreement on

Tariffs and Trade (GATT). Seven rounds of negotiations occurred

under GATT before the eighth round - the Uruguay Round - concluded

in 1995 with the establishment of the WTO as the GATT's replacement.

The GATT principles and agreements were adopted by the WTO,

which was charged with administering and extending them. Unlike the

GATT, the WTO has a substantial institutional structure.

Mission

The WTO aims to encourage smooth and free trade by promoting lower

trade barriers and providing a platform for the negotiation of trade and

to resolve disputes between member nations, when they arise. The goal

is to help producers of goods and services, exporters, and importers

conduct their business.

Principles of the trading system

The WTO discussions should follow these fundamental principles of

trading.

1. A trading system should be discrimination-free in a sense that a

country cannot favour another country or discriminate against

foreign products or services.
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2. A trading system should be freer where there should be little

trade barriers(tariffs and non-tariff barriers).

3. A trading system should be predictable where foreign companies

and governments can be sure that trade barriers would not be

raised and markets will remain open.

4. A trading system should be more competitive.

5. A trading system should be more accommodating for less

developed countries, giving them more time to adjust, greater

flexibility, and more privileges

Structure

All WTO members may participate in all councils, committees, etc.,

except Appellate Body, Dispute Settlement panels, and plurilateral

committees.

Highest level: Ministerial Conference

The topmost decision-making body of the WTO is the Ministerial

Conference, which has to meet at least every two years. It brings

together all members of the WTO, all of which are countries or customs

unions. The Ministerial Conference can take decisions on all matters

under any of the multilateral trade agreements.

Second level: General Council

The daily work of the ministerial conference is handled by three groups

The General Council, The Dispute Settlement Body and The Trade

Policy Review Body.

1. The General Council- is the WTOs highest-level decision-making

body in Geneva, meeting regularly to carry out the functions of the

WTO. It has representatives (usually ambassadors or equivalent) from

all member governments and has the authority to act on behalf of the

ministerial conference which only meets about every two years. Thecouncil acts on behalf on the Ministerial Council on all of the WTO

affairs. The current chairman is Amina Chawahir Mohamed (Kenya).

2. The Dispute Settlement Body - Made up of all member governments,

usually represented by ambassadors or equivalent. The current

chairperson is Eirik Glenne (Norway).
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3. The Trade Policy Review Body (TPRB) - the WTO General Council

meets as the Trade Policy Review Body to undertake trade policy

reviews of Members under the TRPM. The TPRB is thus open to all

WTO Members. The current chairperson is Don Stephenson (Canada).

Third level: Councils for Trade

The Councils for Trade work under the General Council. There are

three councils - Council for Trade in Goods, Council for Trade-Related

Aspects of Intellectual Property Rights, and Council for Trade in

Services - each council works in different fields. Apart from these three

councils, six other bodies report to the General Council reporting on

issues such as trade and development, the environment, regional trading

arrangements and administrative issues.

1. Council for Trade in Goods- The workings of the General Agreement

on Tariffs and Trade (GATT) which covers international trade in

goods, are the responsibility of the Council for Trade in Goods. It is

made up of representatives from all WTO member countries. The

current chairperson is Vesa Tapani Himanen (Finland).

2. Council for Trade-Related Aspects of Intellectual Property Rights-

Information on intellectual property in the WTO, news and official

records of the activities of the TRIPS Council, and details of the WTOs

work with other international organizations in the field.

3. Council for Trade in Services- The Council for Trade in Services

operates under the guidance of the General Council and is responsible

for overseeing the functioning of the General Agreement on Trade in

Services (GATS). Its open to all WTO members, and can create

subsidiary bodies as required. The current chairperson is Claudia Uribe

(Colombia).

Fourth level: Subsidiary Bodies

Under each of the three councils, there are subsidiary bodies under each

one.

1. The Goods Council- subsidiary under the Council for Trade in

Goods. It has 11 committees dealing with specific subjects (such as

agriculture, market access, subsidies, anti-dumping measures and so
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on), which include the following. Again, these committees consist of all

member countries.

Information Technology Agreement (ITA) Committee

Apart from hosting negotiations on trade rules, the WTO also acts as anarbiter of disputes between member states over its rules. And unlike

most other international organizations, the WTO has significant power

to enforce its decisions through the authorisation or trade sanctions

against members which fail to comply with its decisions. Member states

can bring disputes to the WTO's Dispute Settlement Body if they believe

another member has breached WTO rules.

Disputes are heard by a Dispute Settlement Panel, usually made up of

three trade officials. The panels meet in secret and are not required toalert national parliaments that their laws have been challenged by

another country.

ADB Operations

ADB's development work is aimed at improving the welfare of the

people of Asia and the Pacific, especially of the 690 million poor living

on less than a dollar a day.

Within months of adopting its poverty reduction strategy in 1999, ADBbegan focusing its work toward eliminating poverty in the region.

ADB's projects and programs, whether poverty interventions or

otherwise, emphasize one or more of the following priorities:

ECONOMIC GROWTH

HUMAN DEVELOPMENT

GENDER AND DEVELOPMENT

GOOD GOVERNANCE

ENVIRONMENTAL PROTECTION PRIVATE SECTOR DEVELOPMENT

REGIONAL COOPERATION

Each priority is related directly to the three pillars of the poverty

reduction strategy:
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Pro-poor, sustainable economic growth

Inclusive social development

Good governance

Other crosscutting priorities are law and policy reform and social dimensions of

development

ADB's operations are diverse, covering Sectors

Agriculture and natural resources

Education

Energy

Finance

Health, nutrition, and social protection

Industry and trade

Law, economic management, and public policy

Transport and communications

Water supply, sanitation, and waste management

Activities involving multiple sectors

Development Tools

ADB lends to governments and to public and private enterprises in its

developing member countries. ADB's principal tools are loans and

technical assistance, which are provided to governments for specific,high-priority development projects and programs. ADB's lending both

supports and promotes investment for development based on a

country's priorities.

In 2004, ADB approved loans worth $5.3 billion for 64 projects, most of

which went to the public sector. People's Republic of China was the

largest borrower, followed by India, Pakistan, Philippines, and

Vietnam. Grants worth US$99.4 million were provided, and technical

assistance, which is used to prepare projects and support advisory

activities, amounted to $197 million.

Important export docCommercial invoice- basic doc in export transaction. Gives

details of goods, price charged, terms of shipment, marks &

numbers of packages& Customs Cooperation Council
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Nomenclature (CCCN). Several copies made for various

authorities.

Certificate of origin-required by commonwealth nations.

Needed by importer to satisfy the requirements of his govt.

GR form,

Letter of credit-LC is most important doc in international

trade. By LC the promise to pay is usually made by importer is

substituted by the promise to pay by his bank. It gives great

security to the exporter.

Bill of lading-doc issued by the shipping co mentioning that the

good have been placed on board the ship.

Gives an understanding that the goods in like order&

condition as received will be delivered to the consignee-

provided that the freight specified will be duly paid. Made in

sets with 2/3 originals. By air shipment B/L is called airway

bill.

If contract is FOB(free on board), it means that the

freight to be paid by the importer and shipping co will issue

a freight collect bill of lading but if contract is CIF(cost

insurance freight ) then exporter makes the freight payment

and obtains freight paid bill of lading.

A clean B/L indicates no superimposed clause declaring a

defective condition of goods/package/other aspect.

If no direct link between buyer &seller ports, then goods are

transferred to another ship at another port, so exporter obtains

a through B/L covering whole voyage.

bill of exchange,


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shipping bill,

marine insurance policy.