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International Business Management Unit 10

Sikkim Manipal University Page No. 198

Unit 10 International Marketing

Structure:

10.1 Introduction

Objectives

10.2 Scanning interntional markets

10.3 Mode of entering into potential

10.4 Global marketing strategies

Segmentation

Market positioning

International product policy

International pricing decisionsTransfer pricing

International advertising

International promotion and distribution

10.5 Branding for international markets

Valuation of brands

Challenges of international branding

10.6 Summary

10.7 Glossary

10.8 Terminal questions

10.9 Answers10.10 Case-let

10.1 Introduction

In the previous unit, we learnt about finance management at an international

level. We learnt the differences between domestic and international

financing. The unit also familiarised us with the components of international

financial management and the scope of these components.

International marketing refers to marketing of goods and products by

companies overseas or across national borderlines. The techniques usedwhile dealing overseas is an extension of the techniques used in the home

country by the company.

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In this unit, you will cover all the aspects of international marketing like

strategies, policies, valuation of brands and the different ways ofcircumventing the difficulties and challenges.

Objectives:

After studying this unit, you should be able to:

describe international marketing process.

understand scanning of interntional markets.

discuss the process of entering into interntional markets.

discuss global marketing strategies.

explain branding for international markets.

discuss the challenges of international branding.

10.2 Scanning Interntional Markets

The firms sustainable competitive advantages shall be based on the

assessment and appraisal that how effectively such facets of competitive

advances shall synchronise with key and important features of that market.

Scanning the global markets as per the key competitive strength of the firm

will be the key decision, as it will provide firm sustainable environment for

growth expansion and diversification. It is difficult to analyse and generalise

the factors which may be of help for the firm in an international market, but a

reference can essentially be made to the following elements while arrivingon decision to enter into that market for international trade. These elements

of information are as follows:

Table: Factors governing decision criteria for getting started in international

trade

The decision element forgetting started

Decision criteria

The decision to gointernational or not

Assessment of international market keeping in mindthe competitive advantages and synergy with overallcompetitive strategy in light of local and international

competition compared to domestic opportunities.

Scanning the market Economy rate of growth and structure, bureaucracy,capital, economic and trading bloc, legal system,political regime and laws, regulation for investmentand operations, political ideology and stability, typeand structure of competition, etc.

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Modes of entering intomarkets

Political/legallaws, regulations, investment, climate,government ideology, stability.

Targeting the markets Competitiontype, structure, operations, strategyplans, programmes, acquisitions, mergers.

Competition ininternational markets

Analysing various elements which define the natureof competition in target market.

Regulatory formalities forgetting started

Formalities to be completed for getting export-importlicense, registration cum membership certificate,excise code, etc.

Source: Adapted from S. Carter, Global Agricultural Marketing Management

A major mistake which Indian firm usually make is that they try to replicate

home success in international markets which is a laid back approach. Themarket fundamentals in the foreign market may be completely different from

the home market, for example Indian prefer cheaper and cost effective

product as they have low per capital income, while europeans prefer high

quality durable product. Hence the comprehensive analysis of following

aspect must be done while devising the firm competitive strategy for getting

started in international trade in globalised era.

Table: Scanning information for decision to go international

Generalinformation

Specific information

Economic GDP growth, level of inflation, per capita income, disposableincomes

Political Risk, instability, attitudes towards foreigners

Fiscal Taxes, exchange rates, financial architecture, current accountdeficit

Social People, demographics, culture, subculture, pressure groups,interest groups

Technology Current technological stage, rate of change, availableinfrastructure for research and innovation

Resources Money, manpower, materials, acquisitions, joint ventures

Institutions Capital and money markets, regulation for accessing capitalManagerial Skilled manpower, management practices, etc.

Source: Adapted from, S. Carter, Global Agricultural Marketing Management

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An organisation aspiring to get started in international marketing should

address, appraise and analyse the issues in advance in a careful andcomprehensive way. The success in international marketing largely depends

on the fact that firm shall exploit its opportunities handsomely, use its

strengths smartly and address and improve its weakness patiently which

may come on its way. While scanning the international markets, the firms

shall properly study all the aspects of economic data which may be specific

or general or both and can be effectively used for making decisions on

whether to enter markets or not. Such data analysis can also help the firm to

understand the various aspects of risks and can guide in the degree of its

engagement in that market. The general and specific information which can

be of use is as follows:

Table: Specific information to be scanned for getting started in international

marketing

1. Market information

Marketing decisionstatistics and potentialof market

Attitudes and behavior of consumers, disposableincome, per capita income, size of family, purchasefrequency.

Physical features oftarget market

Available infrastructure, communication facilities,money markets, banks, etc.

Kind of channels ofdistribution

Their type, availability, effectiveness and cost factorsinfluencing distribution channel.

Availability,effectiveness and costof media for accessingbuyers

Various information sources, quality, availability andcost factors in media, such as newspaper, television,telecommunication, internet cost, etc.

Resources need fordoing business

Money, manpower, materials, their availability, cost,quality, development.

2. Overall business environments

Economic factors Rate of economic growth, economy structure, i.e. shareof agriculture, manufacturing and services,competitiveness and conduct, capital adequacy,economic blocsand regional integration. Role of cartel,

trade practices, inflation rates.Social factors Customs, culture, attitudes, preferences for products

and services.

Political/legal factors Legislation governing business and trade, such asrules, regulations acts and overall laws friendliness withbusiness, investment climate, government and

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opposition ideology on trade and investment, politicalstability.

Technological factors State funding for research and innovation, trendsdevelopment in country research.

Competition factors Type, structure, operations, strategy plans, programme,acquisitions, mergers.

Trading partner andtheir role in targetmarket

Trade openness, trade propensity, regional intensityand orientation, trade intensity product and marketdiversification.

Management capability Country diplomatic reach and activeness foreignembassies, role of NGOs and other developmentalthrust.

3. Financial factors

Market access issues Quotas, tariffs and non tariff barriers, various duties,SPS and technical barriers to trade.

Monetary and fiscalpolicy

Fiscal and current account deficit, trade balance,balance of payments, foreign exchange reserves,interest rates, ease in accessing funds.

Expectations of players Investors, economic STS, bankers, business people.

Commodity exchanges Legislation governing foreign exchange, rigidity issues,exchange rate system, i.e. free float, managed float,dirty float, fixed float and frequency of regulatoryinterference.

Taxes Legislation governing the trade and business

incentives, dividends tax rules, earnings, repatriation ofprofits.

Spot forward market Level of developed, stage of maturity.

Intervention by outsidebodies

IMF or world bank and their effect on county economicpolicy.

Source: Adapted from, S. Carter, Global Agricultural Marketing Management

The important guiding factors in analysing the specific information while

selecting international markets,is the demographic features of the markets,

such as consumer attitudes towards products, consumer behavior,

disposable income and per capita income. Cultural aspects like the design

of the product as per local requirements and needs. The physical andnatural features of the country, such as its climate, environment,

topography, seasons and issues involved in working under such

circumstances are also of prime importance as it helps the marketer to

calculate the various cost involved in doing business in that country.

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Activity 1

How can one find out the data for the potential markets for export andimport?

Hint:www.trademap.org

10.3 Mode of entering into potential markets

Having scanned the best potential international markets which meet the

corporate competitiveness criteria of the firm, it has to evaluate the most

profitable way of market entry so as to sell its products and services to

potential customers in these markets. There are several methods used in

globalised era for international market entry, such as exporting, franchising,licensing, joint venture and wholly owned subsidiary. The entry method

suitable to firm requirement shall depend on a variety of factors, such as the

nature of firm product or service, the conditions for market penetration, entry

and exit barriers and financial commitment required for getting into

international markets.

Exporting, which is widely used for the first time traders is accomplished by

selling the products or services directly to a foreign firm or customer.

Alternatively, firm can export through an export intermediary, such as a

commissioned agent, an export management company or a trading

company. International joint ventures are very effective means of entry into

potential markets as it provides the firm to share domestic knowledge with

the aligned firm and can use partner strengths effectively and hedge its

risks. Joint ventures are good means for market entry in those markets

where there are entry barriers like capital limit requirement. Licensing,

another wieldy used method by firm getting started involves a contractual

agreement whereby firm assign the rights to distribute or manufacture its

product or service to a foreign company. Wholly owned subsidiary requires

either setting up its own production or manufacturing facility or sub-

contracting the manufacturing of its product to an assembly operator, such

as Coca Cola which uses fobo method for bottling in india.
http://www.trademap.org/http://www.trademap.org/http://www.trademap.org/

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Table: Comparison of foreign market entry modes

Sl.no. Mode Factors favoringthe entry modein target market

Advantages Disadvantages

1. Exporting 1. Opportunitiesfor limitedsales in thetarget country.

2. Chances forlittle product,new productandadaptation.

3. Distribution

channels areusually closetomanufacturingsites.

4. Economies ofscale cannotbe attained inproduction andlogistics,hence highproductioncost in

domesticmarket Liberalimport policiesof targetcountry.

5. High politicalrisk in targetcountry.

1. Minimises the

potential risk intrade as firmsneed not investin target market.

2. Ease in marketentry

3. Better utilisationof productionfacility andresources.

1. Tradebarriersand tariffsand othercost makeproductsandservicesuncompetitive.

2. In case offar awaymarket,transport,packagingandlogisticscosts putadditionalburden.

3. Problems inaccessingthe local

marketinformation.

4. Firm isviewed andregardedas an alienandoutsider.

2. Licensing 1. Firms arefacing importcontrol andinvestmentbarriers for

entry.

2. Countryprovidesprotection todomesticindustry and

1. Licensingminimises riskand investmentof licensor, i.e.exporter.

2. Ensures speedin entering thetarget market.

3. Licensing helpin circumventingthe various

1. In licensing,firm lackthe controlof marketand use of

assets intargetmarket.

2. Sometimes,licenseebecomes

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market.

4. Countryprescribescertain percentof equityparticipation.

5. There arepotentialchances ofsome politicalrisk andexpropriation.

6. A local partneris better indistributionknowledge,technical skills,naturalresources,brand name,etc.

provide chancesfor learning from

partner.

4. Firm is viewedand regarded asinsider

5. Firm requireless finances aslocal firm alsocontribute.

strategicand

operationaldecisions.

3. Jointventureshas higherriskexposurethanexportingandlicensing

4. Firmstechnical

andscientificknowledgegetspilledoverto localpartnersand theymayeventuallybecomecompetitorfor the firm.

4. Whollyownedsubsidiary

1. High importbarriers infirms andforeignownership isallowed.

2. There is littleculturaldistance intarget country.

3. The firm hasgood salespotential intarget market.

4. There is lowpolitical risk forthe firm.

1. Firm has goodknowledge oflocal market andaccordinglydevisestrategies.

2. Firm can applyspecialised skillsin good manner.

3. Chances ofknow-howproliferation getminimised.

4. The firm isviewed as aninsider.

1. Thismethod hasgreater riskthan othermodes ofentry.

2. It requiresmorefinancialand nonfinancialresourcesand

commitment from firm.

3. It ispossiblethat firmcould not

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company in the target country to use its property as a licensee and in

exchange, pays a fee or royalty on sales so incurred. The property oflicensor is intangible, such as trademarks, patents, copy rights, technical

know-how and production techniques. The licensee has to pay the fee in

exchange for the rights to use the intangible property as granted by the

licensor. Licensing is very preferred way of market entry into international

market in globalised era as it requires little investment on the part of the

licensor. Licensing, if effectively used as an entry mode, has the potential to

provide good return to the licensor, but usually it has been seen that

licensee who produces and markets the product takes away returns from

manufacturing and marketing activities due to vague regulatory law in

developing countries.

3. Joint ventures

Joint ventures are market entry options whereby firm and another company

or firm in target market may join together to form a new incorporated

company for business operations in that market. In joint ventures, both the

parties are supposed to provide capital and resources in the agreed

proportion and accordingly they will represent and share profits and loses.

Such mode of entry is popular in countries where there are restrictions on

foreign ownership. For example Venezuela, China, Vietnam.

Joint venture is also a preferred way of market entry as it is good tradeoff

between potential risks and returns and usually joint ventures is manifested

with the following common objectives for market entry in globalised era.

They are:

a. Market entry into potential market.

b. Risk/reward sharing between parties.

c. Technology sharing between parties.

d. Joint product development between parties.

e. Conforming to government regulations.

f. Possible advantages from political connections.

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Following are advantages and disadvantages of joint ventures:

Advantages of joint ventures Disadvantages of joint ventures

1. Helps to acquire new

competencies or skills which are

not domestically available.

2. Helps in quick penetration of the

market and also helpful in rapid

implementation of technological

change.

3. Reducing the firm risks by sharing

it with one or more than one firms.4. Helpful in easy and faster entry

into target market and also enable

quick payback.

5. Pooling of firm resources, such as

capital, technical know-how and

manpower with partner firms.

6. Help in avoiding the tariff barriers

and non tariff barriers.

7. Helpful in satisfying local content

requirements due to partnering

with local firm.

1. Lack of full control on

management of the firm.

2. Sharing of profit may make it

impossible to recover capital

invested.

3. Potential risk of disagreement

with partner organisation on

exploring new markets, new

operations, etc.4. Blocking firm chances of other

joint ventures as existing

partners may have different

views.

5. Fear in partner mind that other

may not take unwanted

advantage out of existing

operations.

Source: Adapted from about exporting, Austrade 2008

4. Wholly Owned Subsidiary (WOS)

Wholly owned subsidiary, as the name suggest, is the direct ownership of

production facilities in the potential international market. It requires a long

term commitment on the part of firm as it involves transfer of resources,

such as capital, technology and personnel to the potential market. Wholly

owned subsidiary can also be made through the acquisition of an existing

firm or the establishment in the target market. WOS has several advantagesas it provides high degree of administrative control in the business

operations of the firm and the firm has better chances to understand and

analyse the consumers and competitive environment in the target market.

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On the other hand, such entry strategy requires a high level of physical and

capital resources to run the business in the target market.

Activity 2

What can be the best possible way for entering into China and India for

getting started in business? Which method of entry will be suitable?

Hint: Read the case drivers of success for market entry into china and

india at weblink www.bus.miami.edu

Self Assessment Questions 1

1. For a firm to be successful internationally, it is not necessary to be

successful locally. (true/false)

2. Culture of a country influences the marketing strategy of the firm.

(true/false)

3. _________________ involves a firm, shipping goods directly to a foreign

market.

4. Direct investment involves ________________ in the overseas market.

5. A joint venture is an understanding between

a. Two or more firms.

b. Two or more countries.

c. The firm and its subsidiary.

d. two or more parties.

Activity 1

Find out few countries where direct foreign investment is not entertained.

Hint: China, Saudi Arabia.

10.4 Global Marketing Strategies

After getting an overview of international marketing, we shall now discuss

the strategies followed in global marketing.

Taking into account the various conditions on which markets vary and

depend, appropriate marketing strategies should be devised and adopted.

Some countries prevent foreign firms from entering into its market space

through protective legislation. Protectionism on the long run results in
http://www.bus.miami.edu/http://www.bus.miami.edu/

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inefficiency of local firms as it is inept towards competition from foreign firms

and other technological advancements. It also increases the living costs andprotects inefficient domestic firms.

To counter this scenario, firms must learn how to enter foreign markets and

increase their global competitiveness. Firms that plan to do business in

foreign land find the marketplace different from the domestic one. Market

sizes, customer preferences and marketing practices all vary, therefore the

firms planning to venture abroad must analyse all segments of the market in

which they expect to compete.

The decision of a firm to compete internationally is strategic; it will have an

effect on the firm, including its management and operations locally. The

decision of a firm to compete in foreign markets has many reasons. Some

firms go abroad as the result of potential opportunities to exploit the market

and grow globally. And for some it is a policy driven decision to globalise

and to take advantage by pressurising competitors.

But, the decision to compete abroad is always a strategic down to business

decision rather than simply a reaction. Strategic reasons for global

expansion are:

Diversifying markets that provide opportunistic global market

development.

Following customers abroad (customer satisfaction). Exploiting different economic growth rates.

Pursuing a global logic or imperative to harvest new markets and profits.

Pursuing geographic diversification.

Globalising for defensive reasons.

Exploiting product life cycle differences (technology).

Pursuing potential abroad.

Likewise, there can be other reasons like competition at home, tax

structures, comparative advantage, economic trends, demographic

conditions and the stage in the product life cycle. In order to succeed, a firm

should carefully look at their geographic expansion and global marketing

strategy. To a certain extent, a firm makes a decision about its extent of

globalisation by taking a stance that may span from entirely domestic to a

global reach where the company devotes its entire marketing strategy to

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global competition. In the process of developing an international marketing

strategy, the firm may decide to do business in its home-country (domesticoperations) only or host-country (foreign country) only.

10.4.1 Segmentation

Firms that serve global markets can be segregated into several clusters

based on their similarities. Each such cluster is termed as a segment.

Segmentation helps the firms to serve the markets in an improved way.

Markets can be segmented into nine categories, but the most common

method of segmentation is on the basis of individual characteristics, which

include the behavioural, psychographic and demographic segmentations.

The basis of behavioural segmentation is the general behavioural aspects of

the customers. Demographic segmentation considers the factors like age,culture, income, education and gender. Psychographic segmentation takes

into accountbeliefs, values, attitudes, personalities, opinions, lifestyles and

so on.

Once you are done with the segmentation of market, you can choose one or

more segments to carry out trade. This process of selecting or choosing the

potential market segment is known as targeting. The three basic criteria for

targeting are potential competition, the current size and growth rate of the

market and compatibility and feasibility. After the target market has been

ascertained, firms should select a global marketing strategy.

Marketing in less developed countries offers several advantages to

organisations. They can take advantage of the huge unexploited markets

and avail tax benefits. By focusing on less-developed countries, firms can

increase their market share and become market leaders. Less-developed

countries usually offer special benefits for the firms who are willing to

establish their operations in their countries. Thus, for firms marketing at a

global level, less-developed countries provide them with advantage.

10.4.2 Market positioning

The next step in the marketing process is, the firms should position their

product in the global market. Product positioning is the process of creating a

favourable image of the product against the competitor's products.

In global markets, product positioning is categorised as high-tech or high

touch positioning. The classification of high-tech and high-touch products is

shown in figure 8.1.

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The classification of high-touch products is shown in figure 8.2.

Figure 10.1: classification of high-tech and high-touch products

One challenge that firms face is to make a tradeoff between adjusting their

products to the specific demands of a country and gaining advantage of

standardisation, such as the maintenance of a consistent global brand

image and cost savings.

10.4.3 International product policy

Some theorists of the industry feel that there is a difference between

conventional products and services, stressing on service characteristics,

such as heterogeneity (variation in standards among providers and different

locations of the same firm), inseparability from consumption, intangibility and

perishability. Typically, products are composed of some service component

like documentation, warranty and distribution. These service components

are an integral part of the product and its positioning.

We often think of a product in terms of fulfilling the need of our own culture.

However, the functions served by that product may be very different in other

cultures, for example cars play a large transportation role in the U.S., but

they are impractical to drive in Japan and thus, there cars are used for

individual indulgence or act as a status symbol. Thus, it is important to

consider the findings of marketing research and determine customers

desires, motives and expectations in buying a product.

Firms have a choice in marketing their products across markets. Many a

times firms opt for a strategy which involves customisation through which

the firm introduces a unique product in each country. On the other hand,

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standardisation proposes the marketing of one global product with the belief

that the same product can be sold in different countries without significantchanges. For example intel microprocessors are the same irrespective of

the country in which they are sold.

Finally, in most cases, firms will go for some kind of adaptation. When

moving a product between markets, minor modifications are made to the

product. For example in the U.S., fuel is relatively cheap, therefore cars

have larger engines than the cars in Asia and Europe.

10.4.4 International pricing decisions

Pricing is the process of ascertaining the value for the product or service

that will be offered for sale.

In international markets, various factors like different currencies, greater

distances and barriers to trade make the pricing decisions more difficult. It is

vital to analyse the target market before establishing the price. It is also to

be in line with firms objective. Their could be pricing objectives like return

on investments, profit, market share, quality of product or sometimes

existence itself. The strategies for international pricing can be classified into

the following three types:

Market penetration: It is the technique of selling a new product at a

lower price than the current market price.

Market holding: It is a strategy to maintain buy orders in order tomaintain stability in a downward trend.

Market skimming: It is a pricing strategy where price of the goods are

set high initially to skim the revenue from the market layer by layer.

The factors that influence pricing decisions are inflation, devaluation and

revaluation, nature of product or industry and competitive behaviour, market

demand and transfer pricing.

There could be various approaches of company towards pricing when

working in international markets ethnocentric, polycentric and geocentric.

A company following an ethnocentric approach will maintain the same pricethroughout the world. In the polycentric approach, the regional managers of

the company are allowed to decide on product prices depending upon the

situations in which they are operating. While in the geocentric approach, the

company takes a middle position and decides on a price somewhere

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between global price and subsidiary requirement. Price can be defined by

the following equation:

receivedGoods

upgivenResourcePrice

The pricing decision enables us to change the price in many ways, some of

them are:

Sticker price changes The simplest way of changing the price is by

changing the price tag. By doing this, you are going to get the same

thing, but for a different amount.

Change quantity When sticker prices are increased, the response of

consumers is unfavourable and usually changes in quantity are noticed

less.

Change quality Another way to effectively increase profit is through

reducing the quality of the product.

Change terms For a firm it is a possible to save money by altering the

terms of operations or transactions with consumers. For example earlier

most software manufacturers provided free support for their programmes

but now services are being charged.

10.4.5 Transfer pricing

Transfer pricing is the process of setting a price for inter unit sale of goods

or services of a firm.Transfer pricing is an important issue for a firm having global operations. It

is determined in three ways Market based pricing, transfer at cost and

cost-plus pricing. For transfer pricing, arms length pricing rule is used.

Transfer pricing can also be defined as the rates or prices that are utilised

when selling goods or services between a parent company and a subsidiary

or company divisions and departments that may be across many countries.

The price that is set for the exchange in the process of transfer pricing may

be a rate that is reduced due to internal depreciation or the original

purchase price of the goods in question. When properly used, transfer

pricing helps to efficiently manage the ratio of profit and loss within the

company. Transfer pricing assists in saving the organisations tax by shifting

accounting profits from high tax to low tax jurisdictions. It also enables to fix

transfer price on a non-market basis and thus enables to save tax. This

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method facilitates in moving the tax revenues of one country to another. A

similar trend can be observed in domestic markets where different states tryto attract investment by reducing the sales tax rates and this leads in an

outflow from one state to another. Therefore, the government is trying to

implement a taxing system in order to curb tax evasion.

10.4.6 International advertising

International advertising is usually associated with using the same brand

name all over the world. However, a firm can use different brand names for

historic reasons. The acquisition of local firms by global players has resulted

in a number of local brands. A firm may find it unfavourable to change those

names as these local brands have their own distinctive market. Therefore,

the company may want to come up with a certain advertising approach ortheme that has been developed as a result of extensive global customer

research. Global advertising themes are advisable for marketing across the

world with customers having similar tastes.

The purpose of international advertising is to reach and communicate to

target audiences in more than one country. The target audience differ from

country to country in terms of the response towards humour or emotional

appeals, perception or interpretation of symbols and stimuli and level of

literacy. Sometimes, globalised firms use the same advertising agencies

and centralise the advertising decisions and budgets. In other cases, local

subsidiaries handle their budget, resulting in greater use of local advertising

agencies.

International advertising can be thought of as a communication process that

transpires in multiple cultures that vary in terms of communication styles,

values and consumption patterns. International advertising is a business

activity and not just a communication process. It involves advertisers and

advertising agencies that create advertisements and buy media in different

countries. This industry is growing worldwide. International advertising is

also considered as a major force that mirrors both social values and

propagates certain values worldwide.10.4.7 International promotion and distribution

Distribution of goods from manufacturer to the end user is an important

aspect of business. Companies have their own ways of distribution. Some

companies directly perform the distribution service by contacting others,

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whereas a few companies take help from other companies who perform the

distribution services. The distribution services include: The purchase of goods.

The assembly of an attractive assortment of goods.

Holding stocks.

Promoting sale of goods to the customer.

The physical movement of goods.

In international marketing, companies usually take the advantage of other

countries for the distribution of their products. The selection of distribution

channel is helpful to gain the competitive advantage. The distribution

channel is also dependent on the way to manage and control the channel.

Selecting the distribution channel is very important for agents and

distributors.

In order to reach its target markets, a company utilises a combination of

sales promotion, personal selling, advertising and public relations, which is

collectively called as promotion.

Advertising is a non-personal form of communication about an organisation

or its products that is propagated to a target audience through a broadcast

medium. A firm can focus on a small, clearly defined market segment by

employing this type of promotion. This promotional method is also cost

efficient. A large number of prospective customers can be reached at aminimal cost per person.

The activity of catching the attention of prospects is known as sales

promotion. It involves activities and materials that are meant to attract

customers. One motive of promotion is to gain a competitive edge, other is

to concentrate on this method as it provides quick return. The consumers

also look forward for sales promotions before purchasing a product.

People interested in a particular industry can be brought together by

organising overseas product exhibitions. These events have the potential to

attract important visitors, such as distributors, agents, journalists, potentialcustomers, politicians and competitors. These events also provide us with

an ideal opportunity to get attention.

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6. Firms that serve global markets cannot be segregated into severalclusters based on their similarities. (True/False)

7. Advertising is a paid form of ______________ communication about

an organisation or its products.

8. Promotional mix is a blend of advertising, personal selling, sales

promotion and ___________.

9. Globalised advertising is associated with the use of the same ______

name across the world.

10. Transfer pricing is considered to be a relatively simple method of

moving goods and services among the overall corporate family.

(true/false)11. __________ is the process of ascertaining the value for the product or

service.

Activity 2

Find out the stages in the process of international promotions and

distributions of a multinational company.

Hint: http:// www. Ehow. Com /list _ 6781615_ examples - advertising-

trade-show- exhibitions.html

10.5 Branding for International Markets

Global marketing strategies provide techniques and methods to sell a

product. Once the product is sold, the image of the product has to be

maintained. We will discuss about this branding here in this section.

With the spread of markets and the increase in competition on a global

scale, firms are expanding their operations overseas either through

investments or acquiring firms in other countries. Firms are also entering

into strategic alliances with firms in other countries or exporting directly or

indirectly to target countries. At the same time markets are getting more

integrated due to the spread of media, the expansion of internationalretailers and the mobility of people, goods and firms across national

borders. To respond to this global market, international firms need to have

coordinated and integrated international branding strategy in place.

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International branding is different from marketing in domestic markets in a

number of ways. The macro-marketing environment, such as legal, cultural,technological and economic aspects in which a firm operates in the

overseas market is different.

The intended audience must be considered while developing an intra-

organisational marketing communication strategy. A successful promotional

strategy is one which is communicated clearly and distributed thoroughly to

their intended audience. In addition, it is important to ensure that consistent

branding and non-contradictory messages are eliminated.

10.5.1 Valuation of brands

Brand value can be defined as the branding efforts that build customer

confidence and loyalty by adding unique advantages to the firms product or

service. The concept of brand value surpasses the concepts of tangible

product and basic brand. This facet of brand value distinguishes a brand

from a product. The three levels of brand value are:

Core functionality.

Emotional values.

Added value services.

The core functionality deals with the core physical product and its features.,

Emotional value is characterised by the intangible aspects of a brand that

fits the psychological profile of the target customer. Added valuesconcentrate on bringing in extra futures and are critical to the brand which

would enhance the usage of the brand for the customers.

10.5.2 Challenges of international branding

A challenge to international branding is to maintain a balance between being

global and being local. Brand ideas, values and concepts have to remain the

same, but the methods to communicate them and to make them familiar to

customers have to vary. Brand values and ideas can principally be same,

but the propagating methods cannot.

The task of building a strong brand is hard and complicated. The firm has to

honour the promises made by the marketing theme. Two conflicting

challenges an international brand has to face is to remain easily recognised

at any global location and simultaneously should be able to blend with the

local culture, traditions and customers' way of perception.

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In the international branding process, the challenges increase many fold.

Therefore, the process of building a strong brand is a complicated andchallenging task.


12. Brand value builds customer confidence and loyalty. (true/false)

13. International branding is all about differentiating between being global

and being local. (true/false)

14. The task of building a brand is:

A) Complicated.

B) Easy.

C) Critical.

D) Moderate.

10.6 Summary

Let us summarise the points covered in this unit about international

marketing:

Selling a product involves considering the need of the customers. In

order to build the customer base, the firms have to take up an

advertising activity.

Firms, both global and local have to advertise their products in order to

inform the customers about the benefits and features of the product.International marketing or advertising differs from domestic or local

marketing as the communication process is across cultures, geographic

conditions and tastes and preferences of the people.

A firm has to develop global marketing strategies in order to deal with

protectionism. The goal of a firm to move to a foreign country is to

exploit the market there.

The different approaches for global marketing are segmentation, market

positioning, branding, promotions, competitive pricing and so on.

Segmentation is the process of dividing the market into clusters and

then positioning the product with respect to the segment and targetaudience.

The pricing decision has to be competitive as there could be local firms

competing.

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10.7 Glossary

Arms length pricing rule: This is defined as the price a buyer is willing topay for an identical item under identical terms and conditions.

Foreign investment: It is the long term participation of a firm in a foreign

country to do business.

Non-current asset: It is an asset that will not convert to cash within the next

year.

Piggyback exporting: Practice of a foreign seller representing

complementary, non-competing lines. Here an exporter is using another

exporter as an intermediary

10.8 Terminal Questions

1. Discuss the process of scnanning the gloal markets for interntional

marketing opportunities.

2. Elaborate the various methods of entering into interntional markets.

3. Write a short note on two of the following:

a. Joint ventuers.

b. Licensing.

c. Wholly owned subsidiary.

d. Direct exporting.

4. Write a note on global marketing strategies.5. What is transfer pricing?

6. What are the factors considered while branding a product or service in

an international market?

10.9 Answers


1. False

2. True

3. Exporting

4. Manufacturing

5. a) two or more firms

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6. False7. Non-personal

8. Public relations

9. Brand

10. True

11. Pricing


12. True

13. False

14. A) Complicated

Terminal Questions

1. International marketing is different from domestic marketing in a sense

that the customer preferences and tastes are not known. There are

cultural differences and other issues. These are explained in sub-section

8.2.1. Refer the same for details.

2. Different global marketing strategies are market segmentation, market

positioning, advertising and so on. These are explained in section 8.3.

Refer the same for details.

3. Transfer pricing is usually used by companies to reduce the tax leviedon them. This is explained in sub-section 8.3.4.1. Refer the same for

details.

4. Branding must not have contradictory messages, the intended audience

must always be kept in mind. The branding process is a complicated

task. These are explained in section 8.4. Refer the same for details.

10.10 Caselet

Flatbread goes around the world

ABC Ltd. is located near El Mante, Mexico and produces corn flour and

other flour products which it processes into tortillas and related snacks for

markets worldwide. Its brand names include X, Y and Z. Its customers

include supermarkets, mass merchandisers, smaller independent stores,

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restaurant chains, food service distributors and schools. The company

was established in 1949. In the early 1970s, ABC Ltd. introduced itsproduct on the central american markets, specifically in Costa Rica. In

1976, it expanded to the United States and in 1987 it began expanding its

operations across the globe, opening plants in Honduras, El Salvador,

Guatemala and Venezuela. It now has plants in Europe and most

recently China.

The Asian market presents a very exciting development for ABC Ltd. The

company established their presence on continental China in the first

instance and then gradually expanded their penetration of markets

across Asia to the middle east. It has already established distributorships

in Japan, Korea, Singapore, Hong Kong, Thailand, the Philippines,Taiwan and India.

How has a mexican company with a niche food product like corn flour

succeed so well in international markets?

The answer is that the firm has focused on emerging markets which

follows the same path of development. In these emerging markets, the

customer demand is predictable as it follows a pattern and this is evident

in every major economic segment. What ABC Ltd. is following in their

international expansion is the tried and tested method of leveraging the

similarities across from market to market and growing their companyaccordingly. The root of the success of ABC Ltd. has been their ability to

observe the life cycle of emerging markets around the world and expertly

time their entry into these markets.

However, the other key factor has been their ability to adapt their

products to local market tastes. Their key competitive advantage in

international markets is based not on their product, but the ability to roll

any kind of flour from rice to corn to wheat into viable flatbread. In India,

many people eat a flatbread made form wheat called naan, but do not eat

corn tortillas. So, ABC Ltd. plans to sell corn tortillas in India. The

Chinese do not eat many corn tortillas, but they buy wraps made by ABCLtd. for Peking duck. Also follows a policy of deploying a senior

beachhead team to enter the new market in which they are building a

presence. In China, the beachhead team had enhanced their skills

through many years of experience in Latin America and was already

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primed to develop the necessary market insights to feed into their

marketing campaign. some of the observed trends in China are decreasein home cooking among dual-career couples, increase in the number of

fast food chains, increase in cold storage refrigeration in supermarkets

and rapid improvements in the logistics and distribution channels were all

utilised in thinking through the ABC Ltd. market-building strategy in

China.

Discussion question

1. Evaluate the reasons behind the success of abc ltd. (Hint: focusing on

emerging markets)

Source:http://estore.bized.co.uk/freecontent/300081f9.pdf

References:

Colin Gilligan, Martin Hird (1986). International marketing: Strategy and

Management.

Kumar N (2002). International marketing, first edition. Anmol publication.

Roger Bennett, Jim Blythe (2002). International marketing: Strategy

planning, market entry.

Sean De Burca, Richard Fletcher And Linden Brown (2004),

international marketing: an SME perspective, London: Ft - Prentice Hall.

Michael R. Czinkota, Ilkka A. Ronkainen.(2001), International marketing,Fort Worth; London: Harcourt college publishers.

Vern Terpstra, Ravi Sarathy (2000), international marketing, Dryden

press.

Michael R. Czinkota, best practices in international marketing, the

Harcourt college publishers series in marketing.

E-References:

Http://www.consumerpsychologist.com/international_marketing.html,

retrieved on 2nd November, 2010

Http://www.slideshare.net/chanvich/international-pricing-decisions-for-

upload, retrieved on 31st October 2010
http://www.consumerpsychologist.com/international_marketing.htmlhttp://www.slideshare.net/chanvich/international-pricing-decisions-for-uploadhttp://www.slideshare.net/chanvich/international-pricing-decisions-for-uploadhttp://www.slideshare.net/chanvich/international-pricing-decisions-for-uploadhttp://www.slideshare.net/chanvich/international-pricing-decisions-for-uploadhttp://www.slideshare.net/chanvich/international-pricing-decisions-for-uploadhttp://www.consumerpsychologist.com/international_marketing.html

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