Student Name VEENA SINHA

Course-MBA

Reg. N0-1305015990LC Code-03377

Subject Code-MB0041Subject Name-Financial and Management Accounting.

Q-1 Discuss the different management orientations of a company. How does it affectinternational marketing?ANS-1 Management Orientations The form and substance of a companys response to global business opportunities depend greatly on managements assumptions or beliefs both conscious and unconscious about the nature of the world. The worldview of a companys personnel can be described as ethnocentric, polycentric, regiocentric, and geocentric. Management at a company with a prevailing ethnocentric orientation may consciously make a decision to move in the direction of geocentricism.Ethnocentric A person who assumes his or her home country is superior compared to the rest of the world is said to have an ethnocentric orientation. The ethnocentric orientation mans company personnel see only similarities in markets and assume the products and practices that succeed in the home country will, due to their demonstrated superiority, be successful anywhere. At some companies, the ethnocentric orientation means the opportunities outside the home country are ignored.In the ethnocentric, international company, foreign operations are viewed as being secondary or subordinate to domestic ones. An ethnocentric company operates under the assumption that tried and true headquarters knowledge and organisational capabilities can be applied in other parts of the world. Although this can sometimes work to a companys advantage. Nissans ethnocentric orientation was quite apparent during its first few years of exporting cars and trucks to the United States. Designed for mild Japanese winters, the vehicles were difficult to start in many parts of the United States during the cold winter months. 1.5.2 Polycentric The polycentric orientation is the opposite of ethnocentrism. The term polycentric describes managements often-unconscious belief or assumption that each country in which a company does business is unique. This assumption lays the groundwork for each subsidiary to develop its own unique business and marketing strategies in order to succeed; the term multinational company is often used to describe such a structure. Until recently, Citicorps executive, offered this description of the company: We were like a medieval state. There was the kind and his court and they were in charge, right? No. It was the land barons who were in charge.Regiocentric and geocentric orientations In a company with a regiocentric orientation, management views regions as unique and seeks to develop an integrated regional strategy. For example, a U.S. company that focuses on the countries included in the North American Free Trade Agreement (NAFTA) the United States, Canada, and Mexico has a regiocentric orientation. Similarly, a European company that discusesits attention on Europe is regiocentric. A company with a geocentric orientation views the entire world as a potential market and strives to develop integrated world market strategies.Benefits of International Marketing The importance of international marketing is neither understood nor appreciated by the consumers though they are carrying out international marketing daily. The Government officials especially the bureaucrats seem always to point a negative aspect of international business. Many of their charges on international marketing are imaginary than real.These benefits are: Endurance Every country is not that fortunate as USA in terms of infrastructure, size, resources and opportunities. Hence, they must trade with other countries to survive. Similarly, every country is not fortunate as India, which has abundant natural resources and treasure of biodiversity that it can survive within its resources even if there is a resource crunch. Even then it has to carry out trading with other countries to get oil and armaments for its own survival.Progress of overseas markets Developing countries, inspite of poor economy having serious marketing problems are excellent markets. The US has found that India is the biggest market in the world for consumer and engineering products. According to a report prepared by US Congress by the US Trade Representative, Latin America and Asia are experiencing the worst economic recession though they have the potential in the world market.Sales promotion Foreign markets constitute a large share of total business of many firms that have cultivated market abroad. Many large US companies have done very well because of their overseas customers. IBM and Compaq sell more computers abroad than at home. The case of Coca-Cola clearly emphasizes the importance of overseas markets. Coca-cola is coming up with milk based products as majority of the Indians and Asians do not relish the taste of aerated drinks which are supposed to be having caffeine and is addictive.Diversification In the international market cyclical factors such as recession and seasonal factors such as climate affect the demand for most of the product. Due to these variables there are sales fluctuations, which frequently are substantial enough to cause lay off of personnel. One way of diversifying a companys risk is to consider foreign markets as a solution for variable demands. Inflation and wholesale price index The best way to control inflation is to earn foreign exchange through exports. Imports can also be highly beneficial to a country because they constitute reserve capacity of the local economy. Without imports, there is no incentive for domestic firms to moderate their prices.Employment and placements Tariff barriers and trade restrictions in certain countries contributed significantly to the great depression of 1930 and have the potential to cause widespread unemployment again. Unrestricted trade on the other hand, improves the worlds GNP and enhances employment generally for all nations.Q-2 It is very important to analyze the politico- legal environment of a country ininternational business. Comment.ANS-2 Legal and Regulatory Environment As there is a multiplicity of political environments, there are various legal environments: domestic, foreign and international. If laws are not handled properly they can prohibit the marketing of a product altogether. To most business people, laws act as an inconvenience. For example, Club Meds policy of rotating its international staff every six months is hampered by the US immigration law, which makes the process of rotation both time consuming and costly. A few issues related to legal aspect of business are discussed in the subsequent sub-sections. 2.3.1 Legal forms of organisations Every country has its own legal forms of organisations to deal with business. Firms doing business in United Kingdom have three primary choices for the legal form of organisation: British Branch, Limited Company, or Partnership. India also follows an almost similar organisation to deal with the business firms. If a limited company is the choice, more decision is needed. A limited company may either be a Public Limited Company (PLC), which can raisecapital by selling securities to the public or a private company, which is not allowed to offer shares or debentures to the public. In general, a public company must meet a number of equirements in terms of registration and capital structure, subscription for shares and profits and assets available for distribution. In the US, a business is able to select from among these forms: sole proprietorship, partnership and corporation. For firms involved in international trade, the most common choice is the corporation because of the limited liability associated with corporate form, its relatively permanent structure and its ability to raise funds by selling securities. Most large US firms have a corporation or Inc. nomenclature as part of their trade name. The nomenclature indicating incorporation is different in other countries. For most British commonwealth countries, the corporate name includes limited or limited company to indicate that the liability of the company is limited. Equivalencies in civil law countries include the following: In France, SA (Societe Anonyme or Sociedad Anonima) for formal corporation/stock company and Saral (Soiete a responsibiliti limitee) for an informal corporation/limited liability company; in Germany and Switzerland, AG (Aktiengesellschaft) for a stock company and GAMBH (Gesellschaft Mit Beschrankter Haphung) for a limited liability company. In Japan, KK (Kabushikikaisha) for a stock company; in Sweden AB and in Netherlands NV. In order to eliminate confusion and ensure some uniformity, European countries are now encouraging the use of PLC instead of other nomenclatures to indicate that the company is incorporated. 2.3.2 Intellectual property The intellectual property is the creation of human mind, the human intellect, hence the designation Intellectual Property. It includes copyright, patent and industrial designs. Copyright relates to the rights of creators of literary, scientific and artistic works. Patents give exclusive rights to inventors; however, inventions can be patented only if they are new, known as obvious, capable of industrial applications, industrial designs are new or original aesthetic creation determining the appearance of industrial products. Intellectual property also includes trade marks, service marks and appellations of origin (geographic indications). In case of these propertyrights, the aspect of intellectual creation although existent is less prominent. Copyrights and related rights The subject matter of copyright protection includes works in the literary, scientific and artistic domain, whatever the mode or form of expression. For a work to enjoy copyright protection, however, it must be an original creation. The idea in the work does not need to be new but the form, be it literary, artistic or scientific, in which it is expressed, must be the original creation of the author.Counterfeiting Once a business has obtained intellectual property protection, it then faces the far more difficult problem of enforcing those property rights in the worldwide market-place. The most significant problem is one of pirated or counterfeit products, especially for popular products. Both governments and individual businesses, have interests in stopping piracy and some grey market practices.Grey market Intellectual property owners face an additional problem in preserving their property rights. The problem is that, under some circumstances, legitimate goods will enter a market through unauthorised channels. Such goods are known as grey market goods. Grey market goods appear either because a seller has priced goods differently in different markets or because currency values change, making it profitable to acquire goods in other markets and import them. For example, if the value of the dollar is high against the German mark, it may make sense to buy German cars directly from German sellers, rather than through the authorised American distributors.Q-3 Compare GATT and WTO and discuss the implications of WTO on internationalMarketingANS-3 General Agreement on Tariffs and Trade (GATT) GATT is a multilateral treaty among the member countries that lays down certain agreed rules for conducting international trade. The member countries contribute together to four-fifth of the total world trade. It is interesting to note that underdeveloped countries form a sizable majority in GATT. The basic aim of GATT is to liberalise world trade negotiations among members countries and, for the last forty seven years, it has been concerned with negotiations on the reduction, even the elimination of trade barriers tariff and non-tariff between countries and improving trade relations so that the international trade flows freely and swiftly. It also provides a forum to member countries to discuss their trade problems and negotiate to enlarge their trading opportunities.WTO The World Trade Organisation (WTO) was established on 1st January 1995. The functions and objectives of WTO are given in following subsections. 3.9.1 Functions of WTO The agreement establishing WTO provides that it should perform the following four functions: First, it shall facilitate the implementation, administration and operation of the Uruguay Round legal instruments and of any new agreements that may be negotiated in the future. Second, it shall provide a forum for further negotiations among member countries on matters covered by the agreements as well as on new issues falling within its mandate.

Third, it shall be responsible for the settlement of differences and disputes among its member countries. Fourth, it shall be responsible for carrying out periodic reviews of the trade policies of its member countries. 3.9.2 Objectives of WTO In its preamble, the agreement establishing the World Trade Organisation reiterates the objectives of GATT. These are: raising standards of living and incomes, ensuring full employment, expanding production and trade and optimal use of the worlds resources. The preamble extends these objectives to services and makes them more precise. It introduces the idea of sustainable development in relation to the optimal use of the worlds resources, and the need to protect and preserve the environment in a manner consistent with various levels of national economic development. It recognises that there is a need for positive efforts to ensure that developing countries, and especially the least developed among them, secure a better share of the growth in international trade. Implication of WTO on International Marketing The implications are as follows: 1. The System Helps to Keep the Peace: helping trade to flow smoothly and providing countries with a constructive and fair outlet for dealing with disputes over trade issues. It is also an outcome of the international confidence and cooperation that the system creates and reinforces. The WTO system helps resolve these disputes peacefully and constructively. 2. Freer Trade Cuts the Cost of Living: The WTOs global system lowers trade barriers through negotiation and applies the principle of non-discrimination. The result is reduced costs of production (because imports used in production are cheaper) and reduced prices of finished goods and services and ultimately a lower cost of living.3. Trade Raises Incomes: Lowering trade barriers allows trade to increase, which adds to incomes national incomes and personal incomes. But some adjustment is necessary. The fact that there is additional income means that resources are available for governments to redistribute. 4. Trade Stimulates Economic Growth and that can be Good News for Employment: Trade clearly has the potential to create jobs. In practice there is often factual evidence that lower trade barriers have been good for employment. But the picture is complicated by a number of factors. Nevertheless, alternative protectionism is not the way to tackle employment problems. 5. The Basic Principles make the System Economically more Efficient and they Cut Costs: Many of the benefits of the trading system are more difficult to summarise in numbers but they are still important. They are the result of essential principles at the heart of the system and they make life simpler for the enterprises directly involved in trade and for the producers of goods and services.Q-4 Nestle is marketing bottled water to Pakistan. Which segmentation it adopts thereand what are the other international market segmentations?ANS-4 Behavioural segmentation Behavioural segmentation focuses on whether people buy and use a product, as well as how often and how much they use it. Consumers can be categorized in terms of usage rates for example, heavy, medium, light, and nonuser. Consumers can also be segmented according to user status: potential users, nonusers, ex-users, regulars, first-timers, and users of competitors products. Although bottled water may be considered a luxury product in some high-income markets, Nestle is marketing bottled water in Pakistan where there is a huge market of nonusers who, despite their low income, are willing to pay 18 rupees a bottle for clean water because of the widespread presence of arsenic poisoning in well water and the pollution of surface water. Tobacco companies are targeting China because the Chinese are heavy smokers.International Market Segmentation Market segmentation is the process of subdividing a market into distinct subsets of customers that behave in the same way or have similar needs. Each subset may conceivably be chosen as a market target to be reached with a distinctive marketing strategy. Some widely used bases of segmentation are discussed below in sub sections. 6.6.1 Geographic segmentation Geographic segmentation is dividing the world into geographic subsets. The advantage of geography is proximity: Markets in geographic segments arecloser to each other and easier to visit on the same trip or to call on during the same time window. Geographic segmentation also has major limitations: The mere fact that markets are in the same world geographic region does not meant that they are similar. Japan and Vietnam are both in East Asia, but one is a high-income, post-industrial society and the other is an emerging, less developed, pre-industrial society. The differences in the markets in these two countries overwhelm their similarities. 6.6.2 Demographic segmentation Demographic segmentation is based on measurable characteristics of population such as age, gender, income, education, and occupation. A number of demographic trends aging population, fewer children, more women working outside the home, and higher incomes and living standards suggest the emergence of international segments. For most consumer and industrial products, national income is the single most important segmentation variable and indicator of market potential. Annual per capita income varies widely in world markets, from a low of $81 in the Congo to a high of $38.587 in Luxemburg. The World Bank segments countries into high income, upper middle income, lower middle income, and low income.6.6.3 Psychographic segmentation Psychographic segmentation involves grouping people in terms of their attitudes, values, and lifestyles. Data are obtained from questionnaires that require respondents to indicate the extent to which they agree or disagree with a series of statements. In the United States, psychographics is primarily associated with SRI International, a market research organization whose original VALS and updated VALS 2 analyses of U.S. consumers are widely known. 6.6.4 Behavioural segmentation Behavioural segmentation focuses on whether people buy and use a product, as well as how often and how much they use it. Consumers can be categorized in terms of usage rates for example, heavy, medium, light, and nonuser. Consumers can also be segmented according to user status: potential users, nonusers, ex-users, regulars, first-timers, and users of competitors products. Although bottled water may be considered a luxury product in some high-income markets, Nestle is marketing bottled water in Pakistan where there is a huge market of nonusers who, despite their low income, are willing to pay 18 rupees a bottle for clean water because of the widespread presence of arsenic poisoning in well water and the pollution of surface water. Tobacco companies are targeting China because the Chinese are heavy smokers.6.6.5 Benefit segmentation International benefit segmentation focuses on the numerator of the value equation the B in V=B/P. This approach can achieve excellent results by virtue of marketers superior understanding of the problem a product solves or the benefit it offers, regardless of geography. For example, Nestle discovered that cat owners attitudes toward feeding their pets are the same everywhere. In response, a pan-European campaign was created for Friskies dry cat food. The appeal was that dry cat food better suits a cats universally recognised independent nature. 6.6.6 Vertical versus horizontal segmentation Vertical segmentation is based on product category or modality and price points. For example, in medical imaging there is X-ray, Computed AxialTomography (CAT) scan, Magnetic Resonance Imaging (MRI), and so on. Each modality has its own price points. These price points were the traditional way of segmenting the medical imaging market. One company decided to take a different approach and segment the same market by the health care delivery system: national research and teaching hospitals, government hospitals, and so on. It then rolled out a campaign that was regional, national, and finally International, which was tailored for each different types of health care delivery. This horizontal segmentation approach worked as well in markets outside the home-country launch market as it did in the home country.Q-5 Write short notes on:a) International packagingb) International logistics planningANS-5 International Packaging Packaging has assumed an important function for the preservation of the goods as well as for the reduction of cost of the products. It may be viewed as consisting of two distinct types: (i) industrial (exterior) and (ii) consumer (inferior). Consumer packaging is designed for the purpose of affecting sales acceptance. The aim of industrial packaging is to prepare and protect merchandise for shipment and storage and this type of packaging accountsfor 7 cents of each retail dollar as well as 30% of the packaging costs. Packing is even more critical for overseas shipment than for domestic shipment because of the longer transit time and a greater number of hazards. The subsequent subsections, we will discuss the problems that businesses face with packaging and a possible way to overcome those problems-containerisation. 8.7.1 Problems with packaging There are four common packing problems some of which are in direct conflict with one another: (i) weight, (ii) breakage, (iii) moisture and temperature, (iv) pilferage. Weight: Over packaging not only directly increases packing cost but increases the weight and size of the cargo. An undue increase in weight or size only serves to raise freight charges. Moreover, import fees or customs duties may also rise when import duties are based on gross weight. Thus, over protection of cargo can cost more than its worth. Breakage: Although over packaging is undesirable, so is under packaging because the latter allows a product to be susceptible to breakage or damage. The breakage problem is prevalent in every step of sea transport. The cargo may be dropped, dragged, pushed, and rolled during loading and unloading, moving in and outside the customs or in transit to the final destination. Therefore, packing must be prepared to accommodate rough manual handling and guard against breakages and pilferage. Moisture and Temperature: A good packing helps in the seepage of moisture and also prevents destruction of goods during extreme temperatures especially when the cargo is to be shipped by sea. The sea saline water corrodes the metal parts of the cargo if it is not properly packed. Similarly, extreme climate also destroys the very shape, colour and qualities of a product. Pilferage: Pilferage of goods is very common especially in the Third World Countries. If the proper packaging of the goods that are being shipped is not done, the pilferage incidents will be more and there will be a loss to the shippers. The packaging has got to be strong and sturdy so that it cannot be easily opened by ordinary means. Containerisation An increasingly popular method of shipment is containerisation. A container is a large box made of durable material such as steel, aluminum, plywood, and glass reinforced plastics. A container varies in size, material, and construction. Its dimensions are typically 8 ft. high and 8 ft. wide, with lengths usually varying in multiples of 10 ft. upto a maximum of 40 ft. A container can accommodate most cargo but is most suitable to packages of standard size and shape. Containers can take care of most of the four main packing problems.B) International Logistics Planning Having sketched in the broad picture of international marketing, we are ready to analyze the approaches of management to international logistic planning. In supplying world markets, companies try to work out systems that will be competitively practical and permit lowest cost operation so that profit is maximized. This is one of the key components of the global unification strategy upon which the overall effectiveness of a multinational firm depends. Looking at the operations of U.S. companies, we find that logistic systems are commonly composed of four main components: I. Export of finished products from the United States. Virtually all companies start their logistic planning with a strong preference for exporting from the United States. Manufacture abroad always involves some risks, along with the complications of managing operations from a distance. Furthermore, exports from the United States add to the volume of output of domestic plants, making them more efficient. II. Manufacture in a foreign country for sale in that country. Under this heading fall two types of situations. First are the plants in less developed countries. Companies selling goods in these countries are repeatedly confronted with the choice of manufacturing on a protected basis within the country or being excluded by restrictions designed to protect those who are willing to manufacture. Sometimes companies have decided to take the second choice rather than make sizable investments of money and manpower in small markets. But because of

the long run potential in the developing countries, most companies are reluctant to be frozen out of them. III. Foreign plants producing for local and export markets. This type of operation may be expected to increase with the reduction of trade restrictions under international agreements and especially with the development of common markets. A major disadvantage of foreign manufacture has been the high cost of producing on a small scale for one-country markets. As barriers to trade are lowered, therefore, companies have shifted toward logistic systems based on small number of fairly large plants located at strategic spots around the world. IV. Export of components from the United States and third countries. Although many finished products cannot be exported from the United States, it is generally possible to export some parts or supplies for use in foreign plants, especially those manufacturing complex products like drugs, automobiles, and electronic equipment. Q-6 Select a product of your choice for export and explain how you will do the pricingand costing of that product.ANS-6 Export Pricing and Costing Export pricing should be differentiated from export costing. Price is what we offer to the customer. Cost is the price that we pay/incur for the product. Price includes our profit margin; cost includes only expenses we have incurred. Export pricing is the most important tool for promoting sales and facing international competition. The price has to be realistically worked out taking into consideration all export benefits and expenses. However, there is no fixed formula for successful export pricing. It will differ from exporter to exporter depending upon whether the exporter is a merchant exporter or a manufacturer exporter or exporting through a canalising agency. You should also assess the strength of your competitor and anticipate the move of the competitor in the market. Pricing strategies will depend on various circumstantial situations. You can still be competitive with higher prices but with better delivery package or other advantages. Your prices will be determined by the following factors: 1. Range of products offered. 2. Prompt deliveries and continuity in supply. 3. After-sales service in products like machine tools, consumer durables. 4. Product differentiation and brand image. 5. Frequency of purchase. 6. Presumed relationship between quality and price. 7. Speciality value goods and gift items. 8. Credit offered. 9. Preference or prejudice for products originating from a particular source. 10. Aggressive marketing and sales promotion. 11. Prompt acceptance and settlement of claims. 12. Unique value goods and gift items. Export Costing is basically a cost accountants job. It consists of fixed cost and variable cost comprising various elements. It is advisable to prepare an export-costing sheet for every export product