Master of Business Administration- MBA Semester 4

MK0018– International Marketing -4 Credits

Q1. Define multinational corporations. How is international marketing different from domestic marketing?

Ans A multinational corporation (MNC) or multinational enterprise (MNE)[1] is a corporation that is registered in more than one country or that has operations in more than one country. It is a large corporation which both produces and sells goods or services in various countries.[2] It can also be referred to as an international corporation.

They play an important role in globalization. Arguably, the first multinational business organization is conjectured to be the Knights Templar, founded in 1120.[3][4][5] After that came the British East India Company in 1600[6] and then the Dutch East India Company, founded March 20, 1602, which would become the largest company in the world for nearly 200 years.

Various definitions of multinational corporations By Size:

The term MNC implies bigness but bigness also has a number of dimensions such as market value, sales, profits, and return on equity when used to identify the largest MNCswill yield varying results. For example, Daimler Chrysler AG is number 1 in terms of sales but it is number 7 in terms of assets. General Motors is no. 2 in terms of assets and no. 4 in terms of sales.International Marketing vs. Domestic MarketingThe striking difference between international and domestic marketing lies in the environment in which the two take place. The important points of differences between international and domestic marketing are: 1.Sovereign Political Entities:Each country is a sovereign political entity and, therefore, they for importing and exporting the goods and services in order to safeguard their national interest impose several restrictions. The traders in international marketing have to observe such restrictions. These restrictions may fall in any of the following categories’) Tariffs and customs duties on import and export of goods and services in order to make them costly in the importing country and not to ban their entry into the country completely. In the post war period, through the efforts of General Agreement on Tariffs and Trade (GATT)there has been a significant reduction in tariff globally and on regional basis due to the emergence of regional economic groupings.ii) Quantitative restrictions are also imposed with an intention to restrict trade in some specific commodities. The major objective behind the restriction is the protection of home industries from the competition of the foreign commodities.Different Legal Systems:Different countries operate different legal systems and they all differ from each other. In most of the countries follow English Common Law as modified from time to time. Japan and Latin American countries are important exceptions to this rule. The existence of different legal systems makes the task of businessmen more difficult as they are not sure as to which particular system will apply to their transactions. This difficulty does not arise in the domestic trade, as laws are the same for the whole country.3.Different Monetary Systems:Each country has its own monetary system and the exchange rates for each country’s currency are fixedunder the rules framed by the International Monetary Fund and, therefore, they are more or less fixed. However, in recent years the exchange rates are fluctuating and are being determined by demand and supply forces. Some countries operate multiple rates; i.e. different rates are applicable to different transactions

Q2. “Though society and culture do not appear to be a part of business situations, yet they are actually key elements in showing how business activities will be conducted”. Discuss.

Ans : Culture and its effect on business :

Businesses do not exist in a vacuum, and even the most successful business must be aware of changes in the cultures and societies in which it does business. As society and culture change, businesses must adapt to stay ahead of their competitors and stay relevant in the minds of their consumers. We know that culture guides the way people behave in society as a whole. But culture also plays a key role in organisations, which have their own unique set of values, beliefs and ways of doing business. This unit explores the concepts of national and organisational culture and the factors that influence both. Organisational culture refers to an organization’s own values, beliefs and learned ways of doing business. This is reflected in its structure and in the people who work in the organisation.

Changing Preferences A major socio-cultural factor influencing businesses and business decisions is changing consumer preferences. What was popular and fashionable 20 years ago may not be popular today or 10 years down the road. Different styles and priorities can undermine long successful products and services. For example, a clothing company must constantly be aware of changing preferences when creating new products or it will quickly become outdated.

DemographicsChanges in demographics are also a significant factor in the business world. As populations age, for example, markets for popular music and fashions may shrink while markets for luxury goods and health products may increase. Additionally, changes in the proportion of genders and different racial, religious and ethnic groups within a society may also have a significant impact on the way a company does business.

Advertising TechniquesAdvertising is perhaps the area of business most closely in touch with socio-cultural changes. Advertising often seeks to be hip and trendsetting, and to do this, advertising agencies and departments cannot lose track of the pulse of the societies in which they engage in business. Changes in morals, values and fashions must all be considered when creating outward facing advertising.

Internal EnvironmentIn addition to a company's interactions with the market and its customers, socio-cultural factors also impact a company's internal decision-making process. For example, changing gender roles and increasing emphasis on family life have led to increased respect for maternity and even paternity leave with organizations. Additionally, attitudes towards racial discrimination and sexual harassment have changed drastically over the years as a result of socio-cultural change.

Q3. Discuss the entry model adopted by McDonalds to build a presence in foreign markets. What are its limitations?

Ans. When a firm is thinking about entering to new markets around the world, the most important decisions to make are: which foreign markets? And which entry mode? When talking about which foreign markets, ultimately, the choice must be based on an assessment of nation’s long-run profit potential. McDonald’s has presence today in 119 countries, but under which criteria were this nations chosen? 

The attractiveness of a country as a potential market for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country. The long-run economic benefits of doing business in a country are a function of factors such as the sixe of the market, the present wealth of consumers in that market, and the likely future wealth of consumers, which depends upon economic growth rates. While some markets are very large when measured by number of consumers, it is also important to look at the living standards and economic growth. 

On the other hand, when a business is choosing an entry mode, it has to look to various options, such as turnkey projects, exporting, licensing, joint ventures, wholly owned subsidiaries and franchising. Each of these entry modes has its advantages and disadvantages, factors that are extremely important when making this decision. 

The entry mode chosen by McDonald’s to have presence in other countries is Franchising. This entry mode is similar to licensing, although franchising tends to involve longer-term commitments than licensing. Franchising is basically a specialized form of licensing in which the franchiser not only sells intangible property o the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business. The franchiser receives a royalty payment, which amounts to some percentage of the franchisee’s revenues. Franchising is employed primarily by service firms, like McDonald’s, this firm is the perfect example of franchising. McDonald’s strict rules as to how franchisees should operate a restaurant extend to control over the menu, cooking methods, staffing policies, and design and location. This factor is a huge part of the successful strategy of McDonald’s.

One advantage of franchising is that the firm is relieved of many of the costs and risks of opening a foreign market on its own. Instead, the franchisee assumes those costs and risks. This creates a good incentive for the franchisee to build a profitable operation as quick as possible. A service firm can build a global presence quickly and at a relatively low cost and risk, as McDonald’s has.

Q4. Market segmentation divides market into distinct subsets. Explain the purpose and bases of international market segmentation.

Ans Purpose of international market segmentation :

International market segmentation has become an important issue in developing, positioning, and selling products across national borders. It helps companies to target potential customers at the international-segment level and to obtain an appropriate positioning across borders. A key challenge for companies is to effectively deal with the structure of heterogeneity in consumer needs and wants across borders and to target segments of consumers in International market segmentation has become an important issue in developing, positioning, and selling products across national borders. It helps companies to target potential customers at the international-segment level and to obtain an appropriate positioning across borders. A key challenge for companies is to effectively deal with the structure of heterogeneity in consumer needs and wants across borders and to target segments of consumers in different countries. These segments reflect geographic groupings or groups of individuals and consist of potential consumers who are likely to exhibit similar responses to marketing efforts. A natural form of international segmentation is to adopt a multi-domestic strategy where each country represents a separate segment. A multi-domestic strategy amounts to selection of countries on the basis of their local advantages. Traditionally, multinational companies implemented such multi-domestic strategies by tailoring national brands to the needs shared by groups of consumers in the same country. In such an approach no coordination is required between countries, products are produced locally and are tailored to satisfy local needs. Distinct advertising, distribution, and pricing strategies are developed for targeting consumers in each country, and competition is managed at a national level. Competitive moves are conducted on a country-to-country basis and do not take the developments in other countries into account. Thus, in segmenting their markets, firms operating according to a multi-domestic approach can suffice with the standard segmentation techniques that are developed for domestic markets International segmentation becomes a particularly challenging issue when companies adopt a global or pan-regional strategy, that is, a strategy integrated across national borders. In many industries, national borders are becoming less and less important as an organizing principle for international activities, rendering multi-domestic strategies less relevant. Developments accelerating this trend include regional unification, shifts to open economies, global investment, manufacturing, and production strategies, expansion of world travel, rapid increase in education, literacy levels, and urbanization among developing countries, convergence of purchasing

power, lifestyles and tastes, advances in information and communication technologies, the emergence of global media, and the increasing flow of information, labour, money, and technology across borders International segmentation offers a solution to the standardization versus adaptation debate in that it creates the conceptual framework for offering products and/or marketing programs that are standardized across countries by targeting the same consumer segment(s) in different countries. When using a similar marketing strategy in multiple countries, economies of scale will lead to a reduction in the average costs of production, advertising, and distribution. If, at the same time, consumers in the targeted segments share the same needs, such strategies can also be highly effective. Hence, international segmentation combines the benefits of standardization (e.g., lower costs, better quality) with the benefits of adaptation (e.g., close to needs of consumers).

Despite the obvious importance of international market segmentation for marketing as a discipline in general and international marketing in particular, it has received relatively little attention in the literature. In a review of about 900 articles on international marketing, it was found that just over 1% (11 papers) dealt directly with international market segmentation (Aulakh & Kotabe, 1993). A similar observation applies to international versus domestic market segmentation: ‘‘Segmentation is a central issue in domestic marketing strategy. Yet, in international markets, it has received little attention’’ (Douglas & Craig, 1992, p. 312). One exception is the review by Walters (1997), which focuses especially on the process and international business aspects of international segmentation. We expand upon this work by providing an in-depth treatment of the key conceptual and methodological issues one should address when doing international segmentation research. Our point of departure is a systematic overview of previous empirical international segmentation studies. These studies are subsequently related to the various issues raised in international market segmentation. These conceptual and methodological issues deserve more attention if international market segmentation is to fulfill its potential. We bring these issues together and apply them in an illustrative case study involving an international segmentation challenge faced by one of the largest global consumer packaged good companies. We conclude with suggestions for future research on international market segmentation.

Q5. Explain the meaning and benefits of e-marketing. Discuss the various e-marketing approaches.

Ans : . E-marketing is also sometimes referred to as the online or the internet marketing. It is the promotion and advertising of the products for the consumers to be attracted using the electronic media and mostly the internet.

E-marketing has been a benefit for the marketing world in all aspects because it has lowered down all the

distribution costs of the marketing which involves conveying of the information to the audience globally.

Through the advertising and promotion with the internet media, the response to the marketing can be

instantly achieved together with the excellent and innovative marketing opportunities.

E-marketing is more than just the creation and maintenance of a website. It involves the whole procedure

involved by the company so as to create and promote a product, by an organization which exists in

reality. The strategy of the E-marketing includes the advertising of the products using the websites with

the help of search engine marketing and social media. The marketer for the product selects the best of the

e-marketing tools so as to be able to gain the interest of the global audience.

Benefits of email marketing

Email marketing is utilised by thousands of businesses of all sizes across the globe. Those who are

unfamiliar with this method of advertising may not immediately understand why it is so popular amongst

companies in a variety of industries - but here are ten reasons why email marketing is seen by many as

vital marketing tool...

Low-cost

One of the most obvious benefits of email marketing is its lower cost compared to mainstream marketing

channels. There are no print or postage costs and no fees paid in exchange for exposure on a certain

billboard, magazine or television channel.  Email marketers might consider investing in specialist

software to automate, track and evaluate their emails. Granted, there may be a small overhead for sending

thousands of emails at a time, but these costs are far lower than what you would expect to pay using other

marketing channels.

Target fans of your brand 

Email marketing is one of the only channels that consumers ask to receive. The majority of businesses

utilising the platform only send messages to those who have signed up to receive them. This can allow for

much higher conversion rates as a business is only targeting those who already have an interest in their

brand. It is, of course, possible to send unsolicited email marketing messages, but this is only likely to

annoy consumers and result in a damaged brand image. 

Segmentation

Most marketing professionals would happily pay to ensure they were only spending money targeting

those who were interested in their brand. Email marketers can go one step further though, by only

sending emails to subscribers who meet certain criteria.

If a franchise only has an offer on in certain areas of the country, it can easily arranged for emails to be

sent only to those living in certain areas. If there is a sale on sports goods, it can be arranged for only

those who have shown an interest in sports to receive an email.

Email list segmentation works fantastically for brands who gain information about their subscribers.

Studies have shown that marketers who use this tactic often boast improved engagement rates as a result.

Calls to action

Email marketing is great for taking advantage of impulse buying. There aren't many other marketing

platforms which allow customers to go from witnessing an offer to purchasing an item within two clicks

of a button. With a tempting call to action and a link straight to the checkout, email newsletters can drive

sales like no other channel.

Easy to create

Email marketing doesn't necessarily require a huge team or reams of technical nous in order to be

successful. It's certainly possible to jazz up an email campaign with fancy templates, videos, images and

logos. Yet, some of the most successful campaigns utilise simple plain text emails, suggesting that it's the

content of an email that is the most important thing.

Easy to track

Another key benefit of email marketing is that it's easy to see where you're going wrong. Most email

marketing software will allow you to track open, click-through and conversion rates, making it simple to

spot how a campaign can be improved. These changes can be made almost immediately too, whereas

print or broadcast advertising requires quite a bit of effort to alter.

Easy to share

Subscribers can forward brilliant deals and offers to their friends at the click of a button. There aren't

many other types of marketing that can be shared as easily as this. Before you know it, subscribers could

become brand evangelists; focused on introducing your business to a new market.    

Global

What other marketing platform lets you instantly send a message to thousands of people across the

world? Sure, social media can help you spread the word amongst a global audience - but there's no telling 

Return on investment

In the business world, results are arguably all that matters. With this in mind, the main reason that most

businesses invest in email marketing is the fantastic return on investment. In 2011, the Direct Marketing

Association estimated that email marketing typically returns £40 for every £1 invested. A number of

sources have suggested that this is better than any other platform.

APPROACHES

To accomplish their objectives, Internet marketers use many approaches some of which include:

BannersSponsorshipsPop-up and Pop-under Portal UseE-mailInterstitials

Banners: A banner ad is a boxed-in promotional message that often appears at the top of the web page. If a visitor clicks on the banner ad, she/he is transported to the advertiser’s home page. This is the most used form of Internet promotion. Banners can be used to create brand recall or recognition. Other names given to banners include side panels, sky scrapers, or verticals.

Sponsorships:This is another common advertising approach on websites. The advertiser is given a permanent place on host’s websiteand pays a sponsorship fee to the host

Pop –p and Pop-under: Pop-up ads or pop-ups are often forms of online advertising on the World Wide Web intended to attract web traffic or capture email addresses.[1]Pop-ups are generally new web browser windows to display advertisements. The pop-up window containing an advertisement is usually generated by JavaScript using cross-site scripting (XSS), sometimes with a secondary payload using Adobe Flash,[2] but can also be generated by other vulnerabilities/security holes in browser security.

A variation on the pop-up window is the pop-under advertisement, which opens a new browser window hidden under the active window. Pop-under do not interrupt the user immediately and are not seen until the covering window is closed, making it more difficult to determine which web site opened them.

Portal Use : A portal may use a search engine API to permit users to search intranet content as opposed to extranet content by restricting which domains may be searched. Apart from this common search engines feature, web portals may offer other services such as e-mail, news, stock quotes, information from databases and even entertainment content. Portals provide a way for enterprises and organizations to provide a consistent look and feel with access control and procedures for multiple applications and databases, which otherwise would have been different web entities at various URLs. The features available may be restricted by whether access is by an authorized and authenticated user (employee, member) or an anonymous site visitor.

E-mail : Electronic mail, most commonly referred to as email or e-mail since approximately 1993,[2] is a method of exchanging digital messages from an author to one or more recipients. Modern email operates across the Internet or other computer networks. Some early email systems required that the author and the recipient both be online at the same time, in common with instant messaging. Today's email systems are based on a store-and-forward model. Email servers accept, forward, deliver, and store messages. Neither the users nor their computers are required to be online simultaneously; they need connect only briefly, typically to an email server, for as long as it takes to send or receive messages.

Historically, the term electronic mail was used generically for any electronic document transmission. For example, several writers in the early 1970s used the term to describe fax document transmission.[3][4]As a

result, it is difficult to find the first citation for the use of the term with the more specific meaning it has today.

Interstitials: interstitials are web pages displayed before or after an expected content page, often to display advertisements or confirm the user's age (prior to showing age-restricted material). Most interstitial advertisements are delivered by anad server. Full-screen interstitial ads are referred to as hyperstitials. They are used in the sense of “in between”. The interstitial web page sits between a referenced page and the page which references it—hence it is in between two pages. This is distinct from a page which simply links directly to another, in that the interstitial page serves only to provide extra information to a user during the act of navigating from one page to the next.

Q 6. List any 6 export promotion schemes. What are SEZs and how are they beneficial to international trades and marketers?

Ans : To achieve the objectives laid down under the Foreign Trade Policy 2004-09 and double India’s percentage share of global merchandise trade by the year 2009, the government is committed to providing a stimulus to exports through various export promotion schemes from time to time. Details of the existing Export Promotion Schemes are as follows:

1. Advance licensing scheme

2. Duty Free Replenishment Certificate (DFRC) scheme

3. Duty drawback scheme

4. Export Promotion Capital Goods (EPCG) scheme

5. Export Oriented Units (EOUs), Electronics Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) scheme

6. Served from India scheme

7. Target Plus scheme

8. Duty Entitlement Pass Book (DEPB) Scheme

9. Vishesh Krishi Upaj Yojana

The Government has formulated a number of export promotion schemes to support and promote exports. Except for Duty Drawback Scheme, the policy framework for various export promotion schemes is laid down in the Foreign Trade Policy 2004-09, whereas the procedures governing the schemes are detailed in the Handbook of Procedures, VoI-I 2004-09. The Department of Revenue has issued notifications to operationalise the scheme.

The objectives of most schemes are to neutralize the incidences of levies and duties on inputs used in export products, based on the fundamental principle that duties and levies should not be exported. Presently, the major schemes are either duty exemption or duty remission schemes. Duty exemption schemes enable duty-free import of inputs required for export production. An Advance Licence is issued as a duty exemption scheme. A Duty Remission Scheme enables post export replenishment / remission of duty on inputs used in the export product. Duty remission schemes consist of (a) DFRC; (b) DEPB Scheme and Drawback. DFRC permits duty-free replenishment of inputs used in the export product. DEPB allows

drawback of import charges on inputs used in the export product. The Drawback Scheme intends to neutralize the incidence of central taxes paid on inputs used in the manufacture of export goods.

Besides, there are other schemes in operation which are basically in the nature of reward schemes to reward high performing exporters. Target Plus, Served from India and Vishesh Krishi Upaj Yojana are reward schemes. Rewards are given on the basis of incremental exports / export turnover and such rewards have no linkage whatsoever with the duties and taxes borne on export goods.

Special Economic Zones (SEZs) is a specially delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. Goods and Services going into the SEZ area shall be treated as deemed exports and goods and services coming into Domestic Tariff Area (DTA) from the SEZ shall be treated as if the goods are being imported.

1. SEZ units may export goods and services including agro-products, partly processed goods, sub-assemblies and components except prohibited items. It may also export by-products, rejects, waste scrap arising out of the production process.2. SEZ unit may import/procure from the DTA without payment of duty all types of goods and services, including capital goods, whether new or second hand, required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC (HS).3. SEZ unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. In such a case the SEZ unit and the domestic/foreign leasing company shall jointly file the documents to enable import/procurement of the capital goods without payment of duty.4. SEZ unit shall be a positive net foreign exchange earner.5. The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to achieve positive foreign exchange earning it shall be liable to penalty in terms of the legal undertaking or under any other law for the time being in force.6. SEZ unit may export goods manufactured or software developed by it, though a merchant-exporter/status holder recognised under the policy or any other EOU/SEZ/EHTP/STP unit.7. Goods imported/procured by an SEZ unit may be transferred or given on loan to another unit, within the same SEZ which shall be duly accounted for, but not counted towards discharge of export performance.8. SEZ unit, may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/EHTP/STP with the permission of the Customs authorities. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. Sub-contracting by SEZ gems & jewellery units through units in DTA or through other SEZ/DOU/EHTP/STP units shall be subject to conditions given in the Handbook.9. SEZ units may sell goods, including by-products and services, in the DTA on payment of applicable duties.