INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Module I (7 Hours) Framework of international marketing: Definition – scope and challenges – difference between international marketing and domestic marketing – the dynamic environment of international trade – transition from domestic to international markets – orientation of management and companies Global e-marketing: The Death of Distance, communications, Targeting the individual customers, relationship marketing, interactivity, Speed to market, living in an age of technical discontinuities, new technologies change the rules of competition, components of the electronic value chain. Module II (8 Hours) Developing a global vision through marketing research: Breadth and scope of international marketing research – problems in availability and use of secondary data – problems in gathering primary data – multicultural research – a special problem – research on internet – a new opportunity – estimating market demand – problems in analyzing and interpreting research information – responsibility for conducting marketing research – communicating with decision makers. Identifying foreign markets – classification based on demand – based on the stage of development – other bases for division of world markets Social and Cultural Environment: Basic aspects of society and culture, Approaches to cultural factors, Impact of Social and Cultural Environment on Marketing Industrial and Consumer Products Module III (7 Hours) Global marketing management – planning and organization: Global perspective – global gateways – global marketing management – an old debate and a new view – planning for global markets – alternative market entry strategies – organizing for global competition Module IV (6 Hours) Products and services for consumers: Quality – Green marketing and product development,

products and culture – analyzing product components for adaptation– products for consumers in SJBIT/MBA Page 1 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 global markets, product development, product adaptation, product standardization, marketing consumer services globally – marketing of services, brands in international markets Products and services for businesses Demand in global business to business markets – quality and global standards – business services – trade shows' crucial part of business to business marketing – relationship markets in business to business context Module V (8 Hours) Licensing, Strategic Alliances, FDI: Introduction, Licensing, Strategic Alliances, Manufacturing Subsidiaries, Entry Modes and Marketing Control, Optimal Entry Strategies. Global Distribution Introduction, Distribution as Competitive advantage, Rationalizing Local Channels, Wholesaling, Retailing, Global Logistics, Parallel Distribution, Global Channel Design International retailing International expansion of retailers – international retailing defined – retail format – variations in different markets – general merchandise: retailing – issues in international retailing Module VI (7 Hours) Pricing decisions: Global Pricing Framework, Pricing Basics, Marginal Cost Pricing and its importance, Transfer Pricing, Counter trade, Systems Pricing, Pricing and Positioning, price quotation – INCO terms – preparation of quotations. Promotion Decisions Promotions – international advertising – sales promotion in international markets – international advertising – direct mailing – personal selling – exhibition – generic promotions in international marketing

Module VII (6 Hours) Recent trends in India's foreign trade : Institutional infrastructure for exports promotions in India – India's trade policy – exports assistance – exports documentation and procedures including different stages of documentation Globalization in India, Opportunities, Constraints and Initiatives India - A Hub for Globalization, Globalization in India - Post Liberalization, India‘s SJBIT/MBA Page 2 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Strengths, Strategies for Sustainable Competitive Advantage, Potential for Made in India, Major Globalization Initiatives from Indian Companies, WTO Regulations and their implications for India, Undesirable effects of globalization, Government Initiatives needed to foster globalization Module VIII (2 Hours) The future of global marketing: Six major changes in global marketing Contents Sl Modules Page NO No: 1 Framework of international marketing 4 – 13 2 Developing a global vision through marketing research 14 - 27 3 Global marketing management

– planning and 28 – 38 organization 4 Products and services for consumers 39 – 48 5 Licensing, Strategic Alliances, FDI 49 – 71 6 Pricing decisions 72 – 81 7 Recent trends in India's foreign trade 82 – 99 8 The future of global marketing 100 – 118 SJBIT/MBA Page 3 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Module I (7 Hours) Framework of international marketing: Definition – scope and challenges – difference between

international marketing and domestic marketing – the dynamic environment of international trade – transition from domestic to international markets – orientation of management and companies Global e-marketing: The Death of Distance, communications, Targeting the individual customers, relationship marketing, interactivity, Speed to market, living in an age of technical discontinuities, new technologies change the rules of competition, components of the electronic value chain. Framework of international marketing International marketing is defined as the performance of business activities designed to plan, price, promote, and direct the flow of a company‘s goods and services to consumers or users in more than one nation for a profit Marketing concepts, processes, and principles are universally applicable all over the world ―International marketing is defined as the performance of business activities designed to plan, price, promote, and direct the flow of a company‘s goods and services to consumers or users in more than one nation for a profit.‖ Marketing concepts, processes, and principles are universally applicable all over the world Scope and challenges: Important Points 1. An increasingly larger share of corporate profits are generated by international operations 2. Till last decade competition for the company comes from the local market only, now it is not so. It comes from all the country Global Perspective: Recent Events 1. Information technology boom 2. Enron scandals 3. September 11th attacks on the World Trade Center and Pentagon 4. Wars in Afghanistan and Iraq SJBIT/MBA Page 4 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 5. International conflict among China, Taiwan, and the United States 6. 2003 SARS outbreak in Asia

7. Global terrorism, e.g., Indonesia, Israel, India, and Morocco 8. Transcending these events, international commerce continued Global Business Trends The rapid growth of the World Trade Organization and regional free trade areas, e.g., NAFTA and the European Union General acceptance of the free market system among developing countries in Latin America, Asia, and Eastern Europe Impact of the Internet and other global media on the dissolution of national borders, and Managing global environmental resources Difference between international marketing and domestic marketing International Marketing Vs Domestic Marketing Sovereign political entities I. Tariffs Or Customs Duties II. Quantitative Restrictions III. Exchange Controls IV. Local Taxes Different Legal Systems Different Monetary Systems Lower Mobility Of Factors Of Production Differences In Market Characteristics Differences In Procedures And Documentation Greater Degree Of Risk The Difference More than one nation, Competition, Legal constraints, Govt. Control, Ecological factors, Consumer traditions, or any uncontrollable elements. SJBIT/MBA Page 5

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Reasons for Internationalization Growth – Access to new markets – Access to resources Survival – Against competitors with lower costs (due to increased access to resources) • Leveraging Key Success Factors Abroad • Follow Customers Abroad • Pursuing Diversification • Taking Advantage of Different Growth Rates of Economies • Exploiting Product Life Cycle Differences • Internationalizing for Defensive Reasons The effects of uncontrollable and controllable both in the domestic and foreign environments - International marketers deals with at least two uncontrollable Elements 1. Domestic 2. International - As the number of international market increases: uncontrollable layer increases - Controllable elements : 4 ps (MARKETING MIX) - Domestic Uncontrollable elements : Political & Legal, Competition, Economy, Culture & Technology - Foreign Uncontrollable elements : Political & Legal, Competition, Economy, Culture, Technology, structure of distribution, Geography & infrastructure Dynamic environment of international trade Environmental Adaptation Needed Differences are in the uncontrollable environment of international marketing Firms must adapt to uncontrollable environment of international marketing by adjusting the marketing mix (product, price, promotion, and distribution) Continuum Adaptation Standardization (of Marketing Mix) (of Marketing Mix) INFLUENCED BY 7 ENVIRONMENTAL FACTORS SJBIT/MBA Page 6 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Developing a Global Awareness To be globally aware is to have:

1. Tolerant of Cultural Differences, and 2. Knowledgeable of: (a) Culture, (b) History, (c) World Market Potential, (d) Global Economic, Social and Political Trends Transition From Domestic To International Business Pre – Export Behaviour 1. Firm Characteristics 2. Perceived External Export Stimuli 3. Perceived Internal Export Stimuli 4. Level Of Organizational Commitment Motivation To Export a. Bulk Sales b. Relative Profitability c. Insufficiency Of Domestic Demand d. Reducing Business Risks e. Legal Restrictions f. Obtaining Imported Inputs g. Social Responsibility h. Increased Productivity i. Technological Improvements How Much Commitment a) No Involvement b)

Temporary Involvement c) Continued Involvement d) Global Involvement e) Producing For Export Stages of International Marketing Involvement SJBIT/MBA Page 7 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 In general, firms go through five different phases in going international: No Direct Foreign Marketing Infrequent Foreign Marketing Regular Foreign Marketing International Marketing Global Marketing Strategic Orientation: EPRG Schema Orientation EPRG Schema Domestic (Ethnocentric) Marketing Extension Multi-Domestic (Polycentric) Marketing Global Marketing (Regio/Geocentric) Generally, four distinctive approaches dominate strategic thinking in international marketing: Orientation of management and companies

Global orientation SJBIT/MBA Page 8 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 ―A global orientation means operating as if al the country markets in a company‘s scope of operations (including domestic market) are approachable as a single global market and to standardize the marketing mix where culturally feasible and cost effective or to adapt the marketing mix where culturally required and cost effective‖. Ethnocentric or Domestic Marketing Extension Concept: Home country marketing practices will succeed elsewhere without adaptation; however, international marketing is viewed as secondary to domestic operations Polycentric or Multi-Domestic Marketing Concept: Opposite of ethnocentrism Management of these multinational firms place importance on international operations as a source for profits Management believes that each country is unique and allows each to develop own marketing strategies locally Regiocentric: Sees the world as one market and develops a standardized marketing strategy for the entire world Geocentric: Regiocentric and Geocentric are synonymous with a Global Marketing Orientation where a uniform, standardized marketing strategy is used for several countries, countries in a region, or the entire world Importance of International Marketing International expansion helps firm: Keep pace with competition Reach a larger market Reap higher profits Prolong the lifecycle of their products Levels of International Marketing Domestic Export Marketing International Global Marketing Marketing

Marketing SJBIT/MBA Page 9 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Least Limited Substantial Extensive international international international international commitment commitment commitment commitment Domestic Involves Focus on Focus on focus direct or indirect individual countries segments, rather export or regions than countries or regions

Ethnocentric Polycentric or Regiocentric Geocentric Drivers of International Expansion Competition Regional Economic and Political Integration Technology Improvements in Transportation and Telecommunication Economic Growth Transition to Market Economy Converging Consumer Needs Firm-Specific Drivers Product Life Cycle Considerations: opportunity to prolong product lifecycle by entering growth markets. Intro Growth Maturity Decline Sales Sales Profits SJBIT/MBA Page 10 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 The International Marketing Environment Foreign Environment (Uncontrollables) 1. Competition 7. Structure of 7 Distribution Domestic environment Environmental (Uncontrollables) uncontrol ables country market A

(Controllables) 1. Competition Price Product 2. Technology 5. Political- Target Environmental Legal Market uncontrol ables 6. Geography and Infrastructure Promotion Place or 2 .Technology country Distribution market B 4. Culture Environmental 3. Economy uncontrol ables 5. Political- 3. ECONOMY country Legal market C 4. Culture Global e-marketing: The Death of Distance One of the powerful consequences of the widespread adoption and use of computer mediated communication (CMC) is believed to be the world becoming ―smaler." Accounts consistently highlight that CMC technologies such as email, video, audio or text chat, listservs and bulletin boards create informational environments that enable the bridging of distances among individuals and groups. The expectation that information and communication technologies lead users to transcend the constraints of physical separation has been expressed as the death of distance ECONOMISTS are beginning to notice that dear oil is having an impact on trade. By making transportation more expensive, high fuel prices are turning back the clock a bit on the process of

globalisation Targeting the individual customers Many startup companies have technologies that are of interest to many different market segments. Given a startup‘s limited resources, the company needs to prioritize which customers to target with their technology and marketing efforts. SJBIT/MBA Page 11 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Relationship marketing Relationship marketing was first defined as a form of marketing developed from direct response marketing campaigns which emphasizes customer retention and satisfaction, rather than a dominant focus on sales transactions Speed to market The elapsed time from order placement to arrival on the retail sales floor. Speed to market is increasingly a factor in competitiveness of any company in the apparel chain. Living in an age of technical discontinuities New Millennium and the Age of the Internet we business journalists can look back knowing we had front-row center seats at the great events of our time. I feel privileged to have helped chronicle this extraordinary saga. And it's not over. The Age of the Internet is, to borrow Peter Drucker's phrase, an Age of Discontinuity. This is not just another story to cover. We are part of this story. For the spread of the Internet has the potential to revolutionize the practice of journalism, like nothing since Gutenberg's printing press. New technologies change the rules of competition Two major findings have characterized management literature in the past decades. The first is that radical innovation, while risky, is one of the major sources of long-term competitive advantage. For many authors, however, the phrase ―radical innovation‖ is an elipsis for a longer

construction that spells radical technological innovation. Indeed, investigators of innovation have focused mainly on the disruptive effect of novel technologies on industries. The second finding is that people do not buy products but meanings. People use things for profound emotional, psychological, and socio-cultural reasons as well as utilitarian ones. Analysts have shown that every product and service in consumer as well as industrial markets has a meaning. Firms should therefore look beyond features, functions, and performance, and understand the real meanings users give to things. The common assumption, however, is that meanings are not a subject for innovation: they are a given. One must understand these meanings but they cannot be innovated. SJBIT/MBA Page 12 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Components of the electronic value chain A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. The concept comes from business management and was first described and popularized by Michael Porter in his 1985 best- seller, Competitive Advantage: Creating and Sustaining Superior Performance. "The idea of the value chain is based on the process view of organizations, the idea of seeing a manufacturing (or service) organisation as a system, made up of subsystems each with inputs, transformation processes and outputs. Inputs, transformation processes, and outputs involve the acquisition and consumption of resources - money, labour, materials, equipment, buildings, land, administration and management. How value chain activities are carried out determines costs and affects profits."

SJBIT/MBA Page 13 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Module II (8 Hours) Developing a global vision through marketing research: Breadth and scope of international marketing research – problems in availability and use of secondary data – problems in gathering primary data – multicultural research – a special problem – research on internet – a new opportunity – estimating market demand – problems in analyzing and interpreting research information – responsibility for conducting marketing research – communicating with decision makers. Identifying foreign markets – classification based on demand – based on the stage of development – other bases for division of world markets Social and Cultural Environment: Basic aspects of society and culture, Approaches to cultural factors, Impact of Social and Cultural Environment on Marketing Industrial and Consumer Products Developing a global vision through marketing research: Breadth and scope of international marketing research Introduction

Marketing research is traditionally defined as the systematic gathering, recording, and analyzing

of data to provide information useful in marketing decision making. International marketing research involves two additional complications. (i) Information must be communicated across cultural boundaries. That is , executive in Chicago must be able to translate their research questions into terms that consumers in Guanszhou, China can understand. (ii) The environment within which the research tools are applied are often different in foreign markets. Rather that acquire new and exotic method of research, the international marketing research must develop the ability for imaginative and deft application of tried and tested techniques in sometimes totally strange milieus. BREDTH AND SCOPE OF INTERNATIONAL MARKETING RESEARCH The basic difference between domestic and foreign market research is the broader scope needed for foreign research, necessitates by higher levels of uncertainty. Research can be divided into three types based on information needs: SJBIT/MBA Page 14 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 (i) General information about the country, area and/or market (ii) Information necessary to forecast future marketing requirement by anticipating social, economic consumer, and industry trend within specific market or countries (iii) Specific market information used to make product, promotion, distribution, and price decisions and to develop marketing plans. A country‘s political stability, culture attributes and geographical characteristics are some of the kind of information not ordinarily gathered by domestic marketing research. THE RESEARCH PROBLEM A marketing research study is always a compromise dictated by limits of time, cost, and the present state of the art. The research must strive for the most accurate and reliable information within existing constraints. A key to successful research is a systematic and orderly approach to the collection and analysis of data. The research process should follow these steps: (i) Define the research problem and establish research objectives. (ii) Determine the source of information to fulfill the research objectives. (iii) Consider the costs and benefits of the research effort.

(iv) Gather the relevant data from secondary or primary sources, or both. (v) Analyze, interpret, and summarize the results. (vi) Effectively communicate the results to decision makers. DEFINING THE PROBLEM AND ESTABLISHING RESEARCH OBJECTIVES The research process should being with a definition of the research problem and the establishment of specific research objectives. the major difficulty here is converting a series of often ambiguous business problem into tightly drawn and achievable research objectives. PROBLEMS OF AVAILABILITY AND USE OF SECOUNDARY DATA :- The problem of availability and use of secondary data are as follows: (i) Availability of data;-detailed data on the numbers of wholesalers, retailers, manufacturers, and facilitating services, are unavailable for many parts of the world, as are data on population and income. Most countries simply do not have governmental agencies that collect on a regular basis the kind of secondary data readily available in the united state. SJBIT/MBA Page 15 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 (ii) Reliability of data;- Available data may not have the level of reliability necessary for confident decision making for many reasons. Official statistics are sometimes too optimistic, reflecting national pride or politics rather that practical reality, while tax structures and fear of the tax collector often adversely affect data. (iii) Comparability of data:- Comparability of available data is the third shortcoming faced by foreign marketers. In United States, current sources of reliable and valid estimates of socioeconomic factors and business indicators are readily available. In other countries, especially those less developed, data can be many years out of data as well as having been collected on an infrequent and unpredictable in many of these countries makes the

problem of currency a vital one. (iv) Validating secondary data:- many countries have similarly high standard for the collection and preparation of data as those generally found in the United States, but secondary data from any source, including the United States must be checked carefully and interpreted carefully.. GATHERING PRIMARY DATA: QUANTITATIVE AND QUALITATIVE RESEARCH :- If, after seeking all reasonable secondary data sources, research questions are still not adequately answered, the market research must collect primary data.- that is , data collected specially for the particular research project at hand. In most primary data collection. The researchers questions respondents to determine what they think about some topic or how they might behave under certain conditions. Marketing research methods, can be grouped into two basic types: quantitative and qualitative research. In both methods, the marketer is interested in gaining knowledge about the market. (i) Quantitative research:- in quantitative research, usually a large number of respondents are asked to reply either verbally or in writing to structure questions using a specific response format or to select a response from a set of choices. Questions are designed to obtain specific responses regarding aspects of the respondent‘s behavior, intentions, attitudes, motives and demographic characteristics. Quantitative research provide the marketer with responses that can be presented with precise estimations. SJBIT/MBA Page 16 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 (ii) Qualitative research:- In qualitative research, if questions are asked they are almost always open-ended or in-depth, and unstructured responses that reflect the person‘s thoughts and feelings on the subjects are sought. Direct observation of consumers in choice or product usage situations in another important qualitative approach to marketing research.

Qualitative research is used in international marketing research to formulate and define a problem more clearly and to determine relevant questions to be examined in subsequent research. It is also used where interest is centered on gaining an understanding of a market, rather the quantifying relevant aspects. Qualitative research is also helpful in revealing the impact of socio-cultural factors on behavior patterns and in developing research hypotheses that can be tested in subsequent studies designed to quantify the concepts and relevant relationship uncovered in qualitative data collection. PROBLEMS OF GATHERING PRIMARY DATA Most problem in collecting primary data in international marketing research stem from cultural differences among countries, and range from the inability of respondents to communicate their opinions to inadequacies in questionnaire translation. (i) Ability to communicate opinions:- The ability to express attributes and opinions about a product or concept depends on the respondent‘s ability to recognize the usefulness and value of such a product or concept. (ii) Willingness to respond;- Cultural differences offer the best explanation for the unwillingness or the inability of many to respond to research surveys. The role of the male, the suitability of personal gender-based inquiries, and other gender-related issues can affect willingness to respond. (iii)Sampling in Field Surveys:- The greater problem in sampling stems the lack of demographic data and available lists from which to drawn meaningful samples. If current, reliable lists are not available, sampling becomes more complex and generally less reliable. (iv) Language and comprehension:- (v) The most universal survey research problem in foreign countries is the language barrier. Differences in idiom and the difficulty of exact respondents answer. Equivalent concept may not exist in all language. SJBIT/MBA Page 17 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 MULTICULTURAL RESEARCH As companies become global marketers and seek to standardize various parts of the marketing mix across several countries, multicultural studies become more important. A

company need to determine to what extent adaptation of the marketing mix is appropriate. Thus market characteristics across diverse culture must be compared for similarities and difference before a company proceeds with standardization on any aspect of marketing strategy. Multicultural research involves dealing with countries that have different languages, economies, social structure, behavior, and attitude patterns. It is essential that these differences be taken into account. RESEARCH ON THE INTERNET For many countries the internet provides a new and increasingly important medium for conducting a variety of international marketing research. Indeed, a survey of marketing research professionals suggests that the most important influences on the industry are the internet and globalization. It has been suggested that there are at least seven different uses for the internet in international research:- (i) Online survey and buyer panels (ii) Online focus groups. (iii) Web visitor tracking (iv) Advertising marketing lists (v) E-mail marketing lists (vi) Embedded research. A vexing challenge facing international marketers will be the cross-cultural concern about privacy and the enlistment of cooperative consumer and customer group. As more of the general population in countries gain access to the internet. This tool will be all can be used one of several methods of collecting data offering more flexibility across countries. Today the real power of the internet for international marketing research is the ability to easily access volumes of secondary data. There are volumes of good secondary data that can be accessed from your computer that will make international marketing research much easier and more efficient that it has ever been. New opportunity The chapter starts with identifying the types and categories of information which are useful in marketing decision making on a global scale and discusses the two main ways of getting SJBIT/MBA Page 18

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 information by surveillance or by research. Details are given on some of the sources of information available to marketers. The chapter then describes in some detail the process of global marketing research and highlights the dangers and pitfalls in the process. Uncertainty In international marketing, the marketer is faced with a dilemma of having too much data and too little information. There is plenty of global data from sources like the World Bank, but often a lack of specific information on countries and markets. In helping to reduce uncertainty around decision making, precise information is the key, getting it is quite another thing. Whilst searching for opportunities globally, uncertainties will arise due to four main factors: lack of knowledge of the existence of possible new market alternatives, the conditions internal and external to the firm which will determine the consequences of a new alternative, what consequences these conditions when known may have for the firm, and how these consequences may be expressed in relevant terms of goal fulfilment. Uncertainty arises due to the time lapse between the decision and the outcome of the action decided on. Carlson (1975)1 also believes that uncertainty increases with the degree of "foreignness" of the place of outcome, the cost of information and the learning effect, that is, when entering a foreign market knowledge of it builds slowly, usually by experience and its attendant uncertainty. When marketing domestically the system is fairly easy to learn. When crossing global boundaries the whole process is exaggerated by necessary paperwork, exchange rates, cash flows and transportation problems to name but a few. This uncertainty gives rise to the need for information. Table 5.1 Specific information Marketing decision Marketing intelligence Go international or Assessment of global market and firm's potential share in it, in view of remain domestic local and international competition, compared to domestic opportunities. Which markets to A ranking of world markets according to market potential, local

enter competition and the political situation. How to enter target Size of markets, international trade barriers, transport costs, local markets competition, government requirements and political stability. How to market in For each market, buyer behaviour, competitive practice, distribution SJBIT/MBA Page 19 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 target markets channels, media, company experience Elements of the information system The following constitute the elements of the global information system. Data may be specific or general or both and used for decisions on whether to enter markets or not, in what degree and what emphasis in terms of the marketing mix. General information includes data on the following: · Economic - rate of growth of GNP, level of inflation, incomes · Social - people, demographics, culture, subculture · Political - risk, instability, attitudes to "foreigners" · Technology - current, rate of change, infrastructure · Resources - money, manpower, materials, acquisitions, joint ventures · Fiscal - taxes, exchange rates · Institutions - money markets · Managerial - funds ESTIMATING MARKET DEMAND In assessing current product demand and forecasting future demand reliable historical data are required. Despite of limitations, there are approaches to demand estimation that are usable with minimum information. The success of these approaches relies on the ability of the researcher to find meaningful substitute or approximations for the needed economic, geographic, and demographic relationships. When the desired figures are not available, a close approximation can be made using local production figure plus imports, with adjustments for exports and current inventory levels. In a rapidly developing economy, extrapolated figures may not reflect rapid growth and must be

adjusted accordingly. Given the greater uncertainties and data limitations associated with foreign markets, two methods of forecasting demand are particularly suitable for international marketers: (i) Expert Opinion: - for many market estimation problems, particularly in foreign countries that are new to the marketer, expert opinion is advisable. In this method, expert are polled for their opinion about market size and growth rates. Such expert may be companies, own sales managers or outside consultants and government officers. the key in using expert opinion to SJBIT/MBA Page 20 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 help in forecasting demand is triangulation, that is, comparing estimates produced by different sources. (ii) Analogy: - This assumes that demand for a product develops in much the same way in all countries as comparable economic development occurs in each country. A relationship must be established between the item to be estimated and a measurable variable. Once a know relationship is established, the estimator then attempt to draw an analogy between the known situation and the country in question. PROBLEM IN ANALYZING AND INTERPRETING RESEARCH INFORMATION After data are collected, the final steps in the research process are the analysis and interpreting of findings in light of the stated marketing problem. There are so many factors, the researchers must take consideration these factors and, despite their limitations, produce meaningful guides for management decisions. Accepting information at face value in foreign market is imprudent:- The meanings of words, the consumer‘s attitude toward a product, the interviewer‘s attitude, or the interview situation can distort research findings. Just as culture and tradition influence the willingness to give information, so they also influence the information, so they also influence the information

given. News paper circulation figures Readership and listener ship studies Retail outlet figures Sales volume can all be distorted through local business practice. To cope with such disparities, the foreign marketing researcher must possess three talented to generate meaningful marketing information. First, the researcher must possess a high degree of cultural understanding of the market in which research is being conducted. Second, a creative talent for adapting research methods is necessary. A researcher in foreign markets often is called on to produce result under most difficult circumstances and short deadlines. Third, a skeptical attitude in handling both primary and secondary data is helpful. SJBIT/MBA Page 21 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 RESPONSIBILITY FOR CONDUCTING MARKETING RESEARCH Depending on the size and degree of involvement in foreign marketing, a company in need of foreign market research can rely on an outside foreign-based agency or on a domestic company with a branch within the country in question. It can conduct using its own facilities or employ a combination of its own research force with the assistance of an outside agency. Many companies have executive specifically assigned to the research function in foreign operations; Other companies maintain separate research department for foreign operations or assign a full- time research analyst to this activity A trend toward decentralization of the research function is apparent. In terms of efficiency, it appears that local analysts are able to provide information more rapidly and accurately than a staff research department. A comprehensive review of the different approaches to multi-country research suggests that the ideal approach is ti have local research in each country, with close coordination between

the client company and the local research companies. COMMUNICATING WITH DECISION MAKERS As concert with the decision maker, it should be clearly recognized, however that getting the information is only half problem/job. That information must also be given to decision makers in a timely manner. High-quality international information system design will be an increasingly important competitive tool as commerce continues to globalize, and resources must be invested accordingly. At the most basic level, marketing research is mostly a matter of talking to customers. Marketing decisions makers have questions about how best to serve customers, and those questions are posed and answered often through the media of questionnaires and research agencies. Even when both managers and customers speak the same language and are from the same culture, communication can become garbled in either direction. That the customer misunderstands the questions and/or managers misunderstand the answers. Throw in a language/cultural barrier, and the changes of misinformation expand dramatically. The four kind of company-agency-customer relationships possible are presented in overcoming the cultural barriers SJBIT/MBA Page 22

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Identifying foreign markets Selection of markets is the first stage in International marketing. No matter how much attempt is made, the firm will not succeed unless it is marketing the right product in the right export market. It costs lot of time and money to find out a suitable market for a product. No firm has unlimited resources. Proper selection of markets would avoid waste in time and effort. The time and care taken to select the product and the market for initial export venture can minimize the risks and make ultimate success quicker and more certain. One product may be more acceptable in some countries than in others. It would, therefore, be better to concentrate on a few fruitful markets than to spread too thinly. Market concentration can lead to better debt collection and cash flow and savings in administration. Of course, after having established in one market, the firm can always move on to the other markets. This is what Larsen and Toubro did while it entered the export markets for the first time. They concentrated on Indonesia. After having established in Indonesia they moved on to other nearby markets. It is easier to extend operation in other markets because of the experience already gained in entering the first market. It is easier to increase business where you have a stronghold rather than increase business in new areas.

In some instances products to be exported might by their very nature have only a small number of possible customers in any one country making it essential to approach a large number of foreign areas simultaneously. This applies to some large items such as complete cement plants or to extremely specialized apparatus like the equipment to measure electrical voltages in the human SJBIT/MBA Page 23 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 muscle. So also in some cases, success might depend on high volume of production that it is essential to aim at every possible market simultaneously. Criteria for classifying world Markets: The basic problem that a firm has to solve in the initial stage of planning its international marketing strategy is to identify global marketing opportunities. To identify and shortlist markets which offer or might offer in future opportunities that can be exploited by it, a classification scheme for segmenting the world markets is required. There are several bases of classification, principal among then are: Classification based on demand – Classification on the basis of stages of demand: Keegan has produced a threefold classification of world marketers: 1. Exiting markets 2. Latent markets 3. Incipient markets In the existing markets, consumer needs are known and are already being serviced by some products. The market opportunities can be assessed by estimating the consumption rate and the share of imports in current consumption. Latent markets have potential customers but because no one has offered a product to fill the latent need there is no existing market. Incipient markets do not exist in the present, however conditions and trends can be identified that point towards the emergence of future needs and preferences for product and services that will create a

potent market, which if supplied will become an existing market. Based on the stage of development – other bases for division of world markets Classification on the basis of Stages of Development: The world markets can be divided into four distinct segments, viz., industrial economies, more developed developing countries, raw material exporting economies and subsistence economies. Industrial Economies: These countries lay more emphasis on research and development and devote their resources to production of more sophisticated products and will therefore like to import goods of simpler technology and simpler manufactures. These countries also have an acute shortage of labor and would, therefore tend to import intensive products like electronics and light engineering goods. They also tend to import spares and components and raw materials to feed their industries and many decorative articles because of their affluence. They are very particular about preventing further pollution and, therefore they would like to import not only anti-pollution equipment but also articles whose SJBIT/MBA Page 24 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 production has been banned for risks of pollution. They are willing to provide technology to set up production and processing facilities in developing countries. They provide a large market as they have no import restriction. In fact, the five major importing countries viz., United States, the United Kingdom, France, Japan and Germany, account for 40 per cent of world imports Social and Cultural Environment: Basic aspects of society and culture, The social environment, social context, sociocultural context, or milieu, refers to the immediate physical and social setting in which people live or in which something happens or develops. It includes the culture that the individual was educated or lives in, and the people and institutions with whom they interact. The interaction may be in person or through communication media, even anonymous or one- way, and may not imply equality of social status. Therefore the social environment is a

broader concept than that of social class or social circle. Cultural environments consist of the influence of religious, family, educational, and social systems within the marketing system. Marketers who intend to market products overseas must be sensitive to foreign cultures. While the differences between our cultural background in the United States and those of foreign nations may seem small, marketers who ignore these differences risk failure in implementing marketing programs. This task is not as easy as it sounds, as various features of a culture can create an illusion of similarity. Even a common language does not guarantee similarity of interpretation. For example, in the U.S. we purchase "cans" of various grocery products, but the British purchase "tins". The following are a few cultural differences that may cause marketers problems in attempting to market their products overseas. Approaches to cultural factors Keegan (1989) suggested a number of approaches to the study of culture including the anthropological approach, Maslow's approach, the Self- Reference Criterion (SRC), diffusion theory, high and low context cultures and perception. There are briefly reviewed here. Anthropological approach Culture can be deep seated and, to the untrained can appear bizarre. The Moslem culture of covering the female form may be alien, to those cultures which openly flaunt the female form. SJBIT/MBA Page 25 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 The anthropologist, though a time consuming process, considers behaviour in the light of experiencing it at first hand. In order to understand beliefs, motives and values, the anthropologist studies the country in question anthropology and unearths the reasons for what, apparently, appears bizarre. Maslow approach In searching for culture universals, Maslow's (1964) hierarchy of needs gives a useful analytical framework. Maslow hypothesized that people's desires can be arranged into a hierarchy of needs

of relative potency. As soon as the "lower" needs are filled, other and higher needs emerge immediately to dominate the individual. When these higher needs are fulfilled, other new and still higher needs emerge. The self-reference criterion (SRC) Perception of market needs can be blocked by one's own cultural experience. Lee (1965)4 suggested a way, whereby one could systematically reduce this perception. He suggested a four point approach. a) Define the problem or goal in terms of home country traits, habits and norms. b) Define the problem or goal in terms of the foreign culture traits, habits and norms. c) Isolate the SRC influence in the problem and examine it carefully to see how it complicates the pattern. d) Redefine the problem without the SRC influence and solve for the foreign market situation. The problem with this approach is that, as stated earlier, culture may be hidden or non-apparent. Uneartherning the factors in b) may, therefore, be difficult. Nonetheless, the approach gives useful guidelines on the extent for the need of standardization or adaption in marketing planning. Diffusion theory Many studies have been made since the 1930's to assess how new innovations are diffused in a society. One of the most prolific writers was Everett Rogers8. In his book, "Diffusion of Innovations" (1962) he suggested that adoption was a social phenomenon, characterized by a normal distribution SJBIT/MBA Page 26 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Impact of Social and Cultural Environment on Marketing Industrial and Consumer Products Potential impacts from the Proposal considered relevant to indigenous cultural heritage in proximity to Anketell Point include: Possible disturbance of heritage sites during vegetation clearing, infrastructure establishment or operations; Possible disturbance or contamination of heritage sites by the workforce during construction or operation; and Possible restrictions or access to certain areas. Assessment of potential impacts A preliminary assessment of known indigenous cultural heritage sites on the DIA register

within proximity to the Proposal has identified a number of archaeological and ethnographic sites (Figure 3.26). Information available from the DIA‘s databases indicates that a total of 12 indigenous cultural heritage surveys have been completed in proximity to the Proposal; many completed over 15 years ago. Detailed surveys in consultation with Traditional Owners is planned for the Proposal area. Based on previous surveys in the Proposal area and the wider Pilbara, it is also considered likely that Aboriginal archaeological sites will be located in the vicinity of major creeks and rivers. The DIA register identifies numerous archaeological and ethnographic sites that are located in proximity to the Proposal. No rock shelters have been publically recorded to date. SJBIT/MBA Page 27 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Module III (7 Hours) Global marketing management – planning and organization: Global perspective – global gateways – global marketing management – an old debate and a new view – planning for global markets – alternative market entry strategies – organizing for global competition Global marketing management – planning and organization: Global perspective: Confronted with increasing global competition for expanding markets, multinational

companies are changing their marketing strategies and altering their organizational structures. Their goals are enhance their competitiveness and to ensure proper positioning in order to capitalize on opportunities in the global marketplace. In fact, the flexibility of a smaller company may enable it to reflect the demands of global markets and redefine its program more quickly than larger multinationals. Acquiring a global perspective is easy, but the execution requires planning, organizations, and a willingness to try new approaches-from engaging in collaborative relationships to redefining the scope of company operations. Global gateways A gateway that global resource manager programs use to access resources outside a CS or TSAF collection GLOBAL MARKETING Definition: ―Marketing on a worldwide scale reconciling or taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives. Why global marketing? Here are three reasons for the shift from domestic to global marketing Saturation of Domestic Markets For a company to keep growing, it must increase sales. Industrialized nations have, in many product and service categories, saturated their domestic markets and have turned to other countries for new marketing opportunities. Companies in some developing economies have found profitability by exporting products that are too expensive for locals but are considered inexpensive in wealthier countries. SJBIT/MBA Page 28 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 World Wide Competition One of the product categories in which global competition has been easy to track is in U.S. automotive sales. Three decades ago, there were only the big three: General Motors, Ford, and

Chrysler. Now, Toyota, Honda, and Volkswagen are among the most popular manufacturers. Companies are on a global playing field whether they had planned to be global marketers or not. E-Commerce With the proliferation of the Internet and e-commerce (electronic commerce), if a business is online, it is a global business. With more people becoming Internet users daily, this market is constantly growing. Customers can come from anywhere. According to the book, ―Global Marketing Management,‖ business-to-business (B2B) e-commerce is larger, growing faster, and has fewer geographical distribution obstacles than even business-to-consumer (B2C) e- commerce. GLOBAL MARKETING EVOLUTION PHASE 1 Leverage of domestic capabilities: Foreign market entry Objective:- Economies of scale PHASE 2 Expansion of foreign market presence Objective :-Economies of Scope PHASE 3 Coordination of global operations Objective :-Exploit synergies throughout network SJBIT/MBA Page 29 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Benefits Of Global Marketing: Economies of scale in production and marketing can be important competitive advantages for global companies Unifying product development, purchasing, and supply activities across several countries it can save costs

Transfer of experience and know-how across countries through improved coordination and integration of marketing activities Diversity of markets by spreading the portfolio of markets served brings an important stability of revenues and operations to many global firms Helps to establish relationships outside of the "political arena" Helps to encourage ancillary industries to be set up to cater the needs of the global player. Disadvantages Differences in consumer needs, wants, and usage patterns for products Differences in consumer response to marketing mix elements Differences in brand and product development and the competitive environment Differences in the legal environment, some of which may conflict with those of the home market Differences in the institutions available, some of which may call for the creation of entirely new ones (e.g. infrastructure) Differences in administrative procedures Differences in product placement. Global Marketing: A Old Debate and a New View Global Marketing Management thought has undergone substantial revision In the 1970s the argument was framed as ―standardization vs. adaptation‖ In the 1980s it was ―globalization vs. localization‖ or ―Think local, act local‖ In the 1990s it was ―global integration vs. local responsiveness‖ The basic issue is whether the global homogenization of consumer tastes allowed global standardization of the marketing mix

SJBIT/MBA Page 30 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 PLANNING FOR GLOBAL MARKETS Planning is a systematized way of relating to the future. It is an attempt to manage the effects of external, uncontrollable factors on the firm‘s strengths, weakness, objectives and goals to attain a desired end. Planning is the job of making things happen that might not otherwise occur. The difference between planning for a domestic company and for an international company Domestic Planning International Planning 1. Single language and nationality 1. Multilingual/multinational/multicultural factors 2. Relatively homogeneous market 2. Fragmented and diverse markets 3. Data available, usually accurate 3. Data collection a large task requiring significantly and collection easy higher budgets and personnel allocation 4. Political factors relatively 4. Political factors frequently vital unimportant 5. Relative freedom from 5. Involvement in national economic

plans; government interference government influences business decisions 6. Individual corporation has little 6. "Gravitational" distortion by large companies effect on environment 7. Chauvinism helps 7. Chauvinism hinders 8. Relatively stable business 8. Multiple environments, many of which are highly environment unstable (but may be highly profitable) 9. Uniform financial climate 9. Variety of financial climates ranging from over- conservative to wildly inflationary 10 Single currency 10. Currencies differing in stability and real value 11 Business "rules of the game" 11. Rules diverse, changeable and unclear mature and understood 12 Management generally 12. Management frequently unautonomous and accustomed to sharing unfamiliar with budgets and controls

responsibilities and using financial controls Planning allows for rapid growth of the international function, changing markets, increasing competition, and the turbulent challenges of different national markets. The plan must be blend the changing parameters of external country environments with corporate objectives and capabilities to develop a sound, workable marketing program. SJBIT/MBA Page 31

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Planning relates to the formulation of goals and methods of accomplishing them, so it is both a process and a philosophy. Structurally, planning may be viewed as corporate, strategic, or tactical. International Corporate Planning is essentially long term, incorporating generalized goals for the enterprise as a whole. Strategic planning is conducted at the highest levels of management and deals with products, capital, and research, and long and short-term goals of the company. Tactical planning or market planning, pertains to specific and to the allocation

of resources used to implement strategic planning goals in specific markets. The Key success of planning is evaluating company objectives, including management‘s commitment and philosophical orientation to international business. THE PLANNING PROCESS Guidelines and systematic procedures are necessary for evaluating international opportunities and risks and for developing strategic plans : International planning process includes 4 phases: T Phase 1: Preliminary Analysis and Screening-Matching Comapany and Country Needs A critical first step in the international planning process is deciding in which existing country market to make a market investment. A company‘s strengths and weakness, products, philosophies, and objectives must be matched with a country‘s constraining factors and market potential. In the first part of the planning process, countries are analyzed and screened to eliminate those that do not offer sufficient potential for further considerations. The next step is SJBIT/MBA Page 32 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 to establish screening criteria against which prospective countries can be evaluated. These criteria are ascertained by an analysis of company objectives, resources, and other corporate capabilities and limitations. It is important to determine the reasons for enetering a foreign market and the returns expected from such an investment. Minimum market potential, minimum profit, return on investment, accepatable competitive levels.

Phase 2: Adapting the Marketing Mix to Target Makets: When target markets are slelected, the market mix must be evaluated in light of the data generated in the phase 1. Incorrect decisions at this point lead to products inappropriate for the intended market or to costly mistakes in pricing, advertising, and promotion. The primary goal of phase 2 is to decide on am marketing mix adjusted to the cultural constraints imposed by the uncontrollable elements of the environment that effectively achieves corporate objectives and goals. Phase 2 also permits the marketer to determine possibilities for applying marketing tactics across national markets.// Phase 3: Developing the Marketing Plan At this stage of the planning process, a marketing plan is developed for the target market- whether it is a single country or a global market segment. The marketing plan begins witn a situation analysis and culminates in the selection of an entry mode and a specific action program for the market. The specific plan establishes what is to be done, by whom, how it is to be done, and when. Included are budgets and sales and profit expectations. Phase 4: Implementation and Control A ―go‖ decision in phase 3 triggers implementation of specific plans and anticipation of successful marketing. However, the planning process does not end at this point. All marketing plans require coordination and control during the period of implementation. An evaluation and control system requires performance-objective action, that is, bringing the plan back on track should standards of performances fall short. A global orientation facility the difficult but extremely important management tasks of coordinating and controlling the complexities of international marketing. SJBIT/MBA Page 33

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 ALTERNATIVE FOREIGN MARKET ENTRY STRATEGIES: When a company makes the commitment to go international, it must choose an entry strategy. This decision should reflect an analysis of market characteristics ( such as potential sales, strategic importance, cultural differences, and country restrictions) and company capabilities and characteristics, including the degree of near-market knowledge, marketing involvement, and commitment that management is prepared to make. Alternative Market-Entry Strategies Import regulations may be imposed to protect health, conserve foreign exchange, serve as economic reprisals, protect home industry, or provide revenue in the form of tariffs. A company has four different modes of foreign market entry from which to select exporting contractual agreements strategic alliances, and direct foreign investment EXPORTING Exporting can be either direct or indirect. In direct exporting the company sells to a customer in

another country. In contrast, indirect exporting usually means that the company sells to a buyer (importer or distributor) in the home country who in turn exports the product. The internet is becoming increasingly important as a foreign market entry method. Direct sales, particularly for high technology and big ticket industrial products a direct sales force may be required in a foreign country. This may mean establishing an office with location expatriate managers and staff depending of course on the size of the market and potential sales revenues. SJBIT/MBA Page 34 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 CONTRACTUAL AGREEMENTS Contractual agreements are long term, non-eqauity associations between a company and another in a foreign market. Contractual agreements involve the transfer of technology, processes, trademarks, or human skills. •Contractual forms of market entry include: (1)Licensing: A means of establishing a foothold in foreign markets without large capital outlays is licensing of patent rights, trademark rights, and the rights to use technological (2)Franchising: In licensing the franchiser provides a standard package of products, systems, and management services, and the franchisee provides market knowledge, capital, and personal involvement in management. STRATEGIC INTERNATIONAL ALLIANCES Strategic alliances have grown in importance over the last few decades as a competitive strategy in global marketing management. A strategic international alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective.. SIAs are sought as a way to shore up weaknesses and increase competitive strengths. SIAs offer opportunities for rapid expansion into new markets, access to new technology, more efficient production and marketing costs.

An example of SIAs in the airlines industry is that of the Oneworld alliance partners made up of American Airlines, Cathay Pacific, British Airways, Canadian Airlines, Aer Lingus, and Qantas. INTERNATIONAL JOINT VENTURES International joint ventures (IJVs) have been increasingly used since 1970s.JVs are used as a means of lessening political and economic risks by the amount of the partner‘s contribution to the venture. JVs provide a less risky way to enter markets that pose legal and cultural barriers than would be the case in an acquisition of an existing company. A joint venture is different from strategic alliances or collaborative relationships in that a joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity. Joint ventures are different from minority holdings by an MNC in a local firm. SJBIT/MBA Page 35 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Four factors are associated with joint ventures: 1. They are established, separate, legal entities 2. They acknowledge intent by the partners to share in the management of the Jv. 3. They are partnerships between legally incorporated entities such as companies, chartered organizations, or governments, and not between indiciduals 4. Equity positions are held by each of the partners. CONSORTIA Consortia are similar to joint ventures and could be classified as such except for two unique characteristics. (1)They typically involve a large number of participants. (2)They frequently operate in a country or market in which none of the participants is currently active. Consortia are developed to pool financial and managerial resources and to lessen risks DIRECT FOREIGN INVESTMENT A fourth means of foreign market development and entry is direct foreign investment. Companies may manufacture locally to capitalize on low-cost labor, to avoid high import

taxes, to reduce the high costs of transportation to market, to gain access to raw materials, or as a means of gaining market entry. Firms may either invest in or buy local companies or establish new operations facilities. Comparison of Market Entry Options The following table provides a summary of the possible modes of foreign market entry: Comparison of Foreign Market Entry Modes Mode Conditions Favoring Advantages Disadvantages this Mode Exporting Limited sales potential in Minimizes risk and Trade barriers & target country; little investment. tariffs add to costs. product adaptation Speed of entry Transport costs required Maximizes scale; Limits access to Distribution channels uses existing local information close to plants facilities. Company viewed as SJBIT/MBA

Page 36 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 High target country an outsider production costs Liberal import policies High political risk Licensing Import and investment Minimizes risk and Lack of control over barriers investment. use of assets. Legal protection possible Speed of entry Licensee may in target environment. Able to circumvent become competitor. Low sales potential in trade barriers Knowledge target country. High ROI spillovers Large cultural distance License period is Licensee lacks ability to limited become a competitor. Joint Import barriers Overcomes Difficult to manage Ventures Large cultural distance

ownership Dilution of control Assets cannot be fairly restrictions and Greater risk than priced cultural distance exporting a & High sales potential Combines licensing Some political risk resources of 2 Knowledge Government restrictions companies. spillovers on foreign ownership Potential for Partner may become Local company can learning a competitor. provide skills, resources, Viewed as insider distribution network, Less investment brand name, etc. required Direct Import barriers Greater knowledge Higher

risk than Investment Small cultural distance of local market other modes Assets cannot be fairly Can better apply Requires more priced specialized skills resources and High sales potential Minimizes commitment Low political risk knowledge May be difficult to spillover manage the local Can be viewed as resources. an insider ORGANIZING FOR GLOBAL COMPETITION An international marketing plan should optimize the resources committed to company objectives. The organizational plan includes the type of organizational arrangements to be used, and the scope and location of responsibility. Companies are usually structured around one of three alternatives: 1. Global product divisions responsible for product sales throughout the world; 2. Geographical divisions responsible for all products and functions within a given geographical area; or SJBIT/MBA Page 37

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 3. A matrix organization consisting of either of these arrangements with centralized sales and marketing run by a centralized functional staff, or a combination of area operations and global product management.

SJBIT/MBA Page 38 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Module IV (6 Hours) Products and services for consumers: Quality – Green marketing and product development, products and culture – analyzing product components for adaptation– products for consumers in global markets, product development, product adaptation, product standardization, marketing consumer services globally – marketing of services, brands in international markets Products and services for businesses Demand in global business to business markets – quality and global standards – business services – trade shows' crucial part of business to business marketing – relationship markets in business to business context PRODUCTS AND SERVICES FOR CONSUMERS QUALITY: The ability of a product or service to meet customer needs. It can be defined on 2 dimensions, Market perceived quality Performance quality Both are important but consumer perception of a quality product often has to do more

with market perceived quality. It is also measured in many industries by objective third parties. Maintaining performance quality is critical, but frequently a product that leaves the factory at performance quality is damaged as it passes through the distribution chain. A product may have to change in a number of ways to meet the physical or mandatory requirements of a new market, ranging from simple package changes to total redesign of the physical core product. Green marketing is a term used to identify concern with the environmental consequences of a variety of marketing activities. Quality is associated with customer satisfaction. It is a means to an end. Q: QUEST FOR EXCELLENCE. U: UNDERSTANDING CUSTOMER‘S NEEDS. SJBIT/MBA Page 39 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 A: ACTION TO ACHIEVE CUSTOMER‘S APPRECIATION. L: LEADERSHIP. I: INVOLVING ALL PEOPLE. T: TEAM SPIRIT TO WORK FOR A COMMON GOAL. Y: YARDSTICK TO MEASURE PROGRESS. GREEN MARKETING At the forefront of the ― green movement,‖ with strong public opinion and specific legislation favoring environmentally friendly marketing and products. •Green marketing is a term used to identify concern with the environmental consequences of a variety of marketing activities. The designation that a product is ― environmentally friendly‖ is voluntary, and environmental success depends on the consumer selecting the eco-friendly product. In some countries each level of the distribution chain is responsible for returning all packaging, packing, and other waste materials up the chain PRODUCTS AND CULTURE: A product is the sum of physical and psychological satisfactions it provides the user. A product is more than a physical item. It is a bundle of satisfaction that the buyer receives.

A product‘s physical attributes generaly are required to create its primary function. The meaning and value imputed to the psychological attributes of a product can vary among cultures and are perceived as negative or positive. To maximize the bundle of satisfaction received and to create positive product attributes rather than negative ones, adaptation of the nonphysical features of a product. The adoption of some products by consumers can be affected as much by how the product concept conforms to norms, values, and behavior patterns as by its physical or mechanical attributes. An important first step in adapting a product to a foreign market is to determine the degree of newness as perceived by the intended market. Any idea perceived as new by a group of people is an innovation. Product diffusion is the process by which innovation spreads. A critical factor in the newness of a product is its effect on established patterns of consumption and behavior. SJBIT/MBA Page 40

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Analyzing the 5 characteristics of an innovation can assist in determining the rate of acceptance or resistance of the market to a product. A product‘s, Relative advantage – The perceived marginal value of the new product relative to the old. Compatibility – With acceptable behavior, norms, values. Complexity – The degree of complexity associated with product use. Trial ability – The degree of economic and/or social risk associated with product use. Observability – The ease with which the product benefits can be communicated. After the degree of its acceptance or resistance. ANALYZING PRODUCT COMPONENTS FOR ADAPTATION:

A product is a multidimensional, and the sum of all its features determines the bundle of satisfactions received by the consumer. Core Component: It consists of the physical product, the platform that contains the essential technology and all its design and functional features. It is on the product platform that product variations can be added or deleted to satisfy local differences. Alterations in design, functional features, flavors, color can be made to adapt the product to cultural variations. Functional features can be added or eliminated depending on the market. Packaging Component: Includes style features, packaging, labeling, trademarks, brand name, quality, price of a product‘s package. Packaging component frequently require both discretionary and mandatory SJBIT/MBA Page 41 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 changes. Care must be taken to ensure that corporate trademarks and other parts of the packaging component do not have unacceptable symbolic meanings. Labeling law create a special problem for companies selling products in various markets with different labeling laws and small initial demand in each. Support Services Component: Includes repair and maintenance, instructions, installations, warranties, deliveries and the availability of spare parts. Repair and maintenance are difficult in developing countries. The product component model can be a useful guide in examining adaptation requirements of products destined for foreign markets. A product should be carefully evaluated on each of the 3 components for mandatory and discretionary changes that may be needed. MARKETING CONSUMER PRODUCTS & SERVICES GLOBALLY: Products are often classified as tangible, whereas services are intangible. The intangibility

of services results in characteristics unique to a services. It is inseparable, heterogeneous, and perishable. A service can be marketed as a B2B or consumer service. There are various barriers to entering global markets for consumer services:- Protectionism Restrictions on Transborder data flows Protection of Intellectual Property Cultural Barriers and Adaptation PRODUCTS AND SERVICES FOR BUSINESS: B2B marketing requires close attention to the exact needs of customers. Basic differences across various markets are less than for consumer goods, but the motives behind purchases differ enough to require a special approach. Global competition has risen to the point that industrial goods marketers must pay close attention to the level of economic and technological development of each market to determine the buyer‘s assessment of quality. Companies that SJBIT/MBA Page 42 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 adapt their products to these needs are the ones that should be the most effective in the market place. The demand for products and services in B2B markets is by nature more volatile than in most common markets. The demand also varies by level of economic development and the quality of educational systems across countries. Ultimately, product or service quality is defined by customers, but global quality standards such as ISO 9000 are being developed that provide information about company‘s attention to matters of quality. After sale services are hugely important aspect of industrial sales. The demand for other kinds of business services is burgeoning around the world. Trade shows are an especially important promotional medium in B2B marketing.

product adaptation Definition Marketing strategy whereby new products are based on modification or some improvement on existing or competing products, and not on pioneering innovations. It is the strategy of a follower. PRODUCT STANDARDISATION Even though product adaptation becomes inevitable in the case of certain products, it should be realized that there is sound economics logic behind a product policy which suggests uniformity in all markets. Terpstra has identified six factors which may favour international product standardization. 1. Economies of Scale in Production: When only one standard version is marketed in all the areas, it will be possible to have larger production runs, which will result in lower manufacturing costs. 2. Economies in Product Research and development: Similarly, product standardization will allow recovery of all costs incurred in product research and development from the entire sales. This will reduce the recovery period as also lower the break-even point. Moreover, additional expenditure on adapting product to each individual market can be avoided. SJBIT/MBA Page 43 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 3. Economies in Marketing. When the same product is to be launched in different markets, economies can be achieved in terms of sales literature, sales force training, inventory management, advertising and after-sales requirements. There are 3 marketing factors which may reinforce the standardization level: 1. Consumer Mobility: Consumers are becoming

increasingly more mobile and transcontinental travel in now fairly common. A consumer who is loyal to a particular brand in his home market is more likely to remain loyal in a foreign country as well when the product in question is the same. 2. Made-in Image: When the name of a country is associated with a high standard of quality in the minds of the consumers, a product manufactured in that country may enjoy a psychological premium in the foreign markets. 3. Impact of Technology: Industrial products generally tend to have standard and specifications and do not require much adaptation for foreign markets unless climatic and similar considerations call for it. Consumer services globally – marketing of services MARKETING OF SERVICE Advice regarding adapting products for international consumer markets also applies to adapting services or intangible products However, many consumer services are distinguished by four unique characteistics: 1.intangibility, 2.inseparability, 3.heterogeneity, and 4.perishability Most services are inseparable and require production and consumption to occur almost simultaneously; thus, exporting is not a viable entry method for them. Globally, consumer services marketers face the following four barriers: SJBIT/MBA Page 44 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 •protectionism, •controls on transborder data flows, •protection of intellectual property, and •cultural requirements for adaptation BRANDS IN INTERNATIONAL MARKETS:

A GLOBAL BRAND is defined as the worldwide use of a name, term, symbol, design or combination thereof intended to identify goods or services of one seller and to differentiate them from those of competitors. A successful brand is the most valuable resource a company has. Brand image is at the very core of business identity and strategy. The brands are Kodak, Sony, Coca-cola, Toyota, Marlboro, Kel ogg, Levi‘s, Caterpil ar, Nestle, Mars, P&G, Gillette, and BMW. A global brand gives a company a uniform worldwide image that enhances efficiency and cost savings when introducing other products associated with the brand name, but not all companies believe a single global approach is the best. Country – of – origin (COE) can be defined as any influence that the country of manufacture, assembly or design has on a consumer‘s positive or negative perception of a product. TOP 20 GLOBAL BRANDS: 1. COCA-COLA 2. MICROSOFT 3. IBM 4. GE 5. INTEL 6. NOKIA 7. DISNEY 8. MC DONALD‘S 9. MARLBORO 10. MERCEDES 11. FORD 12. TOYOTA SJBIT/MBA Page 45 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 13. CITIBANK 14. HP Products and services for businesses Demand in global business to business markets Demand in Global Business-to-Business Markets • Demand in industrial markets is by nature more volatile • Stages of industrial and economic development affect demand for industrial products • The level of technology of products and services make their sales more appropriate for

some countries than others • Cyclical swings in demand • Professional buyers tend to act in concert • Derived demand accelerates changes in markets • Derived demand can be defined as demand dependent on another source • Minor changes in consumer demand mean major changes in related industrial demand • Boeing • Worldwide demand for travel services related to demand for new airplanes • Commercial aircraft industry one of the most volatile Quality and global standards: International standards, which have general applicability for basic medical education, can be defined. These take account of the variations among countries in medical education due to differences in teaching tradition, culture, socio-economic conditions, the health and disease spectrum, and different forms of health care delivery systems. Such differences can also occur within individual countries. The scientific basis of medicine is universal. The task of medical education everywhere is the provision of health care. Notwithstanding variations, there is a high degree of equivalence of structure, process and product of medical schools worldwide. A global set of standards for medical education is not to be equated with a global core curriculum. The core of the medical curriculum consists of the fundamental theory and practice of medicine, specifically basic biomedical, behavioural and social sciences; general clinical skills, clinical decision skills, communication abilities and medical ethics, and must be Addressed by all medical schools aiming to produce safe practitioners of quality. SJBIT/MBA Page 46 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Business services • For many industrial products the revenues from associates services exceed the revenues from the products – Cellular phones – Printers • Leasing capital equipment • Services not associated with products

– Boeing at-sea-satellite-launch services – Ukrainian cargo company space rental on giant jets – Professional services (advertising, banking, healthcare, etc.) • Client followers • Mode of entry – Licensing – Franchising – Direct investment • Protectionism • Restrictions on cross-border data flows Stages of Economic Development: The traditional society The age of m ass Preconditions consum ption for take off Stages of Econom ic Developm ent Drive to m aturity Take off Trade Shows: A Crucial Part of Business-to-Business Marketing • Secondary methods for marketing: – Advertising in print media – Catalogs SJBIT/MBA Page 47 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 – Web sites – Direct mail • Trade shows have become the primary and most important vehicle for doing business in many foreign countries • Total annual media budget spent on trade events: – Europeans – 22 percent

– Americans – 5 percent • Trade shows – Provide the facilities for a manufacturer to exhibit and demonstrate products to potential users – Allow manufacturers to view competitors products – Are an opportunity to create sales and establish relationships with agents, distributors, franchisees, and suppliers • Online trade shows – Become useful in difficult economic and/or political circumstances – Are obviously a less than adequate substitute for live trade shows Relationship Marketing in Business-to-Business Contexts • Not a matter of selling the right product the first time – Instead selling a continuously changed the product to keep it right over time • The objective of relationship marketing – To make the relationship an important attribute of the transaction ► Differentiating oneself from competitors • Using the Internet to facilitate relationship building and maintenance – Cisco Systems – Solar Turbines Inc. • Customer • Sales engineer • Application engineer • Engineering and control systems • Project manager • Manufacturing technicians • Customer services • Suppliers SJBIT/MBA Page 48 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Module V (8 Hours) Licensing, Strategic Alliances, FDI: Introduction, Licensing, Strategic Alliances, Manufacturing Subsidiaries, Entry Modes and Marketing Control, Optimal Entry Strategies. Global Distribution Introduction,

Distribution as Competitive advantage, Rationalizing Local Channels, Wholesaling, Retailing, Global Logistics, Parallel Distribution, Global Channel Design International retailing International expansion of retailers – international retailing defined – retail format – variations in different markets – general merchandise: retailing – issues in international retailing LICENCING: A means of establishing a foothold in foreign markets without large capital outlays is licensing patent right, trademarks right, and the rights to use technological processes are granted in foreign licensing. It is a favorite strategy for small and medium sized companies, although it is by no means. Common examples of industries that use licensing arrangements in foreign markets are television programming and pharmaceuticals. Not many confine their foreign operation to licensing alone it is generally viewed as a supplement to exporting or manufacturing rather than the only mans of entry into foreign market. Although licensing may be the least profitable way of entering a market, the risks and headaches are fewer than for direct investments. It is a legitimate means of capitalizing on intellectual property in a foreign market, and such agreements can also benefit the economies of target countries. • A quick and easy entry tool with little capital investment in the foreign markets. • Some countries offer licensing as the only means of tapping the market. • Licensing is also considered to be an effective tool for life extension of products during their stage of maturity in order of their life cycle. • Licensing is a good alternative to start foreign production and marketing activity in a destination country which has economic inflation, shortages of skilled labour, increasing domestic and foreign governmental regulation and restriction, and severe international competition. • In the licensing arrangement periodic royalties are guaranteed, whereas shared income from investment fluctuates and stays risky. SJBIT/MBA Page 49 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418

• The company which has a strong domestic base can benefit through licensing arrangement in developing customized products without expensive research. • Licensing provides an alternative when exports are no longer profitable because of intense competition. • Licensing can reduce transportation costs and help promoting exports in non-competitive markets. • One of the major advantages of licensing is the immunity over stringent political intervention as expropriation. STRATEGIC ALLIANCES A strategic alliance is a type of cooperative agreements between different firms, such as shared research, formal joint ventures, or minority equity participation. The modern form of strategic alliances is becoming increasingly popular and has three distinguishing characteristics 1. They are frequently between firms in industrialized nations. 2. The focus is often on creating new products and/or technologies rather than distributing existing ones. 3. They are often only created for short term durations. TYPES OF STRATEGIC ALLIANCES • Technology-based alliances • Production-based alliances • Distribution-based alliances • Resource-based alliances Benefits • The organizational efficiency will be improved with the flexibility and informality in strategic alliances. • Alliances developed strategically offer access to new markets and technologies. • The risk and expenses are shared among the allies reducing the impact of risk on the participating members. • The alliance would help the partners build their independent brand and manage retailing of goods and services. • Alliances can take various forms–from simple research and development deals to heavy budget projects. SJBIT/MBA Page 50 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418

Manufacturing Subsidiaries A subsidiary, subsidiary company, daughter company,or sister company is a company that is completely or partly owned by another corporation that owns more than half of the subsidiary's stock, and which normally acting as a holding corporation which at least partly or (when as) a parent corporation, wholly controls the activities and policies of the daughter corporation. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a government or state-owned enterprise. The controlling entity is called its parent company, parent, or holding company. An operating subsidiary is a business term constantly used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity, locomotives and rolling stock. In contrast, a non-operating subsidiary would exist on paper only (i.e. stocks, bonds, articles of incorporation) and would use the identity and rolling stock of the parent company. The entry modes • Exporting • Contractual agreement • Licensing • Franchising • Joint venture • Strategic alliance • Wholly-owned subsidiaries Market control Each international market is different, so strategies and controls will vary Distance, language differences and cultural variations cause communications problems Resentment from subsidiaries of HQ control Local marketing plan will need to controls appropriate for HQ and subsidiaries.

• International context of control • Obtaining performance information SJBIT/MBA Page 51 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 • Principles of a control system. • Simple process of control • Control techniques • Effective control systems • Benchmarking • Balanced Scorecard Principles of a control system • Aim to translate strategic plans into actions (Drummond and Ensor 2001). • Ensure that behaviour and operations conform to corporate objectives • Organisations need to measure, compare and analyse variances so that timely corrections can be made • Effective control involves the measurement of inputs as well as outputs. • Control is important because: 1. ‗You can‘t manage what you can‘t measure‘ adage 2. Gaining importance to measure ROI in marketing 3. Moves afoot to include branding in financial accounts. Global Distribution Introduction, A worldwide computerized reservation network used as a single point of access for reserving airline seats, hotel rooms, rental cars, and other travel related items by travel agents, online reservation sites, and large corporations. The premier global distribution systems are Amadeus, Galileo, Sabre, and Worldspan. They are owned and operated as joint ventures by major airlines, car rental comopanies, and hotel groups. Also called automated reservation system (ARS) or computerized reservation system (CRS). Distribution channels

Getting the product to the target market can be a costly process Forging an aggressive and reliable channel of distribution may be the most critical and challenging task facing the international firms Each market contains a distribution network with many channel choices whose structures are SJBIT/MBA Page 52 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 In some markets the distribution structure is multi-layered, complex, inefficient, even strange Competitive advantage will reside with the marketer best able to build the most efficient channel Channel of distribution or marketing channels is defined as the whole set of interrelated marketing agencies which are involved in making the goods available form the producer to the consumers. Channel of distribution structures The distribution process includes the physical handling and distribution of goods, the passage of ownership (title), and the buying and selling negotiations between producers and middlemen and between middlemen and customers Each country market has a distribution structure through which goods pass from producer to use Within this structure are a variety of middlemen whose customary functions, activities, and services reflect existing competition, market characteristics, tradition, and economic development Channel structures range from those with little developed marketing infrastructure such as those found in many emerging markets to the highly complex, multi-layered system found in Japan Japanese distribution structure a structure dominated by many small middlemen dealing with many small retailers—high density of middlemen, channel control by manufacturers, a business philosophy shaped by a unique culture, and laws that protect the foundation of the system—the small retailer Distribution in Japan has long been considered the most effective non-tariff barrier to the

Japanese market .The Japanese distribution structure is different enough from its U.S. or European counterparts It has four distinguishing features: SJBIT/MBA Page 53 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 a structure dominated by many small middlemen dealing with many small retailers channel control by manufacturers a business philosophy shaped by a unique culture laws that protect the foundation of the system – the small retailer. Channel factor: Manufacturers depend on wholesalers for a multitude of services to other members of the distribution network. Financing , physical distribution , warehousing , inventory , promotion and payment collection are provided to other channel members by wholesalers . the system works because wholesalers and all other middlemen downstream are tied to manufacturers by a set of practices and incentives designed to ensure strong marketing support for their product and to exclude rival competitors from the channel .wholesaler typically act as agent middlemen and extend the manufacturers control through the channel the following element 1. Inventory financing :- sales are made on consignment with credit extending for several months . 2.Cumulative rebates :- rebates are given annually for any number of reasons including quantity purchases , early payments , achieving sales target , performing services , maintaining specific inventory levels , participating in sales promotions , remaining loyal to suppliers , maintaining manufacturers price policies , cooperating and contributing to overall success. 3. Merchandise returns :- all unsold merchandise may be returned to the manufacturers. 4. Promotional support :- intermediaries receive a host of displays , advertising layouts , management educations programs , in store demonstrations and other dealer aids that strengthen the relationship between the middlemen and the manufacturer. Distribution patterns Even though patterns of distribution are in a state of change and new patterns are developing , international marketers need a general awareness of the traditional distribution base . The ―traditional ― system will not change overnight and vestiges of it will remain for SJBIT/MBA Page 54

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 years to come .Nearly every international firm is forced by the structure of the market to use at least some middlemen in the distribution arrangement. The following description should convey a sense of the variety of distribution patterns. General patterns : generalizing about internal distribution channel patterns of various countries is almost as difficult as generalizing about behaviors patterns of people. Despite similarities, marketing channels are not the same throughout the world. Marketing methods taken for granted in the United States are rare in many countries. Middlemen Services:- The service attitudes of people in trade vary sharply at both the retail and whole sale levels from country to country . Line Breadth:- every nation has a distinct pattern relative to the breadth of line carried by wholesalers and retailers . The distribution system of some countries is characterized by middlemen who carry or can get everything in other every middlemen is a specialist dealing only in extremely narrow lines. Government regulation in some countries limit the breadth of line that can be carried by middlemen and licensing requirement to handle certain merchandise are not uncommon. Costs and Margins :- cost levels and middlemen margins vary widely from country to country depending on the level of competition , service offered , efficiencies for inefficiencies of scale and geographic and turnover factors related to market size ,purchasing power , tradition and other basic determinants. Channel Length:-some correlation may be found between the stage of economic development and the length of marketing channels . In every country , channels are likely to be shorter for industrial goods and high priced consumer goods than for low priced products. In general , there is an inverse relationship between channel length and the size of the purchase .combinations wholesaler – retailer or semi wholesaler exist in many countries adding one or two link to the length of the distribution chain. Nonexistent Channels : one of the things companies discover about international channel of distribution patterns is that in many countries adequate market coverage through a simple channel of distribution is nearly impossible. In many instances , appropriate channels do not exist . Blocked Channels :- International marketers may be blocked from using the channel of their choice. Blockage can result from competitors already established lines in the various channel or from trade associations or cartels having closed certain channels.

SJBIT/MBA Page 55 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Stocking :- the high cost of credit , the danger of loss through inflation , a lack of capital and other concerns cause foreign middlemen in many countries to limit inventories this often results in out of stock conditions and sales lost to competitors. Power and Competition :-distribution power tends to concentrate in countries where a few large wholesalers distribute to a mass of small middlemen . large wholesalers generally finance middlemen downstream . the strong allegiances they command from their customers enables them to effectively block existing channels and force an outsiders to rely on less effective and more costly distribution . Distribution patterns are always evolving and new patterns are developing and marketing channels are not the same throughout the world Distribution as Competitive advantage Which is world‘s largest seling biscuit brand? It‘s that thing in yelow wrapper with that baby pic on it that has ruled the Indian market for some 75 years now. Yes, it‘s Parle-G. It is a biscuit that has remained a strong favourite in the market despite not being very differentiated- a simple glucose biscuit. Significantly, they haven‘t done much wrong over the years, sticking to a simple yet effective strategy- Be Available. What really differentiates Parle-G in the marketplace is their strong Sales and Distribution system. They make it a point never to lose out on a customer by being available in the remotest of locations- including several villages with populations of just about 500 people. Parle has an extensive network of over 1500 wholesalers who in cater to nearly 450,000 retailers. In a way thus, they have beaten competition not by spending multi millions on advertising but by using their extensive sales and distribution network as the key differentiating factor. There are several other examples of companies who have used this approach to become industry

leaders. Which channel a company uses to reach its consumers and how effectively it utilizes these channels can go a long way in determining the success of their marketing strategy. Traditionally, there are 4 levels available between the manufacturer and the consumer. With changes in the market place, this structure has changed dramatically. Earlier, most companies used one of the above channels to reach its customers leaving little room for differentiation on this basis. That however no more holds true with sales and distribution becoming an integral part of companies‘ business model. Companies now look to beat SJBIT/MBA Page 56 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 competition by creating value for customers through their sales and distribution structures. Take Dell for example. Dell redefined the entire PC industry by using a direct selling model, the shipping companies being the only intermediary. They entered the industry at a difficult but quickly adapted to the retail chain evolution by adopting a radically different path and taking orders on the phone. The move paid off as they have gone to become one of the industry leaders. Rationalizing Local Channels, Changing Distributors The distribution channel configuration for entry into a foreign markets is rarely optimal once the product is established on the market The traditional reason for termination of a distributor is The exporting firm finds that the distributor is not doing a good enough job in the market Multiple Channels (Parallel Distribution) Channel changes do not necessarily involve termination of contracts In some cases multiple channels emerge or are created Wholesaling The sale and distribution of goods to users other than end consumers. Wholesaling involves selling merchandise to retailers, wholesalers and merchants, or to industrial, commercial and institutional users. A wholesaler can act as a middleman, brokering deals between these businesses. Wholesaling often occurs when large quantities of merchandise are reassembled, sorted, then repackage, and distribute in smaller lots. Wholesaling Functions Primary functions of wholesaling Making contact

Negotiating Buying Selling Warehousing Wholesaling is a major component of a country‘s infrastructure and its structure reveals important clues as to the country‘s stage of development Full-service wholesalers can usually be counted on in most countries SJBIT/MBA Page 57 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 However, because of their size and tie-ins with existing brands and chains they might not be wil ing to distribute the firm‘s products The full-service concept should be carefully assessed for each country entered, since a full-service wholesaler will retain market knowledge and control the marketing. For the experienced entrant, limited services wholesalers might be more beneficial, because of increased control and more management learning. Power and Competition The size distribution of wholesalers in many countries approximates the well-known ―80-20‖ rule 80 percent of the transactions are handled by 20 percent of the firms Efficiency The trend toward integration is based on the technological developments that have make large- scale economies and technical coordination feasible These vertically and horizontally integrated firms become gate-keepers to the local market – entry barriers. Retailing Retail is the sale of goods and services from individuals or businesses to the end-user. Retailers are part of an integrated system called the supply chain. A retailer purchases goods or products in large quantities from manufacturers directly or through a wholesale, and then sells smaller quantities to the consumer for a profit. Retailing can be done in either fixed locations like stores or markets, door-to-door or by delivery. Retailing includes subordinated services, such as delivery. The term "retailer" is also applied where a service provider services the needs of a large number of individuals, such as for the public. Shops may be on residential streets, streets with few or no houses or in a shopping mall. Shopping streets may be for pedestrians only. Sometimes a

shopping street has a partial or full roof to protect customers from precipitation. Online retailing, a type of electronic commerce used for business-to-consumer (B2C) transactions and mail order, are forms of non-shop retailing. Different economies have different retail structures (e.g. Gillette blades are sold through drugstores in the US, tobacco shops in Italy, department stores in Germany, on the street in Moscow, at movie counters in Thailand, & from traveling vans in India) GLOBAL LOGISTICS – the transportation & storage activities necessary to transfer the physical product from the manufacturing plants & warehouses in different countries to various local market countries SJBIT/MBA Page 58 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Nowadays, global distribution has been consolidated such that fully integrated transportation from point to point across the world is possible at low cost. Air Express Technical innovations in computerized inventory systems and numerically controlled machines for good handling made possible the growth of air express systems Ocean Carriers For shipments of bulky and low-value-per-unit products Ocean vessels are still the most economical carrier alternative overseas There have been a number of global carrier alliances in the shipping industry due to the savings involved in sharing resources and the advantage in providing integrated one-stop services to the shipper Overland Transportation The increasing volume of international trade has put the inland distribution system under pressure One North American solution has been the roll-on-roll-off system in which a loaded container is simply rolled onto a railcar and shipped by rail for part of the way, avoiding congested freeways Warehousing The competitive need on the part of global companies to be ―close to the customer‖ and provide fast and efficient service

This places increased demand on warehousing and inventory management Parallel Distribution Parallel distribution on genuine goods by intermediaries other than authorized channel members Three main factors motivate entrepreneurs to engage in gray trade: 1. Wide price discrepancies between national markets 2. Limited availability of certain models or versions in one market 3. Inexpensive logistics means that transportation can be accomplished with relative ease Global Channel Design Two major considerations: 1. What type of channel/middlemen should be used to ensure that the strategic marketing objectives are met in that country? 2. What are the important functions in the channel network for that country? SJBIT/MBA Page 59 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 REVISIT YOUR FSA‘S Key success factors and FSA‘s vary across countries and across channels WHAT CHANNELS ARE AVAILABLE? Once you identify the critical features of your channel network, find out if the country market possesses these channels CHANNEL TIE-UP Channel members might be difficult to enlist due to entry barriers, competition, and special trade allowances COORDINATION & CONTROL Once a distribution network is established, coordination & control from a centralized headquarters should be feasible International retailing International expansion of retailers As the global economy continues to stumble, retailers are struggling to achieve growth domestically. While there are pockets of opportunity, many retail sectors in the United States are saturated and not expected to grow much, if at all. Growth may be heavily dependent on winning share from competitors, typically a taxing effort. Consequently, many retailers are looking beyond their borders or potential growth. Foreign markets offer attractive growth rates fueled by burgeoning middle classes, lower competitive intensity, and greater pricing flexibility. Additionally, a global

presence may help retailers lessen their risk exposure to an economic downturn in any one market. Some of the biggest historical barriers to entering foreign markets have eroded. Many foreign governments have opened their countries to outside investment. Technological advances have revolutionized consumers and companies‘ ability to communicate and share information. Similarly, enhancements in infrastructure around the world have made producing and transporting goods considerably more feasible. However, entering new countries is not as simple as signing a lease and opening the doors. Market entry requires careful consideration of external risks and internal parameters in order to understand market dynamics, requisite competencies, and financial implications. There is no ―one size fits al‖ odel. Based on these considerations, retailers should select a method of entry that balances two critical but often conflicting interests: speed and control. SJBIT/MBA Page 60 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Introduction of retailing

Retailing is going through a process of rapid internalization: the retailing environment worldwide is undergoing dynamic changes; with local retailers defensively countering competitive moves of mammoth chains or successfully duplicating their strategies. Major international retailers are no longer competing only for mature markets-and for consumers in highly industrialized countries. Retailer‘s competitive arena has expanded to al emerging markets, where they are responding to an increasing affluence of consumers and to their increasingly sophisticated consumer related demands. Numerous successful global retailers and consumer-product-companies-cum-retailers such as Wal-Mart (US), Promodes/Carrefour (France), Louis Vuitton Moet Henessy(France). International expansion of retailers Retailers are expanding internationally to gain competitive advantage and to increase

sales, profits, and overall firm performance. As they expand beyond their home country borders, retailers also take cost advantage of cost savings and learn from experiences in a way that could further enhance home-country operations Ex:- Tesco, the British retailer, for example, is using its stores in central and eastern Europe as a testing ground for ideas hat are intended for application in the home market: the new Tesco extra in Newcastle., is based on a Tesco hypermarket in Hungary. Retailers from America are expanding in Latin America, Asia and Europe. For example Wal-Mart has adopted an aggressive strategy for international penetration; its purchase of the Asda group (UK) has boosted its international sales to $25 billion, which is only a fraction of its total sales figure of $165 billion. Its ambition is for its international operations to account for a third of sales. SJBIT/MBA Page 61 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 The top ten list of retailers. Name of retailer Country Sales in million dollars Wal-Mart U.S 137,634 Metro AG Germany 52,131 Sears Roebuck U.S 36,704 Rewe Gruppe Germany 36,212 Edeka Rruppe Germany 32,573 Aldi Gruppe Germany 32,403

Dayton Hudson U.S 30,951 Carrefour France 30,489 Tenzelmann Germany 30,243 Gruppe International retailing defined:- International retailing is defined as all the activities involved in selling products and services to final international consumers for their personal consumption. International retailing differs from local retailing as defined in marketing management in that it address operations of international retailers beyond home-country borders, as well as operations of local retailers in different countries in world wide- in general and/or in response to the presence or entry of international retailers aiming for their target market, as such an examination international retail operations must include an evaluation of global and local retailing formats, retail practices, and overview of local retailing environments. Retail Formats: Variation in different markets There are three main retail formats: 1.General merchandise retailing 2.Food retailing 3.Non store retailing. SJBIT/MBA Page 62 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 1. General Merchandise Retailing a. Specialty Stores Specialty Stores offer a narrow product line and wise assortment. In this category are clothing stores (usualy further specialized in to the women`s, men‘s, or children`s clothing stores), bookstores, toy stores, office supply stores, and consumer electronics, among others. In many markets, specialty stores---- chains in particular--- are expanding at the expense of all forms of n nonfood retailing. For example, specialty store chains are taking market

share away from traditional department stores in the United Kingdom and France. U.K especially retailers have great strides in international expansion: Marks & Spencer is rapidly expanding in France, and retailers such as Virgin Records have already made substantial inroads in to the U.S market .In France ,specialty store appear to be particularly well suited to addressing the unique French lifestyle. Local payers, as well as international firms such as the Gap, are very successful in the market. In most developing countries, specialty stores represent the main retail format. Although western and local specialty chain stores are quite popular and have done well for decades, developing country markets are dominated by independent specialty stores(usually family- owned), such as apparel stores, cosmetic stores, and local arts and crafts stores aimed at the tourist market as well as other traditional retail system as exemplified by specialized markets. b. Specialized Markets Specialized markets contain specialty stores specialized in a particular product category. Example of such markets exist worldwide in both developed and development countries. Examples of specialized markets are the Cairo Gold Market in the Khan El Khalili bazaar, the Jade Market in Hong Kong, and the spice Market and Gold Market in the Covered Bazaar in Istanbul, Turkey. Specialized market may even cover entire cities. For example, the town of Otavalo Ecuador, house large and small retailers of leather goods. c. Department Stores Department stores offer a broad variety of goods and wide assortments. Among the products they carry are clothing for men, women, and children; household appliances and electronics; kitchenware; china; home furnishing; and toys and games. Outside the United States, department stores typically also have large supermarkets sections, and some may even carry fresh produce. SJBIT/MBA Page 63 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 In the United States and Canada, and department stores have suffered substantial losses in

the past decade, mostly attributed to the rise in the discount stores, off-price retailers, and category killers. In an attempt to conquer new markets, however, a number of chains have been looking overseas for expansion: Sears Roebuck and JCPenney, in particular, have been looking at the Latin American Market, with JCPenney recently opening a number of stores in Mexico and Chile. Although department stores remain a dominant retail outlet in Asia, they are currently displaying symptoms of decline, such as oversupply, over duplication of merchandise, fierce competition, and declining profits. Shanghai alone witnessed the demise of five department stores in 1997. Existing department stores in the city have done well when changing their format, for example, specializing in European style clothing and furnishings, or emulating the hypermarket environment by offering lower prices and maintaining a customer-friendly environment. d. General Merchandise Discount Stores General Merchandise Discount Stores sell high volumes of merchandise, offer limited service, and charge lower prices. Discount stores are divided in to two categories: all purposes discount stores, which offer a wide variety of merchandise and offer a wide assortment. The all-purpose category is dominated by stores such as Wal-Mart, Kmart, and target in the United States. Internationally, this retailer category tends to draw a substantial portion of profits from its supermarkets section. In all purpose categories, Wal-Mart has more than 600 stores internationally mainly they ate present in Canada, Mexico, Puerto Rico, Argentina, Brazil, Germany, and the United Kingdom. Wal-Mart also has a presence in china, through joint ventures, and two franchise locations in Indonesia. Its goal is to derive one-third of its earnings from international operations. Category specialists, also known as category killers or stores with category dominance, are large specialty stores that carry a narrow variety of merchandise and a wide assortment. Among examples of category specialists successful internationally are office supply stores, such as Staples, Office Max, and office Depot; home improvement centers, such as Home Depot; bookstores, such as Borders, which are especially well received in East Asia; children`s stores, such as Toys ―R‖ Us, which leads sales in this product category from Scandinavia to South

Africa; and furniture stores, such as IKEA, which dominates the modern, basic furniture market. SJBIT/MBA Page 64 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 e. Off price retailers Off price retailers sell brand name and designer merchandise below regular retail; the products they sell may include over runs, irregular products, as well as products from previous seasons. Among example of off price retailers are factory outlet stores; close-out retailers, with broad, inconsistent assortments; and single price retailers. Although this type of retailing is popular in US and Canada, in the rest of the world, there are only limited possibilities, other than store sales, for purchasing brand names at a discount. For example Hugo boss has an out let store in Sothern Germany, close its factory, near Stuttgart, and Zurich has a famous designer out let mail; Italy has few outlet stores for its famous designers. Non of these examples come close in depth and variety to the north American off price retailer presence, but that is about to change, as more and more international consumers demands similar deals as the ones offered in the US. Often, American companies must build their own outlet stores in environments where this type of retail format is unknown. In Japan, for instance, in the Tokyo suburb of Sagami-one, American malls international opened an outlet mall for companies such as Guess! And Laura Ashely to sell discountinued merchandise at a discount. f. Catalog showrooms Catalog showrooms usually offer high turn over, brand name goods at discount price. A typical format for a catalog showroom is one in which customers order from a Catalog in the showroom where the product is only displayed, and then pick up the merchandise at a designated location. Internationally, the goods sold in retail formats are not typically brand name goods, but, rather, they are goods that have not sold in season through a companies

catalog. For example, Neckrmann and Quelle, the well-known German catalog retailers, have catalog showrooms in many of Germany‘s largest cities where they sel their catalog store brands. In addition, Ikea uses this strategy to sell to consumers worldwide: customers receive a catalog and in the showroom, they order in the store the product they would like to produce and pick it up from a designated location in its unassembled state. Retail Patterns Retail Size Patterns: - the extremes in size in retailing are similar to those that predominate in wholesaling. The retail structure and the problem it engenders cause real difficulties afro the international marketing firm selling consumer goods .large dominant retailers can be sold SJBIT/MBA Page 65 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 direct , but there is no adequate way to directly reach small retailers who in the aggregate handle a great volume of sales. Direct Marketing :-selling directly to the consumer through the mail , by telephone or door to door is often the approach of choice market with insufficient or underdeveloped distribution systems. The approach of course also works well in the most affluent market. Resistance to Change :- effort to improve the efficiency of the distribution system new types of middlemen and other attempts to change traditional ways as typically viewed as threatening and are thus resisted . Alternative Middleman Choices :- A marketers options range from assuming the entire distribution activity to depending on intermediaries for distribution of the product . channel selection must be given considerable thought because once initiated it is difficult to change and if proves inappropriate , future growth of market share may be affected a) Agent middlemen ;- represent the principal rather than themselves b) merchant middlemen:- take title to the goods and buy and sell on their own account. International retailing shows even greater diversity in its structure than does wholesaling Some general retailing patterns include: Home-Country Middlemen :- located in the producing firms country provide marketing services from a domestic base. By selecting domestic middlemen as intermediaries in the distribution process , companies relegate foreign market distribution to others.

Manufacturers‘ Retail Stores :- An important channel of distribution for a large number of manufacture is the owned or perhaps franchised. Global Retailers:-as global retailer like Ikea , Costco, Sears Roebuck , Toys ―R‖ Us and Wall–mart expand their global coverage , they are becoming a major domestic middlemen for international markets. Export Management Companies :- is an important middlemen for firms with relatively small international volume or for those unwilling to involve their own personnel in the international function. Trading Companies:- trading companies have a long and honorable history as important intermediaries in the development of trade between nation. Trading companies accumulate , transport and distribute goods from many countries . SJBIT/MBA Page 66 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 U.S. Export Trading Companies :-the ETC act allows producers of similar products to form export trading companies .A major goal of the ETC Act was to increase U.S exports by encouraging more efficient export trade services to producers and suppliers in order to improve the availability of trade finance and to remove antitrust disincentives to export activities. Complementary Marketers :-companies with marketing facilities or contacts in different countries with excess marketing capacity or a desire for a broader product line sometimes take on additional lines for international distribution although the formal name for such activities is complementary marketing. Manufacturer‘s Export Agent :- is an individual agent middlemen or an agent middlemen firm providing a selling service for manufactures. Home-country middlemen, or domestic middlemen, provide marketing services from a domestic base and find foreign markets for products for local manufacturers Frequently used types of domestic intermediaries include: Home-Country Brokers:- the term broker is a catchall for a variety of middlemen performing low cost agent services. Buying Offices :- a variety of agent middlemen may be classified simply as buyers or buyer for export. Their common denominator is a primary function of seeking and purchasing merchandise on request from principals as such they do not provide a selling service Selling Groups:- several types of arrangement have developed in which various

manufactures or producer cooperate in a joint attempt to sell their merchandise abroad. This may take the form of complementary exporting or of selling to a combined business such a Webb –Pomerene export association. Webb-Pomerene Export Associations:-are another major form of group exporting. WPEAs Act of 1918 made it possible for American business firms to join forces in export activities without being subject to the Sherman antitrust . WPEAs cannot participate in cartesl or other international agreement that would reduce competition in the united states but can offer four major benefits 1. reduction of export costs 2. demand expansion through promotion SJBIT/MBA Page 67 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 3. trade barriers reductions 4. improvement of trade terms through bilateral bargaining . Foreign Sales Corporation :- is a sales corporation set up in a foreign country or U.S possession that can obtain a corporate tax exemption on a portion of the earnings generated by the sale or lease of export property. Export Merchants :- are essentially domestic merchants operating in foreign market . as such they operate much like the domestic wholesaler . specifically they purchase goods from a large number of manufacturers , ship them to foreign countries and take full responsibility for their marketing . Export Jobbers:- deal mostly in commodities they do not take physically possession of goods but assume responsibility for arranging transportation. Foreign-Country Middlemen :- using foreign country middlemen moves the manufacturers closer to the market and involves the company more closely with problems of language , physical distribution , communications and financing . foreign middlemen may be agents or merchants , they may be associated with the parent company to varying degrees or they may be temporarily hired for special purposes. Some of the more important foreign country middlemen are manufacturers representatives and foreign distributors. Manufacturer’s Representatives:- are agent middlemen who take responsibility for a producers goods in a city , regional market area entire country or several adjacent

countries . when responsible for an entire country the middlemen is often called a sole agent. Distributors :- A foreign distributor is a merchant middleman. This intermediary often has exclusive sales right in a specific country and works in close co-operation with the manufacturer . the distributor has a relatively high degree of dependence on the supplier companies and arrangements are likely to be on a long run continuous basis. Foreign-Country Brokers:- are agents who deal largely in commodities and food products . the foreign brokers are typically part of small brokerage firms operating in one country or in a few contiguous countries. SJBIT/MBA Page 68 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Managing Agents and Compradors :- A managing agent conducts business within a foreign nation under an exclusive contract arrangement with the parent company. The managing agent in some cases invests in the operation and in most instances operates under as contract with the parent company. Dealers :- generally speaking anyone who has a continuing relationship with a supplier in buying and selling goods is considered a dealer . more specifically dealers are middlemen selling industrial goods or durable consumer goods direct to customers they are the last step in the channel of distribution. Import Jobbers, Wholesalers, and Retailers :- import jobbers purchase goods directly from the manufacturers and sell to wholesalers and retailers and to industrial customers . large and small wholesalers and retailers engage in direct importing for their own outlets and for redistribution to smaller middlemen . the combination retailer wholesaler is more important in foreign countries than in the united states. It is not uncommon to find large retailers wholesaling goods to local shops and dealers. Some of the more important foreign-country middlemen, who find markets for foreign manufacturers include: Factors Affecting Choice of Channels The international marketers needs clear understanding of market characteristic and must have established operating policies before beginning the selection of channel distribution . the

following points should be addressed prior to the selection process Identify specific target markets within and across countries. Specify marketing goals in terms of volume, market share, and profit margin requirements. Specify financial and personnel commitments to the development of international distribution. Identify control, length of channels, terms of sale, and channel ownership Once these points are established , selecting among alternatives middlemen choices to forge the best channel can begin . marketers must get their goods into the hands of consumers and must choose between handling all distribution or turning part or all of it over to various SJBIT/MBA Page 69 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 middlemen . Distribution channels vary depending on target market ,competition and available distribution intermediaries. 1. Cost :- There are two kinds of channel cost a. The capital or investment cost of developing the channel and b. The continuing cost of maintaining it. The later can be in the form of direct expenditure for the maintenance of the company selling force or in the form of margins , markup or commissions of various middlemen handling the goods. 2. Capital requirement :- the financial ramifications of a distribution policy are often overlooked .critical element are capital requirement and cash flow patterns associated with using a particular type of middlemen . 3. Control ;- the more involved a company is with the distribution , the more control its exerts . A company own sales force affords the most control , but often at a cost that is not practical. 4. Coverage :- another major goal is full market coverage to gain the optimum volume of sales obtainable in each market , secure a reasonable market share. And attain satisfactory market penetration .coverage may be assessed by geographic or market segments or both . 5. Character :- the channel of distribution system selected must fit the character of the company and the markets in which it is doing business. Some obvious product requirement often the first considered relate to perishability or bulk of the product , complexity of sale , sales service required and value of the product. 6.Continuity :- channel of distribution often pose longevity problems . most agent

middlemen firms tend to be small institution when one individual retires or moves out of a line of business the company may find it has lost its distribution in that area. Wholesaler and especially retailers are not noted for their continuity in business either. Most middlemen have little loyalty to their vendors. SJBIT/MBA Page 70 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Issues in international retailing In the run-up to the EU's implementation of International Financial Reporting Standards (IFRS) in 2005, PwC published. IFRS in Action to help board members in retail and consumer goods companies better understand what the change to IFRS would mean for their respective industries. Now, some three years later, the implications and effects of the move to IFRS are easier to see. PwC took the opportunity to update its IFRS framework for financial reporting across a range of issues in the retail and consumer sector. Issues and Solutions for the Retail and Consumer Goods Industries: International Financial Reporting Standards is the result, and it offers an extensive set of accounting solutions to help you understand the key issues and concerns behind this ongoing shift to IFRS. The report also provides a US GAAP perspective to help companies (that must report under this framework) understand the impact that IFRS might have on their operations.

SJBIT/MBA Page 71 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Module VI (7 Hours) Pricing decisions: Global Pricing Framework, Pricing Basics, Marginal Cost Pricing and its importance, Transfer Pricing, Counter trade, Systems Pricing, Pricing and Positioning, price quotation – INCO terms – preparation of quotations. Promotion Decisions Promotions – international advertising – sales promotion in international markets – international advertising – direct mailing – personal selling – exhibition – generic promotions in international marketing Global Pricing Framework Due to the increased shifting sales focussed towards e.g. China, India and other fast developing countries, global Industrial companies are facing sooner that anticipated on the complexity of regional pricing differences. By using advanced price indexing techniques global price setpoint and differentiation issues can be resolved by defining the relative and absolute price positioning. Global Pricing is lot more complex than domestic pricing due to: International Currency Fluctuations Price Escalations due to Tariffs Difficulties to access credit risks Price controls, Anti-dumping laws Regulation on transfer pricing Methods of payment Pricing Basics Basic Principle of pricing considers: Costs or Cost-Plus formula Experience Curve Pricing I.e costs go down as more units are produced Competition Pricing: Discount or premium pricing w.r.t competition Demand factored pricing For Global Pricing, there are several other factors to be considered in addition to the basics SJBIT/MBA Page 72 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418

Transfer Pricing MNC‘s have to determine transfer prices, I.e. the prices charged on subsidiaries for products, components and supplies. Transfer pricing must be: Fair for local subsidiary‘s performance measurement Help repatriate profits Satisfy local tax laws governing transfer pricing Global firms are setting up market related transfer prices to satisfy local laws Counter trade & Systems Pricing When local currency is not freely convertible, firms resort to counter trade. Exchange local currency for some other goods that is then sold for US$ or other currency Systems pricing or Pricing for turnkey projects have several subcomponents that may be separately priced or priced as a bundle Issues with Counter Trade Counter Trade arises when a country does not have sufficient foreign exchange or its currency is not freely convertible Counter Trade is like a Barter, and the exchanged goods then has to be sold to realize any profits E.g: Pepsi for Stolichnaya Vodka in USSR Counter trade can arise from counter purchase agreements to buy back a part of local production for the right to export into that country Product Buyback e.g : Hundai exporting cars from India Third goods buy back e.g: Pepsi exporting potato chips from India Major Problem is accessing the value of the bartered goods Evaluation of Counter Trade Counter Trade is done if it‘s the only option for trade Firms use trading houses to dispose of the goods received in trade Firms need to be extra cautious in fixing the barter exchange rates as international value of certain goods is difficult to valuate SJBIT/MBA Page 73 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Counter Trade is a reality in Global markets Points to Consider in Counter Trade Is this the only way to make a deal? Can the received goods be sold? How to maximize cash returns? Are there any import restrictions in getting the goods back?

Are there other ways of converting the local currency? Turnkey Pricing Turnkey Projects are usually of 2 types: Bundled Pricing : Entire project is priced as one bundle Unbundled Pricing: Components of the project is priced individually Profit Sharing or Penalties for nonperformance is usually used in pricing strategy Component prices are based on competitive positions, market entry decisions and FSA factors Price and Positioning Final selling price depends on Positioning Price-Quality Relationships (high price = High Quality) Competitive Positioning : Premium or discount w.r.t competitors Purchasing power : How much customers are able to pay? Product Life Cycle & Price Skimming : High price during introduction & falling prices later on Penetration Pricing : Discount to gain market share PRICE QUOTATION Many businesses, such as hairdressers, use a standardized price list that remains the same for every customer. Other businesses, such as painters and decorators, have to provide tailored prices for the specific products or services a customer wants to buy. This is usually done with an estimate or a quotation. Larger, more complicated projects are often priced on the basis of a detailed tender document drawn up by the customer. SJBIT/MBA Page 74 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 This guide outlines how to present your prices to your customers. It tells you how to create a price list, describes the difference between a quotation and an estimate, details how to prepare quotations and estimates and describes how to price a tender for a contract. 1. Prepare a price list 2. The difference between a quotation and an estimate 3. Prepare a written estimate 4. Prepare a written quotation 5. Prepare a price for a tender 6. Win contracts at the right price PREPARE A PRICE LIST Most businesses will need to draw up a price list at some stage. If you sell a fixed range of products, this may be the only form of pricing you need. This type of standard price list can also be used as the basis for pricing your non-standard orders.

It's a good idea to date your price lists - particularly if your customer is likely to keep it for a long time. You should make it clear when any special offers expire. It can also be useful to include a clause at the end of the price list stating that prices are subject to change. You should make clear whether any delivery, packing or postage costs are included in your prices. Additionally, although you don't have to indicate discounts for bulk purchases on your price list, it might attract more business. You may be able to use software packages such as Sage Simply Accounting to help you draw up complex price lists. THE DIFFERENCE BETWEEN A QUOTATION AND AN ESTIMATE It's impossible for some businesses to give standard prices for goods and services. This may be because the skills, time and materials required for each job vary depending on different customers' needs. This situation is more common in some trades than others - decorators or builders, for example, rarely do exactly the same job twice. When it's not possible to work from a standard price list, you have to give a quotation or an estimate instead. A quotation is a fixed price offer that can't be changed once accepted by the customer. This holds true even if you have to carry out much more work than you expected. SJBIT/MBA Page 75 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 If you think this is likely to happen, it makes more sense to give an estimate. You can also specify in the quotation precisely what it covers, and that variations outside of this will be subject to additional charges. An estimate is an educated guess at what a job may cost - but it isn't binding. To take account of possible unforeseen developments, you should provide several estimates based on various circumstances, including the worst-case scenario. This will prevent your customer from being surprised by the costs. To work out a quote or estimate you need to know your fixed and variable costs. These include the cost-per-hour of manual labour and the cost of the materials you'll require. Your

quote or estimate is then calculated according to what you think the job will involve. You should provide all your quotes and estimates in writing and include a detailed breakdown. This will help to avoid any disputes about what work is included in your overall price. You may also wish to set an expiry date. Your quote or estimate will no longer be valid after this time. INCO terms Trade terms used in different countries may appear identical on the surface, but actually have different meanings as they are used domestically. Incoterms are internationally recognized and thus help to prevent confusion in terms of foreign trade contracts, by helping sellers and buyers understand their obligations in any transaction. Examples of Incoterms include "DAT" (Delivered at Terminal), "DDP" (Delivered Duty Paid) and "CIF" (Cost, Insurance and Freight). PREPARATION OF QUOTATIONS Quotation: - Its a financial document send from supplier to customer regarding service to be provided. Its also called as temporary financial document for negotiations." A statement of price, terms of sale, and description of goods or services offered by a supplier to a prospective purchaser, a bid. When given in response to an inquiry, a quotation often is considered an offer to sell." Preparation of price quotations will be discussed in classroom in detail. SJBIT/MBA Page 76 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 International Advertising The basic framework and concepts of international advertising include the following seven steps: 1. Perform marketing research 2. Specify the goals of the communication 3. Develop the most effective message(s) for the market segments selected 4. Select effective media 5. Compose and secure a budget 6. Execute the campaign, and 7. Evaluate the campaign relative to the goals specified • Decisions involving advertising are those most often affected by cultural differences

among country markets • Consumers respond in terms of their culture, its style, feelings, value systems, attitudes, beliefs, and perceptions • Advertising‘s function is to interpret the qualities of products in terms of consumer needs, wants, desires, and aspirations, the emotional appeals, symbols, and persuasive approaches • Reconciling an international advertising campaign with the cultural uniqueness of markets is the challenge confronting the international or global marketer Sales Promotions in International Markets • Sales promotions are marketing activities that stimulate consumer purchases and improve retailer or middlemen effectiveness and cooperation • Sales promotions are short-term efforts directed to the consumer or retailer to achieve such specific objectives as consumer-product trial or immediate purchase Examples of sales promotion include 1. Cents-off 2. In-Store Demonstrations 3. Samples 4. Coupons 5. Gifts 6. Product Tie-Ins SJBIT/MBA Page 77 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 7. Contests 8. Sweepstakes 9. Sponsorship of Special Events, 10. Point-Of-Purchase Displays International Advertising and the Communications The international communications process consists of the following seven steps: 1. An information source. An international marketing executive with a product message to communicate 2. Encoding. The message from the source converted into effective symbolism for transmission to a receiver 3. A message channel. The sales force and/or advertising media that convey the encoded message to the intended receiver 4. Decoding. The interpretation by the receiver of the symbolism transmitted from the information source

5. Receiver. Consumer action by those who receive the message and are the target for the thought transmitted 6. Feedback. Information about the effectiveness of the message that flows from the receiver (the intended target) back to the information source for evaluation of the effectiveness of the process 7. Noise. Uncontrollable and unpredictable influences such as competitive activities and confusion that detract from the process and affect any or all of the other six steps DIRECT MAIL ADVERTISING • It is highly selective. • This form of advertising is elastic as the retailer can add or delete the name of consumers at his discretion. • A wide variety of merchandise or service can be advertised to the same consumer. • Privacy on consumer preference/order can be maintained. • Market competition can be avoided instantly. • Direct mail advertising is personal and specific. Home delivery of goods and services can be assured. Performance of merchandise/service sales can be monitored and evaluated. SJBIT/MBA Page 78 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 PERSONAL SELLING 1. Happens via Sales Person 2. In the eyes of most of the customer, the sales person is the company 3. The sales Representative is the final link in the culmination of a company‘s marketing & Sales effort. 4. Growing global competition coupled with the dynamic & complex Nature of international business increases both the need & the means for closer ties with the both customers & suppliers. Relationship marketing built on effective communication between the seller & the buyer, focuses on building long term alliances rather than treating each sales as a one time event. 5. Advances in IT are changing the nature of personnel selling & sales management 6. Following are the steps to manage the sales force: a) Designing the Sales Force b) Recruiting Marketing & Sales Personnel( Sales Personnel include Expatriates, Local Nationals & Third Country Nationals. Virtual Expatriates are the new breed of

Expatriates developed through Internet) c) Selecting Sales & Marketing Personnel d) Training for International Marketing e) Motivating Sales Personnel. f) Evaluating & Controlling Sales representatives. Exhibition An exhibition, in the most general sense, is an organized presentation and display of a selection of items. In practice, exhibitions usually occur within museums, galleries and exhibition halls, and World's Fairs. Exhibitions include (whatever as in major art museums and small art galleries; interpretive exhibitions, as at natural history museums and history museums), for example; and commercial exhibitions, or trade fairs The word "exhibition" is usually, but not always, the word used for a collection of items. Sometimes "exhibit" is synonymous with "exhibition", but "exhibit" generally refers to a single item being exhibited within an exhibition. Exhibitions may be permanent displays or temporary, but in common usage, "exhibitions" are considered temporary and usually scheduled to open and close on specific dates. While many SJBIT/MBA Page 79 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 exhibitions are shown in just one venue, some exhibitions are shown in multiple locations and are called travelling exhibitions, and some are online exhibitions. Though exhibitions are common events, the concept of an exhibition is quite wide and encompasses many variables. Exhibitions range from an extraordinarily large event such as a World's Fair exposition to small one-artist solo shows or a display of just one item. Curators are sometimes involved as the people who select the items in an exhibition. Writers and editors are sometimes needed to write text, labels and accompanying printed material such as catalogs and

books. Architects, exhibition designers, graphic designers and other designers may be needed to shape the exhibition space and give form to the editorial content. Organizing and holding exhibitions also requires effective event planning, management, and logistics Generic promotions in international marketing In the US more than a billion dollars is spent annually on generic commodity promotion, with spending in some individual product categories exceeding $100 million. In South Africa R37 million was spent in 2008 on generic commodity promotion by way of statutory measures. Extensive economic research has been done for many years to evaluate generic promotion programs. A number of studies evaluating the impacts of promotional programs on the demand for agricultural commodities have been undertaken for a variety of generic promotion campaigns. In the US more than a billion dollars is spent annually on generic commodity promotion, with pending in some individual product categories exceeding $100 million. In South Africa R37 million was spent in 2008 on generic commodity promotion by way of statutory measures. Extensive economic research has been done for many years to evaluate generic promotion programs. A number of studies evaluating the impacts of promotional programs on the demand for agricultural commodities have been undertaken for a variety of generic promotion campaigns. Generic promotion, by definition, should be brand or market share neutral. SJBIT/MBA Page 80 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 It may increase total demand but it should not result in one firm or group of firms gaining market share over another. In theory brands associated commodities are not expected to lose or gain market share from the generic advertising of the commodity. Under circumstances where a generic campaign enhances or reduces one brand share or market share relative to others a significant equity problem occurs. Equally, if a commodity based firm is of sufficient size to successfully promote its own brand and capture those gains the firm may argue that their contributions to generic promotion efforts could be more effectively used to

promote their own brands. In this regard the level of concentration and the competitive structure of the commodity sector become major factors in determining the usefulness of generic promotional campaigns. At some point, notwithstanding the economic arguments for or against generic promotional campaigns, the implementation of these programs may move beyond the economics and into the political, legislative, and judicial arenas. The economic evidence is generally in favour of generic promotion via mandated marketing programs. General evidence confirming the positive effects of generic promotional campaigns.Results generally vary between very low impacts in some instances to significantly positives impacts in other instances. Notwithstanding the varied impacts of these generic programs the evidence suggests that generic promotion can expand total demand versus individual firm efforts that often compete only for market are and shelf space with little impact on expanding the total pie. SJBIT/MBA Page 81 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Module VII (6 Hours) Recent trends in India's foreign trade: Institutional infrastructure for exports promotions in India – India's trade policy – exports assistance – exports documentation and procedures including

different stages of documentation Globalization in India, Opportunities, Constraints and Initiatives India - A Hub for Globalization, Globalization in India - Post Liberalization, India‘s Strengths, Strategies for Sustainable Competitive Advantage, Potential for Made in India, Major Globalization Initiatives from Indian Companies, WTO Regulations and their implications for India, Undesirable effects of globalization, Government Initiatives needed to foster globalization Institutional infrastructure for exports promotions in India The Government of India has set up several institutions whose main functions are to help an exporter in his work. It would be advisable for an exporter to acquaint himself with these institutions and nature of help that they can render to him so that he can initially contact them and have a clear picture of what help he can expect of the organized sources in his export effort. Institutions engaged in export effort fall in six distinct tiers. Department of Commerce of the Ministry of Commerce and Industry Deliberative and consultative organizations Commodity specific organizations Service Institutions Government trading organizations Agencies for export promotion at the State Level Export Promotion Board There is an export promotion board under the Chairmanship of the cabinet secretary to provide policy and infrastructural support through greater coordination among ministries concerned for boosting the growth of exports. All ministries directly connected with facilitating foreign trade are represented on this board by their secretaries. Export Promotion Council There are 19 Export Promotion Councils covering a number of products. These councils advice the government regarding current developments in the export sector and measures necessary to facilitate future growth in exports, assist manufactures and SJBIT/MBA Page 82 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 exporters to overcome the various constraints and extend to them the full range of

services for the development of market overseas. India Trade Promotion Organization (ITPO) It has become into effect from 01-01-1992 with the main objective of promoting exports and imports and up gradation of technology through the medium of fairs to be held in India and abroad, to undertake publicity through the print and electronic media to assist Indian companies in product development, to organize programs, buyer seller meets, contact promotion programs for specific products in specific market. National Center for Trade Information (NCTI) It‘s a joint venture of ITPO and National Informatics Center. It was established to provide the latest trade, business and economic information to help Indian and foreign enterprises in the promotion of the trade from and to India. Export Credit Guarantee Corporation (ECGC) For minimizing the risk element in export business and to facilitate the flow of finance from the banks to exporters, Export Credit Guarantee Corporation was established Marine Products Export Development Authority The marine products export development authority started functioning in September 1972. the authority serves the seafood industry right from fishing to processing, packaging, storing, transporting and marketing to the different marketers all over the world. The authority is entrusted with the task of ensuring a healthy growth of the industry through judicious regulation, conservations and control. Importers and exporters can obtain any information relating to the markets and the products from the Marine Export Development Authority. Agricultural and Processed Food Products Export Development Authority With a view to increase the exports from agricultural sector, council has been established. It will coordinate its activities with national bodies like Horticulture Board and State Governments for generating production for exports and with research institute for development of value added products. Export – Import Bank It was established for the purpose of financing, facilitating and promoting foreign trade of India. The bank is the principal financial institution in India for coordinating the work of institutions engaged in financing export and import trade. SJBIT/MBA Page 83

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Federation of Indian Export Organisations An apex body called the Federation of Indian Export Organisations was established in order to make a common and coordinating platform for the various export organizations. Department of Commercial Intelligence and Statistics It is located at Kolkata. Its functions comprise: 1. commercial intelligence 2. collection, compilation and publication of the statistics of trade, tariffs and shipping. India’s Export Policy The objectives are: To earn adequate foreign exchange to finance the required volume of imports To effect a change in the directional pattern with a view to reduce dependence on a single country/limited number of countries To supplement domestic demand for increasing employment opportunities To raise unit value realization by promoting exports of value added items To impose minimum price regulation where inter se compensation is serve. To impose controls when domestic availability is less than adequate. India’s Trade Policy Trade policy of a country refers to the set of policies which govern the external sector of its economy. The twin objectives of India‘s trade policy have been to promote exports and to restrict the level of imports to the level of foreign exchange available to the government. The basic objective of trade policy revolves around the instruments and techniques of export promotion and import management. India’s Import Policy The objectives are: To use the available foreign exchange according to national priorities To so allocate foreign exchange that capacity utilization is maximized To grant protection to domestic industries SJBIT/MBA Page 84 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 To maintain price stability

Long Term Fiscal Policy The government of India has formulated long-term fiscal policy which was presented in December 1985. The principal features of the Long Term Fiscal Policy relating to the foreign trade sector are as follows: Reform of duty drawback scheme for exports Ad Valorem Vs Specific Duties Restructuring of Customs Duties Thrust Commodities Export Assistance Developing countries have started manufacturing industries only recently. As a result their cost of production generally tends to be high because of the following reasons: 1. Total market availability within the country is small with the result that the economies of large scale production cannot be reaped. 2. Productivity of labour is low because the level of mechanization as compared to that in the developed countries is low. 3. The cost of production is generally a function of experience i.e. ―learning by doing‖. 4. Manufacturing units in developing countries being small and new, have considerably less expertise in the field of international marketing and because the volume of exports is low, the per unit cost of the trade promotion expenditure tends to be high. India has to raise higher resources for development which has to be done through a number of indirect levies which tend to push up the overall cost of production. Most developing countries have therefore resorted to a number of export promotion measures. India has also been providing export assistance to Indian exporters. From 1992, export incentive system in India has been made simple. There are essentially three major incentives. These are: 1. market based exchange rate 2. fiscal concessions SJBIT/MBA Page 85 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 3. facilities under the export – import policy Export documents Standardized and Aligned Pre-shipment documents more than two dozen commercial and regulatory documents are involved in the pre-shipment stage of export transactions. These include 16 commercial documents and 9 regulatory documents.

Commercial Documents The commercial documents are those which, by customs of trade, are required for effecting physical transfer of goods and their title from the exporter to the exporter to the important and realization of export sale proceeds. 14 out of 16 commercial documents have been standardized and aligned to one another, shipping order and Bill of exchange could not be brought within the fold of the aligned documentation system because of their very different data elements and having very little in common with other commercial documents. The commercial documents are classified into principal documents and auxiliary documents. Principal Export Documents: 1) commercial Invoice 2) packing list 3) bill of lading 4) combined transport document 5) certificate of inspection/quality control(where required) 6) insurance certificate 7) certificate of origin 8) Bill of exchange and shipment advice Auxiliary Documents: 1) Proforma Invoice 2) Intimation for inspection 3) Shipping Instructions SJBIT/MBA Page 86 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 4) Insurance declaration 5) Shipping order 6) Mate receipt 7) Application for certificate of origin 8) Letter to the bnk for collection/negotiation of documents Regulatory documents: Regulatory pre-shipment export documents are those which have been prescribed by different government departments/bodies in compliance of the requirements of various rules and

regulations under relevant laws governing export trade such as export inspection, foreign exchange regulations, export trade control, customs etc. Documents related to goods: Invoice : An invoice is the seler‘s bil for merchandise and contains particulars of goods, such as the price per unit at particular location, total value, packing specifications, terms of sale, identification marks of the package, etc Packing note and list: A packing note should include the packing note number, the date of packing, the name and address of the exporter, the name and address of the importer, the order number, date, shipment per s/s etc. Apart from the details in the packing note, a packing list should also include item- wise details. Certificate of origin: A certificate of origin, as the name indicates, is a certificate which specifies the country of the production of the goods. This certificate also to be produced before clearance of goods and assessment of duty, for the customs law of the country may require this procedure. CERTIFIED RELATED TO SHIPMENT 1) Mate receipt: A mate receipt is a receipt issued by the commanding office of the ship when the cargo is loaded on the ship, and contains information about the name of the vessel, berth, date of SJBIT/MBA Page 87 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 shipment, description of packages, marks and numbers, condition of the cargo at the time of receipt on board the ship, etc. 2) Shipping Bill: The shipping bill is the main document on the basis of which the customs permission for export is given. The shipping bill contains particulars of the goods exported, name of the vessel, master or agents, flags, the port at which goods are to be discharged, the country of final destination, etc.

3) Cart Ticket: A car ticket, also known as a cart chit, vehicle and gate pass, is prepared by the exporter and includes details of the export cargo in terms of the shippers name, the number of packages, the shipping bill number, the port of destination and the number of the vehicle carrying the cargo. 4) Certificate of Measurement: Freight is charged either on the basis of weight or measurement. When it is charged on the basis of weight, the weight declared by the shipper may be accepted. The certificate contains the name of the vessel, port and destination, the description of goods, the quality, length, breadth, depth, etc. of the packages. 5) Bill of Lading: The bill of lading is a document wherein the shipping company gives its official receipts for the goods shipped in its vessel and at the same time contracts to carry them to the port of destination. It is also a document of title to then goods and, as such, is freely transferable by endorsement and delivery. A bill of lading serves 3 main purposes: As a document of title to the goods; As a receipt from the shipping company; As a contract for the transportation of goods 6) Airway Bill: An Airway bill, also called, an air consignment note, is a receipt issued by an airline for the carriage of goods. As eah shipping company has its own bill of lading, each airline has its own airway bill. SJBIT/MBA Page 88 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Documents Related To Payment (a) Letter of Credit: A letter of credit is a document containing the guarantee of a bank to honor drafts drawn on it by an exporter, under certain conditions and up to certain amounts, provided that the beneficiary fulfils the stipulated conditions.

(b) Bill of Exchange: The Negotiable Instrument Act,1881, defines the bil of exchange as ―an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument‖. (c) Trust Receipt: If the importer is unable to take possession of the documents by making the payment on the D/P bill following the arrival of the goods, the merchandise may be made available to the importer by his bank under an arrangement whereby the importer signs a trust receipt. (d) Letter of Hypothecation: A letter of hypothecation is a document signed by the customer conveying to a banker the full ownership of goods at the port of destination in respect of which he has made advances either by loan or by acceptance or negotiation of bills of exchange. (e) Bank Certificate of payment: It is a certificate issued by the negotiating bank of the exporter, certifying that the bill covering particular consignments, has been negotiated and that the proceeds received in accordance with exchange control regulations in the approved manner. Documents Relating To Inspection Certificate of inspection: It is a certificate issued by the export inspection agency, certifying that the consignment has been inspected as required export act 1963, and satisfies the condition relating to quality control and inspection applicable to it, and is certified to it , and is certified export worthy. SJBIT/MBA Page 89 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Documents Related To Excisable Goods I. G.P. Forms: a. A GP form is a gate pass for the removal of excisable goods from a factory or warehouse. Form GP1 is used for the removal of excisable goods on payment of duty and form GP 2 is used for the removal of excisable goods with payment of duty.

II. Form C: a. Form c is to be used for applying for rebate of duty on the excisable goods ( other than vegetables, non essential oils and tea) exported by sea. III. Forms A.R. -4/A.R. -4A: a. These forms are meant for applying for the removal of excisable goods for export by sea/post. Form A.R.-4 is used for applying For excise inspection at the factory and form A.R.- 4A is used when the goods are to be exported under the claim for rebate of excise duty or under bond. Documents Related To Foreign Exchange Regulation Foreign exchange regulations in India require to fill several forms. There are four important types of forms namely, GR/PP, VP/COD and SOFTEX form for exporter of computer software obtainable from the RBI or a bank authorized deal with the foreign exchange. Globalization in India India had the distinction of being the world's largest economy in the beginning of the Christian era, as it accounted for about 32.9% share of world GDP and about 17% The goods produced in India had long been exported to far off destinations across the world. Therefore, the concept of globalisation is hardly new to India. India currently accounts for 1.2% of World trade as of 2006 according to the World Trade Organisation (WTO). Until the liberalisation of 1991, India was largely and intentionally isolated from the world markets, to protect its fledgling economy and to achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment was restricted by upper-limit equity participation, restrictions on technology transfer, export obligations and government approvals; these approvals were needed for nearly 60% of new SJBIT/MBA Page 90

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 FDI in the industrial sector. The restrictions ensured that FDI averaged only around $200M annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians. India's exports were stagnant for the first 15 years after independence, due to the predominance of tea, jute and cotton manufactures, demand for which was generally inelastic. Imports in the same period consisted predominantly of machinery, equipment and raw materials, due to nascent industrialization. Since liberalization, the value of India's international trade has become more broad-based and has risen to 63,080,109 crores in 2003–04 from 1,250 crores in 1950– 51. India's major trading partners are China, the US, the UAE, the UK, Japan and the EU. The exports during April 2007 were $12.31 billion up by 16% and import were $17.68 billion with an increase of 18.06% over the previous year. India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor, the World Trade Organisation. While participating actively in its general council meetings, India has been crucial in voicing the concerns of the developing world. For instance, India has continued its opposition to the inclusion of such matters as labour and environment issues and other non-tariff barriers into the WTO policies. Opportunities, Constraints and Initiatives 1. In recent times, Indian exporters face a number of problems. The problems demotivate the business firms to enter into foreign markets. Some of the problems are as follows: 2. Recession in World Markets: The world markets faced recession in 2008 and in the first half of 2009. The recession was triggered due to sub-prime crisis of USA in Sept 2007. Due to recession, the demand for several Indian items such as gems and Jewellery, textiles and clothing, and other items were badly hit. During recession, exporters get low orders from overseas markets, and they have to quote lower prices. Therefore, exporters get low profits or suffer from losses. 3. Protectionist Measures by Developed Countries: The developing countries like India

have to face the problem of protectionist measures by developed countries. For instance, in 2009, USA Govt. provided a bailout package to General Motors and other firms to overcome from financial crisis. The bailout package contained ‗Buy American Clause‘ which means the firms getting financial assistance from the Govt. have to use domestic SJBIT/MBA Page 91 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 content rather than importing from other countries. Since USA is the major importer from India, some of the exporters such as auto parts suppliers have to face problems. 4. Reduction in Export Incentives: Over the years, the Govt. of India has reduced export incentives such as reduction in DBK rates, withdrawal of income tax benefits for majority of exporters, etc. The reduction in export incentives demotivates exporters to export in the overseas markets: 5. Competition from China:India is facing stiff competition from China in the world markets, especialy in the OECD markets. As a result, India‘s share of exports to OECD markets has declined from 53% of total exports in 2000-01 to about 38% in 2007/8. Some of the Indian exporters have lost their overseas contracts due to cheap Chinese goods arid supplies. 6. Problem of Product Standards: Developed countries insist on high product standards from developing countries like India. The products from developing countries like India are subject to product tests in the importing countries. At times, the importing countries do not allow imports of certain items like fruits, textiles, and other items on the grounds of excessive toxic content. Therefore, Indian exporters lose markets especially in developed countries. 7. Problem of Anti-dumping Duties: Developed countries impose anti-dumping duties on certain goods imported from developing countries like India, Brazil, China and so on. For instance, USA had imposed anti-dumping duties on Indian steel items in 2008. Quite often, the anti-dumping duties are not justified. Therefore, India has to approach the dispute settlement body of WTO to resolve the dispute regarding anti-dumping duties. Till the dispute is resolved, Indian exporters lose business opportunities. 8. Problem of Sea Pirates Attacks: A major risk faced by international trade is attack by pirates in the Gulf of Aden. More than half of India‘s merchandise trade (exports and imports) passes through the piracy infested Gulf of Aden. New exporters and importers are facing problems because of increased pirate attacks as they find it difficult to get insurance cover. 9. Problem of Subsidies by Developed Countries: The developed countries like USA provide huge subsidies to their exporters. For instance, in case of agriculture exporters, USA, UK and others provide huge subsidies to their exporters. Therefore, the exporters of

developing countries like India find it difficult to face competition in the world markets. 10. Documentation Formalities: There are a number of documents to be prepared in export trade. In India, there are as many as 25 documents (16 commercial documents and 9 SJBIT/MBA Page 92 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 regulatory documents) to be filled in. However, aligned documentation system (ADS) has simplified export documentation procedure. 11. Foreign Exchange Regulations: Export marketing is subject to foreign exchange regulations. For instance, in India, the exporters have to give a declaration in Form GR to the Reserve Bank of India (RBI) that they will realize the full value of exports within a period of 180 days. Major Globalization Initiatives from Indian Companies Globalization of Markets: It refers to the merging of national markets into one huge global marketplace. Globalization of Production: It refers to the sourcing of goods and services from locations around the world to take advantage of national differences in the cost and quality of factors of production. Falling Barriers to Trade and Investment: The falling of barriers to international trade enables firms to view the world as their market. Technological Innovation: Technological changes have achieved advances in communication, information processing, and transportation technology, including the Internet and the World Wide Web. FACTORS DETERMINING INBUILDING GLOBAL COMPANIES• POLITICAL FACTORS - Stability of the government Type of government - Democratic - Theocracy (religious) - monarchy ( kingdom) Control structure Canada, USA ( decentralized province) Japan, France( centralized) POLITICAL FACTORS Government takeover of asset(with or without permission)- Operational restriction Remittance/ Repatriation restrictions Government policies- Opposition parties, pressure groups, external linkages Economic factors Economic system ( open / mixed)- Economic development Standard of living( per capita income) Sectorial share in GDP- Foreign Exchange reserves Economic indicators( inflation rate, BOP)

Technological factors Differentiation strategy Competitive advantage Legal factors Home country laws Host country laws International laws UN resolutions, Patents & Trademark protection & piracy laws, GATT, codes of conduct ITCSUBSIDIARIES JOINT VENTURES• ITC Infotech Surya Nepal Private Limited • Maharaja Heritage• Land base Resorts Ltd.• King Maker Marketing Inc., USA • ITC Filtrona• Technico Pty Limited. Australia• Russel Credit Limited ASSOCIATE COMPANIES• Wimco Limited • SJBIT/MBA Page 93 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Gujarat Hotels Limited• Srinivasa Resorts Limited • International Travel• Fortune Park Hotels Limited House• Bay Islands Hotels Limited• Gold Flake Corporation Limited ITC INFOTECH• The company services industries including, Banking Financial Services & Insurance (BFSI), Consumer Packaged Goods (CPG), Retail, Manufacturing, Engineering Services, Media & Entertainment, Travel, Hospitality, Life Sciences and Transportation & Logistics.• Ranked amongst Top 10 Specialty Application Development Providers - Global Services, CMP Media ITC CIGARETTES Market Value. The Indian tobacco market grew by 8.9% in 2012 to reach value of $11.6 billion. Market Value Forecast In 2013, the Indian tobacco market is forecast to have a value of $14.9 billion, an increase of 29.4% since 2008. MAHINDRAMAHINDRA AND MAHINDRA FORGINGSMAHINDRA• Their global presence • They are one of the largest and most means that you can find technologicaly advanced Mahindra vehicles on the manufacturers of forged roads—both paved and and machined components in the world. unpaved—of Australia, They create parts like Europe, Latin America, links, knuckles, spindles, Malaysia, and South shafts, crankshafts, camshafts, pistons, ball Africa. And they are joints, and stub axles that seeking out new terrain are used in automotive, every day agriculture, railway, mining, construction and other industries throughout the world. MAHINDRAMAHINDRA SATYAM TECH MAHINDRA • Since commencing operations in

1986 as a joint• Sathyam is a global player in venture between Mahindra and the global Information, British Telecom (BT), they have Communication, and Technology (ICT) space. They become one of India‘s largest provide enterprise business software exporters and ranked solutions, infrastructure No.1 in the Telecom Software services, industry native Category (Voice & Data 2010-11). solutions, integrated For over two decades, they have engineering solutions, been the chosen transformation consulting services, partner for wire-line, wireless and application development and broadband operators in Europe, management services, and Asia-Pacific and North America. business process outsourcing to more than 350 clients in We operate in more than 30 35 countries. countries through 17 sales offices and 13 delivery centers, working with major players like British Telecom, Vodafone, among others INFOSYS• Infosys is a global leader in consulting, technology and outsourcing with revenues of US$ 7.231 bilion• Infosys provides business consulting, technology, engineering and outsourcing SJBIT/MBA Page 94 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 services to help clients in over 30 countries build tomorrow‘s enterprise.• Infosys and its subsidiaries have 155,629 employees as on Dec 31, 2012. INFOSYS• Infosys takes pride in building strategic long-term client relationships. 97.5% of our revenues come from existing customers• Infosys has a global footprint with 67 offices and 69 development centers in US, India, China, Australia, Japan, Middle East, UK, Germany, France, Switzerland, Netherlands, Poland, Canada and many other countries. DABUR• Dabur has a special herbal health care and personal care range successfully selling in markets ranging from the Middle East, Far East, North Africa and Europe• Inroads into several European and American markets that have good potential due to resurgence of the back-to-nature movement• Export of Active Pharmaceutical Ingredients (APIs), manufactured under strict international quality benchmarks, to Europe, Latin America, Africa, and other Asian countries•

Export of food and textile grade natural gums, extracted from traditional plant sources• Six modern manufacturing facilities spread across South Asia, Middle East and Africa to optimize production by utilizing local resources and the most modern technology available TATA• Corus Group (U.K.) Tata Steel, one of the leading steel producers in India, acquired Corus Group for U.S. $12.11 bilion (€ 8.5 bilion) on January 31, 2007 This acquisition is considered to be one of the biggest foreign acquisitions by an Indian company, and after this only TATA Steel came out to be the fifth largest steel producer in the whole world. TATA• Jaguar Cars and Land Rover (U.K.) Tata Motors has acquired both Jaguar and Land Rover, which are two iconic British brands with worldwide growth prospects This deal was for a whooping U.S. $ 2.3 billion with Ford, the previous American owners. The deal was effective from May 2008. The deal is seen as yet another endeavor of the fast growing Indian industries, also the latest in a string of foreign acquisitions by Tata. Bharti Airtel• Zain Africa Bharti Airtel had acquired Zain Africa for a value of U.S. $10.7 billion. The acquisition gives Bharti Airtel a total customer base of 180 million, including 131 million subscribers it had in India at the end of April By expanding its business outside the country, Bharti Airtel can in the long term benefit from economies of scale, including getting better deals from suppliers SJBIT/MBA Page 95 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Aditya Birla• Novelis (U.S.)• Has acquired the entire stake in the Atlanta based aluminium company Novelis for U.S. $6 bilion• This company had separated from Alcan, a global aluminium company ONGC• Imperial Energy (U.K.)• Oil and Natural Gas Corp (ONGC) has acquired Imperial Energy. This deal was for 1.3 bilion pounds (U.S. $1.9 bilion).• The company owed the acquisition to government support, which in the past seven years increase its number of projects to 39 in 17 countries, from just a single project in Vietnam Essar Steel Global Algoma Steel (Canada) Ruias owned Essar Steel Global acquires the

Canadian steel company Algoma Steel at a valuation of Canadian $1.85 billion. Essar Steel Holding, Essar Groups overseas investment arm made the investment possible and easy. Algoma would definitely provide Essar an excellent platform for the Canadian and North American market Reliance• Marcel us Shale Reliance, led by Indian billionaire Mukesh Ambani, got the right to buy 40 percent of all new Marcellus Shale leases that Atlas acquires, after this purchase acquisition and agreement was completed. Acquisition Price ($m) Reliance Industries Flag Telecom, Bermuda 212 Trevira, Germany 95Tata Motors Daewoo, Korea 118Infosys Technologies Expert Information 3.1 Services, Australia Wockhardt CP Pharmaceuticals, UK 18Cadila Health Alpharma SAS, France 5.7Hindalco Straits Ply, Australia 56.4Wipro NerveWire Inc, US 18.5Aditya Birla Dashiqiao Chem, China 8.5United Phosphorus Oryzalin Herbicide, US 21.3Bharat Forge Carl Dan Peddinghaus Gmbh, Germany 28Ranbaxy RPG Aventis, France 80 WTO Regulations and their implications for India The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commenced on 1 January 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948.The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participant's adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986–1994). SJBIT/MBA

Page 96 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 The organization is attempting to complete negotiations on the Doha Development Round, which was launched in 2001 with an explicit focus on addressing the needs of developing countries. As of June 2012, the future of the Doha Round remained uncertain: the work programme lists 21 subjects in which the original deadline of 1 January 2005 was missed, and the round is still incomplete. The conflict between free trade on industrial goods and services but retention of protectionism on farm subsidies to domestic agricultural sector (requested by developed countries) and the substantiation of the international liberalization of fair trade on agricultural products (requested by developing countries) remain the major obstacles. These points of contention have hindered any progress to launch new WTO negotiations beyond the Doha Development Round. As a result of this impasse, there has been an increasing number of bilateral free trade agreements signed. As of July 2012, there were various negotiation groups in the WTO system for the current agricultural trade negotiation which is in the condition of stalemate. Principles of the trading system The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games. Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO: 1. Non-discrimination. It has two major components: the most favoured nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members. "Grant someone a special favour and you have to do the same for all other WTO members." National treatment means that imported goods should be treated no less favorably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical

standards, security standards et al. discriminating against imported goods). 2. Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialise. SJBIT/MBA Page 97 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 3. Binding and enforceable commitments. The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures. 4. Transparency. The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports. 5. Safety valves. In specific circumstances, governments are able to restrict trade. The WTO's agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health. There are three types of provision in this direction: articles allowing for the use of trade measures to attain non-economic objectives; articles aimed at ensuring "fair competition"; members must not use environmental protection measures as a means of disguising protectionist policies. provisions permitting intervention in trade for economic reasons. Exceptions to the MFN principle also allow for preferential treatment of developing countries, regional free trade areas and customs unions. Undesirable effects of globalization Globalization seems to be looked on as an unmitigated ―good‖ by economists. Unfortunately, economists seem to be guided by their badly flawed models; they miss real-world problems. In particular, they miss the point that the world is finite. We don‘t have infinite resources, or

unlimited ability to handle excess pollution. So we are setting up a ―solution‖ that is at best temporary. SJBIT/MBA Page 98 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Economists also tend to look at results too narrowly–from the point of view of a business that can expand, or a worker who has plenty of money, even though these users are not typical. In real life, businesses are facing increased competition, and the worker may be laid off because of greater competition. Globalization uses up finite resources more quickly. Globalization makes it virtually impossible for regulators in one country to foresee the worldwide implications of their actions Globalization transfers consumption of limited oil supply from developed countries to developing countries Globalization transfers jobs from developed countries to less developed countries. Globalization transfers investment spending from developed countries to less developed countries. Globalization tends to move taxation away from corporations, and onto individual citizens. Government Initiatives needed to foster globalization Globalization of Markets: It refers to the merging of national markets into one huge global marketplace. Globalization of Production: It refers to the sourcing of goods and services from locations around the world to take advantage of national differences in the cost and quality of factors of production. Falling Barriers to Trade and Investment: The falling of barriers to international trade enables firms to view the world as their market. Technological Innovation: Technological changes have achieved advances in communication, information processing, and transportation technology.

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INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Module VIII (2 Hours) The future of global marketing: Six major changes in global marketing Global economies are so tightly interconnected that companies, governments and industries will soon be forced to cooperate in ways we could not have imagined just a few years ago. In fact, Ernst & Young believes the six trends are themselves connected by three underlying drivers that have helped establish each trend and perpetuate it. 1. Demographic shifts. Population growth, increased urbanization, a widening divide between countries with youthful and quickly aging populations and a rapidly growing

middle class are reshaping not only the business world, but also society as a whole. 2. Reshaped global power structure. As the world recovers from the worst recession in decades, the rise of relationships between the public and private sectors has shifted the balance of global power faster than most could have imagined just a few years ago. 3. Disruptive innovation. Innovations in technology continue to have massive effects on business and society. We're now seeing emerging markets become hotbeds of innovation, especially in efforts to reach the growing middle class and low-income consumers around the globe. Six global trends, interconnected by three key drivers of change SJBIT/MBA Page 100 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Six global trends, interconnected by three key drivers of change 1. Emerging markets increase their global power 2. Cleantech becomes a competitive advantage 3. Global banking seek recovery through transformation 4. Government enhances ties with private sector 5. Rapid technology created innovative and mobile world 6. Demographic shifts transforms the global work force 1. Emerging markets increase their global power Emerging markets serve as the world's economic growth engine, and the far-reaching effects of their spectacular rise continue to play out. But their risks are often downplayed. Therefore, taking advantage of emerging-market opportunities requires careful planning. As the greatest hope for growth in the global economy for the past two years, the emerging markets have become the darlings of the financial press and a favorite talking point of C-suite executives worldwide. Once attractive only for their natural resources or as a source of cheap labor and low-cost manufacturing, emerging markets are now seen as promising markets in their own right. Rapid population growth, sustained economic development and a growing middle class are making many companies look at emerging markets in a whole new way. The emerging markets rise, so do their companies. Many companies that had previously posed no competitive threat to multinational corporations now do so. These emerging market leaders represent a major shift in the global competitive landscape — a trend that will only strengthen as they grow in size, establish dominance and seek new opportunities beyond their traditional domestic and near-shore markets. In particular, we see the following trends ahead:

SJBIT/MBA Page 101 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Leading emerging markets will continue to drive global growth Estimates show that 70% of world growth over the next few years will come from emerging markets, with China and India accounting for 40% of that growth. Adjusted for variations in purchasing power parity, the ascent of emerging markets is even more impressive: the International Monetary Fund (IMF) forecasts that the total GDP of emerging markets could overtake that of the developed economies as early as 2014. The forecasts suggest that investors will continue to invest in emerging markets for some time to come. The emerging markets already attract almost 50% of foreign direct investment (FDI) global inflows and account for 25% of FDI outflows. The brightest spots for FDI continue to be Africa, the Middle East, and Brazil, Russia, India and China (the BRICs), with Asian markets of particular interest at the moment. By 2020, the BRICs are expected to account for nearly 50% of all global GDP growth. Securing a strong base in these countries will be critical for investors seeking growth beyond them. Emerging market leaders will become a disruptive force in the global competitive landscape As emerging market countries gain in stature, new companies are taking center stage. The rise of these emerging market leaders will constitute one of the fastest-growing global trends of this decade. These emerging market companies will continue to be critical competitors in their home markets while increasingly making outbound investments into other emerging and developed economies. Working to serve customers of limited means, the emerging market leaders often produce innovative designs that reduce manufacturing costs and sometimes disrupt entire industries. A case in point: India's Tata Motors' US$2,900 Nano, priced at less than half the cost of any other car on the market worldwide. A version is set to go on sale in Europe this year. Many emerging market leaders have grown up in markets with "institutional voids,"

where support systems such as retail distribution channels, reliable transportation and telecommunications systems and adequate water supply simply don't exist. SJBIT/MBA Page 102 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 As a result, these companies possess a more innovative, entrepreneurial culture and have developed greater flexibility to meet the demands of their local and "bottom-of-the-pyramid" customers. Emerging markets will become the new battleground The BRICs are having a major impact on their regional trading partners and more distant, resource-rich countries, an increasing number of which are being pulled into their economic orbit. In 2009, emerging-to-emerging (E2E) trade reached US$2.9 trillion. This massive flow of investment among emerging markets is well on its way to creating a second tier of emerging market leaders. As pressure for resources increases, we expect a battle for first-mover advantage among emerging heroes, global players and emerging market governments in regions such as the Middle East and Africa. Global influence grows Inevitably, the BRICs' growing economic strength is leading to greater power to influence world economic policy. In October 2010, for example, emerging economies gained a greater voice under a landmark agreement that gave 6% of voting shares in the IMF to dynamic emerging countries such as China. Under the agreement, China will become the IMF's third-biggest member.

2. Cleantech becomes a competitive advantage The cleantech-enabled transformation to a low-carbon, resource-efficient economy may be the next industrial revolution. As this transformation accelerates, global corporations are increasingly realizing that they must understand the impact of cleantech on their industries and develop strategic plans to adapt to this change. Going big: the rising influence of corporations on cleantech growth, EY's 2010 global survey of corporations with more than US$1b in revenue, showed that cleantech is an organization-wide or SJBIT/MBA Page 103 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 business-unit-level initiative for 89% of respondents; 33% spend 3% or more of total revenues on cleantech and 75% expect cleantech spending to increase over the next five years. national strategic platform for creating jobs, fostering innovation and establishing local industries. According to Bloomberg New Energy Finance, investment in cleantech surged 30% in 2010 over the previous year to US$243b, double the amount recorded in 2006 and nearly five times that of 2004. There is still a large gap between the capital required and the capital available to fuel the transition to a low-carbon economy. Primary energy demand is expected to grow by 36% worldwide between 2019 and 2035, with the bulk of that new energy use (93%) coming from emerging markets. By 2035, China alone will see its energy needs rise by 75%, according to the International Energy Agency (IEA) report, World Energy Outlook 2010. In the coming years, surging demand, energy prices, energy security concerns and scarcity of natural resources will encourage governments and companies to work harder to diversify their energy portfolio mix and to continue investments in clean energy innovation, deployment and adoption. This inevitable move to a low-carbon, resource-efficient economy presents an opportunity to stake out and capture a strategic competitive position — not just for governments, but

also for innovators, investors and corporations, too. The energy mix evolves Renewable energy is still expensive in most places, which will limit its use in the short run. But as wind, solar and other renewable projects scale up, their prices will continue to fall. The IEA predicts that power generation using renewables will triple between 2010 and 2035. Fossil fuels such as oil and coal will lose market share over time, as natural gas and nuclear power contribute to the diversified energy mix. There has been a surge in construction of nuclear power reactors worldwide. Natural gas, a cleaner-burning fossil fuel, is expected to grow more important, serving as a bridge to a renewables-based economy. SJBIT/MBA Page 104 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Clean energy is a national competitive advantage Many governments are aggressively implementing clean energy policies, setting emissions targets and providing incentives for cleantech investing. China, Germany, India and Brazil are gaining leadership positions in solar, wind and biofuels. The US remains a cleantech leader because of its entrepreneurial culture and vibrant venture capital environment. Policy-makers are betting that cleantech investments will yield other benefits such as job creation and innovation- led economic growth. Notably, private investment is flowing to countries with comprehensive, clear and long-term energy policies aimed at incentivizing renewable energy use, promoting efficiency and reducing carbon emissions. Companies make cleantech a strategic priority Sensing commercial opportunity, companies increasingly are building cleantech into their growth strategies. Many are also "greening" their existing products in response to increasing consumer demand. Others are moving into growth areas that fall outside their traditional lines of business, hoping to

achieve first-mover advantage as the landscape evolves. For example, Google and Cisco have both entered the home energy management space. In the past year, corporate activity in the cleantech marketplace has significantly increased through direct investments, partnerships and acquisitions of newly formed cleantech companies. Raw materials are strategic assets, especially in a time of scarcity. To secure them, some governments have turned outward. China, for example, is now deeply invested in Africa. Companies, meanwhile, are reconfiguring supply chains, seeking greater flexibility in an effort to mitigate the impact of raw materials shortages, higher commodity costs and price volatility. Some businesses are protecting their supply chains by acquiring their raw material suppliers. Steelmakers, for example, have recently bought several iron ore and coal mines in different countries to guard against supply chain disruptions. SJBIT/MBA Page 105 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Organizations are more transparent about sustainability As concerns about resource scarcity, including energy and water, become more pressing, companies will face increasing pressure from their stakeholders to demonstrate that their businesses are sustainable. Companies will also have to disclose the social and environmental impact of their business activities. Although most sustainability reporting is currently voluntary, the broad trend is toward greater disclosure. More than 3,000 companies worldwide issue such reports, following such voluntary guidelines as the AA1000 AccountAbility Principles Standard and the Global Reporting Initiative Reporting Framework. These voluntary guidelines may soon become mandatory. 3. Global banking seeks recovery through transformation Three years after the financial crisis began, the global financial system remains in flux. Regulatory clarity is nearing, but many issues remain unresolved. Initiatives of the G20, the Basel III global banking standards and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) in the US have begun to bring some

aspects of the new rules into focus. While regulators have focused mostly on the systemic risk posed by some of the largest and most interconnected institutions, banks are concerned with their ability to compete and the resulting regulatory impact on returns. The final shape of the global regulatory framework is still unclear, but it seems clear that international banking will change in fundamental ways, including: Limits on executive pay Heightened corporate governance Strengthened consumer protection More regulation and transparency of the over-the-counter (OTC) derivatives SJBIT/MBA Page 106 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Restrictions on proprietary trading and investments in hedge funds and private equity (PE) funds in the US Emerging market financial institutions are gaining global stature In the developed world many financial institutions continue to recover from the financial crisis, and, in many cases, emerging market banks are in better shape. Many rose from the crisis with hardly a scratch. While the traditional top two international financial centers — New York and London — remain secure in their status, capitals of finance in Asia are rising in the rankings. In The Global Financial Centres Index's September 2010 ranking, Hong Kong rose to third position, while Singapore was fourth. It is growing increasingly apparent that the banking sectors and institutions of emerging markets — particularly those of China, India and Brazil — will make a strong move toward increasing their presence on the global scene. As 2011 unfolds, emerging market banks are well positioned to continue to benefit from strong credit growth in their local economies. However, while many emerging market banks have the scale to consider expanding into other emerging or developed markets, there remain a number of barriers to entry, including the lack, in many cases, of robust investment banking capabilities.

G20 initiatives will require increased regulatory oversight In the US, the Dodd-Frank Act mandates that OTC derivatives, for example, be regulated by the SEC and the Commodity Futures Trading Commission (CFTC). Similar rules are also expected in the EU and the UK. At the same time, new consumer financial protection agencies have been created and proposals to strengthen consumer protection authorities have been proposed. New rules limiting executive compensation are a major regulatory focus affecting the sector. The goal is to ensure that excessive risk-taking is not rewarded. These measures include an agreement SJBIT/MBA Page 107 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 to lower 2010's aggregate bank bonuses in the UK from the previous year, increase transparency and reduce clawbacks and deferred shares subject to vesting periods. Regulation will drive up the cost of business for many large financial institutions The substance of the new rules creates challenges. For instance, Basel III requires banks to boost capital and liquidity levels, implement a leverage ratio, increase risk coverage for certain assets and activities and raise standards for supervisory review. In the US, the Dodd-Frank Act is more than 2,300 pages long and will require agencies to write 353 new rules and conduct 68 studies. Not surprisingly, large financial institutions cite regulatory uncertainty as the biggest challenge they face. Their uncertainty is compounded by the fragmentation of regulations, as individual countries set out to make their own rules. Governments enhance ties with the private sector The global recession left many developed countries with falling tax revenues and rising expenses. Key emerging market countries did not experience the disruptions caused by the financial crisis, but they face the need to develop infrastructure, educational institutions and social safety nets for their fast-growing middle classes. To meet those needs, governments of both mature and developing countries have three

priorities: To strengthen their finances To deliver their services more efficiently, effectively and economically And to make sure that the private sector grows in an economically sustainable manner and ensures better employment To achieve those goals, many governments are trying to further their national interests through diverse vehicles and activities, including state-owned corporations, sovereign wealth funds (SWFs), industrial planning and regulation. The challenges are serious enough that we see governments taking an extremely active role in the economy. SJBIT/MBA Page 108 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Looking ahead, we believe governments will increasingly take the lead in five key areas: Developed countries rebalance their finances After several years of rising debt-to-GDP ratios, most developed countries are now struggling to put their finances in order. From 2006 through 2009, the overall developed country market debt-to-GDP ratio rose from less than 80% to 95%. In 2011, the debt ratio is expected to break the 100% mark. Deutsche Bank projects that the debt- to-GDP ratio for developed countries will reach 133% of GDP by 2020. Alarmed by these numbers, developed economies at the G20 Summit in Toronto in June 2010 committed themselves to reducing their deficits by 2013, and to stabilizing or reducing government debt-to-GDP ratios by 2016. Emerging markets countries expand their social benefits Emerging markets countries with a surplus need to boost social spending on pensions, health care and infrastructure. In some markets, a stronger safety net is intended to promote economic growth. Most Chinese, for example, essentially insure themselves through extraordinarily high household savings rates. To strengthen its consumer economy, China must first convince consumers that it is safe for them to spend. Emerging market countries also need to improve the effectiveness of their tax administration, and to invest in infrastructure, telecommunications, transportation, education and housing.

Public- private partnerships (PPPs) are likely to become important investment vehicles in these markets. Aging populations and immigration inflows pose new spending challenges Meeting the needs of people who are living longer, healthier lives will have a tremendous financial impact. Standard & Poor's reports that the median age-related public spending for developed economies (including health care, pensions, long-term care and unemployment) is expected to rise from 17% of GDP in 2010 to 27% in 2050, versus 11% to 17% for emerging market countries. SJBIT/MBA Page 109 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Median public spending on age-related health care in developed economies is expected to grow from 6% of GDP in 2010 to 11% in 2050, versus 4% to 11% of GDP for emerging market economies. Increased immigration flows are also expected to put upward pressure on future government spending. Governments direct their economies Against the backdrop of uneven economic recovery around the globe, governments continue to be active in economic life. An enormous amount of wealth remains concentrated under state control in the form of SWFs. Although SWF assets fell in value after the recession, they are set to grow again. The total assets of SWFs are expected to climb from roughly US$3.5 trillion in 2010 to US$8 trillion by 2015, making SWFs powerful sources of capital for years to come. State-owned enterprises (SOEs) will remain important to defending strategic industries and guaranteeing the adequacy of critical infrastructure in some countries. SOEs are becoming larger and more globally competitive: Sixty-two percent of Indian companies on the 2010 Fortune Global 500 list are SOEs. Forty-six Chinese SOEs (excluding Taiwan-based companies) are on the 2010 list, up from 34 in 2009.

Three of China's state-owned energy giants are now in the top 10. Governments balance global cooperation with pursuit of their national interests Greater globalization necessitates a new agenda for international economic cooperation, but at the same time, diverging domestic needs are creating conflict. The G20 agree in principle that global rebalancing is desirable to create long-term economic growth and financial stability. Developed economies have to save more and spend less to get their financial houses in order. Key emerging markets need to reduce their reliance on exports and stimulate domestic demand. Meanwhile, the need for faster economic growth is fueling new rounds of trade protectionism and stimulus plans. SJBIT/MBA Page 110 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Trade and currency issues were high on the agenda at the G20 Summit in Seoul in November 2010. Debate centered on varying perceptions of China's valuation of its currency to drive exports, as well as quantitative easing in the US and its potential to increase capital inflows to emerging countries and fuel asset bubbles. Despite fragmented views, the G20 Seoul declaration managed to reaffirm the notion of working together, with a focus on moving toward more market-determined exchange rate systems, refraining from competitive devaluation of currencies and pursuing a full range of policies conducive to reducing excessive imbalances. Rapid technology innovation creates a smart, mobile world Over the past 25 years, the digital revolution has changed the way we work and play almost beyond recognition. Yet the smart, interconnected world we live in now is still neither as smart, nor as connected, as we would like it to be. Consumers want more powerful devices and applications, while businesses seek more cost- effective technology to cope with increasingly complex challenges.

Satisfying these demands will lead to explosive growth in data and analytics, to new competition in almost every field, and to the disruption and realignment of many industries. Specifically, we expect to see the following changes: Businesses will compete on analytics to differentiate themselves The growing number of embedded sensors collecting information about the world, and the rise of social networks that store the data people share, will generate immense quantities of information. IDC, a market research firm, suggests that the amount of digital information created each year will increase to 35 trillion gigabytes by 2020, requiring 44 times more data storage than in 2009. For example, telematics applications, similar to global positioning systems, will allow organizations to send, receive and store information via telecommunications devices while controlling remote objects. SJBIT/MBA Page 111 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Although commonly associated with the automotive industry, telematics applications are being developed for use in medical informatics, health care and other fields. Despite these advances in technology, simply collecting and managing the massive volumes of data will provide minimal value. The real payback comes when business intelligence is applied to enable companies to make better strategic decisions. Business intelligence, which enables organizations to gather quantifiable data on each area of the organization and analyze it in a way that yields information they can act on — helping them enhance decision making, improve performance, mitigate risk and sometimes even create new business models —; is growing in importance. Smart mobility will change the way people interact Increasingly, smart devices — portable tools that connect to the internet — have become a part of our lives. In the last quarter of 2010, sales of smartphones outpaced those of PCs for the first time,

according to data from IDC. By 2014, more smart devices could be used to access the internet than traditional computers. The move to an increasingly mobile world will create new players and new opportunities for a variety of industries. We expect that new emerging market companies will be significant competitors, growing rapidly in part because a lack of legacy systems will enable them to profit more quickly from new technology as it becomes available. Emerging markets will create plenty of opportunities related to smart technology, and they will not be limited to for-profit enterprises In Kenya, for example, mobile phones are being used to collect data and report on disease- specific issues from more than 175 health centers serving over 1 million people. This technology has reduced the cost of the country‘s health information system by 25% and cut the time needed to report the information from four weeks to one week. SJBIT/MBA Page 112 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Technology blurs boundaries Many industries will be disrupted by the consequences of technology innovation. The "blur" created by digital technologies will intertwine geographies, economies, industries, products and even private and business lives. Technology insiders have long spoken of "true convergence," and this is it. As smart devices become increasingly accepted, companies will move into adjacent markets to exploit new revenue models such as mobile commerce and mobile payment systems. Already, a number of data and tech giants are jockeying for position. As these waves of disruption continue, whole new markets will be created even as long- established businesses are destroyed. In this changing environment, network providers, for example, will be faced with a choice: either evolve into the role of innovation provider, or be content simply to serve as a utility.

Over the long term, the ultimate blurring of boundaries might take the form of Web 3.0 — often called the "semantic web" — a term that refers to functions and activities involving the integration of machines, the web and human beings. Currently the stuff of science fiction, the semantic web is nevertheless an area to watch. Cloud computing takes off — finally Analysts have been talking about cloud computing for years, but cloud-based services are finally starting to take off. By 2016, Gartner, a consultancy, expects al Forbes‘ Global 2000 companies to use public cloud services, transforming much of the current IT hardware, software and database markets into infinitely flexible utilities. When cloud computing becomes widespread, it will transform businesses and business models, potentially reducing both initial and recurring costs for IT buyers, increasing their flexibility and lowering their risks. What‘s not to like about an infinitely scalable, pay-as-you-go business model? Despite concerns related to data security, privacy and business continuity, its value proposition makes the success of cloud computing inevitable. Over time, cloud-based services will grow increasingly sophisticated and evolve into full-scale business processes as a service. SJBIT/MBA Page 113 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 The power of the individual will spur innovation Google, Facebook, Twitter, smartphones, tablets and e-readers — technologies that originated in the consumer space — are now reshaping the way companies communicate and collaborate with employees, partners and customers. Through the new possibilities for "social listening," businesses are able to better understand what their customers and employees need and want. More change can be expected when the generation that has grown up with new technologies and instant information gratification joins the workforce. For example, by 2014, Gartner forecasts that social networks will become the main form

of business communication for 20% of employees worldwide. Government’s role in innovation grows Governments will increasingly become involved in technology, investing in a broad range of applications — from home-grown innovation incubators to local manufacturing sites that create jobs and manage geopolitical risk. In cloud computing, for example, governments are taking the lead, much as the US did in the development of the internet. In China, the Beijing Academy of Science and Technology has built the country‘s largest industrial cloud-computing platform, designed to serve small- and medium-sized enterprises in government-supported industries, including biotech, pharmaceuticals, new energy and knowledge-intensive manufacturing. At the same time, governments haven‘t forgotten their regulatory role. As citizens share more personal data on websites such as Facebook, many governments are considering regulations to protect citizens‘ privacy and corporations‘ data. The EU is developing stricter privacy rules, including an "online right to be forgotten," which would require websites to delete data permanently at an individual‘s request. However, the public pressure to strengthen privacy protection through legislative means is likely to vary by region. Consumers in regions such as North America, for example, seem willing to trade some privacy in return for customized service. SJBIT/MBA Page 114 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 Demographic shifts transform the global workforce Despite a growing global population, the availability of skilled workers is actually shrinking, and no longer just in advanced, aging countries such as Japan and Italy. Now, some emerging

markets, such as China and Russia, are also feeling a demographic pinch. The data suggests that this is only the beginning. A ―demographic divide‖ wil soon arise between countries with younger skilled workers and those that face an aging, shrinking workforce. The war for talent will become increasingly acute in certain sectors, especially areas requiring high skill levels and more education. More specifically, we expect: Labor force demographics will shift profoundly Despite projected growth in the global population from 6.9 billion in 2010 to 7.6 billion in 2020, the working-age population is expected to decline in many countries. Japan already has more people exiting the workforce than there are workers prepared to enter it. In the European labor market, 2010 marked the first time more workers retired than joined the workforce. While this labor gap is a relatively manageable 200,000, it will surge to 8.3 million by 2030. By the end of this decade, other large economies such as Russia, Canada, South Korea and China will also have more people at retirement age than are entering the workforce. Other, younger countries stand to profit from those trends. One-third of India‘s population is now under the age of 15. Other emerging market economies with young labor forces such as Brazil, Mexico and Indonesia may benefit from a demographic dividend, a surge in productivity and growth as those workers join the labor pool. But the dividend pays off only if the country provides its youth with adequate educational and economic opportunities to develop their skills. SJBIT/MBA Page 115 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 There is a growing mismatch between the skills employers need and the talent available An estimated 31% of employers worldwide find it difficult to fill positions because of talent shortages in their markets, reports the 2010 Talent Shortage Survey from Manpower, an international employment agency.

When it comes to attracting employees with critical skills, the task becomes even more challenging. Today, 65% of global companies and more than 80% of companies in fast-growth economies are having problems finding employees with the skills they need, according to Towers Watson, an HR consultancy. Why can‘t companies find the right talent despite the growing ranks of college-educated workers and the high unemployment in some of the best-educated markets? Part of the answer has to do with the rising skill level needed in the evolving global economy. Another element is the failure of educational systems to produce an adequate base of talent to meet these changing needs. Although educational access is growing worldwide, not enough students graduate with the skills desired by global employers. ―Generation U‖ and women to fill the skills gaps Desperate for workers, many companies will become more accepting of diverse employees, particularly older workers and women. The leading US advocacy group for retired people, the AARP, believes that 80% of baby boomers will keep working full- or part-time past their current retirement age. The Pew Research Center predicts that Generation U (unretired) workers will fuel 93% of the growth in the US labor market through 2016. Women, an increasingly well-educated source of talent, have entered the workforce in ever greater numbers in recent decades. However, their talents are still often underutilized. This is particularly true in societies with traditional views of gender roles, including many fast- growing economies. SJBIT/MBA Page 116 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 The talent market is increasingly global and mobile Economic development and greater integration across markets in the past few decades have caused many talented people to explore career opportunities overseas. Cross-border migration has grown 42% in the last decade, from 150 million to 214 million, with

most of the traffic directed toward OECD countries. Higher unemployment in developed markets has discouraged many migrants recently. Between a lack of opportunity and local hostility to migrant workers, more would-be migrants are staying home. New legal restrictions also have created a disincentive. As the economy recovers, however, demand for labor is expected to bounce back — and migration along with it. Some countries have taken initial steps to soften or reverse restrictive policy changes that they implemented at the height of the recession. The dramatic growth of emerging market countries is also beginning to change migration patterns. Although developed markets are still a top choice for economic migrants, we are increasingly seeing reverse migration as well. According to the World Economic Forum, ―The return migration of highly skiled workers to their home countries is a growing trend for emerging countries.‖ Employees gain more bargaining power Over the past 20 or 30 years, the bond between company and employee has weakened, even in corporate cultures where loyalty was once prized. Fast-changing company needs and a desire to cut costs led first to more frequent layoffs, and then to nontraditional relationships where the expectation was not decades of service, but only a few years. In a period of high unemployment, this new social contract is an advantage for the employer. But as the market turns, skilled employees should benefit. They will want a better understanding of their employment options and a greater say in how work is assigned, assessed and rewarded. SJBIT/MBA Page 117 INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418 The employer will no longer define the workplace; rather, employees‘ priorities and preferences will dictate what the future workplace will look like, particularly now that technology makes it easier than ever to design a variety of flexible arrangements. Companies operating in aging societies will have to craft methods to engage or re-engage the experienced base of talent. Companies that fail to respond to this change and do not

succeed in redefining their employee value proposition will fail to attract, retain or develop talent effectively. SJBIT/MBA Page 118