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Semester – IV Terminal Examinations (Class of 2006) MKT607 – International Marketing

Part A Q. A global firm is a firm that:

a. treats the world as a portfolio of markets

b. plans, operates, and coordinates business on a worldwide basis

c. standardizes core elements of its business and localizes others

d. relies on indirect export to get its product(s) to the world market

e. relies on direct export to get its product(s) to the world market

Q. Which of the following statements describes a reason why firms enter international markets?

a. Most companies simply want to be in foreign markets.

b. International trade eliminates foreign competition.

c. Foreign markets provide greater profit opportunities than domestic markets.

d. New product development is unnecessary because the product is always new to some market in the world.

e. It is easy to sell in foreign markets

Q. Before any manufacturer enters foreign markets, it should consider the risk associated with:

a. Underestimating government regulation and, as a result, incurring unanticipated costs

b. Creating a market so large it cannot be adequately serviced

c. Excess domestic capacity if the expansion effort is unsuccessful

d. Becoming dependent on a single foreign market

e. None of the above

Q. A manufacturer of small generators wants to open a manufacturing plant in Nepal but it is concerned about terrorists’ activities in Nepal led by members of the Maoists. The manufacturer:

a. Needs to look on this situation as a potential competitive advantage

b. Knows the situation has no effect on the attractiveness of the nepalese market

c. Needs to understand that this situation is one of the risks associated with global marketing

d. Can expect the government to completely protect it from any terrorists’ activities

e. All of the above

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Q. Market attractiveness is influenced by all of the following EXCEPT:

a. Geography

b. Income and population

c. The strategic position of the company d. The product itself

e. Climate

Q. A paper and pulpwood producer uses an export intermediary who buys the pulpwood from the company and then resells it internationally. The pulpwood producer is using a(n):

a. Domestic-based export agent

b. Domestic-based merchant exporter c. Export-management company

d. Cooperative organization

e. None of the above

Q. The method of entering a foreign market that involves the least amount of commitment and risk is:

a. Direct exporting

b. Indirect exporting c. Franchising

d. Licensing

e. Joint venture

Q. In Japan, Kirin breweries brew Budweiser beer using exactly the same recipe as is used in the U.S. Kirin pays Anheuser-Busch a royalty for the right to use this formula. This is an example of:

a. Contract manufacturing

b. A joint venture

c. Licensing d. Direct investment

e. Direct exporting

Q. In Tokyo, Disneyland is owned and operated by Oriental Land Company and pays Walt Disney Company 10 percent of all admissions and 5 percent of all food and merchandise sales. This is an example of a _____ agreement.

a. Joint venture

b. Cooperative organization

c. Direct investment

d. Licensing e. None of the above

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Q. Starbucks Corp, the U.S.-based specialty coffee chain, and Swiss-based Bon Attpetit Group A.G. share ownership and control of the Starbucks coffeehouses in Switzerland. The two companies have entered into a:

a. Contract manufacturing

b. Joint venture

c. Cooperative organization

d. Licensing agreement

e. None of the above

Q. International marketing through joint venturing:

a. Involves joining local investors with whom the firm shares ownership and control

b. Is a more complex form of franchising

c. Is seldom, if ever, required by foreign governments as a condition of entry

d. Is the ultimate and preferred method of entering foreign markets

e. Is a very risky method of entering foreign markets

Q. Which of the following entry strategies gives the company trying to gain an international marketing presence the most control?

a. Indirect exporting

b. Direct investment

c. Direct exporting

d. Licensing

e. None of the above

Q. UPS built a $400 million Asia-Pacific distribution hub in Taiwan. This is an example of:

a. A joint venture

b. Direct investment

c. Contract service

d. Licensing

e. Direct exporting

Q. The _____ process is the term used to describe the evolution from exporting to direct investment.

a. Glocalisation

b. Internationalisation

c. Multinationalisation

d. Globalisation

e. Forward integration

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Q. Firms like Coca-Cola and Exxon that want to have the most consistent marketing worldwide will likely employ _____ marketing mixes. a. Standardized b. Centralized c. Adaptive d. Domestic e. None of the above

Q. The Gilette Mach 3 razor that you buy at your local store can be found in South Africa and in any

other country where Gilette products are sold. Gilette uses a _____ strategy. a. Product adaptation b. Life-cycle c. Product innovation d. Straight extension e. Dual adaptation

Q. In Brazil, Levi-Strauss developed Femina brand jeans, which feature cuts that provide the

ultratight fit traditionally favored by Brazilian women. Levi-Strauss is using a _____ strategy. a. Product adaptation b. Product innovation c. Straight extension d. Product expansion e. Dual adaptation

Q. To better serve the needs of the Indian market, Kellogs added Mango flavour to its product line.

Kellogs engaged in: a. Straight extension b. Dual adaptation c. Product adaptation d. Product standardisation e. None of the above

Q. Which of the following statements about the promotion element of the international marketing mix

is true? a. It is fairly easy to develop advertising campaigns that will effectively cross borders. b. Sales-promotion techniques are the most universal element of the promotion campaign,

seldom if ever requiring adaptation to the international market. c. All effective promotional campaigns should be adapted at the local level by local

management. d. Adaptation may include the media used as well as the message. e. Only local celebrities should be used

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Q. Since regulations on sales promotion vary from country to country, multinational companies generally: a. Avoid sales promotion altogether b. Create a centralized department at the home office to conduct all sales promotion activities c. Make sales promotion a responsibility of local management d. Assume what works in one country will work in a similar country (e.g., norway and sweden) e. Assumes what works in their home country will work in all countries

Q. If an international company uses a uniform price:

a. It will experience widely varying profits and may overprice the product for some markets

b. It may price itself out of the market in countries where costs are high c. Its strategy would ignore the real differences in actual costs among countries d. It risks suits by governments if it charges too high a price to subsidiaries e. All of the above

Q. The Chinese government alleged certain Japanese manufacturers of microprocessors with

charging 75 percent less in the Chinese market for a microprocessor than in their home market. The Chinese government accused the Japanese coprocessor manufacturer of: a. Operating in the gray market b. Having a low transfer price c. Engaging in a price war d. Dumping e. Duty evasion

Q. Which of the following describes one of the ways companies can diminish the problems

associated with gray markets? a. Sponsor regulatory legislation in their home countries b. Police their distributors c. Sell products with the same characteristics for different countries d. Offer different service warranties for different countries e. None of the above

Q. In many countries where there are subscribers to Reader’s Digest magazine, the magazine has

to be delivered by registered mail or by private delivery service because the postal systems are not dependable. Reader’s Digest is having a problem with which element of the marketing mix? a. Product b. Promotion c. Service d. Distribution e. Price

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Q. Distribution channels within nations:

a. Are uniformly complex and inefficient

b. Vary considerably

c. Are unaffected by the nation’s infrastructure

d. Are relatively unaffected by the cultural and economic differences within the countries

e. Are uniformly simple and efficient

Q. A _____ strategy treats the world as a portfolio of national opportunities.

a. Multinational

b. Global

c. Glocal

d. Polycentric

e. Ethnocentric

Q. A _____ strategy standardizes certain core elements and localizes other elements of the company’s marketing strategy.

a. Regiocentric

b. Multinational

c. Global

d. Glocal

e. Ethnocentric

Q. A _____ strategy is warranted when the forces favoring national responsiveness are strong and the forces favoring global integration are weak.

a. Geocentric

b. International

c. Multinational

d. Global

e. Ethnocentric

Q. Which of the following countries is not a part of NAFTA?

a. Canada

b. USA

c. Cuba

d. Mexico

e. None of the above

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Q. Low income countries are characterised by:

a. Low Birth Rates

b. Political Stability

c. Low literacy Rates

d. Less reliance on Foreign Aid

e. None of the above

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Part B Problems, Conceptual Understanding, Analytical Ability and Situational Analysis

1. Discuss the similarities and differences of a Free Trade Area, a Customs Union, a Common Market and an Economic Union. Give an example of each.

(10 marks)

Suggested Answer:

All are some form of Economic integration and cooperation .

FTA : A FTA is an agreement between two or more countries to reduce or eliminate customs duties and non-tariff trade barriers among partner countries while members maintain individual tariff schedules for external countries. Essentially, an FTA provides its members with a mass market without barriers to impede the flow of goods and services. NAFTA is an example of a FTA.

Customs Union : A Customs Union represents the next stage in economic cooperation. It enjoys the FTA’s reduced or eliminated internal tariffs and adds a common external tariff on products imported from countries outside the union. The Customs Union is a logical stage of cooperation in the transition from an FTA to a common market. The agreement between France and Monaco is a Customs Union.

Common Market : A common market eliminates all tariffs and other restrictions on internal trade, adopts a set of common external tariffs, and removes all restrictions on the free flow of capital and labour among member countries. A common market also seeks to coordinate economic and social policy within the market to allow free flow of capital and labour from country to country. MERCOSUR is an example of a Common Market.

Economic Union : In a fully evolved Economic Union, there would be unified central bank, single currency, common policies on agriculture, social services and welfare, regional development, taxation etc. A fully developed economic union also requires extensive political unity. The EU is the closest to an Economic Union.

2. Discuss the strategic alternatives in Global Product Planning. Illustrate your answer with examples.

(10 marks)

Suggested Answer:

When a company has a product / market base, it can select from five strategic alternatives to extend this base into other geographic markets or it can create a new product designed for global markets.

Strategy 1 : Product / Communication Extension ( Dual Extension)

Many companies employ product / communication extension as a strategy for pursuing opportunities outside the home market. This is perhaps the easiest of the product planning strategies and companies using this strategy sell exactly the same product with the same advertising and promotional appeals as used in the home country. Companies follow this strategy because they can either assume all markets are alike or it consciously decides to take advantage of similarities in world markets. There is a scope to save costs in this approach through economies of scale . This approach can also result in marketing failures.

Applications software could be a product which can follow this strategy.

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Strategy 2 : Product Extension / Communication adaptation

This strategy may be ideal when a product fills a different need, appeals to a different segment or serves a different function under conditions of use that are the same or similar to those in the domestic market. As the product in this strategy is unchanged , this strategy also has a low cost of implementation. The cost savings come from economies of scale and inventory costs associated with additions to product lines and new product development costs. The costs involved are in revising marketing communications and in identifying different product functions.

Bicycles satisfy recreational needs in some developed countries whereas in some less developed countries , it can be a means of transport.

Strategy 3 : Product Adaptation / Communication Extension

A company can also extend the basic home-market communications strategy while adapting the product to local use or preference conditions.

Soaps and detergent manufacturers have adjusted their product formulations to adjust to the local water and washing equipment conditions Household appliances , consumer durables etc have also been adapted to suit different local conditions but the communication may have remained the same.

Strategy 4 : Product / Communication Adaptation ( Dual Adaptation)

When companies compare home markets with a new foreign market, they may find that not only the environmental conditions or consumer preferences differ but also the function the product serves or consumer’s receptivity to advertising appeals may differ.

Companies can allow product and advertising decisions left to local country mangers in different countries. Some companies may do this deliberately to bypass the “country of origin” effect .

Hallmark , an USA based greetings card manufacturer , has adjusted both its product and the communication while selling their cards in Europe. Pepsi and Coke have introduced small 200 ml bottles in India and have also changed their advertisement, sales promotion etc to appeal to the Indian masses.

Strategy 5 : Product Invention

If a new market has limited purchasing power, a company has the option to develop an entirely new product designed to satisfy the need or want at a price which is within the reach of the potential customer.

3. Why do countries set up trade barriers?

What are the possible forms of Non-Tariff barriers that a country can set up?

(10 marks)

Suggested Answer:

Countries set up trade barriers to

a. Protect local / infant industries

b. Protect jobs and thereby reducing unemployment

c. To ensure that prices of local products are competitive in relation to imported products

d. Nation should be “self-sufficient”

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Possible forms of non-tariff barriers :

Specific limitations on trade by means of

Quotas

Import licensing requirements

Local-content requirements

Minimum import price limits

Embargoes

Customs and Administrative Entry procedures

Valuation Systems

Antidumping practices

Tariff Classifications

Documentation Requirements

Standards

Standards disparities

Intergovernmental acceptance of testing methods and standards

Packaging, Labelling and Marking requirements

Governmental Participation in Trade

Government procurement policies

Export subsidies

Domestic assistance programs

Charges on Imports

Prior import deposit requirements

Administrative fees

Special supplementary duties

4. Exporting and International Marketing have more differences than similarities. Do you agree? Discuss.

(10 marks)

Suggested Answer:

Exporting and International marketing are quite different from one another. The major differences between Exporting and International marketing are as follows

Exporting International Marketing

Marketing Strategy Selling Production Capacity Meeting Customer needs

Financial Objective To reduce overhead costs To add value

Segmentation Usually by country and customer

characteristics

By identifying common

International customer benefits

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Pricing Cost based Market or customer based

Management Focus Efficiency in operations Meeting market requirements

Distribution Using existing agents or distributors Managing the supply chain

Market Information Relying on agent or distributor feedback

Ananlysing market or customer needs

Customer Relationship

Working through intermediary Building multiple level relationships

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Part C Case Analysis / Applied Theory

5. Read the case and answer the following questions:

Ranbaxy’s Globalisation Journey

February 2004 was a historic moment for Ranbaxy. The company attained its Vision 2004: to achieve US 1 billion in sales and became the first Indian pharma company to enter the coveted billion dollar club.

Ranbaxy took a definitive step towards internationalization in the early 1990s. This coincided with the first wave of economic liberalization in India. With 99 percent of the pharmaceutical market outside India, and anticipating a change in the patent regime , Ranbaxy’s visionary (former) CMD , the late Parvinder Singh saw a huge opportunity to expand into the global arena. He felt the need to shift the focus from being a domestic export-based company to a research-based international pharmaceutical company. There was the need to test Ranbaxy’s mettle in the developed world and transform it into a transnational corporation , straddling the globe.

The company organized its international operations into four regions – India and the Middle East ( HQ in New Delhi) ; Europe, CIS and Africa ( HQ in London) ; Asia-Pacific ( HQ in Hong Kong) ; and North and South America ( HQ in New York) . Innovation and research became the key focus to take the company forward. In 1994, a new state-of-the –art research centre at Gurgaon became fully operational. Such significant decisions mandated in creating the necessary infrastructure across several countries. However, without letting off its eye from the Indian market, Ranbaxy began to tread in the global pharmaceutical space.

USA is the world’s largest pharmaceutical market, has been on the forefront in driving Ranbaxy’s business and growth. Ranbaxy’s first generic product was launched in this market in 1998 and there has been no looking back since. Year 2001 saw the company cross sales of US $ 100 million. Today it has over 80 products in the US contributing to more than US $ 400 million in sales. The company has also scaled its sales force to cover the large distribution chain and doctor base.

While strengthening its presence in the US markets, Ranbaxy increased its focus towards building its strengths in Europe. In April 2000, it acquired Basics GmbH, the generics arm of bayer in Germany, paving the way for the company’s entry into the German generics market. In early 2004, Ranbaxy acquired the generics business of RPG (Aventis) in France, which is presently the sixth largest generics player in the country. During the past few years the company has also established joint ventures and subsidiaries in select markets to strengthen and expand its business. Today, Ranbaxy sells its products in almost all EU markets. The key growth engines in Europe will be provided by the UK, France, Germany and Poland. Ranbaxy will continue to develop both generics and branded business in the European markets.

Just how global is Ranbaxy? Out of total revenues of over Rs.5000 crores, over 75% comes from overseas earnings . Out of a total employee strength of 10000, nearly 2500 are outside India. The company operates in nearly 50 countries and has manufacturing facilities in about 10 !

Today Ranbaxy is among the 10 largest generics pharmaceutical companies and intends to be among the top five global generics players by 2012. Realising the importance of an efficient marketing and distribution system across geographies, Ranbaxy has built a strong infrastructure in this area as well. In the USA, its products are available in major pharmacy chains and mass merchandisers such as Walgreen’s and Wal-Mart.

In 2002, the company was nearing its target of US $ 1 billion in sales, the think-tank got together to re-align and re-position itself. A cross-functional team was formed and a renowned international consulting firm was engaged to chart a vision for the next decade – Vision 2012. The company’s ambition is to achieve significant business in proprietary prescription products with a strong presence in developed markets. With an aspiration to become a US $ 5 billion

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company by 2012, the markets of the USA, Europe and BRIC countries will be strategic to the company’s plans in achieving this target. Generics business will be a source of cash and will fund the research and development necessary for making proprietary drugs. The growing need to develop competencies in in intellectual property , legal and regulatory affairs , brand marketing and partnering with pharmaceutical companies , both for research and business development will be vital to for achieving their vision and aspirations. Ten years from now, Ranbaxy would be recognized as a research-based speciality pharmaceutical company in international markets. Ranbaxy has three competitive edges – aggressive in the home market which it will carry to other global markets, world class manufacturing facilities and relatively low cost of innovation.

People will always remain fundamental to Ranbaxy’s success. With the company now spread far and wide, building the human bridge, teamwork and productivity will be core to its success. Significant amount of time and resource is being invested in employee development and training initiatives.

The best is yet to come Questions:

a. Describe the foreign market entry strategies adopted by Ranbaxy in its global journey. b. How is Ranbaxy preparing itself to meet its aspiration of becoming a top pharmaceutical

company in the world? c. What are the possible challenges that any Indian pharmaceutical company is likely to face in

its globalization initiatives? (30 marks)

Suggested Answer:

Direct exporting

Setting up offices abroad

Establishing manufacturing facilities abroad

Acquisitions

Joint ventures

Subsidiaries

Ranbaxy’s advantages as a strong domestic player

World class R&D facilities

World class manufacturing

Innovation

New Drug development

Emphasis on proprietary products

Too much emphasis on bulk drugs where competition is intense

Legal issues / disputes

Entry barriers

Threat from large MNC pharma companies

Poor country image

Not enough emphasis on R&D

a

b

c.