INTERNATIONAL MAREKETING
INTERNATIONAL MARKETING
International marketing (IM) refers to marketing carried out by
companies overseas or across national borderlines. This strategy
uses an extension of the techniques used in the home country of a
firm. It refers to the firm-level marketing practices across the border
including market identification and targeting, entry mode selection,
marketing mix, and strategic decisions to compete in international
markets.
According to the American Marketing Association
(AMA) "International Marketing is the multinational process of
planning and executing the conception, pricing, promotion and
distribution of ideas, goods, and services to create exchanges that
satisfy individual and organizational objectives
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International Marketing is Marketing across the national frontiers. It
refers to the strategy, process and implementation of the marketing
activities in the international arena.
International marketing may be defined as an activity related to the
sale of goods and services of one country in other, subject to the
rules and regulation framed by the countries concerned. In simple
words it refers to the marketing activities and operations among the
countries of the world following different political and economic
systems. International Marketing is marketing abroad beyond the
political boundaries of the country. International Marketing brings
countries closer due to economic needs and facilitates
understanding and co-operation among them; it is essentially a
constructive economic and commercial activity which is useful and
beneficial to all participating countries.
International marketing act as an instrument of global growth and
development. However, there is a crossover between what is
commonly expressed as international marketing and global
marketing, which is a similar term. The intersection is the result of
the process of internationalization. Many American and European
authors see international marketing as a simple extension of
exporting, whereby the marketing mix 4P's is simply adapted in
some way to take into account differences in consumers and
segments. It then follows that global marketing takes a more
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standardized approach to world markets and focuses upon
sameness, in other words the similarities in consumers and
segments.
Scope of International Marketing
Though international marketing is in essence export marketing, it
has a broader connotation in marketing literature.
Opening a branch / subsidiary abroad for processing,
packaging, assembly or even complete manufacturing
through direct investment.
Negotiating licensing / franchising arrangements whereby
foreign enterprises are granted the right to use the exporting
company know how, viz., patents processes or trade marks,
with or without financial investment.
Establishing joint ventures in foreign countries for
manufacturing and/or marketing.
Offering consultancy services and undertaking turnkey
projects abroad.
Important for export production.
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Characteristics of International Marketing
Large scale operations
Dominance of Multi
Nationals
International restriction and trading
blocs
Need of marketing research
Advance technology
Need for long term planning
Develop cultural
relation and maintain
world peace
Large scale operations
Characteristics of
international marketing
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International Marketing transaction is always conducted in
large and bulky quantity. It is not conducted on the retail basis
but on the wholesale basis.
Dominance of multinationals
Multinational cooperation dominates the International
Marketing scene. Such enterprise has worldwide contacts.
They conduct Business operation more efficiently and
economically. They are in better position to adopt global
approach, which is necessary in International Marketing.
Multinational corporations usually market their product in large
number of countries and thereby dominate developing
countries.
International restriction and trading blocs
International Marketing is not free like internal marketing;
there are various restrictions and barriers because of the
protective policies of different countries. Foreign exchange
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regulation also imposes various regulations on export and
import.
Need for marketing research
International Marketing requires marketing research in the
form of marketing surveys, product surveys, and product
testing as it is highly competitive.
Advance technology
International Marketing is extremely dynamic and competitive;
in such a type of marketing an enterprise must be able to sell
its product that carries the best quality articles at competitive
prices. Countries like USA. Japan and Germany have a
dominating position in international marketing because of the
use of advance technology in production and marketing of
goods.
Need for long term planning
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International Marketing requires long term planning. The
marketing situations in different countries because of
social .economical and political factors. This stresses the
need for long term planning in International marketing.
Develop cultural relations and maintain world peace
International Marketing brings different counties closer and
also develops cultural relations with them. Closer cultural
relations improve the quality of life f people in different
countries. The participating countries have to maintain friendly
relations among themselves
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Globalization of Markets and Competition through
International Marketing
Trade is increasingly global in scope today. There are
several reasons for this. One significant reason is
technological—because of improved transportation
and communication opportunities today, trade is now
more practical. Thus, consumers and businesses now
have access to the very best products from many
different countries. Increasingly rapid technology
lifecycles also increases the competition among
countries as to who can produce the newest in
technology. In part to accommodate these realities,
countries in the last several decades have taken
increasing steps to promote global trade through
agreements such as the General Treaty on Trade and
Tariffs, and trade organizations such as the World
Trade Organization (WTO), North American Free Trade
Agreement (NAFTA), and the European Union (EU).
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Stages in the International Involvement of a
Firm
We discussed several stages through which a firm
may go as it becomes increasingly involved across
borders. A purely domestic firm focuses only on its
home market, has no current ambitions of expanding
abroad, and does not perceive any significant
competitive threat from abroad. Such a firm may
eventually get some orders from abroad, which are
seen either as an irritation (for small orders, there
may be a great deal of effort and cost involved in
obtaining relatively modest revenue) or as "icing on
the cake." As the firm begins to export more, it enters
the export stage, where little effort is made to market
the product abroad, although an increasing number of
foreign orders are filled. In the international stage, as
certain country markets begin to appear especially
attractive with more foreign orders originating there,
the firm may go into countries on an ad hoc basis—
that is, each country may be entered sequentially, but
with relatively little learning and marketing efforts
being shared across countries. In the multi-national
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stage, some efficiencies are pursued by standardizing
across a region (e.g., Central America, West Africa, or
Northern Europe). Finally, in the global stage, the
focus centers on the entire World market, with
decisions made optimize the product’s position across
markets—the home country is no longer the center of
the product. An example of a truly global company is
Coca Cola.
Note that these stages represent points on a
continuum from a purely domestic orientation to a
truly global one; companies may fall in between these
discrete stages, and different parts of the firm may
have characteristics of various stages—for example,
the pickup truck division of an auto-manufacturer may
be largely domestically focused, while the passenger
car division is globally focused. Although a global
focus is generally appropriate for most large firms,
note that it may not be ideal for all companies to
pursue the global stage. For example, manufacturers
of ice cubes may do well as domestic, or even locally
centered, firms.
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Trade balances and exchange rates
When exchange rates are allowed to fluctuate, the
currency of a country that tends to run a trade deficit
will tend to decline over time, since there will be less
demand for that currency. This reduced exchange
rate will then tend to make exports more attractive in
other countries and imports less attractive at home.
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Political and Legal Influences
The political situation
The political relations between a firm’s country of
headquarters (and other significant operations) and
another one may, through no fault of the firm’s,
become a major issue. For example, oil companies
which invested in Iraq or Libya became victims of
these countries’ misconduct that led to bans on
trade. Similarly, American firms may be disliked in
parts of Latin America or Iran where the U.S. either
had a colonial history or supported unpopular
leaders such as the former shah.
Certain issues in the political environment are
particularly significant. Some countries, such as
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Russia, have relatively unstable governments,
whose policies may change dramatically if new
leaders come to power by democratic or other
means. Some countries have little tradition of
democracy, and thus it may be difficult to
implement. For example, even though Russia is
supposed to become a democratic country, the
history of dictatorships by the communists and the
czars has left country of corruption and strong
influence of criminal elements.
Laws across borders
When laws of two countries differ, it may be
possible in a contract to specify in advance which
laws will apply, although this agreement may not be
consistently enforceable. Alternatively, jurisdiction
may be settled by treaties, and some governments,
such as that of the U.S., often apply their laws to
actions, such as anti-competitive behavior,
perpetrated outside their borders (extra-
territorial application). By the doctrine known as
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compulsion, a firm that violates U.S. law abroad
may be able to claim as a defense that it was forced
to do so by the local government; such violations
must, however, be compelled—that they are merely
legal or accepted in the host country is not
sufficient.
The reality of legal systems
Some legal systems, such as that of the U.S., are
relatively “transparent”—that is, the law tends to
be what its plain meaning would suggest. In some
countries, however, there are laws on the books
which are not enforced (e.g., although Japan has
antitrust laws similar to those of the U.S., collusion
is openly tolerated). Further, the amount of
discretion left to government officials tends to
vary. In Japan, through the doctrine of
administrative guidance, great latitude is left to
government officials, who effectively make up the
laws.
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One serious problem in some countries is a limited
access to the legal systems as a means to redress
grievances against other parties. While the U.S.
may rely excessively on lawsuits, the inability to
effectively hold contractual partners to their
agreement tends to inhibit business deals. In many
jurisdictions, pre-trial discovery is limited, making it
difficult to make a case against a firm whose
internal documents would reveal guilt. This is one
reason why personal relationships in some cultures
are considered more significant than in the U.S.—
since enforcing contracts may be difficult, you must
be sure in advance that you can trust the other
party.
Legal systems of the World
There are four main approaches to law across the
World, with some differences within each:
Common law, the system in effect in the U.S., is
based on a legal tradition of precedent. Each case
that raises new issues is considered on its own merits,
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and then becomes a precedent for future decisions on
that same issue. Although the legislature can override
judicial decisions by changing the law or passing
specific standards through legislation, reasonable
court decisions tend to stand by default.
Code law, which is common in Europe, gives
considerably shorter leeway to judges, who are
charged with “matching” specific laws to situations—
they cannot come up with innovative solutions when
new issues such as patentability of biotechnology
come up. There are also certain differences in
standards. For example, in the U.S. a supplier whose
factory is hit with a strike is expected to deliver on
provisions of a contract, while in code law this
responsibility may be nullified by such an “act of
God”.
Islamic law is based on the teachings of the Koran,
which puts forward mandates such as a prohibition of
usury, or excessive interest rates. This has led some
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Islamic countries to ban interest entirely; in others, it
may be tolerated within reason. Islamic law is
ultimately based on the need to please God, so
“getting around” the law is generally not acceptable.
Attorneys may be consulted about what might please
God rather than what is an explicit requirements of
the government.
Socialist law is based on the premise that “the
government is always right” and typically has not
developed a sophisticated framework of contracts
(you do what the governments tells you to do) or
intellectual property protection (royalties are
unwarranted since the government ultimately owns
everything). Former communist countries such as
those of Eastern Europe and Russia are trying to
advance their legal systems to accommodate issues in
a free market.
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Culture
Culture is part of the external influences that impact the
consumer. That is, culture represents influences that are
imposed on the consumer by other individuals.
The definition of culture offered one text is “That complex
whole which includes knowledge, belief, art, morals,
custom, and any other capabilities and habits acquired by
man person as a member of society.” From this definition,
we make the following observations:
Culture, as a “complex whole,” is a system of
interdependent components.
Knowledge and beliefs are important parts. In the
U.S., we know and believe that a person who is skilled
and works hard will get ahead. In other countries, it
may be believed that differences in outcome result
more from luck. “Chunking,” the name for China in
Chinese, literally means “The Middle Kingdom.” The
belief among ancient Chinese that they were in the
center of the universe greatly influenced their
thinking.
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Other issues are relevant. Art, for example, may be
reflected in the rather arbitrary practice of wearing
ties in some countries and wearing turbans in others.
Morality may be exhibited in the view in the United
States that one should not be naked in public. In
Japan, on the other hand, groups of men and women
may take steam baths together without perceived as
improper. On the other extreme, women in some
Arab countries are not even allowed to reveal their
faces. Notice, by the way, that what at least some
countries view as moral may in fact be highly immoral
by the standards of another country.
Dealing with culture
Culture is a problematic issue for many marketers
since it is inherently nebulous and often difficult to
understand. One may violate the cultural norms of
another country without being informed of this, and
people from different cultures may feel
uncomfortable in each other’s presence without
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knowing exactly why (for example, two speakers
may unconsciously continue to attempt to adjust to
reach an incompatible preferred interpersonal
distance).
Warning about stereotyping
When observing a culture, one must be careful not
to over-generalize about traits that one sees.
Research in social psychology has suggested a
strong tendency for people to perceive an
“outgroup” as more homogenous than an
“ingroup,” even when they knew what members
had been assigned to each group purely by chance.
When there is often a “grain of truth” to some of
the perceived differences, the temptation to over-
generalize is often strong. Note that there are
often significant individual differences
within cultures.
High vs. low context cultures:
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In some cultures, “what you see is what you get”—
the speaker is expected to make his or her points
clear and limit ambiguity. This is the case in the
U.S.—if you have something on your mind, you are
expected to say it directly, subject to some
reasonable standards of diplomacy. In Japan, in
contrast, facial expressions and what is not said
may be an important clue to understanding a
speaker’s meaning. Thus, it may be very difficult
for Japanese speakers to understand another’s
written communication. The nature of languages
may exacerbate this phenomenon—while the
German language is very precise, Chinese lacks
many grammatical features, and the meaning of
words may be somewhat less precise. English ranks
somewhere in the middle of this continuum.
Language issues
Language is an important element of culture. It should be
realized that regional differences may be subtle. For
example, one word may mean one thing in one Latin
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American country, but something off-color in another. It
should also be kept in mind that much information is
carried in non-verbal communication. In some cultures,
we nod to signify “yes” and shake our heads to signify
“no;” in other cultures, the practice is reversed. Within the
context of language:
There are often large variations in regional dialects of
a given language. The differences between U.S.,
Australian, and British English are actually modest
compared to differences between dialects of Spanish
and German.
Idioms involve “figures of speech” that may not be
used, literally translated, in other languages. For
example, baseball is a predominantly North and South
American sport, so the notion of “in the ball park”
makes sense here, but the term does not carry the
same meaning in cultures where the sport is less
popular.
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Neologisms involve terms that have come into
language relatively recently as technology or society
involved. With the proliferation of computer
technology, for example, the idea of an “add-on”
became widely known. It may take longer for such
terms to “diffuse” into other regions of the world. In
parts of the World where English is heavily studied in
schools, the emphasis is often on grammar and
traditional language rather than on current
terminology, so neologisms have a wide potential not
to be understood.
Slang exists within most languages. Again, regional
variations are common and not all people in a region
where slang is used will necessarily understand this.
There are often significant generation gaps in the use
of slang.
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Domestic marketing vs International marketing
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Difference Between Domestic marketing and International
marketing
Domestic marketing and International marketing are same when it
comes to the fundamental principle of marketing. Marketing is an
integral part of any business that refers to plans and policies
adopted by any individual or organization to reach out to its
potential customers. A web definition defines marketing as a
process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods and services to create
exchanges that satisfy individual and organizational goals. With the
world shrinking at a fast pace, the boundaries between nations are
melting and companies are now progressing from catering to local
markets to reach out to customers in different parts of the world.
Marketing is a ploy that is used to attract, satisfy and retain
customers. Whether done at a local level or at the global level, the
fundamental concepts of marketing remain the same.
Domestic Marketing
The marketing strategies that are employed to attract and influence
customers within the political boundaries of a country are known as
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Domestic marketing. When a company caters only to local
markets, even though it may be competing against foreign
companies operating within the country, it is said to be involved in
domestic marketing. The focus of companies is on the local
customer and market only and no thought is given to overseas
markets. All the product and services are produced keeping in
mind local customers only.
International Marketing
When there are no boundaries for a company and it targets
customers overseas or in another country, it is said to be engaged
in international marketing. If we go by the definition of marketing
given above, the process becomes multinational in this case. As
such, and in a simplified way, it is nothing but application of
marketing principles across countries. Here it is interesting to note
that the techniques used in international marketing are primarily
those of the home country or the country which has the
headquarters of the company. In America and Europe, many
experts believe international marketing to be similar to exporting.
According to another definition, international marketing refers to
business activities that direct the flow of goods and services of a
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company to consumers in more than one country for profit
purposes only.
Difference between domestic marketing and
international marketing
As explained earlier, both domestic as well as international
marketing refer to the same marketing principles. However, there
are glaring dissimilarities between the two:
Scope – The scope of domestic marketing is limited and will
eventually dry up. On the other end, international marketing has
endless opportunities and scope.
Benefits – As is obvious, the benefits in domestic marketing are
less than in international marketing. Furthermore, there is an added
incentive of foreign currency that is important from the point of view
of the home country as well.
Sharing of Technology – Domestic marketing is limited in the use
of technology whereas international marketing allows use and
sharing of latest technologies.
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Political relations – Domestic marketing has nothing to do with
political relations whereas international marketing leads to
improvement in political relations between countries and also
increased level of cooperation as a result.
Barriers – In domestic marketing there are no barriers but in
international marketing there are many barriers such as cross
cultural differences, language, currency, traditions and customs.
Multinational, global, and world marketing is all the same thing. Multinational marketing treats all countries as the world market without designating a particular country as domestic or foreign. As such, a company engaging in multinational marketing is a corporate citizen of the world, whereas international marketing implies the presence of a home base. However, the subtle difference between international marketing and multinational marketing is probably insignificant in terms of strategic implications.
Foreign Trade Policy of India
Foreign Trade Policy of India
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To become a major player in world trade, a comprehensive
approach needs to be taken through the Foreign Trade Policy of
India . Increment of exports is of utmost importance, India will have
to facilitate imports which, are required for the growth Indian
economy. Rationality and consistency among trade and other
economic policies is important for maximizing the contribution of
such policies to development. Thus, while incorporating the
new Foreign Trade Policy of India, the past policies should also
be integrated to allow developmental scope of India’s foreign trade.
This is the main mantra of the Foreign Trade Policy of India.
Objectives of the Foreign Trade Policy of India
Trade propels economic growth and national development.
The primary purpose is not the mere earning of foreign
exchange, but the stimulation of greater economic
activity. The Foreign Trade Policy of India is based on
two major objectives, they are :
To double the percentage share of global merchandise
trade within the next five years.
To act as an effective instrument of economic
growth by giving a thrust to employment generation.
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Strategy of Foreign Trade Policy of India:
Removing government controls and creating an
atmosphere of trust and transparency to promote
entrepreneurship, industrialization and trades.
Simplification of commercial and legal procedures and
bringing down transaction costs.
Simplification of levies and duties on inputs used in
export products.
Facilitating development of India as a global hub for
manufacturing, trading and services.
Generating additional employment opportunities,
particularly in semi-urban and rural areas, and developing
a series of ‘Initiatives’ for each of these sectors.
Facilitating technological and infrastructural upgradation
of all the sectors of the Indian economy, especially through
imports and thereby increasing value addition and
productivity, while attaining global standards of quality.
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Neutralizing inverted duty structures and ensuring that
India's domestic sectors are not disadvantaged in the Free
Trade Agreements / Regional Trade Agreements /
Preferential Trade Agreements that India enters into in
order to enhance exports.
Upgradation of infrastructural network, both physical and
virtual, related to the entire Foreign Trade chain, to global
standards.
Revitalizing the Board of Trade by redefining its role,
giving it due recognition and inducting foreign trade
experts while drafting Trade Policy.
Involving Indian Embassies as an important member of
export strategy and linking all commercial houses at
international locations through an electronic platform for
real time trade intelligence, inquiry and information
dissemination.
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SEGMENTATION, TARGETING, AND
POSITIONING
The importance of STP
Segmentation is the cornerstone of marketing—almost all
marketing efforts in some way relate to decisions on who to serve
or how to implement positioning through the different parts of the
marketing mix. For example, one’s distribution strategy should
consider where one’s target market is most likely to buy the
product, and a promotional strategy should consider the target’s
media habits and which kinds of messages will be most
persuasive. Although it is often tempting, when observing large
markets, to try to be "all things to all people," this is a dangerous
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strategy because the firm may lose its distinctive appeal to its
chosen segments.
In terms of the "big picture," members of a segment should
generally be as similar as possible to each other on a relevant
dimension (e.g., preference for quality vs. low price) and as
different as possible from members of other segments. That is
members should respond in similar ways to various treatments
(such as discounts or high service) so that common campaigns can
be aimed at segment members, but in order to justify a different
treatment of other segments, their members should have their own
unique behavior.
ENTRY TO OVERSEAS MARKET
A mode of entry into an international market is the channel
which your organization employs to gain entry to a new
international market. This lesson considers a number of key
alternatives, but recognizes that alternatives are many and
diverse. Here you will be consider modes of entry into
international markets such as the Internet, Exporting,
Licensing, International Agents, International Distributors,
Strategic Alliances, Joint Ventures, Overseas Manufacture and
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International Sales Subsidiaries. Finally we consider the
Stages of Internationalization.
It is worth noting that not all authorities on international
marketing agree as to which mode of entry sits where. For
example, some see franchising as a stand alone mode, whilst
others see franchising as part of licensing. In reality, the most
important point is that you consider all useful modes of entry
into international markets - over and above which pigeon-hole
it fits into. If in doubt, always clarify your tutor's preferred
view.
The Internet
The Internet is a new channel for some organizations and the sole
channel for a large number of innovative new organizations. The
eMarketing space consists of new Internet companies that have
emerged as the Internet has developed, as well as those pre-
existing companies that now employ eMarketing approaches as
part of their overall marketing plan. For some companies the
Internet is an additional channel that enhances or replaces their
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traditional channel(s). For others the Internet has provided the
opportunity for a new online company.
Exporting
There are direct and indirect approaches to exporting to other
nations. Direct exporting is straightforward. Essentially the
organization makes a commitment to market overseas on its own
behalf. This gives it greater control over its brand and operations
overseas, over an above indirect exporting. On the other hand, if
you were to employ a home country agency (i.e. an exporting
company from your country - which handles exporting on your
behalf) to get your product into an overseas market then you would
be exporting indirectly. Examples of indirect exporting include:
Piggybacking whereby your new product uses the existing
distribution and logistics of another business.
Export Management Houses (EMHs) that act as a bolt on export
department for your company. They offer a whole range of
bespoke or a la carte services to exporting organizations.
Consortia are groups of small or medium-sized organizations
that group together to market related, or sometimes unrelated
products in international markets.
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Trading companies were started when some nations decided
that they wished to have overseas colonies. They date back to
an imperialist past that some nations might prefer to forget e.g.
the British, French, Spanish and Portuguese colonies. Today
they exist as mainstream businesses that use traditional
business relationships as part of their competitive advantage.
Licensing
Licensing includes franchising, Turnkey contracts and contract
manufacturing.
Licensing is where your own organization charges a fee
and/or royalty for the use of its technology, brand and/or
expertise.
Franchising involves the organization (franchiser) providing
branding, concepts, expertise, and infact most facets that are
needed to operate in an overseas market, to the franchisee.
Management tends to be controlled by the franchiser.
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Examples includeDominos Pizza, Coffee Republic and
McDonald's Restaurants.
Turnkey contracts are major strategies to build large plants.
They often include a the training and development of key
employees where skills are sparse - for example, Toyota's car
plant in Adapazari, Turkey. You would not own the plant once
it is handed over.
International Agents and International Distributors
Agents are often an early step into international marketing. Put
simply, agents are individuals or organizations that are contracted
to your business, and market on your behalf in a particular country.
They rarely take ownership of products, and more commonly take
a commission on goods sold. Agents usually represent more than
one organization. Agents are a low-cost, but low-control option. If
you intend to globalize, make sure that your contract allows you to
regain direct control of product. Of course you need to set targets
since you never know the level of commitment of your agent.
Agents might also represent your competitors - so beware conflicts
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of interest. They tend to be expensive to recruit, retain and
train. Distributors are similar to agents, with the main difference
that distributors take ownership of the goods. Therefore they have
an incentive to market products and to make a profit from them.
Otherwise pros and cons are similar to those of international
agents.
Strategic Alliances (SA)
Strategic alliances is a term that describes a whole series of
different relationships between companies that market
internationally. Sometimes the relationships are between
competitors. There are many examples including:
Shared manufacturing e.g. Toyota Ayago is also marketed as a
Citroen and a Peugeot.
Research and Development (R&D) arrangements.
Distribution alliances e.g. iPhone was initially marketed by O2 in
the United Kingdom.
Marketing agreements.
Essentially, Strategic Alliances are non-equity based agreements
i.e. companies remain independent and separate.
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Joint Ventures (JV)
Joint Ventures tend to be equity-based i.e. a new company is set
up with parties owning a proportion of the new business. There are
many reasons why companies set up Joint Ventures to assist them
to enter a new international market:
Access to technology, core competences or management skills.
For example, Honda's relationship with Rover in the 1980's.
To gain entry to a foreign market. For example, any business
wishing to enter China needs to source local Chinese partners.
Access to distribution channels, manufacturing and R&D are
most common forms of Joint Venture.
Overseas Manufacture or International Sales
Subsidiary
A business may decide that none of the other options are as viable
as actually owning an overseas manufacturing plant i.e. the
organization invests in plant, machinery and labor in the overseas
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market. This is also known as Foreign Direct Investment (FDI).
This can be a new-build, or the company might acquire a current
business that has suitable plant etc. Of course you could assemble
products in the new plant, and simply export components from the
home market (or another country). The key benefit is that your
business becomes localized - you manufacture for customers in
the market in which you are trading. You also will gain local market
knowledge and be able to adapt products and services to the
needs of local consumers. The downside is that you take on the
risk associated with the local domestic market. An
International Sales Subsidiary would be similar, reducing the
element of risk, and have the same key benefit of course.
However, it acts more like a distributor that is owned by your own
company.
Internationalization Stages
So having considered the key modes of entry into international
markets, we conclude by considering the Stages of
Internationalization. Some companies will never trade overseas
and so do not go through a single stage. Others will start at a later
or even final stage. Of course some will go through each stage as
summarized now:
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Indirect exporting or licensing
Direct exporting via a local distributor
Your own foreign presences
Home manufacture, and foreign assembly
Foreign manufacture
Export Pricing And Costing
Pricing and costing are two different things and an exporter should
not confuse between the two. Price is what an exporter offer to a
customer on particular products while cost is what an exporter pay
for manufacturing the same product.
Export pricing is the most important factor in for promoting export
and facing international trade competition. It is important for the
exporter to keep the prices down keeping in mind all export
benefits and expenses. However, there is no fixed formula for
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successful export pricing and is differ from exporter to exporter
depending upon whether the exporter is a merchant exporter or a
manufacturer exporter or exporting through a canalizing agency.
Determining Export Pricing
Export Pricing can be determined by the following factors:
Range of products offered.
Prompt deliveries and continuity in supply.
After-sales service in products like machine tools, consumer
durables.
Product differentiation and brand image.
Frequency of purchase.
Presumed relationship between quality and price.
Specialty value goods and gift items.
Credit offered.
Preference or prejudice for products originating from a particular
source.
Aggressive marketing and sales promotion.
Prompt acceptance and settlement of claims.
Unique value goods and gift items.
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Export Costing
Export Costing is basically Cost Accountant's job. It consists of fixed cost
and variable cost comprising various elements. It is advisable to prepare
an export costing sheet for every export product.
As regards quoting the prices to the overseas buyer, the same are quoted
in the following internationally accepted terms which are commonly
known as Incoterm.
Export License
An export license is a document issued by the appropriate
licensing agency after which an exporter is allowed to transport
his product in a foreign market. The license is only issued after a
careful review of the facts surrounding the given export
transaction. Export license depends on the nature of goods to be
transported as well as the destination port. So, being an exporter
it is necessary to determine whether the product or good to be
exported requires an export license or not. While making the
determination one must consider the following necessary points
What are you exporting?
Where are you exporting?
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Who will receive your item?
What will your items will be used?
Canalisation
Canalisation is an important feature of Export License
under which certain goods can be imported only by
designated agencies. For an example, an item like gold, in
bulk, can be imported only by specified banks like SBI and
some foreign banks or designated agencies.
Application for an Export License
To determine whether a license is needed to export a particular
commercial product or service, an exporter must first classify the item by
identifying what is called ITC (HS) Classifications. Export license are
only issued for the goods mentioned in the Schedule 2 of ITC (HS)
Classifications of Export and Import items. A proper application can be
submitted to the Director General of Foreign Trade (DGFT). The Export
Licensing Committee under the Chairmanship of Export Commissioner
considers such applications on merits for issue of export licenses.
Exports Free unless regulated
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The Director General of Foreign Trade (DGFT) from time to time
specifies through a public notice according to which any goods, not
included in the ITC (HS) Classifications of Export and Import items may
be exported without a license. Such terms and conditions may include
Minimum Export Price (MEP), registration with specified authorities,
quantitative ceilings and compliance with other laws, rules, regulations.
RISK IN INTERNATIONAL TRADE
Risks in International Trade are the major barriers for the growth to
the same. International trade has been a much debated topic.
Economists have differed on the real benefits of international trade.
The increase in the export market is highly beneficial to an
economy, but on the other hand the increase in imports can be a
threat to the economy of that country. It has been the worry of the
policy makers to strike the right balance between free trade and
restrictions.
International trade can develop an economy, but at the same time
certain domestic players can be outperformed by financially
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stronger multi nationals and forced to close down or get merged.
Sometimes these multinational companies become so powerful,
especially in smaller countries, that they can dictate political terms
to the government for their benefit.
International trade is characteristically costlier in terms of
domestic trade. There are a number of reasons such as,
tariffs, cost of delay, cost related to differences in legal
system, etc. The factors of production like labor and capital
are more mobile within the territories of the country than
across other countries. International trade is restricted to the
exchange of goods and services. It does not encourage the
exchange of production factors, which may be more beneficial
in certain cases. The assessment of risks in the international
trade plays an important role in deciding the modes of
payment to be used for the settlement between buyer and
seller.
Risks in international trade can be divided under
several types, such as,
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Economic risks
Risk of concession in economic control
Risk of insolvency of the buyer
Risk of non-acceptance
Risk of protracted default i.e. the failure of the buyer to pay off
the due amount after six months of the due date
Risk of Exchange rate
Political risks
Risk of non- renewal of import and exports licenses
Risks due to war
Risk of the imposition of an import ban after the delivery of the
Surrendering of political sovereignty
Buyer Country risks
Changes in the policies of the government
Exchange control regulations
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Lack of foreign currency
Trade embargoes
GLOBAL MARKETING STRATEGIES
Although some would stem the foreign invasion through protective
legislation, protectionism in the long run only raises living costs and
protects inefficient domestic firms (national controls). The right
answer is that companies must learn how to enter foreign markets
and increase their global competitiveness. Firms that do venture
abroad find the international marketplace far different from the
domestic one. Market sizes, buyer behavior and marketing
practices all vary, meaning that international marketers must
carefully evaluate all market segments in which they expect to
compete.
Whether to compete globally is a strategic decision (strategic
intent) that will fundamentally affect the firm, including its
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operations and its management. For many companies, the decision
to globalize remains an important and difficult one (global strategy
and action). Typically, there are many issues behind a company`s
decision to begin to compete in foreign markets. For some firms,
going abroad is the result of a deliberate policy decision (exploiting
market potential and growth); for others, it is a reaction to a specific
business opportunity (global financial turmoil, etc.) or a competitive
challenge (pressuring competitors). But, a decision of this
magnitude is always a strategic proactive decision rather than
simply a reaction (learning how to business abroad). Reasons for
global expansion are mentioned below:
a) Opportunistic global market development (diversifying
markets)
b) Following customers abroad (customer satisfaction)
c) Pursuing geographic diversification (climate, topography,
space, etc.)
d) Exploiting different economic growth rates (gaining scale and
scope)
e) Exploiting product life cycle differences (technology)
f) Pursuing potential abroad
g) Globalizing for defensive reasons
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h) Pursuing a global logic or imperative (new markets and
profits)
Moreover, there can be several reasons to be mentioned including
comparative advantage, economic trends, demographic conditions,
competition at home, the stage in the product life cycle, tax
structures and peace. To succeed in global marketing companies
need to look carefully at their geographic expansion. To some
extent, a firm makes a conscious decision about its extent of
globalization by choosing a posture that may range from entirely
domestic without any international involvement (domestic focus) to
a global reach where the company devotes its entire marketing
strategy to global competition. In the development of an
international marketing strategy, the firm may decide to be
domestic-only, home-country, host-country or regional/global-
oriented.
Global Marketing Strategies
A global marketing strategy that totally globalizes all marketing
activities is not always achievable or desirable (differentiated
globalization). In the early phases of development, global
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marketing strategies were assumed to be of one type only, offering
the same marketing strategy across the globe. As marketers
gained more experience, many other types of global marketing
strategies became apparent. Some of those were much less
complicated and exposed a smaller aspect of a marketing strategy
to globalization. A more common approach is for a company to
globalize its product strategy (product lines, product designs and
brand names) and localize distribution and marketing
communication.
Integrated Global Marketing Strategy
When a company pursues an integrated global marketing strategy, most
elements of the marketing strategy have been globalized. Globalization
includes not only the product but also the communications strategy,
pricing and distribution as well as such strategic elements as segmentation
and positioning. Such a strategy may be advisable for companies that face
completely globalized customers along the lines. It also assumes that the
way a given industry works is highly similar everywhere, thus allowing a
company to unfold its strategy along similar paths in country by country.
One company that fits the description of an integrated global marketing
strategy to a large degree is CocaCola. That company has achieved a
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coherent, consistent and integrated global marketing strategy that covers
almost all elements of its marketing program from segmentation to
positioning, branding, distribution, bottling, advertising and more.
Reality tells us that completely integrated global marketing strategies will
continue to be the exception. However, there are many other types of
partially globalized marketing strategies; each may be tailored to specific
industry and competitive circumstances.
Global Product Category Strategy
Possibly the least integrated type of global marketing strategy is
the global product category strategy. Leverage is gained from
competing in the same category country after country and may
come in the form of product technology or development costs.
Selecting the form of global product category implies that the
company while staying within that category will consider targeting
different segments in each category or varying the product,
advertising and branding according to local market requirements.
Companies competing in the multi-domestic mode are frequently
applying the global category strategy and leveraging knowledge
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across markets without pursuing standardization. That strategy
works best if there are significant differences across markets and
when few segments are present in market after market. Several
traditional multinational players who had for decades pursued a
multi-domestic marketing approach-tailoring marketing strategies to
local market conditions and assigning management to local
management teams- have been moving toward the global category
strategy. Among them are Nestle, Unilever and Procter&Gamble,
three large international consumer goods companies doing
business in food and household goods.
Global Segment Strategy
A company that decides to target the same segment in many
countries is following a global segment strategy. The company may
develop an understanding of its customer base and leverage that
experience around the world. In both
consumer and industrial industries significant knowledge is
accumulated when a company gains in-depth understanding of a
niche or segment. A pure global segment strategy will even allow
for different products, brands or advertising although some
standardization is expected. The choices may consist of competing
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always in the upper or middle segment of a given consumer market
or for a particular technical application in an industrial segment.
Segment strategies are relatively new to global marketing.
Global Marketing Mix Element Strategies
These strategies pursue globalization along individual marketing mix
elements such as pricing, distribution, place, promotion, communications
or product. They are partially globalized strategies that allow a company
that customize other aspects of its marketing strategy. Although various
types of strategies may apply, the most important ones are global product
strategies, global advertising strategies and global branding strategies.
Typically companies globalize those marketing mix elements that are
subject to particularly strong global logic forces. A company facing strong
global purchasing logic may globalize its account management practices
or its pricing strategy. Another firm facing strong global information logic
will find it important to globalize its communications strategy.
Global Product Strategy
Pursuing a global product strategy implies that a company has
largely globalized its product offering. Although the product may
not need to be completely standardized worldwide, key aspects or
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modules may in fact be globalized. Global product strategies
require that product use conditions, expected features and required
product functions be largely identical so that few variations or
changes are needed. Companies pursuing a global product
strategy are interested in leveraging the fact that all investments for
producing and developing a given product have already been
made. Global strategies will yield more volume, which will make the
original investment easier to justify.
Global Branding Strategies
Global branding strategies consist of using the same brand name or logo
worldwide. Companies want to leverage the creation of such brand names
across many markets, because the launching of new brands requires a
considerable marketing investment. Global branding strategies tend to be
advisable if the target customers travel across country borders and will be
exposed to products elsewhere.
Global branding strategies also become important if target
customers are exposed to advertising worldwide. This is often the
case for industrial marketing customers who may read industry and
trade journals from other countries. Increasingly, global branding
has become important also for consumer products where cross-
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border advertising through international TV channels has become
common. Even in some markets such as Eastern Europe, many
consumers had become aware of brands offered in Western
Europe before the liberalization of the economies in the early
1990s. Global branding allows a company to take advantage of
such existing goodwill. Companies pursuing global branding
strategies may include luxury product marketers who typically face
a large fixed investment for the worldwide promotion of a product.
Global Advertising Strategy
Globalize advertising is generally associated with the use of the same
brand name across the world. However, a company may want to use
different brand names partly for historic purposes. Many global firms
have made acquisitions in other countries resulting in a number of local
brands. These local brands have their own distinctive market and a
company may find it counterproductive to change those names. Instead,
the company may want to leverage a certain theme or advertising
approach that may have been developed as a result of some global
customer research. Global advertising themes are most advisable when a
firm may market to customers seeking similar benefits across the world.
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Once the purchasing reason has been determined as similar, a common
theme may be created to address it.
Composite Global Marketing Strategy:
The above descriptions of the various global marketing models give the
distinct impression that companies might be using one or the other generic
strategy exclusively. Reality shows, however, that few companies
consistently adhere to only one single strategy. More often companies
adopt several generic global strategies and run them in parallel. A
company might for one part of its business follow a global brand strategy
while at the same time running local brands in other parts. Many firms are
a mixture of different approaches, thus the term composite.
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Type Soft drink
Manufacturer The Coca-Cola Company
Country of origin United States
Introduced 1886
On May 8, 1886, a pharmacist named Dr. John Pemberton carried
a jug of Coca-Cola® syrup to Jacobs' Pharmacy in downtown
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Atlanta, where it was mixed with carbonated water and sold for five
cents a glass.
From humble beginnings 125 years ago, This Company has
evolved from one product --Coca-Cola -- to more than 500 brands
in 2011. company grown from selling a modest 9 drinks a day in
1886 to 1.7 billion a day. And we've expanded from one city in one
country to availability in more than 200 countries around the world.
COCA-COLA IN INDIA
Coca-Cola, the corporation nourishing the global community with
the world’s largest selling soft drink concentrates since 1886,
returned to India in 1993 after a 16 year hiatus, giving a new
thumbs up to the Indian soft drink market. In the same year, the
Company took over ownership of the nation’s top soft-drink brand
and bottling network. It’s no wonder our brands have assumed an
iconic status in the minds of the world’s consumers.
The Company has shaken up the Indian carbonated drinks market
greatly, giving consumers the pleasure of world-class drinks to fill
up their hydration, refreshment, and nutrition needs. It has also
been instrumental in giving an exponential growth to the country’s
job listings.
With virtually all the goods and services required to produce
and market Coca-Cola being made in India, the business
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system of the Company directly employs approximately 6,000
people, and indirectly creates employment for more than
125,000 people in related industries through its vast
procurement, supply, and distribution system.
The Indian operations comprises of 50 bottling operations, 25
owned by the Company, with another 25 being owned by
franchisees. That apart, a network of 21 contract packers
manufactures a range of products for the Company.
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