MARKETING AND SALES IN INTERNATIONAL BUSNIESS

International Marketing

&Sales

Rakesh Rakesh KherKher

Context:International SalesInternational MarketingIndustry ExampleForeign Trade Policy

International SalesInternational Sales

WHAT IS INTERNATIONAL WHAT IS INTERNATIONAL BUSINESS ?BUSINESS ?

The exchange of goods & services, Resources, Knowledge

& Skills , among individuals & businesses in multiple/two or

more countries.

Transaction that are carried out across national borders to

satisfy the objectives of individuals and organization

Selling In International MarketSelling In International MarketA company may decide to sell its product in international market

due to one or more of the following reasons-

It has a good market domestically where the growth is limited.

International market offer large and profitable opportunities.

The company has excess capacity, which the domestic market

cannot absorb.

Selling In International MarketSelling In International MarketTrade between countries occurs because of following reasons-

A particular product is unavailable.

There are cost advantage by buying the product instead of

manufacturing locally.

The product offered is differentiated from the local product.

Selling In International MarketSelling In International MarketThe company has a considerable cost advantage over its

international competitors.

The company foresees increased competition in the

domestic market and seeks to mitigate the risk by

diversifying.

Entry Strategies For International Entry Strategies For International MarketMarket

Agent

Distributor

Government

Overseas Subsidiary

Trading Company

Export Management

Piggyback

Overseas Subsidiary

Entry Strategies For International Entry Strategies For International MarketMarket

Foreign Production

Licensing

Joint Venture

Contract Manufacture

Ownership

Export Processing

Organizing For International SellingOrganizing For International Selling

The type of organization a company

adopts for International sales D

EPEN

DS

ON

The size and nature of its

international business

DistributionDistribution Role of distribution becomes more important at global level

due to-

Types of Distribution ChannelsTypes of Distribution Channels

The type of distribution channel chosen

The nature of the product and its positioningDepends on

Distribution Channel

Up market Stores

Exclusive Stores

Supermarkets and

Hypermarkets

Profile of an International Profile of an International SalespersonSalesperson

International salesperson need to have the following additional

qualities-

The ability to speak in one or more international languages.

The ability to adapt to foreign culture.

The ability to act independently and decisively.

A pleasant and amiable personality.

The ability to understand not only the product and pricing, but

also financing of the sales, the instrument of payment, and

foreign exchange risk.

Pricing and Payment Terms Pricing and Payment Terms Pricing of product for international markets can be done on

various terms. Some of the commonly used term are-

6. CIF4. FOB 5. C&F

1. Ex Works

2. FOT 3. FAS

FOT- Free on Truck

FAS- Free alongside Ship

FOB- Free on BoardC&F- Cost and Freight

CIF- Cost, Insurance and Freight

Packing and Shipping Packing and Shipping The packing should be-

Light and Strong.

Must be appealing for the end users.

Usually buyers tend to specify the type of packing required.

Packing should show the contents and specify origin, weight

and quantity of the item inside.

Most shipment these days are done in containers which is

safer and easier to handle.

Market Intelligence and Research Market Intelligence and Research Collecting primary data is very expensive and not feasible for

most companies.

Secondary data is available from no. of sources such as-

Embassies

EXIM bank

Trade journals and publication

Internet websites

Commercial banks, etc.

SALES-Quotation / Pro Forma Invoice SALES-Quotation / Pro Forma Invoice

1) Seller's and buyer's names and addresses

2) Buyer's reference number and date of inquiry

3) Listing of requested products and a brief description

4) Price of each item (It is advisable to indicate whether items

are new or used and to quote the price in U.S. dollars to

reduce foreign exchange risk.)

5) Appropriate total cubic volume and dimensions packed for

export

6) Appropriate gross and net shipping weight

SALES-Quotation / Pro Forma Invoice SALES-Quotation / Pro Forma Invoice

7) Trade discount (if applicable)

•Delivery point

•Terms of sale

•Terms of payment

•Insurance and shipping costs

•Validity period for quotation

•Total charges to be paid by customer

•Estimated shipping date from port or airport or export

•Currency of sale

IncotermsIncoterms

IncotermsIncotermsMost common:

Ex-works: Buy picks up cargo from seller; all shipping costs

for buyer

FAS/FOB: Seller delivers to port / Seller loads cargo on vessel,

buyer pays for shipping

CFR/CIF: Seller pays for shipping to port of import /with

insurance, buy pays for arrival charges, import duties, taxes, and

transport from port.

Payment MethodsPayment Methods Advance

Bill of Exchange (documentary drafts)

Letter of Credit

Payment MethodsPayment MethodsLetter of Credit:

NegotiationNegotiation

Win-Lose VS. Win-Win

Win — Lose: From each deal, there is a winner and a loser

Win — Win: In each deal, both parties gain

J. Salacuse survey:

100% of Japanese > Win — Win

33% of Spanish > Win — Win

Contract or Relationship

Win — Lose or Win — Win approach is tied to overall goal.

For a one-off trade, Win-Lose is likely

What does the International What does the International Manager really do?Manager really do?

Coordinate their company's activities and resources across

international boundaries.

Represent their company overseas:

Purchasing

Sales

Production

Logistics

So, can anyone (or any manager) be an International manager?

INTERNATIONAL MARKETINGINTERNATIONAL MARKETING

STP Strategy

MARKET ENTRY STRATEGIESMARKET ENTRY STRATEGIES

Marketing Mix

MARKET PROGRAMMEMARKET PROGRAMME

INDUSTRY EXAMPLEINDUSTRY EXAMPLE

WHICH MARKETS TO ENTER

External AnalysisPolitical factorsEconomical factorsSocial factorsTechnological factorsEnvironmental factorsLegal factors

Industry Example- UNO MindaIndustry Example- UNO Minda

USA

Government Stability IPR Laws

Stable Currency Free Market

Lifestyles Product Recreational Uses

Product Performance Improvement in life

Competition Market Growth

Competition Market Growth

Based on the above marketing tools we short listed, a company known as Polaris in USA was prospected over mails and telephonic conference. A meeting was organized in USA to showcase our capabilities along with demonstration of our existing products.

Subsequently high level engineering team visited our plants and asses our ability and potential to achieve the product performance required by them.

Once this was stablished we have be final round of price negotiation to conclude the agreement for design, engineering, tooling, manufacturing, testing and validation for the product.

Finally packaging and shipping were discussed and the prices were arrived on FOB basis.

Case StudyCase Study

Recreational Vehicles SegmentRecreational Vehicles Segment

ATVATV

Snow MobileSnow Mobile

Lawn MoverLawn Mover

The relationship with customer grew over a period of next 3-5 years resulting in many other orders for new parts.

What started as initially a small order of few hundred dollars as now resulted into a multimillion supply to this and many other similar companies in the US

Future OpportunitiesFuture Opportunities

FOREIGN TRADE POLICY 2015-20FOREIGN TRADE POLICY 2015-20

FOREIGN TRADE POLICY OF INDIAFOREIGN TRADE POLICY OF INDIA

FOREIGN TRADEFOREIGN TRADETypes of Foreign Trade

Import Trade : Import trade refers to purchase of goods by one country from another country or inflow of goods and services from foreign country to home country.

Export Trade: Export trade refers to the sale of goods by one country to another country or outflow of goods from home country to foreign country.

India’s Foreign Trade i.e. Exports and Imports are regulated by the Foreign Trade (Development and Regulation) Act 1992.

Presently Foreign Trade Policy 2015-20 is effective from 1st April, 2015.

Export is defined as an act of taking out of India any goods by land, sea or air.

HOW TO EXPORTHOW TO EXPORT

Starting Exports

Establishing an Organisation:To start the export business, first a sole Proprietary concern/ Partnership firm/Company has to be set up as per procedure with an attractive name and logo

Opening a Bank AccountA current account with a Bank authorized to deal in Foreign Exchange should be opened..

Obtaining Permanent Account Number (PAN)It is necessary for every exporter and importer to obtain a PAN from the Income Tax Department.

Obtaining Importer-Exporter Code (IEC) NumberAn IEC is a 10 digit number.Mandatory for undertaking export/ import. Issued by DGFT .

Pricing/CostingExport proceeds on the basis of terms of sale Free on Board (FOB), Cost, Insurance & Freight (CIF), Cost & Freight(C&F).

Registration cum membership certificate (RCMC)Mandatory for availing import/ export benefit or concession under FTP 2015-20Issuing Authority Export Promotion Councils/FEDERATION OF INDIAN EXPORT ORGANISATIONS (FIEO)/Commodity Boards.

HOW TO EXPORTHOW TO EXPORT

EXPORT BENEFITSEXPORT BENEFITS1. EXPORT PROMOTION SCHEMES

Foreign Trade Policy 2015-20 and other schemes provide promotional measures to boost India’s exports.

Brief of these measures are as under:

1.1 Exports from India SchemeI - Merchandise Exports from India Scheme (MEIS)Under this scheme, exports of notified goods/ products to notified markets.Listed in Appendix 3B of Handbook of Procedures of FTP.Benefit will receive in form of Duty credit scrips.Benefit rate (2-5%) on FOB value of exports.

The Duty Credit Scrips can be used for the following requirements:

Payment of Customs Duties for import of inputs or goods.Payment of excise duties on domestic procurement of inputs or goods.Payment of service tax on procurement of services.Payment of Customs Duty.

All countries divided into A, B, C categories. A- Traditional markets like US, Europe. B- Emerging markets like Africa, Latin America CIS etc. C- Others.

Example: Exports to Sri Lanka. Handle Bar Switch TVS.HS code of Switch is 85365090.

S. No. ITC(HS) Code Description of goods MEIS rates based on Appendix 3B

Country groups A B C

4396 85365090 Othr Switches 2% 2% 2%

2% benefit will receive on FOB value.

ITC(HS) Code: Indian Trade Clarification (Harmonised Systems)

The Harmonized Commodity Description and Coding System generally referred to as "Harmonized System" or simply "HS" is a multipurpose international product nomenclature developed by the World Customs Organization (WCO).

EXPORT BENEFITSEXPORT BENEFITS

II- Service Exports from India Scheme (SEIS)Service providers of notified services are eligible for duty credit scrip @ 3-5% of net foreign exchange earned.

a) Service providers defined as those located in India

b) On Net Foreign Exchange earned on specified services

Eligible services include service for a- Business. – 5% b- Construction and related Engineering. – 5% c- Educational – 5% d- Environment- 5% e- Health & Social- 5% f- Tourism and Travel related-

Hotel & Restaurants- 3% & Travel agencies and Tourist guides services -

5% g- Recreational, Cultural and sports – 5% h- Transport- 5%


Example: List of Services:

S.No. SECTORS Central product Classification Code Admissible rate in % (on Net (CPC) Foreign Exchange earnings) 1 BUSINESS SERVICES

A. Professional services

a. Legal services 861 5% b. Accounting, auditing and bookkeeping services 862 5%

2 COMMUNICATION SERVICES Audio-visual services

a. Radio and television services 9613 5% b. Motion picture projection service 9612 55

3 CONSTRUCTION AND RELATED ENGINEERING SERVICES A. General Construction work for building 512 5% B. General Construction work for Civil Engineering 513 5%

% will be calculate on Net Foreign Exchange earned on specified services


2. DUTY EXEMPTION & REMISSION SCHEMES

These schemes enable duty free import of inputs for export production with export obligation. These scheme consists of:-

2.1 Advance Authorization Scheme (AA) for Raw MaterialUnder this scheme, duty free import of raw materials are allowed. Material must be physically use in the export product with minimum 15% value addition.AA normally have a validity period of 12 months for the purpose of making importsAnd a period of 18 months for fulfilment of Export Obligation (EO) from the date of issue of AA. AA is issued either to a manufacturer exporter or merchant exporter tied to a supporting manufacturer(s).


2.2 Duty Drawback of Customs/Central Excise Duties/Service TaxThe scheme is administered by Department of Revenue. Under this scheme products made out of duty paid inputs are first exported and thereafter refund of duty is claimed in two ways:i) All Industry Rates : As per Scheduleii) Brand Rate : As per application on the basis of data/documentsExample: Exports Handle Bar Switch of TVS

HS code of Switch is 85365090.Duty Drawback

ITC-HS Code Description Duty Drawback Code

Drawback Rate

85365090 Other switches: Other 853601 2.5%

2.5% incentive receive on FOB value and directly send by customs to Export’s bank A/c.


3.1 Zero duty EPCG schemeUnder this scheme import of capital goods at zero custom duty is allowed for producing quality goods and services to enhance India’s export competitiveness. Import under EPCG shall be subject to export obligation (EO) equivalent to six times of duty saved in six years.Scheme also allows indigenous sourcing of capital goods with 25% less export obligation i.e. equivalent to four & half times of duty saved in six years.

Example: If total duty saved INR 100.00 then EO will be INR 600.00 in case of imported machinery.

If total duty saved INR 100.00 then EO will be INR 450.00 in case of indigenous machinery.3.2 Post Export EPCG Duty Credit Scrip SchemeA Post Export EPCG Duty Credit Scrip Scheme shall be available for exporters who intend to import capital goods on full payment of applicable duty in cash.

3. EXPORT PROMOTION OF CAPITAL GOODS (EPCG SCHEME)EXPORT BENEFITSEXPORT BENEFITS

Under the EOU scheme, the units are allowed to import or procure locally without payment of duty

All types of goods including capital goods, raw materials, components, packing materials etc..

In the case of EOUs engaged in agriculture, animal husbandry, floriculture, horticulture, and poultry

5. OTHER SCHEMES5.1 Marketing Development Assistance (MDA) SchemeFinancial assistance is available for exporters having an annual export turnover upto Rs. 30 crores for trade fairs, buyer seller meets organized by EPC’s/ Trade promotion organizations. MDA guidelines available at www.commerce.nic.in

4. EXPORT ORIENTED UNITS (EOU)


http://www.commerce.nic.in/

Thank you !Thank you !

Q & AQ & A