*MARKETINGcollection of activities undertaken by the firm to relate profitability to its market-study its prospective buyers-develop products that satisfy customer needs and wants-set prices that appear reasonable-distribute products-inform the market-after sales-services

*INTERNATIONAL MARKETINGConsists of finding and satisfying global customer needs better than the competition, both domestic and international, and of coordinating marketing activities within the constraints of the global environment

-concerned with the micro level of the market-uses the company as the unit of analysis

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 -AMA

* WHY COMPANIES ENGAGE IN INTERNATIONAL MARKETING-to expand their sales-acquire resources-diversify their sources of sales and supplies-minimize competitive risk.

*MEANS OF CARRYING OUT INTERNATIONAL MARKETING OPERATIONS

-merchandise exports and imports-service exports and imports-investments

* REASONS FOR RECENT GROWTH IN INTERNATIONAL MARKETING

-expansion of technology-liberalization of government policies regarding cross border

movement ofgoods and resources-development of supporting institutional arrangements-increased global competition

*CHALLENGES FIRMS FACE IN INTERNATIONAL MARKETING

-political and legal environment-Cultural environment-competitive environment

*PROCESS OF INTERNATIONALIZATION/STAGES OF INTERNATIONAL MARKETING

1)DOMESTIC MARKETING COMPANYFocusing solely on domestic consumers and economy

2)EXPORTING MARKETING COMPANYbegins with unsolicited orders from abroadtend to engage in indirect exportingEg:Birla Tyres

3)INTERNATIONAL /MULTINATIONAL MARKETING COMPANYFocus on consumer needs and requirements in more than one

country and accordingly devises product, price and promotion strategies Eg: Samsung, LG Electronics

5)GLOBAL /WORLDWIDE MARKETING COMPANYGlobal product with local variationsEg:Ranbaxy

INTERNATIONAL MARKETING ORIENTATIONOn the basis of EPRG framework, Wind Douglas and Per mutter

have analyzed a company’s approach towards global opportunities1)ETHNOCENTRIC APPROACHDevelop their products on the basis of the requirements of local

customersAre highly domestic centralizedEg: Hero Cycles

2)POLYCENTRIC APPROACHEach market is unique and needs to be addressed individually and

differently.Firms conduct their own business research ,plan their own product

adaptations, price positioning and promotion strategy to suit local needs.Eg: Ford Motors, Toyota

3)REGIOCENTRIC APPROACHSegment the market on the basis of regional similarities eg

economic, political etcEg: Pepsi and Coke

4)GEOCENTRIC APPROACHManufacturers offer homogenous, identifiable services and products to

integrate for worldwide operational efficiencyEg:McDonald’s,Pizza Hut

TYPES OF GOVT. AND POLITICAL ECONOMIC SYSTEM1 ) Collectivism vs. IndividualismRefers to a political system that stresses the primacy of the collective goals

and the needs ,welfare and benefits of a society are given more importance over that

of an Individual.2) SocialismIs a system that advocates government ownership and control of industry considered critical to the welfare of the nation.3)Communism vs.Social DemocratsSocialism can be achieved only through violent revolution and totalitarian dictatorship.Social democrats believed that socialism could be achieved by democratic

means

4) IndividualismEvery man should have freedom to pursue his economic and

political aims 5) DemocracyGovt is elected by the people and is administered and run by the

representatives of the people6) TotalitarianismDenies its citizens all those guarantees on which democratic

nations thrive

POLITICAL RISKS IN INTERNATIONAL MARKETING1)Economic performance of the country2)Political stability3) Spirit of nationalism4) Risk related to the govts trade policies5)Risks pertaining to economic policy6)Confiscation of international firm's assets7)Expropriation of firm’s assetWhen the govt seize the firm’s investments and offer a nominal

compensation for

the same ,such expropriated assets are managed by the public sector agencies

as nationalised units8)Nationalisation of business assetsWhen the govt decides to move the property and assets of business from

private hands to got sponsored public sector undertaking or agencies9)DomesticationUsing locally manufactured raw material for manufacturing products of international firmsGradual transfer of ownership and management of international firms to

local managers not permitting repatriation of funds and profit above a certain limit and

insisting on profits being deployed back in the local industry.10) Diplomatic severances and political sanctions11)Risks pertaining to Non-Governmental organizations and social

activist12)Risks pertaining to religious and political terrorism and extremisms13)Terrorism on net

INTERNATIONAL LEGAL ENVIRONMENT1)International laws2)Host country laws3)Home country laws

INTERNATIONAL TRADE THEORY-SIGNIFICANCE AND BENEFITS OF INTERNATIONAL TRADE

WHY DOES INTERNATIONAL TRADE TAKES PLACE?-entrepreneurial and labour skills differ-factor endowments are not the same-human wants are multiple and varied. No single country satisfies all of them-level of technology is different in different countries

THE THEORY OF COMPARATIVE COST-CLASSICAL VIEWThe classical theory of international trade is an application of the principle

of division of labor known as the Theory of Comparative CostInternational trade occurs due to geographical specialisation in the

production of different goods due to differences in the comparative cost of production of

two nationsAdam Smith asserted that international trade occurred because of absolute advantage by a particular country in particular product and absolute

advantage

enjoyed by another country in another product.The principle of comparative cost was formulated by David

Ricardo

Assumptions of Classical theory1)By production cost, the classicists regarded only labour cost2) A policy of laissez faire is advocated3)There is perfect competition4)All labourers were assumed to be homogenous5)There are constant returns to scale6) The factors of production are completely mobile within the

country and perfectly immobile between different countries7)Transport cost are zero8) Trade takes place only in case of goods. There is no capital

movement9)It is assumed that there are only two countries10) There are no trade cycles in the economy

CRITICAL EVALUATION (stated by Bertin Ohlin and Frank D. Graham)

-unrealistic assumption of labour cost-static nature of theory-neglect of transport cost-assumption of fixed proportions-assumption of constant costs-Unrealistic theory-inadequate explanation of comparative cost-demand conditions ignored-Complete specialization is impossible

MODERN THEORY OF INTERNATIONAL TRADE Bertil Ohlin built up his theory of international trade on the basis

of the following assumptions-there are two regions only between which trade takes place-factors of production are perfectly mobile within the regions-no restrictions on the movement of goods between the two

regions

-no transportation costs-goods transactions alone are to be considered-no qualitative differences in the factors of production in the two regions -each region possesses a paper currency system

REFINEMENTS OF THE THEORY- His theory would also be applicable to more than two regions or countries- Introduced the economies of large scale production- Qualitative differences in three factors of production i.e. land,labour and

capital- Introduced transport costs

CRITICISM OF THE MODERN THEORY- Unrealistic character- Provides at best only a partial equilibrium analysis, not a general

equilibrium system-Leontief paradoxfactor prices are determined not only by the supply of productive factors,

but also by the demand for their services

- Trade even with identical factor endowments- Commodity prices determine factor pricesthe price of a commodity is determined by its utility to the

consumers- Product differentiated- Highly static in nature- Production functions not identical- Qualitative differences in productive factors- Mobility of productive factors

EXPORT BUSINESS ENVIRONMENTS SIGNIFICANT CHANGESRapid growth of world trade and investmentsInternational competitiveness, constant foreign trade deficit and present

foreign exchange crisisGrowth of global brands in autos,food,clothing,electronics etcThe gradual opening up of major new markets,namely,China,Eastern Europe

and the Arab countriesIncreased forming of strategic alliances between major international companies from different countriesSubstantial speedup of international transportation, communication and

financial TransactionsI] ECONOMIC ENVIRONMENT1) Income 2) Level of economic developmentcharacters reflect the country’s attraction as an export market-size of the country’s population

-the country’s industrial structureThere are four types of industrial structuresA} subsistence economiesMajority of people engage in simple agricultureB}raw material exporting economiesThese economies are rich in one or more natural resources but

poor in other aspects e.g. Chile for tin and copperC} industrializing economiesD}developed economies3 ) levels of savings4) Economic policies of the ruling govtII) DEMOGRAPHIC ENVIRONMENT-Population of the country and its growth rate-male/female ratio-family size-purchasing power of consumers-importance of middle class

III) SOCIO-CULTURAL ENVIRONMENT-culture-social structure -Religious and ethical systems-language-education-cultural change-habits and behaviorIV)LEGAL ENVIRONMENTVarious laws,rules,procedures and regulations made by the govtLaws relating to environment protection,ecology protection, retail

price maintenanceV) TECHNOLOGICAL ENVIRONMENTOpportunities for innovation, varying R&D budgets

PRODUCT PLANNING AND DECISIONSa bundle of physical, psychological, tangible and intangible, present and

future attributes that but together bring satisfaction or benefits to the buyer beyond the price paid by him.

BASIC CLASSIFICATION OF PRODUCTS1)Industrial Products (Capital goods and raw materials)-These are the products that can be sold for use in producing other

goods and services, altering the very nature of the original product.

2)Consumer Products-These products satisfy a customer’s need and do not require further

processing.-three categories on the basis of buyers behaviour and on the purchase

action of its consumers. a) Convenience products these are meant for day to day living and basic survival and are brought

on instinct, eg., food items medicine and toiletries etc.b) Shopping products these are purchased after thorough planning in advance, where the

customer may have a preconceived and predetermined brand and budget in mind.

c) Specialty Products these are products that are specially designed and manufactured to cater

to a specific demand of customers, eg., specially designed, tailor- made dress, or a custom made sports car.

PRODUCT PLANNING IN INTERNATIONAL MARKETS-refers to the process of determining the length and depth of the product

line to be offered. -length will specify the number of products to be offered -depth will relate to the various shades to be adopted for the same product

in different international markets.

Local Products-When a product is available in a town or, at best, in a region of the nation

state, it will be known as local product.-Ex: MTR Spices

National ProductsA product that is sold and marketed only within the confines of a national

state.When Dabur India offers ‘Real Fruit Juices’ and Godrej markets ‘Appy’

International Products- The products that are sold across many countries are called international

products.- Ex: Suzuki, Honda and Hyundai Technologies.

Global Products- True global market are always marketed in global markets, in all continents, and

in every

country

-create same perception across continents by universal positioning

e.g Pepsi, Pepsi's Tropicana juice Coke, Nestle , Cadburys and Sony

PRODUCT EXTENSION

-Companies here extend the same product marketed successfully in the home market to

other parts of the world without many modifications

-adopted when enough loyalty has been earned in the home market

e.g.MTR spices ,Mother’s Recipes pickle

PRODUCT STANDARDIZATION AND ADAPTATION

-process of marketing a product in international markets by affecting little change in the

basic nature of the product

-product positioning and strategy also remain ,more or less, the same

Advantages of standardization-builds up a global brand and product image-economies of large –scale productions help achieve an economic cost-global marketing mix can be developed at an optimum cost

FACTORS THAT FAVOUR STANDARDIZATION1) High technology intensive industry- cost of putting up plants in each country in high technology oriented

industry can be prohibitively expensive

- may not be able to find right kind of quality staff to produce another version of the same product as per international standards

e.g. industrial capital equipment, computer hardware2) Prohibitive Adaption Costs- Mean reconverting the product once it has been standardized for one

country.- Will involve making investments on alternate product manufacturing

systems to meet new customers needs or to alter the promotion and communication strategy.

3) Emergence of global customers- Their tastes, preferences, needs aspirations for achieving similar

standards of living and dreams of better future all converge into a global niche of common identified segmentation of sizable market universe.

- e.g. TV, Levi’s Jeans, McDonalds, Pizza hut, Kentucky Fried Chicken, Café coffee day are accepted as popular products by the global customers.

4) Country of origin- It has been a tradition to associate and ascribe excellence of quality of

certain products to their original innovation sources or country of origin.

- Eg: Swiss watches

PRODUCT ADAPTATION-modifying product as per the requirements of overseas consumers.a) Global variations in physical conditions, such as geography,

topography, weather, climatic conditions, availability of logistical support, earning systems and means of livelihood, per capita income and standards of living of the inhabitants of the country etc.

b) Varying cultural manifestations, consumer tastes and perceptions, usages, purchasing patterns, consumptions and satisfaction drivers.

c) Various levels of competition and the competitive strategies adopted by the other international marketing firms around the globe.

Eg: Mattel Toys, in order to lure Indian children, offer dolls that are replicas of Indian Brides.

PRODUCT COMMUNICATION STRATEGIESA product can be marketed abroad only with the help of a communication strategy,

which is what conveys the promotional theme to consumers abroad, allowing them to form perceptions about the product, spelling out, in turn, the quantitative and

qualitative sales for the manufacturers.Keegan has identified five major product communication strategies international

marketers can chose from to convey the message to customers in different foreign markets.

ONE PRODUCT / ONE COMMUNICATION STRATEGY WORLDWIDE (DUAL EXTENSION)

-This strategy is also known an extension of the product, -extension of communication about the product in foreign markets by international marketing firms.-Same product that is offered to the domestic customer is marketed in international markets without any significant changes in the product profile or even in the

campaign themes.Eg: Pepsi, Coca ColaCost of research and development and the expense on marketing activities can be minimized.

PRODUCT EXTENSION / COMMUNICATION ADAPTATION STRATEGY-Same product can be viewed differently in a foreign market, even though

its basic functions remain same.-Customer may look for additional need fulfillment or an altogether different

need satiation from the product.E.g.: three wheeled auto rickshaws are commercial transport vehicles in

India, but in Srilanka it has been converted like a car.-Such adaptations does not change the basic construction of the product but

creates an altogether different perception in the minds of the user.

PRODUCT ADAPTATION / COMMUNICATION EXTENSION STRATEGY-Products are modified to suit alternate usage patterns, weather conditions

and statutory requirements abroad to adopt the same communication strategy in different

countries.-Eg: clothing may serve the purpose of fashion everywhere, yet the fashion

designer will have to design clothes to fit different body types of different countries

PRODUCT / COMMUNICATION ADAPTATION STRATEGY-Strategy involves modifying both the product as well as communication to meet

the tangible as well as intangible needs of customers in all countries. -Such a move is also called as dual adaptation strategy-Strategy is adapted when the conditions of use as well as condition related to environments differs from country to country.-Eg: Americans like to store enough food for the week at home.

INTERNATIONAL MARKETING MIX-idea was first coined by Professor Neil H. Borden of the Harvard Business

School in 1965-the four controllable variables area) PRODUCT Assessment of consumer needs, product standardization or adaptation, packing

and packaging,branding,after sales services and warrantiesb) PRICEPrice determination and administration, competitors pricing strategy and

consumer response

c) PROMOTIONAdvertising and sales promotion, merchandising, public relations and

management of sales forced) PLACEChannel selection, management, channel remuneration ,transport

management

MEANING OF PRODUCT PLANNINGStudy of product in international market includes-product planning and development-product life-cycle-branding decisions-packaging decisions

NEED AND IMPORTANCE OF PRODUCT PLANNING IN INTERNATIONAL MARKET

1) Product introductionThree strategies for introducing a product are product

standardization ,product adaptation and product innovation

2) Packaging decisionsAn attractive and durable packaging not only protects the product but also

acts as a silent salesman3) Branding decisions4) Product mix or product line decisions5)Product positioning decisionsIs the act of designing the company’s offer ao that it occupies a distinct and

valuedplace in the target customer’s minds6) Product labeling and marking decisions7)Product warranty decisionsA warranty attests the suppliers commitment to quality and performance of

the product as stipulated at the time of sale8)After-sales servicesIs provided by the seller to maintain the product in working condition

PRODUCT PLANNING STRATEGIES FOR INTERNATIONAL MARKET1) Product standardization strategy2) Product adaptation strategy

3) Product innovation strategyA company develops a totally new product for overseas marketse.g. Gillette

NEW PRODUCT DEVELOPMENT PROCESSa) Idea generationb)Idea screeningc) Concept testing (seeking expert advice on production and

marketing of a new product)d)Business analysis (demand analysis, cost analysis and profit

potential)e)Product development (actual undertaking of production by

arranging necessary physical and financial resources and basic infrastructure)

f) Test marketing (refers to testing of the actual product in one or two markets on a small scale)

g) Commercialization(if test results are positive, the marketer can go ahead with the commercial production and marketing on a large scale)

INTERNATIONAL PRODUCT LIFE CYCLE Raymond Vernon emphasized that the life cycle starts with the location from where the product originates-innovator familiar with needs of the market-R&D programme promote product development and risk of innovation areperceived as low

Other countries may have similar needs to those of initiating country which forms a

potential export market-growth of demand in importing nations provides sufficient volume to justify local manufacturer-as production becomes abroad, exports of initiating company grow less rapidly

-the mature product uses an already established technology and a lower skilled labour content-consumers are more price conscious because the products are no longer a

novelty-less developed nations may become attractive production points and begin exporting the products to more advanced countries

BRANDINGA brand is a name ,term symbol or design or a combination of

them, which is intended to identify the goods or services of the seller or group of

sellers and to differentiate them from those of competitors -

AMA

ROLE OR SIGNIFICANCE OF BRANDING IN INTERNATIONAL MARKET.

1. Facilitates Brand Recognition2. Promotes Brand Loyalty3. Aids in Brand extensions4. Enhances Brand equity5. Facilitates Advertising6. Increases Overall Profitability7. Help Retailers8. Help Salesman9. Help Consumers

BRANDING DECISION IN INTERNATIONAL MARKETING1.Decision on generic or no brand2.Decision to have manufacturer's own brand or private branda. Manufacturer’s Brandb. Private brand3. Decision to have local or global branda. Local brandsb. Global brand4.Decision to have single brand or multiple branda. Single brandb. Multiple brands

MEANING OF PACKAGING AND PACKINGPackaging refers to inner wrapping or container, which covers one or more units of the product. Packing is the outer casing or materials, which is used to transport the product or number of units of the product.

TYPES OF PACKSDepends upon various factors1.Nature of product2.Physical and physio-chemical properties of the product3.Mode of transportation to be used4.Time taken in transportation5.Trans-shipment involved6.Specifications of the importer7.Legislations governing acceptable packing materials

REQUISITES OF GOOD PACKAGING1.Protection2.Preservation3.Convenience4.Presentation5.Recycling6.Reusable

7. Identification8. Lightness9. Conformity

IMPORTANCE / FUNCTIONS OF PACKAGING IN INTERNATIONAL MARKET

1. Primary Functionsa. Protectionb. Preservationc. Presentation

2. Secondary Functionsa. Self-serviceb. Handling and Transportationc. Identificationd. Informatione. Integrated Marketing Approach

FACTORS INFLUENCING PACKING DECISIONS IN INTERNATIONAL MARKET

1.General Considerations Affecting Packaging Decisionsa. Physical Characteristicsb. Physio-chemical Factorsc. Economyd. Purposee. Conveniencef. Statutory Regulationsg. Environmental Factors

2. Special Considerations Affecting Packaging Decisions In International Marketing

a. Regulationsb. Buyer’s Specificationsc. Socio-cultural Factorsd. Retailing requirementse. Environmental Factorsf. Disposability

MEANING OF TRANSPORT PACKAGINGTransport packaging is the term used internationally and often described as

‘ Distribution Packaging’ or ‘Protective Packaging’. It includes all packaging for the containment and protection of goods

during handling, storage and transportation in the physical distribution process.

CRITERIA FOR TRANSPORT PACKAGING1) Transport packaging in relation to mode of transportThe cycle of transport is comparatively longer and consists of different

modes such as rail,truck,sea and air.2) Transport damage in relation to packaging costsThe main problem in designing packages for transport is not to have a

solution which will protect the product completely and carry it to its ultimate consumer without any damage.

3) ContainerizationContainerization is a system of inter-model freight transport using standard

inter-modal containers as prescribed by the international organisation for standardisation(ISO).

These can be loaded and sealed intact onto container ships, rail road cars, cargo planes and semi trailer trucks.

4) Risk of PilferageProper transport packaging can help in reduce the rate, at least of casual pilferage in harbors and ware houses. Unit loads and particularly shipment in freight containers, make pilfering more difficult.5) Adequate marketing is an indispensable component of transport packagingMarking is put on each packing case so that the consignment may be identified throughout transit and on reaching its destination.

ROLE OF INDIAN INSTITUTE OF PACKAGING

LABELLING AND MARKING IN INTERNATIONAL MARKETING

PRODUCT WARRANTIES AND AFTER SALES SERVICE IN INTERNATIONAL MARKETINGA warranty attests the suppliers commitment to quality and performance of the product as stipulated at the time of saleAn exporter has three options while taking decisions about the warranty to be given to the oversee buyers,

to offer uniform warranty in domestic market as well as in the international marketTo offer different warranties in domestic market and in the international marketTo offer different warranties in different marketsAfter sale service is provided by the seller to maintain the product in working conditionEssential especially in the case of industrial goods and consumer durables

Factors to be considered while taking decisions regarding warranties1)Nature of productGenerally warranty is required for consumer durable and the industrial products, which last for a number of years and are subject to heavy wear and tear.2)Climatic conditionsThe performance of certain products is affected by climatic and weather conditions3)Competitors policyThe seller must take into consideration warranties offered by competitors in the marketWhile trying to match the competitors, the seller must consider his ability to fulfill commitments made by him

4)Cost factorEfficient post-sales servicing requires the maintenance of a separate servicing department.5)Estimated life of the productIf the estimated life of the product is very long, it requires maintenance.

Reasons for providing warranties and after sales service, to maintain product in working condition for a longer duration to build consumers confidence and thereby make them brand loyal to attract consumers and increase the market shareTo enhance the goodwill of the company.

DISTRIBUTION STRATEGIESTwo kinds of methods are adopted as a means of channel distribution when marketing abroadA] Indirect sellingB] Direct selling

A] Indirect selling-Is used when a manufacturer in India, for example, markets his product through another Indian firm that acts as the manufacturer’s sales intermediary or

middlemen-the middlemen acts as the manufacturer’s external export organization -assumes responsibility for moving the product overseas-middlemen may be termed as a domestic agent if it does not take title to the

goodsOr domestic merchant if it does take title to the goods

B] Direct selling-is employed when a manufacturer develops an overseas channel-channel requires that the manufacturer deal directly with a foreign party without going through an intermediary in the home country

Channel

Indirect Channel

Direct Channel

Domestic AgentDomestic Merchant

•Export Broker•Sales Representative•EMC•Co operative Exporter•Buying Agent•Country Controlled Buying Agent•Resident buyer

•Export Merchant•Export Drop Shipper•Export Distributor•Trading Company

•Foreign Distributor•Foreign retailer•State Controlled trading Company•End User

FOREIGN DISTRIBUTORIs a foreign firm that has exclusive rights to carry out distribution for a

manufacturer in a foreign country

-distributor purchases merchandize at a discount and then resells or distributes the

merchandize to retailers or final consumerse.g. Seiko USA is a distributor for its Japanese parent(Hattori Seiko) FOREIGN RETAILERA manufacturer may contact foreign retailers and interest them in carrying a

product ,ranging from a personal visit by the manufacturer's representative to mailings catalogues, brochures and other literature to prospective retailersBody Shop - UKSTATE CONTROLLED TRADING COMPANY- for some products, particularly telecommunication, a manufacturer must contact and sell to state – controlled companies- Being govt sanctioned and controlled for trading in certain goods, buyers for

state controlled trading companies are very definitely influenced by their govt’s policies and politics

END USERA manufacturer is able to sell directly to foreign end users with no

intermediary Involved-natural choice for costly industrial products

EXPORT BROKER-function of an export broker is to bring a buyer and seller together for a fee-negotiates the best terms for the seller but cannot conclude the transaction without the principal’s approval of the arrangement SALES REPRESENTATIVE-an independent businessperson who usually retains his or her own identity

by not using manufacturers name--may take possession but no title to the goods and thus assumes no risk EXPORT MANAGEMENT COMPANY-EMC manages, under contract the entire export program of a

manufacturer-is also known as a Combination Export Manager because it may function as

an export department for several allied but non- competing manufacturers

-an EMC usually solicits business in the name of the manufacturer and may even

use the manufacturer’s letterhead COOPERATIVE EXPORTER/PIGGYBACK EXPORTER/MOTHER HEN

EXPORTERIs a manufacturer with his own export organization that is retained by other manufacturers to sell in some or all foreign markets-the usual arrangement is to operate as an export distributor for other

suppliers PURCHASING AGENTBy residing and conducting business in the exporter’s country, the purchasing

agent is in a favorable position to seek a product that matches the foreign principal’s preferences and requirements-also known as commission agent, buyer for export, commission house, and

export buying agent COUNTRY CONTROLLED BUYING AGENT-performs the same function as the purchasing agent, the only distinction being that a country controlled buying agent is actually a foreign governments

agency

RESIDENT BUYER-is an independent agent that is usually located near highly centralized production Industry-offer a favorable opportunity for a supplier to maintain a steady and continuous relationship as long as the supplier chain remains competitive EXPORT MERCHANT-seeks outs needs in foreign markets and makes purchases from manufacturers in its own country to fill those needs-handles staple goods, undifferentiated products or those in which brands are unimportant- Export merchant resells the goods in its own name through contacts in foreign markets EXPORT DROP SHIPPER-also known as a desk jobber or cable merchant-upon the receipt of an order from overseas, the export drop shipper in turn places an order with a manufacturer, directing him to deliver the product directly to the foreign buyer-is common for bulky products of low unit (coal)

EXPORT DISTRIBUTOR-differs from a foreign distributor simply in location-export distributor is located in the manufacturer’s country and is

authorized to sell in one or more countries abroad TRADING COMPANY-May buy and sell as a merchant-resembles an EMC,except for the fact that it has more diverse

products, offers more services, is larger and better financed, takes title to

merchandize, goes beyond the role of an intermediary by engaging directly in

production, physical distribution channel development,financing,and resource

development

FACTORS AFFECTING CHOICE OF CHANNELS 1. Middlemen Criterion2. Self Reliance Criterion3. Specific Country Reference Criterion

PRICING POLICY IN INTERNATIONAL MARKETSPrice refers to the value of the goods and services expressed in

terms of money.”“Price is also related to value. The price that a customer is

willing to pay depends upon the perceived or actual value received.”

OBJECTIVES OF PRICING Survive Increase Profits Increase the Market ShareMaximize Market SkimmingProduct Quality LeadershipFace CompetitionBrand Loyalty and GoodwillAchieve the Organizational Objectives

FACTORS THAT DETERMINE INTERNATIONAL PRICING DECISIONS

Company and Product FactorsCorporate ObjectivesProduct Life Cycle, USP,Product development costTransportation Market FactorsConsumer’s expectations and ability to payNeed for product adaptationDistributions strategyNeed for creditCompetition objective Environmental FactorsGovernment influencesLevel of inflation

PRICING STRATEGIESLocal PricingStandardized PricingPenetration PricingSkimming PricingCompetitors PricingTransfer Pricing

COSTING/PRICING METHODSI) Cost oriented methodsa] cost plus pricing-adding a certain percentage to the cost price to fix the selling

priceb] Mark up pricingAre calculated as a percentage of selling pricec] break even pricing-the firm determines the level of sales needed to cover all of the

relevant fixed and

variable costs.d]Target return pricing-the firm set prices in order to achieve a particular level of return on

investmente] Marginal cost pricingThe marketer considers only the variable costs in fixing pricesf]Early cash recovery pricing-some firms may fix a price to realize early recovery of investment

involved ,when market forecasts suggest that the life of the market is likely to be short

II) Market oriented methoda} perceived value pricingA good no of firms fix the price of their goods and services on the basis of

customer’s perceived valueb}Going rate pricingThe benchmark for setting prices is the price set by major competitor(s)c} Sealed – bid pricingIn this case ,the buyer expects the lowest possible price, and the seller is

expected to provide the best possible quotation

d} Differentiated pricing-Firms may charge different prices for the same product or service-some types areCustomer segment pricing (customer groups are charged different prices depending upon size of the order, payment terms)Time pricing (where different prices are charged at different timings or seasons)Area pricing (where different prices are charged in different market areas)Product form pricing (where different versions of the product are priced differently but not proportionately to their respective costs)e} Two part pricingService firms often adopt two part pricing ,consisting of a fixed fee and a variable using fee e.g. telephone companies

BREAK EVEN ANALYSISAssumptions and limitations of BEP AnalysisBreak-even analysis is only a supply side. Does not account for

demand. It assumes that fixed costs (FC) are constant. It assumes average variable costs are constant per unit of output. It assumes that the quantity of goods produced is equal to the

quantity of goods sold.Method of production does not change.No change in pricing policy.Product mix remains the same.

Advantages of BEP analysis It is easy to understand and cheap to carry out. It can show the profits/losses at varying levels of output.Helps management to decide the production level. It provides a simple picture of a business - a new business will

often have to present a break-even analysis to its bank in order to get a loan.

EXPORT PROMOTION MEASURES IN INDIA

I) IMPORT FACILITIES TO EXPORTERS

• Export Promotion Capital Goods Scheme (EPCG) Scheme-Introduced by the EXIM policy of 1992-97-enables manufacturer exporter to import machinery and capital goods

for export production at concessional or no custom duties Advance Authorization Scheme-Is issued to allow duty free import of inputs, which are physically

incorporated in export productDuty Free Import Authorization (DFIA) Scheme-is issued to allow duty free import of inputs ,fuel,oil,energy sources

which are required for production of export products-issued only for products for which Standard Input and Output Norms

(SION) have been notified

II) DUTY REMISSION SCHEME:

Duty Entitlement Passbook (DEPB) Scheme-objective of DEPB is to neutralize the incidence of customs duty on

import content of export productDuty Drawback(DBK) Scheme-is administered by the Directorate of Drawback, Ministry of Finance-exporter is entitled to claim customs duty paid on import of raw

materials, components and consumables and central excise duty paid on raw

materials, components and consumables utilized in manufacture of exportable

goodsExcise Duty Refund-Is a tax imposed by the central govt on goods manufactured in India-is collected at source i.e. before removal of goods from the factory

premisesCentral Sales Tax ExceptionService Tax ExemptionOctroi Exemption

III) FISCAL INCENTIVES:Exemption from Income Tax

IV) MARKETING ASSISTANCE: Market Development Assistance (MDA)-is allowed to delegations travelling abroad for market survey sponsored by

theEPC’s,CB’S and FIEO-amount granted varies from 25%-60%of the actual expenditure incurredMarket Access Initiative (MAI)-scheme is formulated on focus product-focus country approach to evolve

specific market and specific product through market survey

V) SUPPLY OF RAW MATERIALS

Industrial Raw Material Assistance Centre (IRMAC)-subsidiary of STC-import raw materials in bulk and supply to registered exporters against a

valid import license

VI) INSTITUTIONAL MEASURES Indian Institute of Foreign Trade (IIFT) to provide training facilities Indian Institute of Packaging(IIP) to upgrade packaging standardsExport Promotion Council’s (EPC) to undertake export promotion

activitiesExport Inspection Council (EIC) to upgrade quality standardsExport credit Guarantee Corporation (ECGC)to protect exporters

against payment risks Indian Council of Arbitration (ICA) to settle and solve disputes

between importers and exporters INCOTERMS-introduced in 1936-Purpose is to provide common interpretation for the different trade

terms used in international tradeGROUP E –DEPARTURESa)EXW-Ex-works-exporter delivers goods to the importer at his factory premises and all

risks and expenses thereafter are borne by the importer

GROUP F-MAIN CARRIAGE UNPAIDa)FCA-Free carrier-seller hands over the goods, cleared for export, in to the custody of the

first carrier named by the buyer at the named place-suitable for all modes of transportb) FAS - Free alongside ship-Carriage to be arranged by the buyer-Risk and cost transfer from seller to buyer when the goods have been

placed alongside the ship-Used only for maritime transportc) FOB - Free on board-Carriage to be arranged by the buyer-Risk and cost transfer from seller to buyer when the goods pass the

ship’s rail -Used only for maritime transport

GROUP C-MAIN CARRIAGE PAIDa)CFR -Cost and freightCarriage to be arranged by the seller

Risk transfer from seller to buyer when the goods pass the ship’s rail

Cost transfer at the port of destinationUsed only in maritime transport.

b) CIF- Cost insurance and freightCarriage and insurance to be arranged by the sellerRisk transfer from seller to buyer when the goods pass the ship’s

railCost transfer at the port of destinationUsed only in maritime transport.

c) CPT -Carriage paid to Carriage to be arranged by the seller to the named port of

destination.Risk transfer from seller to buyer when the goods are handed over

to the first carrierIs the general/multimodal equivalent of CIF

d) CIP- Carriage and insurance paid to

Carriage and insurance to be arranged by the seller to the named port of destinationRisk transfer from seller to buyer when the goods are handed over to the first carrierIs the general/multimodal equivalent of CIF

GROUP D-ARRIVALa) DAF- Delivered at frontierCarriage to be arranged by the seller Risk and cost transfer from seller to buyer when the goods have been delivered at the frontierWhen the goods are transported by rail and road.

b) DES- Delivered ex shipCarriage to be arranged by the seller Risk and cost borne by the exporter up to the arrival of the vessel at the named port

c) DEQ- Delivered ex quayCarriage to be arranged by the seller Exporter undertakes to make goods available at the port of destination Bears the cost of discharging them from quay.

d) DDU -Delivered duty unpaidCarriage to be arranged by the seller Risk and cost transfer from the seller to the buyer when the goods are placed at the named place of the destination.

e)DDP- Delivered duty paidCarriage to be arranged by the seller Seller pays for all transportation and risk till the goods are delivered.Comprehensive price quotation for buyer

As of January 1, 2011 the eighth edition, Incoterms 2010,[1][2] have effect. The changes therein affect all of the five terms previously listed in section D, which are now obsolete and have been replaced with these three:

DAT (Delivered at Terminal)DAP (Delivered at Place)DDP (Delivered Duty Paid)The new terms apply to all modes of transport.

IMPACT OF CONTRACT CONDITIONS ON EXPORT PRICE OFFERS1)Base of export price quotation-since transport costs account for a fairly substantial proportion of total

C&F/C.I.F costs, any increase in freight can substantially affect the profitability of

export transactions.2) Exchange rate variation Quote in Indian rupees Quote in the currency desired by the importer ,but also insert a clause

that the quotation is based on present exchange partly and the change will be on the buyers account

3) Packing of export consignment4) GuaranteeManufacturers prepare the standard guarantee clause and absorb the

anticipatedexpenditure on guarantee/warranty provisions in price calculations5)Price variation formula-only cost changes on account of labour and raw materials will be taken

intoaccount while determining the final prices to be paid

“Research is a systematic design, collection, analysis and reporting the findings and solutions for the marketing problems of a company”.

- Murthy & Bhojanna

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MARKET SELECTION

INTERNATIONAL MARKET RESEARCH

65

66

67

IDENTIFYING FOREIGN MARKETS

FACTORS AFFECTING THE SELECTION OF FOREIGN MARKETS

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INTERNATIONAL MARKET SELECTION PROCESS

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70

Market Segmentation“Market segmentation means breaking down the total market into

self contained and relatively homogenous subgroups of consumers, each

possessing its own special requirements and characteristics.”

- Robert Benett

ESSENTIAL CHARACTERISTICS OF MARKET SEGMENTSMeasurabilitySubstantialAccessibleActionableDifferentiable

BASIS FOR MARKET SEGMENTATION

SELECTING THE MARKET SEGMENTS

M1 M2 M3

P1

P2

P3

Single Market Specialization

Selective Specialization Market Specialization

Product Specialization Full Market Specialization

P = ProductM = Market