BASICS OF INTERNATIONAL MARKETING

FLOW OF PRESENTATION

Definitions & Concepts International Environment Scanning EPRG Framework Methods of Entry

DEFINITION

IM is the performance of business activities designed to plan, price, promote & direct the flow of company’s goods & services to consumers or users in more than one nation for a profit.

TRENDS AFFECTING GLOBAL BUSINESS

WTO & Regional Free Trade Areas Acceptance of free market system by

developing countries The burgeoning impact of Internet & other

global media

DIFFERENCE B/W DOMESTIC & INTERNATIONAL MARKETING

Marketing concepts are universally applicable The answer lies not with the concepts of

marketing but with the environment

NEED/ FACTORS FOR IM

1. Business Factors 2. Competitive Factors

BUSINESS FACTORS Profitability Achieving Economies of Scale Marketing due to life-cycle Uniqueness of Product / Services Access to imported inputsCOMPETITIVE FACTORS The company’s domestic market might be

attacked by global firm’s offering better products or at lower prices.

Counterattack by the domestic firm in the competitors home market.

BUSINESS ENVIRONMENT IN IM

Domestic Environment has profound effect on firm’s foreign market operations e.g. Lack of demand in domestic markets, export incentives etc

Foreign Environment- Firms are generally not aware of these factors. The problem gets complicated with increase in no. of foreign markets

Global environment- Has influence over both domestic & foreign markets.

RELEVANCE OF INTERNATIONAL BUSINESS ENVIRONMENT

No two countries have similar business environments & demand different business strategies.

It becomes imperative for the firm to have in-depth knowledge of all environments.

ANALYSIS OF THE COMPONENTS OF THE FOREIGN ENVIRONMENT

Depends on the nature of the firm. Exporting unit or manufacturing plant

GEOGRAPHICAL ENVIRONMENT

Affects the demand pattern - Climatic conditions- Rolls Royce cars from

England, required extensive body work and renovations in Canada because the salted sand.

Firms plant decision location- Foreign country's nearness to other markets and its strategic location on major trade routes are other equally important considerations.

Location of a country on the world map- It affects its trade prospects with other countries. Landlocked countries such as Bolivia, Zambia and Zimbabwe ,are not only costly to reach but are also difficult to penetrate as trading with these countries depend upon their relations with neighboring countries through which goods have to cross.

ECONOMIC ENVIRONMENT

Economic Development Income Sectoral distribution of GNP Income Distribution Per Capita income Expenditure Pattern Infrastructure- Affects firms ability to reach

various market segments

FINANCIAL ENVIRONMENT

Monetary & Fiscal policies Commercial & Foreign Investment policies Balance Of payments account- Countries

running deficit in their balance of payment accounts generally impose controls on movement of foreign exchange into and out of their economies. These controls prompts the MNCs to resort to transfer pricing mechanism, i.e., over invoicing of imports and under pricing of exports so as to move out more than permitted funds from such countries.

SOCIO- CULTURAL ENVIRONMENT Influences all aspects of human behavior A single national and political boundary does not

necessarily mean a single cultural entity. Canada, for instance, is divided between its French and English heritages, although politically the country is one.

Language- e.g. Nova Aesthetics- The colour of mourning is black in the

United States, but it is white in the Far East. Green is restful colour to Americans, but it is disliked by people in Malaysia where it connotes illness and death. Symbols also need to be interpreted correctly, Seven, for instance, signifies good luck in the United States but just opposite in Singapore, Ghana and Kenya

Education- Availability of educated manpower like skilled labour, technicians and professional.

Media to be used by a company for promoting its products. The conventional forms of printed communications do not work in countries where literacy rates are low

Religion & Superstitions- Location of a building and its architecture in many Asian countries is governed by the principles of 'vastushastra' rather than purely geographical and economic considerations

Attitudes & Values- Americans are more risk taking

Material Culture Business customs & Practices- In

countries like the United States it is necessary to have final agreement in writing, this practice is not much appreciated in many West Asian countries where oral agreement alone is considered more than sufficient.

EPRG FRAMEWORK

This is four types of attitudes or orientations towards internationalization that are associated with successive stages of evolution

Ethnocentrism- Home Country Orientation Polycentrism- Host Country Orientation Regiocentrism- Regional Orientation Geocentrism- World Orientation

Management’s orientation- Management’s assumptions and beliefs:

How it views the new market opportunity How it plans to enter the foreign market How it views the culture, preferences of

customers in foreign market etc.

THE ETHNOCENTRIC ORIENTATION

It is a belief which considers- one’s own country/ culture, products as superior

It views similarities in all markets/ foreign country market

Products/ services/ management practices/ methods that is being offered/ followed in one’s own country/ successful in one’s own country will be acceptable in other world markets, anywhere.

Adaptation of the product is not required.

CRITICISM OF ETHNOCENTRISM

Ignore foreign market and therefore loose great opportunities.

No Adaptation in marketing

THE POLYCENTRIC ORIENTATION

Opposite of Ethnocentrism It views each country as unique. Each subsidiary is to develop its own unique

business. Each subsidiary to develop its own marketing

strategies to succeed in its own right

THE REGIOCENTRIC ORIENTATION

Management views regions as unique. Management seeks to develop an integrated

regional strategy, to market product/services- inthe particular identified region.

Regions are considered to be one- i.e. consumers having one taste, choices, preferences, one regional identity etc.

NAFTA, EU etc are examples

THE GEOCENTRIC ORIENTATION

The Company views the entire world as a potential market.

Company strives to develop integrated world market strategies.

It views similarities and differences in markets and countries.

It seeks to create a global strategy- responsive to local needs and wants.

ENTRY STRATEGIES

FOREIGN MARKETENTRY

MANUFACTURINGAT HOME

MANUFACTURINGABROAD

INVESTMENTENTRY

EXPORTING CONTRACTUAL

DIRECT INDIRECT LICENSING/FRANCHISING

CONTRACTMANUF.

JOINT VENTURES

ACQUISITION/SELF-BUILT

EXPORT APPROPRIATENESS:

The volume of foreign market is not large enough to justify production in the foreign market.

Cost of production is higher in the foreign market. Production bottlenecks like infrastructural problems,

problems of materials supply, labour unrest, etc. Political or other risks of investments in the foreign country. No guarantee of the market available for longer period. Foreign investment is not encouraged by the concerned

foreign government. Excess production capacity in the domestic market Expansion of existing facility is less expensive and easier than

setting up production facilities abroad. Very attractive incentives are available in the country for

establishing facilities for export production

EXPORT

Economies of scale Easy to implement Least Risky

- Higher unit cost to consumer

– Likely lower market share

– Limited learning on country market characteristics

Advantage Disadvantages

INDIRECT EXPORTING

A third party arranges the documentation shipping and selling of an organization’s goods abroad.

Lowest level of commitment to international marketing

The third party refers to independent middlemen

ADVANTAGES

No investment of resources in collecting marketing intelligence for setting up of export department etc. and can receive instant foreign market knowledge.

In case the export house works on commission basis, there is incentive for the export house to expand sales.

Export house will be effecting consolidated shipments, there is a possibility of reduction in unit freight.

The reputation of export house will enable the manufacturer to get better representation for his products abroad.

In case the export house is selling complementary products, sales might increase.

DISADVANTAGES

The export house, in order to earn more through commission may take an too many unrelated lines resulting in the producer getting neither the expertise nor the attention he is looking for.

Manufacturer depends on the export house and not developing export expertise himself.

Export house will be pushing the product abroad on its own name and reputation.

Direct Export As foreign sales grow, an organization often

begins to make a limited commitment,frequently documenting itself/ deciding tohandle their own exports.

LICENSING

Here the licensor licenses a foreign company to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty.

The licensor gains entry into the foreign market at little risk

The licensee gains production expertise or a well-known product or name without having to start from scratch.

Advantage Very flexible Import restrictions in the foreign market. When the transportation costs are higher in

relation to product value.

FRANCHISING

Franchising is a special form of licensing in which a parent company (the franchiser) grants another independent company (the franchisee) the right to do business in a prescribed manner.

In this arrangement, the franchiser makes a total marketing programme(including the brand name, logo, and the method of operation) available to the franchisee.

CONTRACT MANUFACTURING

– Faster start– Reduced investment

in manufacturing– Ability to take

advantage of established manufacturer’s experience and cost structure (experience curve)

– “Training” of competitor

Advantages Disadvantages

JOINT VENTURES

Extensive form of participation and commitment towards international marketing.

Share ownership and control. Might be necessary or desirable for economic

or political reasons. The foreign firm might lack the financial,

physical, or managerial resources to undertake the venture alone.

Particular foreign government might require joint ownership as a condition for entry.

DIRECT ENTRY--ACQUISITIONS

– Control– Learning about

country market– Inorganic growth

– Large investment; risk– Risk of nationalization– May take longer to be

successful

Advantages Disadvantages

e.g. DRL's Acquisition of Betapharma

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