INTERNATIONAL MARKETING

OVERSEAS MARKET SELECTION I

PRESENTED TO:

PROF. MADHAVI

GROUP MEMBERS:
NAME
Nisheeth Nair Shrutika Katile Ramya Nair Gitanjali Palav Nitesh Shahani Swati Krishnan Chaitanya Udyavar

ROLL NO:
10 21 32 34 39 47 48

METHODS OF MARKET ENTRY

1) EXPORTING: Physical movement of goods and services from one country to another through shipment following the rules of the country of origin and destination. Exporting can be further classified as:
a) DIRECT EXPORTING. a) INDIRECT EXPORTING.

Direct Exporting
Export by manufacturer himself
No middlemen involved Direct exporting possible by establishing sales branches or subsidiaries in foreign countries. Not preferred by small manufacturing companies.

ADVANTAGES OF DIRECT EXPORTING

1. The profit margin is more due to reasonable selling price. 2. It enables intensive use of selected foreign market. 3. Exporter can ensure direct and full benefits of various export incentives. 4. It can export independently and regularly. 5. Enables full utilization of production capacity.

6. Risks in marketing is divided due to wide marketing area. 7. Manufacturer importing goods on a large scale has to accept certain export obligation. 8. Firm can establish close contacts with customers. 9. Exporter can effectively control the various export operations. 10. The manufacturer-exporter gets first hand and reliable information.

LIMITATIONS OF DIRECT EXPORTING

1) The exporter needs more capital. 2) Small firms cannot export directly due to financial difficulties. 3) The risk involved is more as it has to be entirely borne by the exporter. 4) The manufacturer-exporter has to bear production as well as marketing overheads. 5) Absence of specialization.

Indirect Exporting
An alternative to direct exporting.

Export through marketing middlemen.

Not undertake export marketing operations directly. Preferred by small manufacturing companies. Successful and quick entry in market. Less time

Advantages of Indirect Exporting

Less capital investment. Relief from actual export marketing. Middlemen take keen interest. Minimum risk. Specializes on production. Sharing of overhead cost. Preferred by small firms. Availability of imported raw material and machinery. Provision of after sale service.

Disadvantages of Indirect Exporting

Middlemen may not take adequate interest. No interference of export organization. Exporting firms may not enjoy the benefits. Less reliable information. Lower price as compared to direct exporter.

LICENSING
Under Licensing, a manufacturer enters into an agreement with licensee and this gives him the right to use the manufacturing process, a patent design or a trademark. For such permission, fee/royalty needs to be paid. It is a quick method for entry in Overseas Market. The licensor gets entry into the foreign market without any expenses Eg: Franchising of Coca Cola Company

Advantages of LICENSING
It is a simple method for entry in foreign market The licensor gets guaranteed income in form of fees The licensee gets profit through marketing the product which is already popular in the market It is a cheaper alternative to direct and indirect exporting Trade restrictions have no effect on licensing as products are manufactured and sold in the target market itself

Disadvantages of LICENSING
In licensing, the profit earned by the licensee is more as compared to the fees or royalty payment. The licensor may suffer loss on long term basis.
It is a technique available only to reputed firms. Licensor has limited control on the licensee as regards production and marketing.

FRANCHISING
Franchising is a form of licensing. The franchisor exercises more control over the franchise. The franchisor not only supplies the product but also provides services such as brand name, trademark, product, operating systems, technical knowhow etc. NIIT and APTECH have appointed franchisers in China, southeast Asia, Africa and middle East. Depending on socio-cultural requirements of the country the franchisor allows product adaptation. Franchising is the fastest moving global business.

CONTRACT MANUFACTURING
Contract manufacturing is a popular methods of entry in international marketing. In service sector, contract manufacturing offers ample opportunities in the form of Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO). The company need not establish its production facilities, there is no risk of investing in foreign countries contract manufacturing is less risky to start the business. Contract manufacturing at times faces problems because there is less control over the manufacturing process.

MANAGEMENT CONTRACTING
One of the basis of association between domestic firm and foreign firm relates to seeking assistance of advanced technology and managerial expertise from foreign countries. It is an agreement between 2 companies whereby one company provides managerial and technical assistance for which proper monetary compensation is paid.
Such compensation could take the form of fixed amount , lump sum fee , a percentage of sales or shares in profit.

 Under this arrangement the supplier brings a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership By using the services of experienced personnel's it enables the firm to commercialize existing know how and can reduce the impact of business fluctuations

 JOINT VENTURE:
It is one more method available for entry in the foreign market. It involves capital partnership between a foreign company and a local company. It is a partnership of two or more companies. It enables the local firm to get technology, machinery, know-how, consultancy services, etc, from the foreign partners. Gives easy entry to Indian companies in foreign countries for export of goods, machinery, technology and consultancy services.

At present, liberal facilities are provided for joint venture abroad. Indian joint ventures are located in the neighbouring countries of South and East Asia followed by UK, USA, West Asia and Africa.

i.

Joint Venture takes place when: The domestic investor buys an interest in a manufacturing unit situated in a foreign country. ii. A domestic investor and an investor of a foreign country jointly start a new venture in that foreign country.

 COLLABORATION
Collaboration refers to work in partnership. They offer technical services to Indian firms. Collaboration is tie-up which could take place in finance, HR, R & D, systems management etc. Eg: Bajaj Auto, Hero Honda, Kinetic-Honda, and IndSuzuki. Eg: collaboration of Kellog Business School with Indian School of Business.

 MERGER
Two companies come together but only one company survives and the other goes out of existence. Merging company goes out of existence but the merged company operates with its original name. Shareholders of merging company are given the shares of the merged company. The acquiring company takes over the shares of another company called acquired company. After merger, the acquired company losses its identity permanently.

 Types of Mergers
Mergers

Horizontal
Both the companies are engaged in the same line of Business Eg. HDFC Bank & Times Bank

Vertical
The combining companies are engaged in the successive stages of production.

Conglomerate
The combining companies are engaged in different business activities.

 TAKEOVER/ACQUISITION
One company gets control over the other company. Such acquisition may be for cost saving, for revival and expansion, or for going global. A corporate takeover does not result in the automatic dissolution of the company whose shares have been acquired. The identity of the company taken-over is retained. In India, takeovers are increasing since 1990. this is due to dilution of MRTP Act 1989 relating to regulation of monopolies & economic reforms.

 Examples of Takeover

Of 1. 2. 3. 4. 5. 6. Godrej Refrigerators Modern Foods Parle Soft Drinks Tetley Tea South India Shipping Kelvinator Refrigerators

By General Electric HUL Coca-Cola Tata Tea Essar Shipping Whirlpool

TAKEOVER V/S ACQUISITION

1. 2.

Acquisition Both the partners are willing to merge. Acquisition is with mutual consent.

Takeover The willingness is absent in the sellers ,management Takeover is with force i.e. without the consent.

 TURNKEY PROJECTS:
Turnkey project take place between a technologically advanced country and an industrially backward country. The country providing advanced technology is involved from inception to completion. It takes up responsibility to supply capital, skilled manpower, erection of plant, installation, trial run & commissioning of the project. The supplier gets fix payment or cost plus profits. Turnkey projects are common in the fields of airport, power plants, dams, highways, railway lines, refineries & steel plants. The turnkey contractor is able to achieve economy in completion before time or saving in finances without sacrificing quality, it enables him to increase his profitability.

FOREIGN DIRECT INVESTMENT(FDI)

Investment is the flow of funds from one country to another or industrial development, infrastructure & manufacturing. Mostly LDCs & developing countries needed financial resources & rarely investment is needed by the developed countries. In India Pepsi, Coca Cola, Kellogg's & Hyatt have invested despite the fact that profits are expected only after gestation period.

FDI is beneficial is to LDCs & developing countries, hence they offer attractive schemes & incentives to the countries willing to provide FDI.

FDI is provided through the following method:

They control operations through subsidiaries.

They exercise control through intellectual property rights, technology, brand name & manufacturing expertise.
In order to monitor day to day operations they appoint a person or a team of experts where investments are made.

COUNTER TRADE:
It is a form of international trade. Certain import & export transaction are directly linked with each other in which import of goods are paid for by export of goods & not money payment. Counter trade is typically a different & unconventional international trade practices which removes currency transactions when exchange of goods takes place. Country that suffers from paucity of foreign exchange reserves still remain actively involved in international trade by using counter trade. If a country refuses or delays payment even though foreign exchange reserves exists this results into non-repatriation of payment. This problem can be corrected through counter trade.

CATEGORIES OF COUNTER TRADE:

COUNTER TRADE

PURE BARTER

BUY BACK

COUNTER PURCHASE

Product-to-product Exchange.

Buy the end product from the host partner.

Exchange of goods in various countries until foreign exchange improves.

WHOLLY-OWNED FOREIGN SUBSIDIARY:

A firm interested in exporting may establish a subsidiary manufacturing unit in a foreign country. The marketing firm will be the exclusive owner & controller of the subsidiary. Such subsidiary is the result of direct investment in a foreign country. The subsidiary will manufacture & market the products in the foreign country but the benefits will be available to the home investors. Sometimes the subsidiary may purchase raw materials from the foreign market & send them to the manufacturer who will manufactures the products & send back to the branches for distribution to consumers. Subsidiaries are different from branches as subsidiaries are separate companies & follow the instructions of their holding company.

IDENTIFYING FOREIGN MARKETS

Select few markets which are most convenient, promising & profitable. This process is called Tapping the Foreign markets or exploring world markets for exports. The Foreign Markets selected through detailed study are treated as target markets & efforts are made to promote such promising markets. Tapping promising export market is essential as it facilitates maximum sale at minimum cost Relevant information needs to be collected & analyzed in depth Tapping Foreign Markets is costly & Time consuming activity as global market is very wide & provides ample scope for selection

SELECTING POTENTIAL MARKETS

Market the right product at the right market.
Time & money consuming exercise to select potential markets. Desirable to concentrate in few markets rather than spreading into many markets simultaneously. Identify the Overseas potential markets.

CLASSIFICATION OF WORLD MARKETS

Existing Markets: In the Existing markets, consumer needs are known and they are being served with some specified products Potential Markets: These markets represent consumers having potentiality to purchase the products Incipient Markets: Export firms can use market research to know the trends & preferences that indicate the emergence of future markets

Economic Features Of Selecting a Market

Income of the country and the people. Amount & distribution of wealth. Work-Habits & occupations. Consumer movement within & outside the country. Money in circulation. Taxation System.

Political Features Of Selecting a Market

Stability Of Government.
International relations. Environment favorable to business.

Rules & regulations.

 Physical Features
Climatic Conditions Topography of the country Forests & Deserts
Transport & Communications
Cost Speed Frequency Mode

Nature Of Markets
Size of the markets Extent of Competition Distribution Network Composition Of consumers

Industrial Development FDI Extent & Stage of Industrial development Scope of expansion

Practices In International Market

Exploring External Markets for Indian goods Selection of Suitable Foreign Markets For Exploration: International Marketing Research is necessary Investigation by individual export organizations like Export Promotion Councils, Trade Associations, Chambers of Commerce, Organization of Exporters, etc

Areas Of Market Study for Exploration

A) KNOWLEDGE OF PRODUCTS.
B) KNOWLEDGE OF FOREIGN MARKETS. C)KNOWLEDGE OF MARKET COMPETITION.

KNOWLEDGE OF PRODUCTS
A product that is good for Home Market may not necessarily be good for Foreign Markets. Product modification or improvement maybe necessary. Quality of Production is Case Sensitive.

Product requirements while exploring Foreign Market

Suitability of existing products in foreign market Need for Variations required in the existing product Special requirements of foreign markets w.r.t size, design, color, etc of the product Prices prevailing for the products in foreign markets Tariff and other trade barriers Transport, Storage and other marketing facilities Patents and Trademarks abroad Quality standards in foreign market Packaging requirements of the product Competition to the product after its introduction

KNOWLEDGE OF FOREIGN MARKET

Detailed knowledge of Foreign Markets is necessary Markets of Developing & Developed Countries- The preference Government Policies in the Foreign Market Various Pivotal aspects of Foreign Market like: Physical Features, Size, Economic Characteristics, Political Influences, Transport and Communication, etc

KNOWLEDGE OF MARKET COMPETITION

Accurate Assessment of Market Competition.
Details of Competitors Pricing and Promotion Policies. Study of Commission offered to Distributors & After Sales Services offered to Consumers. Time Factor.

Necessities Of Exploring World Markets

Facilitates Planning Gaining Reliable Information Adequate Decision Making
Market Selection Decisions Operating Decisions Marketing Mix Decisions Marketing Organization Decisions