INTERNATIONAL MARKETING

MBA-IV SEMESTER

Course Objectives:

The course objectives are to familiarize the students with the International
market and to understand the working of International Organizations and
their changing role in the context of globalization of the world economy.

Course Contents:

Unit I Introduction, Meaning & Concepts of International

Marketing, Distinctions between Domestic & International
Marketing & International Trade, Barriers to International
Marketing.

Unit II International Marketing Environment- Economic, Social,

Cultural, Political & Legal Environment, Factors affecting
International Marketing Environment.

Unit III International Marketing Strategies-, Product Strategy, Pricing

Strategy, Promotion Strategy & Distribution Strategy.

Unit IV Export Procedure & Documentation, International Economic

Institutions-IMF, World Bank,

Unit V General Agreement on Tariffs and Trade (GATT), World Trade

Organization (WTO), United Nations Conference on Trade and
Development (UNCTAD), European Union (EU).

Suggested Readings:

1. Mishra M. N. -International Marketing Management, Oxford &

IBH Publishing, 1993
2. Varshney R.L. & Bhattacharya B., “International Marketing
Management”, Sultan Chand & Sons, 1999
3. Cherunilam Francis, “Global Economy and Business
Environment”, Himalaya Publishing, 2001

4. Bennett Roger, "International Marketing", Kogan Page Ltd, 1995

 International Marketing Management

UNIT I
Introduction
International marketing consists of certain special features, which make it quite
distinctive to domestic marketing. Marketing denotes the concept of marketing
management whereby prices, product, promotion, physical distribution and packaging are
to be managed keeping in view the international environment.

Meaning and Concepts

International marketing is the marketing carried on across national boundaries. Philip
Kotler has defined marketing as "human activity directed at satisfying needs and wants
through exchange process".' It is potential exchange for the purposes of satisfying
human needs and. wants. It is a technique used to the conversion of potential exchanges
into realised exchanges. International marketing is the marketing techniques involved
between countries. It is beyond the boundaries of the country. Marketing within the
boundaries of a national can be termed as domestic marketing and marketing activities
beyond the boundaries of the country are termed as international marketing.

Cateora and Hess have defined international marketing as "the performance of

business activities that direct the flow of a company's goods and services to consumers
or users in more than one nation".

He pointed out that the difference between domestic marketing and international
marketing is that the activities take place in more than one country. It involves complex
and diverse problems. The marketing principles are applicable to domestic as well as
international marketing. There is need of marketing as a separate subject for international
activities because of the environment within which international marketing has to
operate. The markets and consumers living beyond the frontiers have different needs,
wants and behavioral attitude and the international marketers may have to deal with them
differently.
Business activities are directly and primarily concerned with the recognition of the
demand and potential demand, stimulation of demand through promotion and selling and
satisfaction of the demand by the product. Warren J. Keegan has pointed out" foreign
marketing is marketing in an environment different from that of the home or base
environment". The activities performed by business enterprise to promote, support and
control the penetrations and development of international market from a production base
either inside the country or outside the country. Product development, pricing, market
intelligence, distribution and promotion of marketing activities across the national
boundaries are termed as international marketing. International marketing covers those
activities, which are performed at international level.
INTERNATIONAL Vs. DOMESTIC MARKETING

The international and domestic marketing are similar in many cases. In both the
markets, success of marketing depends upon satisfying the basic requirements of the
consumers. They have to find out the buyers' needs. It is necessary to win over the
consumers and develop goodwill in both the markets-domestic as well as international
markets. Research and development is essential in both the markets. Although the same
principles of marketing apply to the domestic and international markets, the preparation
of marketing strategy abroad is somewhat very different. There is severe competition in
international marketing. The goods and services have to move across national boundaries
in case of international marketing, which have to face a number of restrictions viz., tariffs
or customs duties, quantitative restrictions, exchange control, and taxes. The differences
between domestic marketing and international marketing are also due to different legal
systems, monetary systems, and lower mobility of factors, differences in procedures and
documentation and differences in market characteristics.
The differences between domestic and international marketing are entirely because of the
differences in national environments, differences in the organisation and programme. The
international marketing is found in the diversity of problems and the variety of strategies.
International trade agreements may cause further distortions. The international marketing
involves different types of languages, culture and traditions. The domestic marketing
works within a few languages, culture and traditions. Patriotism does not help in
international marketing but it is, very helpful to domestic marketing. The domestic
market is much more homogeneous than that of international marketing. Domestic
marketing deals with one currency whereas international marketing deals with several
currencies. Domestic marketing has uniform economic climate while international
marketing has varied economic climates. Political factors and government interferences
are least in domestic markets but they count maximum in the international markets.
Considerable financial and non-financial risks are present in international markets.
Transport cost influences marketing decision to a great extent.
International marketing generally has been divided into foreign marketing and
multinational marketing. Foreign marketing is marketing in environment different from
that of the home or domestic environment. Multinational marketing is world oriented. It
has two or more national markets across the national boundaries. It arises because a
company is simultaneously marketing its products in more than one national
environment.

INTERNATIONAL MARKETING VS. INTERNATIONAL TRADE

International marketing and international trade are interchangeable. But they are not
the same in real sense. The international trade is primarily related to exports and imports.
It takes place when buyers find foreign markets cheaper and sellers find them more
profitable to dispose them of. The comparative cost and natural resources have been the
basis of international trade.
The international marketing is a wider connotation. It is confined not only to sale and
purchase and depending on the international trade theories, but it is a new discipline and
strategy to export for survival and widening of the existing markets for growth. While
international trade is primarily concerned with balance of trade and payment problems,
The International marketing aims to expand the existing markets in foreign countries and
penetrating new markets by applying various strategies of marketing management.
International marketing is the means of achieving the profit by selling or persuading a
potential customer to buy the product. The needs, wants and preferences of the customers
are the determinants not only of product characteristics but also of pricing, distribution,
advertising, promotion and services. The total set of marketing activities known, as the
marketing mix is the components of international marketing. On the other hand, inter-
national trade is least concerned with these individual activities.
International trade has been developed as a result of government's efforts. The country
as a whole bothers about the international trade whereas individual marketers devote their
efforts to achieve profits in the international market. The international trade views the
profit as a function of sales and the international marketing view the profit as a function
of providing customer benefits.

Barriers to International Marketing

International marketing as discussed above is not free from difficulties and barriers.
The marketer has to follow time-consuming procedures and meet the trade regulations.
The tariffs and taxes increase the prices of goods to be marketed. It creates tough
competition with the domestic goods. The trade restrictions also influence the volume of
goods to be exported. It indicates that there are several barriers to international
marketing. Generally these barriers are divided into two parts:
(i) Tariff barriers and
(ii) Non-tariff barriers.

(i) TARIFF BARRIERS

The tariff barriers are the barriers of taxes imposed on the export and import of goods.
During the period of laissez faire, such barriers were very nominal. Even today, countries
adopting bilateral or multilateral agreements lessen such barriers. Originally the tariffs
were imposed to meet the revenue requirements of the country. The government is in a
comfortable position to impose taxes to meet the expenses of security, defense and
administration of foreign trade. Gradually the tariffs became a successful instrument to
protect indigenous industries against the competition from the foreign products.
The tariff makes the imported product costlier and the product of indigenous industries
become cheaper. The import duties collected are used to subsidies the costs of production
of indigenous industries. The tariffs or duties may be levied as a fixed percentage of the
value of imported goods. Fixed sum of money may be charged upon the commodity. A
modified value added method is being used to buy taxes on import and export. Tariff
barriers may be export duties, import duties, transit duties, subsidies duties and anti-
dumping duties.
a) Export Duties: Export duties are levied to acquire revenue as well as to meet the
requirements of the consumers. The export of raw material is discouraged by levying a
higher rate of export duties making export of raw material costlier. It helps to provide
adequate raw material to domestic industries. However, the export duties are levied at
lower rate on the export of manufacture goods to promote a higher amount of export. The
exporting country levies export duties to collect revenue on the export of rare
commodities. The exporter cannot avoid payment of export duties and has to follow the
policies of government.
b) Import Duties: Import duties are generally levied to protect indigenous industries
against foreign industries. It makes imported goods costlier making the domestic
production cheaper which may invite more market. Import duties may be levied for
collecting revenue. The protection policy of India has levied such duties in the early of
twenties of the twentieth century. Import duties have been levied by the government to
protect domestic industries against the aggressive and unfair competitions of foreign
products. The third purpose of import duties is to rectify the unbalanced trade payment.
The import duties are not uniform to all products but the imported products are divided
into several categories depending upon their utilities in the national economy for the
purposes of levying import duties.

c) Transit Duties: Transit duties are levied on the goods and products passing through a
territory, which provides the shortest route. Had the goods and products been shipped by
the normal route, the cost of transportation would have been higher. So they ship their
products by the shortest route. The territory, therefore, is in a favourable position to levy
some taxes of the goods passing through it. The transit duties were common in the old
age but it is now very nominal to meet the expenses of port-administration. Transit duties
have been used to restrict trade in some cases.
d) Anti-Dumping Duties: When the exporting countries do not get a proper place in
foreign market, they sell their product below the normal price or below marginal cost of
production to capture the foreign market. It is known as dumping. The importing
countries levy some duties on such goods to protect the domestic product. Thus, the
international marketer finds it difficult to export its product. He has to adopt such
policies, which may manage the export of goods in case of dumping of goods.

e) Monetary Barriers: Government can effectively regulate international trade by

exchange control restrictions. Differential exchange rate is an indigenous method of
controlling imports.
(ii) NON-TARIFF BARRIERS
Non-tariff barriers create difficulties in exporting of goods. These non-tariff barriers
are generally rules, regulations and restrictions.
These are not the duties or levies. They may be quantitative restrictions, foreign exchange
regulations, technical and administrative regulations: health and safety regulations, prior
import duties, legal formalities, state trading and procurements.
a) Quantitative Restrictions: The quantitative restrictions may be normally imposed in
the form of quotas and licenses. The quotas may be universal or bilateral depending on
the situation. The quantitative restrictions are more selective. The licenses may be
given on restrictive basis to slow down the speed of imports. The international marketer
has to manage its sale within the constraints of quotas and licenses. He ha... to follow
these restrictions and regulations.
b) Exchange Regulations: The exchange regulations are adopted to regulate Imports and
to restrict import to make the trade balance favourable or correct the unfavourable
balance of trade. Unless the regulations' are followed or clearances are made, the" custom
authorities and import administrator will not allow import of the goods. The marketer has
to see that the trade regulations are followed.
c) Technical Regulations: The technical regulations are mainly in terms of production-
quality. The quality of food and dresses, mechanical standard of electrical goods and
machinery and many other technical standards have to be maintained by the exporting
countries so that the product may be accepted by the importing country. The standard laid
down by the importing country should be strictly adhered to by the exporters. Sometimes,
their discretionary powers create more problems of easy flow of goods.
d) Health and Safety Regulations: Health and safety regulations are imposed on the food
products by the importing country. The environments are becoming difficult to import
such goods. The packing, labeling and processing are examined by the importing country
and non-compliance of such regulations makes the international marketing very difficult.
Sometimes, the exporting countries are unaware of the regulations and have to sell the
product at very low rate because returning back of such products may involve more costs.
The international marketing, therefore, requires knowledge of such regulations.
e) Import Deposits: The issue of import licenses requires deposit of import-value. The
importing authorities may require the exporters to deposit hundred percent amount of
export-value with the importing authorities. This deposit is security money to issue
license. Generally, this deposit is required from the unfamiliar exporters.

f) Consular Formalities: The importing countries need some formalities to be fulfilled,

viz., certified invoices, import certificates, consular's certificates and use of languages of
importing countries. The importing countries may levy heavy penalties if the
documentation formalities are not compiled with. The documentation fees are also levied.

g) State Trading: The foreign trade is governed by the government which frames several
import and export policies. These policies change from time to time according to their
economic plans.

UNIT II

International Marketing Environment

International marketers are facing a diversity of marketing environment in which they

have to operate their business. The international marketing decisions are constrained with
the environments. These factors influence the marketing system. The environment has
been varying from country to country making it difficult for the marketer to cope with
different situations of different nations. Realisation and understanding of different
culture, tradition, political Systems, and other factors of all countries. There are several
factors influencing marketing decisions. They may be termed as controllable and
uncontrollable factors. The controllable factors are product, price, promotion and
distribution. These are also known as internal factors or marketing mix. These are called
controllable factors because the marketer can exercise some sort of control over these
factors. The factors which are uncontrollable are known as environment or external
factors which shape the market mix decisions of the international marketer. The
environment may be economic, social and cultural, political, regional and legal. These are
analysed in the present chapter.

Economic Environment
The economic differences of various countries influence the market significantly. The
economic capacity of a country has direct impact on the pattern of buying and selling by
the people. The differences in the standard of living have relevant bearings on the market
systems. The per capita income is the basis of a particular standard of living. The per
capita income has been used to classify the world economy into developed and
developing economy the developing countries, say countries having per capita income
less than $2500 are having simple market. These countries have subsistence level and no
wide and complex market. As per economic development of the countries, the per capita
income rises giving more purchasing power to the

Income
The income of people is a more valuable economic variable to decide the pattern and
structure of international marketing. Population of the country cannot be ignored because
it is population after all which has to purchase particular goods or services. The per capita
income has been therefore used to decide the level of living standard and purchasing
behaviour. One should not be misguided by the gross national income. The disposable
personal income per population is a deciding factor to determine international marketing
mix. The household habits are simultaneously decided by the marketer to assess the
pattern and trend of market.
The exchange rate becomes an important decider of standard of living because the per
capita income in dollar term may be low but in local currency, it may be as good as per
capita income in the USA. Therefore the prices of goods and services in local currency
decide the purchasing power of the consumers at the given per capita income. Goods and
services, which enter in the international market, are decided at the international prices
based on the foreign exchange rate. For example, industrial products sold in foreign
market bear the international price and no local price is of much use. The less developed
countries have low price rate as compared to those of developed countries. Therefore, the
UN-International Comparison Project (ICP) has developed a method for measuring total
expenditure directly comparable to estimates of per capita income. The World Bank has
given this figure on the basis of exchange rate. The ICP is considered more sophisticated
measure. For example, India's real income comes three times greater than the income
calculated on the basis of exchange rate.
The standard of living at a particular level of income is decided by the prices of goods
and services and also on the basis of per capita income. On international level,
comparison of per capita income on local currency or USA dollar based on exchange rate
may not give the correct figure. Therefore the ICP has taken these two factors into
account to decide the level of living in a particular country.
Population
Population is an important factor to determine market potential. It was observed that
about 60 per cent of the world market was accounted by 10 most populous countries. The
world trade and population increased simultaneously. During the second half of the
century world population increased at a higher rate. Consequently, the world market also
increased significantly. It is natural because the demand for food, clothing, shelter,
education, etc. increase as per number of consumers increases. However, the market does
not increase at par with increase in income. The developing countries with maximum
population have different market patterns. The developed countries have low population.
The basic necessities are the predominant needs of the developing countries whereas the
developed countries require the latest and sophisticated articles.
Age and Education

The number of inhabitants is the guiding factor to decide the market pattern. The
demographic features are similarly more important to decide the market potential and
trend of the market. Working force may need different types of commodities and services
whereas the dependents need basic articles for their growth and survival. Developing
countries have a larger number of dependent populations whereas developed countries
have less number of dependents. The market is wide and varied for educated population
whereas the needs of non-educated population are very simple and do not require much
of technical complexities.

Trade Pattern
The trade pattern also influences the marketing structure. The raw materials and other
resources are being exported by the developing countries to the developed countries
whereas the industrial products are being exported from the industrialised countries to
the developing countries. It has been observed from the data of International Trade
published by GATT that the industrialised countries have accounted more than 65 per
cent of world trade whereas developing countries accounted about 20 per cent of world
trade of which 15 per cent was shared by oil exporting developing countries. The eastern
trading countries took about 10 per cent of the world trade. A major portion of export of
the industrialised countries was exported to other industrialised countries. Thus the
competitors of industrialised countries are also best customers. Developing countries
were also exporting a major share of their export to the industrialised countries. Eastern
trading countries have exported major share of their export to eastern trading countries.
The highest exporting countries have been the USA, Western Europe, Japan and Canada
which accounted for more than 70 per cent of the world trade. The maximum importing
countries have also been these countries.
Consumption Pattern

Income is the guiding factor to determine consumption pattern and the relationship
between income level and consumption pattern is known as per Engel's law. After
knowing the consumption pattern, the market structure can be decided. Therefore, income
is used to define market segmentation, Ernst Engel has pointed out that when income
grew above a certain level, expenditure on food as percentage to total income decreases
although the absolute amount of expenditure on food-articles may remain the same or
may increase. It is also revealed in term of developing and developed countries. There is
inverse correlation between GNP per capita and income elasticity of demand for food.
The income and consumption/pattern have important influence on the market. For
example, the sale of air conditioners will not be popular in less developed countries
whatsoever may be the level of hot climate. But, people of developed countries in north
most regions may not require air-cooler. The allied products' sale is also decided
accordingly.

Social Environment
The social environment shapes the international marketing in different manner.
Consumer-behaviour and purchasers' practices are greatly influenced by the system of
society, social attitude and behaviour, social institutions and other social environment of
the customer countries. The international marketing manager should adapt his business
practices as per social environment of the buying countries. The marketing mix is decided
as per social environment. The primitive social system has progressed into proliferation
of organisation. The government tries to serve the interests of society by controlling
business system and the marketing manager should understand clearly the marketing
systems of various societies. The education religion and family system are the important
components of social system and these sub-parts should be clearly understood by the
manager. He should know how physical goods enter in a particular society and more
from one society to another society. He must have knowledge how various components
of social environment influence the marketing process. The marketing implications in the
different social components should be properly assessed and evaluated to form proper
marketing mix.
Human bahaviour in groups and social settings are guidelines to formulate laws and
generalisations about human nature, Social interaction and social organisation. The
individuals who compose each social class are not identical even though they are of equal
status. People of the same social class generally live in the similar kind of houses, have
similar food habits, dress the same kind of clothes, have similar tastes, literature and
interactions. The marketing manager having deeper knowledge of these things can
succeed and attain the objectives of sales and profit.
Cultural Environment
Culture environment is another important external factor, which mould the
international marketing culture, and is a part of human environment. It is a sub-total of
mankind's knowledge, beliefs, morals, customs and habits of the society. It has become a
pertinent study of international marketing. The marketing manager when designing the
marketing mix e.g. production, promotion, prices and physical distribution must consider
the culture of the customer countries. The marketing mix should be culturally acceptable.
The' marketing manager's efforts acceptable as per culture will decide the degree of
success. He should be culturally sensitive so that he can evaluate, appreciate and adjust
his marketing decision as per attune of the nuances of culture. The success of marketing
operations abroad depends on an awareness and understanding of the basic differences in
culture of his country and of customer countries.

ELEMENTS OF CULTURE

Culture includes all parts of life. Specifically they may include

the following elements:

a. Material Culture
i) Technology;
ii) Economy.
b. Social Institutions
i) Social Organisation and Family system;
ii) Education;
iii) Political Structures.
c. Belief of People
d. Aesthetics
i) Religion;
ii) Art; iii) Folklore; iv) Music.
e. Language.

a) Material Culture

The material culture is related to the economic and commercial attitude of the
population; they affect favourably to increase the marketing opportunities. The material
culture has been divided into technological and economic culture.
i) Technological culture: The technological culture is related to the technical know-
how possessed by the people of society. It affects the means of production
adopted for the purpose of getting different types of production. In a poor country,
high technology is considered a waste and is undesirable. The national income
can be used in a better manner for construction of houses, clothing and food. The
sophisticated technology is, much prevalent in developed countries. The
technological culture is different in different countries and therefore the market
has different dimensions there. The electrical appliances are more popular in
developed countries rather than in developing countries.

ii) Economic culture: Economy is compositors of physical and financial behaviour of the
population. People employ their capabilities to satisfy their wants. The production is also
guided by the economic wellbeing of the population. The economic level of the people
influences the distribution, exchange and consumptions. The economic culture affects the
level of demand, the type and quality of products and functional features to direct the
production line. The marketing system and pattern are also influenced as per economic
culture. For example, the use of car is common feature in the U.S.A. whereas it has
become a status symbol in India. Only bureaucracy is often using the car in India. People
in West are materialistic in their approach whereas people in East have self-satisfaction
approach.
b) Social Institutions

The social institutions greatly shape the market. There are some unique characteristics,
which are common in all the social set-ups. But many characteristics are diverse in
different society. Value system is influenced by the value of social prestige attached to
the status symbol. The independent-attitude affects the products they buy and the saving
habits they adopt. The nationalistic and tradition motives influence the buying behaviour.
They are very selective in their approaches. The free and open minded people encourage
more markets and also purchases of different products., There is need to determine the
nature of social pressures to decide the market-pattern. The social institutions may
include social organisation and family system, education and political structure.
i) Social organisation and family system: Social organisation governs the activities of
the people in order to live in harmony, teaches acceptable behaviour to succeeding
generations and decides the position of men and women in society, family and social
classes. The organisations underlie market behaviour through its important components
and classification of egalitarian or on inheritance, material or non-material attitude,
objective or subjective approach, extensiveness or intensiveness and personal or group
gain. The market is influenced by these factors.
Family system is major determinant of the market. It differs from country to country
and caste to caste. Family system decides the positions of men and women in society,
family, group behaviour and social classes. They influence the market through behaviour,
values and overall pattern of society, there is a close knit family units Le., the
promotional campaign is at the family unit rather than at the individual member of the
family. The French and Japanese are more closely tied with family-knit than the people in
Canada and U.S.A. The Moslems consider their wives as subordinate and see with few
rights and title of recognition. However some democratic countries have accepted equal
rights to men and women. There are other societies such ac; Hindu, Japanese and Latin
American where wives are given more liberty to manage the family affair although
husbands have final authority. The most free society does not believe much of family ties.
American has egalitarian society where wives have equal understanding and right and
they are free to behave differently to the family heads' attitude. Since the family system
vary widely, the advertising and physical-distribution should be changed accordingly.
The Christian wear white colour clothes at auspicious occasion whereas Hindus use white
colour clothes at the time of death and inauspicious occasions. Hindus are fond of
jewellery whereas Japanese are repugnant to jewels. There may be several examples of
differences.
ii) Education: Education is backbone of economic development and marketing structure.
The education pattern differs from country to country. Japanese stresses on learning and
practices. Indian emphasises on reasons and logic. English tells discipline and way of
working. The market, therefore, will vary as per education-pattern. The literacy rate and
general level of education affect the market. In Europe, people emphasis on vocational
courses rather than on higher liberal education. Literate people offer more market than
the illiterate people. Educated masses have - varied need as compared to non-educated
people. Americans give much emphasis on the marketing management whereas Japanese
lay stress on personnel management. In less educated society print media of
advertisement have less impact. The radio and exhibition may be utilised for the effective
advertisement.
iii) Political institution: Political institutions form the basis of cultural environment.
They influence the culture positively or negatively. In free economy particularly,
capitalistic economy, people are more free to adopt their way of living, interacting and
forming institutions and organisations. The socialistic and communistic systems do not
emphasise on the way of living. They have compact and controlled economy. The people
behave as per production and consumption pattern. Certain political institutions hinder
marketing organisation or marketing of politically vulnerable products. Legal structures
differ from country to country. The political and legal systems are outcome of the social
institutions and behaviour.

c) Belief of People

The belief of people towards formation of universe has an important bearing on the
culture. Religion, superstitions, belief and related structure affect the value systems,
which influence the marketing.

They affect the people's habit and outlook to life. Media selection can be made on
political attitude. Acceptance of certain types of clothing, food etc. is frequently
influenced by religion. Superstition plays an important role in society's belief. The
superstition includes belief of ghosts, fortune telling, palmistry, and demons’ verdict.
Superstitions believe that the outdoor of house should not be southward. Similarly, other
beliefs influence the marketing pattern.
d) Aesthetics
Aesthetics have a major impact on marketing process. They may be divided in
religion, art, folklore and music.
i) Religion: Religion has been major determinant of the moral and ethical standards.
Northern Europe, Anglo-Saxon have been influenced by the Protestant who have been
hard workers and live a simple life. They give lower priority to labour-saving techniques.
They have set examples to manage businesses. In Puritanical cultures, it is customary to
think of cleanliness as being next to godliness. Roman Catholic believes in human
behaviour. They have their different culture. The Islam preaches a different type of
attributes. They prohibit liquor. Buddhism and Hinduism believe in spirituality and not in
materialistic achievement. Their business and economic well-being have been lagging
behind. The basic tenets of all religion are to be honest, sincere and truthful. The
marketing manager should analyse the fundamentals of all religions to adopt suitable
marketing strategies.
ii) Art: Love of art is one of several segments of culture. Artistic tastes of people are
reflected in the quality of products, advertising pattern and promotion efforts. The
marketing manager should know various methods of artistic expression, standard of
beauty and colour and unless the manager is aware of the artistic-attitude of the
consumers, he cannot correctly interpret the marketing structure and style. Wrong
understanding of the art-culture may be negative to successful marketing. Proper
understanding of the art will attract the customer to the particular product. For example,
the depiction of yellow and godly picture may invite more customers in India whereas red
colour in USA is not acceptable to people.
iii) Folklore: Folklore is very strong communication of culture. The characteristics of the
culture can be easily assessed with the uniqueness of the folklore. Indians may like to use
their local dance and drama
Political Environment
The political environment includes laws, regulations, government action and
reactionary forces of opposite political parties. The role of political parties has greater
influence on the marketing system of the country. The government directs and controls
the economy, which shapes the marketing system and culture of the countries. The
philosophies and principles of various political parties and also of several organisations
and associations have significant bearings on the marketing structure. For example,
international marketers have no easy entry in the communist countries whereas they can
enter in capitalists’ countries with competitive spirits. The government's participation and
intervention in economic and commercial activities have become common phenomena in
many countries although the degree of intervention may vary from country to country.
The international marketer tries to find out whether his product is politically acceptable.
He has to adopt such policies, which may encourage marketing in such countries. If the
government decides to accept foreign investment and joint venture, the foreign may get
adequate market. The developing countries have been accepting foreign collaboration for
the development of basic and key industries as well as for the expansion of infrastructure
facilities. They may also attract foreign capital and skills for rapid industrialisation.
During war and internal trouble, the government may decide very selective attitudes.
The government may adopt expropriation, prohibition, nationalisation etc.. The political
risks are always doubted in foreign countries. The international marketer must consider
the consistency of government policies, the presence and absence of controls and
relationships with the foreign countries. The foreign government can encourage
international marketing by providing bounties and subsidies. The host country judges
every foreign business by standards of the nations, political philosophies and attitudes of
government.
The international marketer should assess the political environments-i) Political Party
Systems, ii) Stability of Government, iii) Nationalism, iv) Political Vulnerability, v)
Political Risks, vi) Other Risks, (vii Policies of Foreign Investment for achieving success
in the foreign business.

POLITICAL PARTY SYSTEMS

The political party or government systems may take the form of democracy, socialistic,
communistic, dictatorship or monarchy. These forms of government have different
impacts on the foreign trade Le., export and imports by them. The international marketer
must have knowledge of these governments and their possible impacts on his business.
Without having proper understanding of the form of government, the marketer cannot be
successful in his trade.
Its people generally decide the form of government. Its people can change the
monarchy if they decide to overthrow the monarch and replace him by a popular leader.
The will and desire of the masses have influenced the formation of government.
STABILITY OF GOVERNMENT
The stable government may form stable policies of trade. The permanency is more
linked with the stability of the policies. Frequent changes of government or political
parties may have diverse effect on the trade, as radical changes in policies create
uncertainty of market. The long-range policies and philosophies provide an opportunity
to predict the stable policies. The investment in foreign countries is determined by the
climate of the countries. Unpredictable and drastic changes are more fatal to
international market than the opposition and hostility to foreign entry in the countries
because the marketer becomes clearer in the latter situation and may not take the risk of
sale or investment in those countries. Uncertainties will increase the risk of loss of
capital, as instability is prone to frequent changes of form of government. Frequent
changes occur when other form often replaces one form of government. Foreign market
becomes feeble when there are social discontent and national frustrations, since the
reformist government may impose reprisals against foreign marketers. The changes of
head of the government are not so severe as overthrowing of the government by another
government.
NATIONALISM

Nationalism is love of one's nation. The people think in the term of national interest
and integrity for the economic and political organisation. The wave of nationalism is
spreading throughout the world. If the nationalism will continue in its strict sense of
application, the world trade may face strong protectionism. The nationalism tries to
preserve the national economic autonomy. The individual residents give more importance
to their national-interest than serving their own interests. The sovereignty of the state also
known as patriotism is identification of loyalty nationalism. Nationalism is pervasive
although it may have different degrees of philosophy, styles and interest as per the
people's attitude. The nationalism is widespread in the sense that. No nation will tolerate
unlimited penetration by foreign nationals into its economy.

POLITICAL VULNERABILITY

The political systems may be either favourable or unfavourable. The favourable political
systems can protect industry reduce tax rates, exemption from quotas and other types of
concessions. The unfavourable political climate or political vulnerability can be changed
within few months if the government is changed.
The political vulnerability may take the form of confiscation, expropriation and
domestication.

a) Confiscation: Confiscation means taking over the foreign investment by the

government without any reimbursement. It has been practiced in many less developed
countries. It is relatively cheap to practice because it costs nothing. Government by
passing a decree can confiscate the businesses of foreigners in the country. The national
Wealth and property from the hands of foreigners pass to the local people or
government. Although the practice of confiscation has been I reduced to minimum, it is
still a political vulnerability. The foreign investors must be aware of such practices,
which may be used by the governments.
b) Expropriation: Expropriation means taking over of foreign investment by a
government with partial reimbursement. It indicates that the owners of the business did
not sell the investment willingly. It is justified on the grounds that the industry is
critical to national defense, national wealth, national sovereignty and economic growth.
It is observed that certain industries are more susceptible to expropriation than other
industries. Defense industries cannot be in the hands of foreigners for the sake of
national defense. Mining, oil and other natural resources are generally not owned by the
foreigners. The government tries to regulate the foreign investment keeping in account
the national interest and protection of domestic industries.
It is observed that expropriation has not resulted in total loss to the foreign investors.
The expropriation is becoming uncommon in developing countries because foreign
investment helps achievement of desired growth as the local investors lack the will and
 skill of growth. The foreign investors can pressurise for equitable reimbursement at the
expropriation of the foreign business. The foreign investment and expertise become
indispensable and less vulnerable because they provide adequate opportunities of
training and management positions. The local people develop necessary skills and
entrepreneurship with the collaboration of foreign investors.
c) Domestication: Domestication is the process by which foreign held corporations
have to relinquish their control and ownership. Many countries are trying to take over
the ownerships of foreign business to bring the foreign firms' activities at par with the
domestic firms. The expropriation and confiscation have been considered serious steps
of curbing and controlling the foreign investment whereas domestication is a mild step
to control the foreign investment. Domestication is transfer of ownership to nationals.
The domestic nationals get opportunities of higher levels of management. The local
people make the final decisions.

SUGGESTIONS

The political vulnerability can be reduced with certain precautions. The investors have
to accept the challenges and conditions of the host country. If the country is interested in
socio-economic goods, the investors should cope with the requirements. The fear of
multinationals' interest e.g. exploitation of labour, market and raw materials have to be
encountered. The multinationals should cooperate with the policies of host country. They
should accept the profit participation. The Singer, the General Electric Company, the
Sears, the Xerox Corporation and Pflzer Companies are the important multinationals,
which have adapted with the requirements of the host country. Joint ventures are less
vulnerable to political restrictions. The multinationals may avoid domestication by selling
equity to nationals at fair prices, prepare nationals for top decision making positions,
integrate local companies into worldwide marketing programmes and meet other
requirements of the host country. These companies should develop cooperative attitude
rather than conflicting attitude with the government.

POLITICAL RISKS

Political risks are generally related to political attitude and the law and order problems
of the country. War and disturbances have adverse impacts on the business and the
foreigner may hesitate to invest in those countries, which are politically disturbed. The
changes. in government will lead to uncertain business environment. The government
may be suspicious about the foreign investment and may adopt unethical practices. The
people may loot and destroy the businesses of foreign investors. There may not be any
safety and security to the foreign businesses. Government may stop outflow of profit to
the investors' countries. Illegal atmosphere may dominate the situation as no systematic
law and order prevails. The military personnel do exercise some immoral pressures on the
foreign business in their countries. Foreign businesses and investors are suspected as
spies of their countries. This situation becomes out of control and the foreign investors
try to close down their businesses in such country. If no political shelter is available, they
have no other option but runaway from the country - Such examples are not rare; riots,
arson, looting fire, troubles etc. are pervasive in such countries. The foreign investors
should not invest in such countries and should try to relinquish the countries at the time
of political risks. Special precautions are exercised in investing in troubled countries.

OTHER RISKS
There are several other risks to which foreign investment and international marketing
are exposed. Some of them may be exchange controls, import restrictions, tax controls,
price controls and other risks. If a nation faces shortages of foreign exchange, it can
levy some restrictions on movements of capital to conceive the foreign exchanges. The
goods and services to be imported may be categorised as necessities or luxuries. The
necessities are put under favourable exchange categories whereas luxuries are heavily
controlled to preserve foreign exchange balances. Exchanges control is exercised to
avert difficult balance of payments problem. The host country can limit profit
remittance to the investors' countries. The country can regulate the currency
convertibility to avoid sufferings from economic setback or shortage of foreign
exchange reserves.
The import restrictions are selectively utilised to conserve several important resources
for the development of domestic resources. Raw materials, machines and spare parts are
controlled to be exported to other countries. The government does not allow outflow of
such resources particularly when such resources are scarce in the country. Excessive
price controls and taxes may be levied on the movements of resources from one country
to another. Drugs, medicines, gasoline and essential food articles are subject to price
control. The inflationary trend becomes more harmful if costlier imports are allowed. The
taxes or profit may partially limit the outflow of the profit to the investing countries
though it discourages the foreign investment.
Strong labour unions and nationalism cause difficulties to the foreign investors.
Layoffs may be forbidden. The multinationals may face such unavoidable problems.
They have to be very practical to solve the problems by seeking the cooperation of the
government rather than using their control mechanisms. Local unions sometimes
oppose the management policy and create problems of smooth functioning's of the
organisation. The host government can come to the rescue of such multinationals if
their contributions to the nation's economic well-beings are established.

International Legal Environment

There are different legal systems in each country of the world. The international marketer
should know the relevant laws and regulations of the customer countries. There may be several
legal difficulties pertaining to patents and trade marks, price controls, warranty and after-sale
services, packaging laws, product quality laws and controls, resale price maintenance,
cancellation of agreements and so on. The international marketer should know the rules of
competition, restrictions, discrimination, promotion and pricing. He should be aware of the legal
environment and business issues related to the environment.

BUSINESS ISSUES
The business issues related to legal environment may be establishment, resource,
patents and trademarks, expropriation and domestication, taxes, antitrust and bribery.
The conditions relating to establishment of trade are governed by the international
laws. The businessman should ensure that he would be treated nicely in the host country.
The right of establishment is reciprocal. There may be nondiscriminatory treatment with
the foreign firms if the member countries are agreed to their mutual help. The host
government may impose the jurisdiction of its own laws on the foreign businesses in the
country. The local as well as international regulations have to be followed for the
establishment and starting of the business.

INTERNATIONAL LAWS

International laws are those rules and principles of states, which are binding upon
themselves. The laws may belong to one country or to more than one country pertaining
to property, trade, immigration etc. Laws not mutually agreed upon cannot be binding to
the countries. If one nation refuses to submit to arbitration or does not recognize
unfavourable Judgement, the other nation can do nothing. Thus, there is need of mutually
agreed international laws. Previously laws were decided on state-by-state basis. The
common laws governing the British Domain were applicable to all the colonies and allies
of Great Britain. The Roman laws were also used for the purpose of civil, commercial
and criminal laws. The commercial laws have their own administrative structure,
property rights and other formal laws. The common laws were based on previous rulings
and traditions. The property laws were based on ownership. International laws were used
for preventing war or dealing with problems of war. They have been related with the
actions of sovereign states and were not related to individuals.
In absence of any suitable commercial laws governing the international marketing, the
marketers face multiple national laws. Laws of several nations, rulings and local customs
and other national regulations have to be known by the marketer. When no legislative act
or judicial decision is available, customs and usages of forward nations are used for
deciding the international commercial disputes. The considerations of humanity have
been deciding factors of international laws.

BASIS OF LEGAL SYSTEMS

The legal systems as discussed above have been based on common law of England
and code laws of other countries. The international marketers face problems when these
two laws have differing attitudes. The common laws have been the outcome of past
practices, legal precedents, interpretations of statutes and past ridings. Interpretation
through the past decisions has become the basis of deciding the Court cases. Thus the
customary principles of law or sets of facts have become the basis of common laws. On
the other hand, code law is written rule. It may be divided into commercial, civil and
criminal.
Code law is considered complete and all-inclusive. The commercial laws include
important provisions and rulings of code laws and common laws. Since there is no
specific recognition of commercial problems in any law, the civil laws may be applied
to them. Since the legal problems of merchants are often unique, there is need of special
status for the business and commercial activities. Uniformity and measure of
codifications are taken into account to codify commercial law.
The international marketers have to consider the differences of code laws and common
laws. For example, ownership of a property is established by use under common laws
whereas ownership is determined by registration under code-laws. Under Code-laws
agreements may not be materialised unless notarised or registered. The common law may
require proof of agreement. The international marketer will have to be familiar with these
two laws. The nonperformance of a contract is not exercisable unless it is forbidden by
unavoidable forces, may be act of God or unforeseeable human acts. The marketer must
be aware of the two systems: Code law and Common law. In different countries, different
legal systems are applicable. There may be differences in use of the laws in different
countries. The international marketer should be aware of these differences and
similarities.

LEGAL DISPUTES

There is no judicial body to deal with the international commercial problems arising
between individuals of two countries. The International Court of Justice and World Court
at Hague have no jurisdiction of dealing with legal disputes of individuals. They deal
with the international disputes between sovereign nations of the world. Therefore, it
becomes essential to the international marketer to know the legal systems of all the
customer countries. The foreign marketer's operatioI1c; are tailored as per legal system of
the countries. The dispute should be settled under the laws of one of the countries
involved. The important question is to what country's jurisdiction does the dispute
belong'? It may be settled in one of the three. Ways: (1) on the basis of jurisdiction-clause
mentioned on the contract; (2) on the basis of the place where contract was entered into
and (3) on the basis of place of performance. The first alternative is more appealing. The
dispute can be settled very easily if jurisdiction clause is mentioned in the contract. In
absence of such clause, the dispute is generally decided by the place of contract entered
into.

Factors Affecting International Marketing

International marketer has to face different challenges and problems. These challenges
are known as environments, which may be controllable as well as uncontrollable factors.
They affect the marketing decision.

INTERNAL CONTROLLABLE FACTORS

Controllable factors are those factors, which can be influenced by the marketing
managers. The internal controllable factors are product, price, promotion and distribution.
The internal factors can be managed by the marketing manager. These factors are also
known as marketing mix. It should be noticed that these factors are not perfectly
controllable because the market situation and behaviour are not within the decision limit
of the firm. One individual firm can modify and manage its product, price, promotion and
distribution according to internal and external environments.

INTERNAL UNCONTROLLABLE FACTORS

. The environments of the country wherein the marketing activities are decided and
governed are not controllable. They may be socioeconomic climate, political forces and
competitive structure of the market within the country. The culture of the country shapes
the size and structure of the international marketing. Culture is the pattern of learned
behaviour viz., language, habits, religious and moral beliefs, knowledge, attitudes, values
and other behaviours of the majority of the population. Psychological and sociological
behaviours of the population of the country influence the marketing decisions to enter in
the international market.

Fig. 1.1. Factors affecting international marketing

EXTERNAL UNCONTROLLABLE FACTORS

The marketing manager has to face external uncontrollable factors while taking his
marketing decision. These factors may be government regulations, political forces, social
and cultural forces, economic forces, competition, level of technology, geography, and
distribution patterns. The domestic base of international marketing tries to forecast the
environmental conditions and adjust the marketing mix accordingly. There may be severe
difficulties in adjusting the decisions as per extreme conditions of political environments,
socio-economic and cultural climates. These are the main challenges to which the
international marketing has to cope with in designing the programme. The assessing and
forecasting of international business climate are difficult tasks. The alien status makes the
tasks of international marketing more difficult. Political ramifications and other
conditions make the problem complex to confront. Change of governments in
international markets becomes very critical, because it may result in expropriation,
expulsion and restrictions on the operations. The uncertainty of consumers' behaviour in
foreign market may require close study of operating environment. Strategy of marketing
in one country may not be successful in another country.

UNIT III

INTERNATIONAL MARKETING STRATEGIES

PRODUCT STRATEGY
Developing international marketing involves planning and development of markets.
The marketing program decides what products are to be sold, how to be sold and where
to be sold? The product planning is adapted as per changing desires and needs of
customers. The product planning is adapted based on domestically successful products.
The developing international marketing includes: (1) Developing Consumer Products for
Foreign Markets, (2) Marketing Industrial Products and Services and (3) International
Promotion Strategies.
1. Developing Consumer Products
The consumers' desire and needs are constantly changing. The marketing plans and
organisation have to be aware of the changing pattern of consumers. The selling and
producing of consumers' goods basing on domestic pattern are not very desirable strategy
of marketing development. The differences between domestic market and international
market have to be observed to find out a successful way of international marketing. It is
wrongly assumed that the patterns of consumers desires and needs at the domestic market
will also remain the same in the foreign market. The Self-Reference Criterion (SRC) can
be successful only with certain modifications. The national, regional and international
plans should be developed to meet the requirements of different markets. There is need of
deciding product standardisation, product line product adaptation, product diffusion,
product innovation and consumerism for planning and developing consumer products for
international markets.
PRODUCT STANDARDISATION

The uniformity of product or product standardisation offers a number of advantages.

Economies of scale or cost savings are significant advantages of standardisation because
it delimits a number of models and variant products. Henry Ford demonstrated these
advantages by adopting standardized products. The cost saving is achieved in production
techniques, Packaging, advertising and distribution. There is saving of cost in research
development. Standardized product provides more mobile consumption worldwide.
Consumers can develop standardized programme in their operations. The image making
is possible with standardised production. Image of a product may create psychological
favour in the international markets. The technological improvement tends to favour
standardisation. The 'standardisation have been proved very successful in international
marketing; but it has certain limitations.
The standardisation may impose several obstacles in international marketing. The
culturally unique markets may require different types of products. Since the worldwide
markets have different cultural and economic patterns, only different types of products
can meet their respective requirements. Standardisation is less costly and more rigid to
penetrate in world-markets. The cost saving in standardisation and benefits of
differentiated products should be compared to decide the product specifications. It is
well-settled policy that slight modifications in the standardised products should be made
to meet the varying requirements of the consumers.
PRODUCT LINE

International marketing planners should consider the product line to meet the differing
requirements of consumers in different countries. The quality, quantity, prices and
promotion planning have to be adapted as per needs and desires of the varying
consumers. The marketer may decide either to sell the same product throughout the world
without any distinction or modification or adapt the product as per tastes and needs of the
consumers. When the adaptation in the existing product does not serve the purpose of the
consumers, new product can be developed to meet their requirements.
The same product but differing promotional media can meet the requirements of the
people having different cultures and tastes. The same product and the same promotional
media can be another strategy to meet the requirements of the consumers. For example
Coco-cola have the same product line and promotion policy worldwide and have proved
successful in many countries. The inspecting cars of developed countries may be used as
taxi-vehicle in developing countries, which requires different promotion policy for the
same product. The third strategy may be adopting new physical products with the same
promotion policy as used in the domestic markets. Fruit powder may be consumed by
mixing with water or milk depending upon the habits of the consumers of different
countries. The new product with milk is arrived at although the promotion strategy is the
same. The fourth strategy of product line is to change the product as well as the
promotion-policy. It meets the different requirements of the consumers at different
culture. Changing the design and size of clothes with changed promotional-message can
meet the requirements of clothes of different consumers in several countries. The fifth
strategy of product line is to develop product altogether with the changed promotion-
policy. The tractor needs of farmers in developed countries are totally different from the
tractor-needs of the developing countries. The operation, the utilization and maintenance
require different advertising messages to educate people of these countries to use the
different size, shape and power of tractor. The sixth strategy of product line is
modification of product with the same strategy. Products are adapted for country to
country with the same promotional measure. The product is adapted as per culture and
economic levels of the consumers using the same promotion-policy.
PRODUCT ADAPTATION

A product may be suitable in one market but may not be suitable in another market.
The producer has to modify the product to meet the requirements of different markets.
Functional requirements vary from market to market. The products are used for different
purposes and the many facets of product have to be exposed to meet the diversified needs
of the consumers. It should be noted that the product is not the abstract commodity to
satisfy wants but is the virtue and tenets of the products to satisfy different wants of the
consumers. Since there are different needs and desires of several consumers, the product
is modified to meet their respective demands. Culture is woven to shape the demands
besides the economic characteristics. The product adaptation may take the form of
physical adaptation and cultural adaptation.
a) Physical Adaptation: Products are modified to meet the different needs of foreign
markets. The electrical appliance of 220 volts may not be suitable to Japanese markets as
they use 110 volts electrical

party can interrupt the agreement. The barter system although full of disadvantages has
been used by many barter houses who help development of world market. .

PRICING STRATEGY

The marketing manager has to fix appropriate price for international marketing so that
pricing policy is fixed within the range of prices governed by competition, market
situations, government regulations and economic factors. The prices formulated are
administered in different manners in different countries. The pricing concepts, objectives,
factors, strategies and administration are discussed under international pricing 'policy.

Pricing Concept
Price is defined, as exchange value of goods and services and it is a measure of what
one can exchange in order to obtain a particular commodity. Demand, cost and
competition are the important factors to determine the price. The marketers are faced with
government regulations and taxes. The high transportation costs, middlemen's role,
channels of distribution and multinationals' role greatly influence the pricing policy. The
pricing policy is influenced by political, cultural and socio-economic conditions of the
manufacturer's country and of the customers' countries. The pricing strategies are decided
on the complex market situations. Some marketers may use the pricing as a tool to beat
the competition. Different marketing situation forces the manufacturer to use flexible
pricing policies. Sometimes, prices are fixed at lower level in one market and at higher
level in another market. Price escalation, price skimming etc. are used to administer the
pricing policies. The international marketers have to review the pricing policies form
time to time to make more effective pricing in the given situation, intracompany
competition, national and international laws, international 'competitions, type of product
etc.

Pricing Objectives
Pricing objectives are established considering various social obligations such as
consumers, employees, shareholders, and public interest apart from the marketing and
corporate considerations. The pricing objectives may be divided into three categories;
profitability objectives volume objectives and others.
The profitability objective is related to maximization of profit and profitability. The profit
maximisation is considered as business Objective. It aims to maximise the sale. The
marketer tries to maximise the market's share in the market abroad. This objective is used
only for those international marketers who have small business and do not believe in
marketing mix as instrument for increasing sale, and in that case price is not very useful
instrument to maximise sale. The volume objectives or the marketing objectives have
been the main objectives of the company whereby the prices are considered to be instru-
mental to increase volume of sale or market share. The company can try to influence the
prices at the final consumption level. The prices are considered along with the important
marketing mix for expansion of the market. The total prices paid by the consumers minus
distribution prices are considered the mill net pricing which are received by the
manufacturer. Marketing has considered pricing a<; very important instrument for
penetrating and preserving the market. The competition in each country has major share
in finalising the prices.
Other objectives have included intra company objectives and socioeconomic objective
which are related to minimisation of tax burdens duties, profit balancing, repatriation of
profit, continuing growth and proliferation of marketing activities. These factors are
taken into account to determine optimal prices.
The cost, market and competition situations are important factors to be considered for
aiming certain objectives. Sales at prices over and above fixed and variable costs are
known as bonus sale which add to net profit and can be used to recompensate the loss on
account of sale at price commensurate only with the variable cost The full pricing theory
may not achieve the market-objectives but variable cost pricing may be the case of
dumping which may attract ahtidumping laws. Therefore the manufacturer has to be very
cautious to fix tbe prices at appropriate level.

Pricing Strategies
The manufacturer employs several strategies to counteract the price-problems. He may
adopt lowere price to penetrate new markets and higher price to crack foreign markets.
With the given objectives of market and business, the pricing strategies may be price
listing, geographical pricing, psychological pricing, skimming pricing, penetration
pricing, price flexibility, line pricing, promotional prices transfer pricing and price
escalation.

PRICE LISTING
Listing of prices on cost and other bases assures the customers about the reliability of
the price and the product. In absence of declared prices, the distributors may manoeuvre
the prices for their self benefits ignoring the interests of the manufacturer. This list prices
are the basis for determining the practical prices to be charged from the consumers. The
list prices are levelled on the products and circulated with booklet and leaflets. These
prices are determined on the basis of demand, cost, competition and distribution
strategies. The market prices are arrived at discounting the prices listed and this discount
may be cash discount, quantity discount and trade discounts. Cash discount is given for
repayment of the credit within a specific period or at the cash down purchase. The
tradition cash discount Le. 2-10 net 30 is very well known among the merchandise. It
means if the cash is repaid within 10 days of the purchase, 2 per cent discount is
allowable on invoice price. The maximum period of credit is 30 days. The quantity
discount is granted because of large purchases made by the middlemen or consumers.
The trade discount is paid because of some marketing functiol1s being performed by the
buyer or middlemen. It is also known as functional discount. The manufacturer may grant
certain percentage of invoice value to the wholesalers and retailers for performing
marketing functions, particularly distribution functions. Similarly, the manufacturer may
offer promotion allowances, brokerage allowances and other allowances for enhancing
the market share.
GEOGRAPHICAL PRICING
Geographical pricing is determined on the areas basis and logistics. The Free on Board
(EO.B.); Cost, Insurance and Freight (C.LF.), Basing Points and Zone pricing are the
several forms of geographical pricing. The EO.B. refers to the price whereby the buyers
pay the freight charges. The owner's title and responsibilities pass to the importers
immediately after loading the products on the ship or carrier. Cost, insurance and freight
(C.LF) refer to the price whereby the cost, insurance and freight charges are paid by the
exporters. The basing point pricing designates some place as base for charging the freight
cost to the place of consumers. Zone pricing is fixed as per zone. The geographical
pricing is used to impress customers.
PSYCHOLOGICAL PRICING

Psychological pricing is based upon the assumption that certain price-range is more
appealing to consumers. Prices ending with odd number are preferred by many
consumers. For example, they may prefer Rs. 15.95 to Rs. 16.00. Some consumers may
prefer unit pricing i.e. expressed in terms of some recognized unit of measurement.
Pricing based on well formulated policy is known as creative pricing which are
recognised by many managers.

SKIMMING PRICING

Marktt skimming is a deliberate attempt to reach a segment of the market who are
willing to pay higher price because the product has high value to them. Many Western
companies put high price for getting the benefits of sophisticated people. The
manufacturer is in a position to recover sunk costs from the surplus of gain based on the
skimming pricing. The loss in dumping is recouped by the surplus of skimming pricing.
One of the several purposes of skimming pricing is to maximise the revenue received
from the sale of new product before getting any competition. At a later stage, the prices
are reduced to get the benefits of lower prices in competition.

PENETRATION PRICING

Penetration pricing believes in lower prices to enter in the market. Consumer goods are
generally demonstrated higher sale at penetration pricing. The new competition does not
enter in the market because of fear of loss at lower prices. Brand popularity is increased
through lower prices. The penetration pricing is used for innovative product hoping to
with the desire of a large number of consumers; prices may fall further as the scale of
operation expands. This strategy is used where the market is highly sensitive to prices
and reduction in cost of production is expected in future. It discourages present and
potential competition.

PRICE FLEXIBILITY

Price flexibility assumes that the market can be attracted at different price-level and
variable pricing is more suitable where individual bargaining is involved and one price
strategy may suit the requirement of mass selling. The variable pricing has the advantages
of selling to different consumers. It has significant edge over the competitors' prices.

PRICE LIVING

Price living is the practice of marketing merchandise at a limited number of prices.

Few prices are determined and the consumers are free to select any price fix and not
between the two price-lines. The price lines are indicative of quality. Each product line
has separate price.

PROMOTIONAL PRICING

The promotional prices are the ingredient of selling strategies. The manufacturer can
offer many prizes, additional products and other facilities. The prices may vary from
place to place, customer to customer. Competitive bidding may be involved for
promotional purposes. The seasonal prices and off-season discounts attract more
customers. Cash rebates may also attract more consumers to the product. Several other
pricing methods have been employed to promote the sale.

TRANSFER PRICING

Transfer pricing is the pricing pattern for sending goods from one branch of a
company to another branch of the company. The manufacturer performs the task of
marketing on decentralised basis in many cases. Raw materials work in progress and
inventory may be transferred from one branch or office of the manufacturer to other
branches or offices of manufacturer in other countries. The question lies how much
pricing system should be taken into account for transfer of these goods. The manufacturer
may transfer the products and raw materials at direct cost or at direct cost plus overhead
expenses or at price prevailing in the market depending upon the situations and
requirements of the transfer or and transferee offices.

PRICE ESCALATION

Price escalation is the remarkable increase of the imported products' price. The
escalation is done to set off the expenses incurred by the importer for transportation, duty
taxes and margins. The manufacturer can search the international manufacturing system
to have low cost based merchandise to avoid price escalation's adverse impact on the sale
and the distribution cost has to be mitigated to bring the total price at competitive level.
The manufacturer can start production in the customers' countries if the price escalation
become prohibitive. The manufacturer has to evaluate different alternatives of the price
escalation to adopt the best alternative.

PROMOTION STRATEGY
Planning for international promotion has important effect on the marketing mix.
Development of a suitable promotion-strategy depends on the appropriate planning. The
potential market can be exploited only at the effective planning and strategies of
developing promotional media. A promotion mix includes advertising, sales promotion,
personal selling and personnel of sales force. The development of promotional strategy
for the success in international marketing involves determining the promotional mix,
standardisation, developing effective massage, selecting appropriate media and
developing worldwide marketing objectives. The development of international promotion
policy faces the cultural variations which have direct impact on the markets. The
international promotion strategy is discussed under advertising, sales promotion, personal
selling and managing sales-force.
ADVERTISING

The advertising has been considered an effective tool of sales promotion in national as
well as in international markets. Different media of advertising have been used in
different countries depending upon their acceptability by the potential consumers. The
advertisement expenditure have been increasing in all the countries. The advertisement
educates people about the uses of new commodities. It changes the existing patterns of
culture and customs. Every country tries to create demand through advertisement for
expansion of market. The advertising brings together the product already made or would
be made with the present and potential consumers. With the improvements of the
communication system, the advertising is getting more popularity amongst the marketers.
The advertising can be analysed under organisation challenges and media selection.
i) Organisation: The advertisement can be made by independent agencies or by the
company itself. The company can avail the services of independent agencies which may
be either domestic agency, foreign agency, multinationals and coordinating agencies. The
domestic agency provides local expertise. There may be several advertising agencies in a
country. The marketer has to select anyone or many of them. The international agencies
have less cost because of foreign approaches. Multinational agencies will be again
cheaper because of their worldwide network. The coordinating agencies have no wide-
spread branches of their own but have the facilities of coordinating activities of other
agencies. Kickbacks are prevalent in many developing countries for the agency
commission. The self-advertisement is not very effective system of advertisement
because of lack of expertise in these areas. High level talents in advertising many have to
be employed by the company, which would prove costlier. Concentration on
advertisement will be not relief funds for other purposes. There are several other
problems of self-advertisement.

The advertisement requires effective communication which may change from time to
time, product to product and country to country. The basic strategy of advertising is to
use international communication media, determine use of local marketing and creative
talents, encourage creative people, measure creativity and identify common-factors and
differences. .
The costs and benefits analysis of the advertisement is done to decide its effectiveness.
It can be used only when it can contribute economically and effectively to the company.
The advertising budgets and sales thereon are compared to decide the role of advertising.
ii) Challenges: Advertising is a creative strategy. It has to face the creative challenges of
law, language, culture, media, production and company policy. All the advertisers have to
resort basic advertising policies of procedures, media and research. Every advertiser
creates different campaigns for each country. The basic purpose is to motivate people to
purchase the advertised products. The advertising has legal restrictions almost in all
countries. There are certain limitations on expenditures of advertisement, the media of
advertisement, type of product, price of advertised products and other aspects of
advertisement. The advertisement may be challenged in a court of law if other
competitors consider the claims of the advertisers as false or based on wrong notions. The
advertisement expenditure may be taxed. The Monopoly Restrictive Trade Practices Act
imposes certain restrictions on expenditure on advertisement. The legal and tax
regulations are not uniform in all the countries and they vary from country to country.
International policy of advertising faces another problem of language. Different
languages are used in different countries. The linguistic nuances and vernaculars are
different in the different markets of the world. The local dialect may have quite opposite
meaning of the statement. The illiteracy or low level of education may be another bloc of
print media. The use of verbal media is desirable there. In Indian conditions, the verbal
mode of advertisement will be more effective. The multiple languages in India have made
advertisement more difficult. The language translation will not be very effective because
idiomatic and figure of speeches. The advertising language requires some specific words
and phrases which are selected after a proper understanding of the language-culture. The
communication involves the cultural heritage and social inheritance. The advertiser of the
local language can use the word and writing very effectively reveal how far the
advertisement be resisted if the government or people are of the view that it has harmed
the consumers' interest. The advertisers have to consider these challenges in proper
perspective.
iii) Media Selection: Selection of advertising media is another problem of advertising
planning. The advertisers are facing numerous problems in selecting media of
advertisement because of non-availability, higher cost and less-coverage of particular
media. The advertisers should be aware of the media-restrictions, media-convenience
and specialized media of advertisement. Many countries have very few media of
advertisement. Some of them are too costly to be availed by an average advertiser.
Some media do not commonly approach the people. Magazine, journals and newspaper
media are not very useful in India because of high illiteracy figure. Radio and
television may be effective media of advertisement in such countries. On the other
hand, radio and television are very costly. Government has restricted frequent uses of
radio and television for advertisement. Only permitted messages and visual designs
can be broadcasted and telecasted by these media.
The coverage of advertisement will reveal how far a particular media of
advertisement may work in a particular society. The media, massage and cost are
important factors to decide the acceptability of the advertisement. A large number of
media should reach the majority of the world population. The cost factor in
broadening the coverage should be taken into account to reach even to neglected
areas. The lack of data may not substantiate the advertising policy. It requires data on
income, age, education and other market potentials. The advertisers can vary their
advertising policies and procedures as per needs of advertisements.
SELECTION OF ADVERTISING MEDIA

Selection of advertising media is a difficult problem. There may be different

advertising media in particular countries having their respective scope and limitations.
In Indian conditions, several thousands, magazines and journals in different languages
are available. Innovative media may benefit the advertisers maximum while ignoring
the drawbacks of traditional media. The economy moves up gradually in every
country and it changes the needs of the people. Therefore, the marketing may require
new media of advertisement. Not only the media but the specific message and
presentations of the media are undergoing drastic changes as per economic
development. Television has taken lead in this direction. It has much more impact on
the consumers. Other media of advertisement are getting less share of advertising. The
international marketers have to consider the changing patterns of media of
advertisement. The specific attributes of newspaper magazine, radio, television and
other media are discussed for the purpose of selection. .
a) Newspapers: Newspapers have been traditional medium of advertisement. It
contributed significantly in market expansion and had remained a prominent medium of
advertisement. There are lakhs of newspapers throughout the world. Selection of some
specific newspapers depends on various factors such as market potential, culture,
language, economic status of the consumers, rules and regulations of advertisement. The
newspapers charge very high prices sometimes, for advertising. The authentic and more
popular newspapers charge very high rates. The cost may vary from time to time and day
to day. The advertisers have to be very selective in such process. The scarcity of space
may require pre-booking for advertisement. The lack of newsprint has added to the
problems. If the newspapers are very popular, the cost of advertisement will be very high.
The services of advertising agencies may be availed for booking advertisement in good
newspapers although there are very few advertising agencies in India and Middle East.
There are some advertising policies adopted by the newspapers to delimit the space for
advertisement. T)le international newspapers have been used for advertising international
products. All the principles of selecting newspapers for advertisement are taken into
consideration for international marketing.
b) Magazines: Magazines are selected after proper scrutiny because some magazines
have wide circulations, some have specific readers, some are totally unsuitable for the
specific messages. Technical magazines are used for industrial products whereas house
magazines are suitable for consumers goods. There are space and cost restrictions. The
effectiveness of advertisement in a particular magazine is studied and evaluated before its
selection for the purpose. International magazines may include advertisement of
international markets. The local magazines are also suitable for the international markets
provided the messages are carried in local languages. If technical magazines are not
available for the technical products, the advertisement in common journals may be done.
In India, technical magazines are scarce; the advertisers, therefore, adopt common
magazines for the purpose. The advertisement in magazines must mention the distribution
channel to have effective impacts on marketing.
c) Radio: Radio has become very common medium of advertisement in almost all the
countries because of its popularity and cheaper cost per unit of audience. Even illiterate
people can get the message of advertisement through radio. In developing countries, the
radio has proved a very good media of advertisement. Some countries have specially
earmarked commercial radio stations for advertisement. There may be some restrictions
on the radio broadcasting of commercial nature. Government-owned radio has specific
announcements. The advertisement is not free and frank although advertisement by such
radio stations have much more effects on the population because it has become a rare and
selective advertisement. The non-government radio channels may permit free competition
in advertisement. Since the television telecasting is costlier in many countries, the radio
broadcasting has become popular in these countries. The contents and audiences of the
radio advertisements are suitably selected to give more fruitful results. The alcohol and
drug industries cannot avail the radio advertisement because of their impact on society in
general and children in particular. Some international broadcasting institutes are
functioning in the international markets although their time and cost are prohibitive to be
adopted by advertisers. The commercial radio stations are becoming selective in
broadcasting because of competitive attitudes developed after their broadcasting. .
d) Television: Television has become a major media of advertising. Television in
developed countries is more popular. It reaches a larger number of populations. In
developing countries, it has not been so popular. Many audiences do not view television
regularly. The television advertisement has to be very selective to telecast the messages
only when a larger population view the television. In India, more than 80 per cent of the
population viewed television on Sunday to view the telecast of Ramayan and Mahabharat
serials. It was considered very appropriate time of advertisement. Therefore 15 minutes
advertisement was permitted by the Doordarshan Department. Sunday evening moveies
have second place of attracting audience for television advertising. Many governments
have permitted use of television for commercial advertisement whereas other countries
such as India and China have restricted use of television for commercial advertisement.
The time of television advertisements is limited in many countries. The audience
measurement is essential before restoring television advertisement because viewers of
television are limited in' many countries. They view television only at a specific time and
the serials. The costs and benefits of television advertisement should be compared to take
a decision for television advertisement.
e) Other Media: There are other media of advertisement which can be used for
international marketing. They may be cinema, direct mail, posters, exhibitions, fairs, etc.
for advertising the product, messages to local population. The international marketers can
hire local advertising agents or appoint international advertising agencies to convey the
messages of new products. Cinema hac; become powerful media of advertisement in
developing countries because a larger population view the movies in absence of adequate
facilities of television and videos. Direct mails are effectively used in developed
countries. The cost of direct mailing may be high but the addressee may feel it very much
personal. The communication is made as surprise and only to those who are related to the
products. For example, many international publishers directly mail the booklets
mentioning the subject-matter of the books published to the teachers concerned of the
subject. University Directory provides the addresses of the teachers employed in various
universities. Similarly industrial products are also communicated to the persons
concerned.
Roadside posters are used to demonstrate the quality of the product, specially,
transport-products. Exhibitions and fairs have been used to popularise the goods and
services. A large number of exhibitions, fairs and demonstrations are made by Indian
producers in England, U.S.A., U.S.S.R., Japan, West Germany and other countries. These
media of advertising are selected after examining their effectiveness, cost and
appropriateness to the concerned products.
The communication principles should be taken into consideration for affecting an
advertising media. The information process involves seven steps: information source,
encoding, message channel, decoding, receiver and feedback and noise. The socio-
cultural influences are taken into consideration for devising the advertising media The
process is interrupted by noise at every step. The language, culture and social systems
may disturb the process. The international marketers, therefore, use the process with
precautions and in consistent with the marketing environment.

SALES PROMOTION

All activities which stimulate consumer purchases are known as sales promotion. In
the wider sense all functions such as advertising, personal selling and sales force
management may be termed as sales promotion; but in stricter sense, it relates to
discounts, samples, coupons, awards, prizes, free-distribution, public-competition, public
entertainment and so many other activities which directly motivate the buyers to purchase
the products. Advertising personal selling and sales force are not directly influencing the
buyers to purchase the products. The sales promotions are specific and short-term.
Sales promotions are directed towards consumers' satisfaction through product
introduction, product-trial, displays and personal efforts. The consumers are provided a
chance to examine the product attributes and be satisfied with the attributes. Such trials
and attempts help the customers to purchase the product. Group demonstration of use
methods of the new product helps incre.:'1se the sale of the product. The promotion-
methods differ from area to area. In rural areas different methods of sales promotion have
been used. The vehicles and other promotion-vans are carried to rural areas to
demonstrate the utilities of the product. Sales-depots in hill regions have facilitated the
use of the product. In absence of distribution channel, no promotion is possible in interior
rural areas. The retailers are given some facilities to distribute the goods.
The local facilities by international marketers may enhance the marketing
opportunities. It requires appointment of local people for the purpose. The distribution
vans have increased the market. Prag Milk distributors have purchased several milk vans
to distribute the milk in interior areas of cities. These vans procure milk from rural areas
and process them in the factory before distribution. It has increased supply of milk and
milk-products. The Coca-Cola and Pepsi Cola have several vans in the same manner,
which distribute the bottles of soft drink to retailers. The empty bottles are also collected
by the vans. This has facilitated supply of the soft drink even by multinationals into
interior rural areas. These sales promotional activities have increased markets faster than
those of the advertising media. No one method can be said the most effective tool of
market-expansion. The international marketer should use all the techniques of market
expansion.
PERSONAL SELLING
The third method of international marketing promotion is selling of the products by
persons of the companies. The persons may be employees, representatives, agents and
deputed persons of the companies. They take responsibilities of selling the products. The
employees in foreign markets deal directly with the middlemen consumers there. The
sales-force may be appointed from the domestic country as well as from foreign countries
wherein the marketing activities are being performed. It is advisable to appoint persons
from the foreign countries. The sales-force is divided into three categories; viz.,
expatriate salesperson, foreign salesperson and cosmopolitan salesperson.
i) Expatriate Salesperson: The expatriate salespersons are those who are working in
foreign countries other than their own countries. These persons are moving in the country
or in more than one country to find potential consumers. They are experts in the selling
methods and have acquired adequate training, knowledge and expertise. They provide a
platform for the marketers to increase their businesses. Since the foreigners in other
countries are considered a symbol of high reputation, they get more business in foreign
markets. They are technically experts and have necessary calibre of business-promotion,
they should be encouraged to dispose of industrial products.
They can be appointed for foreign assignments for varying periods. They may be
temporarily appointed for a particular period depending upon the nature and requirements
of the companies. They return back to ponent company after the expiry of the period. The
expatriate may also be appointed for life in a particular country. This gives him
permanent understanding of the local culture, political situations and other environmental
conditions of the country. The marketing potential can be exploited in more effective
manner by expatriates. The only problem is of cost. They charge higher wages than the
foreign nationals because the local people are available at lower cost. They also suffer
from legal barriers and unwillingness of the sales force to live abroad. They cannot
contribute significantly if they are away from their families. Thus, the expatriate
salespersons are being replaced by foreign nationals for expansion of market.
ii) Foreign National: The services of foreign nationals are used for marketing purposes
because they are expert in local culture and tradition. They know better how to use the
marketing techniques to influence consumers because of intimate knowledge of the
consumer's behaviour. The cost of services of foreign nationals is lower than that of other
salespersons. Domestic knowledge provides them adequate platform for training. The
foreign nationals can acquire knowledge

DISTRIBUTION STRATEGY
1. Distribution Objectives
The international marketers decide the objectives in specific terms to achieve the
mission of international marketing. The broader objective or the corporate objective helps
formulation of long-term policies and plans whereas the targets are decided for the short-
tern procedures and programme. The targets and goals for each country should be
specifically decided so that the marketing personnel of the related countries can
understand their respective responsibilities. The task assigned to each and every
marketing executive should be neither too much nor too little. The targets and task mast
be scientifically evaluated and properly distributed to the concerned personnel. The
objectives of the company must be properly defined and mentioned for the benefits of the
executives. The formulation of objectives involves consideration of customer
characteristics, product characteristics, environments and middlemen.

i) Customer characteristics: The distribution objectives are decided on the basis of

customers' characteristics viz., income, habits, distribution pattern, and reaction to selling
methods. Different distribution channels are used for meeting varying characteristics of
the customers. The distribution channels are widened if the number of customers is large.
The manufacturer may contact the customers directly if they are very few. If they are
large, the distribution is made via wholesalers and if the number is larger enough, the
producer may ask the wholesaler to contact the retailer for prompt supply of the goods to
the consumers.
ii) Product Characteristics: The product characteristics such as perish ability; service
requirements, unit price and designs are used for considering the distribution channels.
The distribution cost adds to the total price. If the production cost is high and the
distribution cost is also high; the total price will be excessively high. Therefore, the
producers try to abolish or lessen the distribution cost to bring the total price at
competitive-level. The expensive, complicated and sophisticated goods have special
distribution objective. Experienced and trained salesmen can deal with such products
effectively. Ordinary retailer cannot be successful middleman for the purpose. Perishable
commodities require direct exporting so that these articles can reach to the consumers in
time and the consumers can get fresh articles. If it is not sold directly, the producers have
enough control on the sales force so that the consumers may get fresh and qualitative
articles within the limited time. All the product characteristics are analysed, therefore, to
formulate feasible and correct objectives.
iii) Environments: Environmental characteristics are properly evaluated for determining
the distribution-objectives. The environmental characteristics may be economic, social,
politica! and legal conditions in different countries. These environments influence the
international markets different!y in differnet countries. The economic states influence the
markets significantly at different time in a country. The sociocultural conditions influence
the markets in their respective patterns. Super market and multiple' stores have been used
by higher-income level consumers. They have capacity to store and income to purchase
goods in bulk and since they are busy with other activities, they like to purchase goods in
sufficient quantity to meet the requirements of a specific period. On the other hand, small
income group consumers purchase their consumption goods almost every day.
The economic and social environments have much influence on the marketing pattern.
Therefore, the objectives of the distribution system should be moulded to meet their
requirements. Low income and socially backward people have daily purchasing habits. In
Eastern Europe, India and African countries, such practices are more common. On the
other hand, high-income society owns storage facilities, refrigerators and other facilities.
Therefore, they purchase only once or twice in a month. The international marketers,
therefore, adopt strategies suitably to meet the requirements of different environments.
iv) Middlemen Characteristics: The middlemen desire to increase their respective
profitability and not that of manufacturer. If any new products are manufactured, they
require big push from the wholesalers and retailers. The manufacturer by providing a
higher rate of commission stimulates the middlemen to push up the sale of his product.
The manufacturer may sometimes arrange direct selling to avoid the costlier middlemen.
When the manufacturer has gained in the market, the middlemen can approach even at a
liberal term of sale. They may adopt more direct distribution system if such salesmen are
not available. The distribution objectives are decided considering these characteristics of
the middlemen.

2. DISTRIBUTION STRATEGIES
The marketing manager confronts a variety of distribution strategies in the
international markets. The strategies are varied because of different patterns and
alternatives of distribution-channel in the host countries. Besides the variations in
marketing channel, some basic policies are formulated. They are broad and flexible to
adopt the market situations in different countries. The distribution strategies include basic
policy, considerations of cost, capital, control, coverage, and character and continuity of
channels.

BASIC POLICY
The marketers decide the basic policy for distribution of goods and services on the
basis of terms of sale, channel-length, margins and control. The basic policy is
established considering the developing international distribution, rate of return on the
distribution-pattern, specific marketing goals and other marketing phenomena. The basic
policies are divided into long-run and short-run policies. The policies are fixed and
confirmed so far as their basic foundations are concerned, but are changeable as per local
conditions and marketing requirements. The flexibility and adaptability are the important
considerations of the basic policy.
COST

The cost is important factor to decide the distribution channels. Cost involves channel-
cost, capital cost of evolving distribution channel and maintenance cost of the channel.
The costs may be in the form of commission to various middlemen, margin and markup.
The distribution cost should be minimised to the possible extent. It is the difference
between the total price payable by the consumers and the cost of manufacturing.
Sometimes, it becomes difficult to forecast the distribution cost because of changes in the
channels or interruption of the pipeline. The minimising of distribution cost is very
essential to compete in the markets; but, it does not mean that the middlemen and other
persons mobilising the distribution should be discarded because they have their important
contribution to the international marketing. Direct selling becomes more costly in many
cases than involving of middlemen. The real test of cost-strategies is to examine the cost
involved in distribution and additional revenue derived from the distribution channel.

CAPITAL

Capital requirements and cash flow are taken into account while deciding distribution
strategies. The direct exporting may involve huge money for establishment and
distribution channels. The capital for appointing middlemen may require money only for
inventory, loan and other facilities to middlemen. Agent middlemen may require less
investment. On the other hand, the direct selling may provide immediate cash flow. The
middlemen may also give immediate cash to the producers if they have such terms of
sale; but, many distributors sell the goods to the middlemen on credit-term. The well
established companies have constant cash inflow from the distribution-channel.

CONTROL
Control on distribution channel becomes essential to have effective result thereon.
The direct selling has more control on the distribution and compared to the middlemen.
The middlemen may not take deep interest in prompt selling of the goods. They are
biased by their attitude and margins. Each channel arrangement has different levels of
susceptibility to control. The manufacturer must exercise control over the price,
quantity, methods and forms of distribution channels. If the manufacturer does not have
any control on these factors, the middlemen may manoeuvre the distribution against the
interests of the producer. The control pattern is dependent upon the nature and character
of the middlemen. A sound and reputed middlemen may try to give more margins to the
producer. They provide more market familiarities and better understanding of the
market. They have full commitment and major contracts with other distributors.
Appointment of such honest and sincere middlemen may provide desired control on the
distribution by the producer.
COVERAGE

The distribution strategies must aim to maximize the coverage. A broader distribution
channel would have wide coverage. Many companies may be interested to penetrate in
the major populated areas rather than wide coverage even in less populated areas. The
concentration of selling in a thickly populated area may be more useful than selling in
widely distributed population. The producer may like to concentrate on distribution at
lucrative markets and neglect nonprofit able markets. The purposes of coverage strategies
are, gaining the optimum volume of ~ale, securing a reasonable market share and
attaining adequate success in each market. The coverage is difficult in competitive
markets. The producers have to exercise ingenuity to penetrate into new markets for
increasing the distribution-coverage.

CHARACTER

The character of the product and of markets decide the distribution strategies. The
perish ability, bulk, complexity, sales services and the value of product are considered for
the purpose. The evaluation of character is very difficult. The company's standards
should be taken into account for deciding the strategies. Distributors, wholesalers and
retailers are the points of distribution channels which decide the strategies.

CONTINUITY

The distribution channel should continue for a longer period. The middlemen and
agents often discontinue their contracts and so producers should appoint those
distributors who remain almost constant. The middlemen maintain loyalty with the
producers. The channel strategies should balance the cost, capital, control, coverage,
character and continuity for deciding the distribution strategies. The gravity, push and
pull strategies are adopted for channel strategies. The gravity strategies assume that the
manufacturer depends mainly on the middlemen whereas the push strategies believe in
direct controlling and motivating the consumers. The pull strategies require intensive
advertisement and image building and such strategies are adopted as per needs of the
markets and environments.
 UNIT IV

EXPORT PROCEDURE
The export procedure starts from the date of registration of the exporter. The export
procedure in India involves the following steps:
1. Export Officer and Receipt of Indent
2. Arranging the Goods
3. Shipping Arrangement
4. Preparations for Export
5. Customs and Exchange Formalities
6. Placing the goods on boards
7. Mate Receipt
8. Effecting Marine Insurance
9. Bill of lading
10. Other Shipping Documents
11. Securing Payment
12. Obtaining Export Incentives

There is no definite sequence of the procedure in some cases although the above
sequences are maintained in many cases.

EXPORT OFFER AND RECEIPT OF INDENT

The exporter offers sale to the foreign buyers which may be in the form of proforma
Invoice or Quotation. The Quotation contains the name and address of the buyer,
description of goods to be sold, prices, conditions of sale and other provisions viz.,
delivery schedule payment terms, contingency clause, arbitration clause, escalation clause
etc. The responsibilities of the exporters are also described. Ex-factory price is quoted in
domestic currency. The importer may like the quoted prices up to his warehouse. It
facilitates the importer to import the goods easily. He can compare the price with local
competitors. The exporter has to quote this price known as frame price at competitive
level. There are two other forms of price quotation, viz., Free on Board (F.O.B.) and
Cost, Insurance and Freight (C.I.F.). Under Free on Board (F.O.B.) quotation, all
expenses up to delivery of goods on board the ship are borne by the exporter. The
importer takes the responsibilities of paying subsequent expenses of freight, insurance
and other expenses. Under Cost, Insurance and Freight (C.I.F.), the exporter pays all the
expenses of freight, insurance, cost and transportation up to port. The importer pays the
expenses after arrival of the goods at his port. The quotation includes quantity, quality,
prices, terms of payment, discounts etc.
The exporter receives the order or indent from the importer or his agent which contains
all-important particulars of the transactions e.g. price, packing, marketing, insurance,
payment-technique. The foreign order is called indent; the importer prepares 4 copies of
the order or indent. Two copies of the indent are sent to the exporter.
When the proforma invoice sent by the exporter to importers accepted by the importer, it
becomes a confirmed order. The duplicate copy of the proforma invoice is duly signed by
the importer and the conditions accepted by him are informed to the exporter. In some
cases the importer sends the confirmed proforma invoice and also a letter of order to the
exporter. The order received by the exporter is registered with an authorized dealer in
foreign exchange. The government orders take the form of contract and the exporter has
to be very cautious about the terms and conditions of sale.

ARRANGING THE GOODS

The exporter scrutinizes the export order with reference to the terms and conditions of
proforma invoice and letter of order. The manufacturer exporter arranges the goods
through production or procurement. The exporter raises an internal indent on the pro-
duction department. He sends a delivery note to the Works Manager or the Factory
Manager, which contains the description of the goods as per export order, the date by
which the goods are to be manufactured and other formalities to be completed. The
merchant exporter obtains the required goods from the market or from other
manufactures. The export house performs the job of marking up, packing and marking of
goods as per instructions of importer.

SHIPPING ARRANGEMENT
The quality control inspection is done before shipment. The exporter invites the
inspector to examine the goods being manufactured or procured for shipment. He has to
arrange advance booking of space in the ship and this job is done by the shipper or broker
who possesses full knowledge of the various shipping. The shipping company issues a
shipping order to the exporter to carry the exporter's goods. The shipping order is a
document containing instructions to accept the goods on board the ship.
PREPARATIONS FOR EXPORT

The preparation of export requires appointment of forwarding agent who is a person or

firm concerned with collecting goods from a factory or warehouse and delivering them to
a port of shipment or airport for onward transmission of the goods to the destination. He
is specialised in procuring goods, attending to customs formalities booking, procuring
effecting marine insurance and other formalities. On the reverse the clearing agents are
employed for import purposes. The manufacturer-exporter gives instructions to the
forwarding agent for shipment to be consigned. He is specialised person to complete all
the formalities of export and advises his principal on specific points. When the
forwarding agents are not appointed, the exporter has to appoint his own specialist for
export. However, it has been observed that the forwarding agents are appointed in most
cases. They perform several functions, viz., negotiating of shipping contracts, customs
formalities, packing, marking, insurance, loading of goods etc.
The packing is done by the manufacturer or may be entrusted to the packing agent.
Packing is a specialised work to protect the goods, to suit the requirements of the
importer. The forwarding agents are experienced in general routine of packaging. The
packages are marked with the name of importer, destination of port, gross weight and net
weight.
The exporter issues instructions to the forwarding agents with the necessary documents
of export for finalising the export formalities. These documents may be A.R. 4A/A.R.-4 in
original and duplicate, packing list one copy, excise gate pass in original, commercial
invoice in two copies, G.R.J. form in triplicate, customs invoice, original letter of credit,
declaration form in triplicate, purchase memo, railway receipt and inspection certificate.

CUSTOMS AND EXCHANGE FORMALITIES

Customs and exchange formalities include shipping bills, export permission form,
customs house export license and so on. The shipping bills or custom challan describes
the goods, quantity, quality, value, marks measurements, the port of destination and the
name of the ship. The export permission form is filled in duplicate. The exporter submits
four copies of shipping bill and two copies of application to export. The shipping office
collects shipping dues or charges and returns one copy of the application and three copies
of shipping bills. These documents are sent to the customs house. The duty differs from
commodity to commodity. The customs house will register details of export in its books.
The original and duplicate copy of the shipping bills are returned to the exporter. The
customs house issues pass in favour of the exporter. The forwarding agent or the exporter
is required to procure export license from the controller of Exports, Under Foreign
Exchange Regulation Act, the exporter has to fill up four copies of G.R. forms. One copy
of the G.R. is given to the customs house at the time of shipment, three copies of G.R.
and one copy of invoice and other shipping documents are given to the exchange dealer
who procures permission from the Reserve Bank of India.

PLACING THE GOODS ON BOARD

The forwarding agent takes the delivery from the railway station and arranges their
storage in the warehouse. He arranges to get clearance from customs authorities, which is
given on the shipping bill by endorsement. The Port Trust copy of the shipping bill is
presented to the Shed Superintendent at the port. The goods are brought for physical
examination by the Dock Supervsior who also examines the commercial invoice, packing
list, AR-4A form and Shipping Bill. The Dock supervisor records his report, endorses the
words 'out of charge' on the duplicate copy of the Shipping Bill. This certificate is given
to the forwarding agent who presents these documents to the Preventive Officer of the
Customs Department. The Preventive Officer makes an endorsement 'Let Ship' on the
duplicate copy of the Shipping Bill which is given to the forwarding agent for the loading
of the goods on the ship. The shipper makes arrangements to place the goods on board of
the ship. While the goods are handed over to the people at board, one copy of the
Shipping Bill is handed over to the captain of the Ship, who issues a receipt known as
Mate Receipt.

MATE'S RECEIPT

The forwarding agent pays the port charges and obtains the Mate Reciept. The Mate is
the Assistant Captain who allows the loading of the goods only when the shipper presents
a copy of the Shipping Bill and Shipping Order. The Mate issues a receipt after
examining the packing and counting the packages. This receipt is known as the Mate's
receipt. The receipt without any adverse remark is a clean Mate's Receipt. When the Mate
is not satisfied with the documents and goods, he makes certain remarks. Then, it is
known as foul receipt. If the packing is properly done and the Mate is satisfied with the
packages etc., he will issues clean receipt. The remarks of Mate ' s receipt are also made
on the Bill of Lading which is issued by Shipping Company on receiving the Mate's
receipt. After receiving the Bill of Lading from the Shipping Company, the forwarding
agent sends the relevant documents to the exporter. These documents are full set of
"Clean on Board Bill of Lading" together with a few non-negotiable copies, original letter
of credit, copies of customs invoices, one copy of the commercial invoice duly attested
by the customs, export promotion copy of the Shipping Bill, AR-4A/AR-4 forms in
duplicate and G.R.-I form in triplicate.

MARINE INSURANCE

After receiving the Bill of Lading, the exporter makes arrangements with marine
insurance company to insure the goods against marine risks. The insurance covers the
value of goods, expenses and a reasonable percent of profit. The perils are specified
whereby the loss is compensated as per insured perils.

BILL OF LADING

The Bill of Lading is issued by the Shipping Company on presentation of the Mate's
Receipt by the, exporter or his agent. The exporter fills in the details of the goods,
destination, name of ship etc. in the blank forms of the Bill of Lading. The shipping
company checks and signs the Bill of Lading of the exporter. Freight charges are paid by
the exporter and the Bill of Lading is returned to the exporter. The freight may be paid
by the importer. In such a case, the exporter gets the Bill of Lading, duly signed and
stamped by the Shipping Company. The Bill of Lading is marked with 'Freight Forward'.
The goods are handed over to the importer when he pays the freight and presents the Bill
of Lading. The importer is handed over the Bill of Lading by the exporter through postal
sevices or agents. The Bill of Lading is the document of title which is transferable by
endorsement, and delivery. Generally two copies of the Bill of Lading are sent to the
importer by airmail so that at least one should reach him in time.

OTHER SHIPPING DOCUMENTS

Other shipping documents are letter of indemnity, consular invoice, certificate of

origin and other documents attached to the bill of exchange. The letter of indemnity is
furnished by the claimants in absence of Bill of Lading for getting the goods from the
shipping companies. It is a promise by the claimants of the goods to indemnify the
shipping companies of any claim arising out of handling the goods. The consular invoice
is signed and certified by the Consular of the importer country that the goods mentioned
in the invoice are in the package of imported goods arrived at the port. The customs
authorities believing on the invoice do not open the package and let the goods pass onto
the importer. The certificate of origin certifies the name of the country in which the goods
are manufactured. This certificate is produced to get the benefits of preferential treatment
in duties under the GSP Scheme. The Certificate of Quality, AR-4 forms, customs
invoice, packing list etc. are the other documents which are sent with the bill of exchange
to the importer.

SECURING PAYMENTS

The methods of receiving payment are determined as per contract. In normal situations,
there are four methods of receiving payments from the importer.

a ) Documentary Bill of Exchange: The documentary bill of exchange refers to the

arrangements of payment through bank at the delivery of documents or at the expiry of
the due date of the bills of exchange. The bank will handover the documents to the
importer either at the acceptance of the bill of exchange which is known as Documents
Against Acceptance (D/A) or at the receipt of the bill of exchange which is known as
Documents Against Payment (DIP). The bills in the case of D/A are generally for 60 t090
days after acceptance. They are also known as usance bill or time bill. The bank receives
the payment on maturity of the bill.

b) Discounting Documentary Bill: The discounting documentary bill is discounted by

the bank and the exporter gets the payment on the accepted usance bill. The bank
discounting the D/A bill gets the title 0 f the bill and charges a certain fee for discounting
the bill. The letter of hypothecation is also handed over to the bank which on dishonor of
the D/A bill gets the payment by disposing of the goods under his possession. The banks
generally ask for hypothecation for discounting of bill. The exporter dose not like to
discount his D/A bills in doubtful cases because it will result in loss in case the importer
does not honors the bills.

c) Documentary Credit: The importer gets a letter of credit from a bank which promises
to pay the bill of exchange. The D/A and DIP bills can be drawn on the bank as per letter
of credit. The exporter on receipt of the letter of credit, dispatches the documents to the
bank which accepts the bill of exchange if it is DIP bills. The bank issuing the letter of
credit guarantees the payment of D/ A when the maturity arises for payment. The banks
are considered more liable for payment than the individual importers. Therefore, the
documentary credit letters are more common in international marketing for receiving
payment.

d) Other Payment Methods: The importer can pay off his dues by telegraphic transfer
(T.T.) of his cash to the exporter through his banks and the banks will immediately debit
the account of the importers and credit the exporter's account. This information may be
sent by airmail to payoff the dues. The bank draft maybe prepared by the importer to
payoff the dues. The bank draft may be. Presented at the time of receiving the documents
or after the expiry of the period or at some later date. There may be payment by cheques
and money order too for small amounts.

EXPORT INCENTIVFS
The exporter may apply for getting export incentives under export promotion policies
of Government. The incentives may be duty drawback, excise duty refund, import
replenishment licence, cash compensatory allowance etc. The Export Promotion Councils
are approached for the purpose.

EXPORT DOCUMENTATION
Export documentation includes a large number of documents to be filled in by the
exporter or export agent. The documents may be trade" "documents, regulatory
documents, export assistance documents and foreign documents. The trade documents
are commercial invoices, bills of exchange, bills of lading and marine insurance.
Regulatory documents are required for complying with the rules and regulations. They
may be documents pertaining to exchange regulations, customs formalities and so on.
The export assistance documents include import replenishment licences, drawback of
excise duties etc. The foreign documentation includes certificates of origin, consular
invoice, quality control certificate etc.

COMMERCIAL INVOICE

The commercial invoice contains all the information required for export purposes viz.,
descriptions of goods, price, terms of payment, shipment charges, the name and address
of exporter and importer, shipping vessel. There is no prescribed form of commercial
invoice. The contents of letter of credit are recorded in the commercial invoices. Several
copies are prepared for the use of officials and export authorities. It may include
certificate of origin, value, consular invoice, customs invoice etc. The commercial
invoice is prepared by the exporter on the basis of proforma invoice of importer.

LETTER OF CREDIT

The letter of credit is a letter of payment issued by the banker of the foreign importer
in favour of the exporter wherein the banker undertakes to pay the specified amount
mentioned therein. It popularly known as Lie. It has become very important document in
international marketing. The promise to pay is substantiated by the promise made by his
banker. The exporters are assured by this letter of credit the terms and conditions of the
letter of credit are different in different cases. The exporter and importer must agree to
the terms and conditions mentioned in the letter of credit. The letters of credit may be
clean letter of credit, revocable and irrevocable letters of credit, confirmed and
unconfirmed letters of credit, transferable and nontransferable letters of credit and so on.
It has better terms of trade whereby the importer agrees to pay the dues within the
specified period. The exporter can secure loans from his bank on the security of the letter
of credit. The utilities of the letter of credit have been described in the chapter of export
financing.
BILL OF EXCHANGE
The bill of exchange is a popular document in international marketing. It is a
negotiable instrument of credit. There are a large number of discounting and
rediscounting houses in the world. Reputed bills of exchange are discounted by the
Reserve Bank of India and Commercial Banks. The Documents against Acceptance
(D/A) and the Documents against Payment (DIP) are the two important types of bills of
exchange. The documents against ac-acceptance bills are discounted through banks. 'The
bills of exchange are accompanied with the several documents such as commercial
invoice, bill of lading, customs bill etc.
G.R. FORM

Foreign Exchange Regulations Act, 1973 requires the exporter to ensure that the full
value of the goods exported by him is remitted to India. This declaration is made in the
prescribed form known as G.R. Form. The G.R. Form is prepared in duplicate to be
submitted to the customs authorities. The customs authorities verify the value declared by
the exporter and record the assessed value on the G.R Form. The original copy is retained
by the Reserve Bank of India and the duplicate copy is submitted to the commercial bank
for realisation of the foreign exchange. The exporter can retain the proceeds of his
exports by submitting G.R.-3 Form which is prepared in triplicate. The original copy is
sent to the Reserve Bank of India through customs authorities and the other two copies
are dealt with as per instructions of the RBI. The parcel post is declared on PP Form. The
G.R. Form is different for different purposes. GRI form is the popular form of declaration
of receipt of foreign exchange. The G.R.X. Form is used for the receipt in advance. It is
rare phenomenon because advance payment in expo-rt is not received in India.

SHIPPING BILL

The shipping bill is a customs document which may be of three types, viz., shipping
bill for goods exempted from customs duties, shipping bill for dutiable goods and
shipping bill for the refund duties paid. The shipping bill is different from bill of lading.
The shipping bill is not title document; it is merely a custom document.

MARINE INSURANCE POLICY

 Marine insurance policy is an evidence of agreement between the insurer and the
assured for getting compensation from the former in case the latter suffers loss on
account of insured perils. The insurance becomes essential in international marketing
because of expose of several risks. The insurance policy should be as per terms and
conditions of letter of credit and trade transactions.

BILL OF LADING

Bill of Lading (BIL) is the document issued by the shipping company

acknowledging that the goods mentioned therein have been shipped on the board
of the ship. It is undertaking that the goods mentioned therein will be delivered to
the consignee provided the freight is paid. It is a title of goods, a receipt of goods
received by the shipping company and an evidence of the contract to carry the
goods safely to the destination in exchange of the specified freight. The bill of
lading gives details of the goods, carrying vessel, port of shipment, destination
consignee and the exporter and the importer. The bill of lading may be foul or
clean. The foul bill of lading has certain conditions or preimposed clauses. The
clean bill of lading has no conditions or clauses. It demonstrates that the goods
des patched are properly packed under quality control certificate.

IMF
The IMF is an international organization of 184 member countries. It was established to
promote international monetary cooperation, exchange stability, and orderly exchange
arrangements; to foster economic growth and high levels of employment; and to provide
temporary financial assistance to countries to help ease balance of payments adjustment.

Since the IMF was established its purposes have remained unchanged but its operations
— which involve surveillance, financial assistance, and technical assistance — have
developed to meet the changing needs of its member countries in an evolving world
economy.

Growth in IMF Membership, 1945 - 2003

(number of countries)

The purposes of the International Monetary Fund are:

 (i) To promote international monetary cooperation through a permanent institution
which provides the machinery for consultation and collaboration on
international monetary problems.

(ii) To facilitate the expansion and balanced growth of international trade, and to
contribute thereby to the promotion and maintenance of high levels of
employment and real income and to the development of the productive
resources of all members as primary objectives of economic policy.

(iii) To promote exchange stability, to maintain orderly exchange arrangements

among members, and to avoid competitive exchange depreciation.

(iv) To assist in the establishment of a multilateral system of payments in respect of

current transactions between members and in the elimination of foreign
exchange restrictions which hamper the growth of world trade.

(v) To give confidence to members by making the general resources of the Fund
temporarily available to them under adequate safeguards, thus providing them
with opportunity to correct maladjustments in their balance of payments
without resorting to measures destructive of national or international prosperity.

(vi) In accordance with the above, to shorten the duration and lessen the degree of
disequilibrium in the international balances of payments of members.

IMF at Work
The work of the IMF is of three main types. Surveillance involves the monitoring of
economic and financial developments, and the provision of policy advice, aimed
especially at crisis-prevention. The IMF also lends to countries with balance of payments
difficulties, to provide temporary financing and to support policies aimed at correcting
the underlying problems; loans to low-income countries are also aimed especially at
poverty reduction. Third, the IMF provides countries with technical assistance and
training in its areas of expertise. Supporting all three of these activities is IMF work in
economic research and statistics.

In recent years, as part of its efforts to strengthen the international financial system, and
to enhance its effectiveness at preventing and resolving crises, the IMF has applied both
its surveillance and technical assistance work to the development of standards and codes
of good practice in its areas of responsibility, and to the strengthening of financial
sectors.
 THE WORLD BANK
The World Bank Group’s mission is to fight poverty and improve the living standards of
people in the developing world. It is a development Bank which provides loans, policy
advice, technical assistance and knowledge sharing services to low and middle income
countries to reduce poverty. The Bank promotes growth to create jobs and to empower
poor people to take advantage of these opportunities

James D. Wolfensohn became the ninth president of the World Bank Group on June 1,
1995. He has traveled to more than 100 countries to gain first hand knowledge of the
challenges facing the World Bank's member countries.

It is the world’s largest external source of funding for education and HIV/AIDS
programs. It strongly supports debt relief, is a leader in the international anti-corruption
effort, helps bring water, electricity and transport to the poor.

What is world bank

In 2003 the World Bank provided $18.5 billion and worked in more than 100
developing countries, bringing finance and/or technical expertise toward helping them
reduce poverty.

We live in a world so rich that global income is more than $31 trillion a year. In this
world, the average person in some countries earns more than $40,000 a year. But in this
same world, 2.8 billion people—more than half the people in developing countries—live
on less than $700 a year. Of these, 1.2 billion earn less than $1 a day.

As a result, 33,000 children die every day in developing countries. In these countries,
each minute more than one woman dies during childbirth. Poverty keeps more than 100
million children, most of them girls, out of school.

The challenge of reducing these levels of poverty, while the population continues to grow
—by an estimated 3 billion people over the next 50 years—is enormous.

The World Bank works to bridge this divide and turn rich country resources into poor
country growth. One of the world’s largest sources of development assistance, the World
Bank supports the efforts of developing country governments to build schools and health
centers, provide water and electricity, fight disease, and protect the environment.

Not a bank, but rather a specialized agency. The World Bank is not a “bank” in the
common sense. It is one of the United Nations’ specialized agencies, and is made up of
184 member countries. These countries are jointly responsible for how the institution is
financed and how its money is spent. Along with the rest of the development community,
the World Bank centers its efforts on the reaching the Millennium Development Goals,
agreed to by UN members in 2000 and aimed at sustainable poverty reduction.
The "World Bank" is the name that has come to be used for the International Bank for
Reconstruction and Development (IBRD) and the International Development Association
(IDA). Together these organizations provide low-interest loans, interest-free credit, and
grants to developing countries.

Some 10,000 development professionals from nearly every country in the world work in
the World Bank's Washington DC headquarters or in its 109 country offices.

$8.1 billion in assistance. The world’s low-income countries generally cannot borrow
money in international markets or can only do so at high interest rates. In addition to
direct contributions and loans from developed countries, these countries receive grants,
interest-free loans, and technical assistance from the World Bank to enable them to
provide basic services. In the case of the l

Who Runs the World Bank Group?

The World Bank is run like a cooperative, with its member countries as shareholders. The
number of shares a country has is based roughly on the size of its economy. The United
States is the largest single shareholder, with 16.41 percent of votes, followed by Japan
(7.87 percent), Germany (4.49 percent), the United Kingdom (4.31 percent), and France
(4.31 percent). The rest of the shares are divided among the other member countries.oans,
countries have 35-40 years to repay, with a 10-year grace period.

TEN THINGS YOU NEVER KNEW ABOUT THE WORLD BANK

1. The World Bank is the world’s largest external founder of education

Education is central to development. The Bank has committed some US$33 billion in
loans and credits for education, and currently finances 157 projects in 83 countries.
The Bank works closely with national governments, United Nations agencies, donors,
civil society organizations, and other partners to support developing countries in their
efforts to reach the Education for All goals — that all children, especially girls and
disadvantaged children, are enrolled in and able to complete a primary education by
2015. A good example of the Bank’s lending in this area is the India District Primary
Education Program, which specifically targets girls in districts where female literacy
rates are below the national average. Bank funding for this program is now up to
US$1.3 billion and serves more than 60 million students in 271 low-literacy districts
in 18 of the 29 Indian states. In Brazil, El Salvador, and Trinidad and Tobago, Bank
projects have helped local communities increase their influence in the quality of
education for their children by enabling them to evaluate the performance of local
schools and teachers.

2. The World Bank is the world’s largest external funder in the fight against
HIV/AIDS
Each day, 14,000 more people become newly infected with the HIV virus. Half of
them are between the ages of 15 and 24. HIV/AIDS is rapidly reversing many of the
social and economic gains made by developing countries over the past 50 years. As a
co-sponsor of UNAIDS, the umbrella group that coordinates the global response to
the epidemic, the World Bank has committed, in the last few years, more than US$1.6
billion to combating the spread of HIV/AIDS around the world. It has been one of the
largest financial supporters of HIV/AIDS programs in developing countries. The
Bank has pledged that no country with an effective HIV/AIDS strategy will go
without funding. In partnership with African and Caribbean governments, the Bank
launched the Multi-Country HIV/AIDS Program (MAP), which makes significant
resources available to civil society organizations and communities. Many have
developed highly innovative HIV/AIDS approaches, from which others are learning
and adapting to local conditions. In 2002, MAP made available US$1 billion to help
countries in Africa expand their national prevention, care, and treatment programs.
Additionally, every year the Bank commits an average of US$1.3 billion in new
lending for health, nutrition, and population projects in the developing world.

3. The World Bank is the leader in the fight against corruption worldwide
Corruption is a roadblock to development: it taxes poor people by diverting public
resources from those who need them most. It also undermines investment, human
capital, growth, voice and equality. Since 1996, the Bank has launched hundreds of
governance and anticorruption programs and initiatives in nearly 100 developing
countries. Initiatives range from disclosure of assets by government officials and
public expenditure reforms, to training judges and teaching investigative reporting to
journalists. The Bank's commitment to addressing corruption has helped spearhead a
global response to the problem, while it continues to integrate anticorruption
measures into its analytical and operational work. It is committed to ensuring that the
projects it finances are free from corruption, setting up stringent guidelines and a
hotline for corruption complaints; about 100 entities have been declared ineligible to
be awarded Bank-financed contracts. Further, the World Bank Institute has developed
a major knowledge, learning, and data center on governance and anticorruption.

4. The World bank Strongly supported debt relief

In 1996, the World Bank and the International Monetary Fund (IMF) launched the
Heavily Indebted Poor Countries (HIPC) Initiative—the first comprehensive
approach to reducing the external debt of the world’s poorest, most indebted
countries. Today, 26 countries are receiving debt relief projected to amount to US$40
billion over time. With other forms of debt relief, the HIPC Initiative will cut by two-
thirds the external debt in these countries, lowering their indebtedness to levels well
below the average for developing countries overall. As part of the initiative, these
countries are reorienting their budgetary priorities toward key social and human
development sectors. Rwanda, for example, has set targets to increase primary school
enrollment and to hire teachers. Honduras is planning to deliver basic primary and
maternal/child health care to at least 100,000 ben-eficiaries in poor communities. In
Cameroon, resources are being used to strengthen the fight against HIV/ AIDS by,
among other things, expanding education to promote the use of condoms by high-risk
populations.
5. The World Bank is the world’s largest international funders of biodiversity
projects
Since 1988, the Bank has become one of the largest international funders of
biodiversity projects. Even though biodiversity loss is a global concern, the greatest
impacts are felt by rural people in developing countries where they are most
dependent on natural resources for food, shelter, medicine, income, employment, and
their cultural identity. For this reason, the Bank has joined Conservation International,
the Global Environment Facility, the MacArthur Foundation, and the Japanese
government in a fund that contributes to better protection of developing countries’
biodiversity hotspots. Sixty percent of all terrestrial species’ diversity can be found in
these highly threatened regions, which cover only 1.4 percent of the planet’s total
surface area. Concern for the environment is central to the Bank’s poverty reduction
mission. In addition
to environmental assessments and safeguard policies, the Bank's environment strategy
focuses on climate
change, forests, water resources, and biodiversity. Currently, the Bank’s portfolio of
projects with clear environmental objectives amounts to around US$13 billion.

6. The World Bank works in partnership more than ever before

During the past six years, the Bank has joined a large array of partners in the global
fight against poverty. For example, to help reduce the effects of global warming it
collaborated with governments and the private sector to launch the new BioCarbon
Fund, and with the International Emissions Trading Association (IETA) to launch the
community Development Carbon Fund (CDCF). The Bank is also working with the
World Wildlife Fund to protect forests. With the Food and Agriculture Organization
(FAO) and the United Nations Development Programme (UNDP), it sponsors the
renowned Consultative Group on International Agricultural Research — which
mobilizes cutting-edge science to reduce hunger and poverty, improve human
nutrition
and health, and protect the environment. Through the Consultative Group to Assist
the Poor, the Bank works with 27 other multilateral and donor organizations
that support microfinance to help build top-quality, full-service financial systems in
developing countries to serve their poorest citizens. A partnership to defeat river
blindness throughout Africa has successfully prevented 700,000 cases of blindness,
opened 25 million hectares of arable land to cultivation, and treats more than 35
million people a year for the disease.

7. The World Bank is helping bring clean water, electricity and transport to
poor people
While most people in the developed world take infrastructure for granted, it remains a
dreamed-of luxury in many parts of the world. Almost 1.4 billion people in
developing countries lack access to clean water. Some 3 billion live without basic
sanitation or electricity. Infrastructure is not simply about the construction of large
projects. It is about delivering basic services that people need for everyday life. It is
about upgrading slums and providing roads to connect the poorest urban areas.
Infrastructure is also an important part of the World Bank’s efforts to help achieve the
Millennium development Goals. Delivering safe water has a direct impact on
reducing child mortality. Providing communities with electricity avoids women and
children spending long hours fetching firewood for cooking and heating, and gives
them more time for other activities. Children, especially, are able to devote more time
to schoolwork. In Morocco, a Bank-supported road project helped increase girls’
enrollment in schools from 28 percent to 68 percent. Infrastructure also connects
communities to the world around them. A rural electrification project in Ecuador is
helping improve living standards and broaden opportunities by linking poor
communities to telecommunications, electricity, the Internet, and business services.

8. Civil society plays an ever larger role in the bank’s work

The growth of civil society over the past two decades has been one of the most
significant trends in international development. Civil Society Organizations (CSOs)
are not only influential in the global development policy debate, but have become
important channels for social service delivery and innovative development programs.
CSO involvement in Bank-funded projects has risen from 21 percent of all projects in
1990 to about 72 percent in 2003. The World Bank is also increasingly supporting
such groups as community groups, NGOs, trade unions and faith-based organizations
through greater information sharing, skills training, and grant funding. Every year, the
Bank provides grant funds to CSOs at the country level to rebuild war-torn
communities, social services and community development. Its civil society staff in
more than 70 country offices consult and collaborate with CSOs on a range of issues,
from AIDS prevention and micro-credit development to fighting corruption and
protecting the environment.

9. The World Bank helps countries emerging from conflict

The Bank is currently active in 40 conflict-affected countries, working with
government and non-government partners, local and international, to assist war-torn
populations, resume peaceful development, and prevent relapse into violence. The
Bank's work addresses a range of needs, including jump-starting the economy,
repairing and rebuilding war-damaged infrastructure and institutions, clearing land
mines, reintegrating ex-combatants and isplaced populations, and targeting programs
to vulnerable groups such as widows and children. The Bank has also developed tools
and research to better analyze and understand the sources of conflict, and to promote
economic growth and poverty reduction in a way that reduces the risk of future
violence. Among the wideranging and innovative projects supported by the Bank are
demobilization of ex-combatants in the Great Lakes Region; infrastructure
reconstruction and community empowerment efforts in Afghanistan; addressing
psycho-social trauma in war-affected communities of Bosnia and Herzegovina;
rehabilitation of street children in the Democratic Republic of Congo; early
reconstruction through a community empowerment and local governance project in
Timor-Leste; and a program to protect the property of colombians uprooted by
conflict.

10. The World Bank is responding the voices of poor people

 Conversations with 60,000 poor people in 60 countries, as well as our day-to-day
work, have taught the Bank that poverty is about more than inadequate income or
even low human development. It is also about voicelessness and powerlessness. It is
about vulnerability to abuse and corruption. It is about lack of fundamental freedom
of action, choice, and opportunity. The Bank believes that people who live in poverty
should not be treated as a liability, but as a resource and a partner in the fight against
poverty. An empowering approach to poverty reduction puts poor people at the center
of development and creates the conditions where they can gain increased control over
their lives through better access to information, inclusion and participation in
decision-making, accountability, and local organizational capacity. Today, the Bank
supports a variety of community-driven development projects with funding
commitments of more than US$2 billion. Other ways of investing in poor people's
empowerment include social accountability mechanisms in Bank operations,
community-managed school programs, judicial reform and access to justice
programs, and the promotion of citizen scorecards to rate basic services.

UNIT V

General Agreement on Tariffs And Trade (GATT)

The General Agreement on Tariffs and Trade (GATT) was first signed in
1947. The agreement was designed to provide an international forum that
encouraged free trade between member states by regulating and reducing
tariffs on traded goods and by providing a common mechanism for resolving
trade disputes. GATT membership now includes more than 110 countries.

Consideration of GATT's relationship to environmental policy is an emerging concern in

trade and environmental policy circles. Until the recently concluded Uruguay Round of
GATT negotiations, the word environment did not appear in the GATT text. Several
provisions and sections of GATT may be relevant to environmental issues, however. The
following sections of GATT are often referenced in the examination of trade-
environment issues. The excerpts are from GATT as amended through 1966, originally
digitized by the Multilaterals Project of the Fletcher School of Law and Diplomacy, Tufts
University:

Background: the two GATTs

The original General Agreement on Tariffs and Trade, now referred to as GATT 1947,
provided the basic rules of the multilateral trading system from 1 January 1948 until the
World Trade Organization entered into force on 1 January 1995. These rules, which dealt
only with trade in goods, were supplemented and modified by many further legal
instruments adopted over the 47 years between 1948 and 1995, as a result of multilateral
negotiations, protocols of accession, waivers and other decisions. Articles of GATT 1947
dealing with such matters as accession, joint action by the Contracting Parties (the
signatories of the agreement) and consultations and complaints allowed the GATT to
function effectively as an international organization. A further important feature of
GATT 1947, however, was its "grandfather clause", included in the Protocol of
Provisional Application. This provided that the rules in Part III of the GATT 1947, which
essentially dealt with non-tariff trade measures, need be applied only to the extent that
they were not inconsistent with legislation in effect when a country acceded to the
GATT. GATT 1947 is no longer in force.

GATT 1994, which sets out the main WTO rules that bear specifically on trade in goods,
is legally distinct from GATT 1947. Many of its key elements, including post-1948 legal
instruments, have been carried over without change from GATT 1947. Examples are the
most-favoured-nation rule (Article I of both GATT 1947 and GATT 1994) and the
provisions of Part IV, on trade and development. Other Articles carried over into GATT
1994 have effectively been modified, sometimes substantially, by individual agreements
negotiated in the Uruguay Round. Some Articles are no longer valid, having been
replaced by provisions of the WTO Agreement. The Protocol of Provisional Application
is specifically excluded from GATT 1994. The GATT 1994 is defined by a short
Uruguay Round agreement entitled "General Agreement on Tariffs and Trade 1994".
This does not provide a new physical text for GATT 1994, but indicates the relationship
between it and GATT 1947.

GATT 1994

The Marrakesh Agreement Establishing the World Trade Organization states that the
General Agreement on Tariffs and Trade 1994 (GATT 1994) is an instrument legally
distinct from the General Agreement on Tariffs and Trade dated 30 October 1947,
annexed to the Final Act of the United Nations Conference on Trade and Employment
(Havana Conference), and referred to as GATT 1947.

The GATT 1994, as set out in Annex 1A to the WTO Agreement, consists of: (a) the
provisions of GATT 1947; (b) the provisions of legal instruments which entered into
force under GATT 1947 before the date of entry into force of the WTO Agreement; (c)
the Understandings on the interpretation of a number of GATT Articles, adopted at the
end of the Uruguay Round; and (d) the Marrakesh Protocol to GATT 1994.

The General Agreement on Trade on Services (GATS) extends the rules based multilateral
trading system to the wide area of services. Similar advantages should accrue to developing
countries from the operation of a rules based system in services as has been the case for
merchandise trade. While many developing countries are not presently well placed to take
advantage of some of the improved market access opportunities which the Agreement will
provide, they will be in a position to do so in the future as their domestic supply capacity
increases. However, a number of areas of export interest to developing countries (for example
the movement of natural persons) have already been committed to liberalization by major
importing countries or are the subject of ongoing negotiations to improve market access.
Further, the GATS is unique in that it permits Member countries, including developing
countries, to negotiate the conditions under which foreign services suppliers may establish in
their countries. These terms and conditions are bound in the schedules of the Members
concerned. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
offers potential benefits for developing countries by creating a framework which is conducive
to technology transfer and foreign direct investment. Its main disciplines include non-
discrimination (i.e. most-favoured-nation and national treatment) and the equal application by
all Members of minimum standards of protection in relation to all categories of intellectual
property rights.

WTO
What is the WTO?

The World Trade Organization (WTO) is the only global international

organization dealing with the rules of trade between nations. At its heart are
the WTO agreements, negotiated and signed by the bulk of the world’s trading
nations and ratified in their parliaments. The goal is to help producers of goods
and services, exporters, and importers conduct their business.

The multilateral trading system—past, present and future

The World Trade Organization came into being in 1995. One of the youngest of
the international organizations, the WTO is the successor to the General
Agreement on Tariffs and Trade (GATT) established in the wake of the Second
World War.

The past 50 years have seen an exceptional growth in world trade. Merchandise exports grew
on average by 6% annually. Total trade in 2000 was 22-times the level of 1950. GATT and the
WTO have helped to create a strong and prosperous trading system contributing to
unprecedented growth.

The system was developed through a series of trade negotiations, or rounds, held under GATT.
The first rounds dealt mainly with tariff reductions but later negotiations included other areas
such as anti-dumping and non-tariff measures. The last round — the 1986-94 Uruguay Round —
led to the WTO’s creation.

The negotiations did not end there. Some continued after the end of the Uruguay Round. In
February 1997 agreement was reached on telecommunications services, with 69 governments
agreeing to wide-ranging liberalization measures that went beyond those agreed in the Uruguay
Round.

In the same year 40 governments successfully concluded negotiations for tariff-free trade in
information technology products, and 70 members concluded a financial services deal covering
more than 95% of trade in banking, insurance, securities and financial information.

In 2000, new talks started on agriculture and services. These have now been incorporated into
a broader agenda launched at the fourth WTO Ministerial Conference in Doha, Qatar, in
November 2001.

The work programme, the Doha Development Agenda (DDA), adds negotiations and other work
on non-agricultural tariffs, trade and environment, WTO rules such as anti-dumping and
subsidies, investment, competition policy, trade facilitation, transparency in government
procurement, intellectual property, and a range of issues raised by developing countries as
difficulties they face in implementing the present WTO agreements.

The deadline for the negotiations is 1 January 2005.

The organization

The WTO’s overriding objective is to help trade flow smoothly, freely, fairly
and predictably.

It does this by:

• Administering trade agreements

• Acting as a forum for trade negotiations
• Settling trade disputes
• Reviewing national trade policies
• Assisting developing countries in trade policy issues, through technical assistance and
training programmes
• Cooperating with other international organizations

Structure
The WTO has nearly 150 members, accounting for over 97% of world trade. Around 30 others
are negotiating membership.

Decisions are made by the entire membership. This is typically by consensus. A majority vote is
also possible but it has never been used in the WTO, and was extremely rare under the WTO’s
predecessor, GATT. The WTO’s agreements have been ratified in all members’ parliaments.

The WTO’s top level decision-making body is the Ministerial Conference which meets at least
once every two years.

Below this is the General Council (normally ambassadors and heads of delegation in Geneva,
but sometimes officials sent from members’ capitals) which meets several times a year in the
Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the
Dispute Settlement Body.

At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS)
Council report to the General Council.

Numerous specialized committees, working groups and working parties deal with the
individual agreements and other areas such as the environment, development, membership
applications and regional trade agreements.

The WTO agreements

How can you ensure that trade is as fair as possible, and as free as is
practical? By negotiating rules and abiding by them.

The WTO’s rules — the agreements — are the result of negotiations between the members. The
current set were the outcome of the 1986–94 Uruguay Round negotiations which included a
major revision of the original General Agreement on Tariffs and Trade (GATT).

GATT is now the WTO’s principal rule-book for trade in goods. The Uruguay Round also created
new rules for dealing with trade in services, relevant aspects of intellectual property, dispute
settlement, and trade policy reviews. The complete set runs to some 30,000 pages consisting of
about 30 agreements and separate commitments (called schedules) made by individual
members in specific areas such as lower customs duty rates and services market-opening.

Through these agreements, WTO members operate a non-discriminatory trading system that
spells out their rights and their obligations. Each country receives guarantees that its exports
will be treated fairly and consistently in other countries’ markets. Each promises to do the
same for imports into its own market. The system also gives developing countries some
flexibility in implementing their commitments.

Goods

It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower
customs duty rates and other trade barriers; the text of the General Agreement spelt out
important rules, particularly non-discrimination.

Since 1995, the updated GATT has become the WTO’s umbrella agreement for trade in goods.
It has annexes dealing with specific sectors such as agriculture and textiles, and with specific
issues such as state trading, product standards, subsidies and actions taken against dumping.

Services

Banks, insurance firms, telecommunications companies, tour operators, hotel chains and
transport companies looking to do business abroad can now enjoy the same principles of freer
and fairer trade that originally only applied to trade in goods.

These principles appear in the new General Agreement on Trade in Services (GATS). WTO
members have also made individual commitments under GATS stating which of their services
sectors they are willing to open to foreign competition, and how open those markets are.ssues
such as state trading, product standards, subsidies and actions taken against dumping.

Intellectual property

The WTO’s intellectual property agreement amounts to rules for trade and investment in ideas
and creativity. The rules state how copyrights, patents, trademarks, geographical names used
to identify products, industrial designs, integrated circuit layout-designs and undisclosed
information such as trade secrets — “intellectual property” — should be protected when trade
is involved.
Dispute settlement

The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding
is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries
bring disputes to the WTO if they think their rights under the agreements are being infringed.
Judgements by specially-appointed independent experts are based on interpretations of the
agreements and individual countries’ commitments.

The system encourages countries to settle their differences through consultation. Failing that,
they can follow a carefully mapped out, stage-by-stage procedure that includes the possibility
of a ruling by a panel of experts, and the chance to appeal the ruling on legal grounds.
Confidence in the system is borne out by the number of cases brought to the WTO — around
300 cases in eight years compared to the 300 disputes dealt with during the entire life of GATT
(1947–94).

Policy review

The Trade Policy Review Mechanism’s purpose is to improve transparency, to create a greater
understanding of the policies that countries are adopting, and to assess their impact. Many
members also see the reviews as constructive feedback on their policies.

All WTO members must undergo periodic scrutiny, each review containing reports by the
country concerned and the WTO Secretariat.

10 benefits of the WTO trading system

The ten benefits

1. The system helps promote peace

2. Disputes are handled constructively
3. Rules make life easier for all
4. Freer trade cuts the costs of living
5. It provides more choice of products and qualities
6. Trade raises incomes
7. Trade stimulates economic growth
8. The basic principles make life more efficient
9. Governments are shielded from lobbying
10. The system encourages good government

UNCTAD
UNCTAD forty years on: Trade and development in historical perspective
 1. It could be said that Dickens’ description of the period preceding the
French Revolution – “it was the best of times, it was the worst of times”
– applies to all times. (The same could perhaps be said about the
subsequent, less often quoted sentence in the opening paragraph of A
Tale of Two Cities: “It was the age of wisdom, it was the age of
foolishness”.)
Historical
Background
2. The first half of the 1960s, when UNCTAD was created, was in some
ways the worst of times. The Cold War was at its most intense. The
Berlin Wall had been built in August 1961, and a year later the Cuban
missile crisis had brought the world closer to a nuclear holocaust than it
had ever been. The conflict in Viet Nam was beginning to move
inexorably towards becoming one of the most tragic episodes of the post-
war period.
UNCTAD was born
at a time of hope
3. And yet in other respects, the early 1960s were a time of hope and
anticipation. Decolonization had changed the international landscape and
held a promise not only of political independence but also of economic
development and social justice for millions of hitherto forgotten peoples.
In Latin America, the Cuban Revolution had captured the imagination of
a whole generation; partly in response, a social democratic alternative
emerged, championed by the young new President of the United States,
in the form of the Alliance for Progress, the creation of the Inter-
American Development Bank, and the launching of LAFTA with the
signing of the first Montevideo treaty. In India, a formidable effort was
being made under the inspirational political leadership of Nehru and with
the brilliant intellectual contribution of Mahalanobis to transform the
economy from an agricultural to an industrial one. Comparable, but
richly diverse, efforts were taking place elsewhere in Asia and Africa. It
was what could be called the first cycle of global hope – and, to some
extent, illusion – of apparently irreversible economic and social progress.
In the spiritual world, after the ecumenical renaissance introduced by
Pope John XXIII, those were the years in which Pope Paul VI could refer
to development as “the new name for peace”.
The Philosophy
4. The philosophy behind all these efforts was that of a benevolent
nation-state guiding a process of growth and industrialization animated
by national economic actors, entrepreneurs and workers. The expansion
of the domestic market, assisted by regional integration, would provide
the stimulus.
It was a time for
national self-
5. It was, therefore, a philosophy of economic nationalism. Not in the
assertion sense of xenophobia (the Alliance for Progress, for instance, was
predicated upon a substantial increase of US private investment in Latin
America, and just about all Latin American Governments responded
favourably) but in the sense of asserting that, in a system where private
capital has the ultimate responsibility for organizing production, the
 nationality of capital matters. Foreign firms were welcome, but the
central purpose of the development effort was to help strengthen a
national industrial sector. It was a rejection – avant la lettre – of the
notion that maximizing “global welfare” was always good for all, and a
reaffirmation of the old political economists’ discovery that every
economic policy choice involves social and political trade-offs.
Role of Raul
Prebisch
6. Perhaps the most articulate advocate of this approach in the world of
international organizations was the Executive Secretary of the United
Nations Economic Commission for Latin America, later the first
Secretary-General of UNCTAD, Dr. Raul Prebisch. Under his leadership,
ECLAC had been putting forward proposals along these lines since the
1950s, and Latin American Governments had embraced the approach
enthusiastically. And yet, at the beginning of the 1960s, Prebisch – and
others – felt that something crucial was missing.
The need for a
reform of the
7. What was missing was a favourable external environment, one that
external would help close the “trade gap” created by secularly deteriorating terms
environment
of trade. This was to be achieved by improving the working of
commodity markets, expanding developing countries’ access to the
markets of industrialized countries, increasing the flow of resources to
developing countries, facilitating the transfer of technology, and
generally supporting developing countries’ efforts to build a national
development base. The underlying assumption remained the drive for
industrialization in the context of an increasingly interdependent world
economy.

8. When this intellectual realization reached the international political

level through the involvement of the Non-Aligned Movement, the
conditions were ripe for the creation of UNCTAD. The breadth of the
vision behind it is well summed up in the Preamble of the Final Act of
the first session of the Conference:
The birth of
UNCTAD
“The developing countries recognize that they have the primary
responsibility to raise the standard of living of their peoples; but their
national exertions to this end will be greatly impaired if not supplemented
and strengthened by constructive international action based on respect for
national sovereignty. An essential element of such action is that
international policies in the field of trade and development should result
in a modified international division of labour, which is more rational and
equitable and is accompanied by the necessary adjustments in world
production and trade. The resultant increase in productivity and
purchasing power of the developing countries will contribute to the
economic growth of the industrialized countries as well, and thus become
a means to worldwide prosperity.”
First achievements
of UNCTAD
9. UNCTAD thus emerged in the international arena as an expression of
 what the Final Act terms “the growing conviction” about the need for “a
bold new programme of international economic co-operation”. In the
period that followed, it achieved some significant successes in dealing
with the issues that had prompted its emergence. The creation of the
generalized system of preferences, agreed at the second UNCTAD
Conference in 1968, was an innovative and successful approach to the
question of access for developing countries in the markets of the
industrialized countries. Also novel and important were its proposals to
deal with the debt problems of developing countries, contained in the
Report of the Group of Governmental Experts on the Debt Problems of
Developing Countries adopted in 1975, which helped structure the
discussions in the Paris Club mechanism for renegotiation of the official
and officially guaranteed non-concessional debt of developing countries.
The Convention on a Code of Conduct for Liner Conferences, approved
in April 1974, included provisions to strengthen the ability of developing
countries to support national merchant fleets. UNCTAD also made an
important contribution in identifying the group of least developed
countries in 1971; it played a lead role in organizing the three decennial
United Nations Conferences on LDCs and served as a focal point in the
United Nations system for coordinating, reviewing and monitoring the
implementation of the outcomes of the first two Conferences.
Mixed results
10. In other cases, the achievements in this period were mixed. UNCTAD
IV in 1976 approved the Integrated Programme for Commodities, but the
agreement establishing the institutional cornerstone of the proposal, the
Common Fund for Commodities, took over 10 years to negotiate and
ratify, and only entered into force in June 1989; by then the philosophy it
embodied – intervention in commodity markets by producer-consumer
bodies through buffer stocks – had been essentially abandoned and the
Fund had to search for a new role centred on the objective of commodity
development. A proposal for instituting trade preferences among
developing countries was also presented at UNCTAD IV in 1976, but the
Generalized System of Trade Preferences among Developing Countries
(GSTP) that eventually resulted also entered into force only in 1989. A
Code of Conduct for the Transfer of Technology was negotiated but
never approved, although the process leading to a complete text was a
valuable learning experience for developing countries.
Overall
performance of
11. And yet the following two decades were on the whole bright periods
developing for development. For all its fundamental shortcomings, the
countries
industrialization strategy espoused by Prebisch, ECLAC and UNCTAD
resulted in growth rates for the developing world that have not been
equalled since, as table 1 shows.

Table 1. Annual average growth

Total real GDP Real GDP per capita

 1960- 1970- 1980- 1990- 1960- 1970- 1980- 1990-
70 80 90 00 70 80 90 00
Developing
5.7 6.0 3.5 3.8 3.1 3.4 0.6 1.8
countries *

Africa ** 6.3 4.5 2.0 2.5 3.6 1.7 -0.9 -0.1

Asia *** 6.1 6.5 5.2 4.4 3.6 4.1 2.2 2.5

Latin
5.2 5.6 1.7 3.4 2.4 3.1 -0.3 1.6
America
Developed
markets 5.4 3.3 3.2 2.4 4.4 2.5 2.6 1.7
ecs
* Excluding China - ** Including South Africa - *** 1990-2000 include Central
Asian Republics.

Source: UNCTAD ETS Database

12. Some of the largest developing economies in all three continents in

fact exceeded the regional average by significant margins, particularly in
the 1970s. This was the case of Brazil and Mexico, Egypt and the
Maghreb countries, and the East Asian newly industrializing countries.
Differences in
performance
13. The specifics of the approach varied from region to region and indeed
among regions among countries within the same region. Particular attention has been
paid in the debates on development to the differences between the East
Asian and the Latin American approaches, and these have been analysed
in some detail in UNCTAD’s Trade and Development Report of the last
10 years. In essence, in the Latin American case, domestic
industrialization, particularly in the 1970s, was financed with increased
external borrowing without generating a commensurate export capacity
in a context in which real interest rates were negative because of rising
commodity prices. A sudden shift to an anti-inflationary monetary policy
in the United States at the end of the 1970s increased interest rates
sharply and led to a collapse of commodity prices. As a result, Latin
America plunged into the debt crisis of the early 1980s. This in turn led
to an outward-oriented development strategy based on liberalization,
deregulation and privatization. Similar liberalization policies were in fact
adopted elsewhere in the developing world, including in East Asia. There
was, however, a major difference between East Asia and Latin America.
In East Asia, protection and support for domestic industry had been
combined with export growth, technological upgrading and increasing
competitiveness. Protection and support were then removed when they
were no longer needed. In Latin America they were introduced as a
reaction to the exhaustion of the import-substitution development
strategy based on extensive government intervention and in recognition
of its inability to sustain rapid growth and development in the longer run.
The new
conventional
14. Thus, the past two decades have been marked by a radical break in
wisdom development thinking and practice. The new approach promised to
liberate enterprise from the heavy hand of the state, deferring to the
invisible touch of the market and allowing free market forces to set the
pace and pattern of integration into the global economy. The promise was
 for an end to macroeconomic instability, stop-go development cycles and
debilitating levels of debt, ushering in an era of sustained growth and
poverty reduction.
The rise of
globalization and
15. In the 1990s what emerged as essential to the approach was the
the new policy concept of globalization. At its simplest, globalization involves the
approach
assumption that, as a result of technological progress, borders are less and
less relevant for the working of the world economy and indeed for
domestic economic management. The globalized world economy offers
opportunities for firms from all countries in an increasingly unified
global market. The task of Governments is to push globalization forward
by facilitating the access of firms to that global market through the
reduction of border restrictions on the flow of goods, services and factors
of production. This will lead to an optimal allocation of resources at the
global level and the maximization of global welfare. The new approach is
therefore the opposite of the one that prevailed in the 1950s, 1960s and
1970s. It is a philosophy of economic globalism, where nationality does
not matter; what matters is allocative efficiency at the global level.
Evaluation on the
trade front
16. The 1990s also witnessed important evolutions in the multilateral
trading system. The Uruguay Round of Multilateral Trade Negotiations,
which led to the creation of the World Trade Organization with a more
comprehensive mandate, went beyond tariffs and brought into the ambit
of the multilateral trading system a number of within-the-border issues
such as intellectual property, investment measures and services with
profound implications for social and economic development policies and
prospects. By introducing a “single undertaking” character into the
multilateral trading system, it virtually ended the option heretofore
available to developing countries to opt out of obligations under the
multilateral trade agreements.
The response of
UNCTAD
17. UNCTAD responded to the new approach through an effort to build
on its fundamental tenet – that international trade should be a prime lever
for development – and further emphasis on the idea of interdependence,
while updating its mandates, functions and activities. The process began
with the eighth Conference in Cartagena de Indias, Colombia, in 1992,
evolved through the ninth Conference in Midrand, South Africa, in 1996
and culminated with the tenth Conference in Bangkok, Thailand, in 2000.

“Ensuring that all countries enjoy the benefits of globalization requires

meeting complex policy challenges which arise, particularly at the global
macroeconomic level, from the growing interdependence of the various
spheres of economic activity, including particularly trade, finance and
investment, and the downside risks which interdependence sometimes
carries. UNCTAD as the focal point within the United Nations for the
integrated treatments of trade and development and the interrelated issues
in the areas of technology, investment, and sustainable development, is
 pre-eminently placed to examine these issues and to build consensus for
reformulation of policies in a globalizing world from a development
perspective and has a major role to play in helping developing countries,
in particular the least developed countries, and the economies in
transition better understand how to design policies for efficient
integration into the world economy, taking into account the many new
issues which confront policy-makers, and tailoring the process to each
country’s level of economic development and institutions. In this respect
UNCTAD should continue to explore, based on relevant experience, how
to enhance the development opportunities at the domestic, regional and
international level offered by the globalization process.”

Role of UNCTAD in
the new
18. The Conference went on to confirm that the functions of UNCTAD –
international for the purposes and in the subject` areas described – are to act as a forum
environment
for consensus building, to undertake research and analysis and to provide
technical assistance to developing countries More specifically, it
identified four fields of activity as providing the focus for work:
globalization and development; investment, enterprise development and
technology; trade in goods and services and commodity issues; and
services infrastructure for development and trade efficiency. Special
attention was to be devoted to the problems of the least developed
countries.In each of the fields indicated, the Plan of Action identified
more specific activity areas in which UNCTAD should deploy efforts in
support developing countries.
UNCTAD X at
Bangkok in 2000
19.The Plan of Action served as a comprehensive basis for the work of
the organization in the four years following the tenth Conference. It
should continue to be the framework defining the broad contours of
UNCTAD’s work in the years to come. In a sense, it summarizes the
acquis of the institution. However, both the experience in the 1990s as a
whole – the period of fast expansion of globalization – and more
specifically the period after the Bangkok Conference exhibit specific
features that call for some aspects of the work to be revisited with a view
to updating them and elaborating on them.

The European Union

The European Union--previously known as the European Community--is an institutional
framework for the construction of a united Europe. It was created after World War II to
unite the nations of Europe economically so another war among them would be
unthinkable. Fifteen countries are members of the European Union, and some 370 million
people share the common institutions and policies that have brought an unprecedented era
of peace and prosperity to Western Europe.

EU at a glance

The European Union (EU) is a family of democratic European countries, committed

to working together for peace and prosperity. It is not a State intended to replace
existing states, but it is more than any other international organisation. The EU is, in fact,
unique. Its Member States have set up common institutions to which they delegate some of
their sovereignty so that decisions on specific matters of joint interest can be made
democratically at European level.This pooling of sovereignty is also called "European
integration".

The historical roots of the European Union lie in the Second World War. The idea of
European integration was conceived to prevent such killing and destruction from ever
happening again. It was first proposed by the French Foreign Minister Robert Schuman in a
speech on 9 May 1950. This date, the "birthday" of what is now the EU, is celebrated annually
as Europe Day.

There are five EU institutions, each playing a specific role:

• European Parliament (elected by the peoples of the Member States);

• Council of the European Union (representing the governments of the Member States);
• European Commission (driving force and executive body);
• Court of Justice (ensuring compliance with the law);
• Court of Auditors (controlling sound and lawful management of the EU budget).

These are flanked by five other important bodies:

• European Economic and Social Committee (expresses the opinions of organised civil
society on economic and social issues);
• Committee of the Regions (expresses the opinions of regional and local authorities);
• European Central Bank (responsible for monetary policy and managing the euro);
• European Ombudsman (deals with citizens' complaints about maladministration by any
EU institution or body);
• European Investment Bank (helps achieve EU objectives by financing investment
projects);

A number of agencies and other bodies complete the system.

The rule of law is fundamental to the European Union. All EU decisions and procedures
are based on the Treaties, which are agreed by all the EU countries.

Initially, the EU consisted of just six countries: Belgium, Germany, France, Italy, Luxembourg
and the Netherlands. Denmark, Ireland and the United Kingdom joined in 1973, Greece in
1981, Spain and Portugal in 1986, Austria, Finland and Sweden in 1995. In 2004 the biggest
ever enlargement took place with 10 new countries joining.

In the early years, much of the co-operation between EU countries was about trade and the
economy, but now the EU also deals with many other subjects of direct importance for our
everyday life, such as citizens' rights; ensuring freedom, security and justice; job creation;
regional development; environmental protection; making globalisation work for everyone.
The European Union has delivered half a century of stability, peace and prosperity.
It has helped to raise living standards, built a single Europe-wide market, launched the single
European currency, the euro, and strengthened Europe's voice in the world.

Unity in diversity: Europe is a continent with many different traditions and languages, but
also with shared values. The EU defends these values. It fosters co-operation among the
peoples of Europe, promoting unity while preserving diversity and ensuring that decisions are
taken as close as possible to the citizens.

In the increasingly interdependent world of the 21st century, it will be even more necessary for
every European citizen to co-operate with people from other countries in a spirit of curiosity,
tolerance and solidarity.

BIBLIOGRAPHY

1. Bhattacharya Varshneya, “International Marketing”,

2. Cherunilam Francis, “Global Economy and Business
Environment”, Himalaya Publishing, 2001
3. Mishra M. N. -International Marketing Management, Oxford & .
IBH Publishing, 1993