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A PROJECT REPORT
Submitted by: Amit Kumar Singh, Anupam Samanta, Rajesh Kumar, Ravi Ranjan, Shivshendu, Vandana, Rima, Supriya, Madhu, Arun
Of Semester 1 In partial fulfillment for the award of the degree of
ICFAI NATIONAL COLLEGE, RANCHI (2008-10)
ICFAI NATIONAL COLLEGE
Certified that project report on “GLOBAL MARKETING” is a bonafide work of:
1. 2. 3. 4. 5. 6. 7. 8. 9.
Amit Kumar Singh Anupam Samanta Rajesh Kumar Ravi Ranjan Shivshendu Vandana Rima Supriya Madhu Arun
who carried out the project work under my supervision.
Mr. Kaushik Dutta
HEAD OF THE DEPARTMENT
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TABLE OF CONTENTS
2. MEANING OF MARKETING 3. MEANING OF GLOBAL MARKETING 4. EVOLUTION TO GLOBAL MARKETING 5. 6. 7. GLOBAL MARKETING ADVANTAGES AND DISADVANTAGES GLOBAL MARKETING ENVIRONMENT GLOBAL MARKETING: 5 STEPS TO SUCCESSION
8. WHY GLOBAL MARKETING IS IMPERATIVE 9. GLOBAL MARKETING PLANNING 10. DOMESTIC vs INTERNATIONAL PLANNING 11. CONCLUSION 12. BIBLOGRAPHY
Two decades ago, the term global marketing did not even exist. Today, ing Tod global marketing is essent l essential not only for the realization of the full success ion potential of a business, but even more crit critically for the survival of a business. A company which fails to go global is in longer of losing it’s domestic business to competitors with lower costs, greater experience, ic better products and in a nutshell, more value for the customer. The importance of going global to ensure company survival is a more powerful motive for many companies than the attract ion of opportunity abroad. Industries that were entirely national in scope only a few years ago ional are dominated today by a handful of global companies.
MEANING OF MARKETING
ially Marketing is essentially a creative corporate activity involving the planning and execution of the conception, pricing, promotion, and distribution of ideas, products, and services in an exchange that not only satisfies customers’ current needs but also anticipates and creates their future needs f at a profit. Marketing is not only much broader than selling, it also ing selli encompasses the entire c ire company’s market orientation toward customer satisfaction in a competitive environment. In other words, marketing competitive strategy requires close attention to both customers and competitors The competitors. aim of marketing is to create value for stakeholders, and the key ing stakeholder is the customer.
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Customer Needs & Wants
MEANING OF GLOBAL MARKETING
The Oxford University Press defines global marketing as “marketing on a worldwide scale reconciling or taking commercial advantage of global operational differences, similarities and opportunities in order to meet globa global objectives.” Global marketing refers to marketing activities by companies that emphasize activities the following: 1. Reduction of cost inefficiencies and duplication of efforts among their ion ion national and regional subsidiaries 2. Opportunities for the transfer of products, brands, and other ideas across ies products, subsidiaries 3. Emergence of global customers 4. Improved linkages among national marketing infrastructures leading to the development of a global marketing infrastructure. Although Levitt’s view that global market ing does not necessarily mean standardization of products, promot promotion, pricing, and distribution worldwide, ion but rather, it is a company’s proactive willingness to adopt a global ather, proactive perspective instead of a country country-by-country or region-by-region perspective region in developing a marketing stratergy ing
EVOLUTION TO GLOBAL MARKETING
Global marketing is not a revolutionary shift, it is an evolutionary process. While the following does not apply to all companies, it does apply to most companies that begin as domestic domestic-only companies. Domestic marketing A company marketing only within its national boundaries only has to consider domestic competition. Even if that competition includes companies from foreign markets, it still only has to focus on the competition that exists in its home market. Products and services are developed for customers in services the home market without thought of how the product or service could be used in other markets. All marketing decisions are made at headquarters.
The biggest obstacle these marketers face is being blindsided by emerging global marketers. Because domestic marketers do not generally focus on the changes in the global marketplace, they may not be aware of a potential competitor who is a market leader on three continents until they simultaneously open 20 stores in the Northeastern U.S. These marketers can be considered ethnocentric as they are most concerned with how they are perceived in their home country. Export marketing Generally, companies began exporting, reluctantly, to the occasional foreign customer who sought them out. At the beginning of this stage, filling these orders was considered a burden, not an opportunity. If there was enough interest, some companies became passive or secondary exporters by hiring an export management company to deal with all the customs paperwork and language barriers. Others became direct exporters, creating exporting departments at headquarters. Product development at this stage is still focused on the needs of domestic customers. Thus, these marketers are also considered ethnocentric. International marketing If the exporting departments are becoming successful but the costs of doing business from headquarters plus time differences, language barriers, and cultural ignorance are hindering the company’s competitiveness in the foreign market, then offices could be built in the foreign countries. Sometimes companies buy firms in the foreign countries to take advantage of relationships, storefronts, factories, and personnel already in place. These offices still report to headquarters in the home market but most of the marketing mix decisions are made in the individual countries since that staff is the most knowledgeable about the target markets. Local product development is based on the needs of local customers. These marketers are considered polycentric because they acknowledge that each market/country has different needs. Multinational marketing At the multi-national stage, the company is marketing its products and services in many countries around the world and wants to benefit from economies of scale. Consolidation of research, development, production, and marketing on a regional level is the next step. An example of a region is Western Europe with the US. But, at the multi-national stage, consolidation, and thus product planning, does not take place across regions; a regiocentric approach.
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Global marketing When a company becomes a global marketer, it views the world as one mpany market and creates products that will only require weeks to fit into any regional marketplace. Marketing decisions are made by consulting with marketers in all the countries that will be affected. The goal is to sell the same thing the same way everywhere.
The “Four P’s” of marketing: product, price, placement, and promotion are all affected as a company moves through the five evolutionary phases to become a global company. Ultimately, at the global marketing level, a global company trying to speak with one voice is faced with many challenges when creating a worldwide marketing plan. Unless a company holds the same position against its competition in all markets (market leader, low cost, etc.) it is impossible to launch identical marketing plans worldwide. ible
GLOBAL MARKETING ADVANTAGES AND DISADVANTAGES
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Economies of scale in production and distribution Lower marketing costs Power and scope Consistency in brand image Ability to leverage good ideas quickly and efficiently Uniformity of marketing practices Helps to establish relationships outside of the "political arena" Helps to encourage ancillary industries to be set up to cater for the needs of the global player
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Differences in consumer needs, wants, and usage patterns for , products. Differences in consumer response to marketing mix elements Differences in brand and product development and the competitive environment Differences in the legal environment, some of which may conflict with those of the home market market. Differences in the institutions available, some of which may call for the creation of entirely new ones (e.g. infrastructure) Differences in administrative procedures Differences in product placement.
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GLOBAL MARKETING ENVIRONMENT
1. Demographic Environment Demography is the study of human populat y populations in terms of size, density, n location, age, gender, race, occupation, and other stat statistics. The demographic environment is of major interest to marketers because it involves people, and people make up markets. The world population is growing at an explosive rate. It now totals more ion explosive than 5.9 billion and will exceed 7.9 billion by the year 2025. The explosive world populat population growth has major implications for business. A growing population means growing human needs to satisfy. Depending on ion purchasing power, it may also mean growing market opportunities. ,
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The world’s large and highly diverse population poses both opportunities and challenges. Thus, marketers keep close track of demographic trends and developments in their markets, both at home and abroad. The track They changing age and family structures, geographic population shifts, populat educational characteristics, and populat population diversity.
2. Economic Environment The economic environment consists of factors that affect consumer purchasing power and spending patterns. Nat ions vary great ly in their levels and distribution of income. Some countries have subsistence economies they consume most of their own agricultural and industrial output. These countries offer few market opportunities. At the other extreme are industrial economies, which constitute rich markets for many different kinds of goods. Marketers must pay close attention to major trends and consumer spending patterns both across and within their world markets. Marketers should pay attention to income distribution as well as average income. Income distribution in the still very poor. At the top are upperclass consumers, whose spending patterns are not affected by current economic events and who are a major market for luxury goods. There is a comfortable middle class that is some what careful about its spending but can still afford the good life some of the time. The working class must stick close to the basics of food, clothing, and shelter and must try hard to save. Finally, the poor class must count their pennies when making even the most basic purchases. Over the past three decades, the rich have grown richer, the middle class has shrunk, and the poor have remained poor.
3. Natural Environment The natural environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities. Marketers should be aware of several trends in the natural environment. The first involves growing shortages of raw materials. Air and water may seem to be infinite resources, but some group see long-run dangers. Air pollution chokes many of the world’s large cities and water shortages are already a big problem in some parts of the world. Renewable resources, such as forests and food, also have to be used wisely. Nonrenewable resources, such as oil, coal, and various minerals, pose a serious problem. Firms making resources, such as oil, coal, and various minerals, pose a serious problem. Firms making products that require these scarce resources face large cost increases, even if the materials do remain available. A second environmental trend is increased pollution. Industry will almost always damage the quality of the natural environment. Consider the disposal of chemical and nuclear wastes; the dangerous mercury levels in
the ocean; the quantity of chemical pollutants in the soil and food supply; and the littering of the environment with non- biodegradable bottles, plastics, and other packaging materials. 4. Technological Environment The technological environment is perhaps the most dramatic force now shaping our destiny. Technology has released such wonders as antibiotics, organ transplants, computers, and the Internet. It also has released such horrors as nuclear missiles, chemical weapons, and assault rifles. It has released such mixed blessing as the automobile, television, and credit cards. New technologies create new markets and opportunities. However, every new technology replaces an older technology. Transistors hurt the vacuum-tube industry, xerography hurt the carbon-paper business, the auto hurt the railroads, and compact disks hurt phonograph records. When old industries fought or ignored new technologies, their businesses declined. Thus, marketers should watch the technological environment closely. Companies that do not keep up with technological change soon will find their products outdated. And they will miss new product and market opportunities. 4. Political Environment Marketing decisions are strongly affected by developments in the political environment. The political environment consists of laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society. Even the most liberal advocates of free-market economies agree that the system works best with at least some regulation. Well-conceived regulation can encourage competition and ensure fair markets for goods and services. Thus, governments develop public policy to guide commerce-sets of laws and regulations that limit business for the good of society as a whole. Almost every marketing activity is subject to a wide range of laws and regulations. Legislation affecting business around the world has increased steadily over the years. The States has many laws covering issues such as competition, fair trade practices, environmental protect ion, product safety, truth in advertising, packaging and labeling, pricing, and other important areas. The European Commission has been active in establishing a new framework of laws covering competitive behavior, product standards, product liability, and commercial transact ions for the nations of the European Union. Several countries have gone father than the United States in passing strong consumerism legislation. For example, Norway bans several forms of sales Promotion trading stamps, contests, premiums as being inappropriate or unfair ways of promoting products. Thailand requires food processors selling national brands to market lowprice brands also, so that low-income consumers can find economy
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brands on the shelves. In India, food companies must obtain special approval to launch brands that duplicate those already existing on the market. 5. Cultural Environment The cultural environment is made up of institutions and other forces that affect a society’s basic values, percept ions, preferences, and behaviors. People grow up in a particular society that shapes their basic beliefs and values. They absorb a world view that defines their relationships with others. People in a given society hold many beliefs and values. Their core beliefs and values have a high degree of persistence. For example, most Indians believe in working, getting married, giving to charity, and being honest. These beliefs shape more-specific attitudes and behaviors found in everyday life. Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government. The notion of various environmental forces to global company is shown in figure.
GLOBAL MARKETING: 5 STEPS TO SUCCESSION
Companies decide to expand their organizations globally and are unsuccessful because they fail to realize one very important thing. They do not change their marketing efforts to adapt to those of another country. Some people feel one country’s values, beliefs, culture, economic conditions and competitive conditions are not very different from another. But a message that works in one country can fail miserably in another because countries are very different from each other. Companies need to make variations to their marketing approach when doing business internationally. To overcome global marketing struggles and conquer your competition, we’ve created Global Marketing: 5 Steps to Succession to help you guide your way through the marketing process. 1. Do The Research! With any kind of marketing there should always first be some kind of ting research when developing your marketing strategies. This is especially important when a business is expanding internationally because their targeted audience is much different than their home land audience. Researching the demographics and also doing some kind of research to searching figure out if there will be a demand for your product or service is very important. Make sure there is a want or need for your product and then figure out for that country who your audience is and what will be the best way to target them. 2. Recognize Cultural Differences. Countries differ in many ways including language, religion, social structure and education. These differences have significant impact on a business’s marketing strategies. Through one’s research they also need to find what . traditions, tastes and preferences are of other countries, so their marketing ideas can accommodate to the country and be effective. If one does not take the cultural differences into account then most likely their marketing likely campaigns will be considered meaningless or offensive and could damage the credibility of that company. 3. Develop a Unique Marketing Mix to Appeal to the Purchasing Behavior of a Certain Segment in a Given Country. This secret also includes some research. One needs to identify groups of consumers whose purchasing behavior differs from others in an important
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way. These segments can be found though the geographies, demographics, social-cultural factors and psychological factors. The segment that would best benefit the company is the one that then needs to have a unique marketing mix that will appeal to those purchasing behaviors. The marketing mix will include a firm’s choice about product attributes, communication strategy, distribution strategy and pricing strategy that they will offer their targeted segment. 4. Identify Market Segments that Transcend National Borders. In order to do this, a company needs to find the similarities among the consumers in a certain segment. Such similarities like values, age, and lifestyle choices which need to translate into similar purchasing behaviors. Once these similarities are found, a company can then view the global marketplace as a single entity and sell a standardized product worldwide using their same basic marketing mix to help them position and sell that product in a variety of national markets. 5. Decide if standardized advertising will work for your company. If a company’s advertisements legally and ethically can be viewed in their home land country but also in other countries, then standardized advertising is a great idea. If the advertisements are not offensive and abide by that country’s laws then most likely using the same ads instead of developing new ones for different countries is going to be a significant cost saver. Also, there is concern that creative talent is limited and that one large marketing effort has better results than 40 or 50 smaller efforts. On the other hand, cultural diversity makes it exceptionally hard to develop a single advertising theme that will be successful worldwide. Also, advertising regulations might block implementation of standardized advertising. Laws vary from country to country and so what might be acceptable in one country is breaking the law in another. Differentiating between the two and then deciding what will work for your company might save you money or avoid a lawsuit.
WHY GLOBAL MARKETING IS IMPERATIVE
First and fundamentally, domest market saturation in the industrialized domestic-market parts of the world forced many companies to look for marketing opportunities beyond their national boundaries. The economic and aries. population growths in developing countries also, gave those companies ion , an additional incentive to venture abroad. Now companies from emerging ional economies, such as Korea’s Samsung and Hyundai and Mexico’s Cemex Samsung and Grupo Modelo, have made inroads into the developed markets around the world. Second, there is a strong competition around the world. About twenty years ago, the world’s greatest automobile manufacturers were General Motors, Ford, and Chrysler. Today, companies like Toyota, Honda, BMW, otors, and DaimlerChrysler (a recent merger of Daimler-Benz and Chrysler), Benz among others, stand out as competitive nameplates in the automobile market. Similarly, personal computer was almost synonymous with IBM, synonymous which dominated the PC business worldwide. Today, the computer market is crowded with Dell and Compaq from the United States, Toshiba and NEC from Japan, Acer from Taiwan, and so on. Color TVs were invented in the United States, but today it is almost impossible to find a color TV made by U.S. companies. Instead, foreign brands such as Sony, Panasonic, and Magnavox are in most homes in the United States. Even RCA and Zenith television are made overseas. Nike is a U.S. company with a truly all-American shoe brand, but its shoes are all made in foreign American countries and exported to the United States. Burger King and Pillsbury (known for its Haagen Dazs ice cream brand) are two American Haagen-Dazs institutions owned and managed across the Atlantic Ocean by D Diageo, a newly created company as a result of the merger of Britain’s Grand Metropolitan PLC and Guinness PLC. Third, another profound change in the last decade is the proliferation of the Internet and electronic commerce, or e commerce. The Internet e-commerce. opened the gates for companies to sell direct-to-consumers easily across d consumers national boundaries. Many argue that e e-commerce is less intimate than face-to-face retail, but it could actually provide more targeted face demographic and psychographic information. Manufactur Manufacturers that traditionally sell through the retail channel may benefit the most from ee commerce. Furthermore, customer information no longer is held hostage by the retail channel. Most important, the data allow for the development
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of relevant marketing messages aimed at important customers and loyal relationships on a global basis.
An examination of the top one hundred largest companies in the world also vividly illustrates the profound changes in competitive milieu that we have seen in the past thirty years (see Table 1.2). Of the top hundred largest industrial companies in the world, sixty-four were from the United States in 1970 in 1980 the number declined to forty-five companies. The latest figure came down to twenty four in 1997 (not shown) and went back up to thirty-five in 1999. The number of Japanese companies in the top hundred has increased from eight in 1970 to twenty-four in 1999, almost a threefold increase. A similar increase has also been observed with French companies, from three in 1970 to ten in 1997. The relative decline in the number of U.S. companies in the top is reflected in the banking, insurance, and other services sectors, as well as in the manufacturing sectors. The current world economy has changed drastically from what it was merely a decade ago. The changes observed in the past thirty years simply reflect that companies from other parts of the world have grown in size relative to those of the United States. In other words, today’s environment is characterized by much more competition from around the world than in the past. As a result, many U.S. executives are feeling much more competitive urgency in product development, materials procurement, manufacturing, and marketing around the world. The competition is not the only force shaping global business today. Particularly in the past several years, many political and economic events have affected the nature of global business. The demise of the Soviet Union, the establishment of the European Union and the North American Free Trade Agreement, deregulation, and privatization of state-owned industries has also changed the market environments around the world. Furthermore, the emerging markets of Eastern Europe and the rapidly reemerging markets of Southeast Asia contribute to an international climate.
CHANGE IN THE WORLD’S 100 LARGEST COMPANIES AND THEIR NATIONALITIES:
Source: Fortune, various issues up to 2000. *Fortune 500 criteria changed to include services firm (including retailing and trading) **Includes joint nationality of firms (joint nationality, has been counted ionality ionality, for both the countries), so the total may exceed 100.
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The fluid nature of global markets and competition makes the study of re competition global marketing not only interesting but also challenging and rewarding. interesting The term global epitomiz epitomizes both the competitive pressure and the itive expanding market opportunit opportunities all over the world.
GLOBAL MARKETING PLANNING
Planning involves where the organisation would like to be and how to get there, which involves goal setting and strategy determination. Planning involves three main activities: lves a) Situation analysis - where are we now? b) Objectives - where do we want to be? c) Strategy and tactics - how can we best reach our goals? Planning gives a number of advantages: Gives rise to systematic thinking Helps coordinate activities ordinate Helps prepare for exigencies Gives activity continuity Integrates functions and activities Helps in a continuous review of operations. The planning task depends on the level of involvement in a country. Exporting and licensing give minimum country involvement but joint ive ventures involve more in-country activity and give a greater degree of country integration and control. Wholly owned subsidiaries give the organisation almost total control. Because of the "external uncontrollables" intern international planning is rather more difficult than domestic planning (see table 13.2). Planning can be standardised, decentralised or interactive.
Standardised plans These offer a number of advantages: - Cost savings on limited product range and economies of scale both in production and marketing, for example fertilisers. - Uniformity of consumer choice across the world.
There are disadvantages: - Different market characteristics make uniform products inappropriate, for example, fresh milk products. Environmental obstacles disallow standardisation; for example lack of refrigerated transport in developing countries. Decentralised plans Decentralised plans take into account the subtleties of local conditions; however they are usually very costly and resource consuming. Interactive plans In this approach headquarters devises branch policy and a strategic framework, and subsidiaries interpret these under local conditions, for example Nestlè. Headquarters coordinates and rationalises advertising, pricing and distribution. Within any of the above approaches plans can be either long or short term. Increasingly planning is becoming fairly routine. Most companies operate "annual operating plans" although these are often "rolled forward" to cover a few years hence.
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DOMESTIC vs INTERNATIONAL PLANNING
Domestic Planning 1. Single language and nationality 2. Relatively homogeneous market 3. Data available, usually accurate and collection easy 4. Political factors relatively unimportant 5. Relative freedom from government interference 6. Individual corporation has little effect on environment 7. Chauvinism helps 8. Relatively stable business environment 9. Uniform financial climate 10 Single currency
International Planning 1. Multilingual/multinational/multicultural factors 2. Fragmented and diverse markets 3. Data collection a large task requiring significantly higher budgets and personnel allocation 4. Political factors frequently vital 5. Involvement in national economic plans; government influences business decisions 6. "Gravitational" distortion by large companies 7. Chauvinism hinders 8. Multiple environments, many of which are highly unstable (but may be highly profitable) 9. Variety of financial climates ranging from overover conservative to wildly inflationary 10. Currencies differing in stability and real value
11 Business "rules of the game" mature and 11. Rules diverse, changeable and unclear understood 12 Management generally accustomed to sharing responsibilities and using financial controls 12. Management frequently unautonomous and unfamiliar with budgets and controls
Global marketing is a proactive response to the intertwined nature of proactive business opportunities and competit competition that know no political boundaries. ical Global marketing does not necessarily mean that companies should market the same product in the same way around the world as world markets are converging. Global marketing is a company’s willingness to ny’s willing adopt a global perspect perspective instead of a country-by-country or region-byregion perspective in developing a marketing strategy for growth and profit. The six forces making up the company’s macro global environment macro-global include demographic, ec economic, natural, technological, political and , polit cultural forces. These forces shape opportunities and pose threats to the company. Global market possesses great importance of less developed countries (LDCs) It provides all urge to develop knowledge and experience that make development possible in LDC’s. The remarkable growth of the global economy over the post 50 years has occurred because of many driving forces contributing to the growth of international contributing internat business, namely, market needs, modern technology, minimum cost , application, higher quality, information revolution and leverage ion, advantages. Several restraining forces also occurred in international trade in the form of tariff barriers and non non-tariff barriers. There are four identifiable stages in the evolution of marketing across national evolution boundaries. These are known as Ethnocentrism, poly centrism, regiocentrism and geocentrism. Companies have the plan of entry strategy choices to implement their global expansion efforts. Each alternative has its pros an cons. Global companies often adopt a phased and entry strategy. They start off with a minimal risk strategy. Once the perceived risk declines, they switch to higher commitment mode. It is made clear that, a broad range of variables impact the entry mode choice. The three major dimensions include the resource commitment a ce. firm is willing to make, the amount of risk the firm is willing to take and the degree of control that is desirable.
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http://www.wfanet.org/ World Federation of Advertisers aef.com several presentations on Global Advertising given by advertising practitioners
Kotabe, Masaki and Helsen, Kristiaan, Global Marketing Management – 3rd Edition, John Wiley & Sons, Inc – Publishers, Copyright 2004, ISBN 0-471-23062 23062-6 Kotler & Keller, Marketing Management - 12th Edition, 2005, ISBN 81-203-2799-3 Theodore Levitt, The Globalization of Markets, Harvard Business Review 61 (May-June 1983): 92-102 Young, Charles E., The Advertising Research Handbook, Ideas in Flight, Seattle, WA, Handbook, April 2005, ISBN 0-9765574 9765574-0-1
Jaffee S. (1992) "Exporting High Value Food Commodities". World Bank Discussion Paper 198 World Bank 15. Keegan, W. J. (1989) "Global Marketing Management", 4th ed. Prentice Hall International Editions 16. Terpstra, V.(1987) "International Marketing", 4th ed. Dryden Press.
We would like to express my gratitude to all those who gave me the possibility to complete this project. We want to thank the Department of Marketing of ICFAI Ranchi Center for giving me permission to commence this project in the first instance, to do the necessary research work and to use available data. We are bound to the senior batch students for their stimulating support. We are deeply indebted to our supervisor Prof. Mrs.NIDHI, faculty in charge of marketing in-charge whose help, stimulating suggestions and encouragement helped us in all the time of research encouragement for and writing of this report. Especially, we would like to give our special thanks to our parents whose patient love enabled us to complete this work.
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