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Tata Case Study
Tata Case Study
Companies undertake International Marketing for a variety of reasons. Some are pushed by poor opportunities in the home market, and some are pulled by superior opportunities abroad. Given the risks of International Marketing, companies need a systematic way to make their International Marketing decisions. This Project concentrates on major dimensions of global marketing, the global marketing mix, and managing and leading the global marketing effort. A company that fails to go global is in danger of losing its domestic business to competitors with lower costs, greater experience, better products, and, in a nutshell, more value for the customer.
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Following are the steps the company has to keep in its mind while taking major decisions: Considering a particular foreign market, its economic, political-legal and cultural characteristics. Whether to do business in few or many countries To decide in which particular market to enter How to enter the market that is through direct exports, joint venture or direct investment The extent to which their product, price, promotion, distribution should be adapted to individual foreign markets. The main aim of doing this project is to get familiar with the strategies a company adopts to make important international business decisions.
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These companies have strong orientation towards the home country. They use the home base for standardized production for export in order to gain some marginal business. Decision-making is centralized. Ex. Siemens and GM are ethnocentric. Polycentric:
These companies have strong orientation towards the host country. They consider each market to be unique and influenced by income, culture, laws and politics. Decision-making is decentralized. Geocentric:
These companies consider the whole rather than any particular country as the target market. They usually do not identify themselves with a particular country. They combine centralization and decentralization in the syntheses that allows some degree of flexibility. Ex. Colgate-Palmolive. Region centric:
These companies are powerful only in certain regions. Ex. Frooti is present in India, Sri Lanka and Nepal.
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There are five stages in the evolution of the transnational corporation. These stages describe significant differences in the strategy, worldview, orientation, and practice of companies operating in more than one country. One of the key differences in companies at these different stages is in orientation.
Stage OneDomestic
The stage-one company is domestic in its focus, vision, and operations. Its orientation is ethnocentric. This company focuses upon domestic markets, domestic suppliers, and domestic competitors. The environmental scanning of the stage-one company is limited to the domestic, familiar, home-country environment. The unconscious motto of a stage-one company is: "If it's not happening in the home country, it's not happening." The world's graveyard of defunct companies is littered with stage-one companies that were sunk by the Titanic syndrome: the belief, often unconscious but frequently a conscious conviction, that they were unsinkable and invincible on their own home turf. The pure stage-one company is not conscious of its domestic orientation. The company operates domestically because it never considers the alternative of going international. The growing stage-one company will, when it reaches growth limits in its primary market, diversify into new markets, products, and technologies instead of focusing on penetrating international markets.
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Stage TwoInternational The stage-two company extends marketing, manufacturing, and other activity outside the home country. When a company decides to pursue opportunities outside the home country, it has evolved into the stage-two category. In spite of its pursuit of foreign business opportunities, the stage-two company remains ethnocentric, or home country oriented, in its basic orientation. The hallmark of the stage-two company is the belief that the home-country ways of doing business, people, practices, values, and products are superior to those found elsewhere in the world. The focus of the stage-two company is on the home-country market. Because there are few, if any, people in the stage-two company with international experience, it typically relies on an international division structure where people with international interest and experience can be grouped to focus on international opportunities. The marketing strategy of the stage-two company is extension; that is, products, advertising, promotion, pricing, and business practices developed for the homecountry market are "extended" into markets around the world. Almost every company begins its global development as a stage-two international company. Stage two is a natural progression. Given limited resources and experience, companies must focus on what they do best. When a company decides to go international, it makes sense at the beginning to extend as much of the business and marketing mix (product, price, promotion, and place or channels of distribution) as possible so that learning can focus on how to do business in foreign countries. A fundamental strategic maxim is that it is a mistake to attempt to simultaneously diversify into new customer and new-product/technology markets.
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The international strategist observes this maxim by holding the marketing mix constant while adding new geographic or country markets. The focus of the international company is on extending the home-country marketing mix and business model.
Stage ThreeMultinational
In time, the stage-two company discovers that differences in markets around the world demand an adaptation of its marketing mix in order to succeed. Toyota, for example, discovered the former when it entered the U.S. market in 1957 with its Toyopet. The Toyopet was not a big hit: Critics said they were "overpriced, underpowered, and built like tanks." The car was so unsuited for the U.S. market that unsold models were shipped back to Japan. The market rejection of the Toyopet was chalked up by Toyota as a learning experience and a source of invaluable intelligence about market preferences. Note that Toyota did not define the experience as a failure. There is, for the emerging global company, no such thing as failure: only learning experiences and successes in the constantly evolving strategy and experience of the company. When a company decides to respond to market differences, it evolves into a stage-three multinational that pursues a multi-domestic strategy. The focus of the stage-three company is multinational or in strategic terms, multi- domestic. (That is, this company formulates a unique strategy for each country in which it conducts business.) The orientation of this company shifts from ethnocentric to polycentric. A polycentric orientation is the assumption that markets and ways of doing business around the world are so unique that the only way to succeed internationally is to adapt to the different aspects of each national market. Like the stage-two international, the stage-three multinational, polycentric company is also predictable. In stage-three companies, each
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foreign subsidiary is managed as if it were an independent city-state. The subsidiaries are part of an area structure in which each country is part of a regional organization that reports to world headquarters. The stage-three marketing strategy is an adaptation of the domestic marketing mix to meet foreign preferences and practices. Philips and its Japanese competition was dramatic. Matsushita, for example, adopted a global strategy that focused its resources on serving a world market for home entertainment products.
Stage FourGlobal
The stage-four company makes a major strategic departure from the stage-three multinational. The global company will have either a global marketing strategy or a global sourcing strategy, but not both. It will either focus on global markets and source from the home or a single country to supply these markets, or it will focus on the domestic market and source from the world to supply its domestic channels. Examples of the stagefour global company are Harley Davidson and the Gap. Harley is an example of a global marketing company. Harley designs and manufactures super heavyweight motorcycles in the United States and targets world markets. The key engineering and manufacturing assets are all located in the home country (the United States). The only Harley investment outside the home country is in marketing. The Gap is an example of a global sourcing company. The Gap sources worldwide for product to supply its U.S. retail organization. Each of these companies is operating globally, but neither of them is seeking to globalize all of the key organization functions. The stage-four global company strategy is a winning strategy if a company can create competitive advantage by limiting its globalization of the value chain. Harley Davidson gains competitive advantage because it is American designed and made, just as BMW and Mercedes have traded
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on their German design and manufacture. The Gap understands the U.S. consumer and is creating competitive advantage by focusing on market expansion in the United States while at the same time taking advantage of its ability to source globally for product suppliers.
Stage FiveTransnational
The stage-five company is geocentric in its orientation: It recognizes similarities and differences and adopts a worldview. This is the company that thinks globally and acts locally. It adopts a global strategy allowing it to minimize adaptation in countries to that which will actually add value to the country customer. This company does not adapt for the sake of adaptation. It only adapts to add value to its offer. The key assets of the transnational are dispersed, interdependent, and specialized. Take R&D, for example. R&D in the transnational is dispersed to more than one country. The R&D activities in each country are specialized and integrated in a global R&D plan. The same is true of manufacturing. countries and Key assets in are dispersed, interdependent, Components and from specialized. Caterpillar is a good example. Cat manufactures in many assembles many countries. specialized production facilities in different countries are shipped to assembly locations for assembly and then shipped to customers in world markets.
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1. A Global Strategy It treats the world as a single market. This strategy is warranted when the forces for global integration are strong and the forces for national responsiveness are weak. This is true of the consumer electronics market, for example, where most buyers will accept a fairly standardized pocket radio, CD player, or TV. Matsushita has performed better than GE and Philips in the consumer electronics market because Matsushita operates in a more globally coordinated and standardized way.
2. A Multinational Strategy It treats the world as a portfolio of national opportunities. This strategy is warranted when the forces favoring national responsiveness are strong and the forces favoring global integration are weak. This is the situation in the branded packaged-goods business (food products, cleaning products). Unilever can be cited as a better performer than Procter & Gamble (P&G) because Unilever grants more decisionmaking autonomy to its local branches.
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3. A "Glocal" Strategy It standardizes certain core elements and localizes other elements. This strategy makes sense for an industry (such as telecommunications) where each nation requires some adaptation of its equipment but the providing company can also standardize some of the core components. Ericsson can be cited as balancing these considerations better than NEC (too globally oriented) and ITT (too locally oriented).
One of the most successful "Glocal" companies is ABB, formed by a merger between the Swedish company ASEA and the Swiss company Brown Boveri.
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PRODUCT DESIGN Product design is a key factor determining success in global marketing. Should a company adapt product design for various national markets or offer a single design to the global market? In some instances, making a design change may increase sales. However, the benefits of such potential sales increases must be weighed against the cost of changing a product's design and testing it in the market. Global marketers need to consider four factors when making product design decisions: preferences, cost, laws and regulations, and compatibility. Preferences
There are marked and important differences in preferences around the world for factors such as colour and taste. Marketers who ignore preferences do so at their own peril. Cost In approaching the issue of product design, company managers must consider cost factors broadly. Of course, the actual cost of producing the product will create a cost floor. Other design-related costs whether incurred by the manufacturer or the end user must also be considered. Compatibility The last product design issue that must be addressed by company managers is product compatibility with the environment in which it is used. A simple thing like failing to translate the user's manual into various languages can hurt sales of home appliances built in America. Also, electrical systems range from 50 to 230 volts and from 50 to 60 cycles. This means that the design of any product powered by electricity must be compatible with the power system in the country of use.
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Climate
Climate is another environmental characteristic that often demands compatibility. Many products require tropicalization to withstand humidity, whereas other products must withstand extreme cold. Many European automobiles are not suited to the extreme cold winter conditions found in parts of North America. This is particularly true of cars coming from Britain and Italy, two countries that do not have extreme winters. Measuring systems do not demand compatibility, but the absence of compatibility in measuring systems can create product resistance. The lack of compatibility is a particular danger for the United States, which is the only non-metric country in the world. Products calibrated in inches and pounds are at a competitive disadvantage in metric markets. When companies integrate their worldwide manufacturing and design activity, the metric-English measuring system conflict requires expensive conversion and harmonization efforts.
Strategy 1: Product-Communications Extension (Dual Extension) Many companies employ product-communications extension as a strategy for pursuing opportunities outside the home market. Under the right conditions, this is the easiest product marketing strategy and, in many instances, the most profitable one as well. American companies pursuing this strategy sell exactly the same product, with the same advertising and promotional appeals used in the United States, in some or all world market countries or segments. Note that this strategy is utilized by companies in stages two, four, and five. The critical difference is one of execution and mindset. In the stagetwo company, the dual extension strategy grows out of an ethnocentric
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orientation; the stage-two company is making the assumption that all markets are alike. The company in the fourth or fifth stage does not fall victim to such assumptions; geocentric orientation allows the company in stage four or five to thoroughly understand its markets and consciously take advantage of similarities in world markets. One of the leading practitioners of this approach is PepsiCo, whose outstanding robust global performance is a persuasive justification of this practice. Gillette also recently used this strategy in the worldwide launch of its Sensor razor, using the advertising theme "The best a man can get." The product-communications extension strategy has an enormous appeal to global companies because of the cost savings that are associated with this approach. The two most obvious sources of savings are manufacturing economies of scale and elimination of duplicate product R&D costs. Less well known but still important are the substantial economies associated with standardization of marketing communications. For a company with worldwide operations, the cost of preparing separate print and television ads for each market is a significant marketing expense. Although these cost savings are important, they should not distract executives from the more important objective of maximum profit performance, which may require the use of an adaptation or invention strategy. As we have seen, in spite of its immediate cost savings, product extension may in fact result in market failure. Strategy 2: Product Extension-Communications Adaptation When a product fills a different need, appeals to a different segment, or serves a different function under use conditions that are the same or similar to those in the domestic market, the only adjustment that may be required is in marketing communications. Bicycles and motor scooters are examples of products that have been marketed with this approach. They satisfy recreation needs in the United States but serve as basic
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transportation in many other countries. Similarly, outboard marine motors are usually sold to a recreation market in the United States, whereas the same motors in many foreign countries are often sold to fishing and transportation fleets. As these examples show, the product extension-communications adaptation strategy whether by design or by accident results in product transformation. The same physical product ends up serving a different function or use than that for which it was originally designed or created. The appeal of the product extensioncommunications adaptation strategy is its relatively low cost of implementation. Since the product in this strategy is unchanged, R&D, tooling, manufacturing setup, and inventory costs associated with additions to the product line are avoided. The only costs of this approach are in identifying different product functions and revising marketing communications (including advertising, sales promotion, and point-of-sale material) around the newly identified function. Strategy 3: Product Adaptation-Communications Extension A third approach to global product planning is to extend, without change, the basic home-market communications strategy while adapting the product to local use or preference conditions. Note that this strategy (and the one that follows) may be utilized by companies in stages three, four, and five. The critical difference, as noted earlier, is one of execution and mindset. In the stage-three company, the product adaptation strategy grows out of a polycentric orientation; the stage-three company assumes that all markets are different. By contrast, the geocentric orientation of managers and executives in a company in stage four or five has sensitized them to actual rather than assumed differences between markets. Strategy 4: Dual Adaptation
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When comparing a new geographic market to the home marker marketers sometimes discover that environmental conditions of use or consumer preferences differ; the same may be true of the function a product serves or consumer receptivity to advertising appeals. In essence, this is a combination of the market conditions of strategies 2 and 3. In such a situation, a company in stage four or five will utilize the strategy of product and communications adaptation. As was true about strategy 3, stagethree companies will also use dual adaptation regardless of whether the strategy is warranted by market conditions, preferences, function, or receptivity. Unilever's experience with fabric softener in Europe exemplifies the classic multinational road to adaptation. For years, the product was sold in ten countries under seven different brand names with different bottles and marketing strategies. Unilever's decentralized structure meant that product and marketing decisions were left to country managers. They chose names that had local-language appeal and selected package designs to fit local tastes. Today, rival Procter & Gamble is introducing competitive products with a pan-European strategy of standardized products with single names, suggesting the European market is more similar than Unilever assumed. In response, Unilever's European brand managers are attempting to move gradually toward standardization. Strategy 5: Product Invention Adaptation and adjustment strategies are effective approaches to international (stage-two) and multinational (stage-three) marketing, but they may not respond to global market opportunities. Nor do they respond to the situation in markets where customers do not have the purchasing power to buy either the existing or adapted product. This latter situation applies to the less developed part of the world, which includes roughly three-quarters of the world's population.
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Rather than extend or adapt an existing product, it is often necessary to plan and design for the global market. An example is the rechargeable battery market, whose voltage and cycles vary around the world. Anton/Bauer, a small Connecticut company, offers a portable power system (batteries and chargers) that will operate anywhere in the world without adjustments by the user. The charger "knows" or reads the type of power that it is plugged into and adjusts accordingly. The products portability creates added value for customers. The Anton/Bauer approach is to design for the global market: The company manufactures one product instead of many and thereby keeps costs down. This design feature enables Anton/Bauer to manufacture one chassis instead of several, which in turn enables the company to achieve greater economies of scale and greater experience. Scale and experience mean lower costs, and lower costs and higher quality are essential in serving global markets in the 1990s. The winners in global competition are the companies that can develop product designs offering the most benefits, which in turn create the greatest value for buyers. The product invention strategy frequently means higher levels of product performance and lower prices, which translate into greater customer value.
In some instances, value is not defined in terms of performance, but rather in terms of customer perception. Customer perception is as important for an expensive perfume or champagne as it is for an inexpensive soft drink. Product quality is essentialindeed, it is frequently a givenbut it is also necessary to support the product quality with imaginative, value-creating advertising and marketing communications. This can be done with a global advertising campaign. Most industry experts believe that a global appeal and a global campaign are more effective in creating the perception of value than is a series of separate national campaigns.
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When potential customers cannot afford a product, the strategy Indicated is invention. In other words, a company may need to develop an entirely new product designed to satisfy the need or want at a price that is within the reach of the potential customer. This is demanding, but if product development costs are not excessive, it is potentially a rewarding product strategy for the mass markets in the less developed countries of the world. Although there are ample opportunities for the application of the invention strategy in global marketing, it is a strategy that is unfortunately under appreciated and under utilized. For example, an estimated 600 million women in the world still scrub their clothes by hand. Soap and detergent companies have served these women for decades, yet until recently not one of these companies had attempted to develop an inexpensive manual-washing device.
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1.5.2.
2nd P: PRICE
In any country, three basic factors determine the boundaries within which market prices should be set. The first is product cost, which establishes a price floor, or minimum price. While it is certainly possible to price a product below the cost boundary, few firms can afford to do this for extended periods of time. Second, competitive prices for comparable products create a price ceiling or upper boundary. International competition almost always puts pressure on the prices of domestic companies. A widespread effect of international trade is to lower prices. Indeed, one of the major arguments favoring international business is the favorable impact of international competition upon national price levels and, in turn, upon a country's rate of inflation. Between the lower and upper boundaries for every product there is an optimum price, which is a function of the demand for the product as determined by the willingness and ability of customers to buy. The interplay of these factors is reflected in the pricing policies adopted by many Global companies in the mid1990s. A global manager must develop pricing systems and pricing policies that address these fundamental factors in each of the national markets in which his or her company operates. The following is a list of eight basic pricing considerations for marketing outside the home country. Does the price reflect the product's quality? Is the price competitive? Should the firm pursue market penetration, market skimming, or some other pricing objective?
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What type of discount (trade, cash, quantity) and allowance (advertising, trade-off) should the firm offer its international customers?
Should prices differ with market segment? What pricing options are available if the firm's costs increase or decrease? Is demand in the international market elastic or inelastic?
Are the firm's prices likely to be viewed by the host-country government as reasonable or exploitative? Do the foreign country's dumping laws pose a problem?
A firm's pricing system and policies must also be consistent with other uniquely global constraints. Those responsible for global pricing decisions must take into account international transportation costs, middlemen in elongated international channels of distribution, and the demands of global accounts for equal price treatment regardless of location. In addition to the diversity of national markets in all three basic dimensions of cost, competition, and demand, the international executive is also confronted by conflicting governmental tax policies and claims as well as various types of price controls. These include dumping legislation, resale price maintenance legislation, price ceilings, and general reviews of price levels.
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The final determination of a base price can be made only after the other elements of the marketing mix have been established. These include the distribution strategy and communication strategy. The nature and length of channels utilized in the marketing program will affect margins, as will the cost of advertising and communications. Clearly, the marketing program has a dramatic effect on the final price of the product.
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What pricing policy should a global company pursue? Viewed broadly, there are three alternative positions a company can take toward worldwide pricing.
Extension/Ethnocentric The first can be called an extension/ethnocentric pricing policy. This policy requires that the price of an item be the same around the world and that the importer absorbs freight and import duties. This approach has the advantage of extreme simplicity because no information on competitive or market conditions is required for implementation. The disadvantage of this approach is directly tied to its simplicity. Extension pricing does not respond to the competitive and market conditions of each national market and, therefore, does not maximize the company's profits in each national market.
Adaptation/Polycentric The second pricing policy can be termed adaptation/polycentric. This policy permits subsidiary or affiliate managers to establish whatever price they feel is most desirable in their circumstances. Under such an approach, there is no control or fixed requirement that prices be coordinated from one country to the next. The only constraint on this approach is in setting transfer prices within the corporate system. Such an approach is sensitive to local conditions, but it does present problems of product arbitrage opportunities in cases where disparities in local market prices exceed the transportation and duty cost separating markets. When such a condition exists, there is an opportunity for the enterprising business manager to take advantage of these price disparities by buying
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in the lower-price market and selling in the more expensive market. There is also the problem that under such a policy, valuable knowledge and experience within the corporate system concerning effective pricing strategies is not applied to each local pricing problem. The strategies are not applied because the local managers are free to price in the way they feel is most desirable, and they may not be fully informed about company experience when they make their decision.
Invention/Geocentric
The
third
approach
to
international
pricing
can
be
termed
invention/geocentric, Using this approach, a company neither fixes a single price worldwide nor remains aloof from subsidiary pricing decisions, but instead strikes an intermediate position. A company pursuing this approach works on the assumption that there are unique local market factors that should be recognized in arriving at a pricing decision. These factors include local costs, income levels, competition, and the local marketing strategy. Local costs plus a return on invested capital and personnel fix the price floor for the long term. However, for the short term, a company might decide to pursue a market penetration objective and price at less than the cost-plus return figure using export sourcing to establish a market. Another short-term objective might be to estimate the size of a market at a price that would be profitable given local sourcing and a certain scale of output. Instead of building facilities, the target market might first be supplied from existing higher-cost external supply sources. If the market accepts the price and product, the company can then build a local manufacturing facility to further develop the identified market opportunity in a profitable way. If the market opportunity does not materialize, the company can experiment with the product at other prices because it is not committed by existing local manufacturing facilities to a fixed sales volume.
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For consumer products, local income levels are critical in the pricing decision. If the product is normally priced well above full manufacturing costs, the international marketer has the latitude to price below prevailing levels in higher-income markets and, as a result, reduces the gross margin on the product. While no business manager enjoys reducing margins, margins should be regarded as a guide to the ultimate objective, which is profitability. In some markets, income conditions may dictate that the maximum profitability will be obtained by sacrificing "normal" margins. The important point here is that in global marketing there is no such thing as a normal margin The final factor bearing on the price decision is the local marketing strategy and mix. Price must fit the other elements of the marketing program. For example, when it is decided to pursue a "pull" strategy that uses mass-media advertising and intensive distribution, the price selected must be consistent not only with income levels and competition but also with the costs and extensive advertising programs. In addition to these local factors, the geocentric approach recognizes that headquarters price coordination is necessary in dealing with international accounts and product arbitrage. Finally, the geocentric approach consciously and systematically seeks to ensure that accumulated national pricing experience is leveraged and applied wherever relevant. Of the three methods, only the geocentric approach lends itself to global competitive strategy. A global competitor will take into account global markets and global competitors in establishing prices. Prices will support global strategy objectives rather than the objective of maximizing performance in a single country.
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1.5.3.
3rd P: PLACE
The American Marketing Association defines channel of distribution as "An organized network of agencies and institutions, which in combination, perform all the activities required to link producers with users to accomplish the marketing task." Distribution is the physical flow of goods through channels; as suggested by the definition, channels are comprised of a coordinated group of individuals or firms that performs functions adding utility to a product or service. The major types of channel utility are: Place (the availability of a product or service in a location that is convenient to a potential customer); Time (the availability of a product or service when desired by a customer); Form (the product is processed, prepared and ready to use, and in proper condition); and Information (answers to questions and general communication about useful product features and benefits are available). Since these utilities can be a basic source of competitive advantage and product value, choosing a channel strategy is one of the key policy decisions, marketing management must make. Distribution channels in markets around the world are among the most highly differentiated aspects of national marketing systems.
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For this reason, channel strategy is one of the most challenging and difficult components of an international marketing program. Smaller companies are often blocked by their inability to establish effective channel arrangements. In larger multinational companies operating via country subsidiaries, channel strategy is the element of the marketing mix that headquarters understands the least. To a large extent channels are an aspect of the marketing program that is locally led through the discretion of the in-country marketing management group. Nevertheless, it is important for managers responsible for world marketing programs to understand the nature of international distribution channels. Distribution is an integral part of the total marketing program and must be appropriate to the product design, price, and communications aspects of the total marketing program. Another important reason for placing channel decisions on the agenda of international marketing managers is the number and nature of relationships that must be managed. Channel decisions typically involve long-term legal commitments and obligations to other firms and individuals. Such commitments are often extremely expensive to terminate or change. Even in cases where there is no legal obligation, commitments may be backed by good faith and feelings of obligation, which are equally difficult to manage and painful to adjust.
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TARGET MARKETS
The starting point in selecting the most effective channel arrangement is a clear determination of the target market for the company's marketing effort and a determination of the needs and preferences of the target market. Where are the potential customers located? What are their information requirements? What are their preferences for service? How sensitive are they to price? These are some of the questions that the channel manager should answer. Customer preference must be carefully determined because there is as much danger to the success of a marketing program in creating too much utility as there is in creating too little. Moreover, each market must be analysed to determine the cost of providing channel services. What is appropriate in one country may not be effective in another. Channel strategy in a global marketing program must fit the company's competitive position and overall marketing objectives in each national market. If a company wants to enter a competitive market, it has two basic choices.
One option is providing incentives to independent channel agents that will induce them to promote the company's product. Alternatively, the company must establish company-owned or franchised outlets.
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The process of shaping international channels to fit overall company objectives are constrained by four factors: customers, products, intermediaries, and the environment. Important characteristics of each of these factors are discussed briefly.
Customer Characteristics The characteristics of customers are an important influence on channel design. Their number, geographical distribution, income, shopping habits, and reaction to different selling methods all vary from country to country and therefore require different channel approaches. Remember, channels create utility for customers. In general, regardless of the stage of market development, the need for multiple channel intermediaries increases as the number of customers increases. The converse is also true: The need for channel intermediaries decreases as the number of customers decreases. For example, if there are only ten customers for an industrial product in each national market, these ten customers must be directly contacted by either the manufacturer or an agent. For mass-market products bought by millions of customers, retail distribution outlets or mail-order distribution is required. In a country with a large number of low-volume retailers, it is usually cheaper to reach them via wholesalers. Direct selling that bypasses wholesale intermediaries may be the most cost-effective means of serving large-volume retailers. While these generalizations apply to all countries, regardless of stage of development, individual country customs will vary.
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Product Characteristics Certain product attributes such as degree of standardization, perishability, bulk, service requirements, and unit price have an important influence on channel design and strategy. Products with high unit price, for example, are often sold through a direct company sales force because the selling cost of this "expensive" distribution method is a small part of the total sale price. Moreover, the high cost of such products is usually associated with complexity or with product features that must be explained in some detail, and a controlled sales force can do this most effectively. For example, computers are expensive, complicated products that require both explanation and applications analysis focused on the customer's needs. A company-trained salesperson or "sales engineer" is well suited for the task of creating information utility for computer buyers.
Computers, photocopiers, and other industrial products may require margins to cover the costs of expensive sales engineering. Other products require margins to provide a large monetary incentive to a direct sales force. In many parts of the world, cosmetics are sold door to door; company representatives call on potential customers. The representatives must create in the customer an awareness of the value of cosmetics and evoke a feeling of need for this value that leads to a sale. The sales activity must be paid for. Companies using direct distribution for consumer products rely upon wide gross selling margins to generate the revenue necessary to compensate salespeople. Amway and Avon are two companies that have succeeded in extending their direct-sales systems outside the United States. Perishable products impose special form utility demands on channel members. Such products usually need relatively direct channels to ensure satisfactory condition at the time of customer purchase. In less developed
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countries, producers of vegetables, bread, and other food products typically sell their goods in public marketplaces. In developed countries, controlled sales forces distribute perishable food products, and stock is checked by these sales distributor organizations to ensure that it is fresh and ready for purchase. Bulky products usually require channel arrangements that minimize the shipping distances and the number of times products change hands between channel intermediaries before they reach the ultimate customer. Soft drinks and beer are examples of bulky products whose widespread availability is an important aspect of an effective marketing strategy.
The selection of distributors and agents in a target market is a critically important task. A good commission agent or stocking distributor can make the difference between realizing zero performance and performance that exceeds 200% of what is expected. At any point in time, some of any company's agents and distributors will be excellent, others will be satisfactory, and still others will be unsatisfactory and in need of replacement. To find a good distributor, a firm can begin with a list provided by the Department of Commerce or its equivalent in different countries. The local chamber of commerce in a country can also provide lists, as can local trade associations. It is a waste of time to try to screen the list by mail. Go to the country and talk to end users of the products you are selling and find out which distributors they prefer and why they prefer them. If the product is a consumer product, go to the retail outlets and find out where consumers are buying products similar to your own and why. Two or three names will keep coming up. Go to these two or three and see which of them would be available to sign. Before signing, make sure there is
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someone in the organization who will be the key person for your product who will make it a personal objective to achieve success with your product. This is the critical difference between the successful distributor and the worthless distributor. There must be a personal, individual commitment to the product. The second and related requirement for successful distributors or agents is that they must be successful with the product. Success means that they can sell the product and make money on it. In any case, the product must be designed and priced to be competitive in the target market. The distributor can assist in this process by providing information about customer wants and the competition and by promoting the product he or she represents.
The only way to keep a good distributor is to work closely with him or her to ensure that he or she is making money on the product. Any distributor who does not make money on a line will drop it. It is really quite simple. In general if a distributor is not working out, it is wise to terminate the agreement and find another one. Few companies are large enough to convert a mediocre distributor or agent into an effective business representative. Therefore, the most important clause in the distributor contract is the cancellation clause. Make sure it is written in a way that will make it easy to terminate the agreement. There is a myth that it is expensive or even impossible to terminate distributor and agent agreements. Some of the most successful global marketers have terminated hundreds of agreements and know success is based on their willingness to terminate if a distributor or agent does not perform.
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The key factor is performance: If a distributor does not perform, he or she must either shape up or be replaced.
Environmental Characteristics The general characteristics of the total environment are a major consideration in channel design. Because of the enormous variety of economic, social, and political environments internationally, there is a need to delegate a large degree of independence to local operating managements or agents.
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1.5.4. 4th P: PROMOTION Marketing communicationsthe promotion "P" of the marketing mix refers to all forms of communications that organizations use to establish meaning and influence buying behavior among existing and potential customers. Marketing communications should be designed to tell customers about the benefits and values that a product or service offers. The principal forms of marketing communications that is/ the elements of the promotion mix, are Advertising, Personal selling, Publicity and Sales Promotion.
All of these elements can be utilized in global marketing; however, the environment in which marketing communications programs are implemented can vary from country to country. Advertising may be defined as any sponsored, paid communication placed in a mass-medium vehicle.
Advertising plays a more important communication role in the marketing of consumer products than industrial products. Frequently purchased, low-cost products generally require heavy advertising support. Not surprisingly, consumer products companies top the list of big advertising spenders.
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GLOBAL PROMOTION STRATEGIES Companies can run the same advertising and promotion campaigns used in the home market or change them for each local market, a process called communication adaptation. If it adapts both the product and the communication, the company engages in dual adaptation. There are 3 approaches that a global company can use in advertisements:
First Approach
The first approach is to consider the message. The company can change its message at four different levels. The company can use one message everywhere, varying only the language, name, and colors. Exxon used Put a tiger in your tank with minor variations and gained international recognition. Colours might be changed to avoid taboos in some countries. Purple is associated with death in Burma and some Latin American nations; white is a mourning color in India; and green is associated with disease in Malaysia. Even names and headlines may have to be modified. When Clairol introduced the Mist Stick, a curling iron, into Germany, it found that mist is slang for manure. Few Germans wanted to purchase a manure stick. The Dairy Association brought its got Milk? advertising campaign to Mexico only to find that the Spanish translation read, Are you lactating? When Coors put its slogan turn it loose, into Spanish, it was read by some as suffer from diarrhoea. In Spain, Chevrolet's Nova translated, as it doesn't go." A laundry soap ad claiming to wash really dirty parts was translated in French-speaking Quebec to read a soap for washing private parts.
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Second Approach
The second Approach is to use the same theme globally but adapt the copy to each local market. For example, Camay soap commercial showed a beautiful woman bathing. In Venezuela, a man was seen in the bathroom; in Italy and France, only a man's hand was seen; and in Japan, the man waited outside. Danish beer company, Carlsberg, goes so far as to adapt copy not to countries but to individual cities and even neighbour hoods within those cities. The 151-year-old Danish beer is available in more than 140 countries around the world, but because of the competitiveness and maturity of the U.S. market, it has to take a local tack in its approach to win new customers who aren't familiar with the brand. All advertisements feature the same single image of the Carlsberg bottle, along with a humorous message about the specific city.
Third Approach
The third approach consists of developing a global pool of ads, from which each country selects the most appropriate one. Coca-Cola and Goodyear use this approach. Finally, some companies allow their country managers to create country-specific ads within guidelines, of course. Kraft uses different ads for Cheez Whiz in different countries, given that household penetration is 95 percent in Puerto Rico, where the cheese is put on everything; 65 percent in Canada, where it is spread on morning breakfast toast; and 35 percent in the United States, where it is considered a junk food. The use of media also requires international adaptation because media availability varies from country to country. Norway, Belgium, and France do not allow cigarettes and alcohol to be advertised on TV. Austria and Italy regulate TV advertising to children. Saudi Arabia does not want
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advertisers to use women in ads. India taxes advertising. Magazines vary in availability and effectiveness; they play a major role in Italy and a minor one in Austria. Newspapers have a national reach in the United Kingdom, but the advertiser can buy only local newspaper coverage in Spain. Marketers must also adapt sales-promotion techniques to different markets. Greece prohibits coupons, and France prohibits games of chance and limits premiums and gifts to 5 percent of product value. People in Europe and Japan tend to make inquiries via mail rather than phonewhich may have ramifications for direct mail and other salespromotion campaigns. The result of these varying preferences and restrictions is that global companies generally assign sales promotion as a responsibility of local management.
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TATA GROUP
For over 130 years Tata name had been synonymous with leadership in industry, ethical business practices and an ongoing commitment to quality. The Tata Group had fueled the nations growth and prosperity by contributing significantly to Indias core sectors and has emerged as a leading force in the new economy.
March 4, 1996.
1996. 688 acres of land at Dharwad (Karnataka) were allotted for Auto and CEBU Units, in Dec 1996. Concorde Motors Ltd., a Joint Venture was established between
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Tata Engineering and Jardine International Motors (Mauritius) Ltd. 1997-98 1997 Industrial Entrepreneurs Memorandum was filed for taking up
manufacture of special purpose vehicles and construction equipment at Dharwad in Jan 1997. Management Services Division of the Company was transferred to the wholly owned subsidiary of Tata Engineering - Tata Technologies (I) Ltd, in Apr 1997. Tata Sierra Turbo launched. The commercial vehicle, LPT 909 introduced. 100,000th Tata Sumo rolled out.
1998
Tata Safari - India's first Sports Utility vehicle launched in Jan 1998.
Concorde Motors Ltd., a Joint Venture between Tata Engineering and Jardine International Motors (Mauritius) Ltd. was appointed as dealer for the Company's passenger cars in several cities across the country, in Feb 1998. Two millionth vehicle rolled out. Collaboration with Hitachi, Japan, for manufacture of Series V
excavators to replace Series I & III machines, in Mar 1998. Indica, India's first fully indigenous car, launched in Dec 1998. Telco Construction Equipment Company Ltd. (TELCON) came into being as a subsidiary of Tata Engineering, in Dec 1998. 1999 1999 An overwhelming 115,000 bookings for Indica were made against New TATA Logo unveiled. The company would hereafter be called "
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in
Commercial production of Indica begins and first car is sold. Construction Equipment Business Unit is transferred to TELCON. In Oct 1999, the Company won the National award for R&D Efforts Development of Indigenous Technology in the Mechanical
Engineering Industries Sector instituted by Department of Scientific and Industrial Research, Ministry of Science and Technology for the year 1999. 2000 2000 Order for 500 Nos. of Tata Indica received for Malta. First batch of Indica with Bharat Stage II (Euro II) compliant diesel engine Machine Tools and Growth Divisions, Axle Division and 160 Nos. exported in Jan 2000. launched in Feb 2000. Transmission Division of Tata Engineering transferred to newly formed subsidiaries Telco Automation Ltd., HV Axles Ltd. and HV Transmission Ltd. respectively on March 31 2000. The Automobile Business Unit was restructured into Commercial Tata Engineering bagged the National Award for successful Vehicles Business Unit and Passenger Car Business Unit, in Mar 2000. commercialization of indigenous technology by an industrial concern for the year 2000, for the indigenous development and commercialization of Tata Indica, in Mar 2000. Utility vehicles with Bharat Stage II (Euro II) compliant engine Indica 2000, Bharat Stage II (Euro II) compliant with Multi Point Fuel Tata Engineering selected for the "Good Corporate Citizen Award" launched, in Mar 2000. Injection petrol engine launched, in Apr 2000. by Bombay Chamber of Commerce and Industry for the year 19992000. The award was received later in April 2001. Tata Engineering received the "All India Trophy for Highest Exports"
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for the year 1998-99 in the Capital Goods Exports- Non- SSI category, from Engineering Export Promotion Council (EEPC) on May 31, 2000. Tata Engineering was awarded the EEPC Regional Top Exporter's Trophy in the category of 'Units registered with DGTD/ SIA/ Textile Commissioner etc.' for engineering exports in the year 1998-99 on November 10, 2000. Second prize"Central Pollution Control Board Award for Environment Protection" was bagged by Tata Engineering at ENVIRO INTERNATIONAL, 2000 which was jointly organized by TAFCON Projects (India) Ltd. and Royal Dutch Jaarbeurs, Netherlands, in Pragati Maidan, Delhi from September 27 to 29, 2000. Launch of CNG Buses in December, 2000. Launch of 1109 vehicle(11 Ton GVW). Hitachi inducted as an equity partner for TELCON under
2001 2001 The next generation of Indica, Indica V2 launched in January, along 100,000th Indica rolled out in March. Launch of CNG Indica in June.
with 2 new models- DLS in Diesel and LSI in the Indica 2000 range.
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[Rs. Million]
Year
Total
Sales
Value of Gross
PAT
Exports
turnover turnover assets block 2000-01 4,12,906 4,00,623 4,47,341 3,52,938 10,982 65,120 1999-00 3,86,071 3,71,535 4,17,381 3,29,014 19,873 50,170
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Materials Year 2000-01 1999-00 Total 93,150 83,542 Sales 92,016 8,25,79 Value of assets 1,05,088 1,04,245 Gross block 1,24,338 1,18,275 5,631 4,213 8,735 8388 PAT Exports
turnover turnover
Engineering Year 2000-01 1999-00 Total Sales Value of assets 72,753 76,952 Gross block 73,988 69,722 -5,236 953 7,879 6,981 PAT Exports
Energy Year 2000-01 1999-00 Total 38,138 32,389 Sales 35,221 28,490 Value of assets 64,519 62,114 Gross block 50,854 42,926 3,967 4,712 914 501 PAT Exports
turnover turnover
Chemicals Year 2000-01 1999-00 Total 28,627 31,345 Sales 25,774 29,630 Value of assets 35,668 34,386 Gross block 30,757 31,048 1,409 1,434 1,477 1197 PAT Exports
turnover turnover
Consumer products
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turnover turnover
turnover turnover
It can be inferred from the above chart that the major inflow to the company comes from the Tata Engineering sector, which is the most important, and profit-making sector of the Tata Empire.
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Globalization is a two-way process and to benefit from this Indian firms have to exploit global opportunities. The automobile sector can make a difference if Indian firms act with foresight. In 2000, global trade in automobile products totaled $549 billion, 10 per cent of all the global trade. Also the automobile industry creates enormous employment and it has substantial spillover benefits on industrialization and regional development. Currently, the global automobile industry is undergoing a major reorientation. Four clear trends, which are inter-related and intertwined, are discernible. Global automobile firms are segmenting into two distinct product markets low priced cars and premium segment cars with intense competition in both segments. The strategy is to make many variants using the same platform A far-reaching network facilitates exports of automobiles to countries in,
Europe South east Asia West Asia Australia Africa South America
Strengths of TATA Engineering Worldwide marketing and distribution network Sourcing and supplying production services Vendor identification, development and partnering Shipping, logistics and warehousing management
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Expertise in trade laws and regulations of various countries Expertise in import and export documentation Risk management
Ability to raise finance from banks and financial institutions both in India and overseas Expertise in international financial transactions Facilitating technology transfers, joint ventures and strategic alliances
In Tatas ongoing quest to improve customer satisfaction and to meet market demand they constantly seek out opportunities for growth, change and renewal of existing businesses. Tata launched itself into the markets with the commercial vehicles i.e. trucks and busses in 1960 with the markets mainly; Africa, Europe, Malaysia, Dubai etc. It re-launched itself with the passenger cars in the year 1998, with Indica and Safari having the main markets as Europe Italy the diesel and the petrol versions.
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There are a number of objectives of international business but the primary and the basic of them being; 1. Learning and Product Development: Today every organization is a learning organization. Also it has to continuously be in touch with the competition in the market. Hence it has to do the up gradation of the existing products eventually whenever required. When one enters international markets, one comes across other competitors from other countries. One is therefore exposed to competition from other countries. Domestic goods have to match international standards to remain in competition, not only with respect to product, cost and quality but services as well. Therefore, one gets an opportunity to learn and develop or improvise new products. 2. Brand building for other products In international markets, if the company is competent enough to beat the rivals in the field, it not only creates a goodwill and image of the product it is promoting but it also opens avenue for promotion of other line of products manufactured by the company. It not only helps in brand building of the company but also assists in promotion of its product mix.
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3. Capacity utilization and providing cushion for domestic recessions/ slow downs International markets also help in full capacity utilization. it therefore helps in meeting domestic recession and slow down , thus avoiding retrenchment of staff and reduction in their salaries and wages. 4. Foreign exchange earnings Products launched in international markets also assist in earning precious foreign exchange for the country, thus the company can import advanced accessories or gadgets and technology. 5. Quality improvement and cost reduction The precious foreign exchange earned can be thus be utilized for quality improvement of the existing products to stay in international business and subsequently import know-how technology to develop new products.
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Following is the model that Tata adopts to decide upon which country has the potential car market and the perspective customers.
Attributes
Grading 0
Rating Scale 1 2 2 3 3 4 4 4 5 -
5 10 2 -
TOTAL
60
The above given is a hypothetical example of the selection criteria Tata adopts in order to explore the new markets. Tata has developed its own criterion, which is known as Market Attractiveness Matrix. This Matrix depends on four basic factors i.e. Country stability, Market conditions, Ease of entry, Competitors. The above matrix is the way of deciding whether the markets are feasible or not and whether the Company should explore the markets.
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There are 4 major aspects to this matrix, Country Stability, Markets, and Ease of entry, our competitors. An already weighed scale or a standard is given to these attributes to which the actual studied ratings are multiplied. Example: Consider any market not explored by the Tatas. An already established criterion is looked at, which has 4 constraints. Say the standard country stability of the company as feasible to them is 3, but the Country stability of the place that is to be analyzed is coming up to 4. So this 4 is multiplied to the standard figure of 3 and hence 12 is what the company arrives at. Similarly, the other constraints as, the market ease of entry and the competitors are dealt with. This is totaled up and if the total of the potential market lies anywhere between 50 and 81 these are considered to be favorable and are explored. The figures of 50 and 81 are already the set standards established by the company The criteria taken into consideration are broadly classified as:
Market:
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Imports Training requirements Technical requirements or competence Local manufacturing base/support Legal manufacturers.
Products Brands
After locating the market a strategy is devised to find the entry. A network of importer distributor and dealer is selected after studying their credit worthiness, financial capability, their experience and standing in the industry. The importers and distributors of the potential country, Indicating the market size, pricing, other costs and taxes and profitability including competition and expected market share, work out a detailed market plan. A dealer in the Tatas is chosen on the basis of the marketing plan submitted by the dealers to the company.
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MARKETING PLAN:
Market size Total car market (90000 cars) Retail price ($10,000) Cost Insurance Freight (CIF) ($5000) Profitability ($100)
E.g. Market share = 5% of the total market size I.e. 5% of 90,000 = 4,500 cars. Hence volumes mount to a sale of approximately 4,500 cars annually. Importer distributor dealer after selection carry out necessary advertising and sales promotion through audio, video and pint media. The distributors also carry out the required market research by the principals as to what is the market share, the retail pricing of a unit, competitors, trends of the market, fashion, customer profile, product profile etc.
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Italy became a nation-state belatedly - in 1861 when the states of the peninsula and Sicily were united under king Victor Emmanuel II of the Savoy dynasty, hitherto ruler of Piedmont and kings of Sardinia. Rome itself remained for a decade under the Papacy, and became part of the Kingdom of Italy only in 1870, final date of the Italian unification. Vatican is now an enclave, like San Marino. The Fascist dictatorship of Benito Mussolini that took over in 1922 led to a disastrous alliance with Nazi Germany and Japan, and Italian defeat in World War II. In 1946 a referendum on the monarchy resulted in the establishment of a republic. Italy was a charter member of NATO and the European Economic Community (EEC) and joined the growing political and economic unification of Western Europe, including the introduction of the Euro in 1999. Persistent problems include illegal immigration, the ravages of organized crime (mafia), corruption, high unemployment, and the low incomes and technical standards of southern Italy compared with the more prosperous north. Italy has a diversified industrial economy with approximately the same total and per capita output as France or the United Kingdom. This capitalistic economy (still mitigated by a wide presence of state and governmental influences) remains divided into a developed industrial north, dominated by private companies, and a less developed agricultural south, with substantial unemployment. Most raw materials needed by industry and more than 75% of energy requirements are imported. For several years Italy has adopted budgets compliant with the requirements of the European Monetary Union (EMU); representatives of government, labor, and employers also agreed to an update of the 1993 "social pact," which has been widely credited with having brought Italy's inflation into conformity with EMU requirements.
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Italy has been urged to work to stimulate employment, promote wage flexibility, hold down the growth in pensions, and tackle the informal economy. Economic growth was 1.3% in 1999 and was expected to edge up to 2.6% in 2000, led by investment and exports. Football is the main national sport. Italy has won the Football World Cup three times: 1934, 1938 and 1982. Some of world's best football players and teams come from Italy. The latter include A.C. Milan, Inter Milano FC, A.S. Roma, S.S. Lazio (also from Rome), Juventus (from Turin), and Fiorentina (from Florence). GEOGRAPHY OF ITALY:
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Area:
Languages:
Italian (official); German (parts of Trentino-Alto Adige region are predominantly German speaking; official in the province of Bolzano); French (small French speaking minority in Valle d'Aosta region; standard French is official only in the Valle d'Aosta). Slovene (Slovene-speaking minority in the Trieste-Gorizia area). Sardinian (in the island of Sardinia), now partly official; Ladin (in the Dolomite mountains, between Trentino-Alto Adige and Veneto), connected with Swiss Romansh; official only in the part enclosed in the province of Bolzano, together with German;
Catalan (in the town of Alghero, Sardinia). Albanian (villages in Calabria and Sicily); Greek (ancient dialects in villages of Calabria).
ECONOMY OF ITALY:
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The Italian economy has changed dramatically since the end of World War II. From an agriculturally based economy, it has developed into an industrial state ranked as the world's fifth-largest industrial economy. Italy belongs to the Group of Eight (G-8) industrialized nations; it is a member of the European Union and the OECD. Italy has few natural resources. With much of the land unsuited for farming, it is a net food importer. There are no substantial deposits of iron, coal, or oil. Proven natural gas reserves, mainly in the Po Valley and offshore Adriatic, have grown in recent years and constitute the country's most important mineral resource. Most raw materials needed for manufacturing and more than 80% of the country's energy sources are imported. Italy's economic strength is in the processing and the manufacturing of goods, primarily in small and medium-sized familyowned firms. Its major industries are precision machinery, motor vehicles, chemicals, pharmaceuticals, electric goods, and fashion and clothing. Import growth continues to outpace export growth, resulting in a trade surplus in 2000 of $1.3 billion, down from $14 billion in 1999 and $60 billion in 1996.
GDP: purchasing power parity - $1.212 trillion (1999 est.) GDP - real growth rate: 1.3% (1999 est.) GDP - per capita: purchasing power parity - $21,400 (1999) GDP - composition by sector: Agriculture: 2.6% Industry: 31.6% Services: 65.8% (1998)
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CAPITAL: Rome
DEFENSE:
KEY RESOURCES:
production machinery, motor vehicles, transport equipment, chemicals; food, beverages and tobacco; minerals and nonferrous metals
KEY INDUSTRIES: Tourism, machinery, iron and steel, chemicals, food processing, textiles, motor vehicles, clothing, footwear, ceramics
KEY PORTS: Augusta (Sicily), Bagnoli, Bari, Brindisi, Gela, Genoa, La Spezia, Livorno, Milazzo, Naples, Porto Foxi, Porto Torres (Sardigna), Salerno, Savona, Taranto, Trieste, Venice
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MAIN TRADING PARTNERS: Germany, France, the United States, the United Kingdom, Spain, Switzerland, The Netherlands, and Belgium.
GDP PER CAPITA INCOME: $21,400 (1999 estb.) GDP: purchasing power parity - $1.212 trillion (1999 estb.)
POLITICAL STRUCTURE AND DISTRIBUTION OF POWER PRESIDENT: An electoral college of the Senate, the Chamber of Deputies and representatives of regional councils, elects the PRESIDENT for a seven-year term. The President chooses the prime minister and nominates a number of Supreme Court judges. The position, however, carries with it no executive powers. Carlo Azeglio Ciampi was elected in May 1999; his term runs until May 2006
NATIONAL GOVERNMENT: Council of Ministers headed by a prime minister appointed by the president on the basis of ability to form a government with parliamentary support. The present government was formed by Silvio Berlusconi in June 2001.
NATIONAL LEGISLATURE: Bicameral: Chamber of Deputies of 630 seats/ Senate of 315 seats
CHAMBER OF DEPUTIES: There are two main factions or alliances in Italian politics, the center-right "House of Freedom" alliance, and the center-left "Olive Tree" alliance.
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DISTRIBUTION OF POWER: Popular vote Seats held by party Center-right coalition 58.4 368 Left-center coalition 38.4% 242 Other 2.2% 20 Total 100.0% Total 630
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5.1. INTRODUCTION
For a business that has to take important business decisions there are some questions that revolve around the imperative premises of marketing strategies. The marketing strategy spells out the game plan for attaining the businesss objectives. Marketing strategy is the marketing logic by which the business unit expects to achieve its marketing objectives. Marketing strategy consists of making decisions on the businesss marketing expenditures, marketing mix, and marketing allocations in relation to the expected environmental and competitive conditions. Marketing manager must decide what level of marketing expenditure is necessary to achieve its marketing objectives. The company also has to decide how to allocate the total marketing budget to the various tools in the marketing mix. Marketing mix is one of the key concepts in modern marketing theory. Marketing mix is the mixture of the controllable marketing variables that the firm uses to pursue the sought level of sales in the target market. There are literally dozens of marketing mix elements.
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The particular marketing variables under each P are shown in the figure below:
Quality Features Options Style Brand name Packaging Sizes Services Warranties Returns I Product List price Discounts Allowances Payment period Credit terms II Price
Marketing mix
Channels Coverage Location Inventory Transport IV Place Advertising Personal selling Sales promotion Publicity III Promotion
Target market
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The main purpose of this exercise is to study the strategies adopted by Tata on the concept of four Ps. The project is undertaken to study Tata venturing in the European country (Italy) which is the biggest potential car market in Europe in the automobile sector with two models: Tata Indica Euro III: Passenger Cars The information about the marketing mix strategy adopted by both for Tata [Tata Indicia] as also on the marketing mix strategy adopted by Fiat [Seicento (Passenger Car)] in the European country Italy which is the biggest export market for Tata is provided. The information of the competitors of Tata Indica in Italy i.e. with Fiat Seicento is given.
Tata Engineerings Indica has come out for the first time past its competitors the Hyundai Santro and the Maruti Zen. The company has reported a 51% increase in the sales
The Indica has already received the European standards in January 2002.
The company hopes to export 2000 diesel version cars of the Tata Indica in the current year & by the beginning of the next year.
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While light and heavy commercial will contribute 1/3rd of the companys total exports. The rest will comprise pick up trucks and Safari, the companys top utility vehicles.
The exports of commercial and utility vehicles excluding its small car Indica, would cross Rs. 700 crores this year.
The initial exports of Tata Indica have been 3000 cars per annum. Telco is planning to increase this originally.
Tata safari is already holding 5%-6% of the European market share in the sports utility vehicle segment
This shows that Tata Indica and Tata safari have great potential in the Europe Italy being its biggest export market
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High
Brand Low
o Tata Indica
High Quality
Low
Under this category two models are covered: TATA: Tatas Indica (Passenger Car) FIAT: Fiat Seicento (Passenger Car)
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TATA INDICA
With the Indica poised to achieve Euro-III standards by January, Tata Engineering hopes to export around 2,000 diesel cars, mainly to Europe, in the current year. Technology: The Indica embodies the latest in car technology. It has a new 16 bit microprocessor chip for the engine management system. This allows for better responsiveness and drive ability. To top it, the Indica is Euro II compliant. Power: The Indica has a Multi Point Fuel Injection system controlled 1400 cc engine ensuring a peak power output of whopping 75 bhp, unmatched in its category propelling from 0-60 kmph in under 6 seconds. Safety: The Indica is engineered for the ultimate safety. Which is why it comes packed with safety features. Like a collapsible steering, side impact bars an energy-absorbing crumple zone and lots more and to further enhance safety, Tatas have tested every feature at India's only internationally certified crash test facility at Tata Engineering.
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Style: The Indica comes with the latest styling accessories available in cars worldwide. Like a rear roof spoiler with an integrated LED brake light a chrome plated exhaust pipe a sporty gear knob sleek, white instrument dials.
STANDARD SPECIFICATIONS DIMENSIONS Length Width Height Wheelbase Ground Clearance ENGINE Type No. of Cylinders Piston Displacement Maximum Output Maximum Torque STEERING Type Turning Radius TRANSMISSION SUSPENSION Front Rear 475 SI Water cooled Multi Point Fuel Injection System 4 inline 1405 cc 75 PS @ 5500 rpm 110 Nm @ 3000 rpm
Independent, Wishbone type with McPherson strut, Antiroll bar Independent, Semi-trailing arm with coil spring mounted on hydraulic shock absorbers
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Dual Circuit, diagonally split, vacuum assisted with PCR valves Ventilated Disc Drum
Radial-165x65 R 13 37 liters
FEATURES White instrument dials Collapsible steering column Door instrusion beams (ORVM) Remote release for fuel lid latch & tailgate latch Remote seat back rest folding & refolding facility Spot (reading) lamps & cabin lamp Antisubmarine type front seats Tinted windshield, door and tailgate glass Child safety locks on rear doors Digital clock Internal antennae Fabric lined seats Air conditioning system Parcel shelf Spoiler with Brake light Chrome tipped exhaust pipe Silver-tone centre cluster and console Power steering
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Sift feel, four spoke steering wheel Body colour bumpers Wheel covers Power windows (Front & Rear) Body colour ORVM & door handles Heating element on tailgate glass Central locking Tachometer Antiglare inner rear view mirror Rear wiper with wash/wipe and defogger Light intensity adjustment for instrument cluster Rear fog lamp Cigarette lighter 'Key in-Belt not fastened'/'Key out-Head lamps on' audio warning signal Delayed turnoff for rooflamp
Full size -
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FIAT SEICENTO
This car is known as the perfect city car! Compact, but boasting creature comforts normally associated with bigger cars. The Fiat Seicento is designed for excellent fuel returns, but is still a lively performer. Ideal in town traffic as well as the open road, inside, the Seicento feels like a much larger car, because of its excellent use of space and also because it includes many features only found on larger cars.
Features:
This car has;
More than enough room for the driver and adult passengers - and yet so economical
Advanced safety features like a reinforced body shell and passenger compartment protected by crumple zones and the FPS fire prevention system.
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Version Details:
Unique
Qualities that one will find reflected in a car that belongs in pole position. exterior features include side skirts and tailgate with Schumacher's special logo, plus a rear tailgate spoiler and 14" alloy wheels with low profile tyres. Inside you'll find a cockpit designed for the uncompromising. Sill plates also bear Schumacher's logo, while the pedals, gear lever and handbrake grip are all in sporty aluminium. The steering wheel and gear knob are trimmed in soft black leather with red stitching and there's a special numbered plate to remind you which one of the few you own. Safety and handling are paramount - ABS, electronic power steering and driver's airbag are all standard, while the driving experience is further enhanced by the inclusion of a hi-spec Sony single CD player/RDS stereo system. Powering the new champion you'll find the lively, economical and environmentally friendly 1.1 MPI engine, that easily delivers 93mph performance with 43.5mpg combined fuel economy.
Powered by the high performance fuel efficient 1108 Multi-Point injection (MPI) engine, the Seicento S and SX are thoroughly versatile and practical cars - equally at home, in city streets or country roads, and will effortlessly cover long distances, offering high levels of comfort and outstanding fuel economy. All models have a driver's air bag, electronic power steering, heated rear window and rear wash wipe, state of the art stereo in-car entertainment, and the Fiat CODE immobiliser system. The SX further benefits from having electric windows, sunroof, split folding rear seats, and rear head restraints.
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This high performance car could have been custom built for people who appreciate sheer verve and love the thrill of spirited driving. The Sporting has many features that enhance the natural good looks of the Seicento stylish colour-coordinated bumpers with fog lights and striking 13" alloy wheels. The interior is equally exciting with electric front windows, sunroof, rev counter, single CD/ RDS Radio System, sports seats, leather steering wheel and gear lever. This is coupled with the Sporting's outstanding performance. This high-performance 1108cc MPI engine achieves 0-62 mph in only 13.5 second (1.0 second quicker than the S and SX models) with an excellent fuel economy of 43.5 mpg on the combined cycle. There are also numerous options available including ABS, air conditioning and an Abarth Sports Kit to make this remarkable car stand out even more.
SPECIFICATIONS
Dimensions (mm) Fuel capacity Front suspension Rear suspension 3319 (L) x 1521 (W) x 1445 (H) 35 litres Independent, McPherson, with lower wishbones & coil springs. Independent, with lower wishbones & coil springs, anchored to an auxiliary cross-beam by flexible bushings. Halogen headlights, 3rd brake light, headlight adjustment, Standard on all models FIAT code, athermic glass, front seat belt pre-tensioners, impact beams in doors, fire prevention system, heated rear window, folding rear seat, analogue clock, radio/cassette.
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An effective pricing strategy for international markets is one in which competition and costs have influenced the pricing decision. Only examining the price levels of competitive and substitute products in target markets can determine competitive prices. An excellent way to get this information is to visit the market personally. Once these price levels have been established, the base price can be determined. The four steps involved in determining a base price are:
1. Determine the price elasticity of demand. Inflexible demand will allow for a higher price. 2. Estimate fixed and variable manufacturing costs on projected sales volumes. Product adaptation costs must be calculated. 3. Identify all costs associated with the marketing program. 4. Select the price that offers the highest contribution margin.
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The final determination of a base price can be made only after the other elements of the marketing mix have been established. These include the distribution strategy and communication strategy. The nature and length of channels utilized in the marketing program will affect margins, as will the cost of advertising and communications. Clearly, the marketing program has a dramatic effect on the final price of the product.
Medium
Low
Medium
5. Average Strategy
Here
8. Borax Strategy 9. Cheap Value Strategy
is Tata
Low
It can be clearly inferred from the diagram that Tata has a good value Strategy pricing where the quality offsets the price that is prevailing in the market.
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Price Level:
High
o Tata Indica
TATA INDICA: As Tata Indica is just introduced in the Market they have adopted a Penetrating strategy & its one of its merits is that it is priced low (that is 8% to 10% Low) than the price of the other passengers car of its kind. Since it has not been much time after its launch, it does not disclose the exact price that is prevailed in the markets. FIAT SEICENTO:
bhp 54 54 54
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6.3.
3rd P: PROMOTION
Promotion stands for various activities the company undertakes to communicate its product merits and to persuade its target customers to buy them. Marketing communicationsthe promotion "P" of the marketing mixrefers to all forms of communications that organizations use to establish meaning and influence buying behaviour among existing and potential customers. Marketing communications should be designed to tell customers about the benefits and values that a product or service offers. The principal forms of marketing communications i.e. the elements of the promotion mix are;
All of these elements can be utilized in global marketing; however, the environment in which marketing communications programs are implemented can vary from country to country. Companies can run the same advertising and promotion campaigns used in the home market or change them for each local market, a process called communication adaptation. If it adapts both the product and the communication, the company engages in dual adaptation.
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Standardized
o Tata Indica
Branding
In our study i.e. of automobiles, it was seen that the promotional strategies used by the companies was on the same lines as others. For car promotions, trade fairs and motor shows are the most common platforms. TATA The marketing of Tata Indica and Tata Safari is mostly done by the dealers that are selected by the company. It is the dealers responsibility to promote the vehicle and make them noticeable before their customers. The few but important means of promotion for these vehicles are: Motor shows (Geneva Motor Shows held in Switzerland every year in the month of September). This is the biggest platform for promotion of automobile industry in the world,
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Trade shows
Print and broadcast adds. Direct mailers Catalogues Broachers and billboards. Audio-Visual Material (advertisements.)
A company like Tata manages a complex marketing communication system. The company communicates with its middlemen, consumer and various publics - its Tata dealers. Dealers communicate with their consumers and various publics.
High
Sales Promotion
o Tata Indica
Low High Advertising Low
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Tatas are in the initial talks with Rover, the German unit of BMW for a tieup. After this alliance, the marketing and promotion of Tata vehicles will be done by Rover.
FIAT
For the Fiat Seicento and Dolbo; the promotion is done in the same way as in the case of other automobiles in Italy i.e. majorly through motor shows etc. but Fiat has an edge over the Safari as it is an Italian based company in itself and has leverage over this aspect. Moreover Fiat Group owns important editorial bands like
This helps Fiat in publishing to advertise through pint media quite often and stay in peoples attention all the time.
Some national and local newspapers are owned or otherwise controlled by the company. Fiat also has and an advertising center Consorzio Fiat Media Center which helps Fiat in its advertising and sales promotion.
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TATA
Tata distribution in the European country is done through dealership networking. Tata has 70 to 75 dealers in Italy out of which 50% to 60% are exclusively for Tata Indica and Tata safari. Tata owns 5 showrooms in Italy in the following places
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Suppliers
FIAT:
The distribution of Fiat is on the i.e. through distribution network. same lines as that of the Tatas Fiat has got approximately 160
dealers throughout Italy. Fiat has finally bolstered its Auto Arm with a strategic alliance with General Motors, who acquired a 20% in the groups Fiat Auto Division in 2000. This has resulted in a stronger dealership network of Fiat allover.
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7.1. PRODUCT:
1. Product mix: If the price of one product is higher than that of its competitors in that segment itself, a company should launch alternate product to overcome this problem or sell an improved version or quality of the product to match the competitor. This is strategic and the strategy offers a range of product mix to the customers. 2. Comparisons: Product should be such that it can be compared to the other products of the same category. If the company is competent enough to beat the rivals in the field, it not only creates a goodwill and image of the product it is promoting but it also opens avenue for promotion of other line of products manufactured by the company. It not only helps in brand building of the company but also assists in promotion of its product mix. 3. Research and development: The environment is never stagnant. It is very dynamic. And specially when there are a number of players in the field of competition, continuous R&D efforts to upgrade the models should be made. Or newer versions of the same model may be offered to spare the people from the monotony. Example Ambassador Premier Padmini (Fiat) in India. 4. After-sales Service: The Company should have an excellent aftersales service and spare part centre/shops for the products offered by the company so that the same can be given to them on the spot. 5. Cultural values: The product should match the customers requirement keeping in mind his cultural and social background.
7.2.
PRICE:
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1. Competitive: Price has to be competitive keeping in mind the cost of production, import duties, local taxes and the consumers pocket. In case the company has priced its goods higher than that of the competitor, it should see to it that the quality is also provided in order to offset the price difference. 2. Discounts and allowances: Proper loan schemes, discounts, allowances, incentives, installments etc should be provided to the consumers for facilitating easy sales of the products.
7.3.
PLACE:
1. Assembly line: Looking into the future growth potential the company should export the product in completely knock-down condition and create an assembly line in the consumer country. This will also offer job opportunities to the people of Italy i.e. the local population leading to awareness and promotion of the product. 2. Ancillary industry: Since a rise in sales is expected in future, there can be ancillary industries to support the assembly and manufacturing of the product and spares to some extent.
7.4.
PROMOTION:
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1. Blitzkrieg campaign required: A strong blitzkrieg campaign is required to attract a considerable amount of market share. 2. Internet and Websites: The Company should look into the advertising through internet and should have a website of its own for the Italian markets. During the project study it was observed that little information of the Tata Vehicles is provided online, which is not the case with its competitors. Hence it is very important for the company to put up information, product specification, after sales service on the internet. 3. Tie-up with well established automobile company: As Tata Safari and Tata Indica are in their introductory stage in the Italian market, they should go in for a strategic alliance with a local partner or with a competitor. They should go in for a tie up with a well established automobile industry in Italy; this will make their work easier as the latter can then take care of the Tata vehicles distribution and marketing. It is learnt that Tata Rover (a unit of auto major BMW) tieup is in the offing in Italy. This will help to improve the image and market share of Tatas in the car segment. Rover is trying to promote and sell Tata Indica and Safari in UK.
4. Target customer/specific positioning: Positioning is not what you do to a product, but what you do to the mind of the prospective customer. An insight into social and cultural values of the people in Italy shows that the Italians give importance to family values. Tata Indica can be positioned as a family car and as even Tata Indica is 8% to 10% cheaper than the other European Passenger Cars. Hence the concept of value for money can be highlighted effectively. The product also should be so positioned to suit a particular segment of people e.g. family, students, executives etc.
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5. Communication in national language: It is very important for a company to communicate its objectives to its customers. What is communicated, however, should not be left to chance. To communicate effectively, Tata should hire an advertising agency to develop effective ads, sale promotion specialists to design sales incentive programming, public relation firms to develop corporate image.
6. Advertisements in the papers: A proper communication establishes a relationship with the customers. Advertising should also be done through the print media. This can be done in the local language papers, magazines, booklets, brochures, etc.
7. Trade Fairs and Motor Shows: The largest platform for promotion of any automobile industry is trade fairs and motor shows especially the Geneva motor show, which is held every year in September in Switzerland. Tata can often participate in these trade fairs and motor shows to gain popularity. Some of the important ones are given below:
(Bologna)
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8. Promoting through Italian actors and models: The Company can make ads campaigns by inviting Italian models and actors. This gives a glamorous touch to the company and the brand. They can even associate themselves with an Italian celebrity the way Fiat associates itself to Sachin Tendulkar and Shahrukh Khan in India. 9. Associating them with Italy: A company should involve themselves with the people and customers of the country. They should merge themselves with the social well-being of the people and adopt their countries names like the Fiat and Suzuki had done years back and had accepted India as their country.
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10. Italian Brand Names: A company should patronize and popularize their brand names by selecting local word or Italian Brands, e.g. Indica in India, and may be Italica in Italy.
11. Merging Identity: The theme of the company should be to merge its identity with the local aspirations and getting into their hearts. 12. Door to door campaign: The Company can adopt doorto
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8. CONCLUSION
With the explosion of Information Technology and improved
Communication, e-commerce and e-business have taken a centre-stage. Lot of knowledge of international markets and marketing has become available, and in fact the world itself has shrunk to a global market-place. The world is undergoing economic revolution. A company that fails to go global is in danger of losing out to a domestic player with lower cost, richer experience, more finance, better products, offering more value for money. Why companies take international marketing? What are important factors for selecting a global market? How to enter the international markets? And such other questions or aspects are discussed in the project. The project also covers global issues in marketing with regard to transnational corporations, strategies adopted, product - design and services offered, pricing and promotional policies, target markets, selection of distributors, agents, product mix, promotion strategies etc. Four Ps (product, place, price, promotion) have been explained. A case study in particular reference to Tatas marketing of Indica in Italy is undertaken in the project. The case study includes company and product profile and also information of Italian markets with its historical and geographical background. The present market share of Tata engineering; of Tata Safari and Tata Indica is, only 3% to 3.5% in Italy in the previous year. But it is expected to increase by 5%to 6% in the near future.
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It is observed that forTata, product, pricing and distribution are not lacking but can be enhanced further. The promotional strategies if taken up seriously and thoroughly can raise the market share. A tie-up with an established company like Rover will help. The project also covers other important competitors in this segment in the market. Various recommendations and suggestions are also given. The project concludes with bibliography.
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9.
BIBLIOGRAPHY
WEBSITES:
1. www.google.com 2. www.telcoindia.com 3. www.indiainfoline.com 4. www.automarket.com 5. www.tataengineering.com 6. www.tatainternational.com 7. www.projectshub.com 8. www.italyonline.com 9. www.governmentofitaly.org 10. www.italianauto.com