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Question 1: - Define multinational corporations. How is international marketing different from domestic marketing?

Answer: Multinational Corporations (MNCs) are major players in the world of international business. In India, the mention of an MNC usually elicits mixed reaction among the Indians. On the one hand, MNCs are associated with exploitation and ruthlessness. They are often criticized for moving resources in and out of the country as they strive for profit without much regard for the countrys social welfare. For example, Varity Corporation, MNC of Canada was criticized for its action in 1991 to relocate its headquarters from Toronto to United States (Buffalo) in order to take advantage of the US Canadian Trade Agreement. Sovereign Political Entities: Each country is a sovereign political entity and, therefore, they for importing and exporting the goods and services in order to safeguard their national interest impose several restrictions. The traders in international marketing have to observe such restrictions. These restrictions may fall in any of the following categories: A) Tariffs and customs duties on import and export of goods and services in order to make them costly in the importing country and not to ban their entry into the country completely. B) Quantitative restrictions are also imposed with an intention to restrict trade in some specific commodities. C) Exchange control is another restriction imposed by almost every sovereign state. D) Imposition of more local taxes on imported goods with an object to make the imported goods costly is one of the restrictions in international marketing. Different Legal Systems: Different countries operate different legal systems and they all differ from each other. In most of the countries follow English Common Law as modified from time to time. Japan and Latin American countries are important exceptions to this rule. Different Monetary Systems: Each country has its own monetary system and the exchange rates for each countrys currency are fixed under the rules framed by the International Monetary Fund and, therefore, they are more or less fixed. Lower Mobility Factors of Production: Mobility of different factors of production is less as between nations than in the country, itself. However, with the advent of air transport, the mobility of labor has increased manifold. Similarly, the development of international banking has increased the mobility of capital and labor. In spite of these developments, the mobility of labor and capital is not as much as it is within the country itself.

Differences in Market Characteristics: Market characteristics in each segment are different, i.e. demand pattern, channels of distribution, methods of promotion etc. are quite different from market to market. If we take each country a separate market, we can assume different market characteristics there. Differences in Procedure and Documentation: The centuries old laws and customs of trade in each country demand different procedures and documentary requirements for the import and export of the goods and services.

Question 2: - Differentiate between absolute advantage and comparative advantage theories. Answer: Principle of absolute advantage Adam Smith was the first economist to investigate, formally, the rationale behind foreign trade. In his book Wealth of Nations, Smith used the principle of absolute advantage as the justification for international trade. According to this principle, a country should export a commodity that can be produced at a lower cost than can other nations. Conversely, it should import a commodity that can only be produced at a higher cost than other nations. Theory of comparative advantage David Ricardo developed the important concept of comparative advantage in considering a nations relative production efficiencies as they apply to international trade. In Ricardos view, the exporting country should look at the relative efficiencies of production for both commodities and make only those goods it could produce most efficiently.

Question 3: - Write a short note on International Advertising. How is it important for international marketing? Answer: International advertising is the practice of advertising in foreign or international media when an advertiser from another country plans the advertising campaign directly or indirectly. To advertise overseas, a company must determine the availability of advertising media. The media generally uses newspapers, magazines, rural media, and other media for advertising purposes. There are two types of strategies, which are followed for the international advertising. One is the unified advertising strategy and the other is diversified advertising strategy. Unified advertising refers to the policy where the advertising in domestic market is extended to foreign markets in its forms, appeals, and other

selling propositions. On the other hand, in diversified advertising strategy the advertising is not the same as in the domestic market but it requires proper adaptation of the advertising strategy to various elements such as religion, culture, traditions etc. of diverse nature peculiar to the foreign market or market segment. There is no single advertising media that is suitable for all the countries and for all the products. The media has to vary from one target market to another. In the international marketing, it has been traditionally felt that the nature of advertising task varies from country to country. One is the unified advertising strategy and the other is diversified advertising strategy.

Question 4: - What are SEZs and what benefit they provide to the international trade and marketer? Answer: Special Economic Zones (SEZs) is a specially delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. Goods and Services going into the SEZ area shall be treated as deemed exports and goods and services coming into Domestic Tariff Area (DTA) from the SEZ shall be treated as if the goods are being imported. 1. SEZ units may export goods and services including agro-products, partly processed goods, sub-assemblies and components except prohibited items. It may also export by-products, rejects, waste scrap arising out of the production process. 2. SEZ unit may import/procure from the DTA without payment of duty all types of goods and services, including capital goods, whether new or second hand, required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC (HS). 3. SEZ unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. In such a case the SEZ unit and the domestic/foreign leasing company shall jointly file the documents to enable import/procurement of the capital goods without payment of duty. 4. SEZ unit shall be a positive net foreign exchange earner. 5. The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to achieve positive foreign exchange earning it shall be liable to penalty in terms of the legal undertaking or under any other law for the time being in force.

6. SEZ unit may export goods manufactured or software developed by it, though a merchant-exporter/status holder recognized under the policy or any other EOU/SEZ/EHTP/STP unit. 7. Goods imported/procured by an SEZ unit may be transferred or given on loan to another unit, within the same SEZ which shall be duly accounted for, but not counted towards discharge of export performance. 8. SEZ unit may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/EHTP/STP with the permission of the Customs authorities. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. 9. SEZ units may sell goods, including by-products and services, in the DTA on payment of applicable duties.

Question 5: - What are the factors that affect the pricing strategy of an international firm? What different pricing strategies can the firms adopt? Answer: There are three main factors which affect the export price strategy to be adopted by the exporter in the foreign markets. The pricing strategy is a short-term tool to make fit the prices in the changing competitive situations in the short run with its pricing policy decisions. Characteristics of the product and the nature of its demand: It is a major factor in fixing the price of the product at a particular time. In other words, improvement in quality of the product and product adaptation according to the changing competitive conditions in the foreign market should be taken as a continuous process. Elasticity of demand is another factor, which influences the price. If the demand of a product is inelastic the price reduction will not help to increase the revenue. In such a case, higher prices may be fixed taking in view the competitive position in the market. The philosophy of the management: As we know that the main objective of management of every concern is to maximize profits, this is an adverse relationship between the price and the demand. The management can earn more profit at increased revenue by reducing the price if the demand is more elastic. On the other hand, if the objective of the management is to export a committed value of merchandise, the price may be even lower than the marginal cost.

Market characteristics: Market characteristics such as number of competitors and degree of competition, supply position, quality of the product, substitutes available in the market etc. determines the pricing strategy of the firm. These market characteristics vary from country to country. Pricing Strategies The export price quotations may not be the same for all markets. Prices may differ from market to market due to various reasons viz. political influence, buying capacity, financial and import facilities, total market turnover and other pricing and non-pricing factors etc. in order to make the local price of the product competitive. Normally, the following pricing strategies are used in the export market. 1. Market Penetration Strategy: Under this strategy, exporters offer a very low introductory price to speed up their sales and, therefore, widening the market base. It aims at capturing the products in the market especially if the quality of the product is proved with its wide acceptance. 2. Probe Pricing Strategy: Fixing low price for its product may have an adverse effect on the image of the firm and of the product. It may raise doubts in the minds of the buyers about the quality of the product if it is lower than the price of competitors or if it is reduced subsequently. 3. Follow the Leader Pricing Strategy: In a competitive world market or where adequate market information is not available, it may be useful to follow the leader in the market comparing its product with that of the leader the exporter may then fix the price of its product. 4. Skimming Pricing Strategy: Under this strategy, a very high introductory price is fixed to skim the cream of the demand at the very outset. This policy is generally introduced when there is no competition in the market. Such prices continue to be high till competitors enter the foreign market. As soon as competitors enter the market, the exporter reduces the price 5. Differential Trade Margins Strategy: Variation in trade margins may be adopted by the exporter as the pricing strategy in foreign market. This strategy allows various types of discounts on the list price. Quantity discounts encourage procuring huge orders. It may be based on the value or on the quantity purchased or on the size of the package purchase. Special discounts may be allowed while introducing the product 6. Standard Export Pricing Strategy: In some cases, exporter quotes the standard price or list price that is one price for all. But still there should be some margin for negotiations as in many markets especially in under developed countries, bargaining over prices is a part of life. In such cases, fixed prices may serve as a starting point for negotiation.

7. Cheaper Price for Original Equipment and Higher Price for Spare Parts: In certain cases it might be useful to quote lower prices for the original equipment and charging higher prices for spares and replacement parts to be exported later as and when required.

Question 6: - Write short notes on a) Joint venture b) E-marketing Answer: Joint venture A joint venture is a strategic alliance where two or more parties, usually businesses, form a partnership to share markets, intellectual property, assets, knowledge, and, of course, profits. A joint venture differs from a merger in the sense that there is no transfer of ownership in the deal. Fuji-Xerox for example, was set up as a joint venture between Xerox and Fuji Photo. Establishing a joint venture with a foreign firm has long been popular mode for entering a new market. The most typical joint venture is a 50/50 venture, in which there are two parties, each of which holds a 50 percent ownership stake and contributes a team of mangers to share operating control. It can also occur between two small businesses that believe partnering will help them successfully fight their bigger competitors. While forming a joint venture, a company should keep in mind the following: Before a company forms a joint venture, they will need to look for partners to join them. When a company has its partner(s) chosen, agree on the terms of partnership such as who takes on what tasks, what they both earn from the business, solutions to conflicts that may arise, including if one, both, or all of them want to exit the business. Every partner will have to agree on the type of structure that the business is to have.

E-marketing E-marketing involves the marketing of products or services on the internet. Successful E-marketing requires good search engine marketing strategies. The

primary purpose of marketing an online business is the promotion of a good or service. E-marketing makes extensive use of the available tools for getting web users to purchase a product or service from a website. E-marketing approaches To accomplish their objectives, Internet marketers use many approaches, some of which include: Banners: A banner ad is a boxed-in promotional message that often appears at the top of the web page. If a visitor clicks on the banner ad, she/he is transported to the advertisers home page. This is the most used form of Internet promotion. Banners can be used to create brand recall or recognition. Other names given to banners include side panels, skyscrapers, or verticals. Sponsorships: This is another common advertising approach on websites. The advertiser is given a permanent place on hosts website and pays a sponsorship fee to the host. Pop-up and Pop-under: When a visitor accesses a web page, sometimes a window appears either in front or underneath the web page, the visitor is viewing. Pop-ups become visible as sooner the web site is accessed and popunder becomes visible only when the visitor closes the browser. Portal Use: Some portals give a prominent place to a companys offer for a fee. When a visitor follows directed search, the marketers name appears prominently at or near the top of the list. E-mail: Companies send e-mails to Internet users to visit the company web site. It can be effective only when the target customer is appropriate otherwise it becomes junk mail. Interstitials: These ads appear on the computer screen while a visitor is waiting for a sites contents to download. Push Technologies: Some companies provide screen savers to its website visitors that allow the firms to directly hook the visitor to their websites. This is an approach to push a message to the consumers rather than wait for consumers to locate it. Sales Promotions: Many companies effectively use sales promotions such as contests and sweepstakes to generate consumer interest.