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Master of Business Administration- MBA Semester 4 MK0018– International Marketing -4 Credits (Book ID: B1199) Assignment (60 marks

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Q.1. Define Multinational Corporation. How is international marketing deferent from domestic marketing? Answer: A multinational corporation (MNC) or multinational enterprise (MNE) is a corporation that is registered in more than one country or that has operations in more than one country. It is a large corporation which both produces and sells goods or services in various countries. It can also be referred to as an international corporation. They play an important role in globalization. The first multinational company was the British East India Company, founded in 1600. The second multinational corporation was the Dutch East India Company, founded March 20, 1602, which would become the largest company in the world for nearly 200 years. The striking difference between international and domestic marketing lies in the environment in which the two take place. The important points of differences between international and domestic marketing are: 1. 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. i) 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. In the post war period, through the efforts of General Agreement on Tariffs and Trade (GATT) there has been a significant reduction in tariff globally and on regional basis due to the emergence of regional economic groupings. ii) Quantitative restrictions are also imposed with an intention to restrict trade in some specific commodities. The major objective behind the restriction is the protection of home industries from the competition of the foreign commodities.

itself. iv) 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. Some countries operate multiple rates. we can assume different market characteristics there. are quite different from market to market. If we take each country a separate market. Even in one single country. The existence of different legal systems makes the task of businessmen more difficult as they are not sure as to which particular system will apply to their transactions. in recent years the exchange rates are fluctuating and are being determined by demand and supply forces. Differentiate between absolute advantage and comparative advantage theories.e. Japan and Latin American countries are important exceptions to this rule.iii) Exchange control is another restriction imposed by almost every sovereign state. does not ban the entry of goods in the country but the importer is not allowed the necessary foreign exchange to make the payment for the goods imported. corporate entity or country can produce something at a price that is lower than . 2. Different Legal Systems: Different countries operate different legal systems and they all differ from each other. the mobility of labour has increased manifold. Lower Mobility Factors of Production: Mobility of different factors of production is less as between nations than in the country. Different Monetary Systems: Each country has its own monetary system and the exchange rates for each country’s currency are fixed under the rules framed by the International Monetary Fund and. But. i. therefore. channels of distribution. India and America. with the advent of air transport. 4. the mobility of labour and capital is not as much as it is within the country itself. 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. demand pattern. However. These differences are accentuated due to the existence of government controls and regulations. The traders residing in the territory have to comply with these regulations and customs if they want import and export of goods and services. In most of the countries follow English Common Law as modified from time to time. This difficulty does not arise in the domestic trade. different rates are applicable to different transactions. in some cases. i.2. 6. 3. However. Answer: Absolute advantage is used to describe a situation in which a person. However. The Government. they are more or less fixed. for example. this is a difference of degree only. 5. Q. Differences in Market Characteristics: Market characteristics in each segment are different. in some cases. In spite of these developments. the development of international banking has increased the mobility of capital and labour. as laws are the same for the whole country. Similarly. these differences in market patterns may be found from state to state.e. methods of promotion etc. exchange control and quantitative controls are put together along with the grant of import licence.

Both countries can mutually benefit from trading in those two items in order to compensate for the items they are less efficient at producing. budgets are decentralized and placed in the hands of local subsidiaries. While Country A has comparative advantage in the production of shoes. absolute advantage provides more benefits in trade than comparative advantage. International advertising can. resulting in greater use of local advertising agencies. while Country B does not have the kind of climate that permits the growth of oranges and must import its oranges from other countries. while Country B can produce 100 sets of pencil per hour and one pair of shoes per hour. be viewed as a communication . How the advertising function is organized also varies. Country B has comparative advantage in the production of pencils. The reduction in opportunity cost shows a difference between absolute advantage and comparative advantage. Another example of the difference between absolute advantage and comparative advantage is the kind of benefits attached to an absolute advantage concerning the production of an item. In other cases.3. Such a variance might be that Country A has an abundant resource of fresh oranges supplied by local farmers. unlike Country B. respond to humor or emotional appeals. The difference between absolute advantage and comparative advantage lies in the difference between the advantages inherent in the two factors. In some cases. This saves time. An example of this difference is if Country A can produce 10 pairs of shoes per hour and two sets of pencil per hour. which has to put in extra effort just to get the raw material needed to produce the same end product. multinational firms centralize advertising decisions and budgets and use the same or a limited number of agencies worldwide. The main benefit to comparative advantage in economics is the idea of trading a product one is more efficient at producing for a product he or she is less efficient at producing. therefore. companies or countries producing the same the good. The absolute advantage Country A has is due to its close proximity to the source of the raw material. Country A has an absolute advantage over Country B in the production of orange juice simply because it can obtain oranges at a much cheaper rate and without expending too much labor. materials and labor. Absolute advantage is focused on the advantage of cost. This makes it more prudent for Country B to import the finished product from Country A Q. including transportation logistics. How is it important for international marketing? Answer: International advertising entails dissemination of a commercial message to target audiences in more than one country. as well as in levels of literacy and languages spoken. Comparative advantage occurs when a product can be produced more efficiently than other people. while also reducing the opportunity cost for producing the good. both countries have comparative advantage in different items.others. Comparative advantage refers to a situation in which the same type of commodity can be produced with a lower opportunity cost than others. Write a short note on International Advertising. Also. Target audiences differ from country to country in terms of how they perceive or interpret symbols or stimuli. while comparative advantage is based on opportunity cost.

provided they are not prohibited items of imports in the ITC (HS). rejects. . and consumption patterns. source the capital goods from a domestic/foreign leasing company. SEZ unit may import/procure from the DTA without payment of duty all types of goods and services. communication styles. whether new or second hand. on the basis of a firm contract between the parties. International advertising is important for international marketing as: • • Communicating to a target audience that differ in term of language. 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. including capital goods. and propagates certain values worldwide. International advertising is also a business activity involving advertisers and the advertising agencies that create ads and buy media in different countries. International advertising is also a major force that both reflects social values. sub-assemblies and components except prohibited items. SEZ units may export goods and services including agro-products. 1. partly processed goods. The sum total of these activities constitutes a worldwide industry that is growing in importance. 2. 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. 3.process that takes place in multiple cultures that differ in terms of values. required by it for its activities or in connection therewith. firm and brand and remind • • Through the selective reinforcement of certain social role language and values it act as and important for fashioning the cognitions and attitudes that underline behavior not only in the market place. SEZ unit may. but also in all aspects of life Q.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. literacy and other cultural factor Business activities through which a firm attempt to inform target audience in multiple country about itself and its product and service offering It provide reassurance to the consumers about there offering. It may also export by-products. waste scrap arising out of the production process.

in the DTA on payment of applicable duties. though a merchant-exporter/status holder recognised under the policy or any other EOU/SEZ/EHTP/STP unit.4. The philosophy of the management: As we know that the main objective of management of every concern is to maximize profits. the characteristics of the product and the nature of its demand. 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. 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. . 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. 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 viz. SEZ unit shall be a positive net foreign exchange earner. which influences the price. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. 9. Elasticity of demand is another factor. SEZ unit may export goods manufactured or software developed by it. If the demand of a product is inelastic the price reduction will not help to increase the revenue. 5. 6. within the same SEZ which shall be duly accounted for. this is an adverse relationship between the price and the demand.5. SEZ unit. Q. 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. Goods imported/procured by an SEZ unit may be transferred or given on loan to another unit. 8. 7. including by-products and services. SEZ units may sell goods. but not counted towards discharge of export performance. 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. Sub-contracting by SEZ gems & jewellery units through units in DTA or through other SEZ/DOU/EHTP/STP units shall be subject to conditions given in the Handbook. the philosophy of its management and the market characteristics.

Special discounts may be allowed while introducing the product. political influence. This approach is ‘buy sooner or more’. Differential Trade Margins Strategy: Variation in trade margins may be adopted by the exporter as the pricing strategy in foreign market. exporters offer a very low introductory price to speed up their sales and. Follow the Leader Pricing Strategy: In a competitive world market or where adequate market information is not available. Prices may differ from market to market due to various reasons viz. therefore. Such prices continue to be high till competitors enter the foreign market. It . 3. 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. buying capacity. financial and import facilities. Normally. In such cases the price of the product is lower than the leader’s product. total market turnover and other pricing and non-pricing factors etc. These are given on all the purchases. Different Price strategies: The export price quotations may not be the same for all markets. Quantity discounts encourage to procure huge orders. Thus. Market Penetration Strategy: Under this strategy. 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. However. the prices may be adjusted accordingly. Skimming Pricing Strategy: Under this strategy. sufficiently higher prices may be quoted on the first few offers. they may be less than the cost price. Seasonal discount aims at shifting the storing function in the channels. different strategies may be used in different markets. As soon as competitors enter the market. determines the pricing strategy of the firm. This strategy allows various types of discounts on the list price. These market characteristics vary from country to country.Market characteristics: Market characteristics such as number of competitors and degree of competition. This policy is generally introduced when there is no competition in the market. 5. quality of the product. It may be based on the value or on the quantity purchased or on the size of the package purchase. 4. Probe Pricing Strategy: Fixing low price for its product may have an adverse effect on the image of the firm and of the product. the exporter reduces the price. this price has no rational or scientific base for fixing the price. In some markets prices may be higher in some others they may be cost price or in many others. Cash discount attracts prompt payment. substitutes available in the market etc. the following pricing strategies are used in the export market: 1. Hence. No business is really expected to grow except feed back information. widening the market base. When no information is available on the extent of the competition or the likely preferences of the buyers. in order to make the local price of the product competitive. It aims at capturing the products in the market especially if the quality of the product is proved with its wide acceptance. 2. a very high introductory price is fixed to skim the cream of the demand at the very outset. supply position.

But still there should be some margin for negotiations as in many markets especially in under developed countries. E-marketing approaches: To accomplish their objectives. 6. Successful E-marketing requires good search engine marketing strategies. If a visitor clicks on the banner ad. Pop-ups become visible as under becomes visible only when the visitor accesses a web page. telephone equipment. the marketer’s name appears prominently at or near the top of the list. railway equipment and so on. The primary purpose of marketing an online business is the promotion of a good or service. sometimes a underneath the web page. or verticals. · Sponsorships: This is another common advertising approach on websites. it is desirable to keep a certain margin for the negotiations.6. Banners can be used to create brand recall or recognition. she/he is transported to the advertiser’s home page. Trade discount is a reduction in list price given to channel members in anticipation of a job they are going to perform. exporter quotes the standard price or list price that is one price for all. the visitor is sooner the web site is accessed and popvisitor closes the browser. This strategy is generally adopted in the export of capital goods i. Internet marketers use many approaches. This is the most used form of Internet promotion. The advertiser is given a permanent place on host’s website and pays a sponsorship fee to the host. When a visitor follows directed search. This strategy could be used for tractors. defense armaments. · Portal Use: Some portals give a prominent place to a company’s offer for a fee.” . E-marketing makes extensive use of the available tools for getting web users to purchase a product or service from a website.ensures ‘quick pay-back’. skyscrapers. Hence. This strategy is useful where only the supplier of the original equipment can supply standard spare parts. · Pop-up and Pop-under: When a window appears either in front or viewing. It can be effective only when the target customer is appropriate otherwise it becomes “junk mail. 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.e. Other names given to banners include side panels. plant and machinery. fixed prices may serve as a starting point for negotiation. E-MARKETING: E-marketing involves the marketing of products or services on the internet. Q. bargaining over prices is a part of life. 7. In such cases. Standard Export Pricing Strategy: In some cases. Write short notes on A. some of which include: · Banners: A banner ad is a boxed-in promotional message that often appears at the top of the web page. · E-mail: Companies send e-mails to Internet users to visit the company web site.

of course. they will need to look for partners to join them. The most typical joint venture is a 50/50 venture. including if one. agree on the terms of partnership such as who takes on what tasks. This is an approach to “push” a message to the consumers rather than wait for consumers to locate it.· Interstitials: These ads appear on the computer screen while a visitor is waiting for a site’s contents to download. · When a company has its partner(s) chosen. what they both earn from the business. Fuji-Xerox for example. A joint venture differs from a merger in the sense that there is no transfer of ownership in the deal. While forming a joint venture. or all of them want to exit the business. assets.A joint venture is a strategic alliance where two or more parties. Establishing a joint venture with a foreign firm has long been popular mode for entering a new market. a company should keep in mind the following: · Before a company forms a joint venture. · Every partner will have to agree on the type of structure that the business is to have. both. JOINT VENTURE. solutions to conflicts that may arise. knowledge. in which there are two parties. intellectual property. B. · Sales Promotions: Many companies effectively use sales promotions such as contests and sweepstakes to generate consumer interest. usually businesses. · Push Technologies: Some companies provide screen savers to its website visitors that allow the firms to directly “hook” the visitor to their websites. profits. each of which holds a 50 percent ownership stake and contributes a team of mangers to share operating control. and. . It can also occur between two small businesses that believe partnering will help them successfully fight their bigger competitors. form a partnership to share markets. was set up as a joint venture between Xerox and Fuji Photo.