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International Business Management

Unit 10

Unit 10

International Marketing

Structure: 10.1 Introduction Objectives 10.2 Scanning interntional markets 10.3 Mode of entering into potential 10.4 Global marketing strategies Segmentation Market positioning International product policy International pricing decisions Transfer pricing International advertising International promotion and distribution 10.5 Branding for international markets Valuation of brands Challenges of international branding 10.6 Summary 10.7 Glossary 10.8 Terminal questions 10.9 Answers 10.10 Case-let

10.1 Introduction
In the previous unit, we learnt about finance management at an international level. We learnt the differences between domestic and international financing. The unit also familiarised us with the components of international financial management and the scope of these components. International marketing refers to marketing of goods and products by companies overseas or across national borderlines. The techniques used while dealing overseas is an extension of the techniques used in the home country by the company.

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In this unit, you will cover all the aspects of international marketing like strategies, policies, valuation of brands and the different ways of circumventing the difficulties and challenges. Objectives: After studying this unit, you should be able to: describe international marketing process. understand scanning of interntional markets. discuss the process of entering into interntional markets. discuss global marketing strategies. explain branding for international markets. discuss the challenges of international branding.

10.2 Scanning Interntional Markets


The firms sustainable competitive advantages shall be based on the assessment and appraisal that how effectively such facets of competitive advances shall synchronise with key and important features of that market. Scanning the global markets as per the key competitive strength of the firm will be the key decision, as it will provide firm sustainable environment for growth expansion and diversification. It is difficult to analyse and generalise the factors which may be of help for the firm in an international market, but a reference can essentially be made to the following elements while arriving on decision to enter into that market for international trade. These elements of information are as follows:
Table: Factors governing decision criteria for getting started in international trade The decision element for getting started 1. The decision to go international or not Decision criteria Assessment of international market keeping in mind the competitive advantages and synergy with overall competitive strategy in light of local and international competition compared to domestic opportunities. Economy rate of growth and structure, bureaucracy, capital, economic and trading bloc, legal system, political regime and laws, regulation for investment and operations, political ideology and stability, type and structure of competition, etc. Page No. 199

2. Scanning the market

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3. Modes of entering into markets 4. Targeting the markets 5. Competition in international markets 6. Regulatory formalities for getting started

Political/legallaws, regulations, investment, climate, government ideology, stability. Competitiontype, structure, operations, strategy plans, programmes, acquisitions, mergers. Analysing various elements which define the nature of competition in target market. Formalities to be completed for getting export-import license, registration cum membership certificate, excise code, etc.

Source: Adapted from S. Carter, Global Agricultural Marketing Management

A major mistake which Indian firm usually make is that they try to replicate home success in international markets which is a laid back approach. The market fundamentals in the foreign market may be completely different from the home market, for example Indian prefer cheaper and cost effective product as they have low per capital income, while europeans prefer high quality durable product. Hence the comprehensive analysis of following aspect must be done while devising the firm competitive strategy for getting started in international trade in globalised era.
Table: Scanning information for decision to go international General information Economic Political Fiscal Social Technology Resources Institutions Managerial Specific information GDP growth, level of inflation, per capita income, disposable incomes Risk, instability, attitudes towards foreigners Taxes, exchange rates, financial architecture, current account deficit People, demographics, culture, subculture, pressure groups, interest groups Current technological stage, rate of change, available infrastructure for research and innovation Money, manpower, materials, acquisitions, joint ventures Capital and money markets, regulation for accessing capital Skilled manpower, management practices, etc.

Source: Adapted from, S. Carter, Global Agricultural Marketing Management

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An organisation aspiring to get started in international marketing should address, appraise and analyse the issues in advance in a careful and comprehensive way. The success in international marketing largely depends on the fact that firm shall exploit its opportunities handsomely, use its strengths smartly and address and improve its weakness patiently which may come on its way. While scanning the international markets, the firms shall properly study all the aspects of economic data which may be specific or general or both and can be effectively used for making decisions on whether to enter markets or not. Such data analysis can also help the firm to understand the various aspects of risks and can guide in the degree of its engagement in that market. The general and specific information which can be of use is as follows:
Table: Specific information to be scanned for getting started in international marketing 1. Market information Marketing decision statistics and potential of market Physical features of target market Kind of channels of distribution Availability, effectiveness and cost of media for accessing buyers Resources need for doing business Economic factors Attitudes and behavior of consumers, disposable income, per capita income, size of family, purchase frequency. Available infrastructure, communication facilities, money markets, banks, etc. Their type, availability, effectiveness and cost factors influencing distribution channel. Various information sources, quality, availability and cost factors in media, such as newspaper, television, telecommunication, internet cost, etc. Money, manpower, materials, their availability, cost, quality, development. Rate of economic growth, economy structure, i.e. share of agriculture, manufacturing and services, competitiveness and conduct, capital adequacy, economic blocsand regional integration. Role of cartel, trade practices, inflation rates. Customs, culture, attitudes, preferences for products and services. Legislation governing business and trade, such as rules, regulations acts and overall laws friendliness with business, investment climate, government and Page No. 201

2. Overall business environments

Social factors Political/legal factors

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opposition ideology on trade and investment, political stability. Technological factors Competition factors Trading partner and their role in target market Management capability State funding for research and innovation, trends development in country research. Type, structure, operations, strategy plans, programme, acquisitions, mergers. Trade openness, trade propensity, regional intensity and orientation, trade intensity product and market diversification. Country diplomatic reach and activeness foreign embassies, role of NGOs and other developmental thrust. Quotas, tariffs and non tariff barriers, various duties, SPS and technical barriers to trade. Fiscal and current account deficit, trade balance, balance of payments, foreign exchange reserves, interest rates, ease in accessing funds. Investors, economic STS, bankers, business people. Legislation governing foreign exchange, rigidity issues, exchange rate system, i.e. free float, managed float, dirty float, fixed float and frequency of regulatory interference. Legislation governing the trade and business incentives, dividends tax rules, earnings, repatriation of profits. Level of developed, stage of maturity. IMF or world bank and their effect on county economic policy.

3. Financial factors Market access issues Monetary and fiscal policy Expectations of players Commodity exchanges

Taxes

Spot forward market Intervention by outside bodies

Source: Adapted from, S. Carter, Global Agricultural Marketing Management

The important guiding factors in analysing the specific information while selecting international markets,is the demographic features of the markets, such as consumer attitudes towards products, consumer behavior, disposable income and per capita income. Cultural aspects like the design of the product as per local requirements and needs. The physical and natural features of the country, such as its climate, environment, topography, seasons and issues involved in working under such circumstances are also of prime importance as it helps the marketer to calculate the various cost involved in doing business in that country.
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Activity 1 How can one find out the data for the potential markets for export and import? Hint: www.trademap.org

10.3 Mode of entering into potential markets


Having scanned the best potential international markets which meet the corporate competitiveness criteria of the firm, it has to evaluate the most profitable way of market entry so as to sell its products and services to potential customers in these markets. There are several methods used in globalised era for international market entry, such as exporting, franchising, licensing, joint venture and wholly owned subsidiary. The entry method suitable to firm requirement shall depend on a variety of factors, such as the nature of firm product or service, the conditions for market penetration, entry and exit barriers and financial commitment required for getting into international markets. Exporting, which is widely used for the first time traders is accomplished by selling the products or services directly to a foreign firm or customer. Alternatively, firm can export through an export intermediary, such as a commissioned agent, an export management company or a trading company. International joint ventures are very effective means of entry into potential markets as it provides the firm to share domestic knowledge with the aligned firm and can use partner strengths effectively and hedge its risks. Joint ventures are good means for market entry in those markets where there are entry barriers like capital limit requirement. Licensing, another wieldy used method by firm getting started involves a contractual agreement whereby firm assign the rights to distribute or manufacture its product or service to a foreign company. Wholly owned subsidiary requires either setting up its own production or manufacturing facility or subcontracting the manufacturing of its product to an assembly operator, such as Coca Cola which uses fobo method for bottling in india.

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Table: Comparison of foreign market entry modes Sl. no. 1. Mode Factors favoring the entry mode in target market Advantages Disadvantage s 1. Trade barriers and tariffs and other cost make products and services uncompetiti ve. 2. In case of far away market, transport, packaging and logistics costs put additional burden. 3. Problems in accessing the local market information. 4. Firm is viewed and regarded as an alien and outsider.

Exporting

1. Opportunities for limited sales in the target country. 2. Chances for little product, new product and adaptation. 3. Distribution 1. Minimises the channels are potential risk in usually close trade as firms to need not invest manufacturing in target market. sites. 2. Ease in market 4. Economies of entry scale cannot 3. Better utilisation be attained in of production production and facility and logistics, resources. hence high production cost in domestic market Liberal import policies of target country. 5. High political risk in target country. 1. Firms are facing import control and investment barriers for entry. 2. Country provides protection to domestic industry and

2.

Licensing

1. Licensing 1. In licensing, minimises risk firm lack and investment the control of licensor, i.e. of market exporter. and use of assets in 2. Ensures speed target in entering the market. target market. 2. Sometimes, 3. Licensing help licensee in circumventing becomes the various Page No. 204

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allows foreign firms through licensing or franchising only. 3. If the firms foresee low sales potential in target market. 4. If the firms foresee large cultural distance in potential market. 5. Firm foresee that licensee lacks ability to become a potential competitor in future.

trade barriers 4. Licensing offers higher return on investments as investment from firms is virtually zero as product technology offering.

potential competitor. 3. When we give license to other companies we have share our technical know how and R&D with them This results in proliferation as the licensee may use the knowledge for other purpose. 4. Usually, the license period is limited and offsets firms chances for long term flows of profits.

3.

Joint ventures

1. When there are import barriers in target market. 2. When firm have large cultural distance from target markets and its way of functioning. 3. Firms itself can employ all resources needed to tap

1. This method 1. Joint overcomes the ventures problem of are prone ownership to disputes restrictions and and are cultural distance difficult to in target manage as markets. power and authority is 2. Joint venture diluted. helps in combining the 2. It is tough resources of to control foreign and local the companies. administrative, 3. Joint ventures Page No. 205

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market. provide chances strategic for learning from and 4. Country partner. operational prescribes decisions. certain percent 4. Firm is viewed of equity and regarded as 3. Joint participation. insider ventures has higher 5. There are 5. Firm require risk potential less finances as exposure chances of local firm also than some political contribute. exporting risk and and expropriation. licensing 6. A local partner 4. Firms is better in technical distribution and knowledge, scientific technical skills, knowledge natural get resources, spilledover brand name, to local etc. partners and they may eventually become competitor for the firm. 4. Wholly owned subsidiary 1. High import barriers in firms and foreign ownership is allowed. 2. There is little cultural distance in target country. 3. The firm has good sales potential in target market. 4. There is low political risk for the firm. 1. Firm has good 1. This knowledge of method has local market and greater risk accordingly than other devise modes of strategies. entry. 2. Firm can apply 2. It requires specialised skills more in good manner. financial and non 3. Chances of financial know-how resources proliferation get and minimised. commitmen 4. The firm is t from firm. viewed as an 3. It is insider. possible that firm could not Page No. 206

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manage the local resources due to change in working conditions and technology. Source: Adapted from James Foley. The global entrepreneur: Taking your business international

1. Exporting Of the various methods of foreign market entry, exporting is most commonly used by small and first time businesses as exporting involves limited startup costs and risks and profit under this method can be realised as early as firm gets started. The most advantageous aspect of market entry through exporting is that it involves minimal preliminary expenditures except some which incur on market research and product promotion. Getting through export into international market can be by two basic ways, namely: a. Direct export. b. Indirect export. The direct exporting requires the firm/company to find a potential foreign buyer and then the firm is supposed to make all necessary arrangements for transporting the products into destined market. The firms which cannot locate the direct buyers for the product can export indirectly by using an export intermediary. Several types of export intermediaries whom the firm can use are as follows. a. commissioned agents. b. export management companies (EMCS). c. export trading companies (ETCS). d. foreign trading companies. e. export merchants/export agents/buying houses. f. piggyback exporting. 2. Licensing Licensing is also an easy, risk free and costless method to enter into international markets. Licensing operate in a way that it permits another
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company in the target country to use its property as a licensee and in exchange, pays a fee or royalty on sales so incurred. The property of licensor is intangible, such as trademarks, patents, copy rights, technical know-how and production techniques. The licensee has to pay the fee in exchange for the rights to use the intangible property as granted by the licensor. Licensing is very preferred way of market entry into international market in globalised era as it requires little investment on the part of the licensor. Licensing, if effectively used as an entry mode, has the potential to provide good return to the licensor, but usually it has been seen that licensee who produces and markets the product takes away returns from manufacturing and marketing activities due to vague regulatory law in developing countries. 3. Joint ventures Joint ventures are market entry options whereby firm and another company or firm in target market may join together to form a new incorporated company for business operations in that market. In joint ventures, both the parties are supposed to provide capital and resources in the agreed proportion and accordingly they will represent and share profits and loses. Such mode of entry is popular in countries where there are restrictions on foreign ownership. For example Venezuela, China, Vietnam. Joint venture is also a preferred way of market entry as it is good tradeoff between potential risks and returns and usually joint ventures is manifested with the following common objectives for market entry in globalised era. They are: a. Market entry into potential market. b. Risk/reward sharing between parties. c. Technology sharing between parties. d. Joint product development between parties. e. Conforming to government regulations. f. Possible advantages from political connections.

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Following are advantages and disadvantages of joint ventures: Advantages of joint ventures 1. Helps to acquire new competencies or skills which are not domestically available. 2. Helps in quick penetration of the market and also helpful in rapid implementation of technological change. 3. Reducing the firm risks by sharing it with one or more than one firms. 4. Helpful in easy and faster entry into target market and also enable quick payback. 5. Pooling of firm resources, such as capital, technical know-how and manpower with partner firms. 6. Help in avoiding the tariff barriers and non tariff barriers. 7. Helpful in satisfying local content requirements due to partnering with local firm. Disadvantages of joint ventures 1. Lack of full control on management of the firm. 2. Sharing of profit may make it impossible to recover capital invested. 3. Potential risk of disagreement with partner organisation on exploring new markets, new operations, etc. 4. Blocking firm chances of other joint ventures as existing partners may have different views. 5. Fear in partner mind that other may not take unwanted advantage out of existing operations.

Source: Adapted from about exporting, Austrade 2008

4. Wholly Owned Subsidiary (WOS) Wholly owned subsidiary, as the name suggest, is the direct ownership of production facilities in the potential international market. It requires a long term commitment on the part of firm as it involves transfer of resources, such as capital, technology and personnel to the potential market. Wholly owned subsidiary can also be made through the acquisition of an existing firm or the establishment in the target market. WOS has several advantages as it provides high degree of administrative control in the business operations of the firm and the firm has better chances to understand and analyse the consumers and competitive environment in the target market.

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On the other hand, such entry strategy requires a high level of physical and capital resources to run the business in the target market. Activity 2 What can be the best possible way for entering into China and India for getting started in business? Which method of entry will be suitable? Hint: Read the case drivers of success for market entry into china and india at weblink www.bus.miami.edu Self Assessment Questions 1 1. For a firm to be successful internationally, it is not necessary to be successful locally. (true/false) 2. Culture of a country influences the marketing strategy of the firm. (true/false) 3. _________________ involves a firm, shipping goods directly to a foreign market. 4. Direct investment involves ________________ in the overseas market. 5. A joint venture is an understanding between a. Two or more firms. b. Two or more countries. c. The firm and its subsidiary. d. two or more parties. Activity 1 Find out few countries where direct foreign investment is not entertained. Hint: China, Saudi Arabia.

10.4 Global Marketing Strategies


After getting an overview of international marketing, we shall now discuss the strategies followed in global marketing. Taking into account the various conditions on which markets vary and depend, appropriate marketing strategies should be devised and adopted. Some countries prevent foreign firms from entering into its market space through protective legislation. Protectionism on the long run results in
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inefficiency of local firms as it is inept towards competition from foreign firms and other technological advancements. It also increases the living costs and protects inefficient domestic firms. To counter this scenario, firms must learn how to enter foreign markets and increase their global competitiveness. Firms that plan to do business in foreign land find the marketplace different from the domestic one. Market sizes, customer preferences and marketing practices all vary, therefore the firms planning to venture abroad must analyse all segments of the market in which they expect to compete. The decision of a firm to compete internationally is strategic; it will have an effect on the firm, including its management and operations locally. The decision of a firm to compete in foreign markets has many reasons. Some firms go abroad as the result of potential opportunities to exploit the market and grow globally. And for some it is a policy driven decision to globalise and to take advantage by pressurising competitors. But, the decision to compete abroad is always a strategic down to business decision rather than simply a reaction. Strategic reasons for global expansion are: Diversifying markets that provide opportunistic global market development. Following customers abroad (customer satisfaction). Exploiting different economic growth rates. Pursuing a global logic or imperative to harvest new markets and profits. Pursuing geographic diversification. Globalising for defensive reasons. Exploiting product life cycle differences (technology). Pursuing potential abroad. Likewise, there can be other reasons like competition at home, tax structures, comparative advantage, economic trends, demographic conditions and the stage in the product life cycle. In order to succeed, a firm should carefully look at their geographic expansion and global marketing strategy. To a certain extent, a firm makes a decision about its extent of globalisation by taking a stance that may span from entirely domestic to a global reach where the company devotes its entire marketing strategy to
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global competition. In the process of developing an international marketing strategy, the firm may decide to do business in its home-country (domestic operations) only or host-country (foreign country) only. 10.4.1 Segmentation Firms that serve global markets can be segregated into several clusters based on their similarities. Each such cluster is termed as a segment. Segmentation helps the firms to serve the markets in an improved way. Markets can be segmented into nine categories, but the most common method of segmentation is on the basis of individual characteristics, which include the behavioural, psychographic and demographic segmentations. The basis of behavioural segmentation is the general behavioural aspects of the customers. Demographic segmentation considers the factors like age, culture, income, education and gender. Psychographic segmentation takes into accountbeliefs, values, attitudes, personalities, opinions, lifestyles and so on. Once you are done with the segmentation of market, you can choose one or more segments to carry out trade. This process of selecting or choosing the potential market segment is known as targeting. The three basic criteria for targeting are potential competition, the current size and growth rate of the market and compatibility and feasibility. After the target market has been ascertained, firms should select a global marketing strategy. Marketing in less developed countries offers several advantages to organisations. They can take advantage of the huge unexploited markets and avail tax benefits. By focusing on less-developed countries, firms can increase their market share and become market leaders. Less-developed countries usually offer special benefits for the firms who are willing to establish their operations in their countries. Thus, for firms marketing at a global level, less-developed countries provide them with advantage. 10.4.2 Market positioning The next step in the marketing process is, the firms should position their product in the global market. Product positioning is the process of creating a favourable image of the product against the competitor's products. In global markets, product positioning is categorised as high-tech or high touch positioning. The classification of high-tech and high-touch products is shown in figure 8.1.
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The classification of high-touch products is shown in figure 8.2.

Figure 10.1: classification of high-tech and high-touch products

One challenge that firms face is to make a tradeoff between adjusting their products to the specific demands of a country and gaining advantage of standardisation, such as the maintenance of a consistent global brand image and cost savings. 10.4.3 International product policy Some theorists of the industry feel that there is a difference between conventional products and services, stressing on service characteristics, such as heterogeneity (variation in standards among providers and different locations of the same firm), inseparability from consumption, intangibility and perishability. Typically, products are composed of some service component like documentation, warranty and distribution. These service components are an integral part of the product and its positioning. We often think of a product in terms of fulfilling the need of our own culture. However, the functions served by that product may be very different in other cultures, for example cars play a large transportation role in the U.S., but they are impractical to drive in Japan and thus, there cars are used for individual indulgence or act as a status symbol. Thus, it is important to consider the findings of marketing research and determine customers desires, motives and expectations in buying a product. Firms have a choice in marketing their products across markets. Many a times firms opt for a strategy which involves customisation through which the firm introduces a unique product in each country. On the other hand,
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standardisation proposes the marketing of one global product with the belief that the same product can be sold in different countries without significant changes. For example intel microprocessors are the same irrespective of the country in which they are sold. Finally, in most cases, firms will go for some kind of adaptation. When moving a product between markets, minor modifications are made to the product. For example in the U.S., fuel is relatively cheap, therefore cars have larger engines than the cars in Asia and Europe. 10.4.4 International pricing decisions Pricing is the process of ascertaining the value for the product or service that will be offered for sale. In international markets, various factors like different currencies, greater distances and barriers to trade make the pricing decisions more difficult. It is vital to analyse the target market before establishing the price. It is also to be in line with firms objective. Their could be pricing objectives like return on investments, profit, market share, quality of product or sometimes existence itself. The strategies for international pricing can be classified into the following three types: Market penetration: It is the technique of selling a new product at a lower price than the current market price. Market holding: It is a strategy to maintain buy orders in order to maintain stability in a downward trend. Market skimming: It is a pricing strategy where price of the goods are set high initially to skim the revenue from the market layer by layer. The factors that influence pricing decisions are inflation, devaluation and revaluation, nature of product or industry and competitive behaviour, market demand and transfer pricing. There could be various approaches of company towards pricing when working in international markets ethnocentric, polycentric and geocentric. A company following an ethnocentric approach will maintain the same price throughout the world. In the polycentric approach, the regional managers of the company are allowed to decide on product prices depending upon the situations in which they are operating. While in the geocentric approach, the company takes a middle position and decides on a price somewhere
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between global price and subsidiary requirement. Price can be defined by the following equation:

Price

Resource given up Goods received

The pricing decision enables us to change the price in many ways, some of them are: Sticker price changes The simplest way of changing the price is by changing the price tag. By doing this, you are going to get the same thing, but for a different amount. Change quantity When sticker prices are increased, the response of consumers is unfavourable and usually changes in quantity are noticed less. Change quality Another way to effectively increase profit is through reducing the quality of the product. Change terms For a firm it is a possible to save money by altering the terms of operations or transactions with consumers. For example earlier most software manufacturers provided free support for their programmes but now services are being charged. 10.4.5 Transfer pricing Transfer pricing is the process of setting a price for inter unit sale of goods or services of a firm. Transfer pricing is an important issue for a firm having global operations. It is determined in three ways Market based pricing, transfer at cost and cost-plus pricing. For transfer pricing, arms length pricing rule is used. Transfer pricing can also be defined as the rates or prices that are utilised when selling goods or services between a parent company and a subsidiary or company divisions and departments that may be across many countries. The price that is set for the exchange in the process of transfer pricing may be a rate that is reduced due to internal depreciation or the original purchase price of the goods in question. When properly used, transfer pricing helps to efficiently manage the ratio of profit and loss within the company. Transfer pricing assists in saving the organisations tax by shifting accounting profits from high tax to low tax jurisdictions. It also enables to fix transfer price on a non-market basis and thus enables to save tax. This
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method facilitates in moving the tax revenues of one country to another. A similar trend can be observed in domestic markets where different states try to attract investment by reducing the sales tax rates and this leads in an outflow from one state to another. Therefore, the government is trying to implement a taxing system in order to curb tax evasion. 10.4.6 International advertising International advertising is usually associated with using the same brand name all over the world. However, a firm can use different brand names for historic reasons. The acquisition of local firms by global players has resulted in a number of local brands. A firm may find it unfavourable to change those names as these local brands have their own distinctive market. Therefore, the company may want to come up with a certain advertising approach or theme that has been developed as a result of extensive global customer research. Global advertising themes are advisable for marketing across the world with customers having similar tastes. The purpose of international advertising is to reach and communicate to target audiences in more than one country. The target audience differ from country to country in terms of the response towards humour or emotional appeals, perception or interpretation of symbols and stimuli and level of literacy. Sometimes, globalised firms use the same advertising agencies and centralise the advertising decisions and budgets. In other cases, local subsidiaries handle their budget, resulting in greater use of local advertising agencies. International advertising can be thought of as a communication process that transpires in multiple cultures that vary in terms of communication styles, values and consumption patterns. International advertising is a business activity and not just a communication process. It involves advertisers and advertising agencies that create advertisements and buy media in different countries. This industry is growing worldwide. International advertising is also considered as a major force that mirrors both social values and propagates certain values worldwide. 10.4.7 International promotion and distribution Distribution of goods from manufacturer to the end user is an important aspect of business. Companies have their own ways of distribution. Some companies directly perform the distribution service by contacting others,
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whereas a few companies take help from other companies who perform the distribution services. The distribution services include: The purchase of goods. The assembly of an attractive assortment of goods. Holding stocks. Promoting sale of goods to the customer. The physical movement of goods. In international marketing, companies usually take the advantage of other countries for the distribution of their products. The selection of distribution channel is helpful to gain the competitive advantage. The distribution channel is also dependent on the way to manage and control the channel. Selecting the distribution channel is very important for agents and distributors. In order to reach its target markets, a company utilises a combination of sales promotion, personal selling, advertising and public relations, which is collectively called as promotion. Advertising is a non-personal form of communication about an organisation or its products that is propagated to a target audience through a broadcast medium. A firm can focus on a small, clearly defined market segment by employing this type of promotion. This promotional method is also cost efficient. A large number of prospective customers can be reached at a minimal cost per person. The activity of catching the attention of prospects is known as sales promotion. It involves activities and materials that are meant to attract customers. One motive of promotion is to gain a competitive edge, other is to concentrate on this method as it provides quick return. The consumers also look forward for sales promotions before purchasing a product. People interested in a particular industry can be brought together by organising overseas product exhibitions. These events have the potential to attract important visitors, such as distributors, agents, journalists, potential customers, politicians and competitors. These events also provide us with an ideal opportunity to get attention.

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Self Assessment Questions 2 6. Firms that serve global markets cannot be segregated into several clusters based on their similarities. (True/False) 7. Advertising is a paid form of ______________ communication about an organisation or its products. 8. Promotional mix is a blend of advertising, personal selling, sales promotion and ___________. 9. Globalised advertising is associated with the use of the same ______ name across the world. 10. Transfer pricing is considered to be a relatively simple method of moving goods and services among the overall corporate family. (true/false) 11. __________ is the process of ascertaining the value for the product or service. Activity 2 Find out the stages in the process of international promotions and distributions of a multinational company. Hint: http:// www. Ehow. Com /list _ 6781615_ examples - advertisingtrade-show- exhibitions.html

10.5 Branding for International Markets


Global marketing strategies provide techniques and methods to sell a product. Once the product is sold, the image of the product has to be maintained. We will discuss about this branding here in this section. With the spread of markets and the increase in competition on a global scale, firms are expanding their operations overseas either through investments or acquiring firms in other countries. Firms are also entering into strategic alliances with firms in other countries or exporting directly or indirectly to target countries. At the same time markets are getting more integrated due to the spread of media, the expansion of international retailers and the mobility of people, goods and firms across national borders. To respond to this global market, international firms need to have coordinated and integrated international branding strategy in place.

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International branding is different from marketing in domestic markets in a number of ways. The macro-marketing environment, such as legal, cultural, technological and economic aspects in which a firm operates in the overseas market is different. The intended audience must be considered while developing an intraorganisational marketing communication strategy. A successful promotional strategy is one which is communicated clearly and distributed thoroughly to their intended audience. In addition, it is important to ensure that consistent branding and non-contradictory messages are eliminated. 10.5.1 Valuation of brands Brand value can be defined as the branding efforts that build customer confidence and loyalty by adding unique advantages to the firms product or service. The concept of brand value surpasses the concepts of tangible product and basic brand. This facet of brand value distinguishes a brand from a product. The three levels of brand value are: Core functionality. Emotional values. Added value services. The core functionality deals with the core physical product and its features., Emotional value is characterised by the intangible aspects of a brand that fits the psychological profile of the target customer. Added values concentrate on bringing in extra futures and are critical to the brand which would enhance the usage of the brand for the customers. 10.5.2 Challenges of international branding A challenge to international branding is to maintain a balance between being global and being local. Brand ideas, values and concepts have to remain the same, but the methods to communicate them and to make them familiar to customers have to vary. Brand values and ideas can principally be same, but the propagating methods cannot. The task of building a strong brand is hard and complicated. The firm has to honour the promises made by the marketing theme. Two conflicting challenges an international brand has to face is to remain easily recognised at any global location and simultaneously should be able to blend with the local culture, traditions and customers' way of perception.
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In the international branding process, the challenges increase many fold. Therefore, the process of building a strong brand is a complicated and challenging task. Self Assessment Questions 3 12. Brand value builds customer confidence and loyalty. (true/false) 13. International branding is all about differentiating between being global and being local. (true/false) 14. The task of building a brand is: A) Complicated. B) Easy. C) Critical. D) Moderate.

10.6 Summary
Let us summarise the points covered in this unit about international marketing: Selling a product involves considering the need of the customers. In order to build the customer base, the firms have to take up an advertising activity. Firms, both global and local have to advertise their products in order to inform the customers about the benefits and features of the product. International marketing or advertising differs from domestic or local marketing as the communication process is across cultures, geographic conditions and tastes and preferences of the people. A firm has to develop global marketing strategies in order to deal with protectionism. The goal of a firm to move to a foreign country is to exploit the market there. The different approaches for global marketing are segmentation, market positioning, branding, promotions, competitive pricing and so on. Segmentation is the process of dividing the market into clusters and then positioning the product with respect to the segment and target audience. The pricing decision has to be competitive as there could be local firms competing.

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10.7 Glossary
Arms length pricing rule: This is defined as the price a buyer is willing to pay for an identical item under identical terms and conditions. Foreign investment: It is the long term participation of a firm in a foreign country to do business. Non-current asset: It is an asset that will not convert to cash within the next year. Piggyback exporting: Practice of a foreign seller representing complementary, non-competing lines. Here an exporter is using another exporter as an intermediary

10.8 Terminal Questions


1. Discuss the process of scnanning the gloal markets for interntional marketing opportunities. 2. Elaborate the various methods of entering into interntional markets. 3. Write a short note on two of the following: a. Joint ventuers. b. Licensing. c. Wholly owned subsidiary. d. Direct exporting. 4. Write a note on global marketing strategies. 5. What is transfer pricing? 6. What are the factors considered while branding a product or service in an international market?

10.9 Answers
Self Assessment Questions 1 1. False 2. True 3. Exporting 4. Manufacturing 5. a) two or more firms

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Self Assessment Questions 2 6. False 7. Non-personal 8. Public relations 9. Brand 10. True 11. Pricing Self Assessment Questions 3 12. True 13. False 14. A) Complicated Terminal Questions 1. International marketing is different from domestic marketing in a sense that the customer preferences and tastes are not known. There are cultural differences and other issues. These are explained in sub-section 8.2.1. Refer the same for details. 2. Different global marketing strategies are market segmentation, market positioning, advertising and so on. These are explained in section 8.3. Refer the same for details. 3. Transfer pricing is usually used by companies to reduce the tax levied on them. This is explained in sub-section 8.3.4.1. Refer the same for details. 4. Branding must not have contradictory messages, the intended audience must always be kept in mind. The branding process is a complicated task. These are explained in section 8.4. Refer the same for details.

10.10 Caselet
Flatbread goes around the world ABC Ltd. is located near El Mante, Mexico and produces corn flour and other flour products which it processes into tortillas and related snacks for markets worldwide. Its brand names include X, Y and Z. Its customers include supermarkets, mass merchandisers, smaller independent stores,
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restaurant chains, food service distributors and schools. The company was established in 1949. In the early 1970s, ABC Ltd. introduced its product on the central american markets, specifically in Costa Rica. In 1976, it expanded to the United States and in 1987 it began expanding its operations across the globe, opening plants in Honduras, El Salvador, Guatemala and Venezuela. It now has plants in Europe and most recently China. The Asian market presents a very exciting development for ABC Ltd. The company established their presence on continental China in the first instance and then gradually expanded their penetration of markets across Asia to the middle east. It has already established distributorships in Japan, Korea, Singapore, Hong Kong, Thailand, the Philippines, Taiwan and India. How has a mexican company with a niche food product like corn flour succeed so well in international markets? The answer is that the firm has focused on emerging markets which follows the same path of development. In these emerging markets, the customer demand is predictable as it follows a pattern and this is evident in every major economic segment. What ABC Ltd. is following in their international expansion is the tried and tested method of leveraging the similarities across from market to market and growing their company accordingly. The root of the success of ABC Ltd. has been their ability to observe the life cycle of emerging markets around the world and expertly time their entry into these markets. However, the other key factor has been their ability to adapt their products to local market tastes. Their key competitive advantage in international markets is based not on their product, but the ability to roll any kind of flour from rice to corn to wheat into viable flatbread. In India, many people eat a flatbread made form wheat called naan, but do not eat corn tortillas. So, ABC Ltd. plans to sell corn tortillas in India. The Chinese do not eat many corn tortillas, but they buy wraps made by ABC Ltd. for Peking duck. Also follows a policy of deploying a senior beachhead team to enter the new market in which they are building a presence. In China, the beachhead team had enhanced their skills through many years of experience in Latin America and was already
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primed to develop the necessary market insights to feed into their marketing campaign. some of the observed trends in China are decrease in home cooking among dual-career couples, increase in the number of fast food chains, increase in cold storage refrigeration in supermarkets and rapid improvements in the logistics and distribution channels were all utilised in thinking through the ABC Ltd. market-building strategy in China. Discussion question 1. Evaluate the reasons behind the success of abc ltd. (Hint: focusing on emerging markets) Source: http://estore.bized.co.uk/freecontent/300081f9.pdf References: Colin Gilligan, Martin Hird (1986). International marketing: Strategy and Management. Kumar N (2002). International marketing, first edition. Anmol publication. Roger Bennett, Jim Blythe (2002). International marketing: Strategy planning, market entry. Sean De Burca, Richard Fletcher And Linden Brown (2004), international marketing: an SME perspective, London: Ft - Prentice Hall. Michael R. Czinkota, Ilkka A. Ronkainen.(2001), International marketing, Fort Worth; London: Harcourt college publishers. Vern Terpstra, Ravi Sarathy (2000), international marketing, Dryden press. Michael R. Czinkota, best practices in international marketing, the Harcourt college publishers series in marketing.

E-References: Http://www.consumerpsychologist.com/international_marketing.html, retrieved on 2nd November, 2010 Http://www.slideshare.net/chanvich/international-pricing-decisions-forupload, retrieved on 31st October 2010

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