You are on page 1of 26

International marketing (IM) or global marketing refers to marketing carried out by companies overseas or across national borderlines.

This strategy uses an extension of the techniques used in the home country of a firm.It refers to the firmlevel marketing practices across the border including market identification and targeting, entry mode selection, marketing mix, and strategic decisions to compete in international markets. According to the American Marketing Association (AMA) "international marketing is the multinational process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives." In contrast to the definition of marketing only the word multinational has been added.In simple words international marketing is the application of marketing principles to across national boundaries. However, there is a crossover between what is commonly expressed as international marketing and global marketing, which is a similar term. Introduction to International Marketing International marketing is simply the application of marketing principles to more than one country. However, there is a crossover between what is commonly expressed as international marketing and global marketing, which is a similar term. For the purposes of this lesson on international marketing and those that follow it, international marketing and global marketing are interchangeable. The intersection is the result of the process of internationalization . Many American and European authors see international marketing as a simple extension of exporting, whereby the marketing mix 4P's is simply adapted in some way to take into account differences in consumers and segments. It then follows that global marketing takes a more standardised approach to world markets and focuses upon sameness, in other words the similarities in consumers and segments. DEFINITION OF INTERNATIONAL MARKETING International Marketing can be defined as exchange of goods and services between different national markets involving buyers and sellers. According to the American Marketing Association, International Marketing is the multi-national process of planning and executing the conception, prices, promotion and distribution of ideal goods and services to create exchanges that satisfy the individual and organizational objectives.

CONCEPTS OF INTERNATIONAL MARKETING

Domestic Marketing: Domestic Marketing is concerned with marketing practices within the marketers home country. II. Foreign Marketing: It refers to domestic marketing within the foreign country. III. Comparative Marketing: when two or more marketing systems are studied, the subject of study is known as comparative marketing. In such a study, both similarities and dis-similarities are identified. It involves an analytical comparison of marketing methods practiced in different countries. IV. International Marketing: It is concerned with the micro aspects of a market and takes the company as a unit of analysis. The purpose is to find out as to why and how a product succeeds or fails in a foreign country and how marketing efforts influence the results of international marketing. V. International Trade: International Trade is concerned with flow of goods and services between the countries. The purpose is to study how monetary and commercial conditions influence balance of payments and resource transfer of countries involved. It provides a macro view of the market, national and international. VI. Global Marketing: Global Marketing consider the world as a whole as the theatre of operation. The purpose of global marketing is to learn to recognize the extent to which marketing plans and programmes can be extended world wide and the extent to which they must be adopted. DIFFERENCE BETWEEN DOMESTIC MARKETING AND INTERNATIONAL MARKETING Marketing is the process of focusing the resources and objectives of an organisation on environmental opportunities and needs. It is a universal discipline. However, markets and customers are different and hence the practice of marketing should be fine tuned and adjusted to the local conditions of a given country. The marketing man must understand that each person is different and so also each country which means that both experience and techniques obtained and successful in one country or countries. Every country has a different set of customers and even within a country there are different sub-sets of customers, distribution channels and media are different. If that is so, for each country there must be a unique marketing plan. For instance, nestle tried to transfer its successful four flavour coffee from Europe to the united states lost a 1% market share in the us. It is important in international marketing to recognize the extent to which marketing plans and programmes can be extended to the world and the extent to which marketing plans must be adapted. Prof.Theodore Levitt thought that the global village or the world as a whole was a homogeneous entity from the marketing point of view. He advocated organisation to develop standardized high quality word products and market them around the world

using standardized advertising, pricing and distribution. The companies who followed Prof. Levitts prescription had to fail and a notable failure amongst them was Parker pen. Carl Spiel Vogel, Chairman and CEO of the Backer Spiel Vogel Bates worldwide advertising agency expressed his view that Levitts idea of a homogeneous world is non sensible and the global success of Coca Cola proved that Prof. Levitt was wrong. The success of Coca Cola was not based on total standardization of marketing mix. According to Kenichi Ohmae, Coke succeeded in Japan because the company spent a huge amount of time and money in Japan to become an insider. Coca Cola build a complete local infrastructure with its sales force and vending machine operations. According to Ohmae, Cokes success in Japan was due to the ability of the company to achieve global localisation or Glocalisation i.e. the ability to be an insider or a local company and still reap the benefits of global operations. Think global and act local is the meaning of Glocalisation and to be successful in international marketing, companies must have the ability to think global and act local. International marketing requires managers to behave both globally and locally simultaneously by responding to similarities and dissimilarities in international markets. Glocalisation can be a source of competitive advantage. By adapting sales promotion, distribution and customer service to local needs, Coke capture 78% of soft drink market share in Japan. Apart from the flagship brand Coca Cola, the company produces 200 other non- alcoholic beverages to suit local beverages. There are other companies who have created strong international brands through international marketing. For instance, Philip Morris has made Marlboro the number one cigarette brand in the world. In automobiles, Daimler Chrysler gained global recognition for its Mercedes brand like his competitor Bayerische. Mc Donalds has designed a restaurant system that can be set up anywhere in the world. Mc Donalds customizes its menu in accordance with local eating habits.

SCOPE OF INTERNATIONAL MARKETING International Marketing constitutes the following areas of business:Exports and Imports: International trade can be a good beginning to venture into international marketing. By developing international markets for domestically produced goods and services a company can reduce the risk of operating internationally, gain adequate experience and then go on to set up manufacturing and marketing facilities abroad. Contractual Agreements: Patent licensing, turn key operations, co production, technical and managerial know how and licensing agreements are all a part of international marketing. Licensing includes a number of contractual agreements

whereby intangible assets such as patents, trade secrets, know how, trade marks and brand names are made available to foreign firms in return for a fee. Joint Ventures: A form of collaborative association for a considerable period is known as joint venture. A joint venture comes into existence when a foreign investor acquires interest in a local company and vice versa or when overseas and local firms jointly form a new firm. In countries where fully owned firms are not allowed to operate, joint venture is the alternative. Wholly owned manufacturing: A company with long term interest in a foreign market may establish fully owned manufacturing facilities. Factors like trade barriers, cost differences, government policies etc. encourage the setting up of production facilities in foreign markets. Manufacturing abroad provides the firm with total control over quality and production. Contract manufacturing: When a firm enters into a contract with other firm in foreign country to manufacture assembles the products and retains product marketing with itself, it is known as contract manufacturing. Contract manufacturing has important advantages such as low risk, low cost and easy exit. Management contracting: Under a management contract the supplier brings a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership. Third country location: When there is no commercial transactions between two countries due to various reasons, firm which wants to enter into the market of another nation, will have to operate from a third country base. For instance, Taiwans entry into china through bases in Hong Kong. Mergers and Acquisitions: Mergers and Acquisitions provide access to markets, distribution network, new technology and patent rights. It also reduces the level of competition for firms which either merge or acquires. Strategic alliances: A firm is able to improve the long term competitive advantage by forming a strategic alliance with its competitors. The objective of a strategic alliance is to leverage critical capabilities, increase the flow of innovation and increase flexibility in responding to market and technological changes. Strategic alliance differs according to purpose and structure. On the basis of purpose, strategic alliance can be classified as follows: i. Technology developed alliances like research consortia, simultaneous engineering agreements, licensing or joint development agreements. ii. Marketing, sales and services alliances in which a company makes use of the marketing infrastructure of another company in the foreign market for its products. iii. Multiple activity alliance involves the combining of two or more types of alliances. For instance technology development and operations alliances are generally multicountry alliances.

On the basis of structure, strategic alliance can be equity based or non equity based. Technology transfer agreements, licensing agreements, marketing agreements are non equity based strategic alliances. Counter trade: Counter trade is a form of international trade in which export and import transactions are directly interlinked i.e. import of goods are paid by export of goods. It is therefore a form of barter between countries. Counter trade strategy is generally used by UDCs to increase their exports. However, it is also used by MNCs to enter foreign markets. For instance, PepsiCos entry in the former USSR. There are different forms of counter trade such as barter, buy back, compensation deal and counter purchase. In case of barter, goods of equal value are directly exchanged without the involvement of monetary exchange. Under a buy back agreement, the supplier of a plant, equipment or technology. Payments may be partly made in kind and partly in cash. In a compensation deal the seller receives a part of the payment in cash and the rest in kind. In case of a counter purchase agreement the seller receives the full payment in cash but agrees to spend an equal amount of money in that country in a given period.

Q.1.GLOBALISATION OF INDIAN BUSINESS: Globalization, liberalization and privatization were the three cornerstones of Indias New Economic Policy of 1991. The year 1991 marks the beginning of a new era in the Indian economy. The new objective to be pursued by the policy makers, strategists and executives was to make India the largest free market economy of the 21st century. In pursuit of this objective, the Indian economy was to be integrated with the world economy through a programme of structural adjustment and stabilization. While the stabilization programme included inflation control, fiscal adjustment and BOP adjustment, the structural reforms included trade and capital flows reforms, industrial deregulation, disinvestment and public enterprise reforms and financial sector reforms. The programme of economic reforms has not been entirely successful and as a result, the globalization process of the Indian economy has not gathered momentum. Indian business continues to face a number of difficulties and obstacles in their effort to globalize their business. These obstacles are as follows: GOVERNMENT POLICY AND PROCEDURES: Government policy and procedures in India are extremely complex and confusing. Swift and efficient action is a pre-requisite for globalization- which sadly missing. The procedures and practice continue to be bureaucratic and hence a speed breaker in the globalization effort.

HIGH COST OF INPUTS AND INFRASRUCTURAL FACILITIES: The cost of raw materials, intermediate goods, power, finance, infrastructural facilities etc. in India is high which reduces the global competitiveness of Indian business. The quality and adequacy of infrastructural facilities in India is far from satisfactory. Further the technology employed by Indian industries and the style of operation is generally out dated. RESISTANCE TO CHANGE: The pre-reform era (1951- 1991) breeded lethargy, created rigid structures, systems, practices and procedures and generally instilled a laid back attitude. These factors are a hindrance to the processes of modernization, rationalization and efficiency improvement. Technological change is generally perceived to be employment reducing and hence resisted to the extent possible. For instance, information technology was introduced in India in the early eighties. However, computerization process of nationalized banks began only in the mid nineties. Excess labour is particularly employed in the public sectors in areas such as banking, insurance, and the railways and Indian industry in general. As a result, labour productivity is low and cheap labour in many a cases turns out to be dear. SMALL SIZE AND POOR IMAGE: Grant Indian firms are known to be global pygmies. A look at the fortune 500 list would reveal all to you. On a global scale, Indian firms are found to be small in size with low availability of resources. Indian firms there for cannot compete successfully in the international market. Indian products suffer from a poor image in the international market for both reasons valid and otherwise. Indian firms continue to miss consumer focus both domestically and internationally. The value-money equilibrium is missing in Indian products. Further, Indian firms are do not have the where- withal to keep up to the delivery schedule, accepts large orders and match up to international specifications. GROWING COMPETITION AND POOR SPEND: Indian firms are not only up and against competition from developed countries but also emerging Asian powerhouses such as South Korea and China. Continuous improvement in quality and usefulness and competitive costs with competitive pricing can only keep you afloat and in order to remain afloat, one has to spend quite a lot on R & D. both public and private sector outlays on research in India is deliberately low when compared to the developed countries. NON TARIFF BARRIERS (NTBs) Member nations of the World Trade Organizations are bound to progressively reduce tariff rates across the board over a definite period of time so that level

playing field is created in global trade. Tariff barriers are therefore not of much concern. What concerns developing nations in particular, are non- tariff barriers imposed by the developed countries. Issues such as child labor content in some of the products exported by India to the developed nations had cropped up and remain unresolved. Q.2. ADVANTAGES OF GLOBALISATION: For successful globalization, countries need to chalk out strategies and policies to open up the doors for the inflows of foreign direct investment (FDI). The FDI by the MNCs brings with it flow of foreign exchange/ foreign capital, inflow of technology, real capital goods, managerial and technical skills and know- how. Globalization can easily promote exports of the country by exploiting its export potentials in a right way. Globalization can be the engine of growth by facilitating export- led growth strategy of developing country. ASEAN countries such as Indonesia, Malaysia and Thailand have demonstrated their success of export- led growth strategy supported by the FDI under globalization approach. Globalization can provide sophisticated job opportunities to the qualified people and check brain drain in a country. Globalization would provide varieties of products to consumers at a cheaper rate when they are domestically produced rather than imported. This would help in improving the economic welfare of the consumer class. Under globalization, the rising inflow of capital would bring foreign exchange into the country. Consequently, the exchange reserve and balance of payments position of the country can improve. This also helps in stabilizing the external value of the countrys currency. Under global finance, companies can meet their financial requirements easily. Global banking sector would facilitate e banking and e-business. This would integrate countries economy globally and its prosperity would be enhanced. DISADVANTAGES OF GLOBALIZATION Globalization is never accepted as unmixed blending. Critics have pessimistic views about its ill- consequences. When a country is opened up and its market economy and financial sectors are well liberalized, its domestic economy may suffer owing to foreign economic invasion. A developing economy hen lacks sufficient maturity; globalization may have adverse effect on its growth. Globalization may kill domestic industries when they fail to improve and compete with foreign well-managed, well-established firms. Globalization may result into economic imperialism.

Unguarded openness may become a playground for speculators. Currency speculation and speculators attacks, as happened in case of Indonesia, Malaysia, Philippines, Thailand, etc. recently, may lead to economic crisis. It may lead to unemployment, poverty and growing economic inequalities. Q.3. STRATEGIES FOR GLOBALISATION: Ans. When a company makes the commitment to go international, it must choose an entry strategy. This decision should reflect an analysis of market potential, company capabilities and the degree of marketing involvement and commitment management is prepared to make. The approach to foreign marketing can range from minimal investment with infrequent and indirect exporting with little thought given to market development, to large investments of capital and management in an effort to capture and maintain a permanent, specific share of world markets. Depending on the firms objectives and market characteristics, either approach can be profitable. In fact, a company in various country markets may employ a variety of entry modes since each country market poses a different set of conditions. Having more than one strategy allows the company to match its expertise with the specific needs of each country market. The various strategies available to Indian firms to enter the international environment are discussed as follows: 1. EXPORTING Exporting is perhaps the first step for a company to go global. It is the first of the attempts to understand the international environment develop markets abroad. Exporting can be direct or indirect. With direct exporting the company sells to a customer in another country. This is the most common approach employed by companies taking their first international step because the risks of financial loss can be minimized. In contrast, indirect exporting usually means that the company sells to a buyer in the home country who in turn exports the product. Customers include large retailers like Wal-Mart or Sears, Wholesale supply houses, trading companies, and others that buy to supply customers abroad. In a global environment, the sourcing of finance, materials, managerial inputs etc. will also be global. However, with 0.5 percent share in the world trade, India is an insignificant player. There are a number of products with large export potential but these have not been tapped properly. With a more pragmatic and realistic export policy, procedural reforms and institutional support, with technological development, modernization and expansion of production facilities, India can definitely improve its share in the world trade from its present poor status. There are three strategies to increase export revenue. These are:

1. increase the average unit value realization, 2. increase the quantity of exports and 3. Export new products. Value added exports assume significance in the context of increasing the average unit value realization. The bulk of Indias manufactured exports constitute the low price segment of international markets. Quality improvement and aggressive marketing is required to enter the high price segments of the markets. This can be achieved by technology imports and or foreign collaborations. The size of Indias export basket needs to be expanded by adding new products. In order to identify new products for exports, export opportunities needs to be explored and products with high foreign demand also need to be identified. There are also market segments, and industries which are abandoned by the developed countries on account of factors such as environmental consideration, lack of competitiveness etc. For instance, developed countries are progressively vacating production of a range of chemicals due to higher expenditure on overheads and wages. Yet another strategy available to Indian Companies is Niche Marketing. 2. FOREIGN INVESTMENT It refers to investment in foreign country. Foreign investment by Indian Companies have been negligible because of factors such as assured domestic market, want of global orientation, protective government regulation etc. However, this inward orientation has undergone substantial change after the adoption of the new economic policy 1991. With the economic liberalization and growing global orientation, many Indian firms are setting up manufacturing, assembling and trading bases overseas. These facilities are either wholly owned or foreign partnership firms. Further, through acquisition route, Indian companies have made substantial investments abroad. The Aditya Birla Group has been pioneer in making foreign investments much before the adoption of the new economic credo. Indian companies are also setting up production bases in foreign countries to get an easy entry into the regional trade blocks. For instance, a production facility in Mexico opens the doors to the NAFTA area for Arvind Mills. Yet another example is that of Cheminoor Drugs by Dr. Reddys Labs in New Jersey which is set up as a subsidiary. 3. MERGERS AND ACQUISITIONS In merger, two companies come together but only one survives and the other goes out of existence as it is merged in the other company. While in acquisition, one company (acquirer) gets control over the other company (acquired) at the willingness of each of the companies. Mergers and acquisitions is an important entry strategy in international business.

Mergers and acquisitions can be used to acquire new technology, reduce the level of competition and provides quick access to markets and distribution network. Many Indian firms have resorted to the acquisition route to gain a foothold in the foreign market. For instance, Indian companies had spent $ 711.4 million in acquisitions abroad in 2000 in industries such as InfoTech, drugs and pharmaceuticals, paints, tele-communication, petroleum and broadcasting. Some of the major acquisitions include investments by Zee Telefilms, Leading Edge System BPL Software and Tata Tea. Dataline Transcription, Teamasia semiconductors, Goa Carbons, Wockhordt and Acro lab are few other firms to name from a long list. A very important acquisition has been the $ 271 billion leveraged buy out of Tetley by Tata Tea. With the acquisition of Tetley, Tata Tea, having been the largest integrated tea producer in the world, also got possession of the second largest global tea marketer. Indian companies have also acquired foreign brands. Nicholas Piramal India has acquired the Indian rights for three anti-infective brands from the US firm Eli Lilly. Ranbaxy interred the German pharma market by acquiring the generics business of Bager Ali. The Indian Rayon acquired Madura Garments; a subsidiary of the UK based coats Viyella and also acquired global rights for Coats Viyella brands such as Louis Phillipe, Allen Solly and Peter England. 4. JOINT VENTURES Joint Ventures as a means of foreign market entry have accelerated sharply since the 970s. Joint ventures refer to joining with foreign companies to produce or market the products or services. Besides serving as a means of lessening political and economical risks by the amount of the partners contribution to the venture, JVs provide a less risky way to enter markets that pose legal and cultural barriers than would be the case in an acquisition of an existing company. There are two types of JVs, namely: 1. Contractual JVs and 2. Equity based JVs. A contractual JV consists of a contractual arrangement between two or more companies in which certain assets and liabilities are shared for a specific purpose and time. Contractual JVs are common in the construction, extractive and consultancy services. An equity JV is a capital sharing arrangement between an MNC and a local company or another MNC or even a foreign government. Each partner holds share in the subsidiary and shares the profits in proportion to its ownership share. The advantage of a JV for MNC is that it can spread its investment across locations, and thereby minimize its risks. The liberalization of policy towards the foreign investment by Indian firms along with

the new economic environment seems to have given joint venture a boost. At the beginning of 1995 although there were 177 JVs in operation, there were 347 under implementation. Not only the number of JVs is increasing but also the number of countries and industries in the map of Indian JVs is expanding. Companies like Ranbaxy, Dr. Reddys Lab, Lupin etc. have taken the JV route to mark their presence in the overseas market. 5. STRATEGIC ALLIANCE: A Strategic International Alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective. It is an agreement between companies that is of strategic importance to one or both companies competitive viability. Strategy refers to the means to fulfill companys objectives. In every day business, the term strategic alliance is generally used to describe a wide variety of collaborations, irrespective of strategic importance. In a strategic alliance, a firm could establish relationships with organization that have the potential to add values. Bench marking, re-engineering, outsourcing, merger and acquisition are examples of strategic alliance. On the basis of structure, strategic alliances can be classified into equity based and non- equity based. Non-equity based alliances such as licensing agreements, marketing agreements, technology transfer agreements etc. are found to be more dynamic, constructive and strategic. The scope of strategic alliance ranges from Research and Development to distribution. 6. LICENSING AND FRANCHISING: A means of establishing a foothold in foreign markets without large capital outlays is licensing. It is a favorite strategy for small and medium sized companies. International licensing helps a firm from one country (licensor) to permit another firm in a foreign country (licensee) to use its intellectual property such as patents, trademarks, copyrights, technology, technical know-how, marketing skill etc. in return for royal payments. Royal payments or license fee is regulated in most of the countries. The advantages of licensing are most apparent when: capital is scarce, import restrictions forbid other means of entry, a country is sensitive to foreign ownership, or it is necessary to protect trademarks and patents against cancellation of nonuse. An important risk of licensing is that the licensor may give birth to his own competitor i.e. the licensee can become a competitor after the expiry of the licensing agreement. The only anti-dote that is available to the licensor to pre-empt any potential or actual competition is continuous innovation. Only innovation will provide sustainable competitive advantage.

Franchising is a form of licensing in which a parent company (franchiser) grants another company (franchisee) the right to do business in a specific manner. Franchising can assume various forms such as selling the franchisers products, using the name of the franchiser, production and marketing techniques etc. Important forms of franchising are: 1. Manufacturer- retailer systems e.g. automobile dealership 2. Manufacturer- wholesaler system e.g. soft drink companies 3. Service firm- retailer systems e.g. lodging and fast food outlets. Potentially, the franchise system provides an effective blending of skill centralization and operational decentralization, and has become increasingly important form of international marketing.

Political & Social Environment

A] Examine the various issues that needs to be considered by an international business organization while studying the political environment of a country. Answer - The International Marketing activities take place within the political environment of national political institutions such as the government, political executive, legislative and the judiciary. Any company doing business overseas should Carefully study the political environment of he country it intends to operate and analyze issues such as the attitude of the political party in power toward (a) Sovereignty, (b) Political Risk, (c) Taxes, (d) Threat of Equity dilution and (e) Expropriation. Sovereignty: The sovereign political power of a country in a command economy may determine every aspect of economic life of the people. In contrast, in a market economy, the government may only play the role of a facilitator and a regulator. However, after the fall of the Soviet Union, the command economics around the world have progressed towards a market oriented system. Eastern European countries, countries in Central America, and most importantly, India and China have also adopted the free market system. With globalization and economic integration, political sovereignty of individual nation states is on the wane. However, erosion of political sovereignty is not without a quid pro quo. There are definite economic advantages in forging a

regional economic union as exemplified in cases such as the European Union, NAFT A, ASEAN and others. Political Risk: There is always a political risk involved in making investments both within and without the country. The element of risk and its severity is relatively high in foreign countries. More objectively, the extent of political risk depends upon the political stability of the host country. An unstable country is fraught with investment risks. A country needs to be stable both internally and externally. Frequent changes in the government and attendant changes in the economic policy of the government will increase the element of uncertainty and adversely effect upon a company's ability to operate effectively in a foreign country. Investments in highly destabilized countries like Afghanistan and Iraq may be very attractive economically speaking but the political risks involved are overwhelming. Political instability is therefore a great .deterrent to foreign investment. In order to justify investment in a foreign country, risk assessment should be undertaken on a regular basis and investments should be made only when opportunities to make profits are much greater than the risks involved.

Taxes: A company which is geographically diversified needs to take care of the tax laws of the countries in which it operates. Companies, generally minimizes their tax liability by shifting the location of their income. One method of reducing tax liability is called earnings stripping. Foreign companies reduce earnings by' making loans to their affiliates in a country rather than making direct foreign investment. The subsidiary company which takes the loan can deduct the interest it pays on such loans and reduce its tax burden. There is an absence of international laws to govern the levy of taxes on companies that are into international business. In order to provide fair treatment, governments in many countries have negotiated bilateral tax treaties to provide tax credits for taxes paid abroad. Generally foreign' companies are taxed by the host country up to the level imposed in the home country. Equity Stripping and Dilution of Control: In less developed countries, there is a general tendency to exert political pressure for governmental control of foreign companies. Host-nation governments may attempt to control ownership of foreign-owned companies operating in their Countries. For instance, foreign equity participation in industries such as insurance

is limited to 74 percent in India and as a result, a foreign insurance company must team up with a local company to do insurance business in India. In industries where, the government wants to keep the ownership in the hands of Indian companies, foreign equity participation is less than fifty percent. The threat of equity dilution has forced companies to operate in host countries through joint ventures and strategic alliances. Expropriation: Expropriation is the ultimate threat that a government can pose toward a foreign company. Expropriation refers to governmental action to dispossess a company investor. Generally, compensation is provided to foreign investors. However, quite often, the compensation is not prompt, adequate and effective. If there is no compensation then the act of expropriation would be termed as confiscation. When severe limitations are imposed the activities of a foreign company, it is termed as creeping expropriation. Such restriction may include limitations on repatriation of profits, dividends, royalties, local content etc, quotas for hiring local nationals, price controls etc. All these restrictions and limitations adversely affects the profitability of foreign investment. Discriminating tariffs and non-tariff barriers, discriminating laws on patents and trademarks may also limit market entry of certain consumer and industrial goods manufacturing foreign firms. When governments expropriate foreign property, there are limitations on actions to reclaim the property. For instance, according to the United States act of State doctrine, if the government of a foreign State is involved in a specific act, the US court will not get involved. In such a situation, expropriated companies representatives may seek redressal through arbitration at the World Bank Investment Dispute Settlement Center. It is safe to buy expropriation insurance than to seek redressal through World Bank mechanism. In 1970 and 1971; some foreign copper companies in Chile resisted government efforts to employ local nationals in the managerial cadre of the companies. Such companies were expropriated by the Chilean government and companies which obliged were allowed to operate under joint management. Q.1 Illustrate the impact of social and cultural environment on the marketing of industrial products. Ans. The social and cultural environment encompassing the religious aspects; language; customs; traditions and beliefs; tastes and preferences; social stratification; social institutions; buying and consumption habits etc are all very important factors for business. What is liked by people of one culture may not be liked by those of some other culture. One of the most important reasons for the failure of a number of companies in foreign markets is their failure to understand the

cultural environment of these markets and to suitably formulate their business strategies. Many companies modify their products and/or promotion strategies to suit the tastes and preferences or other characteristics of the population of the different countries. Significant differences in the tastes and preferences may exist even within the same country, particularly when the country is very vast, populous and multi-cultural like India. For a business to be successful, its strategy should be the one that is appropriate in the socio-cultural environment. The marketing mix will have to be so designed as best to suit the environmental characteristics of the market. In Thailand, Helene Curtis switched to black shampoo because Thai women felt that it made their hair look glossier. Even when people of different cultures use the same basic product, the mode of consumption, conditions of use, purpose of use or the perceptions of the product attributes may vary so much so that the product attributes, method of presentation, positioning, or method of promoting the product may have to be varied to suit the characteristics of different markets. The differences in language sometime pose a serious problem, even necessitating a change in the brand name. For instance, Chevrolets brand name Nova in Spanish means it doesnt go. In some languages, Pepsi-Colas slogan come alive translates as come out of the grave. The values and beliefs associated with colour vary significantly between different cultures. White indicates death and mourning in China and Korea; but in some countries, it expresses happiness and is the colour of the bridal dress. Boeing an United States based aero-space manufacturer has felt the impact of an unwritten buy national policy in Europe. As a result, the market share of Airbus for commercial planes which is a consortium of European countries grew to 50 percent. The market share of Boeing in Europe declined resulting in a loss. Boeing attempted joint venture with Russian, Ukrainian and Norwegian partners and hired a designer to decorate a facility to watch the launch of the Sea Launch rocket. The designer decorated the facility in black which is considered as bad luck colour in Russia. The Russians were furious to see black colour. Boeing repainted the facility with a shade of blue to avoid a cultural blunder. While dealing with the social environment, we must also consider the social environment of the business which encompasses its social responsibility and the

alertness or vigilance of the consumers and of society at large. Marketing people are at interface between company and society. In this position, they have the responsibility not merely for designing a competitive marketing strategy, but for sensitizing business to the social as well as the product, demand of the society.

International marketing: Kotler on marketing A company that masters only its domestic market will eventually lose it. Strong foreign competitors will inevitably come in and challenge your company. It is now business without borders. One of the best growth paths for a business is to go regional or global. But most companies hesitate to go abroad. They see obstacles and risks stemming from tariffs, language differences, cultural differences, devaluation and exchange control risk, and bribery. But there are also gains. By going abroad, companies actually diversify their risks by not depending on only one countrys market. In fact, the market for their products and services may be mature at home and growing abroad. Furthermore, these companies will be stimulated to improve their products as they compete in new situations against new competitors. But companies must adapt their products and marketing mix when they go abroad. Asea Brown Boveri (ABB) uses the slogan: We are a global firm local everywhere. Royal Ahold, the giant Dutch food retailer, has the brand philosophy, Everything the customer sees we localize. Everything they dont see, we globalize. When naming its new products, a company must make sure its name will travel internationally. Chevrolet named its new car Nova, not realizing that in Latin Americano vameansdoesnt go. Companies usually evolve globally through five stages: (1) passively exporting, (2) actively exporting using distributors, (3) opening sales offices abroad, (4) setting up factories abroad, and (5) establishing regional headquarters abroad. In expanding abroad, companies tend to exercise loose administrative controls initially, preferring to put their faith in their entrepreneurial country managers. Later they start imposing some strategic controls aimed at standardizing global planning and decision processes. Companies must choose foreign distributors carefully. They need to define distributor performance very clearly and be aware of host country laws regarding distributor treatment. The distributors need to be given adequate incentives to grow the market as fast as possible.

Companies succeed best when they recognize a large target market whose needs are not being met by the current sellers. By inventing new values for this target market that are difficult to replicate and by building a strong company culture to serve this market, the company has a good chance to succeed. Companies entering developing countries should offer new benefits or introduce their products at a lowerprice, rather than come in with the same offerings made at home. They must be conscious of liability for the potential misuse of their products due to low literacy and the poor quality of intermediary channels, as well as counterfeiting possibilities. Two issues arise when a company appoints regional managers. The first is whether to locate regional management at headquarters or in a capital city of the region. The second is whether regional managers should represent the interests of headquarters or of the regions country managers. The regional headquarters location will influence its orientation. Although a company may grant high autonomy to its country managers, it can still achieve a fair measure of coordination through corporate information exchange systems, company guidelines and regulations, regional line managers, and headquarters product directors. Country managers are not all equal. Usually the country managers in the larger markets have more autonomy and influence. The larger markets are often chosen as centers of excellence in the handling of research and development (R&D) and new product launches. They also have a large influence on the country managers in the smaller surrounding countries. Multinational corporations face tough decisions on which products to emphasize in which countries. The allocation of products and advertising money to the different countries must be guided by consumer preferences and purchasing power, distribution strength, competitor positions, and economic future conditions in each country. Highly efficient export-oriented companies are likely to gain market share in other countries. This will set up resistance by entrenched interests in the form of high tariffs and dumping charges. Ultimately these exporters may be wise to move production into countries that are resisting these imports. A multinational that abandons troubled countries will have to eventually abandon all countries. The company should think more of shrinking its presence in a troubled country than abandoning it. Global countries must learn to use counter trading. Many countries are poor but they will barter. Youd better learn to take some goods in exchange or forget selling to that country. Pepsi-Cola had to promise Russia that it would help sell Russian vodka abroad in exchange for selling Pepsi-Cola in Russia. When companies fail abroad, the most common factors are:

Failure to take enough time to observe, absorb, and learn the new market. Failure to get reliable statistical information about the new market. Failure to define the target user. Failure to adapt the product and/or marketing mix. Failure to offer adequate service. Failure to find good strategic partners.

THE INTERNATIONAL MARKETING MIX

When launching a product into foreign markets firms can use a standard marketing mix or adapt the marketing mix, to suit the country they are carrying out their business activities in. This article talks you through each element of the marketing mix and the arguments for and against adapting it suit each foreign market.

International Marketing Mix: Product Basic marketing concepts tell us that we will sell more of a product if we aim to meet the needs of our target market. In international markets this will involve taking into consideration a number of different factors including consumer's cultural backgrounds, religion, buying habits and levels of personal disposable income. In many circumstances a company will have to adapt their product and marketing mix strategy to meet local "needs and wants" that cannot be changed. Mcdonald is a global player however, their burgers are adapted to local needs. In India where a cow is a sacred animal their burgers contain chicken or fish instead of beef. In Mexico McDonalds burgers come with chilli sauce. Coca-cola is some parts of the world taste sweeter than in other places. The arguments for standardisation state that the process of adapting the product to local markets does little more than add to the overall cost of producing the product and weakens the brand on the global scale. In todays global world, where

consumers travel more, watch satellite television, communicate and shop internationally over the internet, the world is a smaller than it used to be. Because of this there is no need to adapt products to local markets. Brands such as MTV, Nike, Levis are all successful global brands where they have a standardised approach to their marketing mix, all these products are targeted at similar groups globally. As you can see both strategies; using a standard product and an customised product can work just as well. The right approach for each organisation will depend on their product, strength of the brand and the foreign market that the marketing is aimed at. International Marketing Mix: Promotion As with international product decisions an organisation can either adapt or standardise their promotional strategy and message. Advertising messages in countries may have to be adapted because of language, political climate, cultural attitudes and religious practices. For example a promotional strategy in one country could cause offence in another. Every aspect of promotional detail will require research and planning one example is the use of colour; red is lucky in China and worm by brides in India, whilst white is worn by mourners in india and China and brides in the United Kingdom. Many organisation adapt promotion strategies to suit local markets as cultural backgrounds and practices affect what appeals to consumers. The level of media development and availability will also need to be taken into account. Is commercial television well established in your host country? What is the level of television penetration? How much control does the government have over advertising on TV, radio and Internet? Is print media more popular than TV? Before designing promotional activity for a foreign market it would be expedient to complete a PEST analysis so that you have a complete understanding of the factors operating in the foreign market you would like to enter.

International Marketing Mix: Pricing Pricing on an international scale is a complex task. As well as taking into account traditional price considerations such as fixed and variable costs, competition and target groups (click here for further information about marketing mix pricing) an organisation needs to consider additional factor such as the cost of transport tariffs or import duties exchange rate fluctuations personal disposal incomes of the target market the currency they want to be paid in and the general economic situation of the country and how this will influence pricing.

The internet has created further challenges as customers can view global prices and purchase items from around the world. This has increased the level of competition and with it pricing pressures, as global competitors may have lower operating costs. International Marketing Mix: Place The Place element of the marketing mix is about distributing a product or service to the customer, at the right place and at the right time. Distribution in national markets such as the United Kingdom will probably involve goods being moved in a chain from the manufacturer to wholesalers and onto retailers for consumers to buy from. In an overseas market there will be more parties involved because the goods need to be moved around a foreign market where business practices will be different to national markets. For example in Japan there are approximately five different types of wholesaler involved in the distribution chain. Businesses will need to investigate distribution chains for each country they would like to operate in. They will also need to investigate who they would like to sell their products and services to businesses, retailers, wholesaler or directly to consumers. The distribution strategy for each country a business operates in could be different due to profit margins and transportation costs. Conclusion Prior to designing an international marketing mix a business should carry out a PEST analysis for every country they would like to operate in. This will help them determine what elements of the marketing mix can be standardised and which elements will need adjustments to suit local needs. It may well be that a business is able to use a standard marketing mix in the majority of cases and only need to adjust it on the rare occasion. Or every country may need its own marketing mix.

The International Market Entry Evaluation Process How to Enter a Foreign Market This lesson gives an outline of the way in which an organization should select which foreign to enter. The International Marketing Entry Evaluation Process is a five stage process, and its purpose is to gauge which international market or markets offer the best opportunities for our products or services to succeed. The five steps are Country Identification, Preliminary Screening, In-Depth Screening, Final Selection and Direct Experience. Let's take a look at each step in turn. Step One - Country Identification The World is your oyster. You can choose any country to go into. So you conduct country identification - which means that you undertake a general overview of potential new markets. There might be a simple match - for example two countries might share a similar heritage e.g. the United Kingdom and Australia, a similar language e.g. the United States and Australia, or even a similar culture, political ideology or religion e.g. China and Cuba. Often selection at this stage is more straightforward. For example a country is nearby e.g. Canada and the United States. Alternatively your export market is in the same trading zone e.g. the European

Union. Again at this point it is very early days and potential export markets could be included or discarded for any number of reasons.

Step Two - Preliminary Screening At this second stage one takes a more serious look at those countries remaining after undergoing preliminary screening. Now you begin to score, weight and rank nations based upon macro-economic factors such as currency stability, exchange rates, level of domestiv consumption and so on. Now you have the basis to start calculating the nature of market entry costs. Some countries such as China require that some fraction of the company entering the market is owned domestically - this would need to be taken into account. There are some nations that are experiencing political instability and any company entering such a market would need to be rewarded for the risk that they would take. At this point the marketing manager could decide upon a shorter list of countries that he or she would wish to enter. Now indepth screening can begin. Step Three - In-Depth Screening The countries that make it to stage three would all be considered feasible for market entry. So it is vital that detailed information on the target market is obtained so that marketing decision-making can be accurate. Now one can deal with not only microeconomic factors but also local conditions such as marketing research in relation to the marketing mix i.e. what prices can be charged in the nation? - How does one distribute a product or service such as ours in the nation? How should we communicate with are target segments in the nation? How does our product or service need to be adapted for the nation? All of this will information will for the basis of segmentation, targeting and positioning. One could also take into account the value of the nation's market, any tariffs or quotas in operation, and similar opportunities or threats to new entrants. Step Four - Final Selection Now a final shortlist of potential nations is decided upon. Managers would reflect upon strategic goals and look for a match in the nations at hand. The company

could look at close competitors or similar domestic companies that have already entered the market to get firmer costs in relation to market entry. Managers could also look at other nations that it has entered to see if there are any similarities, or learning that can be used to assist with decision-making in this instance. A final scoring, ranking and weighting can be undertaken based upon more focused criteria. After this exercise the marketing manager should probably try to visit the final handful of nations remaining on the short, shortlist. Step Five - Direct Experience Personal experience is important. Marketing manager or their representatives should travel to a particular nation to experience firsthand the nation's culture and business practices. On a first impressions basis at least one can ascertain in what ways the nation is similar or dissimilar to your own domestic market or the others in which your company already trades. Now you will need to be careful in respect of self-referencing. Remember that your experience to date is based upon your life mainly in your own nation and your expectations will be based upon what your already know. Try to be flexible and experimental in new nations, and don't be judgemental - it's about what's best for your company - happy hunting. International Marketing Environment Environment analysis for international marketing One of the fundamental steps that needs to be taken prior to beginning international marketing is theenvironmental analysis. Of course there are many tools on Marketing Teacher that would prove useful at this stage such as lessons on the marketing environment, PEST Analysis, SWOT Analysis, POWER SWOT and Five Forces Analysis. However, the very specific and unique nature of each individual nation needs to be looked into. Below we consider the nature of an international PEST Analysis, and the influence of tariff and non-tariff barriers. An International PEST Analysis. PEST is a well-known and widely applied tool when considering the external nature of the domestic market. However, it is equally as useful when applied to the nature of the international marketing environment. International PEST Analysis would consider:

How easy will it be to move from purely domestic to international marketing? Would your business benefit from inward foreign investment? What is the nature of competition within each individual market, and how will companies from other nations compete when you meet with them head-to-head in unfamiliar countries? Many other factors that are specific to your organization or industry. Political

Is there any historical relationship between countries that would benefit or hinder international marketing?

What is the influence of communities or unions for trading? E.g. The European Union and its authority over European laws and regulation. What kind of international and domestic laws will your business encounter? What is the nature of politics in the country that you are targeting, and what is their view on encouraging foreign competition from overseas? Economic

What is the level of new industrial growth? E.g. China is experiencing terrific industrial growth. What is the impact of currency fluctuations on exchange rates, and do your home market and your new international market - share a common currency? E.g. Polish companies trading in Eire will use Euros. There are of course the usual economic indicators that one needs to be aware of such as inflation, Gross Domestic Product (GDP), levels of employment, national income, the predisposition of consumers to spend savings or to use credit, as well as many others. Socio-cultural

Culture, religion and society are of huge importance. What are the cultural norms for doing business? E.g. is there a form of barter? Will cultural norms impact upon your ability to trade overseas? E.g. Putonghua is very difficult for many Western people to learn. Technology

Do copyright, intellectual property laws or patents protect technology in other countries? E.g. China and Jordan do not always respect international patents. Does your technology conform to local laws? E.g. electrical items that run on nondomestic currents could be dangerous. Are technologies at different stages in the Product Life Cycle (PLC) in various countries? E.g. versions/releases of software. Tariff and Non-Tariff Barriers. There are a number of fences that companies need to plan for when initialising international marketing. Tariff and non-tariff barriers are still very common, even today. Tariff barriers are charges imposed upon imports - so they are a form of import taxation. This could mean that your margins are reduced so much that trading overseas becomes too unprofitable. However they are normally transparent and you can plan to take them into account. Non-tariff barriers are trickier to spot. Governments sometimes act in favour of their own domestic industries rather than allow competition from overseas. Bureaucracy is a hurdle often encountered by exporting companies - it takes many forms and includes unnecessary hold-ups and red tape. Quotas are another form of non-tariff

barrier i.e. restricting the quantity of a product that can be imported into a particular country. Modes of Entry into International Markets (Place) How does an organization enter an overseas market? Background A mode of entry into an international market is the channel which your organization employs to gain entry to a new international market. This lesson considers a number of key alternatives, but recognizes that alteratives are many and diverse. Here you will be consider modes of entry into international markets such as the Internet, Exporting, Licensing, International Agents, International Distributors, Strategic Alliances, Joint Ventures, Overseas Manufacture and International Sales Subsidiaries. Finally we consider the Stages of Internationalization. It is worth noting that not all authorities on international marketing agree as to which mode of entry sits where. For example, some see franchising as a stand alone mode, whilst others see franchising as part of licensing. In reality, the most important point is that you consider all useful modes of entry into international markets - over and above which pigeon-hole it fits into. If in doubt, always clarify your tutor's preferred view. The Internet The Internet is a new channel for some organizations and the sole channel for a large number of innovative new organizations. The eMarketing space consists of new Internet companies that have emerged as the Internet has developed, as well as those pre-existing companies that now employ eMarketing approaches as part of their overall marketing plan. For some companies the Internet is an additional channel that enhances or replaces their traditional channel(s). For others the Internet has provided the opportunity for a new online company. More Exporting There are direct and indirect approaches to exporting to other nations. Direct exporting is straightforward. Essentially the organization makes a commitment to market overseas on its own behalf. This gives it greater control over its brand and operations overseas, over an above indirect exporting. On the other hand, if you were to employ a home country agency (i.e. an exporting company from your country - which handles exporting on your behalf) to get your product into an overseas market then you would be exporting indirectly. Examples of indirect exporting include: Piggybacking whereby your new product uses the existing distribution and logistics of another business. Export Management Houses (EMHs) that act as a bolt on export department for your company. They offer a whole range of bespoke or a la carte services to exporting organizations. Consortia are groups of small or medium-sized organizations that group together to market related, or sometimes unrelated products in international markets. Trading companies were started when some nations decided that they wished to have overseas colonies. They date back to an imperialist past that some nations might prefer to forget e.g. the British, French, Spanish and Portuguese colonies.

Today they exist as mainstream businesses that use traditional business relationships as part of their competitive advantage. Licensing Licensing includes franchising, Turnkey contracts and contract manufacturing. Licensing is where your own organization charges a fee and/or royalty for the use of its technology, brand and/or expertise. Franchising involves the organization (franchiser) providing branding, concepts, expertise, and infact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser. Examples include Dominos Pizza, Coffee Republic and McDonald's Restaurants. Turnkey contracts are major strategies to build large plants. They often include a the training and development of key employees where skills are sparse - for example, Toyota's car plant in Adapazari, Turkey. You would not own the plant once it is handed over. International Agents and International Distributors Agents are often an early step into international marketing. Put simply, agents are individuals or organizations that are contracted to your business, and market on your behalf in a particular country. They rarely take ownership of products, and more commonly take a commission on goods sold. Agents usually represent more than one organization. Agents are a low-cost, but low-control option. If you intend to globalize, make sure that your contract allows you to regain direct control of product. Of course you need to set targets since you never know the level of commitment of your agent. Agents might also represent your competitors - so beware conflicts of interest. They tend to be expensive to recruit, retain and train. Distributors are similar to agents, with the main difference that distributors take ownership of the goods. Therefore they have an incentive to market products and to make a profit from them. Otherwise pros and cons are similar to those of international agents. Strategic Alliances (SA) Strategic alliances is a term that describes a whole series of different relationships between companies that market internationally. Sometimes the relationships are between competitors. There are many examples including: Shared manufacturing e.g. Toyota Ayago is also marketed as a Citroen and a Peugeot. Research and Development (R&D) arrangements. Distribution alliances e.g. iPhone was initially marketed by O2 in the United Kingdom. Marketing agreements. Essentially, Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate. Joint Ventures (JV) Joint Ventures tend to be equity-based i.e. a new company is set up with parties owning a proportion of the new business. There are many reasons why companies set up Joint Ventures to assist them to enter a new international market:

Access to technology, core competences or management skills. For example, Honda's relationship with Rover in the 1980's. To gain entry to a foreign market. For example, any business wishing to enter China needs to source local Chinese partners. Access to distribution channels, manufacturing and R&D are most common forms of Joint Venture. Overseas Manufacture or International Sales Subsidiary A business may decide that none of the other options are as viable as actually owning an overseas manufacturing plant i.e. the organization invests in plant, machinery and labor in the overseas market. This is also known as Foreign Direct Investment (FDI). This can be a new-build, or the company might acquire a current business that has suitable plant etc. Of course you could assemble products in the new plant, and simply export components from the home market (or another country). The key benefit is that your business becomes localized - you manufacture for customers in the market in which you are trading. You also will gain local market knowledge and be able to adapt products and services to the needs of local consumers. The downside is that you take on the risk associated with the local domestic market. An International Sales Subsidiary would be similar, reducing the element of risk, and have the same key benefit of course. However, it acts more like a distributor that is owned by your own company. Internationalization Stages So having considered the key modes of entry into international markets, we conclude by considering the Stages of Internationalization. Some companies will never trade overseas and so do not go through a single stage. Others will start at a later or even final stage. Of course some will go through each stage as summarized now:

Indirect exporting or licensing Direct exporting via a local distributor Your own foreign presences Home manufacture, and foreign assembly Foreign manufacture