ASSIGNMENT DRIVE WINTER 2014

PROGRAM Bachelor of Business Administration- BBA

SEMESTER 4
SUBJECT CODE & NAME - BBA 403 - International Marketing

Q.No 1 Explain the meaning, need and significance of international marketing.

(Meaning, Need, significance) 3 +4 +3 =10
Answer: Meaning of International Marketing
Definition: International marketing is defined as the performance of business activities designed to plan,
price, promote and direct the flow of a companys goods and services to customers or users, in more than one
nation, for a profit. Philip R Cateora
Applying marketing principles to more than one country is referred to as international marketing. International
marketing is seen as a simple extension of exporting, by many American and European authors, whereby the
marketing mix is a simple adaptation in some way that takes into account the differences in consumers and
segments. It is then followed by global marketing taking a more standardised approach towards world markets
and focusing on the similarities between consumers and segments.
"At its simplest level, international marketing involves the firm in making one or more marketing mix decisions
across national boundaries. At its most complex level, it involves the firm in establishing manufacturing facilities
overseas and coordinating marketing strategies across the globe." Doole and Lowe (2001).
The efforts associated with reaching out international customers are called as International marketing.
Need and significance:
The host countries have their own legal systems. Many countries have different legal systems which at times
pose barriers to trade. Although at the international level, loss impacting trade is progressively being
standardised by framing uniform procedures, legal disparities still prevail in most of the nations and are needed
to be precisely understood by the international marketer. For example, payments and settlements pertaining to
international trade are governed by negotiable instruments act.

There are vast cultural differences between the home market and the host country market. Cultural differences
across nations significantly impact international marketing. Cultural change is taking place; nevertheless, such
changes take place at a very slow pace which is not helpful to the cause of the international marketer. This is on
account of resistance to cultural change taking place in every market.
The host countries with which the international marketer is dealing with normally has different payment
systems. The economic strengths and weaknesses comprising domestic and external economy of the host country
matter in terms of timely payment of export dues.
The infrastructure available for carrying out marketing activities in a host country may not be the same as in the
home country. Although some of the countries present tremendous opportunities for international trade, the
existing infrastructure in host countries are not properly developed, the incidental cost may affect the
profitability of the international marketer.
The international marketer is also confronted with restrictions imposed by agencies functioning in the host
country. Some of the host country institutions may pose impediments to the international marketer like
excessive supervision of the goods or specifying untenable standards resulting in the restrictions for free trade.

Q2 Compare Adam Smith and David Ricardos theories of international trade.

Compare the two theories 10
Answer:
Economists, David Ricardo and Adam Smith advocated the view that trade is positive-sum game or a situation
where all countries can benefit.
Adam Smiths theory of absolute advantage
Economist, Adam Smith, disagreed with the version of mercantilism. Adam Smith said that different countries
produce different goods efficiently. Like England due to its efficient manufacturing processes, was the worlds
most efficient textile manufacturer.
France has an efficient wine industry due to a combination of factors like favourable climate, good soil and
accumulated expertise.
France therefore had an absolute advantage in the production of wine and England had an absolute advantage in
textile sector. This goes to establish that a country will have absolute advantage in the production of a product if
it produces it more efficiently than any other country.

Adam Smith advocated the view that countries should specialise in the production of goods for which they have
an absolute advantage and then trade these for goods produced by other countries. Hence, England should
specialise in the production of textiles whereas France needs to specialise in the production of wine. Adam smith
argued that England could sell its textiles in exchange for wine to France and it is beneficial to France to buy
textiles from England.
In the theory of absolute advantage Adam Smiths view is that a country should never produce goods at home
which can be bought from other countries at a lower cost. Each country should specialise in the production of
goods in which it has an absolute advantage. In this way, both the countries can benefit by engaging in trade.
Availability of resources, accumulated expertise and consequent productivity confers absolute advantage to a
particular country. Here, it is pertinent to quote the examples of Ghana for Cocoa, Bangladesh for jute, few south
east nations for rice, in addition to England and France.
As a result of specialisation and trade, output of commodities would increase and consumers in countries
participating in trade would be able to consume more. This signifies that trade is a positive-sum game as it
produces net gains for all.
David Ricardos theory of comparative advantage
Economist David Ricardo in his theory of comparative advantage discovered further the Adam Smiths theory of
absolute advantage. He visualised a situation as to what might happen, when one country has an absolute
advantage, in the production of all goods. If Adam Smiths theory is applied, a country having absolute advantage
in the production of all the goods may not derive any advantage when it involves in international trade.
David Ricardo in his book Principles of Political Economy (1817) mentioned that it makes sense for a country to
specialise in the production of those goods which they most efficiently produce. For a sustainable economic
system, Ricardo argued that a country should specialise in the production of those goods that it can produce most
efficiently and import the goods which it produces less efficiently even if it has absolute cost advantage in the
production of all those goods. He showed how while trading two commodities, both the countries will gain even
if one country is better in production of both the goods.
Without trade a country has to consume whatever it produces. By engaging in trade, the production can be
increased in countries and more goods can be consumed by consumers in various countries. David Ricardo
advocates that more goods can be consumed by consumers in all nations, if there are no restrictions on trade.
This happens even in countries lacking an absolute advantage in the production of any good.
The theory of comparative advantage provided a strong base for encouraging international trade and promoting
free trade. Those advocating free trade use the views of David Ricardo as a tool to argue that all countries
engaging international trade will gain.

Q3 Culture is an invisible barrier to international trade. Discuss. 10

Answer: Trade barriers of any category constrain a firms ability to disperse its productive activities in a
satisfactory manner.
Many of the barriers are deliberately caused either for economic gains or for promoting local business houses.
Most of these barriers are visible or explicit while the barriers caused by cultural differences are many times
invisible or unable to be noticed at the first instance. Unnoticed cultural barriers on account of poor information
pooling can cause enormous damage to beginners of international trade. In a new country and market it is
essential to examine how people think, how people do things, how people shake hands and greet others, what are
their reservations, how are their expressions, which cultural traits are conspicuously different from other market,
the superstitions and dogmas having influence on life, etc.
Cultural awareness training is imparted to the manpower stock so that local market conditions do not impair the
prospects of sale. In fact right at the time of product design and choice of such design for production, cultural
issues are taken note of and suitable changes are made. The changes may be in the content or may be in style or
packing.
In Japan, superstition with regard to numbers is prevalent, in view of which normally a unit for sale comprises
pieces of four. Colour superstition continues to prevail in Arab countries and therefore products or packages are
preferably green. American firm McDonalds made its name by selling beef burgers and while going international
collected discreet information that beef burger will not find the same market in India. Similarly, pork is banned
under Islamic culture and therefore in Muslim countries sale of pork products should not be contemplated.
While launching a product in a new market if local language is used by the sales personnel, it would result in
better promotion. The marketer needs to be apprehensive in verbal and non verbal communications and the
method of greeting the inhabitants of a new market, in which perspective cultural awareness training plays an
important role.
In manpower management, when local manpower is used, some of their practices need to be treated with
respect; otherwise conflict of interest arises if the local workforce resents interference in their cultural ethics. The
resultant unrest may not help the cause of international marketing. Over time, diffusion of cultures may take
place with the staggered elimination of traditional dogmas; nevertheless, such a situation may take unreasonably
long time.
Russia and the commonwealth of independent states (CIS countries) provide great opportunity for trade and
investment. This part of the earths hemisphere is not developed mostly because of the terrain, topography or
climate of this region. In terms of international relations, Russia and its accomplices view other countries in the
West (USA & European countries) and some in the east (Japan & China) with distrust and fear. The trust deficit
is on account of long history of cold war between these groups of countries. Both the sides are apprehensive in

trade and investment relationship; nevertheless in such a situation, business opportunities are being exploited
now. During these transition periods or till cultural diffusion takes place, each section has to honour the cultural
traits of others so that international marketing is not hampered by some irrationally held truths.
International marketer has to initiate certain confidence building measures and create comfort zones for people
of different cultures, so the kind of suspicions attributed to a foreigner attempting trade is eliminated. In the art
of marketing, a human connection is established for reciprocal gains in international trade.

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Q4 Explain the meaning and need of secondary research in international marketing.

Meaning
Need 3+7=10
Answer: Meaning of secondary research:
Secondary data is the data collected by somebody earlier for their use.
Secondary research is carried out first. This research is conducted by collecting data from the following sources:
a) A firms database covering its P&L account, inventory levels, visit reports from the sales team and previous
market research reports, if any.
b) Staff members recruited from competing firms.
c) Government publications and notifications. Government bodies, from time to time, conduct surveys, studies
and reports. The major findings from them are published in government websites.
d) Trade journals and magazines published by associations representing each industry.

e) Balance sheets and related data of the competitor. Today, in most countries, transparency has been imposed
on business units by Governments due to the introduction of Corporate Social Responsibility.
f) Business dailies and magazines.
g) The internet.
h) Market research reports published by market research organisations.
i) Statistics relating to sales obtained from dealers of the product.
j) International publications/journals and data from foreign governments/institutions.

NEED:
Required secondary research for the following reasons:
a) Helps in identifying and understanding the areas creating problems since various problems are likely to
emerge in the areas of product features, pricing, distribution, and promotion network.
b) Provides an opportunity to locate opportunities in the business environment since an intelligent marketer is
always on the lookout for existing and emerging opportunities in his line of activity to achieve success.
c) Also provides a mechanism to monitor the environment in which a marketer is operating by understanding the
relative strengths and weaknesses of the product in comparison to that of his competitors.
d) Helps the marketer to monitor the changes taking place in the environment in which he operates.

5 What is the mode of entry adopted by McDonalds? Discuss the various modes of entry in
international business.
(Mode of entry by McDonalds, Modes of entry) 3 +7 =10
Answer: 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 in fact
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 McDonalds
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.

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 are 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, Hondas relationship with
Rover in the 1980s.

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

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 standalone 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 tutors 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.
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.

Q6 Write short notes on:

a) Modes of transportation in international trade
b) Benefits and risks of Global e marketing
a) Modes of transportation in international trade
b) Benefits and risks of Global e marketing 5+5=10
Answer:
a) Modes of transportation in international trade
The volume of goods and services exchanged between nations is taking a growing share of the generation of
wealth, primarily by offering opportunities of economic growth in new regions and by bringing down the costs of
a wide assortment of goods that are manufactured. With the improvement in the infrastructure all over the
world, the transportation cost is steadily coming down. This among other factors reduced the cost of goods to the
benefit of the customer and to marketer.
Innovations and improvements in the types of transportation and infrastructures in terms of their capacity have
resulted in a significant increase in of transport efficiency. Ports are especially significant in such a context as
they function as gateways to international trade via sea routes. Consequently, the ability to transfer commodities,
parts and finished goods has improved. More than an increase in trade results from decreasing transport costs;
does more than increasing trade; it can also contribute towards a change in the location of economic activities.
International transportation is being considered a fundamental element supporting world economy because of
the growth of the amount of freight being traded as well as a great variety of origins and destinations. The
dominant factor behind the growth of international transportation in recent years has been the economic

development in Pacific Asia, especially in China. There is an increasing demand on the maritime shipping
industry and on port activities because of considerable trading distances. China is importing an increasing
amount of raw materials and energy while exporting larger quantities of manufactured products as its industrial
and manufacturing activities develop. As a result of all this there has been a swell in demands for international
transportation over long distances.
Evidence of this surge is the number of containers handled by the ports in the Pearl River delta in Guangdong
province, which now process almost as many containers as all the ports in the United States combined.
Additional demands in international cargo volume and the distance traversed by this cargo have placed an
increasing amount of pressure on international transportation systems. This could not have taken place without
significant technical improvements permitting to transport larger quantities of passengers and freight, and this
more quickly and more efficiently. It has mostly been the technical improvements in containerisation that have
contributed to this environment of growing mobility of freight. A growing share of general freight moving
globally is containerised because containers and their inter modal transport systems improve the efficiency of
global distribution.
As a consequence, transportation is often seen as factor that enables and not one that necessarily causes
international trade. It is instead, considered a condition without which globalisation could not have occurred. A
common development problem is the inability of international transportation infrastructures to support flows,
denying access to the global market and the benefits that can be derived from international trade.
International trade demands distribution infrastructures that can sustain trade between several partners. Three
components of international transportation facilitate trade:
Transportation infrastructure. This refers to physical infrastructures such as vehicles, networks and terminals.
While efficiencies in transport infrastructures will promote international trade, deficiencies will inhibit it.
Transportation services. This refers to the complex set of services involved in the international circulation of
passengers and freight. It includes activities such as logistics, distribution, marketing, finance and distribution.
Transactional environment. This refers to the complex legal, political, financial and cultural context in which
international transport systems operate. It deals with facets like regulations, quotas, exchange rates, and tariffs,
including consumer preferences.
Among the numerous transport modes, two are specifically concerned with international trade:
Ports and maritime shipping 90% of the global trade takes place through ports.
Airports and air transport In terms volume and weight air transport involve in 0.2% of tonnage of goods
transported by air, but in terms of value, it is significant.
Road and railway modes tend to occupy a more marginal portion of international transportation since
international rail and road links are less.

b) Benefits and risks of Global e marketing

Benefits of global e-marketing to companies
Reduction in costs through automation: Through the use of technology, e-marketing has reduced the
cost of the company to reach to the target segments of the consumer. Global e-marketing enables the companies
to make up for most of the differences in the countrys costs of production which, in turn, encourages
competition from low-cost companies from the emerging economies. The operational costs like order taking,
billing, etc. get reduced.
Response time reduction: Global e-marketing has made it possible to take order at anytime of the day.
The customer can order immediately after seeing the product. The marketer gets the order at the record short
time from any location of the world.
Global reach: Through global e-marketing, companies are able to reach vast audience. Earlier because of the
cost factor this was possible only for big multinationals but e-marketing opens up new avenues for small firms
through small investment.
Measurable results: The effectiveness of an advertisement campaign can be measured through number of
hits and clicks on the advertisement.
Mass customisation: Global e-marketing is a two-way communication and through the pull-type
processing allows the company to customise their products and services according to the customer requirements
and still reach economies of scale.
Lower promotional costs: It is cheaper to have an advertisement on internet than any other traditional
methods.
Instant conversion rate: If the consumer is convinced with the features and other aspects of the product,
he will buy immediately.
Benefits of global e-marketing to the consumer
Different suppliers within a short span of time: Global e-marketing provides option for the consumer
to find different suppliers within a short span of time. Consumers can research and purchase products and can
assess a number of global suppliers. The consumer can do price comparison between the suppliers and can buy
from the appropriate supplier.
Faster delivery: This is possible as the marketer gets the order within a short time. The consumer is likely to
get the product faster as the companys total order taking time reduces. Also some products like music, software,
etc. can be downloaded instantly.
Competition: The competition in the e-marketing business ensures that the consumer gets the product at
good discounts and value-added features.

 Convenience: Global e-marketing enables the consumers to buy anytime from home according to their
convenience. This helps consumer in taking rational decisions.
After sales service: E-marketing includes after sales service, i.e. customer relationship. The scope of emarketing is definitely more than the traditional marketing. It enables the consumer to take advantage of this
increased scope of business.

Risks involved in global e-marketing

From the angle of customer
Security and reliability concerns: Hacking and security holes in software are common occurrences in the
e-marketing. The consumers are also reluctant to purchase online because of privacy concerns. Another aspect is
reliability of the order, i.e. getting what you ordered. The consumers are not sure whether they will receive
exactly what they ordered.
Feel and touch: The consumer is not able to touch, feel or smell the product which makes the consumer
hesitant of buying the product.
Internet infrastructure: Issues like low-speed internet connections are also involved. The order processing
takes long time and sometimes ends up unsuccessful. The websites are overcomplicated and very large. It takes a
long time for the buyer to download the contents.
Cost of computing equipment: Changing technologies require updated equipment to access the internet.
Dependability on technology: E-marketing requires both the customers and manufacturer to use newer
technologies.
From the angle of organisation
Changes in technologies: The technologies keep changing rapidly and sometimes the companies are not
able invest in the new technology and have a fear of being left behind.
Increased global competition: The cost of the product can be different in two countries due to many
reasons like resources available, etc. Some companies are not able to cut the costs and are forced to exit the
market.