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What is International Marketing?

"International Marketing is the performance of business activities that direct the flow
of a company's goods and services to consumers or users in more than one nation for
a profit. ("Cateora and Ghauri (1999))

International marketing can be defined as "marketing carried on across national

International marketing has also been defined as ' the performance of business
activities that direct the flow of goods and services to consumers or users in more than
in one nation.

"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

Why go International?

Profit Motive
Government Policies
Monopoly Power
Domestic Market constraint
Spin off benefits

Difference between international marketing and domestic marketing?

Political Entities
Different Legal Systems
Cultural Differences
Different Monetary Systems: Each country has its own monetary system and the
exchange value of each country's currency is different from that of the other. The
exchange rates between currencies fluctuate every day. In case of domestic marketing

there is only one currency prevailing in the country.
Differences in the Marketing infrastructure
Trade Restrictions: Trade restrictions, particularly import controls are a very

important problem which an international marketer faces.
Transport Cost
Procedures and Documentations

International Trade .  Degree of Risk Stability in Business Environment Importance of global marketing A) Importance from the consumer's point of view:  Consumption of unpronounced goods  Consumption of goods at a low price  Enjoying benefits of competition  Consumption of new products  Increase in consumption B) Importance from the producer's point of view:  Export of surplus production  Expansion of market in foreign countries  Production of goods at a low cost  Increase in production  More profitable  Reduce business risk  Reduce cost C) Importance from economic point of view:  Increases total production  Increases export earnings  Challenging natural calamities  knowledge and cultural progress  Increases international peace and assistantship  Extension of industry  Export of unusual goods  Optimum utilization of natural resources  Progress in technological knowledge  Image development.

• Trades mainly have two components EXPORTS and IMPORTS.• International trade is the exchange of capital. goods. and from those characteristics deduce what they actually trade. and be right. and services across international borders or territories. That’s why we have a variety of models that postulate different kinds of characteristics as the   reasons for trade. Trade theories . to know about the effects of trade on the domestic economy. Why trade theories?  The first purpose of trade theory is to explain observed trade. A third purpose is to evaluate different kinds of policy. Secondly. That is. we would like to be able to start with information about the characteristics of trading countries.

Theory of Comparative Advantage . Mercantilist Theory  Mercantilist theory proposed that a country should try to achieve a favorable balance of trade (export more than it imports)  Mercantilism was at its height in the 17th and 18th centuries. and was popularised by Adam Smith in 1776. and trade   for those goods where it is not efficient Trade between countries is. Theory of Absolute Advantage  Suggests specialization through free trade because consumers will be better off if they can buy foreign-made products that are priced more cheaply than domestic   ones A country may produce goods more efficiently because of a natural advantage or because of an acquired advantage Adam Smith: Wealth of Nations (1776) argued: o Capability of one country to produce more of a product with the same amount of input than another country o A country should produce only goods where it is most efficient. The term Merchantilism was coined by the Marquis de Mirabeau in 1763. but its purpose is to achieve some social or political objective  A nation’s wealth depends on accumulated treasure    Gold and silver are the currency of trade Theory says you should have a trade surplus.a.  Minimize imports through tariffs and quotas Flaw: restrictions.  Maximize export through subsidies.  Neomercantilist policy also seeks a favorable balance of trade. beneficial Assumes there is an absolute balance among nations c. impaired growth b. therefore.

Trade Pattern Theories    How much a country will depend on trade if it follows a free trade policy What types of products countries will export and import With which partners countries will primarily trade h. . The Porter Diamond theory Four conditions as important for competitive superiority: 1) demand conditions 2) factor conditions 3) related and supporting industries 4) firm strategy. They are generally more self-sufficient than smaller countries. and rivalry g. d. Product Life Cycle (PLC) Theory f. Theory Of Country Size  Countries with large land areas are apt to have varied climates and natural  resources. structure. Also proposes specialization through free trade because it says that total global output can increase even if one country has an absolute advantage in the production of all products. Theories of Specialization  Both absolute and comparative advantage theories are based on specialization e.

services and payments from one destination to another”. • Trade barriers are man-made obstacles to the free movement of goods between different countries and impose artificial restrictions on trading activities between countries TRADE BARRIERS OBJECTIVES • To protect domestic industries from foreign goods • To promote new industries and research & development activities by providing a home market for domestic industries • To maintain favorable balance of payment • To conserve foreign exchange reserves of the country by restricting imports from foreign countries . and capital will determine the  relative costs of these factors Factor costs will determine which goods the country can produce most efficiently j. labor. Country-similarity Theory  Most trade today occurs among high-income countries because they share similar market segments and because they produce and consume so much  more than emerging economies Much of the pattern of two-way trading partners may be explained by cultural similarity between the countries. political and economic agreements. Factor-Proportions Theory  A country’s relative endowments of land. impediment or road block that hampers the smooth flow of goods. raising the transport costs of foreign trade i. and by the distance between them TRADE BARRIERS • A trade barrier is defined as “any hurdle. • They arise from the rules and regulations governing trade either from home country or host country or intermediary. Large countries’ production and market centers are more likely to be located at a greater distance from other countries.

reduce their demand and thereby discourage their imports CLASSIFICATION OF TARIFFS (1) On the basis of origin and destination of goods crossing national boundaries • Export duty: an export duty is levied by the country of origin on a commodity designated for use in other countries. so as to discourage their entry into the home country for marketing purposes. thereby restricting their sales as well as their import. Governments impose tariffs only on imports and not on exports as they are interested in export promotion  The aim of a tariff is thus to raise the prices of imported goods in domestic markets.  Tariffs enhance the price of the imported goods. a. The majority of finished goods do not attract . A country may use both tariff and non-tariff barriers in order to restrict the entry of foreign goods.  Tariff refers to the duties imposed on internationally traded commodities when they cross national boundaries and may be in the form of heavy taxes or custom duties on imports. TARIFF BARRIER  A tariff barrier is a levy collected on goods when they enter a domestic tariff area through customs. This also restricts conspicuous consumption within country • To counteract trade barriers imposed by other countries • To encourage domestic production in the domestic market and thereby make the country strong and efficient TYPES OF TRADE BARRIERS Trade barriers are classified as tariff barriers and non-tariff barriers.• To protect the national economy from dumping by other countries with surplus production • To mobilize additional revenue by imposing heavy duties on imports.

Here the value of the commodity on the invoice is taken as the base for calculation of the duty e. etc. Here. • Import duty: an import duty is a tax imposed on a commodity originating in another country by the country for which the product is designated. For example. The purpose of heavy import duties is to earn revenue. Protective tariffs are usually high so as to reduce imports . to make imports costly and to provide protection to domestic industries.. but does not really obstruct the flow of imported goods. Here. • Ad-valorem duty: this duty is imposed at a fixed % on the value of a commodity imported. Such duties are normally imposed on the primary products in order to conserve them for domestic industries. rs 800 on each tv set or washing machine or rs 3000 per metric ton on cold rolled iron coils. • Compound duty : a tariff is referred to a compound duty when the commodity is subject to both specific and ad-valorem duty (3) On the basis of the purpose they serve • Reverse tariff : it aims at collecting substantial revenue for the government. the duty is imposed on items of mass consumption. the rate of the duty is fixed and is collected on each unit imported. In India. (2) On the basis of quantification of tariffs • Specific duty: a specific duty is a flat sum collected on physical unit of the commodity imported. but the rate of duty is low. export duty is levied on oilseeds.export duty.g. 3% ad-valorem duty on the c&f value of the goods imported. • Protective tariff: it aims at giving protection to home industries by restricting or eliminating competition. coffee and onions. • Transit duty: a transit duty is a tax imposed on a commodity when it crosses the national frontier between the originating country and the country which it is consigned to.

• Countervailing duty: such duties are similar to anti-dumping duties but are not so severe. Non-tariff barriers (1) QUOTA SYSTEM . The lower rate is made applicable to a friendly country or to a country with which the importing country has a bilateral trade agreement. In addition it also creates employment opportunities within the country by promoting domestic industries. This facilitates an increase in domestic production. • Tariffs aim to reduce the deficit in the balance of trade and balance of payment of a country. two rates of duty are fixed on all or some commodities. • Tariff brings in substantial revenue to the government. They are general tariff.• Anti-dumping duty: dumping is the commercial practice of selling goods in foreign markets at a price below their normal cost or even below their marginal cost so as to capture foreign markets. tariff rates are fixed for various commodities and the same rates are made applicable to imports from all other countries. Benefits of tariff to the home country • Imports from abroad are discouraged or even eliminated to a considerable extent. • Protection is given to the home industries and manufacturing sector. They are imposed to nullify the benefits offered through cash assistance or subsidies by the foreign country to its manufacturers. • Triple column tariff : here three different rates of duties are fixed. (4) On the basis of trade relations • Single column tariff : under this system. • Consumption of foreign goods is reduced to a minimum and the attraction for imported goods is brought down. The first two categories have minimum variance but the preferential tariff is substantially lower than the general tariff and is applicable to friendly countries where there is a bilateral relationship. • Double column tariff : under this sysytem. The rate of such duty will be proportional to the extent of cash assistance or subsidy granted. international tariff and prefential tariff. The higher rate is applicable to all other countries.

Importers have to approach the licensing authorities for permission to import certain commodities. • Penalties are imposed for non-compliance of such documentation formalities. the producers are obliged to utilize a certain % of domestic raw materials in manufacturing the finished products. • Some importing countries impose strict rules regarding the consular documents necessary to import goods. Imports in excess of this limit are subject to a higher rate of duty • Unilateral quota : in a unilateral quota system. . Foreign exchange for imports is provided against license. Such quotas are usually administered by requiring importers to have licences to import a particular commodity. The types of quotas are : • Tariff quota : it combines the features oof the tariff as well as the quantity here.Under this system. a country fixes its own ceiling on the import of a particular item. Such documents include import certificates. (2) IMPORT LICENSING • In this system. • Bilateral quota : in a bilateral quota. imports are allowed under license. • Mixing quota : under the mixing quota. certificates of origin and certified consular invoices. As a result trade is developed among the member countries and allows advantages to all member countries. the imports of a commodity upto a specified volume are allowed duty free or at a special low rate of duty. but it is the result of negotiations between the country importing the goods and the country exporting them. Imports are not allowed over and above a specific limit. the quantity to be imported is decided in advance. • Such import licenses are the practice in many countries. This method is used to control the quantity of imports (3) CONSULAR FORMALITIES. (4) PREFERENTIAL TREATMENT THROUGH TRADING BLOCS • Some countries form regional groups and offer special concessions and preference to member countries. • The purpose of consular formalities is to restrict imports to some extent and prevent free imports of commodities that are not necessary. the quantity of a commodity permitted to be imported from various countries during a given period is fixed in advance.

Under such regulations. Trade relations were mainly confined to Britain and other . • Such state trading acts as a barrier. which are applicable to imports. the foreign exchange earned should be surrendered to the government. • Such health & safety measures are mainly applicable to raw materials and food items. The government provides foreign exchange to the businessmen as per priorties that are fixed periodically (8) HEALTH & SAFETY MEASURES • Many countries have specific rules regarding health & safety regulations. etc. • Such restrictions have the following objectives: (a) to restrict the demand for foreign exchange and to use the foreign exchange reserves in the best possible manner. restricting the freedom of private parties. (b) to check the flow of capital. minerals. • Restrictions under such acts are useful to curtail imports. State trading is useful to restrict imports as the final decision is taken by the government. bullion. (c)to maintain the value of exchange rates.• On the other hand. pertaining to the movement of drugs. it can cause considerable loss to nonmember countries. (5) CUSTOMS REGULATIONS • Customs regulations and administrative regulations are very complicated in many countries. foreign trade of India was typical of a colonial and agricultural economy. as a trading bloc acts as a trade barrier. Imports are not allowed if the regulations are not followed properly. India’s foreign trade since independence • On the eve of Independence in 1947. Tax administration also acts as barrier to free marketing amongst countries. There are a number of ‘commodities acts’. (7) FOREIGN EXCHANGE REGULATIONS • Countries impose various restrictions on the use of foreign exchange earned through imports. (6) STATE TRADING • State trading refers to import-export activities conducted by the government or a government agency.

with focus on post-1991 developments. Beginning mid-1991. Exports remained relatively sluggish owing to lack of exportable surplus. foreign investments (both direct and portfolio). foreign exchange reserves. foreign trade of India suffered • from strict bureaucratic and discretionary controls. It addresses issues related to trade policy. defence equipment. Imports galloped because of increasing requirements of capital goods. external debt and aid. with some exceptions.Commonwealth countries. contingent on achieving certain preconditions to ensure an orderly process of liberalization and ensuring macroeconomic stability. petroleum products. India. Imports always exceeded exports. The exports cover a wide range of traditional and nontraditional items while imports consist mainly of capital goods. current account dynamics. For about 40 years (1950-90. petroleum products. and chemicals to meet the ever-increasing needs of a developing and diversifying economy. exchange rate management. This was characteristic of a developing country struggling for • reconstruction and modernization of its economy. export strategy. Exports consisted chiefly of raw materials and plantation • crops while imports composed of light consumer goods and other manufactures. always faced deficit in its balance of payments. i. foreign exchange transactions were tightly controlled by the Government and the Reserve Bank of India. Similarly. This approach has been vindicated in recent years with the growing incidence of financial crises elsewhere in the world. All the same. From 1947 till mid-1990s. tariff policy. raw materials. and raw materials. and WTO. inflation at home. capital account liberalization. . competition in the international market. Reforms in the external sector of India were intended to integrate the Indian economy with the world economy.e. Over the last 60 years. India’s approach to openness has been cautious. this book describes and examines changes in the pattern of India’s foreign trade since Independence in 1947. In recognition of the growing importance of the foreign trade in driving the economy. India’s foreign trade has undergone a complete change in terms of composition and direction. the Government of India introduced a series of reforms to • liberalise and globalise the Indian economy. the policy regime in India in regard to liberalization of the foreign sector has • witnessed very significant change. and increasing protectionist policies of the developed countries.