Introduction To International Marketing

Introduction to International Marketing
Board of Studies
Prof. H. N. Verma Prof. M. K. Ghadoliya

Vice- Chancellor Director,
Jaipur National University, Jaipur School of Distance Education and Learning
Jaipur National University, Jaipur
Dr. Rajendra Takale
Prof. and Head Academics
SBPIM, Pune
___________________________________________________________________________________________
Subject Expert Panel
Dr. Chetan Choudhary Kartik Bijapurkar

Director, SBS, Sinhgad Subject Matter Expert
Pune
___________________________________________________________________________________________
Content Review Panel
Vijayalakshmi R.H
Subject Matter Expert
___________________________________________________________________________________________
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First Edition 2013
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Index
I. Content....................................................................... II
II. List of Figures............................................................ V
III. List of Tables...........................................................VI
IV. Abbreviations........................................................ VII
V. Case Study................................................................ 92
VI. Bibliography............................................................ 95
VII. Self Assessment Answers..................................... 96
Book at a Glance
I
Contents
Chapter I . ..................................................................................................................................................... 1
Introduction to International Marketing.................................................................................................... 1
Aim................................................................................................................................................................. 1
Objectives....................................................................................................................................................... 1
Learning outcome........................................................................................................................................... 1
1.1 Introduction . ............................................................................................................................................ 2
1.2 Definition of Marketing ........................................................................................................................... 2
1.3 Understanding Strategic Marketing ......................................................................................................... 2
1.4 Post Modern Era of Marketing................................................................................................................. 3
1.5 Global Marketing...................................................................................................................................... 3
1.6 Marketing Evolutionary Stages................................................................................................................. 4
1.7 Factors Leading to Internationalization.................................................................................................... 5
1.8 The International Product Trade Cycle..................................................................................................... 5
1.9 Orientation of Management...................................................................................................................... 6
Summary ...................................................................................................................................................... 7
References...................................................................................................................................................... 7
Recommended Reading................................................................................................................................ 7
Self Assessment . ........................................................................................................................................... 8
Chapter II.................................................................................................................................................... 10
The Marketing Environment..................................................................................................................... 10
Aim............................................................................................................................................................... 10
Objectives .................................................................................................................................................... 10
Learning outcome......................................................................................................................................... 10
2.1 Introduction . ...........................................................................................................................................11
2.2 Economic Cycles.................................................................................................................................... 12
2.3 Strategic Planning and the Marketing Process........................................................................................ 12
2.4 SWOT Analysis...................................................................................................................................... 15
2.5 Consumer Behaviour ............................................................................................................................. 15
2.5.1 Factors Affecting Consumer Behaviour ................................................................................ 15
2.5.2 Consumer Attitude.................................................................................................................. 16
2.5.3 Consumer Beliefs.................................................................................................................... 16
2.5.4 Consumer Effects.................................................................................................................... 16
2.6 Behavioural Intention.............................................................................................................................. 17
2.7 Reference Group..................................................................................................................................... 18
2.8 The Family Life Cycle............................................................................................................................ 18
2.9 Family Decision Making......................................................................................................................... 18
2.10 Organisational Buyers........................................................................................................................... 20
Summary .................................................................................................................................................... 21
References ................................................................................................................................................... 21
Recommended Reading.............................................................................................................................. 21
Self Assessment............................................................................................................................................ 22
Chapter III.................................................................................................................................................. 24
Economic Environment.............................................................................................................................. 24
Aim .............................................................................................................................................................. 24
Objectives .................................................................................................................................................... 24
3.1 Introduction............................................................................................................................................. 25
3.2 Economic Marketing Overview.............................................................................................................. 25
3.3 The Global Economy.............................................................................................................................. 25
3.4 Balance of Payments............................................................................................................................... 26
II
3.5 The Nature of Economy.......................................................................................................................... 27
3.5.1 Classification of Economic Activity As Per Countries........................................................... 27
Summary .................................................................................................................................................... 28
References.................................................................................................................................................... 28
Self Assessment............................................................................................................................................ 29
ChapterIV . ............................................................................................................................................ 31
Cultural Environment................................................................................................................................ 31
Aim .............................................................................................................................................................. 31
Objectives .................................................................................................................................................... 31
4.1 Introduction............................................................................................................................................. 32
4.2 Various Approaches of culture................................................................................................................ 32
4.2.1 Anthropological Approach...................................................................................................... 32
4.2.2 Maslow’s Approach................................................................................................................ 32
4.2.3 Self Reference Criterion......................................................................................................... 34
4.2.4 Diffusion Theory..................................................................................................................... 34
4.2.5 High and Low Context Cultures and Perception.................................................................... 36
4.3 Elements of Culture ............................................................................................................................... 36
Summary...................................................................................................................................................... 38
References.................................................................................................................................................... 38
Recommended Reading ............................................................................................................................. 38
Self Assessment . ......................................................................................................................................... 39
Chapter V..................................................................................................................................................... 41
Market Entry Strategy............................................................................................................................... 41
Aim .............................................................................................................................................................. 41
Objectives .................................................................................................................................................... 41
5.1 Introduction............................................................................................................................................. 42
5.2 Implementation of Marketing Strategy . ................................................................................................ 42
5.3 Cunningham’s Five Strategy . ................................................................................................................ 43
5.4 Entry Strategies....................................................................................................................................... 44
5.5 Piggybacking........................................................................................................................................... 47
5.6 Foreign Production.................................................................................................................................. 47
5.7 Special Features of Commodity Trade.................................................................................................... 49
Summary .................................................................................................................................................... 51
References.................................................................................................................................................... 51
Self Assessment . ......................................................................................................................................... 52
Chapter VI................................................................................................................................................... 54
Competitive Analysis and Strategy........................................................................................................... 54
Aim .............................................................................................................................................................. 54
Objectives .................................................................................................................................................... 54
6.1 Introduction............................................................................................................................................. 55
6.2 Industry Analysis.................................................................................................................................... 55
6.3 Competition Analysis.............................................................................................................................. 58
6.3.1 Competitive Strategy.............................................................................................................. 58
6.3.2 Generic Approaches................................................................................................................ 59
6.4 Strategy for Success................................................................................................................................ 59
6.4.1 Sourcing.................................................................................................................................. 60
III
Summary .................................................................................................................................................... 61
References ................................................................................................................................................... 61
Self Assessment . ......................................................................................................................................... 62
Chapter VII................................................................................................................................................. 64
Product and Promotion Decision............................................................................................................... 64
Aim .............................................................................................................................................................. 64
Objectives..................................................................................................................................................... 64
7.1 Introduction . .......................................................................................................................................... 65
7.2 Basic Concept ........................................................................................................................................ 65
7.3 Product Design........................................................................................................................................ 65
7.4 Production Decision................................................................................................................................ 66
7.4.1 Manufacturing Process........................................................................................................... 66
7.4.2 Specifications . ....................................................................................................................... 67
7.4.3 Culture.................................................................................................................................... 67
7.4.4 Physical Product..................................................................................................................... 67
7.4.5 Packaging................................................................................................................................ 68
7.4.6 Labelling................................................................................................................................. 68
7.4.7 Branding ................................................................................................................................ 68
7.4.8 Warranty.................................................................................................................................. 68
7.4.9 Service.................................................................................................................................... 68
7.5 Product Strategy . ................................................................................................................................... 69
7.6 Promotion Decision ............................................................................................................................... 69
7.6.1 Global Promotion . ................................................................................................................. 70
7.6.2 Campaign Design.................................................................................................................... 70
Summary .................................................................................................................................................... 72
References.................................................................................................................................................... 73
Self assessment ........................................................................................................................................... 73
Chapter VIII................................................................................................................................................ 76
Distribution and Global Marketing Logistics documentation................................................................ 76
Aim .............................................................................................................................................................. 76
Objectives .................................................................................................................................................... 76
8.1 Introduction . .......................................................................................................................................... 77
8.2 Channel Structure.................................................................................................................................... 77
8.3 Role of Government................................................................................................................................ 80
8.4 International Merchant............................................................................................................................ 81
8.5 Market Strategy in Distribution Channel................................................................................................ 82
8.6 Tariff for Distribution Channel............................................................................................................... 83
8.6.1 Custom Duties during the time of import............................................................................... 83
8.7 International Trade and Export Contracts............................................................................................... 83
8.7.1 Terms of Payment .................................................................................................................. 84
8.8 Documents for Distribution in Global Market........................................................................................ 84
8.8.1 Export Documentation............................................................................................................ 84
8.8.2 Commercial Document........................................................................................................... 84
8.8.3 Official Document.................................................................................................................. 86
8.8.4 Insurance Document............................................................................................................... 87
8.8.5 Transport Document............................................................................................................... 87
Summary .................................................................................................................................................... 89
References.................................................................................................................................................... 89
Self Assessment............................................................................................................................................ 90
IV
List of Figures
Fig. 1.1 Relation between product life cycle (Trade and investment)............................................................ 5
Fig. 2.1 Components of strategy................................................................................................................... 13
Fig. 2.2 BCG Matrix..................................................................................................................................... 14
Fig. 2.3 Factors of consumer behaviour........................................................................................................ 16
Fig. 4.1 Maslow’s Hierarchy ....................................................................................................................... 33
Fig. 4.2 Rate of adaptors............................................................................................................................... 35
Fig. 5.1 Phases of strategy............................................................................................................................ 42
Fig. 5.2 Methods for foreign market entry.................................................................................................... 44
Fig. 5.3 Aggressive and passive export path................................................................................................. 45
Fig. 5.4 Export marketing channel for Kenyan horticulture product............................................................ 46
Fig. 6.1 Forces influencing competition in the Industry............................................................................... 55
Fig. 6.2 Porter’s Five Force Model............................................................................................................... 56
Fig. 6.3 Generic competitive advantage....................................................................................................... 59
Fig. 7.1 Cycle of manufacturing process...................................................................................................... 67
Fig. 7.2 Product strategy............................................................................................................................... 69
Fig. 7.3 Block diagram of conveying message............................................................................................. 70
Fig. 7.4 Phases of Campaign design............................................................................................................. 71
Fig. 8.1 Channel for consumer . ................................................................................................................... 78
Fig. 8.2 Channel for business to business..................................................................................................... 78
Fig. 8.3 Cotton distribution........................................................................................................................... 81
V
List of Tables
Table 1.1 Stages of domestic to global evolution........................................................................................... 4
Table 5.1 Matrix for comparing alternative methods of market entry........................................................ 49
Table 6.1 Factors affecting international competitiveness for products/commodities.................................. 57
Table 6.2 Sources of competitive advantage for selected commodity systems............................................ 58
Table 8.1 Documents Required for Export................................................................................................... 85
VI
Abbreviations
CIF - Cost Insurance Freight
CMD - Citrus Marketing Board
CSC - Cold Storage Company
EPRG - Ethnocentrism Polycentrism Regiocentrism Geocentrism
EPZ - Export Processing Zones
ESAP - Economic Structural Adjustment Programmes
FOB - Free On Board
GATT - General Agreement on Tariffs and Trade
HCDA - Horticultural Crops Development Authority
ICT - Information and Communication Technology
LDCs - Less Developed Countries
PTA - Preferential Trade Area
SRC - Self Reference Criterion
SWOT - Strength Weakness Opportunity Threat
UN - United Nations
VII
Chapter I
Aim
The aim of this chapter is to:
• explain the general concept of marketing
• introduce the basic fundamental of International Marketing
• establish the relationship between product life cycle, trade and investment
Objectives
The objectives of this chapter are to:
• enlist various definition and operational activities of marketing
• understanding the strategic concept and modern culture trend of marketing
• explain global marketing
• enlist various marketing stages
Learning outcome
At the end of this chapter, the students will be able to:
• understand the concept of marketing
• difference between global market and local market
• analyse the product life cycle and how it affected by investments
1
1.1 Introduction
Whether an organization markets its goods and services domestically or internationally, the definition of marketing
still applies. Due to the globalization the scope of marketing is broadened when the organization decides to sell
across international boundaries.
For example, the organization’s language of business may be English, but it may have to conduct business in French,
Japanese or German. This not only requires translation facility of various languages, but cultural conditions have to be
accounted for as well. Doing business in different cultural forms may be different from doing it the English way.
Let us, firstly define marketing and then see how, by marketing across multinational boundaries, differences,
whereever they exist, have to be accounted for.
1.2 Definition of Marketing

Various authors have defined the term marketing in many ways such as ;
• S. Carter defines marketing as: The process of building lasting relationships through planning, executing and
controlling the conception, pricing, promotion and distribution of ideas, goods and services to create mutual
exchange that satisfy individual and organizational needs and objectives.
• Kotler says that marketing is the social process by which individuals and groups obtain what they need and
want through creating and exchanging products and value with others.
• Adcock defines Marketing as the the right product, in the right place, at the right time, at the right price.
• Palmer defines marketing is essentially about marshalling the resources of an organization so that they meet
the changing needs of the customer on whom the organization depends.
• Bartles defines marketing is the process whereby society, to supply its consumption needs, evolves distributive
systems composed of participants, who, interacting under constraints - technical (economic) and ethical (social)
- create the transactions or flows which resolve market separations and result in exchange and consumption.
The long held tenets of marketing are:

• Customer value
• Competitive advantage
• Focus
This means that organizations have to study the market, develop products or services that satisfy customer needs and
wants, develop the 'correct' marketing mix and satisfy its own objectives as well as give the customer satisfaction
on a continuing basis. However, it became clear in the 1980's, that the definition of marketing was too narrow.
Preoccupation with the tactical workings of the marketing mix led to neglect of long term product development,
so strategic marketing was born. The focus shifted from knowing everything about the customer, to knowing the
customer in a context which includes the competition, government policy and regulations, and the broader economic,
social, and political macro forces that shape the evolution of markets.
In global marketing terms, this means create networking, working closely with home country’s government officials
and industry competitors to gain access to a target market. Also, the marketing objective has changed from one of
satisfying organizational objectives to one of stakeholder benefits - including employees, society, and government.
Profit is still essential but not an end in itself.
1.3 Understanding Strategic Marketing

Strategic marketing according to Wensley, has been defined as: "initiating, negotiating and managing acceptable
exchange relationships with key interest groups or constituencies, in the pursuit of sustainable competitive advantage
within specific markets, on the basis of long run consumer, channel and other stakeholder franchise."
Whether one takes the definition of marketing or strategic marketing, marketing must still be regarded as both a
philosophy and a set of functional activities. As a philosophy, embracing customer value (or satisfaction), planning,
and organizing activities to meet individual and organizational objectives, marketing must be internalized by all
members of an organization, because without satisfied customers the organization will eventually die.
2
Marketing is only a philosophy. It has some operational activities also like:
• Advertising
• Selling
• Promotional activities
• Campaigning
• Market research
• Product development
It is both. In planning for marketing, the organization has to basically decide what it is going to sell, to which target
market and with what marketing mix (5 P's: product, place, promotion, price and people).
Although these tenets of marketing planning must apply anywhere, when marketing across national boundaries,
the difference between domestic and international marketing lies almost entirely in the differences in national
environments within which the global programme is conducted and the differences in the organization and programs
of a firm operating simultaneously in different national markets.
1.4 Post Modern Era of Marketing

It is recognized that in the post modern era of marketing, even the assumptions and long standing tenets of marketing
like the concepts of consumer needs, consumer sovereignty, target markets and product/ market processes are being
challenged. The emphasis is towards the emergence of the customizing consumer demand, that is, the customer who
takes elements of the market offerings and moulds a customized consumption experience out of these.
Even further, post modernism, posts that the consumer who is the consumed, the ultimate marketable image, is also
becoming liberated from the sole role of a consumer and is becoming a producer. This reveals itself in the desire
for the consumer to become part of the marketing process and to experience immersion into “thematic settings”
rather than merely encounter products.
So in consuming food products for example, it becomes not just a case of satisfying hunger needs, but also can
be rendered as an image-producing act. Like if someone wants to reduce his or her thirst in the month of summer,
then the first thing comes into mind is Coca Cola (“Thanda bole to Coca Cola”) . In the post modern marketplace
the product does not project images, it fills images. This is true in some foodstuffs. The consumption of “designer
water” or “slimming foods” is a statement of a self-image, not just a product consuming act.
Acceptance of post modern marketing affects discussions of products, pricing, advertising, distribution, and
planning. However, given the fact that this textbook is primarily written with the developing economies in mind,
where the environmental conditions, consumer sophistication and systems are not such that allow a quantum leap
to postmodernism, it is intended to mention the concept in passing. Further discussion on the topic is available in
the accompanying list of readings.
1.5 Global Marketing

When organizations develop into global marketing organizations, they usually evolve into this from a relatively
small export base. Some firms never get any further than the exporting stage. Marketing overseas can, therefore,
be anywhere on a continuum of 'foreign' to 'global.' It is well to note at this stage that the words 'international,'
'multinational' or 'global' are now rather outdated descriptions. In fact 'global' has replaced the other terms to all
intents and purposes.
'Foreign' marketing means marketing in an environment different from the home base, it’s basic form being 'exporting'.
Over time, this may evolve into an operating market rather than a foreign market. One such example is the Preferential
Trade Area (PTA) in Eastern and Southern Africa where involved countries can trade inter-regionally under certain
common modalities. Another example is the cold storage company of Zimbabwe.
3
Management Stage one Stage two Stage three Stage four

emphasis Domestic International Multinational Global
Focus Domestic Ethnocentric Polycentric Geocentric
Marketing strategy Domestic Extension Adaption Extension
Adaption
Structure Domestic International Worldwide area creation matrix/
mixed
Decentralised bottom
Management style Domestic Centralised top down Integrated
up
Lowest cost
Manufacturing stance Mainly domestic Mainly domestic Host country
worldwide
Domestic used Mainly in each host Cross
Investment policy Domestic
worldwide country subsidization
Domestic market Against home country Each host country
Performance evaluation Worldwide
share market share market share
Table 1.1 Stages of domestic to global evolution
In global marketing, the mode of operation is very different. Organizations begin to develop and run operations in
the targeted country or countries outside of the domestic one. In practice, organizations evolve and Table 1.1 outlines
a typology of terms which describes the characteristics of companies at different stages in the process of evolving
from domestic to global enterprises.
1.6 Marketing Evolutionary Stages

The four stages of marketing's evolution are as follows:
I. Domestic focus
Stage one: Domestic in focus, with all activity concentrated in the home market. Whilst many organizations can
survive like this, for example raw milk marketing, solely domestically oriented organizations are probably doomed
to long term failure.
II. Home focus

Stage two: Home focus, but with exports (ethnocentric). Probably believes only in home values, but creates an
export division. Example: Homemade pickles, spices which are distributed locally.
III. Multinational focus

Stage three: Organizations which come under stage two realize that they must adapt their marketing mixes to overseas
operations. The focus switches to multinational (polycentric) and adaptation becomes paramount.
IV. Global focus

Stage four: Creating value by extending products, services globally and focus on serving emerging global markets
(geocentric). This involves recognizing that markets around the world consist of similarities and differences and
that it is possible to develop a global strategy based on similarities to obtain scale economies, but also recognizes
and responds to cost effective differences. Its strategies are a combination of extension, adaptation, and creation. It
is unpredictable in behavior and always alert to opportunities.
4
1.7 Factors Leading to Internationalization
There have been many underlying forces, concepts, and theories which have emerged as giving political explanation
to the development of international trade. Remarkably, despite the trend to world interdependency, some countries
have been less involved than others. Some of the major factors are like :
• The reduction in trade and investment barriers in the post-World War II period.
• The rapid growth and increase in the size of developing countries’ economies.
• Changes in technologies.
The USA, for example, has a remarkably poor export record. About 2000 US companies only account for more
than 70% of US manufacturers’ exports. This has been mainly due to its huge statewide domestic market, which is
tantamount to international trade, for example, Californian fruit being sold three thousand kilometers away in New
Jersey. Japan has risen fast to dominate the export rankings, with countries of Africa struggling to make a significant
mark, mainly because of their emphasis on exporting primary products. This section will briefly examine the forces
which have been instrumental in the development of world trade.
1.8 The International Product Trade Cycle

The model describes the relationship between the product lifecycle, trade and investment (see figure 1.1) and is
attributable to Venon1 (1966).
The international product trade cycle model suggests that many products go through a cycle during which high-
income, mass consumption countries which are initial exporters, lose their export markets and finally become
importers of the product. At the same time other countries, particularly less developed but not exclusively so, shift
from being importers to exporters. These stages are reflected in Figure 1.1.
Fig. 1.1 Relation between product life cycle (Trade and investment)
5
From a high income country point of view,

Phase 1 involves exporting, based on domestic product strength and surplus
Phase 2, when foreign production begins
Phase 3 when production in the foreign country becomes competitive
Phase 4 when import competition begins
The assumption behind this cycle is that new products are firstly launched in high income markets because a) there
is the potential is vast and b) the product can be tested best domestically, near its source of production. Thus, new
products generally emanate from high income countries and, over time, orders begin to be solicited from lower
income countries and so a thriving export market develops. High income country entrepreneurs quickly realize that
the markets to which they are selling often have lower production costs and so production is initiated abroad for the
new products, so starts the second stage.
In the second stage of the cycle, foreign and high income country production begins to supply the same export
market. As foreign producers begin to expand and gain more experience, their competition displaces the high income
export production source. At this point high income countries often decide to invest in foreign countries to protect
their share. As foreign producers expand, their growing economies of scale make them a competitive source for
third country markets where they compete with high income exporters.
The final phase of the cycle occurs when the foreign producer achieves such a scale and starts exporting to the
original high income producer at a production cost lower than its original high income producer, at a production
cost lower than its original high income supplier. High income producers, once enjoying a monopoly in their own
market, now face competition at home. The cycle continues as the production capability in the product extends
from other advanced countries to less developed countries at home, then in international trade, and finally, in other
advanced countries’ home markets.
Whilst the underlying assumption behind the International product trade cycle is that the cycle begins with the export
of new product ideas from high income countries to low income importers, and then low income countries begin
production of the product, etc., Things do not always turn out as the cycle suggests. Sometimes a high or even low
income exporter may put a product into a high/low income country which is simply unable to respond. In this case,
the Trade Cycle ceases to be the underpinning concept. This may be due to a number of factors like;
• lack of access to capital to build the facilities to respond to the import
• lack of skills or that the costs of local production cannot get down to the level of costs of the imported
product
In this case, product substitution between the exporter and importer may also take place. A classic example of this
phenomenon is the case of Zimbabwe Sunsplash fruit juice drinks.
1.9 Orientation of Management

Perlmutter (1967) identified distinctive “orientations” of management of international organizations. His 'EPRG'
scheme identified four types of attitudes or orientations associated with successive stages in the evolution of
international operations -
• Ethnocentrism - home country orientation - exporting surplus
• Polycentrism - host country orientation - subsidiary operation
• Regiocentrism - regional orientation - world market strategies
• Geocentrism - world orientation - world market strategies
6
Summary
• Firstly, it covered the concept of marketing by elaborating some of the important definition of marketing. The
focus of marketing shifted from knowing everything about the customer, to knowing the customer in a context
which includes the competition, government policy and regulations, and the broader economic, social, and
political macro forces that shape the evolution of markets.
• The 'post modern' era of marketing, even the assumptions and long standing tenets of marketing like the concepts
of 'onsumer needs, consumer sovereignty, target markets and product/ market processes are being challenged.
• When organizations develop into global marketing organizations, they usually evolve into this from a relatively
small export base. Some firms never get any further than the exporting stage. Marketing overseas can, therefore,
be anywhere on a continuum from foreign to global.
• Some of the major factors of internationalization are discussed such as; the reduction in trade and investment
barriers in the post-World War II period, the rapid growth and increase in the size of developing countries’
economies and changes in technologies.
• The international product trade cycle model suggests that many products go through a cycle during which high-
income, mass consumption countries which are initial exporters, lose their export markets and finally become
importers of the product.
References
• Some basic definition of marketing and marketing concept. http://www.marketingteacher.com http://www.
marketingteacher.com/lesson-store/lesson-what-is-marketing.html. Last accessed 10th March 2011.
• Keegan W.J(2003). Global marketing Management. 4th ed. Prentice Hall International Edition.
• World Bank. World Development Report. The Challenge of Development. Oxford University.
Recommended Reading
• Philip R. Cateora. (March 2004). International Marketing:Concept of Marketing. McGraw-Hill Companies;
12th ed.
• Hakan Hakansson. International Marketing and Purchasing of Industrial goods. John Wiley & Sons.
• Michael R. Czinkota, Illka A. Ronkainen. International Marketing. Publisher: South-Western College.
7
Self Assessment
1. Over the last few decades, ———————— have grown because of a number of market factors.
a. Internationalism
b. terrorism
c. warfare
d. restrictions
2. EPRG scheme identified ————— types of attitudes or orientations associated with successive stages in the
evolution of international operations.
a. two
b. four
c. three
d. five
3. Acceptance of ———————— marketing affects discussions of products, pricing, advertising, distribution

and planning.
a. post-modern
b. pre-modern
c. ancient
d. marketing trends
4. Standardised approach towards International Marketing can be aided and abetted with ————————.
a. technology
b. finance
c. raw material
d. technology
5. International ———————— cycle is that the cycle begins with the export of new product ideas from high
income countries to low income importers.
a. product trade
b. culture trade
c. income trade
d. custom trade
6. The more culturally unbounded the product is, the more can ————— clustering take place.
a. domestic
b. global
c. economic
d. financial
7. The international product trade cycle ——————— suggests that many products go through a cycle.
a. model
b. trend
c. direction
d. process
8
8. High-income, mass consumption countries which are initial —————, lose their export markets.
a. importers
b. exporters
c. local
d. global marketers
9. Stage two organizations which realize that they must adapt their ———— to overseas operations.
a. marketing mixes
b. culture mixes
c. joint venture mixes
d. corporate mixes
10. The scope of marketing is broadened when the organization decides to sell across —————————
boundaries.
a. domestic
b. international
c. district
d. global
9
Chapter II
The Marketing Environment
Aim
• explain the environmental concept of marketing
• introduce strategic planning in the marketing process
• indentify various changing attitude of behavioural intention
Objectives
• describe the economic cycle for international marketing, BCG matrix and SWOT analysis
• enlist various levels of strategic planning and factors affecting consumer behaviour
• formulate the family life cycle for international marketing
• explain the concept of organisational buyer
Learning outcome
• understand the various environmental factors affecting marketing concept
• know about strategic levels of marketing process
• identify the economic factors which effects the global market
10
2.1 Introduction
Last chapter we discussed about general overview of marketing and various stages of marketing starting from local
market to global market. To support the global marketing, various environmental elements should be considered.
The elements are like

• Political
• Competition
• Economics
• Technological
• Legal
• Social
Political: Businesses are very vulnerable to changes in the political situation. For example, because consumer groups
lobbied Congress, more stringent rules were made on the terms of car leases. The tobacco industry is currently the
target of much negative attention from government and public interest groups. Currently, the desire to avoid aiding
the enemy may result in laws that make it more difficult for American firms to export goods to other countries.
Competition: Competitors often creep in and threaten to take away markets from firms. For example, Japanese
auto manufacturers became a serious threat to American car makers in the late 1970s and early 1980s. Similarly,
the Lotus Corporation, maker of one of the first commercially successful spreadsheets, soon faced competition from
other software firms.
Note that while competition may be frustrating for the firm, it is good for consumers. In fact, we will come back to
this point when we consider the legal environment. Note that competition today is increasingly global in scope.
Economics: Some firms in particular are extremely vulnerable to changes in the economy. Consumers tend to put
off buying a new car, going out to eat, or building new homes in bad times. In contrast, in good times, firms serving
those needs may have difficulty keeping up with demand.
Technological: Changes in technology may significantly influence the demand for a product. For example, the
advent of the fax machine was bad news for Federal Express.
Legal: Firms are very vulnerable to changing laws and changing interpretations by the courts. Firms in the U.S. are
very vulnerable to lawsuits. McDonald’s, for example, is currently being sued by people who claim that eating the
chain’s hamburgers caused them to get fat.
Some impacts of the legal environment: Firms are significantly limited in what they can do by various laws—some
laws, for example, require that disclosures be made to consumers on the effective interest rates they pay on products
bought on installment. A particularly interesting group of laws relate to antitrust. These laws basically exist to
promote fair competition among firms. Some principles involved here include:
• Collusion: Firms may not conspire to fix prices (agree that they will not sell below an agreed upon price) or
reduce services.
• Predation: Firms may not sell their products below their cost of production for the purpose of driving competitors
out of business so that they, themselves, can raise prices when competition is reduced.
• Market share: Firms which have an unacceptably large market share may be broken up by court order so that
many smaller firms will be around to compete (This is what happened to AT&T, and at times, IBM has been
worried about this prospect).
• Tying: A firm that controls a valuable product may not require the consumer to buy a more commonplace one
to get the scarce product. For example, Intel controls many of the newest microprocessors (e.g., Pentium IV).
Intel also makes motherboards for computers; however, motherboards are made by a lot of firms. Intel would
be thought to abuse its effective monopoly power if it required consumers to buy a motherboard in order to get
its newest chips.
11
Social: Changes in customs or demographics greatly influence firms. More women work outside the home today, so
there is a greater demand for prepared foods. There are more unmarried singles today. This provides opportunities
for some firms (e.g., fast food restaurants) .Today, there are more blended families that result as parents remarry
after divorce. These families are often strapped for money but may require duplicate items for children at each
parent’s residence.
2.2 Economic Cycles

The economy goes through cycles. In the late 1990s, the U.S. economy was quite strong, and many luxury goods
were sold. Currently, the economy is somewhat weak, and many firms are facing the results.
Car makers, for example, have seen declining profit margins (and even losses) as they have had to cut prices and
offer low interest rates on financing. Generally, in good economic times, there is a great deal of demand, but this
introduces a fear of possible inflation. In the U.S., the Federal Reserve will then try to prevent the economy from
overheating. This is usually done by raising interest rates. This makes businesses less willing to invest, and as a
result, people tend to make less money. During a recession, unemployment tends to rise, causing consumers to spend
less. This may result in a bad circle, with more people losing their jobs due to lowered demands. Some businesses,
however, may take this opportunity to invest in growth now that things can be bought more cheaply.
2.3 Strategic Planning and the Marketing Process

I. Plans and planning
In general strategy, it means Plan of Action. Plans are needed to clarify what kinds of objectives an organization
would like to achieve and how this is to be done. Such plans must consider the availability of resources like one of
the major resource is capital.
Microsoft keeps a great deal of cash on hand to be able to jump on opportunities that come about. Small startup
software firms, on the other hand, may have limited cash on hand. This means that they may have to forego what
would have been a good investment because they do not have the cash to invest and cannot find a way to raise the
capital.
Other resources that affect what a firm may be able to achieve include trademarks/brand names. It would be very
difficult to compete with factors such as Patents. It would be difficult to compete against Coke and Pepsi in the
cola market, compete against Intel and AMD in the microprocessor market since both these firms have a number
of patents that are difficult to get around.
Plans are subject to the choices and policies that the organization has made. Some firms have goals of social
responsibility, for example. Some firms are willing to take greater risks, which may result in a very large payoff but
also involve the risk of a large loss, than others. Figure 2.1 shows the entities relate to strategy.
Strategic marketing is best seen as an ongoing and never-ending process. Typically:

• the organization will identify the objectives it wishes to achieve. This could involve profitability directly, but
often profitability is a long term goal that may require some intermediate steps. The firm may seek to increase
market share, achieve distribution in more outlets, have sales grow by a certain percentage, or have consumers
evaluate the product more favorably. Some organizations have objectives that are not focused on monetary profit
e.g., promoting literacy or preventing breast cancer
• an analysis is made, taking into consideration issues such as organizational resources, competitors, the competitors’
strengths, different types of customers, changes in the market, or the impact of new technology
• based on this analysis, a plan is made based on tradeoffs between the advantages and disadvantages of the
different options available
• this strategy is then carried out. The firm may design new products, revamp its advertising strategy, invest in
getting more stores to carry the product, or decide to focus on a new customer segment
• after implementation, the results or outcome are evaluated. If results are not as desired, a change may have to be
made to the strategy. Even if results are satisfactory, the firm still needs to monitor the environment for changes
12
Fig. 2.1 Components of strategy
II Levels of strategy
Plans for a firm can be made at several different levels like;
• Corporate level
• Business level
• Functional level
At the corporate level, the management considers the objectives of the firm as a whole. For example, Microsoft
may want to seek to grow by providing high quality software, hardware, and services to consumers. To achieve this
goal, the firm may be willing to invest aggressively.
Plans can also be made at the business unit level. For example, although Microsoft is best known for its operating
systems and applications software, the firm also provides Internet access and makes video games. Different managers
will have responsibilities for different areas, and goals may best be made by those closest to the business area being
considered. It is also more practical to hold managers accountable for performance if the plan is being made at a
more specific level. Therefore, plans are needed both at the corporate and at the business levels.
Occasionally, plans will be made at the functional level, to allow managers to specialize and to increase managerial
accountability. Marketing, for example, may be charged with increasing awareness of Microsoft game consoles to
55% of the U.S. population or to increase the number of units of Microsoft Office sold. Finance may be charged
with raising a given amount of capital at a given cost. Manufacturing may be charged with decreasing production
costs by 5%.
A firm’s mission should generally include a discussion of the customers served (e.g., Wal-Mart and Nordstrom’s
serve different groups), the kind of technology involved, and the markets served.
Several issues are involved in selecting target customers. We will consider these in more detail within the context
of segmentation, but for now, the firm needs to consider issues such as:
• the size of various market segments
• how well these segments are being served by existing firms
13
Fig. 2.2 BCG Matrix

• changes in the market e.g., growth of segments or change in technology
• how the firm should be positioned, or seen by customers. For example, Wal-Mart positions itself as providing
value in retailing, while Nordstrom’s defines itself more in terms of high levels of customer service
III Boston Consulting Group Matrix

The Boston Consulting Group matrix provides a firm an opportunity to assess how well its business units work
together. Each business unit is evaluated in terms of two factors:
• market share
• growth prospects in the market
Basically, larger the firm’s share, stronger is its position and greater the growth in the market, better future
opportunities. The following four combinations emerge:
• A star represents a business unit that has a high share in a growing market. For example, Nokia has a large share
in the rapidly growing market for cellular phones.
• A question mark results when a unit has a small share in a rapidly growing market. The firm’s position, then, is
not as strong as it would have been had its market share been greater, but there is an opportunity to grow. For
example, Hewlett-Packard has a small share of the digital camera market, but this is a very rapidly growing
market.
• A cash cow results when a firm has a large share in a market that is not growing, and may even be shrinking.
Brother has a large share of the typewriter market.
• A dog results when a business unit has a small share in a market that is not growing. This is generally a somewhat
unattractive situation, although dogs can still be profitable in the short run. For example, Smith Corona now has
a small share of the typewriter market.
Firms are usually best off with a portfolio that has a balance of firms in each category. The cash cows tend to generate
cash but require little future investment. On the other hand, stars generate some cash, but even more cash is needed
to invest in the future—for research and development, marketing campaigns, and building new manufacturing
facilities. Therefore, a firm may take excess cash from the cash cow and divert it to the star. For example, Brother
could harvest its profits from typewriters and invest this in the unit making colour laser printers, which will need
the cash to grow. If a firm has cash cows that generate a lot of cash, this may be used to try to improve the market
share of a question mark. A firm that has a number of promising stars in its portfolio may be in serious trouble if
it does not have any cash cows to support it. If it is about to run out of cash—regardless of how profitable it is—it
becomes vulnerable as a takeover target from a firm that has the cash to continue running it.
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2.4 SWOT Analysis
SWOT is the acronym for Strengths, Weaknesses, Opportunities and Threats. It represents a conscious, deliberate
and systematic effort by an organisation to identify opportunities that can be profitably exploited by it. Periodic
SWOT analysis facilitates the generation of ideas. The factors in SWOT analysis will vary from project to project.
Some of the common features of SWOT analysis include:
Strengths Weaknesses Opportunities Threats

• brand reputation • a weak brand name • unfulfilled customer • new regulations
• customer satisfaction • poor reputation among needs • entry of new
• less cost and more customers • new technologies competitor
production • high cost structure • removal of • increasing trade
• strong distribution • lack of access to the international trade barriers
channel best natural resources barrier
• optimum utilisation of • lack of access to key
scarce resources distribution
2.5 Consumer Behaviour

Consumer behaviour involves the psychological processes that consumers go through in recognising needs, finding
ways to solve these needs, making purchase decisions (e.g., whether or not to purchase a product and, if so, which
brand and where), interpret information, make plans, and implement these plans (e.g., by engaging in comparison
shopping or actually purchasing a product).
2.5.1 Factors Affecting Consumer Behaviour

Often, we take cultural influences for granted, but they are significant. An American will usually not bargain with
a store owner. This, however, is a common practice over the world. Physical factors also influence our behaviour.
We are more likely to buy a soft drink when we are thirsty, for example, and food manufacturers have found that
it is more effective to advertise their products on the radio in the late afternoon when people are getting hungry. A
person’s self-image will also tend to influence what he or she will buy—an upwardly mobile manager may buy a
flashy car to project an image of success. Social factors also influence what the consumers buy—often, consumers
seek to imitate others whom they admire, and may buy the same brands. The social environment can include both
the mainstream culture (e.g., Americans are more likely to have corn flakes or ham and eggs for breakfast than to
15
Perception/ Market
Sensation Research Info
Search
Cognition
Strategy Choices
Affect
Preferences
Beliefs
Consumer
Communication
Social and
other influence
Fig. 2.3 Factors of consumer behaviour
rice, which is preferred in many Asian countries) and a subculture (e.g., rap music often appeals to a segment within
the population that seeks to distinguish itself from the mainstream population). Thus, sneaker manufacturers are
eager to have their products worn by admired athletes. Finally, consumer behaviour is influenced by learning—you
try a hamburger and learn that it satisfies your hunger and tastes good, and the next time you are hungry, you may
consider another hamburger.
2.5.2 Consumer Attitude

Consumer attitudes are a composite of a consumer’s (1) beliefs about (2) feelings about (3) and behavioural intentions
toward some object within the context of marketing, usually a brand, product category, or retail store. These
components are viewed together since they are highly interdependent and together represent forces that influence
how the consumer will react to the object.
2.5.3 Consumer Beliefs

The first component is beliefs. A consumer may hold both positive beliefs toward an object (e.g., coffee tastes
good) as well as negative beliefs (e.g., coffee is easily spilled and stains papers). In addition, some beliefs may be
neutral (coffee is black), and some may be differ depending on the person or the situation (e.g., coffee is hot and
stimulates—good on a cold morning, but not well on a hot summer evening when one wants to sleep). Note also
that the beliefs that consumers hold need not be accurate (e.g., that pork contains little fat), and some beliefs may,
upon closer examination, be contradictory.
2.5.4 Consumer Effects

Consumers also hold certain feelings toward brands or other objects. Sometimes these feelings are based on the beliefs
(e.g., a person feels nauseated when thinking about a hamburger because of the tremendous amount of fat it contains),
but there may also be feelings which are relatively independent of beliefs. For example, an extreme environmentalist
may believe that cutting down trees is morally wrong, but may have positive effect toward Christmas trees because
he or she unconsciously associates these trees with the experience that he or she had at Christmas as a child.
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2.6 Behavioural Intention
Behavioural intention is what the consumer plans to do with respect to the object (e.g., buy or not buy the brand).
As with effect, this is sometimes a logical consequence of beliefs (or effect), but may sometimes reflect other
circumstances e.g., although a consumer does not really like a restaurant, he or she will go there because it is a
hangout for his or her friends.
Changing attitudes is generally very difficult, particularly when consumers suspect that the marketer has a self-
serving agenda in bringing about this change (e.g., to get the consumer to buy more or to switch brands). Here are
some possible methods:
• Changing effect: One approach is to try to change effect, which may or may not involve getting consumers to
change their beliefs. One strategy uses the approach of classical conditioning - trying to pair the product with
a liked stimulus. For example, we pair a car with a beautiful woman. Alternatively, we can try to get people to
like the advertisement and hope that this liking will spill over into the purchase of a product. For example, the
Pillsbury Doughboy does not really emphasise the conveyance of much information to the consumer; instead,
it attempts to create a warm, fuzzy image. Although Energizer Bunny ads try to get people to believe that their
batteries last longer, the main emphasis is on the likeable bunny. Finally, products which are better known,
through the mere exposure effect, tend to be better liked—that is, the more a product is advertised and seen in
stores, the more it will generally be liked, even if consumers to do not develop any specific beliefs about the
product.
• Changing behaviour: People like to believe that their behaviour is rational; thus, once they use our products,
chances are that they will continue unless someone is able to get them to switch. One way to get people to switch
to our brand is to use temporary price discounts and coupons; however, when consumers buy a product on a
deal, they may justify the purchase based on that deal (i.e., the low price) and may then switch to other brands
on deal later. A better way to get people to switch to our brand is to at least temporarily obtain better shelf space
so that the product is more convenient. Consumers are less likely to use this availability as a rationale for their
purchase and may continue to buy the product even when the product is less conveniently located.
• Changing beliefs: Although attempting to change beliefs is the obvious way to attempt attitude change, particularly
when consumers hold unfavourable or inaccurate ones, this is often difficult to achieve because consumers tend
to resist. Several approaches to belief change exist:
Change currently held beliefs: It is generally very difficult to attempt to change beliefs that people hold,
particularly those that are strongly held, even if they are inaccurate. For example, the petroleum industry
advertised for a long time that its profits were lower than were commonly believed, and provided extensive
factual evidence in its advertising to support this reality. Consumers were suspicious and rejected this
information, however.
Change the importance of beliefs: Although the sugar manufacturers would undoubtedly like to decrease the
importance of healthy teeth, it is usually not feasible to make beliefs less important — consumers are likely
to reason, why, then, would you bother bringing them up in the first place? However, it may be possible to
strengthen beliefs that favour us e.g., a vitamin supplement manufacturer may advertise that it is extremely
important for women to replace iron lost through menstruation. Most consumers already agree with this, but
the belief can be made stronger. Consumers are less likely to resist the addition of beliefs so long as they
do not conflict with existing beliefs. Thus, the beef industry has added beliefs that beef (1) is convenient
and (2) can be used to make a number of creative dishes. Vitamin manufacturers attempt to add the belief
that stress causes vitamin depletion, which sounds quite plausible to most people.
Change the ideal: It is usually difficult, and very risky, to attempt to change ideals, and only few firms
succeed. For example, Hard Candy may have attempted to change the ideal away from traditional beauty
toward more unique self-expression.
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2.7 Reference Group

A useful framework of analysis of group influence on the individual is the so called reference group—the term comes
about because an individual uses a relevant group as a standard of reference against which oneself is compared.
Reference groups come in several different forms. The inspirational reference group refers to those others against
whom one would like to compare oneself. For example, many firms use athletes as spokespeople, and these represent
what many people would ideally like to be. Associative reference groups include people who more realistically
represent the individuals’ current equals or nearequals—e.g., co-workers, neighbours, or members of churches, clubs,
and organisations. Finally, the dissociative reference group includes people that the individual would not like to be
like. For example, the store literally named The Gap came about because many younger people wanted to actively
dissociate from parents and other older and uncool people. The quality paperback book specifically suggests in its
advertising that its members are a breed apart from conventional readers of popular books.
2.8 The Family Life Cycle

Individuals and families tend to go through a life cycle. The simple life cycle goes from child/teenager —> young
single —> young couple —> full nest — > empty nest —> widow(er).
In real life, this situation is, of course, a bit more complicated. For example, many couples undergo divorce. Then
we have the scenario: full nest —> single parent.
This situation can result either from divorce or from the death of one parent. Divorce usually entails a significant
change in the relative wealth of spouses. In some cases, the non-custodial parent (usually the father) will not pay
the required child support, and even if he or she does, that still may not leave the custodial parent and children as
well off as they were during the marriage. On the other hand, in some cases, some non-custodial parents will be
called on to pay a large part of their income in child support. This is particularly a problem when the non-custodial
parent remarries and has additional children in the second (or subsequent marriages). In any event, divorce often
results in a large demand for:
• low cost furniture and household items
• time saving goods and services
Divorced parents frequently remarry, or become involved in other non-marital relationships; thus, we may see full
nest —> single parent —> blended family.
Here, the single parent who assumes responsibility for one or more children may not form a relationship with the
other parent of the child.
Generally, there are two main themes in the Family life cycle, subject to significant exceptions:
• As a person gets older, he or she tends to advance in his or her career and tends to get greater income (exceptions:
maternity leave, divorce, retirement).
• Unfortunately, obligations also tend to increase with time (at least until one’s mortgage has been paid off).
Children and paying for one’s house are two of the greatest expenses.
Note that although a single person may have a lower income than a married couple, the single may be able to buy
more discretionary items since he or she has fewer current obligations. This will change when a house is bought or
children come along.
2.9 Family Decision Making

Individual members of families often serve different roles in decisions that ultimately draw on shared family resources.
Some individuals are information gatherers/holders, who seek out information about products of relevance. These
individuals often have a great deal of power because they may selectively pass on information that favours their
chosen alternatives. Influencers do not ultimately have the power to decide between alternatives, but they may make
their wishes known by asking for specific products or causing embarrassing situations if their demands are not met.
The decision maker(s) have the power to determine issues such as:
18
• Whether to buy
• Which product to buy
• Which brand to buy
• Where to buy it
• When to buy
Note, however, that the role of the decision maker is separate from that of the purchaser. From the point of view
of the marketer, this introduces some problems since the purchaser can be targeted by point-of-purchase (POP)
marketing efforts that cannot be aimed at the decision maker. Also note that the distinctions between the purchaser
and decision maker may be somewhat blurred:
• The decision maker may specify what kind of product to buy, but not which brand
• The purchaser may have to make a substitution if the desired brand is not in stock
• The purchaser may disregard instructions (by error or deliberately)
It should be noted that family decisions are often subject to a great deal of conflict. The reality is that few families
are wealthy enough to avoid strong tension between demands on the family’s resources. Conflicting pressures are
especially likely in families with children and/or when only one spouse works outside the home. Note that many
decisions inherently come down to values, and that there is frequently no objective way to arbitrate differences.
One spouse may believe that it is important to save for the children’s future; the other may value spending now (on
private schools and computer equipment) to help prepare the children for the future. Who is right? There is no clear
answer here. The situation becomes even more complex when more parties such as, children or other relatives are
involved.
Culture
Culture is part of the external influences that impact the consumer. That is, culture represents influences that are
imposed on the consumer by other individuals.
The United States has undergone some changes in its predominant culture over the last several decades. Again,
however, it should be kept in mind that there are great variations within the culture. For example, on the average,
Americans have become less materialistic and have sought more leisure; on the other hand, the percentage of people
working extremely long hours has also increased.
Significant changes have occurred in gender roles in American society. One of the reasons for this is that more
women work outside the home than before. However, women still perform a disproportionate amount of housework,
and men who participate in this activity tend to do so reluctantly. In general, commercials tend to lag somewhat
behind reality e.g., few men are seen doing housework, and few women are seen as buyers and decision makers on
automobile purchases.
Regional influence, both in the United States and other areas, is significant. Many food manufacturers offer different
product variations for different regions. Joel Girardeau, in his book The Nine Nations of North America, proposed
nine distinct regional sub-cultures that cut across state lines. Although significant regional differences undoubtedly
exist, research has failed to support Girardeau’s specific characterisations.
Consumer behaviour is frequently affected by the situation. For example, people may buy different products when
shopping for others than they would for themselves. We tend to make quicker but less elaborate decisions when
facing time pressure. There are also influences of mood. For example, people who are unhappy tend to make more
rational and more critical decisions.
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2.10 Organisational Buyers

A large portion of the market for goods and services is attributable to organisational, as opposed to individual,
buyers. In general, organisational buyers, who make buying decisions for their companies for a living, tend to be
somewhat more sophisticated than ordinary consumers. However, these organisational buyers are also often more
risk averse. There is a risk in going with a new, possibly better (lower price or higher quality) supplier whose product
is unproven and may turn out to be problematic. Often the fear of running this risk is greater than the potential
rewards for getting a better deal. In the old days, it used to be said that “You can’t get fired for buying IBM.” This
attitude is beginning to soften a bit today as firms face increasing pressures to cut costs.
Organisational buyers come in several forms. Resellers involve either wholesalers or retailers that buy from one
organisation and resell to some other entity. For example, large grocery chains sometimes buy products directly
from the manufacturer and resell them to end-consumers. Wholesalers may sell to retailers who in turn sell to
consumers. Producers also buy products from sub-manufacturers to create a finished product. For example, rather
than manufacturing the parts themselves, computer manufacturers often buy hard drives, motherboards, cases,
monitors, keyboards, and other components from manufacturers and put them together to create a finished product.
Governments buy a great deal of things. For example, the military needs an incredible amount of supplies to feed
and equip troops. Finally, large institutions buy products in huge quantities. For example, UCR probably buys
thousands of reams of paper every month.
Organisational buying usually involves more people than individual buying. Often, many people are involved in
making decisions as to
• whether to buy
• what to buy
• at what quantity
• from whom
An engineer may make a specification as to what is needed, which may be approved by the managers, with the
final purchase being made by a purchase specialist who spends all of his or her time finding the best deal on the
goods that the organisation needs. Often, such long purchase processes can cause long delays. In the government,
rules are often especially stringent e.g., vendors of fruit cake have to meet fourteen pages of specifications put out
by the General Services Administration. In many cases, government buyers are also heavily bound to go with the
lowest price. Even if it is obvious that a higher priced vendor will offer a superior product, it may be difficult to
accept that bid.
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Summary
• Firstly it covered various environmental elements like; Political, Competition, Economics, Technological, Legal
and Social.
• Then it described for various strategic planning and processes. In general strategy, it means 'Plan of Action'.
Plans are needed to clarify what kinds of objectives an organization would like to achieve and how this is to be
done. Such plans must consider the availability of resources like one of the major resource is capital.
• Plans for a firm can be made at several different levels like; Corporate level, Business level and Functional
level.
• The Boston Consulting Group matrix provides a firm an opportunity to assess how well its business units work
together. Each business unit is evaluated in terms of two factors: market share and the growth prospects in the
market.
• Consumer behaviour involves the psychological processes that consumers go through in recognising needs,
finding ways to solve these needs, making purchase decisions (e.g., whether or not to purchase a product and,
if so, which brand and where), interpret information, make plans, and implement these plans (e.g., by engaging
in comparison shopping or actually purchasing a product).
• The first component is belief. A consumer may hold both positive beliefs toward an object (e.g., coffee tastes
good) as well as negative beliefs (e.g., coffee is easily spilled and stains papers). In addition, some beliefs may
be neutral (coffee is black), and some may differ depending on the person or the situation (e.g., coffee is hot and
stimulates—good on a cold morning, but not well on a hot summer evening when one wants to sleep).
• A useful framework of analysis of group influence on the individual is the so called reference group—the term
comes about because an individual uses a relevant group as a standard of 'reference' against which oneself is
compared. Reference groups come in several different forms.
• A large portion of the market for goods and services is attributable to organisational, as opposed to individual,
buyers. In general, organisational buyers, who make buying decisions for their companies for a living, tend to
be somewhat more sophisticated than ordinary consumers.
References
• Ries A. Trout J. Positioning. The Battle of Your mind.
• Warren J. Keegan, Mark Green, Global Marketing (3rd Editionpages, Publisher: Prentice Hall)
• Masaaki Kotabe, Kristiaan Helsen. Global Marketing Management Publisher: Wiley
Recommended Reading
• Vern Terpstra, Lloyd C. International Dimensions of Marketing. Russow Publisher: South-Western College
• Michael R. Czinkota, Illka A. Ronkainen. International Marketing. Publisher: South-Western College
21
Self Assessment
1. ————————— auto manufacturers became a serious threat to American car makers in the late 1970s.
a. Japanese
b. Indian
c. China
d. Brazil
2. Organisational buying usually involves ———— people than individual buying.

a. more
b. less
c. equal
d. nill
3. Family decisions are often subject to a great deal of ———————.

a. understandings
b. conflict
c. economical
d. negotiation
4. The reality is that few families are ——————— enough to avoid a strong tension due to demands on the
family’s resources.
a. wealthy
b. poor
c. not capable
d. educated
5. Consumer ———————— are a composite of a consumer’s beliefs, feelings and behavioural intentions
toward an object.
a. attitudes
b. habits
c. responses
d. behaviour
6. Usually a brand, product category, or retail store components are viewed together since they are highly
__________.
a. interdependent
b. independent
c. costly
d. capable
7. The beliefs that consumers hold need not be ———————.

a. incorrect
b. accurate
c. wrong
d. particular
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8. Consumers holding certain feelings toward brands or other objects are based on
————————————.
a. misunderstandings
b. beliefs
c. miscommunication
d. mismanagement
9. An extreme environmentalist may ——————— that cutting down trees is morally wrong.
a. believe
b. not believe
c. not agree
d. accept
10. Changing attitudes is generally ————————, particularly when consumers suspect that the marketer
has a self-serving 'agenda'.
a. not difficult
b. difficult
c. easy
d. manipulative
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Chapter III
Economic Environment
Aim
• describe the economic environment in general
• explain the global economy
• identify the balance of payment in financial transformation
Objectives
• explain the major changes in global economy
• identify the global economy in terms of world trade and comparative cost
• explain the nature of economy in economic environment
• enlist the economic activity as per countries
Learning outcome
• understand the economic environment and its fluctuation
• understand the global effect in marketing concept
• identify the developing and developed countries as per their economic activities
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3.1 Introduction
The chapter starts off with a review of the global economy, the composition of world trade and the World Trade
Institutions. Regionalism is a major phenomenon of the late 80's and early 90's and so the chapter describes in
detail a number of major regional economic blocs. Very important in any discussion on economic factors is the size
of market, and more specifically, the market ability to purchase, which depends on levels of income. The chapter
finishes by looking at the nature of economic activity including the stages of market development, urbanisation and
infrastructure as important precursors to the degree of economic activity.
3.2 Economic Marketing Overview

In the past fifty years the global economy has changed rapidly. Particularly marked has been the development of
world economic integration and standardised products. Coca Cola, Nissan and Marlboro cigarettes are examples of
products which serve nearly every market. Generally there have been three major changes:
• capital movements rather than trade have become the driving force of the global economy
• production has become 'uncoupled' from employment
• primary products have become “uncoupled” from the industrial economy
The world economy is in control - individual nations are not, despite the large world economic share of the USA
and Japan.
Taking each of these changes in turn, world trade is about some US$ 3 trillion, however, capital movements are much
higher. The London Eurodollar market is worth about US$ 75 trillion per annum and foreign exchange transactions
are US$ 35 trillion per annum.
Another change is the decoupling of employment from production. Employment is in decline whilst manufacturing
output is growing or remains static at 20-25% of GNP. Sectors such as agriculture, are achieving higher productivity
through mechanisation but this is at the expense of employment. Still another change is the decoupling of the primary
product market from the industrial economy. Unfortunately the prime producers have been dramatically affected.
Finally, the most significant change is the change of focus from domestic to the world economy as the chief
economic unit. This has been grasped by Japan and Germany, but not really by the USA, or Africa. These factors
have repercussions on exporting by developing countries.
Firstly, with developing countries’ emphasis on the export of primary products, they are at the mercy of world
supply and demand movements, with the resultant fluctuations in prices. Depressed world market prices can have
a deleterious effect on developing economies.
Secondly, the rapid globalisation and focus away from domestic economies has created global competition and in
turn, this has pushed up quality. Generally speaking, unless developing countries can break into non-committally
based products, they are being further left behind in the global economic stakes. However positively, whilst developed
worlds concentrate on industrial and service products, it leaves opportunities for developing countries to export
more food based products.
3.3 The Global Economy

The development of the global economy can be traced back many hundreds of years when traders from the east
and west came together to exchange goods. However, the growth of the modern global economy is marked by a
number of features as follows:
I. The Legacy of Mercantilism 1500-1750

The prevalent wisdom was one of nationalism, that is, that one nation prospered at the expense of another. Nations
like the UK, Netherlands and later France and Germany, with powerful navies which ruled the waves in the West,
and the traders of the East, dominated that area. Over time, nationalism gave way to bullionism, where gold and
silver, rather than other raw materials, became the basis of wealth. Still later, domination took another form, where
25
countries were believed to be powerful if they had a favourable balance of trade - an excess of exports over imports.
Mercantilism died with the development of the United Nations (UN) and the General Agreement on Tariffs and
Trade (GATT), along with Adam Smith’s tome on the 'Wealth of Nations' which advocated market forces as the
principal driving force to development and wealth.
II. World Trade

Economic progress is linked to world trade and those who preach trade restrictions are denying this fact. Countries
like the old communist bloc (Russia, East Germany, etc.) have not developed as fast as those with more outward
orientation. The same can be said of African nations, where the inability to industrialise and export in volume has
locked them into, generally, and primary product producers. Economic Structural Adjustment Programmes (ESAP)
are supposed to remedy this situation by giving 'command economies' a market oriented focus.
Another argument concerns whether marketing has relevance to the process of economic development. Less
developed countries (LDCs) have traditionally focused on production and domestic income generation. Also,
marketing addresses itself to needs and wants and it could be argued that where LDC's productive capabilities are
far less than unsatisfied needs and wants, the marketing is superfluous. However, adopting 'marketing' could lead
to the more efficient and effective use of productive and marketing resources and it may be able to focus on current
needs and find better solutions. For example, techniques developed in the West for optimising transport resources
could well be transferred to effect. Similarly, adopting new methods of marketing may give better results. A good
example is the Cold Storage Company of Zimbabwe (CSC). By changing from the current system of marketing
cattle (the CSC takes in cattle, at fixed prices and slaughters) to an auction system by description, all actors in the
system could benefit.
Decisions in product, price, communications and merchandising can stimulate economic development. Changing
from fixed price systems to market based pricing could lead to the faster achievement of development objectives (for
example 'higher incomes'). In current drought conditions in Africa, governments could well benefit from advertising
other forms of nutritious food, for example, fish, rather than let the populace be left uninformed and disgruntled
about the lack of maize.
Price has been called the immediate basis for international trade - cheaper prices based on different cost structures,
especially labour. Countries trade because they produce and export goods in which they enjoy a greater comparative
advantage and import goods in which they have least comparative advantage. A further refinement of this is the
international product cycle discussed fully in chapter one.
3.4 Balance of Payments

This is the measure of all economic transactions between one nation and another. The balance of payments is made
up of the current account, showing trade in goods and services; and the capital account, which shows financial
transactions.
In 1989, after official transfers, the USA had a US$ 109,242 million deficit on its current account, Japan had a $
131,400 million surplus, Tanzania, a $ 778,5 million deficit and Zimbabwe, a $ 2,783 million deficit.
The balance of payments account helps marketers select the location of supply for foreign markets and the selection
of markets. The capital account may show the nations which have control restrictions and hence be difficult to deal
with. In this regard, African nations are generally disadvantaged.
The primary purposes of the balance of payment are:

• to provide standards for concepts, definitions, classifications, and conventions
• to facilitate the systematic national and international collection, organization and comparability of balance of
payments transition.
26
3.5 The Nature of Economy
The economic environment is more than just money. Natural resources, raw materials now are important in future. If
synthetic gold or tobacco were developed or, in the case of the latter, became unfashionable, Zimbabwe’s economy
would be ruined.
Topography may produce two, three or more sub-markets in a country. Zambia, for example, has 'rural' and 'urban'
areas with different needs and wants. Extremes of climate - like the Southern African drought in 1992 can devastate
economies and derail any economic development plans and exports. Simply, products are not available to export,
because they are being consumed by the domestic economy.
3.5.1 Classification of Economic Activity As Per Countries

• Pre-industrial countries - incomes less than US$ 400 GNP per capita. Limited industrialisation, low literacy
rates, high birth rates, heavy reliance on foreign aid, political instability. Parts of Sub-Saharan Africa. Little
market potential.
• Less developed countries - per capita between US$ 401 and US$ 1,635. Early stages of industrialisation, growing
domestic market, mature product markets, increasing competitive threat.
• Developing countries - per capita income between US$ 1,636 and US $ 5,500. Decrease in percentage of
agricultural workers, industrialisation, rising wages, high literacy rates, lower wage rates than developed
countries, formidable competitors.
• Industrialised countries - per capita income between US$ 5,501 and US$ 10,000. Moving towards post
industrialisation, high standard of living.
• Advanced countries - per capita income in excess of US$ 10,000. Post industrialisation, information processors,
knowledge based, less machine based. Product opportunities are in new products, innovations and raw materials
plus fresh foods.
27
Summary
• Firstly, it covered the economic marketing overview of international marketing. Generally, there have been
three major changes when economy affects the marketing. These are capital movements rather than trade have
become the driving force of the global economy, production has become 'uncoupled' from employment and
primary products have become 'uncoupled' from the industrial economy
• The development of the global economy can be traced back many hundreds of years when traders from the east
and west came together to exchange goods.
• Economic progress is linked to world trade and those who preach trade restrictions are denying this fact.
Countries like the old communist bloc (Russia, East Germany, etc.) have not developed as fast as those with
more outward orientation.
• The balance of payments is made up of the current account, showing trade in goods and services; and the capital
account, which shows financial transactions.
References
• David Meerman Scott (2010).The New Rules of Marketing and PR. Marketing to Reach Buyers Directly. Kindle
Edititon.
Recommended Reading
• Terpstra. V. International Marketing. 4th Edition
• Philip R. Cateora. (March 2004). International Marketing. Concept of Marketing. McGraw-Hill Companies;
12th ed.
• Hakan Hakansson. International Marketing and Purchasing of Industrial goods. John Wiley & sons.
28
Self Assessment
1. Capital movements rather than trade have become the driving force of the ————————economy.
a. global
b. domestic
c. district
d. local market
2. Employment is in ——————— while manufacturing either grows or remains static.

a. decline
b. flat
c. upward
d. downward
3. ——————— prices may collapse but industrial economies can be unaffected.

a. Commodity
b. IMF
c. Rupee
d. Dollar
4. Growth achievable in —————— trade is often at a greater rate than domestically and the returns higher.
a. International
b. domestic
c. local
d. global
5. —————— is the most important variable affecting market potential.

a. Income
b. Profit
c. Challan
d. Money
6. In Kenya the lowest —————— of the population receive less then 3% of national resource.
a. 30%
b. 20%
c. 50%
d. 60%
7. Per capita judges a country’s level of ————————development and its degree of modernisation and
progress.
a. economic
b. cultural
c. political
d. social
29
8. Gross National Product is a better indicator of potential than Gross Domestic Product as —————————
includes more than 'product'.
a. FDP
b. GDP
c. WTO
d. NNP
9. World GNP figures reveal the concentration of wealth in the three nations, the USA, Japan and Western Europe
for which —————— trails far behind.
a. Africa
b. Australia
c. China
d. Brazil
10. While evaluating ——————————— it is wise to consider individual product areas.

a. markets
b. culture
c. growth
d. economy
30
ChapterIV
Cultural Environment
Aim
• explain the general idea of cultural environment
• enlist the approaches for channel environment
• describe the diffusion theory on the basis of innovation, communication channel and problem solving
Objectives
• explain the anthropological approach
• enlist the level of Maslow’s approach and the elements of culture
• identify the SRC for cultural environment
Learning outcome
• understand the concept of culture as per marketing theory
• analyse the diffusion theory of communication, and problem solving
• identify the various elements of culture
31
4.1 Introduction
Much argument in the study of culture has revolved around the 'standardisation' versus 'adaptation' question. In the
search for standardization, certain 'universals' can be identified. Murdock (1954) suggested a list, including age
grading, religious rituals and athletic sport.
Levitt (1982) suggested that traditional differences in task and doing business were breaking down and this meant
that standardisation rather than adaptation is becoming increasingly prevalent. Culture, alongside economic factors,
is probably one of the most important environmental variables to consider in global marketing. Culture is very often
hidden from view and can be easily overlooked. Similarly, the need to overcome cultural myopia is paramount.
4.2 Various Approaches of culture

Keegan (1989) suggested a number of approaches to the study of culture like
• Anthropological Approach
• Maslow’s Approach
• Self Reference Criterion (SRC)
• Diffusion theory
• High and low context cultures and perception.
These are briefly reviewed here.
4.2.1 Anthropological Approach

Anthropology is the study of humanity. Cultural anthropology is also called as social anthropology or socio-cultural
anthropology. There are several ways of understanding culture – from the linguistic level with a focus on discourse
and conflicts, to a 'taken for granted' level where 'tacit knowledge' is the key phrase, whereas culture as 'webs of
significance' can be understood from an epistemological position, in short, how we grasp the world.
In addition, different cultural perspectives like integration, differentiation and ambiguity are important in cultural
analyzes, but whether one is dealing with a single unitary culture, many subcultures, or no culture at all, is not a
theoretical question but an empirical one, as will be demonstrated using oil drilling as a case. One implication of this
is that researchers should be more sensitive to different cultural levels/perspectives and methodological triangulation
in their cultural analyses – and managers should be a little more modest in their efforts to manage cultures.
4.2.2 Maslow’s Approach

Maslow’s approach defines seven categories for accomplishment of basic needs of all human needs. As per Maslow's
theory, individuals must meet the needs at the lower level of pyramid before they are successfully tackle the next
levels.
Various levels are given below: (Refer fig. 4.1)

• Physiological needs
• Need for security
• Need to be loved and belong
• Self esteem
• Needs to know and understand
• Aesthetic need
• Self actualization
32
Fig. 4.1 Maslow’s Hierarchy
(Source: Wadsworth Cengage Learning)
The physiological needs are the foundation of the pyramid. Maslow suggested that the first and most basic need
people have is the need for survival: their physiological requirements for food, water, and shelter. People must
have food to eat, water to drink, and a place to call home before they can think about anything else. If any of these
physiological necessities is missing, people are motivated above all else to meet the missing need.
After their physiological needs have been satisfied, people can work to meet their needs for safety and security. (But
the physiological needs must be met first.) Safety is the feeling people get when they know no harm will befall them,
physically, mentally, or emotionally; security is the feeling people get when their fears and anxieties are low.
After the physiological needs and the needs for survival and for safety and security have been met, an individual
can be motivated to meet the needs represented at higher levels of the pyramid.
The third level of the pyramid is needs associated with love and belonging. These needs are met through satisfactory
relationships with family members, friends, peers, classmates, teachers, and other people with whom individuals
interact. Satisfactory relationships imply acceptance by others. Having satisfied their physiological and security
needs, people can venture out and seek relationships from which their need for love and belonging can be met.
Once individuals have satisfactorily met their need for love and belonging, they can begin to develop positive feelings
of self-worth and self-esteem, and act to foster pride in their work and in themselves as people. The fifth level of
Maslow’s pyramid represents an individual’s need to know and understand. According to Maslow’s hierarchy, this
motivation cannot occur until the deficiency needs have been met to the individual’s satisfaction.
Aesthetics refers to the quality of being creatively, beautifully, or artistically pleasing; aesthetic needs are the needs
to express oneself in pleasing ways. Decorating your living room, wrapping birthday presents attractively, washing
and waxing your car, and keeping up with the latest styles in clothing are all ways of expressing your aesthetic sense.
People are motivated to meet this need only after the previous five needs have been met.
At the top of the pyramid is the need for self-actualization, which is a person’s desire to become everything he or
she is capable of realizing and use his or her full potential, capacities, and talents.
33
4.2.3 Self Reference Criterion

It is the assumption that the product can successfully penetrate the abroad market after getting success in home
market. There are three approaches in self reference criterion, as mentioned below -
• Define the problem or goal in terms of home country traits, habits and norms.
• Isolate the SRC influence in the problem and examine it carefully to see how it complicates the pattern.
• Redefine the problem without the SRC influence and solve for the foreign market situation.
4.2.4 Diffusion Theory

Diffusion is the process by which an innovation is communicated through certain channels over time. Diffusion is
a different type of communication which spread the messages of new ideas in products and services.
The main components of diffusion theory is given below:
• Innovation
• Communication channel
• Innovation stages
• Problem solving
• Innovation
An innovation is a newly generated idea which is perceived by an individual. The characteristics of an innovation,
as perceived by the members of a social system, determine its rate of adoption. Four major drivers of innovations
are like:
• Global challenge
• Public sector challenge
• Networking
• Creating value for customer
Companies will constantly search for new business opportunities, and they will realize that global challenges such
as climate change, economic growth and social needs consists a huge new market.
By creating new and more responsible solutions, companies can cultivate new business opportunities. Innovation
in public sector is more demand now days. However, the difficulties also seem quite substantial. Citizens look for
more individualized welfare services of higher quality, but the amount of resources allocated to the welfare system
are under pressure, and the system’s ability to innovate can be questioned.
These challenges open a huge territory for private companies if they can find ways for innovating with the owners of
welfare institutions, but the path into public services is a road with many political obstacles. Collaborative networks
among various companies open the door of innovation and growth. Previously, companies usually searched for
knowledge from renowned experts and institutions. Today, with some sector variation, companies locate knowledge
from a wide range of sources, even from individuals with a background and from different organizations also.
Companies have to open their innovation processes. They must listen carefully to customers and address needs based
on the customer’s terms and not the company’s. Information and communication technology (ICT) will be a key
enabler in co-creating unique value with individual customers and in enhancing the experiences of the consumers.
ICT enables companies to create new customers for organisational growth. Companies will involve users in early
stages of their innovation processes by tapping tacit or hidden knowledge from customers, and by finding inspiration
in users’ new solutions to problems.
Communication channel
Communication is the process by which the information can be shared between individual or in group in order to
achieve a common goal. A communication channel is the means by which messages get from one individual to
another.
34
Mass media channels are more effective in creating knowledge of innovations, whereas interpersonal channels are
more effective in forming and changing attitudes toward a new idea, and thus in influencing the decision to adopt
or reject a new idea. Most individuals evaluate an innovation, not on the basis of scientific research by experts, but
through the subjective evaluations of near-peers who have adopted the innovation.
The three stages of innovation are -

• Decision making
• Adaptability
• Rate of adaptor
The decision making process works out in five major phases, given below:
• Knowledge – person becomes aware of an innovation and has some idea of how it functions
• Persuasion – person forms a favourable or unfavourable attitude toward the innovation
• Decision – person engages in activities that lead to a choice to adopt or reject the innovation
• Implementation – person puts an innovation into use
• Confirmation – person evaluates the results of an innovation-decision already made
Adaptability means the degree to which an individual or a unit adopting new ideas than other members of social
system.
Number of adopters
Early Late
Innovators adopters majority Laggards
Fig. 4.2 Rate of adaptors
Rate of adaptor means the relative speed with which an innovation is adopted by members of a social system. The
rate of adoption is usually measured as number of members of the system that adopt innovation in a given period
of time. Refer to Fig. 4.2.
Problem solving
A social system is defined as a set of interrelated units that are engaged in joint problem-solving to accomplish a
common goal. The members or units of a social system may be individuals, informal groups, organizations, and/or
subsystems. The social system constitutes a boundary within which an innovation diffuses. How the system's social
35
structure affects diffusion has been studied. A second area of research involved how norms affect diffusion. Norms
are the established behaviour patterns for the members of a social system.
A third area of research has had to do with opinion leadership, the degree to which an individual is able to influence
informally other individuals' attitudes or overt behaviour in a desired way with relative frequency. A change agent
is an individual who attempts to influence clients' innovation-decisions in a direction that is deemed desirable by
a change agency.
4.2.5 High and Low Context Cultures and Perception

Hall (1977) has suggested the concept of high and low context cultures as a way of understanding different cultural
orientations. In low context cultures, messages have to be explicit, in high context cultures, less information is
required in the verbal message. In low context cultures, for example like Northern Europe, a person’s word is not to
be relied upon, things must be written. On the other hand, in high context cultures like Japan and the Middle East,
a person’s word is their bond. It is primarily a question of trust.
Perception
Perception is the ability to see what is in culture. The SRC can be a very powerful negative force. High perceptual
skills need to be developed so that no one misperceives a situation, which could lead to negative consequences.
Many of these theories and approaches have been 'borrowed' from other contexts themselves, but they do give a
useful insight into how one might avoid a number of pitfalls of culture in doing business overseas.
Consumer products are likely to be more culturally sensitive than business to business products, primarily because
technology can be universally learned. However there are dangers in over generalisations. For example, drink can
be very universal and yet culture bound. Whilst appealing to a very universal physiological need - thirst - different
drinks can satiate the same need. Tea is a very English habit, coffee American but neither are universals in African
culture. However, Coca Cola may be acceptable in all three cultures, with even the same advertising appeal.
Nationalism
Nationalism is a cultural trait which is increasingly surfacing. The break-up of Yugoslavia and the USSR are witness
to the fact. In Western, developed countries, a high degree of interdependence exist, so it is not so easy to be all that
independent. In fact, blocs like NAFTA and the EU are, if anything, becoming more economically independent.
However, less developed countries do not yet have the same interdependence in general, and so organisations need to
re-assess their contribution to the development of nations to make sure that they are not holding them 'to hostage'.
Culture is a very powerful variable and cannot be ignored. Whilst 'universals' are sought, there is still a need to
understand local customs and attitudes. These are usually no better understood than by the making use of in-country
personnel.
4.3 Elements of Culture

There are seven major elements of culture associate with person’s entire way of life. The elements are -
• Social organization
• Customs and traditions
• Language
• Arts and literature
• Religion
• Forms of government
• Economic system
36
Social organisation
Society starts from a smaller group in an organisation. The smaller group in an organisation are like
• Family: Nuclear family or joint family
• Friends: relatives
• Religious group
• Social classes: Social classes based money, occupation, education and race
• Occupation: Business class or self employed
Customs and traditions

Tradition and customs are varying from one country to another. It is one of the cultural element which affects global
market a lot. On the other hand we can say that rules and behaviour change drastically when custom and tradition
differ.
Language
Language reflects the nature and values of society. There may be many sub cultural languages like dialects which
may have to be accounted for. Some countries have two or three languages. In Zimbabwe there are three languages
-English, Shona and Ndebele with numerous dialects. In Nigeria, some linguistic groups have engaged in hostile
activities. Language can cause communication problems - especially in the use of media or written material. It is
best to learn the language or engage someone who understands it well.
Forms of government
Various forms of government are like:
• democracy
• republic
• dictatorship
In democratic government people have supreme power, where as in republic people choose their own leaders. In
case of dictatorship a ruler or group holds power by force.
Economic system
There are four types of economic systems in cultural elements. These are:
• Traditional
• Market
• Command
• Mixed
37
Summary
• Culture, alongside economic factors, is probably one of the most important environmental variables to consider
in global marketing. Culture is very often hidden from view and can be easily overlooked. Similarly, the need
to overcome cultural myopia is paramount.
• Then it described the various approaches of culture. Anthropology is the study of humanity. Cultural anthropology
is also called as social anthropology or socio-cultural anthropology. There are several ways of understanding
culture – from the linguistic level with a focus on discourse and conflicts, to a 'taken for granted' level where 'tacit
knowledge' is the key phrase, whereas culture as 'webs of significance' can be understood from an epistemological
position, in short, how we grasp the world. Maslow’s approach defines seven categories for accomplishment
of basic needs of all human needs. It is the assumption that the product can successfully penetrate the abroad
market after getting success in home market.
• Communication is the process by which the information can be shared between individual or in group in order
to achieve a common goal. A communication channel is the means by which messages get from one individual
to another.
• The three stages that are integral to the process of innovation are also discussed. These are Decision making,
adaptability and Rate of adapter.
• Nationalism is a cultural trait which is increasingly surfacing. The break-up of Yugoslavia and the USSR are
witness to the fact. In Western, developed countries, a high degree of interdependence exist, so it is not so easy
to be all that independent. In fact, blocs like NAFTA and the EU are, if anything, becoming more economically
independent.
• Then lastly it described the elements of culture which affects the economic environment
References
• Philip R. Cateora. (March 2004). International Marketing. Concept of marketing. McGraw-Hill Companies;
12th ed
• Diffusion of Innovation Theory. http://a.parsons.edu/~limam240/thesis/documents/Diffusion_of_Innovations.
pdf
• Franke. R. H. Cultural Roots of Economic Performance.
Recommended Reading
• Dirk Pilat, Head, Structural Policy New Nature of Innovation.http://www.newnatureofinnovation.org/full_report.
pdf
• Keegan W.J(2003). Global marketing Management. 4th ed. Prentice Hall International Edition.
• World Bank. World Development Report. The Challenge of Development. Oxford University
38
Self Assessment
1. The main elements of culture are —————— , ———————.

a. religion, ethics
b. market, product
c. currency, demand
d. market, demand
2. The main approaches to culture are ————— , —————-

a. anthropological, self reference
b. direct, indirect
c. higher, lower
d. easy, difficult
3. Nationalism is a _________trait
a. social
b. cultural
c. economical
d. financial
4. ____________ is one of the stages of innovation.

a. Decision making
b. Planning
c. Strategy implementation
d. Creativity in marketing
5. Anthropology is a study of ____________.

a. marketing concept
b. humanity
c. culture
d. costom
6. __________ is one of the forms of government.

a. Democracy
b. Command economy
c. Market economy
d. Mix economy
7. Language reflects the nature and _________ of society.

a. value
b. culture
c. ethics
d. nationalisim
39
8. Aesthetics refer to the ideas in a culture concerning ———————.

a. beauty and good taste
b. money
c. politics
d. social
9. In Zimbabwe, most people would instantly recognise FAVCO as the brand of ————————— produce.
a. Horticultural
b. Cosmetics
c. Clothing
d. Anthropology
10. 'Culture', itself is made up of a number of learned characteristics including ——————————.

a. aesthetics, education
b. demand, supply
c. trade, union
d. culture, society
40
Chapter V
Market Entry Strategy
Aim
• formulate the strategy for entering into the new market
• describe the market entry strategy
• understand the concept called export processing zone
Objectives
• enlist the phases of marketing strategy
• describe the Cunningham’s marketing strategy
• explain the production of foreign production strategy
Learning outcome
• understand the concept of strategy and how it is used in global marketing
• describe the concept called export processing zone
• identify the aggressive and passive export
41
5.1 Introduction
Generally, strategy means the 'Plan of Action'. This plan of action is to be taken for organisational growth. The
various phases of strategy are mentioned in Figure-5.1.
Market Exploration Phase
Strategy Formulation Phase
Strategy Implementation Phase
Fig. 5.1 Phases of strategy
Market exploration is the phase where research is done to know opportunity and scope in local and global market.
In second phase, the strategy is made on the basis of product, pricing, positioning and segmentation. The last phase
is strategy implementation phase which is the most crucial part for any organisation because it gives the shape to
formulated strategy.
5.2 Implementation of Marketing Strategy

Marketing strategy can be implemented on the basis of following points:
• Identify the potential and target customer to generate business leads
• Technical barrier for entry in new market
• Competitor’s analysis
• Possible partners
• Government regulation
• Location analysis
Potential customers help for a long way in the success of a company in a new market. Business leads are generated
only because of potential customers and effective strategy implementation. Technology is one of the main attribute
for success of any organization. It is one of the main competitive elements for entry into the new market. The main
strategy which are adapted:
• The scalability of the technology used
• User friendliness of the technology
42
Competitor analysis is an important part of the strategic planning process. Competitor analysis has several important
roles in strategic planning:
• To help management understand their competitive advantages/disadvantages relative to competitors
• To understand competitors’ past, present and future strategies
• To provide information about the competitive advantage in future.
5.3 Cunningham’s Five Strategy

Cunningham's five strategies are mentioned below.
• Technical innovation strategy - perceived and demonstrable superior products
• Product adaptation strategy - modifications to existing products
• Availability and security strategy - overcome transport risks by countering perceived risks
• Low price strategy - penetration price
• Total adaptation and conformity strategy - foreign producer gives a straight copy.
Marketing products from developing countries to developed countries poses major problems. Buyers in the interested
foreign country are usually very careful as they perceive transport, currency, quality and quantity problems.
This is true, say, in the export of cotton and other commodities. Because, in most agricultural commodities, production
and marketing are interlinked, the infrastructure, information and other resources required for building market entry
can be enormous. Sometimes this is way beyond the scope of private organisations, so the Government may get
involved. It may get involved not just to support a specific commodity, but also to help the 'public good'.
Whilst the building of a new road may assist the speedy and expeditious transport of vegetables, for example, and
thus aid in their marketing, the road can be put to other uses, in the drive for public good utilities. Moreover, entry
strategies are often marked by 'lumpy investments'. Huge investments may have to be undertaken, with the investor
paying a high risk price, long before the full utilisation of the investment comes. Good examples of this include
the building of port facilities or food processing or freezing facilities. Moreover, the equipment may not be able to
be used for other processes, so the asset specific equipment, locked into a specific use, may make the owner very
vulnerable to the bargaining power of raw material suppliers and product buyers who process alternative production
or trading options.
Zimfreeze, Zimbabwe is experiencing such problems. It built a large freezing plant for vegetables but found itself
without a contract. It has been forced, at the moment, to accept sub optional volume product materials just in order
to keep the plant ticking over.
In building a market entry strategy, time is a crucial factor. The building of an intelligence system and creating an
image through promotion takes time, effort and money. Brand names do not appear overnight. Large investments in
promotion campaigns are needed. Transaction costs also are a critical factor in building up a market entry strategy
and can become a high barrier to international trade. Costs include search and bargaining costs. Physical distance,
language barriers, logistics costs and risks limit the direct monitoring of trade partners. Enforcement of contracts
may be costly and weak legal integration between countries makes things difficult. Also, these factors are important
when considering a market entry strategy. In fact these factors may be so costly and risky that Governments, rather
than private individuals, often get involved in commodity systems. This can be seen in the case of the Citrus
Marketing Board of Israel. With a monopoly export marketing board, the entire system can behave like a single
firm, regulating the mix and quality of products going to different markets and negotiating with transporters and
buyers. Whilst these Boards can experience economies of scale and absorb many of the risks listed above, they can
shield producers from information about, and from buyers. They can also become the 'fiefdoms' of vested interests
and become political in nature. They, then result in giving reduced production incentives, and cease to be demand
or market oriented, which is detrimental to producers.
43
Normal ways of expanding the markets are by expansion of product line, geographical development or both. It
is important to note that the more the product line and/or the geographic area is expanded, the greater will be the
managerial complexity. New market opportunities may be made available by expansion but the risks may outweigh
the advantages, in fact it may be better to concentrate on a few geographic areas and do things well. This is typical of
the horticultural industry of Kenya and Zimbabwe. Traditionally these have concentrated on European markets where
the markets are well known. Ways to concentrate include concentrating on geographic areas, reducing operational
variety (more standard products) or making the organisational form more appropriate. In the latter, attempt is made to
'globalise' the offering and the organisation to match it. This is true of organisations like Coca Cola and MacDonald’s.
Global strategies include 'country centred' strategies (highly decentralised and limited international coordination),
'local market approaches' (the marketing mix developed with the specific local (foreign) market in mind) or the
'lead market approach' (develop a market which will be a best predictor of other markets). Global approaches give
economies of scale and the sharing of costs and risks between markets.
5.4 Entry Strategies

There are a variety of ways in which organisations can enter foreign markets. The three main ways are -
• Direct export
• Indirect export
• Production in a foreign country (see figure 5.2).
Home market production Foreign prodution
- Licesing
Direct export indirect export - Joint Venture
- Contract
manufacture
- Ownership
- Export
-Agent -Trading company processing zone
- Distributor - Export Management

- Government company
- Overseas - Piggyback
subsidiary - Countertrade
Fig. 5.2 Methods for foreign market entry
Exporting is the most traditional and well established form of operating in foreign markets. Exporting can be defined
as the marketing of goods produced in one country into another. Whilst no direct manufacturing is required in an
overseas country, significant investments in marketing are required. The tendency may be not to obtain as much
detailed marketing information as compared to manufacturing in the marketing country; however, this does not
negate the need for a detailed marketing strategy.
The advantages of exporting are:

• manufacturing is home based thus, it is less risky than overseas based
• gives an opportunity to learn about overseas markets before investing in bricks and mortar
• reduces the potential risks of operating overseas
The disadvantage is mainly that one can be at the mercy of overseas agents and so the lack of control has to be
weighed against the advantages. For example, in the exporting of African horticultural products, the agents and
Dutch flower auctions are in a position to dictate to producers.
44
A distinction has to be drawn between passive and aggressive exporting. A passive exporter awaits orders or comes
across them by chance; an aggressive exporter develops marketing strategies which provide a broad and clear picture
of what the firm intends to do in the foreign market. They distinguished between firms whose marketing efforts were
characterised by no activity, minor activity and aggressive activity.
Those firms who are aggressive have clearly defined plans and strategies, including product, price, promotion,
distribution and research elements. Passiveness versus aggressiveness depends on the motivation to export. In
countries like Tanzania and Zambia, which have embarked on structural adjustment programmes, organisations are
being encouraged to export, motivated by foreign exchange earnings potential, saturated domestic markets, growth
and expansion objectives, and the need to repay debts incurred by the borrowings to finance the programmes. The
type of export response is dependent on how the pressures are perceived by the decision maker. Piercy (1982)
highlights the fact that the degree of involvement in foreign operations depends on endogenous versus exogenous
motivating factors, that is, whether the motivations were as a result of active or aggressive behaviour based on the
firm’s internal situation (endogenous) or as a result of reactive environmental changes (exogenous).
If the firm achieves initial success at exporting quickly all the good, but the risks of failure in the early stages are
high. The learning effect in exporting is usually very quick. The key is to learn how to minimise risks associated
with the initial stages of market entry and commitment - this process of incremental involvement is called creeping
commitment (see figure 5.3).
Aggressive export paths
Active export behaviour Export success
Export commitment
Active pre-export paths
Passive export paths
Passive export
Poor results
behaviour
Withdrawal from Tentative

exporting commitment
Inactive pre-export behaviour
Fig. 5.3 Aggressive and passive export path
Exporting methods include direct or indirect export. In direct exporting the organisation may use an agent, distributor,
or overseas subsidiary, or act via a government agency. In effect, the Grain Marketing Board in Zimbabwe, being
commercialised but still having government control, is a government agency. The Government, via the Board, are
the only permitted maize exporters. Bodies like the Horticultural Crops Development Authority (HCDA) in Kenya
may be merely a promotional body, dealing with advertising, information flows and so on, or it may be active in
exporting itself, particularly giving approval (like HCDA does) to all export documents. In direct exporting, the
major problem is that of market information. The exporter’s task is to choose a market, find a representative or
agent, set up the physical distribution and documentation, promote and price the product. Control, or the lack of it,
is a major problem which often results in decisions on pricing, certification and promotion being in the hands of
others. Certainly, the phytosanitary requirements in Europe for horticultural produce sourced in Africa are getting
45
very demanding. Similarly, exporters are price takers as produce is sourced also from the Caribbean and Eastern
countries. In the months June to September, Europe is on season because it can grow its own produce, so prices are
low. As such, producers are better off supplying to local food processors. In the European winter prices are much
better, but product competition remains.
According to Collett (1991), exporting requires a partnership between exporter, importer, government and transport.
Without these four coordinating activities, the risk of failure is increased. Contracts between buyer and seller are a
must. Forwarders and agents can play a vital role in the logistics procedures such as booking air space and arranging
documentation. A typical coordinated marketing channel for the export of Kenyan horticultural produce is given
in figure 5.4.
In this case, the exporters can also be growers and in the low season both these and other exporters may send produce
to food processors which is also exported.
Producer
Middleman
Processors Exporter
Importer Wholesale market

food distribution
Fig. 5.4 Export marketing channel for Kenyan horticulture product
Exporting can be very lucrative, especially if it is of high value added produce. For example in 1992 and 1993,
Zimbabwe exported 5 338,38 tonnes of flowers, 4 678,18 tonnes of horticultural produce and 12,000 tonnes of citrus
at a total value of about US$ 22 016,56 million. In some cases, a mixture of direct and indirect exporting may be
achieved with mixed results. For example, the Grain Marketing Board of Zimbabwe may export grain directly to
Zambia, or may sell it to a relief agency like the United Nations, for feeding the Mozambican refugees in Malawi.
Payment arrangements may be different for the two transactions.
Nali products of Malawi gives an interesting example of a 'passive to active' exporting mode. It is interesting to note
that Korey ,1986 warned that direct modes of market entry may be less and less available in the future. Growing
trading blocks like the European Union (EU) or European Fair Trade Association (EFTA) means that the establishment
of subsidiaries may be one of the only ways forward in future. Indirect methods of exporting include the use of
trading companies (very much used for commodities like cotton, soya, cocoa), export management companies,
piggybacking and countertrade.
Indirect methods offer a number of advantages including:

• Contracts - in the operating market or worldwide
• Commission sales give high motivation (not necessarily loyalty)
• The manufacturer/exporter needs little expertise
• Credit acceptance takes the burden from manufacturer
46
5.5 Piggybacking
Piggybacking is an interesting development. The method means that organisations with little exporting skill may
use the services of one that has. Another form is the consolidation of orders by a number of companies in order to
take advantage of bulk buying. Normally, these would be geographically adjacent or able to be served, say, on an
air route. The fertiliser manufacturers of Zimbabwe, for example, could piggyback with the South Africans for both
import potassium from outside their respective countries.
5.6 Foreign Production

Besides exporting, other market entry strategies include the following:
• Licensing
• Joint ventures
• Contract manufacture
• Ownership
• Participation in export processing zones or free trade zones
Licensing
Licensing is defined as 'the method of foreign operation whereby a firm in one country agrees to permit a company
in another country to use the manufacturing, processing, trademark, know-how, or some other skill provided by
the licensor.'
The mode of operation is not dissimilar to franchising. Coca Cola is an excellent example of licensing. In Zimbabwe,
United Bottlers have the license to make 'Coke'. Licensing involves little expense and involvement. The only cost
is signing the agreement and policing its implementation.
Licensing gives the following advantages:

• good way to start foreign operations and open the door to low risk manufacturing relationships
• linkage of parent and receiving partner interests means both get most out of the marketing effort
• capital not tied up in foreign operation
• options to buy into partner exist or provision to take royalties in stock
The disadvantages of licensing are as follows:

• limited form of participation - to length of agreement, specific product, process, or trademark
• potential returns from marketing and manufacturing may be lost
• partner develops know-how and so license is shortl
• licensees become competitors - overcome by having cross technology transfer deals
• requires considerable fact finding, planning, investigation, and interpretation
Those who decide to license ought to keep the options open for extending market participation. This can be done
through joint ventures with the licensee.
Joint ventures
Joint ventures can be defined as “an enterprise in which two or more investors share ownership and control over
property rights and operation.” Joint ventures are a more extensive form of participation than either exporting or
licensing. In Zimbabwe, Olivine industries have a joint venture agreement with HJ Heinz in food processing.
47
Joint ventures give the following advantages:

• sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-how in
technology or process
• Joint financial strength.
• May be only means of entry
• May be the source of supply for a third country.
They also have disadvantages:

• Partners do not have full control of management.
• May be impossible to recover capital if need be.
• Disagreement on third party markets to serve and
• Partners may have different views on expected benefits.
If the partners carefully map out in advance, what they expect to achieve and how, then many problems can be
overcome.
Ownership
The most extensive form of participation is 100% ownership and this involves the greatest commitment in capital
and managerial effort. The ability to communicate and control 100% may outweigh any of the disadvantages of
joint ventures and licensing. However, as mentioned earlier, repatriation of earnings and capital have to be carefully
monitored. The more unstable the environment, the less likely is the ownership pathway an option. The forms of
participation: exporting, licensing, joint ventures or ownership, are on a continuum rather than discrete and can
take many formats.
Integrated channels offer the advantages of planning and control of resources, flow of information, and faster market
penetration, and are a visible sign of commitment.
The disadvantages are that they incur many costs (especially marketing), the risks are high, some may be more
effective than others (due to culture), and in some cases their credibility amongst locals may be lower than that of
controlled independents.
Independent channels offer lower performance costs, risks, less capital, high local knowledge, and credibility.
Disadvantages include less market information flow, greater coordinating and control difficulties, and motivational
difficulties. In addition, they may not be willing to spend money on market development and selection of good
intermediaries may be difficult as good ones are usually taken up anyway.
Once in a market, companies have to decide on a strategy for expansion. One may be to concentrate on a few segments
in a few countries - typical are cashew nuts from Tanzania and horticultural exports from Zimbabwe and Kenya
- or concentrate on one country and diversify into segments. Other activities include country and market segment
concentration - typical of Coca Cola or Gerber baby foods, and finally country and segment diversification.
Another way of looking at it is by identifying three basic business strategies: stage one - international, stage two
- multinational (strategies correspond to ethnocentric and polycentric orientations respectively) and stage three -
global strategy (corresponds with geocentric orientation). The basic philosophy behind stage one is extension of
programmes and products, behind stage two is decentralisation as far as possible to local operators and behind
stage three is an integration which seeks to synthesis inputs from world and regional headquarters and the country
organisation. Whilst most developing countries are hardly in stage one, they have within them organisations which
are in stage three. This has often led to a rebellion against the operations of multinationals, often unfounded.
Export Processing Zones (EPZ)

An EPZ is first and foremost a managed policy tool of governments. As with any policy tool, it is properly utilized
48
to achieve a social objective that is not being met by current programs and policies. In a free zone, the government
can create a coherent policy framework that is different than the policy framework in the rest of the economy.
Traditionally the policy framework has been applied to a small geographical area or enclave that does not tend to
have a resident population. It is this type of small area Economic Progressive Zone (EPZ) that has been on the mind
of most Vanuatu government and private sector individuals who knew about the program. However, increasingly
free zones in the modern world have been defined by non-geographic criteria, or have included much larger areas
with resident families.
Entry mode
Evaluation criteria Indirect Direct Marketing Counter Licensing Joint Wholly EPZ
export export subsidiary trade venture owned
operation
a) Company goals
b) Size of company
c) Resources
d) Product
e) Remittance
f) Competition
g) Middlemen
characteristics
h) Environmental
characteristics
i) Number of
markets
j) Market
k) Market feedback
l) International
market learning
m) Control
n) Marketing costs
o) Profits
p) Investment
q) Administration
personnel
r) Foreign problems
s) Flexibility
t) Risk
Table 5.1 Matrix for comparing alternative methods of market entry
Organisations are faced with a number of strategy alternatives when deciding to enter foreign markets. Each one
has to be carefully weighed in order to make the most appropriate choice. Every approach requires careful attention
to marketing, risk, matters of control and management. A systematic assessment of the different entry methods can
be achieved through the use of a matrix (see Table 5.1).
5.7 Special Features of Commodity Trade

As has been pointed out time and again in this text, the international marketing of agricultural products is a close
coupled affair between production and marketing and end user. Certain characteristics can be identified in market
entry strategies which are different from the marketing of say cars or television sets. These refer specifically to the
institutional arrangements linking producers and processors/exporters and those between exporters and foreign
buyers/agents.
49
Institutional Links between producers and processors/exporters

One of the most important factors is contract coordination. Whilst many of the details vary, most contracts contain
the supply of credit/production inputs, specifications regarding quantity, quality and timing of producer deliveries and
a formula or price mechanism. Such arrangements have improved the flow of money, information and technologies,
and very importantly, shared the risk between producers and exporters.
Most arrangements include some form of vertical integration between producers and downstream activities. Often
processors enter into contracted out grower arrangements or supply raw inputs. This institutional arrangement has
now, incidentally, spilled over into the domestic market where firms are wishing to target higher quality, higher
priced segments.
Producer trade associations, boards or cooperatives have played a significant part in the entry strategies of many
exporting countries. They act as a contact point between suppliers and buyers, obtain vital market information, liaise
with Governments over quotas, etc. and provide information, or even get involved in quality standards. Some are
very active, witness the Horticultural Crops Development Authority (HCDA) of Kenya and the Citrus Marketing
Board (CMD) of Israel, the latter being a Government agency which specifically got involved in supply quotas.
Institutional Links between exporters and foreign buyers/agents

Linkages between exporters and foreign buyers are often dominated by open market trade or spot market sales or
sales on consignment. The physical distances involved are also very significant.
Most contracts are of a seasonal, annual or other nature. Some products are handled by multinationals, others by
formal integration by processors, building up import/distribution firms. In the case of Kenyan fresh vegetables,
familial ties are very important between exporters and importers. These linkages have been very important in
maintaining market excess, penetrating expanding markets and in obtaining market and product change information,
thus reducing considerably the risks of doing business. In some cases, the government gets involved in negotiating
deals with foreign countries, either through trade agreements or other mechanisms. Zimbabwe’s imports of Namibian
mackerel were the result of such a government negotiated deal.
50
Summary
• Firstly, it covered the phases of strategy. Market exploration is the phase where research is done to know
opportunity and scope in local and global market. In second phase, the strategy is made on the basis of product,
pricing, positioning and segmentation. Last phase is the strategy implementation phase which is the most crucial
part for any organisation because it gives the shape to formulated strategy.
• In marketing products from developing countries to developed countries poses major problems. Buyers in the
interested foreign country are usually very careful as they perceive transport, currency, quality and quantity
problems.
• Exporting is the most traditional and well established form of operating in foreign markets. Exporting can be
defined as the marketing of goods produced in one country into another. Whilst no direct manufacturing is
required in an overseas country, significant investments in marketing are required.
• Those firms who are aggressive have clearly defined plans and strategies, including product, price, promotion,
distribution and research elements.
• Piggybacking is an interesting development. The method means that organisations with little exporting skill
may use the services of one that has. Another form is the consolidation of orders by a number of companies in
order to take advantage of bulk buying.
• The most extensive form of participation is 100% ownership and this involves the greatest commitment in capital
and managerial effort. The ability to communicate and control 100% may outweigh any of the disadvantages
of joint ventures and licensing.
• Linkages between exporters and foreign buyers are often dominated by open market trade or spot market sales
or sales on consignment. The physical distances involved are also very significant.
References
• Vern Terpstra, Lloyd C. International Dimensions of Marketing. Russow Publisher: South-Western College
Recommended Reading
• Korey, G. “Multilateral Perspectives in International Marketing Dynamics” European Journal of Marketing,
• Shipley, D.D. and Neale, C.W. “Successful Countertrading. Management Decision”, Vol. 26,
• Keegan, W.J. “Global Marketing Management”,4th ed.
51
Self Assessment
1. Interlinking of production and marketing means private __________ alone may not be possible.
a. company
b. investment
c. capital
d. institutions
2. _______ intervention may be needed to build infrastructure.

a. Private
b. Public
c. Government
d. Company
3. Licensing is method of foreign operation whereby a firm in one country agrees to permit a_______ company
in another country to use the manufacturing.
a. local
b. foreign
c. domestic
d. global
4. An _______ is one in which two or more investors share ownership and control over property rights and
operation.
a. enterprise
b. temple
c. gift
d. financial Institution
5. _________, distributor, Government, overseas - subsidiary are direct investment options.

a. Merchant
b. Agent
c. Middle men
d. Third party
6. Trading company, export Management Company, ________, countertrade are indirect investment options.
a. piggy bank
b. investment
c. service
d. balance of payment
7. A zone within a country, exempt from tax and duties, for the processing or reprocessing of goods for export is
called
a. EPZ
b. SSF
c. SSC
d. GDP
52
8. Licensing, ___________, contract manufacture, ownership, export processing zone are under foreign investment
option.
a. joint venture
b. partnership
c. Quality of Service
d. collaboration
9. Direct exchange of one good for another (may be straight or closed or clearing account method) has no
_________.
a. advantages
b. disadvantages
c. quality
d. credit
10. Devise a ________ entry strategy for the product, clearly showing which you would use and justify your choice
indicating why the method chosen would give benefits to your country.
a. culture
b. society
c. market
d. quality
53
Chapter VI
Competitive Analysis and Strategy
Aim
• describe the competition in the market as per industry analysis
• explain competitive strategy of market
• understand strategies used in competitive market
Objectives
• analyse the industry analysis
• describe Porter’s five force model
• explain the various strategy for success
Learning outcome
• understand the competition in industries
• identify the five forces in competitive market
• portray various succes strategies
54
6.1 Introduction
Competition in most global product/markets is intense. In the fertiliser industry for example, few companies dominate
- including Norsk Hydro. Product type competition has also become intense, for example, Pannar and Cargil seeds,
so has brand competition, for example Israel’s CARMEL and South Africa’s OUTSPAN. Substitute competition
has also become an increasingly bitter battleground, with products being able to replace others as technology and
tastes have changed.
6.2 Industry Analysis

One way to look at competition is by industry analysis. Competition drives down rates of return on invested capital.
If the rate is “competitive” it will encourage investment, if not, it will discourage competition. Porter (1980) and
(1985), looked at the forces influencing competition in an industry and the elements of industry structure. Figure 6.1
shows the four forces influencing competition, threat of new entrants, threat of substitute products, macro factors
like changes in technology and social factors and micro factors like customers’ or buyers’ changing needs.
Threat of new entrants
Macro forces Micro forces

Economics The industry Customer or buyer changing
Social Competitors needs and wants
Cultural jockeying for position Governments
Technological Suppliers bargaining power
Political and effectiveness
Threat of substitute products
Fig. 6.1 Forces influencing competition in the Industry
Porter further postulated that the elements of industry structure are suppliers, buyers, new entrants and substitute
product (see Figure 6.2).
Porter’s five force model gives the framework and information for economic factors which affects the price and
profits of an industry. It is one of the economic tool which provides answers to the following information
• How the company can make profit?
• What kind of opportunities can provide success to the organization?
• It is the base for generating strategic choices.
In 1990, Porter hypothesized in his text, “The Competitive Advantage of Nations”, why some nations were more
competitive than others. As well as being able to successfully manoeuvre through the environment, he identified that
the foundation of success lay in the diamond of home advantage. To successfully launch an international challenge,
he identified four home prerequisites - the maximum use of endowed resources (natural and human), the forming
of domestic networks to fully exploit these resources, domestic demand (which may involve the invitation to world
55
class players to help develop these resources in the country) and finally, an industry and environmental structure
(the latter provided by Government) in order that these forces can thrive.
Unfortunately, in many developing nations, only the first stage has been reached and even then much of the added
value is exported.
Fig. 6.2 Porter’s Five Force Model
A food system, to be competitive, must have two requisites. Firstly it must be competitive with other agricultural
systems or any other system for that matter (say wildlife management) in attracting resources, and secondly it must
be absolutely competitive against similar commodity systems or industries in other countries. The commodity system
may have to compete against those industries in international markets or be threatened by them in its domestic markets.
Porter would refer to this as competitive advantage or international competitiveness. While Porter concentrates on
two factors in the control of manufacturing industries i.e.:
• Lower cost of production and delivery - leading to under pricing over competition
• Differentiation of product - quality, image, services. In export oriented agriculture it is essential to recognise a third
potential source of competitive advantage, that of Complementary supply - off season, meeting production shortfalls
because of weather, disease and so on. However, complementary supply may not be a competitive strategy per-se,
in the long term, because a supplier must still look at himself as a low cost or product differentiated supplier.
As in industrial products, many factors go into making up the comparative or competitive advantage of a supplier.
Similarly in food systems, many technological, market or natural resource endowment factors go towards making
up the competitive advantage. Many of these factors have actually been discussed, and these are summarised in
table 6.1. These factors are primarily related to the size and patterns of food demand (shaped by incomes, tastes,
technological developments, etc.), microeconomics and sector policies (rate of inflation, investment policies, natural
resources and human capital endowments (weather, soils, labour), physical and social infrastructure (roads, ports,
telephones, power system) and micro-marketing relationship (quality/ price relationships, management).
56
Factor Vector
Income, tastes, resources and strengths of competing,
Market research
suppliers, work patterns, population clusters, price, elasticity
Terms of access and trade, price policies, fiscal and monetary
Macroeconomics and sector policies
policies, tariff and non tariff barriers
Natural resources and human capital Geological resources, labour, climate, experience
Physical, technical, and social Transport, credit, market information, extension,

infrastructure communications, marketing extension, post harvest facilities
Quality control, efficiencies of management- buying,
selling, handling, production, marketing, promotion, credit
Micro marketing relationships
coordination, market research, risk analysis, relationship
building.
Table 6.1 Factors affecting international competitiveness for products/commodities
In Porter’s analysis, industry competitors can be “threatened” by new or potential entrants and substitutes. In food
marketing systems, barriers to new entrants can exist, as well as barriers to international competitiveness. These
barriers can be related to technical characteristics of commodities, perishability, bulkiness; production characteristics
- small scale producers incurring higher transport costs; production support systems; dissemination of information
to producers; processing and distribution functions - economies of scale, and laws; rules and standards - hygiene
requirements, sizing, grading, phytosanitary systems. Conversely these factors can also be standardised by the
government or other market intermediaries and players to make the “threat” of new entrants even more real. These
include standard technological measures like containerisation, packaging, wax coating, use of accredited pesticides,
mechanical handling; standard laws, rules and regulations, size, standards, grades and rules defining property rights;
permissible forms of cooperation and competition; unusual brand marks or reputations; spot or contact trading;
standard channels of distribution and so on. All these can help facilitate the entry of a newcomer and make the
incumbent be particularly on guard and responsive. Table 6.2 give an example of a number of sources of competitive
advantage for selected worldwide products.
57
Table 6.2 Sources of competitive advantage for selected commodity systems
One of the remarkable success stories, against nearly all the odds, has been that of Argentina beef. It is an example
of how, through low cost of production and product differentiation, it has been able to maintain its international
competitiveness.
Many more examples exist of less developed countries taking advantage of the low cost of production and product
differentiation to make an international success. But this is not limited to LDC' s alone. Israel found itself unable to
compete internationally with its citrus products, but found a new way to remain competitive internationally.
6.3 Competition Analysis

In order to know how best to compete, as well as the analysis given above, one needs to know the way competitors
measure themselves, their strategy to date, their major strengths and weaknesses and likely future strategy. In the
first of these - knowing the way competitors see themselves - much can be learned from public accounts, interviews
and the trade press. Other ways are to have competitive personnel, take part in trade fairs, purchase the competitor’s
product and take it apart, or indulge in “espionage”. In identifying the competitor’s strategy to date, it is not enough
to believe what they say but to reconstruct their strategy. Evaluating resources is difficult. It is essential to look at
their production, marketing, financial and management resources. On the basis of these first three, it is possible to
guess the future.
Not all competitors are necessarily bad. Good competitors can absorb demand fluctuations, expand the market,
increase motivation, and act responsively to the industry. There is, for example, room for all developing countries
to take a share in most world markets in commodities, without one country wishing to be too aggressive.
6.3.1 Competitive Strategy

Value chain analysis espouses three roles for marketing in a global competitive strategy. The first relates to the
configuration of marketing. It may be advantageous to concentrate some marketing activities in one or a few
countries.
A second role relates to the coordination of activities across countries to gain leverage say, of know- how.
A third critical role of marketing is its role in tapping opportunities for upstream advantage in the value chain.
58
6.3.2 Generic Approaches
According to Porter (1980), there are three generic approaches to outperforming others in an industry - overall cost
leadership, differentiation and focus (see figure 6.3).
Figure 6.3 Generic competitive advantage
If there are a few perceived differences between products and their uses are widespread, then the lowest cost firms
will get the advantage. This is the case of television sets and many fruit products. If there is a large perceived
difference created, then the firm has more price leeway. CARMEL and OUTSPAN successfully created a perceived
quality advantage, as have Cadbury and Nestle. Focus strategies concentrate on serving a particular segment better
than anyone else. A good example of this is the Dutch flower auction or Gerber baby foods.
6.4 Strategy for Success

Success can be achieved in industries by identifying growth segments within an overall market, enhancing quality
and stressing operating efficiencies. In fragmented industries success can be achieved by the creation of economies
of scale. In the poultry and beef cattle industry, for example, this means feed lots and intensive rearing. Another
way of overcoming fragmentation is by “positioning”, which must be consistent.
The three types of positioning strategy are market leader, market challenger or market follower. In market leadership,
the firm must work at maintaining its position, having got there through, say, cost advantage or innovation, by being
very responsive to market needs. We saw in the case of Argentina’s beef and Brazil’s frozen concentrated orange
juice that success was built on:
• Economies of scale - low cost of production
• Customer knowledge - shifting the product mix to meet changing demand
• Technological innovation - vacuum packing policy, bulk transport
• Infrastructural development - supermarkets, transport systems
In the market challenger category, an organisation may publicly announce its intention to take over the number one
position either by price advantage, product innovation or promotion. We shall see this later in the case of Thailand’s
tuna industry.
59
The market follower is allowed to stay in the market only if the leader chooses to maintain a price umbrella and not
maximise share. However the follower may be able to service segments on a more personal level than the leader
and hence maintain an industry position.
Other strategies include market flanking - a classical Japanese approach. The competitive position of the industry
is very important to the global marketer. Intelligence, such as that gathered by the process described in chapter
five, is an essential prerequisite to designing a strategy. Too often developing countries attempt to gain entry into
the international market without knowledge of the industry or competitors. Malaysia attempted to break into the
cocoa industry, but did not achieve success because the cocoa was the wrong type and the product could not be
absorbed into the world market. In the cut flower industry, it is the high value types which are giving the returns
now - carnations, roses, orchids - rather than the low value ones. In marketing vegetables to the UK, any other
route but through buying agents, until recently, was a recipe for disaster. Now it is somewhat changing. The need
to properly assess the market and devise a strategy on the assessment is a must to succeed.
The copy adapt strategy is a relatively well tried strategy in which an organisation may seek to copy a successful
product/market strategy pioneered by another organisation and adapt it to local conditions or other markets. Many
examples of this strategy exist in LDCs, where the local populace may simply not have the income to afford the
real thing. Typical examples exist in all countries but none more so than in India. One can see agricultural land
implements, tractors, ox carts and many other cheaper adaptations of well known marques, for example, the
International Harvester and the Indian Mahindra tractor look alike.
6.4.1 Sourcing
A different approach to gaining competitive advantage may be through “out sourcing” from a number or countries, or
throughout sourcing in country as in the case of Kenya vegetables. In analysing a value chain, the organisation may
find it much cheaper or easier to source certain components of the chain from outside of the country it is operating
in. This is often called the make or buy decision. The criteria for the outsourcing decision are:
• Factor costs and availability
• Logistics: time required to fill orders, security and safety and transportation costs
• Country’s infrastructure
• Political risk
• Market access
• Foreign exchange
• Technological capability
“As illustration of the above discussion, take the assembly of tractors in Zimbabwe. The electronics and some
other components are incapable of being sourced locally because of the technical sophistication required in the
production process. These components have, therefore, to be imported. It is only when all the factors listed above
are in place, that global sourcing can occur effectively. Continuing with the Zimbabwean example, it is impossible
for the country to be highly outsource orientated and find cheaper labour factor countries to manufacture products
because, prior to 1990, there was insufficient foreign exchange to pay for them. Since 1990, with economic reform,
this situation is now rapidly changing.
Outsourcing is a well-established global strategy. It is uncommon for global organisations like Ford and Toyota
to source components and end products from a variety of countries or to shift global production to the most cost
competitive economies. World markets are a stage on which a player must choose or find his unique part. Essentially,
this is what competitive strategy is all about.
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Summary
• One way to look at competition is by industry analysis. Competition drives down rates of return on invested
capital.
• Porter’s five force model gives the framework and information for economic factors which affects the price and
profits of an industry. It is one of the economic tool which provides answers to the following information. It is
the base for generating strategic choices:
How the company can make profit
What kind of opportunities can provide success to the organization
• In order to know how best to compete, as well as the analysis given above, one needs to know the way competitors
measure themselves, their strategy to date, their major strengths and weaknesses and likely future strategy.
• Success can be achieved in industries by identifying growth segments within an overall market, enhancing
quality and stressing operating efficiencies. In fragmented industries success can be achieved by the creation
of economies of scale. In the poultry and beef cattle industry, for example, this means feed lots and intensive
rearing.
• Value chain analysis espouses three roles for marketing in a global competitive strategy. The first relates to the
configuration of marketing. It may be advantageous to concentrate some marketing activities in one or a few
countries.
References
• Porter, M.E. “Competitive Strategy”. New York: The Free Press.
• Porter, M.E. “The Competitive Advantage of Nations”. New York: The Free Press.
• Porter, M.E. “Competition in Global Industries”. Boston: Harvard Business School Press.
Recommended Reading
12th ed
61
Self Assessment
1. Success can be achieved in industries by identifying growth segments within an overall market,
——————quality and stressing operating efficiencies.
a. enhancing
b. reducing
c. maintaining
d. analyzing
2. The three types of positioning strategy are market leader, market challenger or market —————————.
a. viewer
b. follower
c. direction
d. quality
3. In —————— leadership, the firm must work at maintaining its position, cost advantage or innovation.
a. market
b. local
c. political
d. social
4. The principal sources of ___________ advantage are lower costs of production and a differentiated product
offering.
a. comparative
b. competitive
c. controlling
d. compliance
5. _______ developed countries usually have the former, but may have to work hard to obtain the latter.
a. more
b. lesser
c. none of the
d. economically
6. There are other ________ available to marketers other than low cost, these include market leadership, market
challenger or market flanking.
a. strategy
b. quality
c. company
d. product
7. Industry competitors can be 'threatened' by _______ or potential entrants and substitutes.

a. old
b. new
c. strategy
d. entry
62
8. In food marketing systems, barriers to new entrants can exist, as well as barriers to international _________.
a. comparative
b. competitiveness
c. controlling
d. compliance
9. The barriers can be related to technical characteristics of commodities, ___________, bulkiness; production
characteristics - small scale producers incurring higher transport costs.
a. comparative
b. compliance
c. perishability
d. physical evidence
10. In fragmented industries, success can be achieved by the creation of __________.

a. economic
b. economic of scale
c. quality
d. service
63
Chapter VII
Product and Promotion Decision
Aim
• explain the basic concept of product and promotion decision
• enlist the standardisation factors of product design
• understand the manufacturing process
Objectives
• describe the product design
• enlist the production decision variables
• explain promotion decision factors
Learning outcome
• understand the product design concept
• identify various promotional decisions
• analyse promotion decision factors
64
7.1 Introduction
Decisions regarding the product, price, promotion and distribution channels are based on the elements of the
“marketing mix”. Marketing mix is the consolidation of product, price, place and promotion. It can be argued that
product decisions are probably the most crucial as the product is the very epitome of marketing planning. These
can include the imposition of a global standardised product where it is inapplicable, for example large horsepower
tractors may be totally unsuitable for areas where small scale farming exists and where incomes are low; devolving
decisions to affiliated countries which may let quality slip; and the attempt to sell products into a country y without
cognizance of cultural adaptation needs. The decision whether to sell globally standardised or adapted products is
too simplistic for today’s marketplace. Many product decisions lie between these two extremes. Cognizance has
also to be taken of the stage in the international life cycle, the organisation’s own product portfolio, its strengths
and weaknesses and its global objectives.
Unfortunately, most developing countries are in no position to compete on the world stage with many manufactured
value-added products. Quality, or lack of it, is often the major letdown. As indicated earlier, most developing countries
are likely to be exporting raw materials or basic and high value agricultural produce for some time to come.
7.2 Basic Concept

A good, idea, method, information, object, or service that is the end result of a process and serves as a need or want
satisfied. It is usually a bundle of tangible and intangible attributes (benefits, features, functions, uses) that a seller
offers to a buyer for purchase.
In post modernisation, it is increasingly important that the product fulfils the image which the producer is wishing
to project. This may involve organizations producing symbolic offerings represented by meaning laden products
that chase stimulation-loving consumers who seek experience-producing situations. So, for example, selling mineral
water may not be enough. It may have to be 'Antarctic' in source, and flavourful. This opens up a wealth of new
marketing opportunities for producers.
A product’s physical properties are characterized the same, the world over. They can be convenience or shopping
goods or durables and non-durables; however, one can classify products according to their degree of potential for
global marketing:
• Local products - seen as only suitable in one single market
• International products - seen in other markets
• Multinational products - products which are manufactured in various nation is called as multinational product
Global products - products designed to meet global segments.

It is becoming increasingly important to maintain quality products based on the ISO 9000 standard, as a prerequisite
to export marketing. Consumer beliefs or perceptions also affect the world brand concept. World brands are based
on the same strategic principles, same positioning and same marketing mix but there is a change in message which
is communicated to the user or other images.
In fertilisers, brands like Norsk Hydro are universal; in tractors, Massey Ferguson; in soups, Heinz; in tobacco,
BAT; in chemicals, Bayer. These world brand names have been built up over the years with great investments in
marketing and production. Few world brands, however, have originated from developing countries. This is hardly
surprising, given the lack of resources. In some markets, product saturation has been reached, yet surprisingly the
same product may not have reached saturation in other similar markets.
7.3 Product Design

Changes in design are made to improve the product sales, and this, over the accompanying costs. Changes in
design are also subject to cultural pressures. The more culture-bound the product is, for example food, the more
adaptation is necessary. Most products fall in between the spectrum of standardisation to adaptation extremes. The
application the product is put to also affects the design. In the UK, railway engines were designed from the outset
to be sophisticated because of the degree of competition, but in the US this was not the case. In order to burn the
65
abundant wood and move the prairie debris, large smoke stacks and cow-catchers were necessary. In agricultural
implements, a mechanised cultivator may be a convenience item in a UK garden, but in India and Africa it may
be essential equipment. As stated earlier, the perceptions of the product’s benefits may also dictate the design. A
refrigerator in Africa is a very necessary and functional item, kept in the kitchen or the bar. In Mexico, the same
item is a status symbol and, therefore, kept in the living room.
Factors encouraging standardisation are:

• Economies of scale in production and marketing
• Consumer mobility - the more consumers travel, the more is the demand
• Technology
Factors encouraging adaptation are:

• Usability as per requirment - These may be due to climate, skills, level of literacy, culture or demographic
conditions. Maize, for example, would never sell in Europe rolled and milled as in Africa. It is only eaten
whole. In Zimbabwe, Kapenta fish can be used as a relish, but will always be eaten as a starter to a meal in the
developed countries.
• General market factors - incomes, tastes, per capita income and occupation etc. Canned asparagus may be very
affordable in the developed world, but may not sell well in the developing world.
• Government - taxation, import quotas, non- tariff barriers, labelling, health requirements. Non-tariff barriers
are an attempt, despite their supposed impartiality, at restricting or eliminating competition. A good example of
this is the Florida tomato growers, cited earlier, who successfully got the US Department of Agriculture to issue
regulations establishing a minimum size of tomatoes marketed in the United States. The effect of this was to
eliminate the Mexican tomato industry which grew a tomato that fell under the minimum size specified. Some
non-tariff barriers may be legitimate attempts to protect the consumer, for example the ever stricter restrictions
on horticultural produce insecticides and pesticides use may cause African growers a headache, but they are
deemed to be for the public good.
• History - Sometimes, as a result of colonialism, production facilities have been established overseas. In Kenya,
the tea industry is a colonial legacy, as is the sugar industry of Zimbabwe and the coffee industry of Malawi.
These facilities have long been adapted to local conditions.
• Financial considerations - In order to maximise sales or profits, the organisation may have no choice but to sell
its products to local people. Whenever a new product is designed financial aspects should also be taken into
consideration.
• Pressure - Sometimes, as in the case of the EU, suppliers are forced to adapt to the rules and regulations imposed
on them if they wish to enter into the market.
7.4 Production Decision

In decisions on producing or providing products and services in the international market, it is essential that the
production of the product or service is well planned and coordinated, both within and with other functional areas of
the firm, particularly marketing. For example, in horticulture, it is essential that any supplier or any of his out grower
(sub-contractor) can supply what he says he can. This is especially vital when contracts for supply are finalised, as
failure to supply could incur large penalties. The main elements to consider are the manufacturing process itself,
specifications, culture, the physical product, packaging, labelling, branding, warranty and service.
7.4.1 Manufacturing Process

Manufacturing is the use of machines, tools and labour to produce goods for use or sale. The term may refer to a
range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in
which raw materials are transformed into finished goods on a large scale. Such finished goods may be used for
manufacturing other, more complex products, such as aircraft, household appliances or automobiles, or sold to
wholesalers, who in turn sell them to retailers, who then sell them to end users, the consumers.
66
Manufacturing takes turns under all types of economic systems. In a free market economy, manufacturing is
usually directed toward the mass production of products for sale to consumers at a profit. In a collectivist economy,
manufacturing is more frequently directed by the state to supply a centrally planned economy. In free market
economies, manufacturing occurs under some degree of government regulation.
The process of manufacturing shown in Fig. 7.1
Raw Material Extraction Manufacturing/

Production
Disposal Transportation
Recycling
Utilisation/Reuse
Fig. 7.1 Cycle of manufacturing process

7.4.2 Specifications
Specification is very important in agricultural products. Some markets will not take produce unless it is within
their specification. Specifications are often set by the customer, but agents, standard authorities (like the EU or the
International Trade Center, Geneva) and trade associations can be useful sources. Quality requirements often vary
considerably. In the Middle East, red apples are preferred over green apples. In one example, French red apples,
well boxed, are sold at 55 Dinars per box, whilst not so attractive Iranian greens are sold for 28 Dinars per box. In
export, the quality standards are set by the importer. In Africa, Maritim (1991)2, found generally, that there are no
consistent standards for product quality and grading, making it difficult to do international trade regionally.
7.4.3 Culture
Product packaging, labelling, physical characteristics and marketing have to adapt to the cultural requirements
when necessary. Religion, values, aesthetics, language and material culture all affect production decisions. Effects
of culture on production decisions have been dealt with already in chapter three.
7.4.4 Physical Product

The physical product is made up of a variety of elements. Consumers are looking for benefits and these must be
conveyed in the total product package. Physical characteristics include range, shape, size, colour, quality, quantity
and compatibility. Subjective attributes are determined by advertising, self-image, labelling and packaging. In
manufacturing or selling produce, cognizance has to be taken of cost and country legal requirements. Again a number
of these characteristics are governed by the customer or agent.
For example, in beef products sold to the EU, there are very strict quality requirements to be observed. In fish
products, the Japanese demand more exotic types than, say, would be sold in the UK. None of the dried fish products
produced by the Zambians on Lake Kariba, and sold into the Lusaka market, would ever pass the hygiene laws if
sold internationally. In sophisticated markets like seeds, the variety and range is so large that constant watch has to
be kept on the new strains and varieties in order to be competitive.
67
7.4.5 Packaging
Packaging serves many purposes. It protects the product from damage which could be incurred in handling and
transportation and also has a promotional aspect. It can be very expensive. Size, unit type, weight and volume are
very important in packaging. For aircraft cargo, the package needs to be light but strong, for sea, cargo containers are
often the best form. The customer may also decide the best form of packaging. In horticultural produce, developed
countries often demand blister packs for mangetouts, beans, strawberries and so on, whilst for products like pineapples,
a sea container may suffice. Costs of packaging have always to be weighed against the advantages gained by it.
Increasingly, environmental aspects are coming into play. Packaging which is non-degradable - plastic, for example
- is less in demand. Bio-degradable, recyclable, reusable packaging is now the order of the day. This can be both
expensive and demanding for many developing countries. Now tetra pack is in demand for its portability. So those
liquid foods can easily being moved from one place to another place.
7.4.6 Labelling
Labelling not only serves to express the contents of the product, but may be promotional (symbols for example
Cashel Valley Zimbabwe; HJ Heinz, Africafe, Tanzania). The EU is now placing very stringent regulations in force
on labelling, even to the degree that the pesticides and insecticides used on horticultural produce have to be listed.
This could be very demanding for producers, especially small scale, ones where production techniques may not
be standardised. Government labelling regulations vary from country to country. Bar codes are not widespread in
Africa, but do assist in stock control. Labels may have to be multilingual, especially if the product is a world brand.
Translation could be a problem with many words being translated with difficulty. Again labelling is expensive, and
in promotion terms non-standard labels are more expensive than standard ones. Requirements for crate labelling,
etc. for international transportation will be dealt with later under documentation.
7.4.7 Branding
Branding include the promotional aspects. A family brand of products under the Zeneca (ex ICI) label or Sterling
Health are likely to be recognised worldwide, and hence enhance the subjective product characteristics.
7.4.8 Warranty
Many large value agricultural products like machinery require warranties. Unfortunately not everyone upholds them.
It is common practice in Africa that if the original equipment has not been bought through an authorised dealer in
the country, that dealer refuses to honour the warranty. This is unfortunate, because not only may the equipment
have been legitimately bought overseas; it also actually builds up consumer resistance to the dealer.
7.4.9 Service
In agricultural machinery, processing equipment and other items which are of substantial value and technology, service
is a prerequisite. In selling products to many developing countries, manufacturers have found their negotiations at
stake due to the poor back-up service. Often, this is no fault of the agent, distributor or dealer in the foreign country,
but due to exchange regulations, which make obtaining spare parts difficult. Many organisations attempt to get around
this by insisting that a Third World buyer purchases a percentage of parts on order with the original items. Allied to
this problem is the poor quality of service due to insufficient training. Good original equipment manufacturers will
insist on training and updating as part of the agency agreement. In order to illustrate the above points, cotton can
be used as an example. Cotton is a major foreign exchange earner for Zimbabwe. In 1990/ 91, 52,000 tonnes were
sold overseas at a value of Zim$ 238 million. As the spinners, particularly those in the export market, are in a highly
competitive industry, it is essential that the raw material is as clean as possible. Also today’s spinning equipment is
highly technical and the spinner wishes to avoid costly break-downs by all means.
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7.5 Product Strategy
See fig. 7.2 where various product strategies are mentioned.
Local and international environment depends upon the adaptability of product by the potential customer. If elements
of the environment like culture, manufacturing process, availability of resources, government rules and regulation
changes then the product strategy also changed accordingly.
Local
and
International
Environment
Firm’s
Customer Product
Internal
Needs Strategy
Situation
Competitive
Situation
Fig. 7.2 Product strategy
Firm’s internal situation concerned with availability of resources in an organization. If the resources are up to the
mark, then the product will developed in a proper way, otherwise it is a bigger task to be developed. Customer
needs based upon the customer’s requirements. The customer requirements are like labelling, Packaging, branding,
service and warranty.
7.6 Promotion Decision

Products or services will not sell unless people are told about them. It is true that few companies from developing
countries are global in operation, so much of the promotion process is limited to either third party advertising (for
example, the Dutch advertising Kenya grown flowers) or taking part in international exhibitions (for example,
the Zimbabwe International Trade Fair in Bulawayo). As many primary products of developing countries become
the end products of developed countries, most promotion is limited to mentions of origin in developed country
promotion.
Nonetheless, the rules still apply for effective promotion, whether it is of limited or more extensive nature. Most
basic marketing textbooks cover the “ground” rules for effective advertising and promotion and so the reader is
referred to these rather than repeat these again here. It is usual to distinguish between advertising and promotion.
Advertising is defined as: “Any form of communication in the paid media.” Promotion, on the other hand, is defined
as: “An incentive, usually at the point of sale, intended to enhance the intrinsic value of a product or service.”
Other expressions in common use are 'above the line' and 'below the line', the line being an imaginary one, defining
the boundary between promotion from the retailer to consumer and the other from manufacturer to retailer.
69
*Noice
Language differences
Goverment controls
Media availability,
Coded Decoded
Seller Economic differences, Buyer
Message message
Local distributer,
Tastes, attitudes
Agency availability
Fig. 7.3 Block diagram of conveying message

7.6.1 Global Promotion
When organisations advertise across international boundaries, a number of important factors have to be taken into
consideration. When the process is ostensibly straightforward, (that is someone (seller) says something (message)
to someone (buyer) through a medium), the process is compounded by certain factors. These are illustrated in
figure 7.3.
These mitigating factors can be called noise and have an effect on the decision to extend, adapt or create new
messages. Language differences may mean that straight translation is not enough when it comes to message design.
Advertising may also play different roles within developed, between developed and underdeveloped and within
underdeveloped countries. In developing countries, education and information may be paramount objectives. In
developed countries, the objectives may be more persuasive.
Cultural differences may account for the greatest challenge. However, many, notably Elinder (1961) challenged
the need to adapt messages and images, as he argued that consumer differences between countries are diminishing.
Changes may be needed only in translation. However, this is only one point of view, as there is no doubt that cultural
differences do exist across the world. For example, it would be quite unacceptable to have swim-suited ladies
advertising sun care products in Moslem countries.
Three major difficulties occur in attempting to communicate internationally:

• The message may not get through to the intended recipient, due to a lack of media knowledge
• The message may get through but not be understood, due to lack of audience understanding
• The message may get through, be understood but not provoke action. This may be due to lack of cultural
understanding
Media availability is a mitigating factor. Take for example, television. In Africa a number of countries do have it,
the extent of its use and time available may be limited. Media use and availability, coupled with the type of message
which may or may not be used, is tied to government control. Government may ban types of advertising, as is the
case of cigarettes on british television. Intending advertisers should refer to the appropriate codes of advertising
practice available in each country.
7.6.2 Campaign Design

Before embarking on a promotion campaign, the following questions, among many others, must be answered. What
can be said about the product? Which audience is being reached? What resources does the organisation have? Can
someone do it better, say an agency? The basic steps in designing a campaign are set out in figure 7.4.
Campaign objectives
Advertising must only be undertaken for a specific purpose(s) and this purpose must be translated into objectives.
Whilst difficult to directly attribute to advertising, persuasive advertising’s ultimate objective is to obtain sales.
Other objectives include building a favourable image, information giving, stimulating distributors or building
70
confidence in a product. Whatever objective(s) are pursued, these must be related to the product life cycle and the
stage the product is in.
Set Objectives
Set Budget
Use an agency
Message Selection
Media Choice
Campaign Scheduling
Campaign Evaluation
Organisation and control of campaign
Fig. 7.4 Phases of Campaign design
Budgets
Budgets can be set in a variety of ways. Many budgets use a percentage of past or future sales, objective and task
methods, or rule of thumb. “Scientific” methods include sales response methods and linear programming.
Agency
Agencies can be used or not depending on the organisation’s own abilities, confidence in the market and market
coverage. Many organisations, like Lintas and Interpublic, are worldwide and offer a wide range of expertise.
Message selection
Message selection is probably where the most care has to be taken. Decisions hinge on the standardisation or
adaptation of message decision, language nuances and the development of global segments and customers. Message
design has three elements, illustration, layout and copy. Advertising appeals should be consistent with tastes, wants
and attitudes in the market. Coke and Pepsi have found universal appeal. With the “post modern age” now affecting
marketing, message design is becoming particularly crucial. It is not just a question of selling, but of crafting images.
It is often the image, not the product, which is commercialized. Products do not project images, products fill the
images which the communication campaign project’s. Coke’s 'Life' theme is a classic in this regard.
In illustrations and artwork, some forms are universally understood. Coke, again, with its life theme is applicable
anywhere. Cheese and beer adverts would go well together in Germany, but it would have to be cheese and wine
in France.
Copy, or text, has been the subject of much debate. Effective translation requires good technical knowledge of the
original and translated language, the product and the objectives of the original copy. Care has to be taken that the
meaning does not get lost in translation.
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Media selection
There is a great difference in variety and availability of media across the world. The choice of media depends on
its cost, coverage, availability, character (national or local or international) and its atmosphere, for example in
Zimbabwe, posters versus adverts in the Financial Gazette.
In advertising, the choice is television, radio, press, magazines, cinema, posters, direct mail, transport and video
promotion. In promotion the choice is wide, between money-off offers, discounts, extra quantities, and so on. Other
forms of promotion include exhibitions, trade missions, public relations, selling, packaging, branding and sponsored
events. Governments can be a very powerful promotion source, both by providing organizations like Horticultural
Promotion Councils and by giving information and finance. GATT/UNCTAD Geneva provides a promotional
service, giving information about products to interested parties. Trade Fairs are popular both as a flag flyer, and as
a product display and competitive information gathering facility. There are over 600 trade fairs worldwide; These
include the Hanover Fair, Germany, the Royal Agricultural Show, UK for machinery and the Zimbabwe International
Trade Fair for agricultural produce and other things in general. The criterion for participating in fairs is always cost
versus effectiveness.
Campaign scheduling
Scheduling international campaigns is difficult, especially if handled alone rather than with an agency or third party.
Scheduling decisions involve decisions on when to break the campaign, the use of media solely or in combination,
and the specific dates and times for advertisements to appear in the media.
Campaign evaluation
Advertising campaign evaluation is not very easy at the best of times. Whilst it would be nice to say that “X” sales
had resulted from “Y” advertising inputs, too many intervening factors make the simple tie-up difficult. Evaluation
takes place at two levels - the effectiveness of the message and the effectiveness of the media. Few African developing
countries, except Kenya, have any sophisticated methods for campaign evaluation. Measures include message recall
tests, diary completion, and brand recall.
Organisation and control

When companies like Nestle may have centrally organised and controlled advertising campaigns, many are devolved
to local subsidiaries or agencies. The degree of autonomy afforded to local subsidiaries depends on the philosophy
of the organisation and the relative knowledge of the local market by the principal.
Global advertising, or even regional advertising, is a phenomenon not normally associated with African countries,
as time goes by it may be. Unfortunately few countries see or use the overseas media to advantage. For developing
countries, trade missions can be very useful for promotion. This is a relatively cheap but effective medium. Few
countries activate their overseas embassies sufficiently to generate possible trade. If, however, it is done, the foregoing
sections have to be considered carefully in order that possible mistakes are avoided.
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Summary
• Decisions regarding the product, price, promotion and distribution channels are based on the elements of the
marketing mix. Marketing mix is the consolidation of product, price, place and promotion. It can be argued that
product decisions are probably the most crucial as the product is the very epitome of marketing planning.
• A good, idea, method, information, object, or service that is the end result of a process and serves as a need or
want satisfier. It is usually a bundle of tangible and intangible attributes (benefits, features, functions, uses) that
a seller offers to a buyer for purchase.
• Changes in design are made to improve the product sales, and this, over the accompanying costs. Changes
in design are also subject to cultural pressures. The more culture-bound the product is, for example food, the
more adaptation is necessary. Most products fall in between the spectrum of standardisation to adaptation
extremes.
• Manufacturing is the use of machines, tools and labour to produce goods for use or sale. The term may refer to
a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production,
in which raw materials are transformed into finished goods on a large scale.
References
• Dixie, G.B.R., "Horticultural Marketing", FAO Agricultural Services Bulletin.
• Keegan, W.J., "Global Marketing Management", Prentice Hall.
Recommended Reading
• Warren J. Keegan, Mark Green, Global Marketing (3rd Editionpages, Publisher: Prentice Hall
• Masaaki Kotabe, Kristiaan Helsen. Global Marketing Management. Publisher: Wiley
73
Self assessment
1. In agricultural machinery, processing equipment and other items which are of substantial value and technology,
—————— is a prerequisite.
a. service
b. tax
c. loss
d. profit
2. Manufacturers have found their negotiations at stake due to the poor back-up ———————.
a. service
b. tax
c. loss
d. profit
3. Good original _________ manufacturers will insist on training and updating as part of the agency agreement.
a. equipment
b. qulity
c. software
d. product
4. Decisions regarding the product, price, promotion and distribution channels are decisions on the elements of
the “__________”.
a. product mix
b. marketing mix
c. campaigning
d. customer
5. It can be argued that product decisions are probably the most crucial as the product is the very epitome of
___________ planning.
a. strategy
b. marketing
c. financial
d. technological
6. Most developing countries are in no position to compete on the world stage with many manufactured __________
products.
a. value added
b. valuable
c. costly
d. technological
7. A product is a combination of ___________ attributes say, size and shape; and subjective attributes say image
or “quality”. A customer purchases on both dimensions.
a. physical
b. cultural
c. quality
d. technological
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8. In ——————————, it is increasingly important that the product fulfils the image which the producer
is wishing to project.
a. post-modernisation
b. pre-modernisation
c. active-modernisation
d. passive -modernisation
9. Quality, method of operation or use and maintenance are catchwords in ___________.

a. marketing
b. international marketing
c. global marketing
d. domestic marketing
10. Consumer beliefs or perceptions also affect the world brand concept.
a. perception
b. quality
c. service
d. motivation
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Chapter VIII
Distribution and Global Marketing Logistics documentation
Aim
• introduce the distribution channel for global marketing
• formulate the channel structure for business distribution channel
• enlist the various channel structure for distribution channel
Objectives
• enlist various documents related to logistic (Global market)
• explain the role of government for distribution channel
• describe the international merchant role in distribution channel
Learning outcome
• understand the distribution channel
• portray the role of government in logistic
• identify the role of international merchant
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8.1 Introduction
Distribution has two elements, the institutional and the physical. The actual institutions are like retailers, agents and
so on. Physical distribution aspects cover transport and warehousing.
While most agricultural exports from developing countries are either in a primary format (for example cotton,
maize) or finished format (for example flowers, vegetables), increasing attention is being placed on processed or
added value formats. This means that, whereas in the former, exporters are in the hands of agents, merchants or
other middlemen, in the latter, much more needs to be understood of the channel itself. The more is known about
the end user and the channel to reach him/her, the better equipped will be the exporter to understand and meet the
needs and also to perhaps gain more of the exported added value. It is a fact in flowers for example; that these are
sold from the Dutch market to the Far East, where the price commanded is much more than the original exporter
price. If the original exporter could participate in this channel, the greater would be the return.
Longer the channel, the more likely that producer profits will be indirectly reduced. This is because the end product’s
price may be too expensive to sell in volume, sufficient for the producer to cover costs. Sometimes cutting channel
length may be impossible, as country’s infrastructure requirements may dictate them being there. So longer the
channel, the more margins are added.
Channels are one of the important parts of the marketer’s activities. They also give very vital information flow to
the exporter. In deciding on channel design, the following have to be considered carefully:
• Market requirements
• The cost of channel service
• Incentives for channel members and mode of payment
• The size of the end market which is going to be served
• Product characteristics like, complexity of product, price, perishability, packaging
• Middlemen’s role- how aggressively they can sell the product to end user
• Market and channel concentration and organization
• Appropriate contractual agreements
• Degree of logistic control
8.2 Channel Structure

Channel structure varies considerably according to whether the product is consumer or business to business oriented.
The former tends to have a variety of formats, whereas the latter is less complicated. Figures 8.1 and 8.2 give the
channel alternative structure. Most developing countries rely heavily on agents in distributing their products. We
can now look in detail, at some important types of channel members which are relevant to some global marketing
aspects.
Broker
Brokers do not take title to the goods traded but link suppliers and customers. They are commonly found in
international markets and especially agricultural markets. Brokers have many advantages.
• They are better informed by buyers and or sellers.
• They are skilled socially to bargain and forge links between buyers and sellers.
• They bring the “personal touch” to parties who may not communicate with each other.
• They bring economies of scale by accumulating small suppliers and selling to many other parties.
• They stabilise market conditions for a supplier or buyer faced with many outlets and supply sources.
Personalize trading network

Frequently, relationships may be built up between a buyer and a seller, in which over time as confidence grows,
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Manufacturer/ Producer
Sales
Manufacturer Wholesale
force Sales
owned retail
force
Agents
Mail
order
Wholesale
Retail
Door to door
Retail
Retail Retail
Consumer
Fig. 8.1 Channel for consumer
unwritten and informal understandings develop. These relationships reduce information, bargaining, monitoring and
enforcement costs. Often, as relationships build, trust develops. Trust and reciprocity can enable trade to develop
unstable economic circumstances, but both parties are aware the relationship can be undermined through opportunistic
behaviour. The Kenyan fresh vegetable industry is a classic example of personalized trading networks enabling
international trade between Kenya suppliers and their familial (often Asian) buyers in the United Kingdom.
Associations, Voluntary Chains, Cooperatives
Manufacturer/ Producer
Wholesale Distributor
Sales
Agents
Sales force
force
Wholesale
Wholesale
Wholesale
Consumer
Fig. 8.2 Channel for business to business
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Associations, voluntary chains and cooperatives can be made up of producers, wholesalers, retailers, exporters and
processors who agree to act collectively to further their individual or joint interests. Members may have implicit or
exclusive contracts, membership terms and standard operating procedures.
These forms of coordination have a number of advantages:

• They figure out the huge investment phenomenon by spreading the cost of investment among members.
• They can reduce or pool members’ risks by bulk buying, providing insurance and credits, pooling market prices
and risk.
• They lower transaction costs of members through arbitration of disputes, provision of market information
systems, be a first stop for output.
• They can reduce marketing costs through the provision of promotion, protection of qualities and monitoring
members’ standards.
• They can act as a countervailing power between buyers and producers. This is very important where supermarkets
in the UK, for example, are now buying in such quantities that they are dictating terms to suppliers.
Developing countries do not have a history of good cooperative development, primarily because of poor management,
financial problems and lack of optimum utilization of resource. However, the Bombay Milk Scheme in India is
working very well. The latter has been very successful in going into value added processing as well.
Contracting
Contracting represents an intermediate institutional arrangement between spot market trading and vertical integration.
Marketing and production contracts allow a degree of continuity over a season, cycle or other period of time, without
the instantaneous of spot trading.
The two main types of contract are:

• Forward Markets-These involve commitments by buyers and sellers to sell and purchase a particular commodity
over a stated period of time. Specifications usually include weight, volumes, standards and values. Prices may
be based on cost plus or negotiated. These contracts exist between farmers and first handlers and exporters and importers.
• Forward resource/management contracts- These arrangements combine forward market sale and purchase
commitments with stipulations regarding the transfer and use of specific resources and/or managerial functions.
In such a contract, the exchange of raw material or commodity is made on condition that it involves the use of
certain inputs or methods, advised by the buyer, who may even take over the distribution function.
This is a typical Marks and Spencer arrangement. Marks and Spencer is a very successful, high quality and price
retail operation in the UK. Such arrangements are found in many franchising, distributor or marketing/management
agreements and help to internalise many future product transactions.
Both these forms of contract reduce the risks on both the buyers’ and the sellers’ side. By creating forward markets,
the seller reduces market risk, and the buyer ensures that he receives right commodities in right time. Forward/
resource management contracts also have the advantage of the provision of credit, market information and, perhaps,
other trade secrets. Production contracts to farmers are also a source of credit collateral.
Integration
Integration vertically involves the combination of two or more separate marketing or production components
under common ownership or management. It can involve investments forward or backward in existing activities or
investments in interlinked activities. Integration horizontally means the linking of marketing or production separable
at the same level in the system, for example, a group of retailers. Integration can bring a number of economies to
food marketing systems, viz:
• Production/logistical economies: Integration can bring economies of bulk, transport, and inventories.
• Transaction cost economies: Integration brings cost economies because the firm may become the sole supplier
of goods and services to itself; these include bargaining costs, information system streamlining and centralised
decision making.
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• Risk bearing advantages: Vertical integration can overcome risk and uncertainty, i.e. by internalising flows, the
organisation can eliminate the risk of variability in supplies, outlets, qualities and so on. More direct control over
assets may enable the firm to invest in processing and marketing facilities which further enable the development
of economies of scale. Typical examples include nuclear estates and outgrower schemes.
• Market imperfections: These can be absorbed often by vertically integrated organisations. Taxes, prices and
exchange controls and other regulations may be absorbed to give pecuniary gain. Also, integration enables the
firm to increase its market share and leverage with suppliers and customers
8.3 Role of Government

Government can take a leading role in the distribution of goods and services via state-owned Marketing Boards. The
government may provide an infrastructure which the private sector just cannot afford, for example roads, utilities,
training and extension. Government has the sovereign authority to provide the regulatory framework within which
commodity or agricultural export systems can be developed. It can also define the rules for international trade and
market entry. It can negotiate in either a bilateral or multilateral form, to facilitate a particular commodity transfer
or arrange lower terms of access.
Some of the roles of goverment are like;

• to play like cooperating or providing services in defined markets.
• provide credit or market information.
• stabilise prices with price controls like floor or ceiling prices, buffer stocks, quantity controls and so on.
• regulate the competitive position of markets by passing regulations which protect or promote a market
structure.
• force suppliers into Marketing Boards as the only outlet and so alter the whole competitive structure of
industry.
Both, marketing boards and marketing orders can be used to control physical commodity flows, enforce market
quality standards and pool market risk. Finally, the government can enable suppliers through the introduction of
export incentives, reduced taxes or export retention schemes.
Example of International Channel Decision and Management for cotton (Source: ITC Training Manual)
Customer requirements
In marketing cotton the basic question is who is the customer? For cotton it may be an international merchant (large
or small) or a local/regional merchant (large or small) or a spinning mill in the end user country. The customer has
a number of clearly defined needs including the following:
• Availability - on time and in steady supply
• Quality - reliable, even running, free from foreign matter, no country damage and will pass the micro, PSI and
GPT test values
• Shipment - on time, in a container, clearly marked and direct to customer
• Price - competitive at a given time. Its relative value must be competitive versus synthetics quality and against
the Liverpool index
• Terms - these must be simple - FOB, CFR etc. and be in tune with arrival/delivery schedules. Deferred terms
and payment in home currency are advantageous
• Arbitration - a system for rejection, substitution and penalties must be agreed
• Information - advice on price developments, time to buy, who else buys and ranges of prices.
In addition, the producer and merchant have needs and objectives:
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Producer
• Maximum inflow - for goods and services (freight insurance)
• Maintain presence in key markets
• Image - quality, contract performance and administrative excellence
Merchant
• Margin level
• Market share/key customers - either big, international or niche
• Image - cheapest, most aggressive, quality and customer service.
Producer
Agent Cooperative Country Central

buyer marketing
company
Broker agent
Merchant
Agent Central
buying
organisation
User
Fig. 8.3 Cotton distribution
Channel structure
Figure 8.3 below gives a typical channel structure for cotton. At each stage, value is added. The typical value chain
is seed merchants, farmers, country buyers/cooperatives, ginner, buyer, merchant, selling agent and end user.
8.4 International Merchant

A good merchant is characterized by the following characteristics, in comparison to the producer/seller selling
direct:
• Well informed
• Well disciplined
• Knows the details of his business
• Thinks in terms of probabilities and absolute terms (risk/reward)
• Is concerned but not dogmatic - he can accept when he is wrong
• Reports to few and knowledgeable people
An international merchant acts as a bridge between producers and consumers. He performs the following
functions:
• Language -conducts communications in suppliers’ and consumers’ preferred language
• Medium of Supply -he prepares the logistics function including sea and/or land transportation arrangements,
documentation preparation and arrangements for insurance coverage
• Financial activities - financing through own/banking facilities
• Currency risk - buys and sells in currencies required by sellers and buyers, does currency conversions, provides
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financial information and technical assistance and offers a currency gap guarantee
• Market risks - takes a long or short market basis position, deals with hedging, options, off-take and supply deals
and price guarantee contracts
• Brokerage service- provides a brokering service and fixations
• Quality -gives information on quality available, gives quality recommendations for consumers, handles quality
option/basket contracts and shows quality alternatives
• Culture –bridge the gap between remote developing areas and highly advanced and sophisticated centres of
the world
The services he can provide to a producer are as follows:

• Provides latest market information
• Information of competitors and prices
• Financing (producer and end user)
• Buying of all exportable qualities
• Buying on local terms
• Prompt payment
• Buying when producer can/wants to sell
• Contract guarantee for proper business.
Despite of all of the above service they have some consequences which they can’t ignore
• Representation - does agent handle other representations who are involved in business.
• Pricing integrity - does the agent ever try to change the price given by the business owner?
8.5 Market Strategy in Distribution Channel

In designing a marketing strategy for distribution channels both external factors (macro-environmental) and internal
factors (micro-environmental) have to be considered.
External factors
The principal factor to consider here is, government. In general the role of government has increased over the years
with few truly free, purely supply/ demand oriented producer countries.
Government has an effect on three areas - exports and imports.
• Exports - government influence here has been in minimum price legislation, special exchange rates, export
credit facilities and export duties.
• Imports - Basically this has been free of influence for typical importing countries, but there are special ad hoc
regulations for occasional imports.
Internal factors
A clearly defined strategy is required. Primarily the producer has to decide whether it will sell pre-season or when
the crop comes in, and/or is it to be a one off or steady seller.
• Pricing - the producer has to decide on what pricing strategy to follow-average fixed, average on call, speculative
or the use of options.
• Added to the price equation is basis trading. Basis trading has become more prevalent for exporters for a number
of reasons:
The market position risk is too large (basis fluctuations are normally less than market hedging)
Many conserve cash for margins
A producer/exporter has the opportunity to obtain more US dollars (or less)
A mill has the opportunity to obtain a lower (or higher) price
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8.6 Tariff for Distribution Channel
Tariff systems provide either a single rate of duty for each item applicable to all countries, or two or more rates,
applicable to different countries or groups of countries. Tariffs are usually grouped into two classifications:
Single Column Tariff

With this system, there is only one level of import duty for each product, wherever the country of origin.
Two Column Tariff

The initial single column of duties is supplemented by a second column of conventional duties, which shows
reduced rates agreed through tariff negotiations with other countries. The second column is supplied to all countries
enjoying the most favoured nation status within the framework of General Agreement on Tariffs and Trade (GATT).
Signatories to GATT, with some exceptions, apply the most favourable tariff to products.
Preferential Tariff
A reduced tariff rate applied to imports from certain countries. GATT prohibits preferential tariffs except historical
preference schemes like the Commonwealth, those part of a formal economic integration treaty like a free trade area
and preference to companies of a developing country importing into a developed country.
8.6.1 Custom Duties during the time of import

Customs duties are of two different types - ad valorem or specific amounts per unit
Ad valorem - This duty is expressed as a percentage of the value of goods. As definitions of customs values vary
from country to country, it is best to secure valuation policy information first. A uniform basis for the valuation of
goods for customs purposes was elaborated by the Customs Cooperation Council in Brussels and was adopted in
1953 (the Brussels Nomenclature came out of this). In this case the customs value is landed GIF cost at the port of
entry. This cost should reflect the arm’s length price of the goods at the time the duty becomes payable.
Specific duties - Expressed as a specific amount of currency per unit of weight, volume, length, or number of other
units of measurement, e.g. 25 cents per kg. Usually specific duties are expressed in the currency of the importing
country.
8.7 International Trade and Export Contracts

The export transaction is founded on a contract of international sale of goods with the special characteristic that it
is entwined with other contracts, a thing that differentiates the international sale from the local sale.
These connected contracts are the contract of carriage by sea or air under which goods are exported and the contract
of insurance by which the goods are insured. In many export transactions, delivery of the shipping documents
amounts to performance of the contract of sale. These shipping documents consist normally of the bill of lading,
the marine insurance policy and the invoice. The position becomes more involved when payment is made under a
banker’s documentary credit because this common method of payment requires the addition of two other contracts
to the export transaction, viz: the contract of the bank with the buyer and seller respectively.
A contract is a general agreement between a seller making an offer and a buyer making an acceptance. The acceptance
should be unqualified and any variation is regarded as a repudiation of the contract. The export contract should be
very explicit regarding goods and specifications, price, mode of payment, storage, packing, delivery schedule and
so on. Normally the contract is sent with a pro forma invoice by airmail.
Although contracts may be oral or partly in writing and partly by word of mouth, it is always safer for the exporter
to produce his terms of selling in writing and obtain the signatures of his buyer or authorised representative.
The essential elements of a contract of sale should include the following:
• Names and addresses of the parties
• Product, standards (quality) and specifications
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• Inspection of products
• Packaging, labelling and marking requirements
• Marine insurance
• Port of shipment, destination and delivery schedule
• Mode of payment
• Price FOB, Common International Format (CIF), cost & freight etc. in international currency or currency asked
for by the buyer
• Settlement of disputes including the arbitration clause.
If the buyer is satisfied with the terms set out in the contract and the proforma, the exporter can then get an order
with duplicate copy of the contract, detailing payment arrangement and other details and an indication that a letter
of credit (LC) has been opened in favour of the exporter. Details of documents required will also be indicated in the
export order. The following must happen:
• Acknowledgment - Exporter must acknowledge receipt of the order indicating that confirmation follows.
• Scrutiny - Contents of the order in respect of product, sizes, specifications, etc. as per quotation must be examined
in terms of elements of contract conveyed by the exporter to his buyer. Qualities/ volume should be examined
and ascertained in respect of capability to supply within the stipulated time.
8.7.1 Terms of Payment

This is very important: If payment is to be by letter of credit (LC), the following should be borne in mind when
examining the LC:
• Confirmation of the LC.
• Documents stipulated in the LC will be submitted by the exporter’s bank.
• Draft to be drawn against the LC is for the period set out in terms of the contract
• The credit validity period allowed in the LC.
• Payment against the LC is permissible according to requirements of foreign exchange control regulations.
8.8 Documents for Distribution in Global Market

Various documents are needed for distribution channel. Some of the major documents are like
• Export documentation
• Commercial Documentation
• Official Documentation
• Insurance Documents
• Transport Documents
8.8.1 Export Documentation

Below is a list of basic documents used in export trade. See table 8.1
a) Invitation to quote
b) Quote
c) Pro forma Invoice
d) Order confirmation/acknowledgement
e) Bill of lading/short form bill of lading
f) Airway bill
g) Marine (other) insurance policy
h) Commercial invoice
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i) Consular invoice
j) Certified invoice
k) Certificate of origin
l) Packing list/weight note
m) Specification sheet
n) Manufacturer’s analysis certificate
o) Health, sanitary, phytosanitary, veterinary certificates
p) Quality inspection certificate/certificate of value
q) Independent third party inspection certificate
r) Dispatch advice note
s) Dangerous goods declaration
t) Shipping or export consignment notes
u) Documentary credit of payment drafts
v) Export licences
w) Import licences
x) Exporter’s commission advice to agent
y) Customs and Excise export entry forms
z) EU Movement documents EUR 1 Form
a1) Other specifically requested documents
Table 8.1 Documents Required for Export
8.8.2 Commercial Document

Various commercial documents are mentioned below
Pro forma invoice

This is a form of quotation by the seller to a potential buyer. It is the same as Commercial Invoice except for the
words 'Pro forma invoice' which appear on it. It may be an invitation to the buyer to place a firm order and is often
required by him so that the authorities of the importer’s country will grant him an import licence and/or foreign
exchange permit. The pro forma invoice normally shows the terms of trade and price so that once the buyer has
accepted the order; there is a firm contract to be settled as stipulated in the pro forma. Details from the accepted pro
forma must be transposed identically to the commercial invoice that goods are in accordance with the pro forma
invoice. No pro forma invoices are used in settlements:
• In advance
• On consignment
• Subject to tender
• After an invitation to tender has been accepted by the seller.
Commercial invoice
The following details must appear on a commercial invoice used in international trade:
• Names and addresses of buyer and seller and date
• Complete description of goods. If payment is to be obtained by means of documentary letter of credit, this
description of goods must exactly match the details in the documentary credit
• Unit prices where applicable and final price against shipping terms
• Terms of settlement, e.g. documentary credit or 30 days on site. Documents against acceptance
• Shipping marks and numbers
• Weight and quantity of goods
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Sometimes it is necessary to show to the customs authorities in the buyer’s country:

• Seller’s signature
• Origin of goods
• Ports of loading and discharge or places of taking in charge and delivery
• Details of freight and insurance charges specified separately where applicable.
Certified invoice
A certified invoice may be an ordinary signed commercial invoice specially certifying:
• That the goods are in accordance with a specific contract or pro forma
• That the goods are, or are not, of a specific country of origin
• Any statement required by the buyer from the seller.
There are also formal certified invoices which when submitted to the importing authorities, will provide them
with the necessary evidence to pass the goods through customs with a lower import duty or none at all. Combined
certificates of value and origin (CVO) are used between members of the Commonwealth and special invoices for
the other major trade areas such as the EU. All certified invoices must be signed and in case of combined certificates
of value and origin, they should be signed by a witness as well.
Packaging and list specification

These documents set out details of the packing of the goods. These are required by the customs authorities to enable
them to make spot checks or more thorough checks on the contents of any particular package. The packing list has
no details of cost/price of the goods; the specification does have these details.
Third party certificate or inspection
This is a certificate declaring the result of an examination of the goods by a recognised independent inspection body.
In order to protect him from paying when sub-standard or worthless goods have been shipped, an importer can call
for an independent check or examination of goods before they are despatched.
This is important for the buyer as banks’ liabilities and responsibilities under documentary credit are limited to
documents and not goods represented by the documents.
8.8.3 Official Document

These are legion. This section looks at the following few official documents only for example purposes,
• EURI form
• TzL form
• Consular invoice
• Legalised invoice
• Chamber of Commerce Certificate of Origin
• Blacklist Certificate
European Commission Documents - EURI and TzL

EURI form is used in respect of preferential exports from an EU country to a non EU country. The TzL is used for
trade between EU member states, where the goods are being transported directly between member states and without
passing through the territory of a non-member country.
Consular invoice
Importing authorities of several countries require consular invoices to be produced before goods may be cleared
through customs. These invoices are normally obtained by the exporter from the Embassy of the importing country
and are submitted to the Embassy for stamping at a charge. Sometimes, a Chamber of Commerce is required to
certify on the consular invoice that the origin of the goods is as stated. This mainly happens in the South American
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countries.
Legalised invoice
Some countries require that commercial invoices should be legalized by their own embassy or consulate in the
seller’s country. Sellers produce their own invoices and have them stamped (visaed) by the buyer’s embassy. This
is normally required in the Middle East countries.
Certificates of origin
These constitute signed documents evidencing origin of the goods and are normally used by the importer’s country
to determine the tariff rates. They should contain the description of goods and signature and seal of the Chamber
of Commerce.
Blacklist Certificate
Countries at war or with badly strained political relations may require evidence that:
• The origin of the goods is not that of a particular country
• That the parties involved (manufacturer, bank, insurance company, shipping line, etc.) are not blacklisted
• That the ship or aircraft will not call at ports in such a country unless forced to do so.
8.8.4 Insurance Document

The following are insurance documents required in international trade:
• Letter of insurance
• Insurance company’s open cover certificate
Letter of insurance
It is normally issued by a broker to provide notice that an insurance has been placed pending the production of a
policy or a certificate. Sometimes this takes the form of a cover note. The above documents do not contain details of
the insurance being effected and therefore are not considered satisfactory by banks which normally require evidence
of an insurance contract in documents required under a documentary credit.
Insurance company’s open cover certificate

These are issued by insurance companies to embrace either open covers or floating policies. The systems of open
cover and floating policies are similar in that:
• Once the system has been arranged, the insured party is covered for all his shipments on the terms and for the
risks agreed. The insured will declare to the insurance company the value and details of each shipment and
will receive a pre-printed insurance certificate made valid and the document will show the risks covered and
be pre-signed by the insurer.
• Under English Law, no action will be obtained on a contract of insurance evidenced solely by an insurance
certificate. So, any action to be taken against insurers can only be on production of a policy to be sued on.
8.8.5 Transport Document

The IATA airway bill (sometimes called an air consignment note or air freight note) is often issued in a set of
12 of which 3 are commercially important, the remainder being copies for airline purposes. The three important
documents are:
• for the issuing carrier
• for the consignee
• for the shipper
The way bill is a receipt only and not a document of title and the goods are delivered to the named consignee without
further formality once customs clearance has been obtained. If the third original document is in the hands of the
shipper, this can be surrendered to the airline before delivery is made to the consignee.
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There might be an arrangement for payment whereby the bank might wish to have a lien over the goods until
payment is effected by the importer. The goods will, therefore, be consigned to a correspondent bank (provided
that the correspondent bank is agreeable to this) and in such a case the bank will release the goods or documents
as instructed. The document should bear the airline stamp with date of despatch and flight number, and be signed
on behalf of the airline.
Rail Consignment Note

With the growth of freight liner traffic, the volume of goods being exported by rail through to final continental
destination is increasing. Consequently, the carrier’s receipt, or duplicate copy, frequently accompanies the other
documents. Goods will be released to the consignee, upon application and normal proof of identify, by the rail
authorities at destination or by delivery direct. Control over the goods would be arranged in the same way as for
an air consignment. The rail consignment note should bear the stamp of the station of departure and the date of
departure.
Road Way Bill (CMR)

The CMR (Convention Merchandises Routiers) consignment note is an internationally approved and recognized
non-negotiable transport document used when goods are travelling by road through or to countries which are parties
to the CMR. The contracting countries are Austria, Belgium, Bulgaria, Czechoslovakia, Denmark, Finland, France
(including overseas territories), Federal German Republic, German Democratic Republic, Gibraltar, Greece, Hungary,
Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, United Kingdom
(including Northern Ireland) and Yugoslavia.
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Summary
• Firstly, it covered the distribution channel based on institutional and physical. The actual institutions are like
retailers, agents and so on. Physical distribution aspects cover transport and warehousing.
• Channel structure varies considerably according to whether the product is consumer or business to business
oriented.
• Government can take a leading role in the distribution of goods and services via state-owned Marketing Boards.
The government may provide an infrastructure which the private sector just cannot afford, for example roads,
utilities, training and extension. Government has the sovereign authority to provide the regulatory framework
within which commodity or agricultural export systems can be developed.
• Tariff systems provide either a single rate of duty for each item applicable to all countries, or two or more rates,
applicable to different countries or groups of countries.
• Various documents are needed for distribution channel. Some of the major documents are like; Export
documentation, Commercial documentation, Official documentation, Insurance documents, Transport
documents
References
• Keegan W.J(2003). Global marketing Management. 4th edition. Prentice Hall International Edition.
Recommended Reading
12 edition
• Hakan Hakansson. International Marketing and Purchasing of Industrial Goods. John wiley & sons.
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Self Assessment
1. The buyer instructs a bank in his own country (the issuing bank) to get a credit with a bank in the seller’s country
(the advising bank) in favour of the seller, is called ——————.
a. Letter of Credit
b. Letter of Contract
c. Letter of Conflict
d. Letter of Consignment
2. It must be noted that a —————— contract is not a sale of goods itself but a sale of the documents of title.
a. CIF
b. ICC
c. WWF
d. Letter of Contract
3. A _________ arrangement will be agreed upon in the contract of sale.

a. Letter of Credit
b. Letter of Contract
d. Letter of Consignment
4. Receipt issued by warehouse is known as __________.

a. Warehouse Receipt
b. Letter of Credit
d. Letter of Contract
5. How many documents are required for transportation?

a. One
b. Two
c. Three
d. Four
6. The number of certificate issued by insurance documents are_________.

a. One
b. Two
c. Three
d. Four
7. How many official documents are required for logistics?

a. Four
b. Five
c. Six
d. Seven
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8. The pricing strategy of any organization is defined by __________.
a. Producer
b. Policy maker
c. Government
d. Financer
9. How many tariffs are there in distribution channel?

a. One
b. Two
c. Three
d. Four
10. The actual institutions are like _________.

a. retail
b. manufacturer
c. quality controller
d. companies
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Case Study I
Market Entry Strategy of Lopez Foods
Lopez Foods, Inc. is an industry benchmark in food and plant safety, quality production, environmental protection
and customer service. Currently, Lopez produces beef patties, ground beef and precooked sausages. In September
of 2006, it was retained as Lopez's agency of record to provide market entry strategy and marketing support in
launching their new brand, Country Cousin.
To promote this new brand Lopez Foods developed a comprehensive campaign including Print, Radio, Outdoor,
Promotional, PR and Web-based elements. The marketing mix and media is designed to conduct research and
demographic profiling to ensure that appropriate message should be conveyed to appropriate client.
Main concept to launch this brand is to “Bring Breakfast Back”. It educates people regarding the benefits of eating
a balanced breakfast. Furthermore, we aimed to tailor our messaging in a way that also communicated the benefits
sharing breakfast with the family, as opposed to grabbing breakfast on the run or skipping it altogether.
Questions
1. What is Marketing Mix? Explain it by considering the above case.
2. “Bring Breakfast Back” How the strategy implemented here?
3. Which strategy is used in above case?
Answers
1. Marketing Mix is integration of following concepts.

• Product
• Place
• Price
• Promotion and advertisement
• Public relation
Lopez Foods Inc is one of the renowned food making industry which has opted some marketing strategy
to launch it’s new brand called “Country Cousin”. Campaigning activities like Print, Radio, Outdoor,
Promotional, PR and internet are developed to promote this new brand. It helps the organisation to convey
appropriate message to its client or customer.
2. “Bring Breakfast Back” campaign with the intention of educating people on the benefits of eating a balanced
breakfast. Some of the main strategy which are used for launching this new brand are
• Product adaptation strategy - modifications to existing products. Existing product is modified and new product
is made along with new concept.
• Competitive strategy: to compete in market and develop unique product is main motive of Lopez Foods
3. The main strategy which is used is Product adaptation strategy - modifications to existing products. Brand names
do not appear overnight. Large investments in promotion campaigns are needed. Transaction costs also are a
critical factor in building up a market entry strategy and can become a high barrier to international trade. Costs
include search and bargaining costs. Physical distance, language barriers, logistics costs and risks limit the direct
monitoring of trade partners.To overcome all of the above barriers Product adaptation is fit for this situation.
92
Case Study II
The Gillette Co. - The Best a Man can Get
Gillette is known world over for its razor blades. Its manufacturing operations are conducted in more than 50
locations in 26 countries and its products are distributed in over 200 countries. In 1901, King C. Gillette and
William Nickerson started the American Razor Company in Boston to produce Gillette razor sets. They could sell
only 51 razor sets in the first year. However, in the next year they sold 90,844 sets. Within four years, in 1905,
Gillette established its first overseas operations. It developed sales by distributing free razor blades and with boxes
of Wrigley’s chewing gum.
During 1960s and 1970s the company expanded its product range by introducing Right Guard (deodorant), Trace
2( twin blade razor), Cricket (disposable lighter), Good News (disposable razor), and Erase Mate ( Erasable pens).
It also acquired Braun (electric shavers and appliances). In 1984 it even branched into dental products.
The different marketing strategies adopted by the company are as follows:
• Identifying a product for which there was need and developing from the beginning a high quality product and
convincing the customers to buy the products. This enabled the company to sell more expensive product at a
higher margin of profit.
• They carried out market research, studied the needs of the customers and produced new products as demand
arose. The company always did considerable market research and design engineering. From the data obtained
after the research, it launched a new razor in 1990, known as ‘Sevor’. Researches have stated that this is the
most successful product launched in Gillette’s history and has helped it grab 9 per cent of the US market share
in the year it was launched.
• They carried out test marketing and sales wave’s research.
• After the research, they implemented pricing strategies that made huge profits.
• They studied product lie cycle and carried out effective product planning.
Thus, Gillette has made remarkable profits and established as the most successful organization.
Questions:
1. What are the different marketing strategies carried out by Gillette Co.?
2. What are the stages of product life cycle?
3. What are the advantages of test marketing?
4. Customer behavior should be considered while deciding pricing strategies. Give reasons.
93
Case Study III
Pricing Strategies of Premium Product
Ravindra Ghosh is a computer engineer who has successfully completed his M.Tech. course. He had a passion to
study the characteristics of different software technology and prepare a unique product from the technologies. He
was interested in developing new software product. That is why, after his course he invested a small capital to start
manufacturing and selling the product under the brand name Power. Coming up from a middle-class family, Ghosh
decided to set the price of the software much lesser than the other software available in the market. His pricing
strategy worked out in the market. Thus, this paid rich dividends and Power became an instant success.
Using his newly acquired financial strengths, Ravindra developed high quality unique software. However, Ravindra
did not consider customers needs and did not carried out any prior market research. Although the cost of production
for this soap was high, Ravindra decided to set lower prices for marketing. Thus, he decided to gain low profit
margin by maintaining comfortable product in the market. Therefore, there was no profit gained and Ravindra had
to face losses, as the cost of production was higher than the profits gained.
Questions:
1. What marketing strategies should Ravindra had followed to get good profits?
2. Do you feel that pricing strategy decided by Ravindra was incorrect? Give reasons.
3. Why is consumer needs and market research important before setting price?
94
Bibliography
References
• David Meerman Scott . (2010).The New Rules of Marketing and PR. Marketing to Reach Buyers Directly.
Kindle Edititon.
• Diffusion of Innovation Theory. http://a.parsons.edu/~limam240/thesis/documents/Diffusion_of_Innovations.
pdf
• Dixie, G.B.R., “Horticultural Marketing”, FAO Agricultural Services Bulletin.
• Franke. R. H. Cultural Roots of Economic Performance.
• Hakan Hakansson. International Marketing and Purchasing of Industrial goods. John wiley & sons.
• Michael R. Czinkota, Illka A. Ronkainen. International Marketing Publisher: South-Western College
• Philip R. Cateora. (March 2004). . International Marketing. Concept of marketing. McGraw-Hill Companies;
12 edition
• Porter, M.E. “Competition in Global Industries”. Boston: Harvard Business School Press.
• Porter, M.E. “Competitive Strategy”. New York: The Free Press.
• Porter, M.E. “The Competitive Advantage of Nations”. New York: The Free Press.
• Vern Terpstra, Lloyd C. International Dimensions of Marketing Russow Publisher: South-Western College
Recommended Reading
• Dirk Pilat, Head, Structural Policy New Nature of Innovation.http://www.newnatureofinnovation.org/full_report.
pdf
• Korey, G. “Multilateral Perspectives in International Marketing Dynamics” European Journal of Marketing,
• Michael R. Czinkota, Illka A. Ronkainen. International Marketing Publisher: South-Western College
• Philip R. Cateora. (March 2004). . International Marketing. Concept of marketing. McGraw-Hill Companies;
12 ed
• Shipley, D.D. and Neale, C.W. “Successful Countertrading. Management Decision”, Vol. 26,
• Terpstra. V. International Marketing. 4th ed.
• Vern Terpstra, Lloyd C. International Dimensions of Marketing Russow Publisher: South-Western College
• World Bank. World Development Report. The Challenge of Development. Oxford University
95
Self Assessment Answers

Chapter I
1. a
2. b
3. a
4. a
5. a
6. b
7. a
8. b
9. a
10. b
Chapter II
1. a
2. a
3. b
4. a
5. a
6. a
7. b
8. b
9. a
10. b
Chapter III
1. a
2. a
3. a
4. a
5. a
6. b
7. a
8. b
9. a
10. a
Chapter IV
1. a
2. a
3. b
4. a
5. b
6. a
7. a
8. c
9. a
10. a
96
ChapterV
1. b
2. c
3. b
4. a
5. b
6. a
7. a
8. a
9. a
10. c
ChapterVI
1. a
2. b
3. a
4. b
5. b
6. a
7. b
8. b
9. c
10. b
ChapterVII
1. a
2. a
3. a
4. b
5. b
6. d
7. a
8. a
9. b
10. a
Chapter VIII
1. c
2. d
3. a
4. a
5. c
6. b
7. c
8. a
9. b
10. a
97

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Introduction To International Marketing

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Introduction to International Marketing

Prof. H. N. Verma Prof. M. K. Ghadoliya

Dr. Chetan Choudhary Kartik Bijapurkar

First Edition 2013

II. List of Figures............................................................ V

III. List of Tables...........................................................VI

IV. Abbreviations........................................................ VII

VII. Self Assessment Answers..................................... 96

• explain the general concept of marketing

• introduce the basic fundamental of International Marketing

• enlist various definition and operational activities of marketing

• understanding the strategic concept and modern culture trend of marketing

• explain global marketing

• enlist various marketing stages

• understand the concept of marketing

• difference between global market and local market

• analyse the product life cycle and how it affected by investments

1.2 Definition of Marketing

The long held tenets of marketing are:

1.3 Understanding Strategic Marketing

1.4 Post Modern Era of Marketing

1.5 Global Marketing

Management Stage one Stage two Stage three Stage four

Marketing strategy Domestic Extension Adaption Extension

Table 1.1 Stages of domestic to global evolution

1.6 Marketing Evolutionary Stages

II. Home focus

III. Multinational focus

IV. Global focus

1.8 The International Product Trade Cycle

From a high income country point of view,

1.9 Orientation of Management

3. Acceptance of ———————— marketing affects discussions of products, pricing, advertising, distribution

• explain the environmental concept of marketing

• introduce strategic planning in the marketing process

• indentify various changing attitude of behavioural intention

• formulate the family life cycle for international marketing

• explain the concept of organisational buyer

• understand the various environmental factors affecting marketing concept

• know about strategic levels of marketing process

• identify the economic factors which effects the global market

The elements are like

2.2 Economic Cycles

2.3 Strategic Planning and the Marketing Process

Strategic marketing is best seen as an ongoing and never-ending process. Typically:

Fig. 2.2 BCG Matrix

III Boston Consulting Group Matrix

Strengths Weaknesses Opportunities Threats

2.5 Consumer Behaviour

2.5.1 Factors Affecting Consumer Behaviour

Fig. 2.3 Factors of consumer behaviour

2.5.2 Consumer Attitude

2.5.3 Consumer Beliefs

2.5.4 Consumer Effects

2.7 Reference Group

2.8 The Family Life Cycle

2.9 Family Decision Making

2.10 Organisational Buyers

2. Organisational buying usually involves ———— people than individual buying.

3. Family decisions are often subject to a great deal of ———————.

7. The beliefs that consumers hold need not be ———————.

• describe the economic environment in general

• explain the global economy