DECEMBER 2021 P/ID 77516/PMBS/

PMB1S/MBN5B/
MBS5C

Time : Three hours Maximum : 100 marks

PART A — (5  6 = 30 marks)
Answer any FIVE questions.

1. What are the various types of tariff and non tariff

barriers?

types of tariff Barriers

1. General and Conventional Tariff: General tariff rate is imposed by the
government on
the commodity it imported. It is announced by the government at the beginning of
the
year under its annual tariff policy. On the other hand, conventional tariff rates
are based
on trade agreements or treaties between the countries.
They are not flexible, as it
requires consent of member countries to change the conventional tariff rate.
2. Maximum and Minimum Tariff: Government imposes two different rates for the same
imported commodity from different countries. It imposes minimum tariff rate with
its
most favoured nation while maximum tariff rate is imposed on imported commodities
of
the rest of the nations.

Under multiple or triple tariff system, government imposes triple tariff rate on
the
imported commodity. Generally, these are of three types viz; (i) general tariff
rate, (ii)
intermediate tariff rate, and (iii) preferential tariff rate.

types of Non tariff Barriers

1. Import Quota and Export Quota: A quota is the most important non-tariff trade
barrier.
It is a direct quantitative restriction on the amount of a commodity allowed to be
imported or exported. Import quota can be used to protect a domestic industry, to
protect
domestic agriculture, and/or balance of payment situation. Developing nation used
quota
to stimulate import substitution of manufactured products and for balance of
payments
reasons.
2. Voluntary Export Restraints: Voluntary exports restraint is also known as
voluntary
export agreement3
refers to the case where an importing country induces another nation
to reduce its exports of a commodity “voluntarily” under the threat of higher all-
round
trade restrictions, when these exports threaten an entire domestic industry. These
voluntary exports restraints are sometimes called “orderly marketing arrangements”.
Voluntary export restraints were less effective in limiting imports than import
quotas
because the exporting nations agree only reluctantly to curb their exports.
3. Export Subsidies: Export subsidies are direct payments4
or granting of tax relief and
subsidized loans to the nation’s exporters or potential exporters and/ or low-
interest loans
to foreign buyers so as to stimulate the nation’s exports. As such, export
subsidies can be
regarded as a form of dumping.
4. Countervailing Duties: Countervailing duties are often imposed on imports to
offset
export subsidies by foreign governments.

2. Write short notes on Global Advertising and

country-specific advertising.

Global Advertising:
Global advertising positions a brand in the same way all over the world, has the
same target market, and a consistent brand name. Coca-Cola, McDonald's, and
Microsoft are examples of companies that utilize global advertising. These are
massive companies that are able to advertise throughout the world and gain
significant profit. These companies work well globally because they address the
customers needs no matter what country they live in. For instance, Microsoft is an
application used on computers worldwide which makes it easy for the company to
advertise itself across the globe.

Online marketing and television commercials are popular strategies used for global
advertising. A company's website is a good way to list upcoming events or
promotions they may have going on. Social media - like Twitter, Facebook or
Instagram - allows a company to connect with consumers all over the world.
Companies may also have to use various advertising agencies to make sure their
advertising message can be provided for the people different regions. Companies
operating in numerous countries often have the financial resources to use varying
tactics, then narrow down which ones gain the most brand recognition and increase
profit.

country-specific advertising:

It’s inevitable that the reinvention process can reveal huge differences among
consumers in foreign countries, which in turn triggers a need for a difference
between international and local (meaning American) advertising messages. You may
have seen this phenomenon for yourself on vacation in a foreign country, especially
if you’ve stopped in a grocery store to look for a favorite American snack. You may
have been surprised by the sight of some products that look similar in some ways
but include at least one key difference. The logo, for example, might be largely
unchanged, but the packaging or even the name of the product may be somewhat
altered to appeal to consumers in that country.
So how would you choose between a global and international marketing and
advertising strategy – the strategy that would ultimately guide your move into an
overseas market? The experts agree that it’s no simple task, but it’s one that
begins with aligning the strategy with your company’s vision and mission statements

3. Differentiate between Market research and

Marketing research.

Key Differences Between Market Research and Marketing Research

The distinction between market research and marketing research can be drawn clearly
on the following grounds:

...Market Research refers to the study of the entire market and consumer behavior,
within that market. Marketing research implies well planned and rational study,
analysis, and interpretation of marketing problems undertaken for actionable
decision making.
....Market research is a branch of marketing research, whereas marketing research
is a component of marketing information system.
....The scope of market research is limited as it studies about the aspects of
market and consumer behavior only. On the other hand, marketing research involves
the study of the whole marketing process, i.e. the research of advertising,
pricing, packaging, policymaking and the market as well.
.....Market research is specific in nature, i.e. the research gives and
understanding about the particular market which is not applicable to other markets.
Conversely, marketing research is generic in nature, i.e. the study can be helpful
in solving various marketing problems.
....Marketing research is dependent while marketing research is independent.
....Market research is conducted to check the viability of the product in the
target market. Unlike marketing research is carried out to make effective decisions
regarding marketing activities and to keep control on the marketing of economic
output i.e. goods and services.
....Market research involves research of the marketplace and the buyer’s behavior
within that market. In contrast to marketing research, that involves the study, of
all aspects of marketing.

4. Write a short note on NAFTA.

The North American Free Trade Agreement (NAFTA) was implemented to promote trade
between the U.S., Canada, and Mexico. The agreement, which eliminated most tariffs
on trade between the three countries, went into effect on Jan. 1, 1994. Numerous
tariffs—particularly those related to agricultural products, textiles, and
automobiles—were gradually phased out between Jan. 1, 1994, and Jan. 1, 2008.

NAFTA’s purpose was to encourage economic activity among North America's three
major economic powers: Canada, the U. S., and Mexico. Proponents of the agreement
believed that it would benefit the three nations involved by promoting freer trade
and lower tariffs among Canada, Mexico, and the United States.

NAFTA's immediate aim was to increase cross-border commerce in North America, and
it did indeed spur trade and investment among its three member countries by
limiting or eliminating tariffs. It was especially advantageous to small or mid-
size businesses, because it lowered costs and did away with the requirement of a
company to have a physical presence in a foreign country to do business there.

On Aug. 27, 2018, President Donald Trump announced a new trade deal with Mexico to
replace NAFTA. The U.S.-Mexico Trade Agreement, as it was called, would maintain
duty-free access for agricultural goods on both sides of the border and eliminate
non-tariff barriers while also encouraging more agricultural trade between Mexico
and the United States.

5. Write the functions of UNCTAD.

The essential purpose of instituting UNCTAD was to promote accelerated development

of the less developed regions of the world by dealing properly with the problem of
slow expansion of exports, persistently increasing BOP deficits, burden of external
debts etc. confronting the LDC’s.

UN General Assembly has laid down certain essential functions of UNCTAD.

Accordingly, it shall promote accelerated development of the less developed regions
of the world by dealing properly with the problem of slow expansion of exports
confronting the less developed countries.

The main functions of the UNCTAD are as follows:

(i) To promote international trade between the developed and under-developed

countries having diverse socio-economic organisations with special emphasis upon
the accelerated development of the under-developed countries.

(ii) To formulate the principles and policies concerning international trade and
related problems of economic development.

(iii) To make proposals for putting the said principles and policies into effect
and to adopt measures that may be relevant to this end.

(iv) To generally review and facilitate the coordination of activities of other

institutions within the fold of the United Nations related to international trade
and economic development.

(v) To be available as a centre for harmonious trade-related policies of

governments and the regional economic groupings in pursuance of Article 7 of the
Charter of the United Nations.

(vi)To make proposals for implementing its principles and policies.

(vii)To promote research and support negotiations for commodity agreements,

technical elaboration of new trade activities designed to assist in the areas of
trade and capital for developing countries.

6. What are SEZ and its features?

7. Differentiate quality control and pre-shipment

inspection.

8. Write short note on “clearing and forwarding

agents”.
P/ID 77516/PMBS/
PMB1S/MBN5B/
MBS5C
2
PART B — (5  10 = 50 marks)
Answer any FIVE questions.

9. Discuss various objectives of International

Marketing along with challenges.

Objectives of International Marketing

Bringing countries closer for trading purpose and to encourage large scale-free
trade among the countries of the world and integration of economies of different
countries and thereby to facilitate the process of globalization of trade.

For Ex: A free trade agreement (NAFTA) between US, Canada and Mexico has removed
most of the barriers to trade and investments.

Establishing and strengthening trade relations among the nations and thereby to
maintain cordial relations among nations for maintaining world peace.

To facilitates and encourage social and cultural exchange among different countries
of the world. For example in country like India we love to consume Mexican,
Chinese, Italian food which is a fine example of socio-cultural exchange.

To provide better life and welfare to people from different countries of the world.
In addition, to provide assistance to countries facing natural calamities and other
emergency situations.

To provide assistance to developing countries in their economic and industrial

growth and thereby to remove the gap between the developed and developing
countries.

To ensure optimum utilization of resources (including surplus production) at global

level.

To encourage world export trade and to provide benefits of the same to all
participating countries.

To offer the benefits of comparative cost advantage to all countries participating

in international marketing.

To keep international trade free and fair to all countries by avoiding trade
barriers.
The challenging circumstances described below make us wonder about the future of
globalisation and international marketing. Let us look at some of the key
challenges and options to overcome these challenges.

1. Slow growth in the developed markets

The foremost challenge facing us is slow growth in the developed markets. It is a
fact that the growth rate in developed markets has slowed down. An International
marketer however, remains to remember that despite the slow growth rate these
markets remain large markets and that all marketers would need to continue to
target these markets.

2. Falling growth rates in emerging markets

The second big challenge facing the world is falling growth rates in emerging
markets. Despite the fall in growth rates of a lot of emerging markets a marketer
needs to remember that the emerging markets will continue to grow at a faster pace
than the developed markets. This is because of their large population and rising
income levels which gives a boost to demand in these markets. Thus all
international marketing organisations’ need to look beyond the developed markets
and focus their efforts on all emerging markets too.

3. Demographics
The third key factor to remember is demographics. The population in developed
western markets is aged whereas the emerging economies have a younger population.
The emerging markets will, therefore remain important and international marketing
organisations, therefore will need to continue their focus on emerging markets.

4. Increased competition and innovation

The fourth important factor is that of increased competition and innovation.
Companies in the developed world will be challenged by more and more companies from
emerging markets. Organisations which focus on innovation to reduce costs or
increase the perceived benefit to their customers will thrive.

5. The increased role of communication

The last important consideration would be the increased role of communication. The
role of communication will further go up as companies from one part of the world
acquires customers from very different parts of the world. A successful
international marketing organisation will therefore, need to focus more and more on
its efforts to communicate effectively with its customers.

10. Explain the Balance of Trade and Balance of

Payments.

BALANCE OF TRADE: the difference in value over a period of time between a country’s
imports and exports of goods and services, usually expressed in the unit of
currency of a particular country or economic union (e.g., dollars for the United
States, pounds sterling for the United Kingdom, or euros for the European Union).
The balance of trade is part of a larger economic unit, the BALANCE OF PAYMENTS
(the sum total of all economic transactions between one country and its trading
partners around the world), which includes capital movements (money flowing to a
country paying high interest rates of return), loan repayment, expenditures by
tourists, freight and insurance charges, and other payments…..

If the exports of a country exceed its imports, the country is said to have a
favourable balance of trade, or a trade surplus. Conversely, if the imports exceed
exports, an unfavourable balance of trade, or a trade deficit, exists. According to
the economic theory of mercantilism, which prevailed in Europe from the 16th to the
18th century, a favourable balance of trade was a necessary means of financing a
country’s purchase of foreign goods and maintaining its export trade. This was to
be achieved by establishing colonies that would buy the products of the mother
country and would export raw materials (particularly precious metals), which were
considered an indispensable source of a country’s wealth and power….

The assumptions of mercantilism were challenged by the classical economic theory of

the late 18th century, when philosophers and economists such as Adam Smith argued
that free trade is more beneficial than the protectionist tendencies of
mercantilism and that a country need not maintain an even exchange or, for that
matter, build a surplus in its balance of trade (or in its balance of payments).

Balance of Payments:

The balance of payments accounts of a country record the payments and receipts of
the residents of the country in their transactions with residents of other
countries. If all transactions are included, the payments and receipts of each
country are, and must be, equal. Any apparent inequality simply leaves one country
acquiring assets in the others. For example, if Americans buy automobiles from
Japan, and have no other transactions with Japan, the Japanese must end up holding
dollars, which they may hold in the form of bank deposits in the United States or
in some other U.S. investment. The payments of Americans to Japan for automobiles
are balanced by the payments of Japanese to U.S. individuals and institutions,
including banks, for the acquisition of dollar assets. Put another way, Japan sold
the United States automobiles, and the United States sold Japan dollars or dollar-
denominated assets such as Treasury bills and New York office buildings….

Although the totals of payments and receipts are necessarily equal, there will be
inequalities—excesses of payments or receipts, called deficits or surpluses—in
particular kinds of transactions. Thus, there can be a deficit or surplus in any of
the following: merchandise trade (goods), services trade, foreign investment
income, unilateral transfers (foreign aid), private investment, the flow of gold
and money between central banks and treasuries, or any combination of these or
other international transactions.

11. Explain the product life cycle concept in global

market.
The international product cycle concerns the stages of product development in the
international market. It is best explained by the Product Life Cycle theory,
developed by researcher Raymond Vernon. According to Vernon, products go through
five stages of production:

Introduction,
Growth,
Maturity,
Saturation,
Decline.
A product can be characterized based upon its stage in the lifecycle as well as the
nature or effects of the product in the market. Vernon identified 3 product
categories:

New Product
Maturing Product
Standardized Product
Per the Product Lifecycle theory, new products are comprised of local parts and
labor. Often this are custom-manufactured parts and the efforts of the inventor.
Once established and entering the growth phase, product parts and labor are sourced
more broadly - outside of the immediate location (outsourced). Also, the product
may be offered for sale in the international market.

A mature product that sells in high volume generally requires parts and labor from
even broader sources. This may include outsourcing various aspects of the product
(manufacture of parts, assembly, shipping, etc.). The requirements for production
increase and there is increased demand from non-local (often global) markets.

Because of comparative advantages in the cost of production, the product may be

completely manufactured in a nation that is not where it is primarily sold (often a
developing nation). This is particularly true for high-end goods.

Eventually, the product will become obsolete. That is, it will succumb to
competitive products or replacement goods. This may happen at different rates based
upon the characteristics of the market in which it is being sold.

12. Briefly elaborate on multinational investment

guarantee agency.

13. Explain the objectives of EXIM policy and state its

importance in international Marketing.

The objectives of EXIM policy in India are to achieve a more significant objective.
These policies are introduced to enhance foreign exchange and achieve the economic
development of the country.

These objectives include:-

To boost the economy and grow the EXIM process in India.

To improve the balance of payment and trade.
To enhance the trading activities and generate a workforce environment.
To provide consumers with goods and services of utmost quality and with effective
cost.
To raise the infrastructure of small scale industries to keep a check on trade
imbalance in the country.
To establish the advance licensing system issued by DGFT to allow duty-free
imports.
To remove the restrictions on goods and services, allowed to be freely imported,
mentioned under the open general license list should be removed.
Digitalization of all the documents to reduce conflict between exporters and DGFT
Ease of access to credits by the startups and increasing limits.
Canalization of import goods to diversifying market opportunities

14. Examine the role of state trading agencies in

foreign trade.
15. Bring out the different modes of payment and
letters of credit.

Cash-in-Advance
With cash-in-advance payment terms, an exporter can avoid credit risk because
payment is received before the ownership of the goods is transferred. For
international sales, wire transfers and credit cards are the most commonly used
cash-in-advance options available to exporters. With the advancement of the
Internet, escrow services are becoming another cash-in-advance option for small
export transactions.

Documentary Collections
A documentary collection (D/C) is a transaction whereby the exporter entrusts the
collection of the payment for a sale to its bank (remitting bank), which sends the
documents that its buyer needs to the importer’s bank (collecting bank), with
instructions to release the documents to the buyer for payment. Funds are received
from the importer and remitted to the exporter through the banks involved in the
collection in exchange for those documents. D/Cs involve using a draft that
requires the importer to pay the face amount either at sight (document against
payment) or on a specified date (document against acceptance).

Open Account
An open account transaction is a sale where the goods are shipped and delivered
before payment is due, which in international sales is typically in 30, 60 or 90
days. Obviously, this is one of the most advantageous options to the importer in
terms of cash flow and cost, but it is consequently one of the highest risk options
for an exporter. Because of intense competition in export markets, foreign buyers
often press exporters for open account terms since the extension of credit by the
seller to the buyer is more common abroad.

Consignment
Consignment in international trade is a variation of open account in which payment
is sent to the exporter only after the goods have been sold by the foreign
distributor to the end customer. An international consignment transaction is based
on a contractual arrangement in which the foreign distributor receives, manages,
and sells the goods for the exporter who retains title to the goods until they are
sold.

Letters of Credit
Letters of credit (LCs) are one of the most secure instruments available to
international traders. An LC is a commitment by a bank on behalf of the buyer that
payment will be made to the exporter, provided that the terms and conditions stated
in the LC have been met, as verified through the presentation of all required
documents. The buyer establishes credit and pays his or her bank to render this
service. An LC is useful when reliable credit information about a foreign buyer is
difficult to obtain, but the exporter is satisfied with the creditworthiness of the
buyer’s foreign bank. An LC also protects the buyer since no payment obligation
arises until the goods have been shipped as promised

Common types of letters of credit

Revocable
A revocable letter of credit is uncommon because it can be changed or cancelled by
the bank that issued it at any time and for any reason.

Irrevocable
An irrevocable letter of credit cannot be changed or cancelled unless everyone
involved agrees. Irrevocable letters of credit provide more security than revocable
ones.

Confirmed
A confirmed letter of credit is one to which a second bank, usually in the
exporter's country adds its own undertaking that payment will be made. This is used
when the exporter does not find the security of an unconfirmed credit sufficient
due to issuing bank risk or political and/or economic risk associated with the
importer's country.

An irrevocable and confirmed letter of credit has not only the commitment of the
issuing bank but also a binding undertaking given by the confirming bank to pay
when the documents are presented in accordance with the terms and conditions of the
credit. So a confirmed letter of credit provides more security than an unconfirmed
one.

Unconfirmed
An unconfirmed letter of credit is one which has not been guaranteed or confirmed
by any bank other than the bank that opened it. The advising bank forwards the
letter of credit to the beneficiary without responsibility or undertaking on its
part but confirming authenticity.

Transferable
A transferable letter of credit can be passed from one 'beneficiary' (person
receiving payment) to others. They're commonly used when intermediaries are
involved in a transaction.

16. Enumerate the marine insurance and overseas

marketing.
Marine insurance refers to a contract of indemnity. It is an assurance that the
goods dispatched from the country of origin to the land of destination are insured.
Marine insurance covers the loss/damage of ships, cargo, terminals, and includes
any other means of transport by which goods are transferred, acquired, or held
between the points of origin and the final destination.

Importance of Marine Insurance

Marine insurance is required in many import-export trade proceedings. Admitting the
terms, both parties are liable for the payment of goods under insurance. However,
the subject matter of marine insurance goes beyond contractual obligations, and
there are several valid arguments necessary for buying it before dispatching the
export cargo.

Goods in transit need to be insured by one of the three parties:-

The Forwarding Agent

The Exporter
The Importer
Also, it can be taken by anyone involved in the transit of goods.

Marine Insurance Act 1963

The Marine Insurance Act, in India, came into existence in 1963. As per section
three of the act, any time the term ‘marine insurance’ is used, expressed or even
extended for the insuring of goods against loss or damage, the insurer will be at
risk to bear the charges.
Principles of Marine Insurance
Principle of Good faith - Parties demand absolute trust on the part of both; the
insurer and the guaranteed.

Principle of Proximate Cause - The proximate cause is not adjacent in time; also,
it is inefficient. Nevertheless, it is the definitive and adequate cause of loss.

Principle of Insurable Interest - Any object presented as a marine risk and the
assured covering the insurance of goods - both should have legal relevance. Also, a
series is devoted called 'Incoterms' to respectfully assign the insurance of goods
to each party.

Principle of Indemnity - The insurance extended to the parties will only be

applicable up to the loss. The parties can't buy insurance to gain profits. If they
do, they won't get more than the actual loss.

Principle of Contribution - Sometimes, the risk coverage for goods has more than
one insurer. In such cases, the amount has to be fairly distributed amongst the
insurers.

Types of Marine Insurance

Freight Insurance
Liability Insurance
Hull Insurance
Marine Cargo Insurance

Types of Marine Insurance policies

Floating Policy
Voyage Policy
Time Policy
Mixed Policy
Named Policy
Port Risk Policy
Fleet Policy
Single Vessel Policy
Blanket Policy

Over Seas Marketing:-----------

Oversear or International marketing is the application of marketing principles by

industries in one or more than one country. It is possible for companies to conduct
business in almost any country around the world, thanks to the advances in
international marketing.

In simple words, international marketing is trading of goods and services among

different countries. The procedure of planning and executing the rates, promotion
and distribution of products and services is the same worldwide.

The major participants in international marketing are as follows −

Multinational Corporations (MNCs) − A multinational corporation (MNC) is an

organization that ensures the production of goods and services in one or more
countries other than its home country.

Exporters − They are the overseas sellers who sell products, and provide services
across their home country by following the necessary jurisdiction.

Importers − They are the overseas buyers who buy products and services from
exporters by complying with the jurisdiction. An import by one nation is an export
from the other nation.

Service companies − A service company generates revenue by trading on services and

not on physical commodities.

The major objectives of international marketing are outlined as follows −

To enhance free trade at global level and attempt to bring all the countries
together for the purpose of trading.

To increase globalization by integrating the economies of different countries.

To achieve world peace by building trade relations among different nations.

To promote social and cultural exchange among the nations.

To assist developing countries in their economic and industrial growth by inviting

them to the international market thus eliminating the gap between the developed and
the developing countries.

To assure sustainable management of resources globally.

To propel export and import of goods globally and distribute the profit among all
participating countries.

To maintain free and fair trade.

The activities that take place on a marketing platform that has recently been
established outside the home country or parent country are known as international
marketing tasks.

These tasks include the following operations −

Observing and acknowledging customers’ buying behavior.

Adapting to the changes in market trends.

Identifying competitors and acquiring the required information about them.

Acquiring knowledge about products.

Conducting a Political, Economic, Social and Technological analysis, that is, PEST
analysis.

Practicing SWOT analysis

Selecting the right promotional mixture: Pricing, Promotion, Advertising, etc.

P/ID 77516/PMBS/
PMB1S/MBN5B/
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PART C — (1  20 = 20 marks)
(Compulsory)
17. Discuss the various factors influencing the choice
of channel of distribution in international
marketing.

1. Nature of Product: The is the first and most important consideration.

Product features, size, shape, color, durability, perishability, Value of product
etc are the factors that constitute the product characteristics. Perishable items
needs strong packaging and shorter channel whereas items with long life can have
longer channels. Size and handling also affects the channel. Odd sizes, difficult
handling are often found to have shorter channel. Industrial machinery, that
requires particular customer preference are often sold through direct channels.

2. Customer Characteristics: If the product has got huge customer base and are
geographically dispersed, buying product in small quantities requires longer
channels. This is because producers needs to have wide network of retailers and
wholesalers to make the product easily accessible in the local market. For eg
product like Pepsi needs a longer channel. Unlike above, industrial products, where
customers have preferences regarding the technology and the functions to be
incorporated needs shorter channel, because the product is needed to be adjusted
according to customer preference.

3. Nature of Market: The location and the coverage of the market also
determines the channel selection. If the market is dense, spread across in length
and breath, requires longer channel. Whereas if the product has niche market, the
channel can be short.

4. Cost Consideration: The cost of maintaining the channel is also a key

consideration. Every producer would like to have shorted channel, may be direct
channel, but its cost. Now this cost has to be compared with the benefits derived.
Longer channel, with high number of middleman also tend to raise the price of the
product, because every middleman, looks for his share and wants a larger share.

5. Time: Time taken by the channel to make the product available to the
consumer, is one other factor. Longer channel are often found to take shorter time.
This is because the middleman are well versed with the market and are efficient in
distribution of product. Keeping a channel short means that the customers have to
first look for distributor and place his orders.

6. Competition: Manufacturers are often found to use the same channel of

distribution as the competitors are using. If one deviates, other plan for the
same. Longer, indirect channels are to be used if the competition is intense,
however shorter channel can be used, if competition is less. For eg Industrial
product, where the competition is less uses more direct and shorter channel than
the FMCG products where the competition is more.

7. Availability of Middleman: Availability of middleman in foreign nations, is

one other factor to be considered, specially for industrial product, or product
with high end specification. Product which are customer oriented, which are brought
regularly, may be everyday, which is a necessity can use longer channel, as
middleman are very easily available. However product with specific technology,
industrial equipments, middleman are not easy to come by. Even middleman needs to
be trained with the product feature thereby marketing the same in their local
markets.

8. Technological Factors: The technology component of the product also affects

the channel selection. Products which are not technology oriented can have longer
channels are product Is not needed to be explain to the customers. However, if the
product is highly technical, requires a shorter direct channel, as it functioning
is to be explained to the consumers.

9. Consumption Pattern: Consumption pattern is also a factor to be considered

before designing the channel. If the product is consumed regularly, may be
periodic, then such products should longer channels, as consumers would like such
product to be easily accessible. People will not like to make great research and
run around for such product, and will buy anything which is easily available.

The choice of channel of distribution is also influenced by company’s own

characteristics as to its size, financial position, reputation, past channel
experience, current marketing policies and product mix etc. In this connection,
some of the main factors are as follows:

i) Financial Strength:
A company which is financially sound may engage itself in direct setting. On the
contrary, a company which is financially weak has to depend on intermediaries and,
therefore, has to select indirect channel of distribution, such as Wholesalers,
retailers, with strong financial background.

ii) Marketing Policies:

The Policies relevant to channel decision may relate to delivery, advertising,

after-sale service and pricing, etc. For example, a company which likes to have a
policy of speedy delivery of goods to ultimate consumers may prefer direct selling
and thus avoid intermediaries and will adopt a speedy transportation system.

iii) Size of the Company:

A large-sized company handling a wide rang of products would prefer to have a
direct channel for selling its products. On the contrary, a small-sized company
would prefer indirect selling by appointing wholesalers, retailers etc.

iv) Past Channel Experience:

Past Channel experience of the company also influences the choice of selection of
channel distribution. For instance, an old and established company with its past
good experience of working with certain kinds of intermediaries will like to opt
for the same channel. However, different will be the case in reverse situation.

v) Product Mix:
The wider is the company’s product mix, the greater will be its strength to deal
with its customers directly. Similarly, consistency in the company’s product mix
ensures greater homogeneity or uniformity and similarity in its marketing channels.

vi) Reputation:

It is said that reputation travels faster than the man. It is true in the case of
companies also who wish to select channel of distribution.

Other Factors: To end with, there are some other factors like infrastructure in the
foreign nation, political environment, legal regulations, social attitude, culture,
values etc that may affect the selection of the particular channel.
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