Definition of international

marketing

 According to American Marketing Association

“International marketing is the multinational process
of planning and executing the conception, pricing,
promotion and distributions of ideas, goods and
services to create exchanges that satisfy individual and
organizational objectives.”
 According to Cateora and Graham ‘International
marketing is the performance of business activities
designed to plan, price, promote and direct the flow of
a company’s goods and services to consumers or users
in more than one nations for a profit.”
 Distinguish Between international
marketing and domestic marketing.
 1. Scope of business
 2. Distance
 3. Rules and regulations
 4. Technical difference
 5. Buyer and seller
 6. Cultural difference
 7. Mobility of factors of production
 8. Usage of different currencies
 9.Marketing programs
 10.Tariff barriers
 11. Use of documents
 12. Capital
 13. Sharing of technology
14. International Relationship
15. Control
16.Transport and insurance cost
17. Nature of transactions
THE IMPORTANCE OF
INTERNATIONAL MARKETING
 Importance of international marketing

From the view point From the view From the view point From the view
of consumer point of producer of economy point of society.
1. Importance from the
consumer’s point of view:
 a. Consumption of foreign goods Vs
domestic produced goods:
 b. Consumption of goods at a low price:
 c. Enjoying benefits of competition:
 d. Consumption of choice full /new
products:
 e. High quality product:
2. Importance from producer’s
point of view:
 a. Export of surplus production
 b. Production of goods at a low cost:
 c. Expansion of market in foreign countries:
 d. Increase in production
 f. Reduce business risk:
 g. Reduce advertising cost:
3. Importance from the view point
of economy:
 a. Increase total production:
 b. Increase export earnings:
 c. Challenging natural calamities:
 d. Extension of market or industry:
 e. Export unused product or services:
 f. Optimum utilization of national
resources:
 g. Import of essential goods:
 h. Employment opportunities:
 i. Economic development:
 j. Progress in technological
Knowledge:
4. Importance from view point of
society:
 a. Knowledge and cultural Progress:
 b. Increase international peace and
assistantship:
 c. Image development:
 d. Improving standard of living:
 e. Technological development:
The international marketing tasks.
 Foreign environment
(uncontrollable)

Economic forces
Political/legal forces
Domestic environment
(uncontrollable)

(Controllable)
Political/legal forces Competitive Competitive forces
Cultural forces Price Product structure

Promotion Distribution

Geography and
infrastructure Economic climate Level of
technology

Structure of
distribution
A. Marketing decision factors:
 1. Product:
 2. Price:
 3. Promotion:
 4. Channel of distribution:
 B. Aspects of the domestic environment:
 1. Political and legal forces:
 2. Economic climates:
 3. Competitor structure:
 C. Aspect of the foreign environment:
 1. Political and legal factors:
 2. Economic forces:
 3.Competitive forces:
 4. Level of technology:
 5. Structure of distribution:
 6. Cultural forces:
 7. Geography and infrastructure:
Stages or phases of international
marketing involvement.
 1. No foreign marketing: In this stage, the firm doesn’t
involve itself in international marketing. It continuous to
operate in the domestic market. No serious effort are made
by the firm to enter the foreign market, however its
products enter the international market indirectly. The
indirect ways are—
 The firm sells the products to foreign buyers who actually
come for tourism and purchase the products according to
their needs.
 The firm sells its products to export house, or to some
domestic manufacturers or to other agencies who
ultimately export those.
 Dwellers in abroad send sometimes in their motherland.
 2. Infrequent or temporary foreign marketing: in
this stage, the firm gets involved in foreign marketing
just to dispose its temporary surplus or to utilize
excess capacity. Because it finds similar market as
home in terms of domestic, geographic, cultural
similarities. Temporary surplus may be caused by
fluctuations of in production levels or demand. As a
result it infrequently markets its products abroad.
Export of aluminum in the last decade was only of
temporary nature because its export was allowed only
when its domestic demand was much lower than its
production. Again, for example- Aromatic soaps are
exported under this method too. Here, no serious
effort for international marketing is taken.
 3. Regular foreign marketing: it’s the full process
of internationalization. Here the firm is serious to
foreign market commitment. It produces a fixed
amount especially for export. The firm makes serious
effort to develop the foreign markets. It appoints
foreign or domestic middlemen or sets up its own
distribution channel and sales force in foreign markets
to explore the marketing potentials. It frequently visits
to the foreign countries. Here, it’s considered some of
the countries as its target market.
 4. International and Multinational marketing : in
this phase the firm gives full effort in marketing
internationally. Firm will now fully concentrated both
in domestic and international market. Here it installs
different production unit in different countries
and produces, set prices, advertises according to
those segments’ specifications. So, it’s also called
multinational marketing. For example- Uniliver does
its business according to this phase.
 5. Global marketing: At this stage, companies treat
the world, including their home market, as one
market. Market segmentation decisions are no longer
focused on national borders instead; market segments
are defined by income levels, usage patterns or other
factors that often span countries and regions. All
marketing strategies regarding pricing, advertising,
policies etc. are taken considering the whole
population of the world. For example- coca cola with
red can.
Strategic orientation of
international Marketing
 1. Domestic market extension: Under this concept, domestic firm
tries to sell products in the foreign market which were actually
produced for the domestic market. It may include in the second phases
of international marketing. Primary objective of it is to sell the
excess production of the firm after meeting up the domestic
demand. Here mainly, the priority is given to the domestic market and
sale in foreign market is treated as the profitable extension of domestic
marketing activities. Although the foreign market is more profitable,
the domestic market considered as the fundamental market. Under
this concept, the product may be sold in any country; but no
change will be brought into the marketing mix. Domestic
marketing mix will be applied in the foreign market. The products are
sold in those markets which are similar to the domestic market.
According to this concept, it is profitable for both small and big firms.
The firms adopting this concept or approach will include in the
Ethnocentric group. Meter-Man Inc Company follows this approach.
 2. Multi-domestic Market Concept: When a
company understands that domestic market and
foreign market are different from each other and the
effect of foreign business on their firm is more
profitable, then its orientation towards international
business may shift to multi domestic market strategy.
The company uses different marketing programs for
different countries to adapt their business with those
countries. Advertising, product, and distribution
channel are separately taken for each country. The
firms do standardization of their marketing mix rather
than finding similarity among the elements of
marketing mix to adapt in the market. The company
adopting this approach will include in the Polycentric.
Feeders are that type of company. Ex; uniliver
 3. Global Marketing Concept: A company guided by the
global marketing orientation or philosophy is generally
referred to as a global company. The marketing activities of
the company will be global and the whole world will be
treated as one market to that company. The product will be
standardized, qualitiful and that product will be sold at
reasonable price. The main feature of global marketing
concept is to meet up the needs and demands of the people
in a similar way considering the whole world as one market.
The company has to take some strategies which will be
universally applicable. Considering the whole world as one
market, the company develops a global marketing strategy.
The company adopting this approach will include in the
Regiocentric or Geocentric. Example: Coca-Cola, Intel,
General Motors Company.
International marketing Environment
 The key difference between domestic marketing and
marketing on an international scale is the
multidimensionality and complexity of the many
foreign country markets a company may operate in. An
international manager needs a knowledge and
awareness of these complexities and the implications
they have for international marketing management.
Environmental Influences
on International Marketing
 1. Social/cultural environment
 2. Legal environment
 (i) local domestic law;
 (ii) international law;
 (iii) domestic laws in the firm’s home base.
 3. Economic environment

 4. Political Environment
 Political Factors include:
 A. Laws
 B. Licensing and Permits
 C. Taxes
 D. Fees
 E. Tariffs
 F. Currency risks
 G. Other Political Risks and Restrictions
 Investment restrictions:
 Operational restrictions:
 Discriminatory restrictions:

 5. Technological environment
The Procedures to be followed in
import trade
 1. Placing of the order: The importer sends a cable to
one of the shipping houses or exporters in the foreign
country stating the full particulars about the articles
he wants, the price or the rate of price he is prepared to
pay for same and the time when he needs them. The
cable is sent preferably in code language.
 2. Opening the latter of credit by the importer:
The order being booked, the importer will have to
arrange for opening credit in favor of the exporter
through some local bank. He arranges with his banker
or with any other bank approved by the exporter and
the letter of credit is issued by the bank in favor of the
exporter.
 3. Booking of Exchange: The next step to be taken by
the importer is to book the rate of exchange at which
he will be required to pay in home currency for the bill
drawn upon him by the exporter.

 4. Advice of shipment: After this, the importer has

not much to do; He sits right till the exporter informs
him of the shipment of the articles and other
necessary information in connection therewith.
 5. Payment of the Bill: As soon as the vessel carrying
the goods arrives, the importer cannot wait any longer
and must accept or pay the documentary bill
according as it is a Documents Against Acceptance
(D/A) bill or Documents Against Payment (D/P) and

 6. Delivery of the Goods: Upon arrival of the boat,

the usual customs formalities must have to be
undertaken. If the goods are duty-free, the importer
has not to experience any difficulty for their delivery
from the customs people.
 7. Closing the Transaction: In case the goods are up
to the standard and the importer is satisfied with
them, the transaction is closed. But, if the quality is
inferior, or there is any shortage in weight, the
importer will have to negotiate with the exporter and
settle the matter.
The procedure of carrying out
Export Trade.
 1. Receiving the order: The foreign buyer writes or cables
generally in code language to the exporter stating the
particulars regarding the quality, quantity, rate or price,
time of delivery and the like of the goods he requires. The
offer may be firm or open.
 2. Acceptance of the offer: If the terms offered by the
foreign buyer are satisfactory and the exporter thinks
himself to be in a position to supply the goods, he accepts
the offer.
 3. Opening of credit by the foreign merchant: When
the order is accepted, the exporter would demand a letter
of credit from the foreign merchant, who would arrange for
same through his local banker.
 4. Arrangement for shipping: The shipment of the goods may
be ready or forward, according to the terms of the order. In case
of ready shipment, the exporter will have to make arrangement
for shipping as soon as the order is accepted by him.
 5. Booking the rate of Exchange in advance: Sometimes, the
exporter has recourse to forward exchange and books his rate of
exchange in advance, so that he might be sure of the amount in
home currency, he would get for his goods.
 6. Procurement of the goods: If the exporter is himself a
manufacture, he will experience little, if any, difficulty, in getting
the requisite goods. If he is merely an exporter, he will have to
procure the necessary articles from the actual manufacturers.
 7. Shipment of the goods: The articles are packed and
forwarded to the docks for shipment, if the goods to be exported
are liable to customer export duty. The requisite amount of
duty must be paid before the goods can be placed on board the
vessel.
 8. Effecting of Insurance: The next stage is to insure
the goods shipped. The exporter arranges with
Insurance Company for insurance of goods against risk
due to maritime adventure and the Insurance company
issues the marine insurance Policy.
 9. Preparation of the Documents: The exporter
would now make out his export invoice in the usual
form showing the quantity, quality, description
and price of the goods etc., the consular invoice,
certificate of origin and the Bill of Exchange.
 10. Information to the Foreign Buyer: The exporter
would now let the foreign buyer know all about the
export and also the date when he might expect delivery
of the goods.
 11. Discounting the documentary bill: The exporter will
now go to his banker with the documentary bill, e.g., the
bill of exchange proper, accompanied by the shipping and
export documents, e.g., the bill of lading, the marine
insurance policy, the Export invoice, Certificate of Origin,
consular invoice and sells, rather, discounts it with him.
 12. Collection of the Documentary Bill: The banker will
now forward the Documentary Bill to his agent or branch
office in the place of import at the other end.
 13. Closing of the Transaction: If the importer gives a
satisfactory report of the goods, the exporter’s business is
finished and the transaction is closed. On the contrary
when the importer is not satisfied with the goods because
of inferior quality, shortage of quantity or for any other
reason, a lot of trouble would arise. Complaints like these
may be settled by correspondence and mutual agreement
between the importer and the exporter.
 Developing global vision through
market research
Marketing research is traditionally defi ned as the
systematic gathering, recording, and analyzing of data to
provide information useful to marketing decision making.

Although
the research processes and methods are basically the same,
whether applied in Columbus, Ohio, or Colombo, Sri Lanka,
international marketing research involves two additional
complications.
 First, information must be communicated across
cultural boundaries.

Second, the environments within which the research tools

are applied are often different in foreign markets. Rather
than acquire new and exotic methods of research, the
international marketing researcher must develop the
capability for imaginative and deftapplications of
tried and tested techniques in sometimes totally
strange milieus.
Breadth and Scope of International
Marketing Research
Research can be divided into three types on the basis of
information needs:
(1) general information about the country, area,and/or
market;
(2) Information necessary to forecast future marketing
requirements by anticipating social, economic,
consumer, and industry trends within specifi c
markets or countries; and
(3) Specific market information used to make product,
promotion, distribution, and price decisions and to
develop marketing plans.
Marketing Research collecting and assessing
the following types of information:
1. Economic and demographic.

2. Cultural, sociological, and political climate.

3. Overview of market conditions.

4. Summary of the technological environment

5. Competitive situation
The Research Process
1. Define the research problem and establish research
objectives.
2. Determine the sources of information to fulfill the
research objectives.
3. Consider the costs and benefits of the research effort.
4. Gather the relevant data from secondary or primary
sources, or both.
5. Analyze, interpret, and summarize the results.
6. Effectively communicate the results to decision
makers
Multicultural Research: A Special
Problem
-As companies become global marketers
multicultural studies become more important.
-what extent adaptation of the marketing mix is appropriate
Multicultural research involves countries that have
different languages, economies, social structures, behavior,
and attitude patterns. When designing multicultural studies,
it is essential that these differences be taken into account.
-Different methods may have varying reliabilities in different
countries. Examples: focus group for some and personal
interview for others
Research on the Internet: A
Growing Opportunity There are at least eight
different uses for the Internet in international research:

1. Online surveys and buyer panels.

2. Online focus groups
3. Advertising measurement; links to other websites
4. Customer identification systems. registration
5. E-mail marketing lists.
6. Embedded research. Search products, compare shopping.
7. Observational research (also known as
netnography) chat rooms, blogs
Problems in Analyzing and
Interpreting Research Information
 First, the researcher must possess a high degree of
cultural understanding of the market in
which research is being conducted. To analyze
research findings, the social customs, semantics,
current attitudes, and business customs of a society or
a sub-segment of a society must be clearly
understood.

 Second, a creative talent for adapting research

methods is necessary.
Responsibility for Conducting
Marketing Research
 decentralization of the research

 The obvious advantage to decentralization of the research function is

that control rests in hands closer to the market. Field personnel,
resident managers, and customers generally have more intimate
knowledge of the subtleties of the market and
an appreciation of the diversity that characterizes most foreign
markets.
 One disadvantage of decentralized research management is possible
ineffective communications with home office executives. Another is
the potential unwarranted dominance of large-market studies
in decisions about global standardization.
 close coordination between the client company and the local
research companies.
 professional marketing research firm

 Growing potential for governmental controls on the

activity
Absolute cost advantage theory

 Adam smith provided the basic building blocks for the

construction of the classical theory of international
trade. The theory or model which is given by him is
called absolute cost advantage model.
 Smith started with simple truth that trade between
two nationals will be occurred each other voluntarily
both nations mast gain if one nation gain nothing it
will refuse the trade.
Statement of the theory

 Trade between two nations will be based on

absolute advantage. When one nation is more
efficient than another nation in the production of
one commodity and less efficient in the
production of another commodity then both
nations must gain absolute advantages in the
production of the commodities i.e. when each
nation exchanging each other commodities they
must gain absolute advantage for exchanging their
product.
Assumptions
 1. Price of the product is determined by the value
of labor required to produce it.
 2. There is no transportation cost.
 3. There exists full mobility of labor within the
country but not between two centuries.
 4. There exists free trade
 5. There are only two centuries and two
commodities.
 6. The production possibilities are such that both
centuries can produce both goods if they wish
Illustration of the theory

Goods Bangladesh (unit; USA (unit; certain amount

certain amount of labour) of labour)

jute 40 20

wheat 12 18
 Here we see that Bangladesh is more efficient and has
an absolute advantages than USA in the production of
jute. On the other hand USA is more efficient and has
an absolute advantage than Bangladesh in the
production of wheat. So according to the theory
Bangladesh should specialize in the production of jute
and USA give attention in the production of wheat. As
a result both of them will be benefited in free trade.
 A
wheat

O B F

jute
 Suppose USA produce OB jute or OA wheat by using
certain amount of labor. On the other hand
Bangladesh produces OF jute and OE wheat by using
certain amount of labor. From the diagram we see that
Bangladesh get absolute advantage in the production
of jute than USA because OF>OB.
 On the other hand USA get absolute advantage in
the production of wheat than Bangladesh because
OA>OE. So according to the theory, Bangladesh
must specialize the production of jute USA
specialize the production of wheat. Then they will
be benefited in free trade. According to the graph,
Bangladesh will be benefited if they import OE
wheat from USA by exchanging less than OF jute
.Again, USA will be benefited if they import OB
jute from Bangladesh by exchanging less than OA
wheat.
Criticism of Absolute advantage
theory
 1. According to this theory production cost are determined
on the basis of labor cost. But in production cost it may
include rent capital interest etc.
 2. According to this theory the capacity of labor is equal
within the countries. This is unrealistic.
 3. This theory is established on the basis of constant cost of
production. But production cost may be increase or
decrease.
 4. There have mobility of production within the country
but not in different countries.
 5. According to this theory there will be no transportation
cost.
 6. This theory is established on the basis of free trade but at
present it is impossible.
 7. This theory emphasis on full employment economy.
 8. This theory emphasis on supply rather than demand.
 9. This theory is based on the two countries two
commodities. But a country can trade with many countries.
Opportunity cost theory

 In 1936 Haberler gave the theory of opportunity cost to

rescue the law of comparative advantage theory.
Statement of the theory

 The opportunity cost of a commodity is the amount of

a second commodity that must be given up in order to
release just enough factors of production or resources
to be able to produce one additional unit of the first
commodity.
Example: X=1 unit
Y=2 unit (country A)
X=1
Y=1.5 unit (country B)
Here, production cost is same.
 That means, the opportunity cost of 1 unit of X is 2
units of Y in country A & 1.5 unit of Y in country B.
According to the opportunity cost theory, a nation
with a lower opportunity cost for a commodity has a
comparative advantage in that commodity &
comparative disadvantage of the other commodity.
 For an example- if in the absence of trade, the United
States must give up two-third
 Of a unit of cloth to release enough resources to
produce one additional unit of wheat domestically,
then opportunity cost of one unit of wheat is two-third
of a unit of cloth. That means 1wheat = 2/3 cloth in the
United States. Again, if one wheat = two cloth in
Bangladesh, then the opportunity cost of wheat is
lower in the united states than that of Bangladesh.
 As a result the United States would have a comparative
(cost) advantage over the Bangladesh in wheat& then
Bangladesh would have a comparative advantage in
cloth.
 According to the law of comparative advantage, the
United States should specialize in producing wheat &
exchange some of it’s for Bangladeshi cloth. Here
though the result is same as comparative advantage
theory but now our explanation is based on the
opportunity cost theory because of the existence of
other factors of production. So, we can say that trade
may happen between two countries on the basis of
opportunity cost.
Assumption of opportunity cost
theory

 There exists perfect competition.

 Each product price is equal to its marginal cost.
 There exists free trade.
 There exists full employment of factors of production.
 Available factors are constant within the country.
 Factors are fully mobilized within the country, but not
between the countries.
Criticism of the theory:

• Trade occurs between two countries due to the

difference in opportunity cost is expressed. But why
the difference occurs is ignored in this theory.
• The perfect competition of product market & element
market is not realistic. Actually the perfect
competition does not really appear in economics.
• Transport cost is avoided.
• Real cost plays more vital role in economic welfare
than the opportunity cost.
Comparative or Relative cost
theory
 Comparative or Relative cost theory is given by David
Ricardo in 1817 in his book-"Principle of Political
Economy and Taxation"
Statement of the law

 Ricardo argued that any two

countries can gain by trading even
if one of the countries is having an
absolute advantage in both the
countries over another; when there
are comparative differences in cost.
 According to this theory- a country
should specialize in the production
and export of those goods in which
either its comparative advantage is
greater or its comparative
disadvantage is less; it should import
those goods in which either its
comparative advantage is less or
comparative disadvantage is greater.
Assumption of comparative cost
theory

• 1. Labor is the only element of cost of production.

• 2. Goods are exchanged against one another according
to their relative amounts of labor employed in them.
• 3. Labor is perfectly mobile within the country but
perfectly immobile between countries.
• 4. Labor is homogeneous.
• 5. Production is subject to the law of constant returns.
 6. International trade is free from all barriers.
 7. There is no transport cost.
 8. There is full employment.
 9. There is perfect competition
 10. There are only two commodities and two countries.
Illustration of comparative
difference in cost
Country Textiles(unit ) Rubber(unit ) Cost ratio

India 120 120 1:1

Malaysia 40 80 1:2
 From the table we see that India has an absolute
advantage in producing both goods. On the other
hand, Malaysia has an absolute disadvantage in
producing both goods. Malaysia can produce either 40
units of textiles compared with India 120 units or 80
units of rubber compared with India 120 units.
 Here we also see that Malaysia has to give up the
opportunity of producing 2 units of rubber in order to
produce 1 unit of textile. On the other hand, to
produce 1 unit of textile or rubber, India has to give up
1 unit of other alternative goods foregone. India's
comparative advantage is greater than Malaysia in the
production of textiles 3:1 as against rubber 3:2. On the
other hand, Malaysia's comparative disadvantage is
lower in relation to India in production of rubber 2:3 as
against textiles 1:3.

 Therefore, India should produce and export textiles to
Malaysia and Malaysia should produce and export
rubber to India, then both countries would gain by
trading.
Graphical Representation
Y

140

120 A

100
Rubber

80 C

60 India

40 Malaysia

20

D B
O 20 40 60 80 100 120 140 X

Textile
In the above diagram, it is clear
that India has an absolute
advantage in producing both
textiles and rubber because OA>
OC and OB> OD. But Malaysia is
specialized in producing rubber
compared to textile because
OC>OD.
 Therefore, we can say that India has an advantage in
both goods but on the basis of comparative advantage
trade can be happened and both India and Malaysia
will be benefited by trading.
Criticism of Comparative Cost
Theory

 1. Assumption of constant cost: The comparative cost

theory is based on the assumption of constant cost.
But this is not a valid assumption since beyond a point;
the law of increasing or decreasing cost operates. The
cost ratio is bound to change when specialization
between two countries has gone apace.
 2. Some static assumptions: The comparative cost
theory is based on static assumptions of fixed tastes
and fixed supplies of land, labor, capital etc. But it can
not apply to the real world which is dynamic.
Moreover, with changing technology and factors, it is
impossible to calculate comparative costs.
 3. No transport cost as assumption: The comparative
cost theory also ignores transport costs. Therefore, this
theory is unrealistic because transport cost may
influence the comparative cost.
 4. Labor cost assumption: The great weakness of this
theory is that it assumes that there are no other costs
except labor costs. It ignores other costs like cost of
raw materials, cost of capital etc.
 5. Assumption of perfect mobility inside and
immobility outside: The comparative cost theory
makes a very big assumption that labor is perfectly
mobile within the country but perfectly immobile
between countries. But this assumption is unrealistic
because it is possible to transfer labor into the foreign
country.
 6. The model of two countries and two commodities is
limited: The model of two countries and two
commodities is not realistic.
 From the overall discussion we can say that though
comparative cost theory has some limitations but it
can play a vital role in case of trading between
countries.
Difference between classical
theory and modern theory.

 Modern theory is basically an improvement over

classical theory. There are some difference between
classical theory and modern theory those theory
identify modern theory as a superior position over
classical theory. These differences are given as follows:
 1. Basis of theory: modern theory seeks to explain the
phenomenon of international terms of general theory
of value. On the other hand, the classical theory seeks
to explain the phenomenon of international terms of
labour theory of value.
 2. Necessity of a separate theory: The classical
theory asserts that there is a need for a separate theory
of international trade. On the other hand, the modern
theory asserts that there is no need for a separate
theory of international trade.
 3. Realistic: The modern theory is more realistic than
the highly abstract classical theory. Because, the
modern theory is the multiple market theory of
pricing.
 4. Existence of factors of production: The modern
theory recognizes the existence of all factors of
production (land, labor, capital, organization). But the
classical theory takes into account only one factor of
production that is labor.
 5. Part of the economics: The modern theory can be
said as the part of positive economics. On the other
hand, the classical theory can be said as the part of
welfare economics.
 6. Acceptability: The modern theory is more
acceptable than the classical theory because the
modern theory laid emphasis on all the factor of
production whereas the classical theory laid emphasis
on the quality of a single factor labor.
PLANNING FOR GLOBAL MARKET

 In general sense, planning is an intention or decision

about what one is going to do. In broad sense,
planning is systematic way of relating to the future. It
is an attempt to manage the effects of external,
uncontrollable factors in the firm’s strengths,
weaknesses, objectives and goals to attain a desired
end.

• In other word, planning is a commitment of resources
to a country market to achieve specific goals.
•
• International marketing planning and global
marketing planning is not different in their principles
but there are some differences between them. On the
basis of operating environment, organizational
structure and the task of controlling a multinational
operation create differences in the complexity and
process of international planning.
• Planning allows a rapid growth of international
function, changing market, increasing competition
and to face the challenges of international market.
• Planning may be various types based on their
structure:
• Corporate planning
• Strategic planning
• Tactical planning.
 1. Corporate planning: Corporate planning is
essentially long-term, incorporating generalized goals
for the enterprise as a whole.
 2. Strategic planning: Strategic planning is
conducted at the highest levels of management and
deals with product, capital and research and long and
short-term goals of the company.

• 3. Tactical planning: Tactical planning or market
planning pertains to specific actions and to the
allocation of resources used to implement strategic
planning goals in specific market.
• In each stage of planning, company objectives and
resources must be analyzed and evaluated. In
international planning there must be an international
commitment of the management and planning board
of the company.
PLANNING PROCESS
Information derive from each phase, market research, and evaluation of program performance

Phase 1 Phase 2 Phase 3 Phase 4

Preliminary analysis and screening Adapting the marketing Developing the Implementation and
Matching company / Country needs mix to target markets marketing plan control
country needs

Environmental factors, Marketing mix Marketing plan Implementation,

company character and requirements development evaluation and control
screening criteria
Company character Product  Situation analysis  Objectives
 Objectives and goals  Standards
Philosophy Adaptation  Strategy and tactics  Assign responsibility
Objectives Brand name  Selecting model of entry  Measure performance
Resources Features  Budget  Correct for error
Management style Packaging  Action program
Organization Service
Financial imitations Warranty
Management and marketing skills Style
Products standards
Others Price

Credit
Discount

Home-country constraints Promotion

Political Advertising
Legal Personal selling
Economic Media
Other Message
Host-country(s) constraints Sales promotion

Economic
Political/legal Distribution
Competitive
Level of technology Logistic
Culture Channels
Structure of distribution
Geography
Competition
• Phase-1: Preliminary analysis and screening
(matching company and country needs): In the
first step of planning process, the planner first decide
in which market he wants to enter. In this stage a
company’s strengths and weaknesses, products,
philosophy and objectives must be analyzed and
matched with the country’s established and potential
market.
• The next step is to establish screening criteria against
which prospective countries can be evaluated. Here
the company’s objectives, resources and other
corporate strengths and weaknesses must be analyzed.
 It is important to select a target return from the
investment made to the international market. A set of
evaluation criteria have to be selected for international
commitment, minimum market potential, political
stability, minimum profit, acceptable competitive
levels and so on. After setting the evaluation criteria,
environmental analysis must be operated.

 Phase-2: Adapting the marketing mix to target
market: After completing phase 1 the next task of
planning process is to adapt the marketing mix to
target market. In this stage the company selects some
criteria to product development, promotional strategy,
distributor pattern, pricing the product and so on. In
this stage, right products are selected to be produced
for potential market. A wrong innovator of product
may spoil the target result of the marketer.
• Phase-3: Developing the marketing plan: At this
stage of the planning process, a marketing plan is
developed for the target market whether it is a single
country or a global market segment. The marketing
plan begins with an analysis of situation and
culminates in the selection of an entry mode on a
specific action program for the market. The specific
plan establishes what is to be done, by whom, how it is
to be done and when. Included are budget, sales and
profit expectations in marketing plan.
• Phase-4: Implementation and control: At this stage
the planning criteria have to be analyzed, evaluated
and implemented and finally control over the
function. The planning process doesn’t end at this
stage, rather it is the stage in which the actual
performance of plan are operational zed and
interpreted the result and compare the result with
stated standard. All marketing plans require
coordination and control during the period of
implementation. An evaluation and control system
requires performance, that is bringing the plan back
on track should standard of performance.
ALTERNATIVE MARKET ENTRY
STRATEGY

• When a company makes the commitment to go in the

international market, it must choose an entry strategy.
This decision should reflect the an analysis of market
characteristics (such as potential sales, strategic
importance, cultural differences and country
restrictions) and company capabilities including the
degree of near market knowledge, marketing
involvement and commitment that management is
prepared to make. Even so many firms simply imitate
others in the industry or repeat their own successful
entry strategies.
 A company has four different modes of foreign market
entry from which to select exporting, contractual
agreements, strategic alliances and direct foreign
investment. The different modes of entry can be
further classified on the basis of the equity or non
equity requirements of each mode. The alternative
market strategies can be shown in the following figure:
 Internet
Exporting Exporter Greater control and
Importer greater risk
Distributor
Direct sales

Contractual Licensing and

agreements franchising

Strategic alliances
Strategic alliances
Joint venture and
consortia

Direct foreign investor

Ownership
 1. Exporting: Exporting can be either direct or
indirect. With direct exporting, the company sells to a
customer in another country. This is the most common
approach employed by companies taking their first
international step because the risks of financial loss
can be minimized.
 In contrast, indirect exporting usually means that the
company sells to a buyer (importer or distributor) in
the home country who in term exports the product.
 Early motives for exporting often are to skim the cream
from the market or gain business to absorb overhead.
Early involvement may be opportunistic and come in
the form of inquiry from a foreign customer or
initiatives from an importer in the foreign market.
 a. The internet: The internet is becoming
increasingly important as a foreign market entry
method. Initially, internet marketing focused on
domestic sales. However, a surprisingly large number
of companies started receiving orders from customers
in other countries, resulting in the concept of
international internet marketing.
 Many companies already started the selling and
marketing activities through internet which is called
on-line business. Dell Computer Corporation
expanded its strategy of selling computer over the
internet to foreign sites as well.
 b. Direct sales: Particularly for high technology and
big-ticket industrial products, a direct sales force may
be required in the foreign country. This may mean
establishing an office with local and/or expatriate
managers and staff depending of course on the size of
the market and potential sales revenues.
 2. Contractual agreement: Contractual agreements
are long term, no equity associations between a
company and another in the foreign market.
Contractual agreements generally involve the transfer
of technology, processes, trademarks or human skills.
In short, they serve as a means of knowledge rather
than equity. Contractual agreements include licensing
and franchising.
 a. Licensing: It is a means of establishing a foothold
in foreign markets without large capital outlays is
licensing. Patent rights, trademark rights and the right
to use technological processes are granted in foreign
licensing. It is a favorite strategy for small and medium
sized companies, although it is by no means limited to
such companies.
 b. Franchising: It is rapidly growing form of licensing
in which the franchisor provides a standard package of
products, systems and management services and the
franchisee provides market knowledge, capital and
personal involvement in management.


 3. Strategic international alliances: A strategic
international alliance (SIA) is a business relationship
established by two or more companies to cooperate
out of mutual need and to share risk in achieving a
common objective. Strategic alliances are sought as a
way to shore up weaknesses and increase competitive
strengths.
 Opportunities for rapid expansion into new markets,
access to new technology, more efficient production
and marketing costs, strategic competitive moves and
access to additional sources of capital are motives for
engaging in strategic international alliances. The SIA
includes international Joint Ventures (IJV) and
consortia.
 a. International joint venture: International joint
ventures (IJUs) as a means of foreign market entry
have accelerated sharply since the 1970s. Besides
serving as a means of lessening political and economic
risks by the amount of the partner’s contribution to
the venture. IJVs provide a less risky way to enter
markets that pose legal and cultural barriers than
would be the case in an acquisition of an existing
company.
 4. Consortia: Consortia are similar to the joint
ventures and could be classified as such except for two
unique characteristics: (1) they typically involve a large
number of participants and (2) they frequently operate
in a country or market in which none of the
participants is currently active. Consortia are
developed to pool financial and managerial resources
and to lessen risks.
 5. Direct foreign investment: A fourth mean of
foreign market development and entry is direct foreign
investment, that is, investment within a foreign
country. Companies may manufacture locally to
capitalize on low cost labor, to avoid high import taxes,
to reduce the high costs of transportation to market, to
gain access to raw materials or a means of gaining
market entry. Firms may either invest in or buy local
companies or establish new operation facilities.
 The selection of an entry mode and partners are
critical decision because the nature of the firms
operation in the country. Market is affected by and
depends on the choice mode. It affects the future
decisions because each mode entails an accompanying
level of resource commitment and it is difficult to
change from one entry mode to another without
considerable loss of time and money.

INTERNATIONAL
PRICING

130
 Active marketing in several countries compounds the
number of pricing problem and variables to price policy.
Unless a firm has a clearly thought-out explicitly defined
price policy, expediency rather than design establishes
prices. The country in which business is being
conducted; the types of product, variation in
competitive condition and other strategic factors affect
pricing activity. Price and terms of sale cannot be based
on domestic criteria alone.

131
So the policy which is taken considering the
international market to set price is called pricing policy.

132
 PRICING OBJECTIVES

 1. Pricing as an active instrument of accomplishing

marketing objective: If prices are viewed as an active
instrument the company uses price to achieve a specific
objective whether a targeted return on profit, a targeted
market share or some other specific goal.

133
 2. Pricing as a static element in a business
decision:
 the Company that follows the second approach,
pricing as a static element probably export only
excess inventory places a low priority on foreign
business and views its export sales as passive
contributions to sales volume.

134
 The more control a company has over the final
selling price of a product, the better it is able to
achieve its marketing goals. However it is not
always possible to control end prices. The broader
the product line and larger the number of countries
involved the more complex the processes of
controlling prices to the end user.

135
 PARALLEL IMPORTS

 Besides having to meet price competition country by

country and product by product, companies have to
guard against competition with their own subsidiaries or
branches. Because of the different prices possible in
different country markets, a product sold in one country
may be exported to another and undercut the price
charged in that country.


136
 For example to meet economies condition and local
competition , an American pharmaceutical company
might sell its drugs in a developing country at a low
price and then discover that these discounted drugs are
being exported to a third country where as parallel
import they are in direct competition with the same
product sold for higher prices by the same firm.

137
 Parallel import develop when importer buy product from
distributors in one country and sell them in another to
distribution who are not part of the manufacturers
regular distribution system. This practice is lucrative
when wide margin exist between prices for the same
product in different countries.

138
APPROACHES TO INTERNATIONAL PRICING

 1. Full-cost versus Variable cost pricing: Firms

that orient their price must think whether to use
full cost or variable cost pricing. In variable cost
pricing the firm is concerned only with the
marginal or incremental cost of producing goods to
be sold in overseas market.

139
 Such firms regard foreign sales as bonus sales and
assume that they return over their variable cost
makes a contribution to net profit. These firms may
be able to price most competitively in foreign
markets, but because they are selling products
abroad at lower net prices than they are selling
them in domestic market, they may be subject to
charge of dumping.

140
 In that case they open themselves to antidumping
tariffs or penalties that take away from their
competitive advantage. Variable cost pricing is a
practical approach to pricing when a company has
high fixed cost and unused production capacity.

141
 On the other hand, companies following the full
cost pricing philosophy insist that no unit of a
similar product is different from any other unit in
terms of cost and that each unit must bear its full
share of the total fixed and variable cost. This
approach is suitable when a company has high
variable costs relative to its fixed costs. In such
cases prices are often set on a cost plus basis. That
is total cost plus profit margin.

142
 2. Skimming versus penetration pricing: Firms must
also decide when to follow a skimming or a penetration
pricing policy. A company uses skimming when the
objective is to reach a segment of the market that is
relatively price sensitive and thus willing to pay a
premium price for the value received.

143
 If limited supply exists a company may follow a
skimming approach in order to maximize revenue and to
match demand to supply. When a company is the only
seller of a new or innovative product a skimming price
may be used to maximize profit until competitor forces at
lower prices. Skimming often is used in those markets
where there are only two income levels, the wealthy and
the poor. Cost prohibits setting a price that is attractive to
the lower income market.

144
 So the marketers charge a premium price and direct the
product to the high income relatively price insensitive
segment. The existence of larger markets attracts
competition and as is often the case, the emergence of
multiple product lines, thus leading to price competition.

145
 A penetration pricing policy is used to stimulate market
growth and capture market share by deliberately offering
products at low prices. Penetration pricing most often is
used to acquire and hold share market as a competitive
maneuver. However, in country markets experiencing
rapid and sustained economic growth and where large
share of the population are moving into middle income
class.

146
 Penetration pricing may be used to stimulate market
growth even with minimum competition. Penetration
pricing may be a more profitable strategy than skimming
if it maximizes revenues and builds market share as a
base for the competition that is sure to come.


147
 WHAT IS PRICE ESCALATION?
 In short, price escalation means rising price level of a
product or services in the foreign market. We find that
many goods are relatively inexpensive in the home
country but high in other countries. Because of higher
prices reflect the higher costs of exporting. For example
– pace maker for heart patients that sells for $2100 in the
United States.

148
 But this pace maker is sold for over $4000 in
Bangladesh, because at each level of the distribution,
markups are added. That is why; MNC marketers are
facing the majors pricing obstacle. Especially the term
relates to situation in which ultimate price are raised by
shopping costs, insurance, packing, larger middleman
margins, administration costs.

149
WHAT ARE THE REASONS FOR
PRICE ESCALATION?
 1. Taxes, tariffs and administration cost: The
most familiar proved for international marketer is
nothing is surer than death and taxes. Because
taxes includes tariffs and tariffs are one of the most
obstacle of international trading. Taxes and tariffs
affect the ultimate consumer price for the product
and consumer bears the burden of both.

150
 Sometimes consumer gets benefit from the manufacture
when they reduce their net return in order to gain access
to a foreign market. A tariff or duty is a special from
of taxation. A tariff is a fee charged when goods are
brought into a country from another country .These
cost may be export and import licenses, other document,
and physical arrangement for getting product from port
of entry to the buyer’s location.


151
 2. Inflation: manufacture must consider the affect of
inflation on cost of product. In countries with rapid
inflation or exchange variation, the selling price must be
related to the costs of goods sold and the cost of
replacing the items. Goods often are sold below their
cost of replacement plus overhead and sometimes are
sold below replacement cost.


152
 3. Deflation: Deflation means drop the product price
over several months. In a deflation market it is essential
for a company to keep prices low and raise brand value to
win the trust of consumer. Whether the deflation or
inflation an exporting must emphases controlling price
escalation.


153
 4. Exchange rate fluctuation: The added cost incurred
rate fluctuation on a day to day basis must be considered
especially where there is a significant time laps between
signing the order and deliver of the goods. For exchange
rate fluctuation some companies lost a larger amount

154
 5. Varying currency values: In addition to risks from
exchange rate variation other risk results from the
changing values of a country currency relative to other
currencies. For a company with long range plans calling
for continued operation in foreign market yet wanting to
remain price strategies need to reflect variation in
currency values.

155
 6. Middleman and transportation costs: Channel
length and marketing pattern vary widely but in most
countries channel and longer and middleman keep
higher margin. The diversity of channel used to reach
markets and lack of standardized middleman markets,
many products became unaware of the ultimate prices of
a product.

156
 There is no convenient source of data middleman costs.
Exporting also incurs increased transportation cost
when moving goods from one country to another. If the
goods go over water additional cost such as insurance,
packaging and handling added to cally product goods.
From the above it follows that length channel of
distribution, transpirations costs and other costs are the
main causes for prices escalation.

157
STRATEGIC APPROACHES TO LESSENING PRICE
ESCALATION

 1. Lowering cost of goods: Manufacturer’s price

has a great impact on the whole chain. If the
manufacturer price can be lowered, the effect is felt
throughout the chain.

158
 One of the important reasons for manufacturing in a
third country is an attempt to reduce manufacturing
costs and thus price escalation. Manufacturer price
depends upon the manufacturer’s costs. Manufacturer’s
costs can be reduced by proper utilization of skilled
labors in cheap rate. Cheap labors and cheap resources
ensure lower cost of production.

159
 Eliminating costly functional features or even
lowering overall product quality is another method
of minimizing price escalation. There is no need to
impose high quality and feature in the product required
for under developed or developing countries like
developed countries.

160
 Because consumer of developing or under developed
countries will not able to pay rational price for high
qualified product. Eliminating the high quality and
features means lower manufacturing costs and thus a
corresponding reduction in price escalation.

161
 2. Lowering tariffs: A large part of price escalation is
created through tariffs. Therefore, companies are
always trying to lower the rate of tariff. Different
countries impose various types of tariff in importing
products. The rate of tariff varies among various
customs classification. Therefore, there remains an
opportunity to reduce the rate of tariff by
reclassifying products into a different customs
classification.

162
 By reclassifying a product into a lower tariff category
marketer can lower tariffs and thus price escalation.
Besides having a product reclassified into a lower tariff
category, it may be possible to modify a product to
qualify for a lower tariff rate within a tariff
classification.

163
 3. Lowering distribution costs: Shorter channels can
help keep prices under control. Designing a channel
that has fewer middlemen may lower distribution costs
by reducing or eliminating middleman markup.
Besides eliminating markups, fewer middlemen may
mean lower overall taxes. Some countries levy a value-
added tax on goods as they pass through channels.
Goods are taxed each time they change hands. The tax
may be cumulative or non-cumulative.

164
 A cumulative value- added tax is based on total selling
price and is assessed every time the goods change
hands. Obviously, in countries where value-added tax is
cumulative, tax alone provides a special incentive for
developing short distribution channels. Where that is
achieved, tax is paid only on the difference between the
middlemen’s cost and the selling price.

165
 4. Using foreign trade zones: Some countries have
established foreign or free trade zones or free ports to
facilitate international trade. In these zones imported
goods can be stored or processed in free tariff. By using
foreign trade zones companies can reduce costs and
thus price escalation. By following the above strategies
we can lessen price escalation.

166