Session 12 FFF Fs

05-03-2019
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
International
Business
Marketing
Chapter 15
Chapter Objectives
• To appreciate the nature and importance of international

markets
• To learn how to gather information about the target market
• To understand how to choose the markets to enter
• To understand the Legal and Cultural aspects of the
international marketing environment
• To understand the risks involved in doing international
business
• To know the entry strategies for international markets
• To understand the pricing, financial terms and payment
methods used in international trade
• To learn about building International Marketing channels 2
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Nature of International Markets
• Vary in terms of size and level of development – from large & affluent
western countries to small and extremely poor and underdeveloped markets
in Africa, Asia etc.
• Each of them offer opportunities for different reasons – high levels of
consumption of the developed markets to lack of manufacture and poor
infrastructure in less developed countries
• Outsourcing of products to areas where there is definite cost advantage
without loss of quality is a trend
• Outsourcing of manufacturing and services to countries like India, China is
increasing
• Many large Automobile companies like Ford, GM, Hyundai, Suzuki, Volvo
etc. have setup manufacturing bases and are exporting from India.
• A majority of international trade is in industrial products like machinery,
chemicals, pharma, transport equipment and components
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Market Intelligence and

Research
• Most companies are ignorant of the opportunities in export
markets and hence miss out
• Data collection is an important first step in international

marketing
• Secondary data is available from a number of sources like

chambers of commerce, embassies and consulates, trade
associations, journals, banks and internet websites of
government and other agencies
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Choosing the Market
• Factors to be considered in choosing markets:

– Size of the market
– The language and Culture of the country
– The competition in the market
– Proximity to the home market
– Political & Financial stability of the country
Risks in International Business
• Culture & International

Business
• Legal Aspects
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Culture & International Business
• Understanding culture – thinking and ways of doing

business, customs, etiquette, beliefs etc. is very
important for doing business effectively
• Language is an important part of culture – since

marketing involves communicating, this is very
important
• Culture influences consumption patterns and usage of

products
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Legal Aspects
• Applicability of laws in case of disputes important to

understand and incorporate in contracts
• Laws vary among countries. Some important laws to be
understood are:
– Business laws – approval processes, shareholding permitted,
compensation rules, employment rules, tax laws
– Patent laws, protection of IP laws etc.
– Environmental laws
– Safety and pollution regulations
– Product liability laws
– Other social laws such as sexual harassment laws etc.
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Risks in International Business
• Political Risks
– Disruption of business due to
political changes, coups, wars or
deterioration of relationships
between countries
• Commercial Risks
– Failure to pay for goods supplied
due to bankruptcy, changes in
regulations relating to Forex
payments, Currency rate changes
etc.
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Pricing Terms
• Ex Works – at the manufactures factory gate

• FOT / FOR – free on truck/rail – goods at factory
loaded on truck or train
• FAS – free alongside (ship at port)
• FOB – free on board (includes loading, stowage,
lashing on board ship)
• C&F – Cost of goods + Freight to destination
• CIF - Cost of goods + Freight to destination +
Insurance (marine + transit + storage)
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Payment Terms
• Cash in Advance – risk to importer in case of delay or
non delivery of goods
• Cash against documents – Payment after shipment and
on receipt of documents – risky for exporter in case of
default
• Documents against acceptance - risky for exporter in
case of default
• Letter of credit – widely preferred method – low risk
for both importer and exporter
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Currency of Pricing
• Freely convertible currencies preferred – US Dollar is

most widely used, Euro, British Pound, Middle
Eastern currencies like Saudi Riyal, UAE Dirhams,
Japanese yen, currencies of countries like Canada, HK,
Australia, Singapore etc. are also used
• Biggest risk is the fluctuations in the value of the

currencies
• These can be hedged with suitable instruments

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Entry Strategies
• Some of the available options are:
– Exhibit products at Trade Fairs
– Appoint indenting agents
– Tie up with local exporter(s)
– Tie up with foreign importer(s)
– Licensing or Franchising
– Joint Venture with foreign company(ies)
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Packing and Labeling

• Industrial packing
– Is to protect and preserve the goods for the duration of transit,
handling and storage
– Needs to be strong and lightweight to avoid excessive freight
charges
– Must be capable of mechanical handling and containerization
• Sales packing
– is to facilitate sale of the product
– Must be good in appearance
– Must be in convenient sizes as per local customers normal demands
– Must carry details of the products, contents, size, weight, origin,
dates of manufacture & expiry, bar codes, usage instructions etc. 14
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Session 12 FFF Fs

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05-03-2019

• To appreciate the nature and importance of international

Market Intelligence and

• Data collection is an important first step in international

• Secondary data is available from a number of sources like

• Factors to be considered in choosing markets:

– The language and Culture of the country

– The competition in the market

– Proximity to the home market

– Political & Financial stability of the country

• Culture & International

• Understanding culture – thinking and ways of doing

• Language is an important part of culture – since

• Culture influences consumption patterns and usage of

• Applicability of laws in case of disputes important to

• Ex Works – at the manufactures factory gate

• Freely convertible currencies preferred – US Dollar is

• Biggest risk is the fluctuations in the value of the

• These can be hedged with suitable instruments

Packing and Labeling

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