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IBO-02/2020-21
International Marketing Management

1.What is international market segmentation? What are the bases of international market
segmentation? 20

International Market Segmentation.

International market segmentation refers to the process of dividing its total international
market into one or more parts (segments or sub-markets) each of which tends to be
homogeneous in all significant aspects. In other words, international market segmentation is
the process of identifying groups or set of potential customers at international level who
exhibit similar buying behaviour. Through international market segmentation, similarities
and differences among potential buyers in foreign markets can be identified and grouped

Basis of Market Segmentation

● Gender
The marketers divide the market into smaller segments based on gender. Both men
and women have different interests and preferences, and thus the need for
segmentation.
Organizations need to have different marketing strategies for men which would
obviously not work in case of females.
A woman would not purchase a product meant for males and vice a versa.
The segmentation of the market as per the gender is important in many industries
like cosmetics, footwear, jewellery and apparel industries.
● Age Group
Division on the basis of age group of the target audience is also one of the ways of
market segmentation.
The products and marketing strategies for teenagers would obviously be different
 than kids.
Age group (0 - 10 years) - Toys, Nappies, Baby Food, Prams
Age Group (10 - 20 years) - Toys, Apparels, Books, School Bags
Age group (20 years and above) - Cosmetics, Anti-Ageing Products, Magazines,
apparels and so on

● Income
Marketers divide the consumers into small segments as per their income. Individuals
are classified into segments according to their monthly earnings.
The three categories are:
High income Group
Mid Income Group
Low Income Group
Stores catering to the higher income group would have different range of products
and strategies as compared to stores which target the lower income group.
Pantaloon, Carrefour, Shopper’s stop target the high income group as compared to
Vishal Retail, Reliance Retail or Big bazaar who cater to the individuals belonging to
the lower income segment.
● Marital Status
Market segmentation can also be as per the marital status of the individuals. Travel
agencies would not have similar holiday packages for bachelors and married couples.
● Occupation
Office goers would have different needs as compared to school / college students.
A beach house shirt or a funky T Shirt would have no takers in a Zodiac Store as it
caters specifically to the professionals

2.Discuss the emerging global competitive environment. Examine whether small

enterprises have scope in the emerging global business environment.
MNCs and Global Competition

Many industries are characterised by dominance of multinational corporations (MNCs), The

size of operations of MNCs is mind boggling. The annual sales turnover of a number of MNCs
is higher than the Gross Domestic Product (GDP) of most developing nations. The number of
MNCs and their subsidiaries has been on rapid increase. A significant share of global
investment, production, employment and trade is accounted for by MNCs which number
over 50,000 with about 4 lakh affiliates. Their combined sales turnover is estimated to
exceed the aggregate GDP of all developing nations, excluding the oil exporters.
Liberalisation of economic policies across the world has facilitated the market penetration
and expansion of MNCs, extensifying and intensifying the global competition. As a result,
many firms, whose market is confined to the home country, are forced to face increasing
global competition in the domestic market. To a considerable extent, MNCs have been able
to depress a number of domestic firms, Several local national firms have been taken over by
MNCs and Inany have downed their shelters or have lost market share due to increasing
competition from MNCs. Increasing competition from MNCs has had on the other hand
some favourable effects also on many domestic firms. To cope with competition, they have
been forced to improve their efficiency and performance a ~d consequently many of them
have become more dynamic and innovative. This has enab 1 ed them not only to compete
domestically but also to venture into overseas markets. There are differences in the
portfolio and competitive strategies of MNCs of different countries. MNCs compete in many
national markets but the nature of competition they face may differ from market to market.
In some major markets, the global competitors are the same. However, their relative market
shares and positions may he different in different markets. In some markets they encounter
powerful domestic firms. Strategic posture and organisational behaviour of MNCs show
variations. Several MNCs like Philips, Unilever and ITT traditionally gave substantial strategic
freedom and organisational autonomy to subsidiaries so that their operations were localised
to a considerable extent. However, competitive environment has, sometimes, necessitated
changes in strategic postures and organisational behaviour. Philips, for example, had to
move from a multinational towards n transnational approach later, A number of companies
(particularly the Japanese ones) have developed international operations that are driven
More by the need for global efficiency and are more centralised in their strategic and
operational decisions. To these companies, which regard the world market as an integrated
whole, the global operating environment and worldwide consumer demand are the
dominant units of analysis, not the nation, state, or the local markets

Small Firms and Global Business

The growth in the number and size of MNCs does not imply that small firms have no
competitive edge in global business. Indeed, n number of well-known large players
(including Microsoft) are of recent origin and had a humble beginning. There are algo young
Indian firms, like Infosys, which are growing fast in global business. Size has advantages as
well as disadvantages. Large companies need not necessarily be efficient or highly
competitive. The large number of loss-making companies in the Fortune 500 list is an
indication of this fact. In the early 1990s, Fortune 500 companies accounted for only about
10 per cent of the America economy, down from 20 per cent in 1970. John Naisbitt
observes in the Global Paradox that small and medium size companies are creating the huge
global economy. About 50 per cent of the US exports is companies with 19 or fewer
employees. The same is true of Germany. MarkeTIng Operations Well over one-third of
India's exports is contributed by the small scale sector. Gary Hamel and C.K. Prahalad in
their Howard Business Review article on Strategic Intent point out that several Japanese
firms which have grown spectacularly in the global market had fewer resources than their
American counterparts. Companies that have risen to global leadership over the recent
decades invariably began with ambitions that were oul of proportion to their resources and
capabilities, but they created an obsession with winning at all levels of organisation and
then sustained that ohsession over the 10-20 yean quest for global leadership. This
obsession is termed as strategic intent. Hamel and Prahalad point out that on the one hand,
strategic intent envisions a desired leadership and establishes the criterion the organisation
will use to chart its progress. Komatsu set out to "encircle caterpillar", Canon sought the
"beat Xerox", and Honda strove to become "second Ford". In short, companies with small
size and resource constraints can also become important global players with strategic intent
and right strategies
Mergers and Acquisitions, and Consolidation

Several industries.across the world have been witnessing significant mergers and
acquisitions (M&As), and the resultant consolidation of market power. There have been a
number of mega mergers and many mergers have been international in nature. M&As
have, obviously, implications on all operations of busine~s such as productivity, profits,
efficiency, competition, cost reduction, market share, etc.

Recent years have seen tremendous growth in cross-border mega mergers. According to
UNCTAD report, the total value of majority-owned international mergers and acquisitions
amounted to $ 411 billion in 1998, .almost twice that of 1997 and three times the 1995
level. The UNCTAD report also points out that the surge in M&A activity is partly due to
increased competition brought about by liberalisation and international business
consolidation.

M&A is alio employed as a market entry strategy. According to UNCTAD in 1998, nearly
90 per cent of large cross-border Mas which do not necessarily require cash or new
funds but can be based on a mutual exchange of stocks - took place in developed
countries, where this mode of entry is more important than in developing countries.
The recent M&As cut across several critical industries such as pharmaceuticals,
telecommunications, infotech, food and beverage, automobiles, steel and energy. Several
factors have contributed to the growth of M&As. The global trend towards 'focus' has
been responsible for sale.c\f non-core businesses by many companies. This has been made
use bf by other companies to consolidate their core business by acquiring the businesses
put on the block.

Several mergers haye been the result of the realisation by the respective companies of the
need to consolidate their power to eff~ctively fight competition. MAS have obviously
been causing changes in competitive equations.

Since M&As have the effect of reducing the number of competitors consumer interest may
be adversely affected. The World Investment Report (WIR) 1998 indicates that, in 1997,
M&As accounted for more than 85 per cent of all FDI flows. This means a corresponding
decrease in the share of green field investments, that is those which result in creation of
additional productive assets in the host country. This has far reaching competitive
implications.

3.Distinguish between the following:

(a) International and Multinational marketing.
The International Marketing is the application of marketing principles to satisfy the varied
needs and wants of different people residing across the national borders.

Simply, the International Marketing is to undertake the marketing activities in more than
one nation. It is often called as Global Marketing, i.e. designing the marketing mix (viz.
Product, price, place, promotion) worldwide and customizing it according to the preferences
of different nation people.

The foremost decision that any company has to make is whether to go international or not,
the company may not want to globalize because of its huge market share in the domestic
market and do not want to learn the new laws and rules of the international market.

But however, there are following reasons that attract the organization to be global:

● Increased Economies of Scale

● High-profit opportunities in the international market than the domestic market
● Huge Market Share
● Elongated life of the product
● Untapped International Market
Multinational marketing, also known as international marketing, is when a business
directs products and services toward potential consumers in other countries. Seeking new
markets helps to offset domestic saturation and increase revenue.

Businesses use one or more core methods of multinational marketing: entering joint
ventures with foreign companies, exporting goods or services from another country,
licensing trademark and patent rights to foreign companies and creating manufacturing
plants in companies abroad. There is no single best practice.

There are both advantages and disadvantages to this type of marketing. Advantages include
establishing a global presence, increasing revenue and minimizing the effect of negative
domestic financial situations such as recessions.

Disadvantages include foreign trade policy changes, cultural challenges and the host
country's laws, infrastructure and technology level. Much research and planning must be
done before a company enters a foreign market

(b) High tech positioning and High touch positioning.

High-tech Positioning: High-tech products are the products which are frequently purchased
on the basis of concrete product features although image may also be important. High-tech
positioning is effective in case of hightech products such as personal computers, video,
stereo equipment, automobiles etc. Buyers typically already possess or wish to acquire
considerable technical information. High-tech products may be divided into three
categories:

a) Technical Products: Computers, chemicals, tires and financial services are just a sample of
the product categories whose buyers have specialized needs, require a great deal of product
information and share a common “language”. Computers buyers in Russia and the United
States are equally knowledgeable about microprocessors, 20-gigabyte hard drives, modems,
and RAM (Random Access Memory). Marketing communications for high-tech products
should be informative and emphasize features.
(b) Special-Interest Products: Although less technical and more leisure or recreation-
oriented, specialinterest products also are characterized by a shared experience and high
involvement among users. Again, the common language and symbols associated with such
products can transcend language and cultural barriers. Fuji bicycles, Adidas sports
equipment and Canon cameras are examples of successful global special- interest products.

(c) Demonstrable Products: Some products are highly demonstratable and are successful
global products. Such products speak for themselves in advertising of features and benefits
and are globally well positioned

High-Touch Positioning: Marketing of high-touch products requires less emphasis on

specialised information and more emphasis on image. High-touch categories are highly
involving for consumers. Buyers of high-touch products also share a common language and
set of symbols relating to themes of wealth, materialism and romance. The three categories
of high touch products are products that solve a common problem, global village
products and products with a universal theme.

(a) Products that solve a common problem: At the other end of the price spectrum from
high tech, products in this category provide benefits linked to ‘life’s little movements’. Ads
that show friends talking over a cup of coffee in a cafe or quenching thirst with a soft drink
during a day at the beach put the product at the center of everyday life and communicate
the benefit offered in a way that is understood worldwide.

(b) Global Village Products: Channel fragrances, designer fashions, mineral water, and pizza
are all examples of products whose positioning is strongly cosmopolitan in nature.
Fragrances and fashions have travelled as a result of growing worldwide interest in high
quality, highly visible, high price products that often enhance social status. However, the
lower priced food products just mentioned show that the global village category
encompasses a broad price spectrum. In global markets, products may have a global appeal
by virtue of their country of origin. The “Americanness” of Levis, Marlboro, and
Harley-Davidson enhances their onymous with vaunted Japanese quality; in automobiles,
Mercedes is the embodiment of legendary German engineering.

(c) Products that use universal theme: As noted earlier, some advertising themes and
product appeals are thought to be basic enough that they are truly transnational. Additional
themes are materialism, heroism (themes include rugged individuals or self-sacrifice), play
(leisure/recreation), and procreation (images of courtship and romance).

(c) Direct and Indirect exporting.

What is indirect exporting? Indirect exporting involves an organization sells to an
intermediary in its own country. This intermediary then sells the goods to the international
market and takes on the responsibility of organizing paperwork and permits, organizing
shipping and arranging marketing. An indirect exporter can sell to the following
intermediary customers: export houses (trading houses or export merchants, confirming
houses, and foreign organizations based in the organization’s country (buying offices).

What is direct exporting? Direct exporting involves an organization selling goods directly to a
customer in an international market. Organizations can sell to a wide range of customers,
some of whom act as intermediaries in the target market. Even if an intermediary is
involved, the export is still direct because the intermediary is a customer based in the target
market. Some of the most important customers for direct-exporting organizations include
importers, wholesalers, distributors, retailers, government procurement departments and
consumers themselves.

(d) Trade selling and Missionary selling. 5x4

Trade Selling

selling products to wholesalers and retailers for resale purposes

Missionary selling and competitive selling involve different types of sales situations and
approaches. Missionary salespeople typically work for manufacturers. Their main job is to
tell distributors and retailers, who are often established customers, about available
products. Competitive selling involves an aggressive effort by a salesperson to win business
from a new client, often at the expense of a rival product.

4.Write short notes on the following:

(a) EPRG Orientation
EPRG stand for Ethnocentric, Polycentric, Regiocentric, and Geocentric. It is a framework
created by Howard V Perlmuter and Wind and Douglas in 1969. It is designed to be used in
an internationalization process of businesses and mainly addresses how companies view
international management orientations. According to the EPRG Framework (or the EPRG
Model), there are four management approaches that an organization can take to get more
involved in international business substantially.

The EPRG Framework suggests that companies must decide which approach is most suitable
for achieving successful results in countries abroad. For this reason, the EPRG Framework
can be a useful tool to utilize if a company does not know yet how to manage business
activities between companies in the local country and a host country. The EPRG Framework
is additionally useful for making strategic decision

(b) Franchising
Franchising is based on a marketing concept which can be adopted by an organization as a
strategy for business expansion. Where implemented, a franchisor licenses its know-how,
procedures, intellectual property, use of its business model, brand, and rights to sell its
branded products and services to a franchisee. In return the franchisee pays certain fees and
agrees to comply with certain obligations, typically set out in a Franchise Agreement.
(c) Test Marketing
test marketing is a marketing method that aims to explore consumer response to a product
or marketing campaign by making it available on a limited basis before a wider release.
Consumers exposed to the product or campaign may or may not be aware that they are part
of a test group

(d) Transfer Pricing 5x4

transfer price is the price at which related parties transact with each other, such as during
the trade of supplies or labor between departments. Transfer prices are used when
individual entities of a larger multi-entity firm are treated and measured as separately run
entities. It is common for multi-entity corporations to be consolidated on a financial
reporting basis; however, they may report each entity separately for tax purposes

5.Comment on the following:

(a) There are several reasons for a business firm to go international.

Improving Profit Margins

Improving profit margins is one of the most common reasons for entering international
markets. When growth strategies are used up on the national level, the next path is often to
seek out international growth. Distributing your products in additional countries increases
your customer base. As you offer compelling solutions and build loyalty across international
markets, revenue strengthens and escalates as well.
There are also significant cost savings that can be associated with going international. A
company may want to reduce costs by relocating closer to a supplier or benefit from lower
production costs by expanding operations to another country. Doing business
internationally may open up new investment opportunities. Further, a lower cost of
acquiring customers may be another compelling reason to expand internationally.

Competing for New Sales

Closely connected to the goal of improved profit margins is the desire to increase sales.
Even if company operators generally are satisfied with revenue levels, international
expansion can further improve overall revenues. The race to expand internationally is often
about gaining a presence in foreign markets. Being the first to arrive in a new market can
provide significant advantages.

If you don't enter a ripe market with your solution, competitors do. Not only do you miss
the revenue source, but you lose out on other valuable assets that you could use to
promote your company at home and abroad. In some cases, a strong domestic company
gets overrun by a lesser player that succeeds globally and grows big through global synergy.

Bear in mind that in the modern economy, many companies are already global thanks to
technology. Companies develop specific international strategies in order to gain competitive
advantages in the new global economy.

Diversifying the Business

The international expansion allows a company to diversify its business in a couple of key
ways. First, you spread the risk of slowing demand across multiple countries. If one market
never gains or loses interest in your offerings, you can pick up the slack with success in other
countries. In addition, you can connect with suppliers in international markets and take
advantage of raw materials and resources unavailable in domestic markets.

Also, companies often enhance innovation and develop additional variations of their
solutions when they operate in multiple countries. Product diversification similarly insulates
you from the risks of declining interest in a particular item.

Examples of Diversification
For example, Xiaomi, one of the most popular smartphone manufacturers in China, seeks to
expand in India over the next few years. In addition to mobile devices, the company is
planning to sell electric folding bikes, self-balancing scooters, fitness bands and other
products. This will allow it to reach a wider audience and diversify its operations.

Diversifying your brand's offerings and its customer base are two popular reasons for
international business expansion. Sometimes, a product isn't a bad product, but a bad fit for
the market where it was originally launched. Launching that product again in a different
market, toward people with a different culture and a different budget can mean an entirely
different, much more positive reception for that product.

Recruiting New Talent

Operating in international markets also gives businesses access to a larger and more
diversified talent pool. Employees who speak different languages and understand different
cultures enhance connections with a broader customer base. Having an international brand
that is well reputed will invite top talent to the company. Businesses can also structure
global work teams in a way that allows for synergy in building a global brand.

(b) Even after entering the markets a company must answer questions like, should it
build, divest or abandon the market it has entered; how many such market it should hold
and so on.

Every company is forced to address the question of which market to enter. Even after
entering the markets a company must answer questions like, should it build, divest or
abandon the market it has entered; how many such markets should it hold so as to
maximize its economic benefits; how best to export to the chosen market. To answer such
questions every company must formulate procedures, policies and adopt strategies which
allow it to keep the - focus on both country marker factors and company factors. Since the
process of market selection begins with an attempt to match the market requirement with
the company's ability, the first step involves defining the market and the company's ability,
the second step involves identifying the section of the market to be captured or market
segmentation and the final step involves determining the number of markets to be held.

(c) GATS Eliminates various legal barriers to international marketing in services.

International marketing in services is subject to a number of legal barriers. These barriers

include the following:

● Restrictions on cross border movement of services.

● Protection of domestic firms from foreign competition.

● Subsidies to domestic industries.

● Laws for infringement of international copyright and trade mark.

GATS is a part of WTO and aims at liberalization of trade in services. General Agreement on
Trade in Services (GATS) refers to a multilateral treaty containing rules, disciplines and
commitments for progressive liberalization of trade in services. GATS covers four modes of
international delivery of services:

● Cross-border supply (trans border data flows, transportation, services).

● Commercial presence (Provision of services abroad).

● Movement of personnel (entry and temporary stay of foreign consultants).

Among the obligations is a most favored nation (MFN) obligation that essentially prevents
countries from discriminating among foreign suppliers of services. Another obligation is the
transparency requirements according to which each member country shall promptly publish
all its relevant laws and regulations pertaining to services including international
agreements pertaining to trade in services to which the member is a signatory. Further each
member shall also respond promptly to all requests for specific information, by any other
member, pertaining to any aspect of the service covered by the GATS. Each member shall
also establish one or more inquiry points to provide specific information to other members

The GATS lays down that increasing participation of developing countries in world trade
shall be facilitated through negotiated commitments on access to technology,
improvements in access to distribution channels and information network and the
liberalization of market access in sectors and models of supply of export interest to them.
With reference to domestic regulations, the Agreement lays down that all measures of
general application affecting trade in services are administrated in a reasonable objective
and impartial manner. There would be a requirement that parties establish ways and means
for prompt reviews of administrative decisions relating to the supply of services.

It is recognized that particular pressures on the balance of payments of a member in the

process of economic development or economic transition may necessitate the use of
restrictions to ensure, inter alia, the maintenance of a level of financial reserves adequate
for the implementation of its program of economic development or economic transition.
A member country may, therefore, apply restrictions on international transfers and
payments for current transactions under certain circumstances envisaged under the GATS.
In the event of serious balance of payments and external financial difficulties of threat
thereof, a member may adopt or maintain restrictions on trade in services on which it has
undertaken specific commitments including on payments or transfer for transactions related
to such commitments. The commitments of member countries under the GATS also include
national treatment (that is, to treat foreign suppliers or services like domestic suppliers and
provision of market access. Hence, it may be concluded that GATS has eliminated Various
legal barriers to international marketing in services.

(d) International marketing research is full of complexities.

International marketing research is more complicated as compared to domestic marketing
research due to differences in the environment. Marketing research is systematic and
objective collection of data, its analysis and evaluation and decision-making in respect of
specific aspects of marketing problem. Collection of accurate and reliable data is a
complicated job even in domestic markets.

Following are the special problems associated with international marketing:

1. Differences in perceptions.

2. Conceptual differences.

3. Language.

4. Sampling errors.

5. Lack of standardized approach.

6. Difficulty in analysis and interpretation.

Difference in Perceptions.

Perceptions differ across countries. Cycles are perceived as basic means of transportation in
some countries, while in few other countries they have recreational value and in some other
they are used as a good means of physical exercise. In these circumstance, the perceptions
about cycles cannot be compared on same scale and the scales have to be adjusted for
accommodating the differences in situations

Conceptual Differences.

Conceptual differences also need to be tackled carefully in international marketing research,

as the same terms do not carry the same meanings in different markets. For example, the
terms such as middle class, upper middle class, upper class do not imply same income
groups across countries. What one may mean by middle class in India may entirely be
different from the meaning of middle class in USA. Living standards and economic
conditions in India and the USA need to be analyzed on different scales.

The following concepts of economics and marketing need to be analyzed with utmost
care, while analyzing the data and information generated out of international marketing
research:

● Premium segment of a market.

● Prosperous markets.

● Desirable level of living.

● Economic openness.

● Social openness.

● High and low levels of saving.

● High and low levels of growth.

● Consumer awareness.

● Political liberty.

● Consumerism.

● Aggressive marketing