fe pb Global Marketing (Units) M CRM and Global Marketing - —— eee ing Objectives yearn qhis unit defines the fundamentals of direct marketing and global marketing. After vudying this unit one would be able to: : Understand the features and functions of direct marketing. , Learn the different public issues in direct marketing. 1 Understand the global Ps of marketing , Understand the current scenario of global marketing. + Define the global marketing environment, ea) ‘The multi-dimensional process through which the organisations gain knowledge about the needs, wants, desires and buying pattems of their customers by csublishing a two-way communication with them with the use of information technologies, is known as Costomer Relationship Management (CRM). tt involves developing a business philosophy and several strategies, systems and programs, in order to identify profitable customers and build customer loyalty. It functions on the philosophy that building song relationships with better customers can increase the organisation's profitability as the profitability level attached to all the customers is not sane. Thus, creating loyal customers who frequently bay organisational products is the main aim here. According to Gartner, “CRM is a business strategy designed to optimise profitability, revenue, and customer satisfaction”. According to PWC Consulting, “CRM is a business Stalegy that aims to understand/appreciate, manage and personalise the needs of an organi and potential customers”. According to Parvatiyar and Sheth, “CRM is @ competitive strategy and process of acquiring, reacting and partnering with selective customers to create superior value for the company and the customer”. CRM can be divided into three main components: 1) Customer: It is important to recognise and manage customers for an organisation as its profit and growth solely depends on customers. Information technologies play a very important role here. 2) Relationship: Uninterrupted _ bi-directional communication between the organisation and its customers builds the relationship between them. This relationship can take any form such as continuous or discrete, repetitive or one-time, and short-term or long-term. 3) Management: CRM is a management function that should be considered not only in marketing department but in the whole corporate culture, departments, and activities. A broad change in the procedures and functions of the organisation and employee attitude is required for CRM. CRM is a new phase of marketing industry which drives the philosophy of information technology enabled relationship marketing. There is an emergit need for CRM in the current marketing scenario as it is equipped with several IT tools such as MS Access, Spreadsheets, Data warehouses, MIS, SMS, Fax, E- mails, Telephones, Loyalty cards, ATMs, etc. These182 tools help in dev potty yp f¥eloping customer loyalty thus Prontability “of ‘the “organisation by improving ervice processes within the organisation With the help of improv Customer dase Proved analysis of the processed Process of Relationship Management + IT = CRM Hence, CRM. incule ates all the techniques essential for muntan with customers. IT’ tools and ‘maintaining relationships ae : Architectural Elements of : Types of i RM ae Relationship CRM has achieved its significance for providing Profit to various organisations in the recent years Following are the types of CRM: my ———— CRM: An operational CRM deals hancement ofvanouscstome cvs proces iomer-cenitic processes (customer-facing or customer support) in the business. In operational CRM, numerous interconnected delivery channels are used in business for automation of horizontally linked processes like front office touch points for customers (customer service, sales, marketing, etc.), It also involves the integration of front office and back office. Organisations having direct interaction with their customers implement operational CRM for automated support of their business. In this, personal preferences of customers and their interactions with the organisations are recorded and used by several departments in order to generate customer information. 2) Analytical CRM: The analytical CRM deals with automation and improvement of different back-office operations and analysis functional in ‘an organisation. It controls all the processes and operations that are indirectly connected to the customers. Thus, the analytical CRM differs from the operational CRM. In operational CRM, horizontally linked processes like front office touch points for customers (customer service, sales, marketing, etc.) are automated to generate customer information. Whereas, analytical CRM is focused towards exploring the intentions of the customers (by thoroughly analysing the customer related information) to be used by the organisation. Analytical CRM highlights the significant patterns and predictions of the customer data (provided by operational CRM systems), thus, supports and improves the functional operations and decision-making ability of the concerned organisation a MBA Fist Semester (Mat 43) Collaborative CRM: Collaborative Cy ceneey towards referting the customers organised and reliable way by integrating a oreatinating the cOMMUTICALION chang creme, fax, e-mail. web, 2) and cisome remetions, The concept of collaborative C inter encompasses enhancing the custom | met atons but also inculeates enhance intetomer retention as well as freedom. Ditferer | departments (marketing, finance, service, | the organisation are covered” unge: etc.) of or porative CRM. In order to develop effective | Managemen) akqy is Chderstanding of the customer, "cu information is shared among these deparment | by collaborative CRM. | 5.1.3. Role of CRM | ‘The role of CRM can be understood by considering the following points: Role of CRM, Tovey Far on | Tenge pea ii Handling the Customer Issue} [ THeiping Top Management th Decision-making Helping Organist ‘Atacting and Retaining ‘Helping in Reducing Com Castomers Providing Feedback and New Taformation on Competitors 1) Handling the Customer Issue: CRM facilitates the organisation and the customer service department in handling the customer issues and problems. As CRM contains vast customer data, the departments dealing with customers are provided with this data to enable the effective customer service transactions, Therefore, the resources available to support department, satisfaction level of customers and profitability of the business is increased due to CRM. 2) Knowing the Future Course of Action: With the help of CRM systems, the management can easily forecast future course of actions of the organisation. Customer name, address, order status, account details, transaction dates, status of transaction (pending or complete), shipping and order fulfilment dates, nature of issues/complaints, demographic details and many other important information is provided by CRM, which is sufficient for the organisations '0 forecast their decisions. | | |GSS ee St iOS qgnend Gal Miteting (Ui) 3) Helping Top | Management ‘es > gnaking: CRM systems help the ob eesion decision-making by providing ye anager in ihe satisfied customers and the ey |_Matvites Gain Cusiomer Suistacion Case ston Case Dimaiion q q Casa Lay Tao i coma ona Customer Renton tes be NG Re-acqusiton| Detection Figure 5.1: Process of CRM_ 1) Acquisition: Acquiring potential customers is the most essential step of customer relationship management. The process of acquisition encompasses five major stages, viz., enquiry, imeraction, exchange, co-ordination, and adoption. Each stage performs an important role in the process of acquisition, In the enquiry stage, different organisational aspects including nature of organisation, product, transaction methods, etc., are enquired by the potential customers. This enquiry will result in the interaction of the customers with the organisation (interaction stage). Next is the exchange stage, in which different exchange related aspects like mode of delivery, terms and conditions of exchange, etc, are determined. Later, in the co- aordination stage, both the customer and the organisation exhibit the co-ordinated effort and the organisational products and services are adopted by the customer (adaptation stage). 2) Customer Interaction Management (CIM): Building customer relationships is not possible without focusing on the interaction between the customers and the organisation. CIM encompasses combination of _ customer relationship technologies and technology-centric interactive solutions. CIM is based on interactive communications related to potential customers enabled through available channels of interaction. This further supports the development of customer relations. With the emerging change in technologies, communication through message, content, media, accuracy, speed, distance, reach, repetition, etc.. plays a very crucial role in supporting the CIM. CIM covers these routes: i) Online Routes: These routes consist of e~ mails, chat rooms, web communities, etc. ii) Offline Routes: These routes consist of television network, telephone, fax, mails. iii) Outsourcing: CIM can be implemented by outsourcing, i.e., indulging a third party having expertise in CIM. The effective interaction of the organisation with their potential customers is the result of effective CIM. Based on customer segment, service needed and the channels utilised, these interactions must be regular and also modified as per the customer requirements. Customer Retention: The main concern of the organisation is retention of acquired customers for longer period. The process of effectively accomplishing the customer requirements, and thus, going beyond their expectations, so as to keep them in the customer inventory of the organisation for longer period, is called customer retention. Thus through customer retention, an ordinary customer is transformed into loyal customer. In modem business, customer retention plays a vital role in building customer relationship. In selling organisations, number of defected customers is reduced with the help of customer retention strategy. Making first contact with the customer and developing relationship with hinvher, which lasts for lifetime, is the characteristic of a good customer retention strategy. Customer retention not only involves satisfying the MBA Fit Semester (Marketing Mangemeny gy customers, rather it inculcates satisfying or beyond their expectations $0 2s to convert them Joyal supporters of the brand/organisa™ Therefore, business strategy of the organisajgs™® more inclined towards ‘customer Value’ rater y a poider value of Profit maximisation developing customer loyalty. or 4) Attrition: The next phenomenon occuring CRM after the retention is atrition, which nygy, gradual destruction of the customer loyalty The stage encompasses tne queries that customers about their returns and benefits from Tong relationship with the organisation, Avoiding arly ation arising from CUSTOMERS, may lea Gefection of customers. Hence, the organisa Should be capable of identifying the atrition spt So that appropriate precautions can be en Following are some of the attrition signs tha organisations must recognise: i) Decreasing frequencies of contacts, ji) Increasing complaints, iii) Decreasing enquiries, iv) Decreased communication ¥) Decreasing number of active buyers, ang vi) Decreasing business volume. 5) Defection: Customer defection refers to the process of discontinuation of purchase by ay tinhappy customer which ultimately means losing fa business. In case, when the organisation is nq able to provide required products (services) ig the customer as per his/her need, the unhappy customer switches to another alternative anj discontinues the purchases from eatiy organisation, resulting in defection. Thus, the customer defection acts as a threat 10 the organisation. Hence, the attrition signals shoud be timely recognised by the organisations, i these signs are not identified at the earliest, the ‘customer will become dissatisfied and will move ‘on to other available alternatives in the marke. In that case, the organisations must try to regun the lost customer loyalty by designing re- acquisitioning strategies. 5.1.5. Significance of CRM The significance of CRM in the business processesis explained below: 1) Increased Sales Revenues’and Reduced Cost o Sales: CRM results in increased sales reveaue from building relationship with customers tt provide the needed information without wasing ‘any extra costs and time, Cost of sales is als reduced as appropriate and costeffective ses I eeTS * AY ara increased Customer Satista, to increase in number of s, their needs and wants are a action: CRM leads atisfied customers as organisation. recognised and fulfilled and’ better service is provided to them, the satisfaction set of eustomers continuously increases, N°" Hevel 3) Lower Costs of Recruitin, implementing CRM, reeruitment are incu various customer-rel mailing, marketing, up, etc. are reduced i Customers: B; lower costs of custome, ured. The costs related to lated operations like contact, services, fulfilment, follow. due to effective CRM. CRM reduces the required number of customers for maintaining a sound busines ‘S potential (particularly in B2B markets) so as to oon customer related costs. (© control the 4) Increased Customer Retention and Loyalty: Implementation of CRM system results ta increased customer loyalty and retention. ‘The baying frequency of customers increases, they buy in bulk, communicate their needs nck expectations (helpful in building. relationship), and therefore, stay attached to the organisation for undefined period, 5) Customer Knowledge: CRM systems provide customer information through a common knowledge base which is easily accessible to all the departments of the organisation. It provides updated and accurate information to the employees about the customers. This extracted information helps in making accurate decisions and also aids in being close to the customers so as to forecast and fulfil their needs. 6) Customisation: Simple and customised solutions (particularly for SMEs) are developed with the help of CRM. CRM helps in easy integration of different business processes within the organisation, It is the CRM which enables the organisation to modify itself according to changing business needs. 7) Customer Self-Service: In _ organisations Practicing CRM, all the customer service Tepresentatives are asked to analyse the large number of customer calls to generate the list of commonly asked questions by them. The 5.1.6. an Along with having major benefits. is als associated with some shortcomings. Following are the limitations of CRM for any business 185 the determine \d provide the ete customer organisation here is able to ‘customer support requirements an solutions automatically, as compl information is available with it. Limitations of CRM i) Re ‘OF Management —_ Support: fog deta wena oer SS ote rears 2) Complicated and Confusing: CRM system is so complicated that sometimes organisations get confused about its features and use. Some ‘organisations link it with business strategy while others consider it a technology-related aspect. 3) Problem in Implementation: —_ Incorrect implementation of CRM systems within an organisation leads to several business problems. If any of the organisational department is skipped from being involved in CRM network, the information developed is not complete and reliable. Therefore, different decisions, schemes and plans based on CRM systems become doubtful, 4) Fails to Serve Interested Customers: In CRM, along with serving and satisfying regular customers, sometimes organisations fail to focus the other interested customers. Thus, due to loss ‘of such customers, the profitability of the organisation is affected. 5) Customer Dissatisfaction: Even after the implementation of CRM systems, many organisations still face the problem of customer dissatisfaction. 6) Training of Frontline Staff: Frontline support staff needs adequate training as they are still not customer-focused. Training the frontline staff acts as a big challenge in implementation of CRM systems as CRM will only be effective if properly implemented and utilised. 5.1.7. Relationship Marketing Vs. Relationship Management Relationship marketing is heavily dependent on CRM. In-spite of this, several points of di: exists between the two concepts: ‘inction" Jemester (Marketing Mana MBA First Se ma y lr h conception, pricing, promotion, and distinyy, Relationsh . ship Marketi : rind services 10 Create exchan®™ of goods, and hange ‘Customer Relationship Beton | “ttamegeneartenay | aca Fee ca se etm oo _ soe aa and organisational object) h he development of alinvolves the use of products and) , {Rating stacey which has solons of TT te implemen) According «0 Warren J- Keegan, “Inema “etectatontip, elaionship marketing in the) marketing is the process OF Focusing the eyg, 9 eles jorzansaion ina beuerway.—/ Ang objectives of an organisation oq gy ‘he ~busineslnterction with end eusiome eee thot jimteraction with customers inlis rarketing opportuni the entire frm i facieed teas) women’ th eter pean ad calaboraine) ang the concept of global marke Junderstanding of their current|CRM with the use of tools of 8, tnd future reyunemens and the ecology like call cent, following similar concepts should be understg: methods by which these can be portal, IVRS and 80 0. 1) Domestic Marketing: “Domestic “ma, ne wa ofl involves ceacnelve calieaon ofl refers to those marketing activities ya 8 ne od i ines STG] cared out mane! COTY Tay {data related to the present and|profiling the customers and! in the home country, Keeping im ming ht pbrespective customers requirements of customers. [cross =a eines aa selling. up selling andl Top management is assisted in a i: repetitive seling ure the resulting "eeatepe business) 2) Foreign Marketing: In foreign marketing, 4 [of successful relationship| decisions by using CRM ress company operates in other county, eter yt i. lobtained from Busines the home nation. The goods and sen Intelligence, Data Warehouse, produced are based on the tastes and pref me | [Mainly reaiod wih_pewonallt inher imnive pros of that particular country. For ¢ te Felations. communications” and focused activites resulting fom} Indian company does marketing in India ay” managing the vital conditions tothe strategy is called as domestic marketing, on the gy! esa the confidence of te hand if the Indian company is [Relationship ——ranaperh a marketing in U.S. and U.K. then itis tem coordinates different activities foreign marketing. [Mporiscm of eT Head ¥bo| 5) Comparative Marketing: ‘The | cininacs wit) ie) Comparative marketing involves compe! [Focuses on developing Tonglh rovides lye daa toWe| _—_—etWeen two Or More marketing systems, Thi term, profitable relationship internal team to accomplish the done by companies in order to analyse a specig, ‘with the customers. lgouls and objectives of] country more effectively. Tt als0 ‘helps ig fo siness. __| identifying the similarities and the dissimil Damn clase wibleaoncs | between different marketing systems. Hence, lboth partners and customers. type of marketing consists of two or kis largely focused towards the|On the ober side, CRM is) countries and for this purpose various analyticg ifirm’s marketing operations and|largely focused towards the| tools are used. lowardsthe customers leustomers andthe whole [process of creating value to the| 4) International Trade: International Trade refers | = customers. to the flow of goods and services across diffeny | nations. The main aim of international trade is 5. ,OBAL MARKETING enhance the commercial and monetary conditions of a country which influences the balance of payment and foreign exchange scenario, Whereas, global marketing is a micro view of the market and also involves company analysis, the main purpose of this analysis is to examine the success and failure of a product abroad and find out the marketing factors which influence the overall ou Many authors worldwide prefer global marketing to be termed as multinational marketing, word marketing or international marketing. These tems can be used interchangeably as all the global According to AMA (American Marketing opportunities and its market emerge out from Association), “International marketing is the multinational corporations and there is nothing like multinational process of planning and executing the domestic or foreign market. 5.2.1. Introduction Global marketing is defined as the marketing activity which is carried out across the national boundaries. Hence, it involves the process of marketing the goods and services from one nation to another nation. A company can market its products in more than one country at a time. One should not misunderstand global marketing as intemational wade. Global marketing is just « part of international trade.vr a ya » ey ee an los! Marketing Uri 5) Wi Nature of Global , igh class 32. of global marketing cay Marketing they are able to manufacture and sll high © ‘of following points: understood in quality products at lower prices: et is Ved ye Seale Operations; 6) ’ fion: The Global Market 1a ing trantactions a marl the global ° ae ee crpettve " SS red gusty Which help the manufactnce® & Pk igs huge competion amon has been penefis Of economies of scale Iti eae te developing and developed nations. It has pee 4 3s osporations. These corporations fontacts and connections, whe eer sod ens hy. at's capable of adapting global approaches whichever is necessary in global "oonen actvites. They manage their business onenae very economically and proficienty, International Barriers and Trading Blocks: Intemational Marketing is a way diffrent ten intemal marketing. “It involves. numeroes restrictions as different countries follow different protection policies. ‘Usually, all countries implement trade barriers and foreign exchange regulations on exports and imports of various goods and services. There are many trade blocks such as ASEAN, LAFTA, EEC or CMEA which limit the scope and growth of the international marketing. These blocks restrict the free flow of goods and services between the counties. Sensitive Character: The nature of intemational marketing is greatly flexible and seasitive. The environmental factors largely influence the intemational marketing, e.g, the changing political and economic conditions may prove a product to be ‘unfavourable for a country. Other than this new and advanced technologies used by competitors may directly affect the sales of a product. Use of Advanced Technology: The technological advancement is highly dynamic in nature. There is technological change on daily basis. Moreover, the Intemational market is quality conscious and competitive. In these kinds of markets, the company needs to be extra conscious for providing products and services to the intemational market. Many countries have their dominance in international market, because of the use of highly advanced technology for Producing different products and services. These Countries are USA, Japan, France and Germany These countries have large market share, and observed that the developed nations excelled in providing quality products On other hand, the developing countries aid excelled in providing cheaper produc aie competition is becoming fiereer because. government of developing nations are provict® different benefits to various foreign industries setup their plant or factories. ; 7) Develops Cultural Relations and Maintais World Peace: In the era of globalisation, intemational marketing has brought nations °° close to each other. The world has become & Beta village. The countries are building close ct - relationships with each other. This relaonshit building process has increased the standard of living and interdependence on each other, which is promoting peace among different nations. 5.2.3, Current Scenario of Global Marketing 7 Following points depict the current scenario in global marketing: ‘Current Scenario of Global Marketing Forced Dyramism = | |_{ cooperation among Counties Liberalisation of Cros Borer ‘Movements I f I ‘Transfer of Technology rowth in Emerging Mae's Growin Eerie Mates |) ein Agricultural and ‘Manufacture Goods Tale tewcen Parner of |_| Repon Trade Agee -clong Gomes Tre |_[ Deelping Counties Tre ominstcoee |} 4 [Gana Noma] InFimtae | 1) Forced Dynamism: Foreign trade or int business is deeply impacted by socio-econ cultural, and political factors. It functio dynamic environment and is therefore sophisticated. On one hand, it is co reaching out to enhance the technology, scenarios, cultures, and growth of econ which in tum effect societal and economical situations. While on the other hand, the externalamong Countries: There are aati ‘Ways in which nations build coordination operation, i.e., treaties, —intemational eeeanisations, ete. The restrictions and baries put peep ie) business are thus lifted due to Fee ecation and the organisations have to face less "garding their overseas operations, The main Boals of establishing cooperation are: To reap mutual benefits, i) To tackle issues which are out of their reach. iti) To get solutions to problems cooperatively. » Liberalisation of Cross-Border Movements: roa last ten years or so, countries have eased their cross-border’ barriers which they earlier imposed very strictly. Movement or trade of Boods, services, labour, capital, etc., beyond any Country's boundary has to be regulated. Highly restricted regulations. tend to hamper international trade. As the years have passed, these barriers are normalised so that organisations can reap more benefits from international business. 4) Transfer of Technology: Under international business, both commercial and non-commercial technology gets transferred and distributed. It does not necessarily need a written agreement but takes place as a technology transfer transaction between a transferor and a transferee. The global cooperation contracts among developing and developed countries involve the non-commercial technology transfer. 5) Growth in Emerging Markets: Countries like India, China, Brazil, etc., have rapidly growing and emerging markets which has boosted the international business tremendously. ‘These emerging markets not only have intensified the spread and strength of international market, but have also provided ample opportunities and facilities for the growth of innovation based organisations, 6) Trade in Agricultural and Manufactured Goods: The past two decades of international business reflect the increased significance of agricultural as well as manufactured products. While the processed agricultural products are being demanded since only the last decade, manufactured products. (except _ mining products) have shown a decent growth in last two decades. | MBA First Semester (Marketing Managemen aK, 7) Trade between Partners of Regional Trag, ‘Agreements (RTAs): According to a recent of WTO, there were about 220 RTAS out of whit 150 had been brought to the notice of WTO, 4 members of WTO belong to at least one RTA, ‘on an average, they belong to six RTAs, ‘and ‘The formation of RTAS has proven beneficial has resulted in rapid foreign trade between Ry partners, Also, the number of RTAS is expected increase at an increasing pace. 8) Developing Countries’ Trade: Though there have been issues in assessing and evaluating ihe correct custom value of second-hand computer, cars, clothes, machines, etc. developed counties are increasingly eying the developing countiey to export the surplus produce, It has also been analysed that developin countries are the major contributors towards ihe success of international trade as compared i developed countries. 9) Containerised Cargo: The different types of freight containers used in transportation modeg are Swap Bodies for road and rail transport, Unit Load Devices (ULDs) for aviation, and various maritime containers, ie., dry and refrigerated containers for seaborne transport. The most popular among these in international business are the maritime containers which are also used when the transportation involves two or more different modes of transportation. 10) Global Production Network: There has been advancement in worldwide production specialisation especially in manufactured products. There has been a rapid increase in the contribution level towards international business of manufactured products as well as the export of parts and components of final products to be exported. Exported products also include a significant part of imported intermediate inputs 11) Intra-Firm Trade: It is basically the trade within the same organisation or its subsidiaries and its shaze in the international business is about 33 per cent. It has been noticed that a major portion of intra-firm trade within developed countries was of finished products for the ‘marketing and distribution subsidiaries. Finished products have been traded mainly for local markets even when the subsidiaries needed further manufacturing.Marketing (Uni sc Mating Uns 14. Entry Strategies to, 5 geting Mor opal eXPANSION, businesses Feral eOUY SURRS, Which gr pa ws Global Entry Strategies for Global Marka sg Lm yy Creating an Existence on Jy sertegy eNCOMPASseS online intemationalising @ business. It can creating an existence on the internet and lowest cost. A business can easily sci), products i the global markets though a webs Similarly, customers find it easy to purchase ts from a well-managed website ‘The lucts offered on the internet are available 4x7, and the customers can buy them anytime at their convenience. Hence, creating a business website is an ultimate tool, especially for the small businesses seeking growth where it can sain similar significance as that of fax machine and telephone, For example, a local bakery can gain access to intemational markets by creating its presence on the internet. ternet: This mote of be done by in the fastest Using Trade Intermediaries: Using trade intermediaries is another strategy which provides access to global markets at low risks and lesser costs, These intermediaries are local agencies which offer trade intermediation facilites forall local businesses irrespective of their size. They act as distributors who market the products of local businesses, all over the world, Trade intermediaries have intense network of global contacts and intense knowledge of local markets. They also possess good experience in international trade and act as export depertments for various smal! and local firms. Hence, the products of a local business can reach into intermational markets through trade intermediaries at Jower costs and the firms can concentrate on other important functions. 3) 4) 5) 189 for te Exporting: Exporting is another - BY ic entering into) a foreign MAMA ucts in businesses can manufacture the! Fe ther ther local production units and 27 OP ey can into various international markets. Bi obtain economies of scale manufacturing different products 2 tion them across. the boundaries of ‘fhe Usually, there are two forms of _ of the i) Indirect Exporting: When Pt ‘ly sold ‘© local businesses are ena local potential foreign customers eal indirect export intermediaries, it is known as iNT ‘exporting. In this form of exporting. P! either are first sold to intermediaries ‘who a sell them direct to foreign wholesales, customers. It offers convenience and. 1% costs to local businesses as they do not ine i ss of overseas any expense in the process of OnemTr distribution and logistics, identifica potential foreign markets, etc. ; ii) Direct Exporting: When products of domestic ; firms are directly exported and sold to potential foreign customers, it is known as direct exporting. In this form of exporting, business commitment is essential for being directly liable and accountable to manage market research, ' logistics," stijpments, overseas distribution, and collection of payments. Licensing: Licensing. agreement is the most common mode adopted by an organisation as it reduces the risk of. intemationglising. The agreement is due for renewal after five to seven years on the consent of parties attached to it. ‘There are basically two parties in a licensing agreement, ie. the licensor and the licensee. Licensee is the firm to which the licensor gives authority to use few of its ‘technology, trademarks, patents, etc., in lieu of a monetary consideration often called royalty or fee. As licensing is a contract, the licensee has to pay a fixed amount called fee upon signing the contract, and a royalty thereafter of 2-5 per cent based on the volume of sales. When an organisation plans to go overseas, it is not worried to lose its firm- specific advantages. Franchising Local businesses can use intemational franchising for accessing global markets. When an owner (franchisor) of a brand ame, patent, copyright, trademark, business operation, property, process, or system grants legal rights to other business (franchisee) to use that property, process, or system for production of goods and services, in return for a fee, it is2 90 known as fi s franchising. The loc, ee local business can act = anciso by distributing its franchises to “ign businesses and thus, can sell its ee in foreign markets, Iwill also_be ficial in building foreign market coverage and buildi a eee ee international name in ) Contre Manufacturing: Under contract manufacturing, one organisation (cient) enters contract with another organisation to Manufacture its products or parts. The ‘organisation (client) in this way does not have t0 arrange for production infrastructure, workforce raw materials, etc.. and can focus entirely on sales and marketing of products. A local producer can be brought into agreement for a firm looking to sell its products in overseas . Many of the world’s _ leading organisations carry on their manufacturing Processes through third party manufacturers in countries having low cost of labour. The advantages include less capital investment and ease of exit in case of product failure. 7) Turnkey Projects: As the name suggests, 8) 9) tumkey project is when a licensor builds a completely new plant or production infrastructure which is fully operational, and hand over the key to the licensee. As the licensee receives the keys of # fully functional plant, he can start its operations. A turkey project is a form of project which is constructed and sold to anonymous purchasers as a finished product These projecis are common in intemational business. Tukey projects are mostly applicable in constructions of plants, such as steel factories, oil refineries, cement and fertilisers plants, ete. Management Contracts: Local businesses, which lack in technology and managerial skills, can enter into an agreement with a foreign business for seeking managerial assistance, specialised guidance, and technical expertise for a specified period of time in return for a fee or 8 financial reward. This agreement is known as @ management contract, and is very useful for a local business to enter into foreign markets. With the acquired management expertise and know- how, a local business thus can sell its products in global markets. Joint Ventures: When two or more independent pusinesses are cooperatively joined together t0 form a new business identity, it is known as a joint venture. A local business can form a joint venture with foreign businesses and can easily ee MBA Fir Semester (Marketing Managemen axy ¥ center into new foreign markets. Even if oy organisation has acquired @ low stake in Mother organisation, they are entitled t0 the right have, a say in management activities of 7 newly formed venture. It will also be beneicig, in the cases, where foreign government police dnd laws do not allow foreign control by, promote joint ventures and local companies, 10) Strategic Alliances: A strategic alliance occur, when two or more organisations enter int contract or come together to perform a specific fonetion and achieve mutually set objectives ig the market, These organisations do not me fand remain anonymous. Recently, strategic alliances have become popular and are proven as fan effective means to tackle weaknesses ang enhance strengths. The main objectives behing setting-up a strategic alliance are marke, expansion, capital enhancement, access to lates technology, et of 5.2.5. Importance Globat Marketing Points highlighting the importance of global marketing are as follows: 1) Diversification Opportunities: Due to global marketing, companies prefer to invest in variety ff segments of products/services and utilise their resources extensively i MeW® product development. This provides diversification ‘opportunities for majority of companies in the nation. 2) Expansion Opportunities: Due to global marketing, it becomes the necessity of the nation to expand its production and marketing activites, ‘This causes the generation of new economy which ultimately results in new expansion ‘opportunities. 3) Increased Market Share: Global marketing brings new markets and customers, as the company operates in more than one nation. Ths helps in increasing market share. 4) Career Opportunities: Due to the globalisation, more and more companies are attracting towards global marketing, thus, requiring highly qualified individuals. Many educational institutions are now offering special courses and subjects in order to cater the demands of qualified persons. ‘There is demand for individuals in the field of production, distribution, finance, marketing, an¢ after sales services. Therefore, vast, career opportunities are developed through. global marketing.ons Massing (Ui) a os recognition: The global may bis and Sevices is hep iq pF ecogsition t0 both comey gs. By providing produ and ene 00 anat COMPAHIS establish «gy oF image in the plbal marke, po eucamt p04 image he enterprises peg iain oO 1 customers BY providing beter qund® i services at Competitive agg Tally o tment — Opportunities: ° Vaie ps t opportunities are generarea of : i art, These invest eh Hof sev Ehtooy, beter inet pow maine)» NEW marketing strategies and wy pdtion methods. Standard of Living: Wi ores egy res and sevies at highly afobe aeampesive res, which ukinatly in ige sandard of living. The global comp, a ode employment opportunities which help in seducing unemployment. «Meaty of Factors of Producto: Dae lta fosing, companies are able w transfer thir jon plants to any nation. Suppliers can be fasly arranged in these nations. Thus, global Savkeing causes mobility of factor of production ‘ Investment Opportunities; Variety of iavesiment opportunites are generated through iba marketing, These investments can be in ferns of new technology, better infrastructure, new machinery, new marketing strategies and ew production methods. 1 Increased Standard of Living: With the help of global marketing, the domestic economy gets beter quality products and services at highly affordable nd competitive prices, which ultimately increases the standard of living. The global companies also provide employment opportunities which help in reducing unemployment. 1) Mobility of Factors of Production: Due to global marketing, companies are able to transfer their production plants to any nation. Suppliers can be easily arranged in these nations. Thus, global marketing causes mobility of factors of production. 12\Cooperative Agreements: Global marketing is considered as cooperative agreement between various partes. These parties combine their suengths and capabilities in order to provide tewer products, technology and services to the customers than they can manufacture on their own, OE eee 19h Air bal 52.6. Domestic Marketing /* Ol Marketing between The important points of differences domestic and global marketing af: domestic and global marketing ae ‘ne nation, same | Many 2 = any languages condidons language atl MAD) ARN a cae Trampon ost 2) Transportation | Transport cost is TRHMSPON yg o . ae ¢ extent makeing =| som 3) Currency fe re (att ae ironments and cavironment environment and factors in different fas eet 3) Natureot [Markers | Markets Oe market relatively diverse and hig |__| homogenous. _| heterogenous ©) Change control [No problems of There 7 andtariffs exchange conve! | problems) janine ntfs and |they act as | | [7 Daa —‘(D ailable, | Dats. collection | availabilty | usually accurate | formidable tsk) and relatively | equring | casiy collected at| significantly less cos. gets TRelaive freedom | Government from government | influences imerference. | business decisions. [8) Government Interference 5.3. GLOBAL ENVIRONMENT ‘The term ‘globalisation’ was evolved in 1980s, but it is an older concept and is understood differently by different people all over the world. These varied conceptions gave an unclear view about ‘globalisation’. Different scholars, policymakers, and activists regarded it as a stimulus for the worldwide economic growth. While, the same people simultaneously also assumed it as a crucial threat to the world economic system. Globalisation is an international integration which involves exchange of products, services, ideas, business practices and cultures. It has emerged as one of the most dominant factors responsible for shaping192 utMe Pattems of the world market. In other MearGS slobalisation is a process which imegrates ‘gional economies and their culture, by developing @ network of world trad le, transportati imi and commaniaton = msPoraton tmian The environment of an organisation can be referred sum total of all the situations, proced factors that surround and fet i The environment may be categorised as domestic, foreign and global. A company’s management is more familiar to the domestic environment and the external factors that influence the home country operations, All the external factors that affect the functioning of a firm in global and domestic markets together form the global marketing environment of that firm. The Global Marketing Environment enforces many limitations on global firms and greatly affects their operations, direction and scope. Global or international firms have very limited control on their global environment. The firm simply needs to Fecognise its operating environment and frame Policies according to the factors that influence the marketing environment Global or international marketing differs from domestic marketing as the domestic environment and its constituents also change when a company crosses national boundaries. Usually, enterprises are familiar with domestic market environment, but are less aware of the environment of other countries. Thus, they should spend time and resources to know more about the international environment. Constituents of + Global_~— Marketing EnvironmentThe different constituents of global marketing environment and their influences are given below: Constituents of Global Marketing Environment Physical Environment ‘Cultural Environment Political Environment Legal Environment ‘Technological Environment 5.3.1. Physical Environment ‘The constituents of physical environment are rivers, forests, lakes, climate conditions, natural resources, ‘geographical location and territorial size of a country The political and economic decisions, religion, language, culture, transport, business activities, determination of land usage, etc., are influenced by the physical environment. It is important for the managers to observe the growth and development in WV MBA First Seneser Marketing Mammen) agp, raw materials and natural resources in target na Th order to formulate and sustain a feasible g marketing plan. Country's natural environm important for the prosperity of its people aforal resources are used for the Benefits of peo ar enterprise irrespective oftheir tate of depletion’ ® er is Inthe past few years, people have become conce nationwide and even internationally, regarding yy tray humans interact with one another, the seryp ¢¢ their economic systems and the natural environiney of the planet. One of the main components of yo | economic setup is ‘business’ as it affects nature 1, utilising its resources and altering the can, ‘ecological systems. Influence of Physical Environment While making international marketing plans, 14, following influences of physical environment my be considered: Ty Demand Pattern: Pattems of demand gy | influenced by the climate and topographica factors. For example, where there are uneven | roads, especially in hill areas. jeeps are prefeneq | Qver cars. Likewise, woollen clothes are iq ‘demand in areas with low temperature and Ac, fand coolers are required in warm or hot aess Natural environment of country may ofey require changes in the product storage, packaging and product mix. 2) Population Distribution: The distribution of population depends upon the topographical ang climate conditions. People prefer to live in the freas with moderate weather and sufficient water | availability. Topographical factors affect the path as well as the mode of transport. All these factos, influence the product cost, and therefore, the final price offered to the end customer. 3) Product Adaptation: Climate factors influence modifications in the product, For example, certain oils and glues do not work in areas where the temperature is low. The climatic conditions also impact the packaging (from the marketing point of view) and safety packing when it is being transported from one place to another or when it is stored. The products that cannot survive the uncertain climates get negatively impacted in extreme temperatures or humid weather (for example, fruits and dairy produc transported in extreme weather conditions). 4) Disrupt the Transportation: Uncertain climatic condition may disturb the transport of the goods to be exported. Unexpected clit ‘change also adversely affects the firms producing season! items.gpa Marketing (Unit 5) jon of Industry: With a rise wis_are compelled to shift their fi, © ee pe sea level ies when pofae puntess peatersely affects the agricutaray = melts and tne world. This in tum, ap tctvities gn ONT ahd society. The locate Meets. the ines q location of ‘hea reste, needs 10 be closer tthe ghey iniy of ra material For eqaegDISS® of salt industries in India are locate iron sod pete there is abundance of renege (coal and iron ore). Stone wired oil drilling and other, T27Dng, mies ame dependent upon ioe ate adits available in the region, mineral in sea level, Ser rin ral ames like floods, earthquakes cals, ete» Which Tead 10 10Ss of property. other associated issues, For cee M goss suffering heavy damages in flenis, a Mave t0 Dear huge losses. Repair eyo see Sordnce wa ae eNO Ney experince companies can Tower the burdes erat sree up t0 an extent, but are not helpful me Gzeding up the reconstruction work. During this ose of rebuilding or repair works of the pesrnesses, other usinesses such as construc weefing. et. flourish 532. Economic Environment $32 ic environment refers 10 those. economic faye which largely influence the functioning of a ee pusiness organisation im any country. ‘These Bers consist of production processes and wealth sehuion system prevalent in countries, The aefomie environment also affects the marketing ‘Shiues of the organisation. In addition to this, the set size and consumers’ willingness to spend also hs 2 vital role in determining the economic Ehironment of a particular nation. heavy ou may ‘Thus, some of the other economic factors are interest nes inflation, disposable income, savings of the society. etc. All these factors prevalent in the ‘vironment influence the purchasing power of the consumers in that particular country. Moreover, ssonomic development leads to changes in the tastes and preferences of the customers. Understanding the economic environment of other cations and their markets, will prove beneficial for tte management, to anticipate the impact of latest tends and happenings on the future performance of bie organisation, The fact that a country will prove tWod as a host for global business projects depends ind its per upon its size, rate of economic growth 7 capita income, Countries having lower PEL Terex income are not profitable for heavy ™# market but are better for agricultural Such countries cannot bear the price Machines. Countries with good growth [ Prospective markets for latest industry Hem consumer goods/services 1 equipment of technical ste are However, few industrially backward nations 3° developing ata faster pace. For example. the US will face competition from China and India in 1° hear future, Even though the per capita income 01 TT USA is seven times and twelve times than China 2° India respectively, these two countries are rich 1" human resource as their population is very high Infrastructure and marketing practices like public services, banking, utilities, communication and transportation facilities are also considered | while making plans to enter an international market: Inadequacy on account of infrastructure can hinder the plan related to. manufacturing. promoting and distributing products and services in certain countries Influence of Economic Environment Economic environment around a global organisation affects its functioning in following manner: 1). Changing Income: The purchasing power of the consumers directly affects the _ economic environment, as the purchasing ability depends fon the income capacity of the consumers. The factors affecting the economic state of customers in a particular country, involve economic uncertainty, heavy taxation, high rate of unemployment, inflation condition, ete. Few biz companies in the market provide hefty pa packages to the deserving candidates. These people increase the rate of cash flow in the market with their high income level. Hence, global marketers should analyse the income capacity of the target markeUVcountry before launching their products and services in 2) Changing Consumer Spending Patterns: The consumer spending pattern is a significant factor for marketing of products and services of an organisation. Most of the household expenses are. incurred on food, transportation and housing. With increase in family income, expenditure on food decreases, the amount spend on housing, remains the same and the expense incurred on the other categories are considered as savings. In a particular country, with the increased income, the consumption pattern of different commodities change and it may cause variation in demand,194 Therefore, it ig marketers to. preaie%p,e°SeRtal for global i ict the consumer Changing Economic Conditions: Economy of a Fee tt COuntry is susceptible to change due to world a tdence of different countries of the rd: A minute change in one country may t Condition of the other one. Analysing the economic conditions of the target narkede® therefore very essential forthe global ‘marketers. With the help of observing the GDP, SxPort and import level, trade and employment conditions, forex Teserves, etc., of the target market, one can for om ns recast the economic conditions of @ particular country, $3.3. Cultural Environment One of the vital elements of global marketing environment is cultural environment. Cultural environment is a complex marketing environment that is not so easy to understand as it is principally hidden. According to Kluckhohn and Strodtbeck, Cultural environment is the general body of common Values and beliefs that helps in ascertaining what is ight or wrong for a social group. When such values and beliefs are shared by the public of a country, it becomes the national culture. Usually, these values and beliefs seem to emerge from factors like language, history, geographical situation, historical background, education and administration. Therefore, an organisation cannot initiate its cultural analysis without analysing such factors. 3) Culture is a belief system consisting of norms and values mutually shared by the members of a Particular group. These norms and values are responsible for determining the way of living. Norms refer to the social rules and regulations that suggest suitable behaviour under specific circumstances Values are the intangible thoughts of a group regarding what is considered righteous, just and desirable. Society means a social group whose members hold certain mutual norms and values Though society may correspond to a country, many countries like India often shelter different societies, ice, they are multi-cultured. Henceforth, it is quite essential for global marketers to explore the cultural background of the target nation (such as its language, religion, educational and value system), before launching their operations in it. Components of Culture While trading in a global scenario, it is quite vital to become tolerant towards cultural diversity i 4 MBA Fit Semester Marketing Masemen) Ak Following are the main components of a culture: » 2 3) 4) 6) Language: The philosophy and way of living 4 particular group are revealed through «hey language. It determines their thoughts behaviour. More than 3,000 languages spoken worldwide, and every language play. © primary role in its culture. Hence, language considered as a vital part of a culture. Religion: It is the key towards the developmen, and survival of a culture. It provides a sense y understanding to most of the people about thei livelihood and also determines their reasons existence. Religious ideas and viewpoints often determine the values, aetions and outlook of the society. Though there are a number of religious faiths prevailing under different societies, yey they are categorised under six basic religiog, philosophies, ie., animism (Primitive religions) Buddhism, Hinduism, Islam, Christianity ang Judaism. Attitudes and Values: Attitudes, viewpoints ang values of individuals regarding particular matters play a vital role in determining their actions ang developing country's economy. Several countries such as Australia, the USA, the UK, etc., which support individualism, allow individuals to open up their minds end convey their thoughts if they disagree on certain points. However, countries such as Indonesia, Japan, Mexico or Ching which support collective cultures, consider this type of behaviour as rude and ill-mannered Social Organisation: The organisation of social actions and role relationships is in accordance with the cultural beliefs and outlook, such as source and history of the culture, family, acquaintance, masculine and feminine roles, relationship between the juniors and seniors, ec Education System: The education system followed in a particular country is. specifically based on its culture which certainly helps in disseminating society's cultural norms and values. Many researchers have revealed thatthe secondary and higher educational levels are closely" interrelated with the economic development of the nation, As per global point of view, education plays a crucial role in determining the competency of a nation, because & country becomes successful only when it retains trained and skilled manpower. ‘Technology: The technological and educational development of a culture is significantly reflected through material signs, problem-solving methods, quantitative systems, administrativeyr shal Marketing (Unit 5) scl o work of ostnigve’: a and other rely weet 108. RESCH hay shoyn thee hs sitive eationship eye nt tee pa ation and et ele °Y GDP and ical Systems: Before ener Frsines: AN oFBanistion needs to tl tral political environmen ton Plae “) theit_poiical relationships with ae “oats. The ulistion ofa nation’s waa is people is managed and contlieg itcians. Undoubtedly, politics is renege fven through religious association, tage yn ix nations corporations (INC) py gah NaS posed infront of varia Mi shen te ake tide towards intematont wn? 1 Systems: The legal syste Caer renttten writen OF unwriten) lid down by the socien auiority oF customs. The overall outlook aj gqtude of @ particular culture is. reflected though its legal system, Though there area umber of legal systems” prevailing under diferent societies, yet they ean be categorised ander following: civil, common, communism, indigenous or Islam, H nlence of Cultural Environment ‘ie various global marketing decisions or actions are iivenced by different cultural factors. Following se the influences of the cultural environment on sjobal marketing: Culture Determines Goods and Services: The <éecsion regarding what kind of goods and services should be produced by a business is determined by the culture ofthe host country. It also influences the food habits, way of dressing, colour options, et, of the people. For example, there may be a great demand of seafood in some markets whose culture ‘supports it. However, in some countries, there may rio be any demand of seafood as they find it against their cultural norms, Henceforth itis vital for a global business to contemplate upon the culture of the host country before taking any ‘manvfacturing decision, Culture Determines Attitude to Work: In some societies, culture determines people's atitude towards their work. People belonging to a paricular culture are hard working as they are ‘more committed towards their work. For example, it is believed that Arabians are comparatively less dedicated towards their work jn comparison to the Japanese. 3) 4) 5) 5.3.4, NN A ee Culture and Global Companies operate in more than one hence deal with various cultures. 10 recognise the cultural and social ‘belt Various countries and feeuMNE ‘manufacturing, advertising and sales e°0N as per the needs. For this purpose of Sometimes need to alter the characleish their products, such as design, colour. packaB! and soon, Culture and Competitive Advantage: The cultural ethics and customs of the society have * reat impact on the costs involved in doing @ business. These costs further affect the capability ‘of a company to build a competitive advantage under intemational market. In case of conducting global business, the relationship between competitive advantage and culture is vital due (© the following reasons: - i) It helps in identifying possible competitors and ii) It suggests countries the best alternatives for conducting manufacturing and marketing operations. Culture and Strategy: The success of global business depends upon maintaining harmony between the culture and business strategy: However, it is not simple to practically attain this harmony as MNCs operate in different nations having varying cultural environment. However by successfully identifying some similarities, MNCs can control the needs to customise their ‘business practices, It will also fulfil the demands of regional cultures. Political Environment Governmental activities and actions that influence the daily business operations of a company or business constitute the political environment. The Political environment in which an organisation works (or is planning to work) has a stantial influence on its global marketing actions. There is a greater need to regulate political environments of the nations in which business is being carried-out. In other words, a global company needs to assess the political environment of the host country before conducting its business activi s. Alteration in governi nt generally brings about alterations in rules, policies and outlook of conducting international business. A Political system refers to sum total of all ‘organisations and politcal institutions, how they are associated and the political system and regulations that direct their business operations. ‘The marketing