MarketingManagement

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Unit15

InternationalMarketingManagement

Structure
15.1 Introduction

15.2. NatureofInternationalmarketingconcept 15.3. Internationalmarketingconcept. 15.4. Internationalmarketentrystrategies. 15.5. Approachestointernationalmarketing 15.6. Internationalproductpolicy 15.7. Internationalpromotionspolicy 15.8. Internationalbranding 15.9. Countryoforigineffects 15.10. Internationalpricing 15.11. Summary Terminalquestions AnswerstoSAQsandTQs

15.1. Introduction In the previous chapters our study was focused on how marketing strategies are formulated, implementedand controlled in the Indian marketing. Aftertheglobalization and liberalization of the Indianeconomy inthe year1991, Indianenterprises startedfacing the competitionfromthe global brands. In this context it has become inevitable for all the companies small or big to analyze the international marketing environment and strategies to adapt to it. The companies which were operatinginthedomesticmarketarealsoaggressivelyredraftingtheirpoliciesandstrategiestosuit theglobalneeds.Companiesexpresstheirdesiretoenterintotheinternationalmarketbecauseof thefollowingreasons 1. Itidentifiedpotentialintheforeignmarketsforitsproducts. 2. Thedomesticmarketismatured.
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3. Existing customers demand for the international availability of organizations products and services. LearningObjectives Afterstudyingthisunit,youwillbeableto 1. Understandthenatureofinternationalmarket. 2. Analyzetheappropriateentrystrategiesforthefirmininternationalmarket. 3. Examinetheapproachestotheinternationalmarket. 4. Assestheimportanceofcomponentsofmarketingmixesintheinternationalmarket. 5. Bringouttheimportanceofcountryoforigineffects.

15.2.NatureOfInternationalMarketingConcept InternationalmarketingisdefinedasTheperformanceofbusinessactivitiesdesignedtoplan,price, promoteanddirectthecompanysflowofgoodsandservicestoconsumersorusersinmorethan onenationforaprofit. A company that wants to sell their product in other than domestic market should understand the environmental factors, consumer behavior, market forces and other characters relevant to the internationalmarket.Afterunderstandingthedefinitionseveralquestionsmayariseinyourmindlike whymarketershouldgotheinternationalmarket?Andwhatisthedifferencebetweeninternational marketinganddomesticmarketing.Aswediscussedintheintroductionpartcompaniesenterintothe international market to tap the potential, to support the customer requirements or to avoid the unprofitable domestic market. The difference between domestic marketing and international marketingarelistedbelow. Characteristics 1. Culture InternationalMarketing Multiculture DomesticMarketing Single culture and in some casesmulticulture. 2. Data Verydifficult Easy

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accessibility 3. Datareliability VeryLow 4. Control 5. Consumer preferences 6. Productmix 7. Business operation 8. Currency exposure Required Required only if it into the importing. Adaptabilityrequired Morethanonecountry Standardizationrequired. Homecountryonly difficult Varyfromcountrytocountry High Relativelyeasy. Varyinsmallextent

Advantagesofinternationalmarketing: 1. Internationalmarketingprovidesgrowthopportunitiesforthecompanieswhosedomesticmarket is maturing. For example, General motors focusing its strategies on the emerging markets like India 2. It brings the major portion of sales and profits to the company. For example, Unilevers major revenuecomesfromtheAsianmarkets. 3. Itgeneratesemployment:Indiantextilesectorwhichexportsmajorityoftheproductproducedis largeemployerafteragricultureandretail. 4. International market also acts as survival place for the companies. If one market become unattractive either they establish their operation in another country or outsource the major functionstostreamlinethebusinesses. 5. Ithelpsinimprovingthestandardoflivinginthecountry. 15.3.TheInternationalMarketingConcept
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The marketing concept is the idea that afirm should seek to evaluate market opportunitiesbefore production,assesspotentialdemandforgood,determinetheproductcharacteristicsdesiredbythe consumers,predictthepricesconsumersarewillingtopayandthensupplygoodscorrespondingto theneedsandwantsoftargetmarkets.Adherencetomarketingconceptmeansthefirmconceives and develops products to satisfy consumer wants. For international marketing this means the integrationoftheinternationalsideofthecompanysbusinesswithallaspectsofitsoperationsand the willingness to create new products and adapt existing products to satisfy the needs of world markets. Products may have to be adapted to suit the tastes, needs and other characteristics of consumers in specific regions, rather than it being assumed that an item which sells well in one countrywillbeequallysuccessfulelsewhere. 15.4.InternationalMarketEntryStrategies Organizationsthatplanstogoforinternationalmarketingshouldanswersomebasicquestionslike a. Inhowmanycountriesthecompanywouldliketooperate? b. Whatarethetypesofcountriesitplanstoenter? To answer the above questions companies evaluate each country against the market size, market growth,andcostofdoingbusiness,competitiveadvantageandrisklevel. Checklistforcountryevaluation Characteristics 1. Politicalrights 2. Civilliberties 3. Controlofcorruption 4. Government effectiveness 5. Ruleoflaw weightages score

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6. Healthexpenditure 7. Education expenditure 8. Regulatoryquality 9. Cost of starting a business 10. Days to start a

business 11. Tradepolicy 12. Inflation 13. Fiscalpolicy 14. Consumption 15. Competition Once the market is found to be attractive companies should decide how to enter this market. Companiescanenterinternationalmarketfromanyoneofthefollowingstrategies.Theyare a. Exporting b. Licensing c. Contractmanufacturing d. Managementcontract e. Jointownership f. Directinvestment Exporting is the techniques of selling the goods produced in the domestic country in a foreign country with some modifications. For example, Gokaldas textiles export the cloths to different countries from India. Exporting may be indirect or direct. In case of indirect exporting, company works with independent international marketing intermediaries. This is cost effective and less risky
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too.Directexportingisthetechniquesinwhichorganizationexportsthegoodsonitsownbytaking all the risks. Maruti udyog limited Indias leading car manufacturer exports its cars on its own. Company can also set up overseas branches to sell their products. Adaniexports another leading exporterfromIndiahasinternationalofficeintheSingapore. Licensing:AccordingtoPhilipKotlerlicensingisamethodofenteringaforeignmarketinwhichthe companyentersintoanagreementwithalicenseintheforeignmarket,offeringtherighttousea manufacturingprocess,trademark,patent,orotheritemofvalueforafeeorroyalty.Forexample, torrentpharmaceuticalshaslicensetosellthecardiovasculardrugsofChinesemanufacturerTasly. Licensing may cause some problemstothe parent company.Licensee mayviolate theagreement andcanusethetechnologyoftheparentcompany. Contract manufacturing: company enters the international market with a tie up between manufacturertoproducetheproductortheservice.Forexample,Gigabytetechnologyhascontract manufacturing agreement with D link India to produce and sell their mother boards. Another significant manufacturer is TVSelectronics it produces key boards in itsown name as well asfor othercompaniestoo. Managementcontracting:Inthistypeacompanyenterstheinternationalmarketbyprovidingthe know how of the product to the domestic manufacturer. The capital, marketingand other activities arecarriedoutbythelocalmanufacturerhenceitislessriskytoo. Joint ownership: A form of joint venture in which an international company invest equally with a domesticmanufacturer.Thereforeitalsohasequalrightinthecontrollingoperations.Forexample, BarbaraalingeriemanufacturerhasjointventurewithGokaldasimagesinIndia. DirectInvestment:InthismethodofinternationalmarketentryCompanyinvestinmanufacturingor assembling.Thecompanymayenjoythelowcostadvantagesofthatcountry.Manymanufacturing firms invested directly in the Chinese market to get its low cost advantage. Some governments provideincentivesandtaxbenefitstothecompanywhichmanufacturestheproductintheircountry. Thereisgovernmentrestrictioninsomecountriestooptonlyfordirectinvestmentasitproducesthe jobstothelocalpeople.Thismodealsodependsonthecountryattractiveness.Itmaybecomerisky ifthemarketmaturesorunstablegovernmentexists.

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15.5. ApproachesToInternationalMarketing
The orientation towards the market varies with a company to company. Each one adopts different approachesonthebasisoftheirexpertiseorstrengthofthecompany.Somecompaniesadaptsame productforallthemarketswhileothersdifferentiatetoeachcountries.Inthiscontextwewouldliketo knowwhatarethecommonapproachesadoptedbythecompanyintheinternationalmarketing.The threecommonapproachesusedintheinternationalmarketare a. Domesticmarketextensionapproach. b. Multidomesticmarketorientation. c. Globalmarketorientation. Domestic market extension approach: Companies that adopt this strategy thinks international marketsaresecondarytoitsdomesticmarkets. Multidomesticmarketorientation:Intheinternationalmarketeachcountryhasitsuniqueness.Their preference varies. The Consumer profile is different from domestic operation. Companies develop differentmarketplansforsuchmarkets.Forexample,InFrancemenusemorecosmeticsthanthe women where as in India women use more cosmetics than men. A cosmetics company should changetheproductpositioningdifferently. Global market orientation: In this approach company thinks that products needs are universal in nature irrespective of country they work. Here company tries to standardize their products or services.Forexample,Sonywalkmanissameacrosstheworld.Theproductinformationbrochure containsexplanationindifferentlanguagesofdifferentcountries.Thefinalproductissameinallthe countries.

15.6. InternationalProductPolicy
Customer satisfaction towards company offerings will be positive if they able to meet their needs. Thereforeproductplanningbecameintegralpartofinternationalmarketingplan.Thedistinctiveness inthedifferentcountriesforcescompaniestothinkindifferentwaysofproductofferingsandsupport promotion programs. These organizations adopt five different types of product strategies in the internationalmarkets.Theyare 1. Productextension
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2. Communicationadaptation 3. Productadaptation 4. Productandcommunicationadaptation 5. Productinvention. 1. Product extension is marketing a product in the international market without change in the product and promotion activities. Microsoft office 2007 and Microsoft servers are similar to USA marketandcommunicationisalsounaltered. 2. Communication adaptation: Company does not change the product but adopt the different

communicationstrategyintheforeignmarket.Colgatesellsitstoothpasteinasamewayalloverthe world.Theircommunicationstrategyvariesindifferentcountries.InIndiaandUSAwhiteteethare preferredbytheconsumerswhileinIndonesiayellowteetharepreferred.HenceColgatechanged itscommunicationstrategiesforthesecountries. 3. Productadaptation:Marketerunderstandthedifferentneedsoftheconsumerandadoptsthe

productaccordingtothelocaltastesbutkeepsthecommunicationstrategiessame.Majorityofthe Indian consumers are vegetarians. KFC started selling vegetarian burgers in India though it is famousforchicken.ThecommunicationstrategiesofKFCremainsameallovertheworld. 4. Productandcommunicationadaptation:Theproductwillbemodifiedaccordingtotheneeds

oflocalmarket.Nokiaworldslargestcellphonemanufacturerincreasedthevolumeoptionsinthe India as most of the placesareovercrowded. Consumers in Indiaarenot sofamiliar withEnglish language. Hence Nokia changed its promotion to regional languages also. This is adoption of productandcommunicationbythecompany.Thisstrategyisalsoknownasdualstrategy. 5. Productinvention:Here,marketerdevelopsentirelynewproducttosuittherequirementsof

thelocalcustomers.Nokiamanufactured1100cellphoneonlyfortheIndianmarketandpromotedit asmadeforIndia.Inthisstrategycompanymayadoptcommunicationstrategysameasintheother countryorchangeaccordingtothelocalmarket. SelfAssessmentQuestions1 1. Themethodinwhichmanagementknowhowistransferred a.Exporting b.Licensing

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c. Managementcontract d.Contractmanufacturing 2. Globalmarketorientationfocusesonproductstandardization. a.True b.False 3. Company does not change the product but adopt the different communication strategy in the foreignmarketisknownas 4. Productandcommunicationadaptationisalsoknownas a.Productinvention b.Straightproductextension c. Dualadaptation d.Alltheabove. 5. Method of international market entry in which company invests in manufacturing or assemblingdirectly.

15.7. InternationalPromotionsPolicy
Communication in the international market is very challenging. There exist many languages and dialects and different perceptions about communication strategies. In some countries there are regulationsontheadvertisementsandsalespromotions.InIndiaalcoholadvertisementsarebanned. Inthissectionwearediscussingwhatthecommunicationstrategiesthecompanyshouldadaptare and what are the barriers to it. The marketer may face the language barrier, culture barrier, legal barriersinsomecountries.InSaudiArabiausingwomeninadvertisementsareprohibited.Vodafone hastochangeitspromotionprogramtoTamilinTamilnadu,astateinIndia.Organizationsalsoface theproblemofmediaandproductionandcostindifferentcountries. Global promotional program will have three set of objectives. First, setting the global objectives, Secondly, formulating the regional objectives and finally setting the local objectives. The media decisionsdependontheobjectivesofthepromotionprogram.Aswediscussedinthepromotionunit media budget in the international marketing is also determined by percentage sales method, competitiveparity,resourceallocationandobjectiveandtaskmethod. Globalpromotionprogrammaybestandardizedoradapted.Standardizationwillhelpthecompanyto reducecostandaddthevaluetotheproduct.Thepitfallofstandardizationislocalcustomerscannot
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understand global messages. One of the famous companies in the world was showing its advertisementsonsupplychainmanagementsoftwareinIndiainthesamewayasintheUSA.The advertisement evaluation results were very strange. People can recall only the horse word in the advertisement. As we discussed in the earlier section of the unit company can adapt its communicationstrategyonlytothelocalmarketorbothproductandcommunicationcanbeadapted. Advertisementswillhavemodifications.IfmarketerwantstoselltheirproductsinJapanshouldnot use white color as it is considered only for mourning. Communication should not contain anything usingcowintheNepalasitisconsideredassacred.Thefollowingexamplesoftheunitedcolorsof Benetton and Microsoft depict the different advertisements strategies adopted by them.

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Global marketer also uses sales promotion, Public relation and direct marketing techniques to communicate it to the consumer. Amwaydirectmarketing companyadapts same strategy in India, while Cadbury and Microsoft also use Public relation and sales promotion techniques to communicatethemessages. Sales promotion covers the issue of coupons, the design of competitions, special offers, and distribution offree samples. International businesses wishingtoemploy salespromotionsfor cross bordercampaignsfaceanumberofseriouspracticaldifficulties,becauseinmanynationstheuseof certain sales promotion techniques is regarded as unfair competition and as such is subject to stringentlegalcontrol.Indeedconflictinglawssometimesapplytothesemattersinvariouscountries. MoneyoffvouchersislegalinSpainbutnotinGermanyLowerpriceforthenextpurchasearelegal inBelgiumbutillegalinDenmark.InGermanyandcertainothercountriesfreegiftsareforbiddenif theyconstituteagenuineincentivetobuy.

15.8. InternationalBranding
Brand names used in foreign markets need to be internationally acceptable distinct and easily recognizable, culture free, legally available and not subject to local restrictions. Brand name communicates its messages and appeals to consumers. They create the stimulus in the minds of consumer to purchase the product. Brand name should be small, easy to pronounce and should havepropermeaning.Suchbrandnamescanbeusedinseveralcountriessimultaneouslyforfamily brandingandmaybes8upportedwithintheadvertisementsbyawidevarietyofpictorialillustrations. Brand positioning: As we discussed in the product standardization the debate exist for brand communicationstandardizationoradaptability.Wewilldiscussthevariousfactorsthatinfluencethe optingthesingleormultiplepositioningstrategies. a. Theinfluenceoflocalsubstitutesontheforeignbrand b. Thecoverageofthebrand(massversusniche) c. Acceptabilityforproductuniquenessinallpurchasepoints d. Brandnamesuitabilityintheparticularmarket. Nowwewilldiscusstheadvantagesofbrandstandardizationintheglobalmarkets. 1. Firmsconcentrationonthepositioningwillbeeffective. 2. Ithelpsinsavingthecosts.
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3. Astandardizedproductandstandardizedpromotionhelpstohavesamepackaging. Butallthecompanieswillnotgoforstandardizingthebrand.Standardizationofbrandingstrategies hasitsownlimitations.Theyare 1. Stereotype image of the national products (Germany for engineering, china for low price product).Ifthecustomerthinksthatanyproductcomingoutofthechinaisoflowpriceand lowqualitywhatevertheefforttheChinesecompanydoesinothermarketwillfail. 2. Patriotismofthepeopleandtheirperceptionthattheirnationalbrandsissuperiortoothers. Brandvaluationintheinternationalmarkets:Brandvaluationinonecountryhelpsittoleveragethe same brand in the other country. It also helps it to acquire different brands in the international markets.Brandvaluationcanbedoneonthefollowingfactors 1. Brandimageinthemarket. 2. Consumerlifestyleandbrandinfluence 3. Brandedsalesversusunbrandedsales 4. Brandscontributiontothecorporateimage. 5. Lengthofbrandloyalty. 6. Marketshareofbrandineachcategoryitoperates. 7. Adaptabilityandstandardizationofthebrandindifferentcountries. 8. Brandsabilitytobeextendedtootherlinesorcategory.

Thetop10brandsof2007(Source:Businessweek) INTERBRAND TAKES lots of ingredients into account when ranking the world's most valuable brands.Toevenqualifyforthelist,eachbrandmustderiveaboutathirdofitsearningsoutsideits home country, be recognizable outside of its base of customers, and have publicly available marketing and financial data. One or more of those criteria eliminate such heavyweights as Visa, WalMart,Mars,andCNN.Interbranddoesn'trankparentcompanies,whichexplainswhyProcter& Gambledoesn'tshowup.Andairlinesarenotrankedbecauseit'stoohardtoseparatetheirbrands' impact on sales from factors such as routes and schedules. BUSINESSWEEK CHOSE Interbrand's methodology because it evaluates brands much the way analysts value other assets: on the basis of how much they're likely to earn in the future. The projectedprofitsarethendiscountedtoapresentvalue,takingintoaccountthelikelihoodthatthose
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earningswillactuallymaterialize. THE FIRST STEP IS figuring out what percentage of a company's revenues can be credited to a brand.(Thebrandmaybealmosttheentirecompany,aswithMcDonald'sCorp.,orjustaportion,as it is for Marlboro.) Based on reports from analysts at J.P. Morgan Chase, Citigroup, and Morgan Stanley,Interbrandprojectsfiveyearsofearningsandsalesforthebrand.Itthendeductsoperating costs,taxes,andachargeforthecapitalemployedtoarriveattheintangibleearnings.Thecompany strips out intangibles such as patents and management strength to assess what portion of those earningscanbeattributedtothebrand. FINALLY, THE BRAND'S strength is assessed to determine the risk profile of those earnings forecasts. Considerations include market leadership, stability, and global reachor the ability to crossbothgeographicandculturalborders.Thatgeneratesadiscountrate,whichisappliedtobrand earningstogetanetpresentvalue.BusinessWeekandInterbrandbelievethisfigurecomesclosest torepresentingabrand'strueeconomicworth.

Brand

Countryoforigin

Sector

Valuation(in Million$)

1. Cocacola 2. Microsoft 3. IBM 4. GE 5. Nokia 6. Toyota 7. Intel 8. McDonalds

USA USA USA USA Finland Japan USA USA

Beverages Software Software Diversified Telecommunication Automobiles ComputerHardware Restaurants

65,324 58,709 57,091 51,569 33,696 32,070 30,954 29,398

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9. Disney 10. Mercedes

USA Germany

Media Automotive

29,210 23,568

15.9. Countryoforigineffects.
Country of origin is the country of manufacture, production, or growth where an article or product comesfrom.Therearedifferingrulesoforiginundervariousnationallawsandinternationaltreaties. Countryoforiginasamarketingstrategy From a marketing perspective, "country of origin" gives a way todifferentiate the productfrom the competitors.Itisbelievedthatthecountryoforiginhasanimpactonthewillingnesstobuyaproduct, and studies have shown that consumers may tend to have a relative preference to products from theirowncountryormaytendtohavearelativepreferencefororaversiontocertainproductsthat originatefromcertaincountries.Theeffectofcountryoforiginishoweverdebatedasstudieshave shownthattheoriginofdesign(forinstanceApplecomputersorNikeshoes)canbemoreimportant thanthecountryoforigin. Ambiguouscountryoforiginlabeling While many products made within the EuropeanUnion carry the country of origin label or marking "MadeinEU"or"MadeinEC",somenonEUmanufacturersinEuropeandsomeothersoutsidethe continent of Europe use ambiguous markings, such as "Made in Europe" (made anywhere else in Europe,butnotintheEUorECthismayconstituteanycountrygeographicallyclosetoEuropeor theEUthatalsowishestobein)or"MadeforEurope"(madeanywhereelseintheworld,butnotin Europe or the European Union). These tactics appear to be intended for consumer deception, wherebyabuyernotproficientinEnglishmaycometobelievefromlookingatthelabelthatthenon EUproductheisinterestedinismadeintheEU. Countryoforiginininternationaltrade When shipping products from one country to another, the products may have to be marked with country of origin, and the country of origin will generally be required to be indicated in the export/importdocumentsandgovernmentalsubmissions.Countryoforiginwillaffectitsadmissibility,
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the rate of duty, its entitlement to special duty or trade preference programs, antidumping, and governmentprocurement. Today,manyproductsareanoutcomeofalargenumberofpartsandpiecesthatcomefrommany differentcountries,andthatmaythenbeassembledtogetherinathirdcountry.Inthesecases,it's hardtoknowexactlywhatthecountryoforiginis,anddifferentrulesapplyastohowtodetermine their"correct"countryoforigin.Generally,articlesonlychangetheircountryoforiginiftheworkor material added to an article in the second country constitutes a substantial transformation, or, the articlechangesitsname,tariffcode,characteroruse(forinstancefromwheeltocar).Valueadded inthesecondcountrymayalsobeanissue.

15.10.

InternationalPricing

Determinationofsellingprices: Thepriceofanorganizationmaychangeforitsoutputdependsonmanyfactors.Theyare a. Customerperceptiontowardstheproduct. b. Totaldemandforthegood c. Thedegreeofcompetitioninthemarket. d. Competitorspricereactions e. Substituteproductsanditseffectontheproduct. f. Productsbrandimage g. Costofproductionanddistribution. h. Priceelasticityofdemandfortheproduct Specialproblemsapplytointernationalpricingparticularlyinrelationtolackofinformation,uncertain consumerresponse,andforeignexchangerateinfluencesandthedifficultyofestimatingalltheextra costsassociatedwithforeignsales.Theseextracostsmightincludetranslatingandinterpretingfees, exportpackaginganddocumentationcosts,insurancepayments,clearingagentsfees,preshipment inspectionandmanyotheritems.Creditperiodareverylonginsomecountries.Governmentprice controls apply in certain states. A company may adopt penetration pricing, skimming pricing, cost pluspricingandproductlifecyclepricing.(AsdiscussedinPricingUnit)

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Transferpricing: TransferpricingmeansthedeterminationofthepricesatwhichanMNCmovesgoodsbetweenits subsidiariesinvariouscountries.AcrucialfeatureoflargecentralizedMNCsistheirabilitytoengage intransferpricingatartificiallyhighorlowprices.Toillustrate,consideranMNCwhichextractsraw materials in one country, uses them as production inputs in another, assembles the party finished goods in a third and finishes and sells them in a fourth. The governments of the extraction, production, and assembly countries will have sales or value added taxes while the production assembly and finished goods countries will impose tariffs on imports of goods. Suppose the MNC values its goods at zero prior to their final sale at high prices. The government of the extraction countryreceivesnorevenuefromsalestaxesbecausetheMNCssubsidiaryinthatcountryisselling its output to the same MNCs subsidiary in the production country at a price of zero. Equally the productioncountryraisesnoincomefromimporttariffsonthistransactionbecausetherawmaterials areimportedatzeroprices!TheonlytaxtheMNCpaysisasalestaxinthelastcountryinthechain. Transfer pricing atunacceptably low valueshasbeen major problemfor many developingnations. Sometimes, therefore the government of the country in which an MNC operated the government officially shalldeclare the price at which the MNC exports its output, notanemployeeof the MNC itself.Thusthegovernmentofhostcountrywillensurethatitreceivesanappropriateamountofsales tax.Similarlyimportingcountriesmightimposequantitybasedinsteadofpricebasedimportdutiesto ensurereasonablerevenuesfromtaxesonimportsofanMNCsgoods. Taxconsiderationsaside,transferpricesneedtoberealisticinorderthattheprofitabilityofvarious internationaloperationsmaybeassessed.Possiblecriteriaforsettingthetransferpriceinclude 1. Thepriceatwhichtheitemcouldbesoldontheopenmarket. 2. Costofproductionoracquisition. 3. Acquisition/productioncostplusaprofitmarkup 4. Seniormanagementsperceptionsofthevalueoftheitemtotheoverallinternationaloperations. 5. Politicalnegotiationsbetweentheunitsinvolved. Normally the solution adopted is at which maximize profitsfor the company takenas a whole and which best facilities the parent control over subsidiaries operations. Arms length pricing is the methodgenerallypreferredbynationalgovernmentsandisrecommendedina1983codeofpractice on the subject drafted by the organization for economic cooperation and development. Note how
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subsidiary that charges a high transfer price will accumulate cash which might be invented more profitability in the selling country than elsewhere. Problems with setting a realistic transfer priceas follows. 1. Differencesintheaccountingsystemsusedbysubsidiariesindifferentcountries. 2. Executives inoperating unitsdeliberately manipulatethe transfer toenhance the book valueof subsidiaryprofits. 3. Disparatetaxratesandinvestmentsubsidylevelsinvariouscountries. 4. Possibleabsenceof competitioninlocalmarketsatvariousstagesinthesupplychain.Thusa market price in such an area may be artificially high in consequences of the lack of local competition. 5. Theremightnotbeanyotherproductdirectlycomparabletotheiteminquestion,againmakingit difficulttoestablishamarketprice. 6. Ifthepriceissettoohighlevelthesellingunitwillbeabletoattainitsprofittargetstooeasilyand leadperhapstoidlenessandinefficiencyinthesellingsubsidiaries.

SelfAssessmentQuestions2 1. Moneyofvouchersisillegalin a. Spain b. Brazil c. Germany d. Denmark. 2. means the determination of the prices at which an MNC moves goods between its subsidiariesinvariouscountries. 3. Country of origin need not be marked on the shipping goods but should be entered in the export/importdocuments a. True b.false. 4. WorldsNo1brandonthebasisofitsvaluations. 5. Whichofthefollowingisnotusedwhilesettingthetransferpricing a. Thepriceoftheproduct b. Politicalnegotiations
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c. Costofproduction d. Competitorsprice.

15.11.

Summary

International marketing is defined as The performance ofbusiness activities designed to plan, price, promote and direct the companys flow of goods and services to consumers or users in morethanonenationforaprofit. International market entry strategies are exporting, licensing, contract manufacturing, managementcontract,directinvestmentandjointownership. International marketing approaches are of three types. They are domestic market orientation, multidomesticmarketorientationandglobalmarketorientation. Countryoforiginisthecountryofmanufacture,production,orgrowthwhereanarticleorproduct comes from. There are differing rules of origin under various national laws and international treaties. TransferpricingmeansthedeterminationofthepricesatwhichanMNCmovesgoodsbetween itssubsidiariesinvariouscountries. TerminalQuestions 1. Defineinternationalmarketing. 2. Discusstheadvantagesofinternationalmarketing. 3. Explainthedifferentmodesofmarketentrystrategiesavailableforacompanyintheinternational market. 4. Writeanoteoninternationalproductpolicy 5. Whatiscountryoforigineffects/explainitsroleintheinternationaltrade. 6. Explaintransferpricingwithexample.

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AnswerstoSelfAssessmentQuestions SelfAssessmentQuestions1 1. Managementcontract 2. True 3. Communicationadoption. 4. Dualadaption 5. Directinvestment SelfAssessmentQuestions2 1. Germany 2. Transferpricing 3. False 4. Cocacola 5. Competitorsprice AnswertoTerminalQuestion 1. Refer15.2 2. Refer15.2 3. Refer15.4 4. Refer15.6 5. Refer15.9 6. Refer15.10

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