NEW TECHNIQUES IN

INTERNATIONAL
MARKETING

Ms. Kanupriya
PGGC-11,Chandigarh
 CONTENTS
► INTRODUCTION
► NEW TECHNIQUES IN INTERNATIONAL
MARKETING
1. JOINT VENTURE
2. COUNTER TRADE
3. SUB CONTRACTING
► CONCLUSION
 INTRODUCTION
► Organisations exist in environment. The
changes in customer’s tastes, supplier’s
conditions, government policies, political
conditions, international conditions etc.
result in the corresponding changes in the
production and trade structure. New systems
and techniques are evolved and developed
to conduct international business. There are
new techniques which have been recognised
as important in this area.
 NEW TECHNIQUES IN
INTERNATIONAL MARKETING

► JOINT VENTURES

► COUNTER TRADE

► INTERNATIONAL SUBCONTRACTING
 Joint Venture

KFC entered Japan through a joint ownership venture with Japanese

conglomerate Mitsubishi.
 Joint Venture
► A corporate entity created with the participation of two
companies that share equity, capital, and labour, among
others.
► Preferred entry mode in developing countries, where they
contribute to developing local expertise and to the country’s
balance of trade if production is exported.
►International firm provides expertise, know-how, most of
the capital, brand name reputation, trademark
►Local partner provides the labour, the infrastructure, local
expertise and relationships, and connections to the
government
 Joint Venture (contd.)
Advantages:
 Higher control entry mode, potentially resulting in higher
profits.
 Costs and risks shared with joint-venture partner.
 Local partner shares local market expertise, relationships,
as well as connections to government decision-making
bodies.
Disadvantages:
 Repatriation of profits may be difficult if local government
has control over/stake in the local joint-venture partner.
 Can produce a new competitor: the joint-venture partner
 70% of all joint ventures break up within 3.5 years
 Counter trade

► Tradecarried out wholly or partially

in goods rather than money.
 Counter trade
► Denotes a whole range of barter-like agreements
► Primarily used when a firm exports to a country
whose currency is not freely convertible
 Developing countries e.g. former USSR
► Importing country may lack the foreign exchange
reserves required
► 8 to 10% of world trade in form of countertrade
 Example: Venezuelan government’s contract
with Caterpillar.
 Types of counter trade
► Barter
 Direct exchange of goods and services between two
parties without a cash transaction
 Two fold problems
►If goods are not exchanged simultaneously, one
party ends up financing the other for a period
►Goods may be unwanted, unusable or have a low re-
sale value
► Counterpurchase
 Reciprocal buying agreement
 Types of counter trade
► Offset
 One party agrees to purchase goods and services with a
specified percentage of the proceeds from the original
sale
 Party can fulfill the obligation with any firm in the country
to which the sale is being made
 Gives exporter greater flexibility to choose goods to be
purchased
► Switch trading
 Occurs when a third-party trading house buys the firm’s
counterpurchase credits and sells them to another firm
that can better use them
 Types of counter trade

► Compensation or buybacks
 Occurs when a firm builds a plant in a country
or supplies technology, equipment, training, or
other services
 Agrees to take certain percentage of plant’s
output as partial payment for the contract
 Advantages of counter trade
► Means to finance an export deal when other
means are not available
► Unwilling firms may lose an export
opportunity and be at a competitive
disadvantage
► Countertrade can become a strategic
marketing weapon
 Disadvantages of counter trade
► Accept alternative means of payment
instead of hard currency
► Exchange of unusable or poor-quality goods
that cannot be disposed profitably
► Expenses relating to maintaining an in-
house trading department to arrange and
manage countertrade deals
 SUB CONTRACTING
► An arrangement by
manufacturer in the
developed country with
one in the developing
country under which the
latter agrees to supply the
parts and components and
or do assembly operations
for the former, on a long
term basis
 Contd…
► Under this system the manufacturer of a final
product does not produce the whole product but
imports some of its parts and components from
the manufacturers of those parts and components
in another country under specifications provided to
them by the former
► Sometimes the contractee also supplies finance
and technical assistance to the contracting party
► Such types of arrangements are generally made in
labour-intensive industrial products.
 REASONS FOR GROWTH OF SUB
CONTRACTING
► CAPITAL SCARCITY

► LABOUR-COST FACTOR

► LACK OF EXPERTISE

► LACK OF NATURAL RESOURCES

► SURVIVAL OF SMALL SCALE UNITS

 SCOPE OF SUB CONTRACTING
► WHERE THERE IS UNUTILISED OR UNDER-
UTILISED CAPACITY
► JOINT TENDERING
► NO SPECIFIC ITEMS
► CO-PRODUCTION
► PRODUCTION SHARING SCHEME
► MINIMUM EXPORT-IMPORT CONTROLS
► TURNKEY PROJECTS
 CONCLUSION
► Once a firm has decided to go international it
has different alternatives to choose, amongst
for getting the entry into the foreign market.
The choice depends very much on the
resources of the firm and the market
potentials for its product in the importing
country. New systems and techniques are
evolved and developed to conduct
international business from time to time.
THANK
YOU