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INTERNATIONAL MARKETING

The Concept of

International Marketing

Globalization

• Globalization of production

• Globalization of markets

International marketing • Selling goods in international markets as old as 3000BC in India. Indian goods

reached markets in Persia, Mesopotamia, Egypt and other markets of South East Asia.

• Breakthrough in ICE around the world witnessed a unprecedented change in international marketing

• Growth in income has also triggered choice of foreign goods and wider choices.• Lower trade barriers .• Active role of WTO has also triggered the internationalization of companies .• Globalization-process defined as the process of economic integration of the entire

world through the removal of barriers to free trade and capital mobility as well as diffusion of knowledge and information

• World output during 1986-95 grew 3.3% while trade grew at 6.2% during the period. In the years to come the figure is expected to be 3.9% and 6.1%.

• Emerging of BEMs even in Asia (like China, India, Philippines, Singapore, Taiwan etc.

• Globalization of processes, production, and markets.

International marketing • Cateora defines International Marketing as the performance of businesses

activities designed to plan, price, promote and direct the flow of company’s

goods and service to consumers or users in more than one nation for profit.

• Consequent to economic liberation a firm operating in domestic markets can no

longer rely on domestic only IT IS RISKY.

• International marketing involves-identifying needs and wants of the customers

in international markets, taking decisions of marketing mix keeping view of the

diverse consumer behaviour across different countries/

• Decisions keeping in view of international marketing environment Penetrating

the international markets using various different modes of entry.

Domestic marketing and International marketing

Domestic• Political

• Economic

• Legal

• Socio-Cultural

• Legal

• Technology

• Marketing

International• Political Stability-Pakistan and

India, CIS countries unpredictable• Economic-currency issues,

payment issues (Argentina, Brazil) hyperinflation in CIS countries-payment modes, manage foreign risks

• Legal • Cultural and Social• Technology• Marketing Channels

Globalization index

• economic integration: trade, portfolio, foreign direct investment, and investment income• personal integration: telephone, travel, remittances, and personal transfers• technology integration: internet users, internet hosts, and secure internet services• political integration: international organization, UN peacekeeping, treaties, and government transfers

Globalization index (contd)

Rank Country 1 Ireland 2 Singapore 3 Switzerland 4 Netherlands 5 Finland 6 Canada 7 United States 8 New Zealand 9 Austria 10 Denmark 61 India

Competition

Consumer

Marketing Challenges in country Z

Marketing Challenges in country Y

Marketing Challenges in country X

Place

Promotion

Price

(Controllables)

Product

Legal

Socio Cultural

Competition

Political

Economic

Infrastructure

Domestic Environmental Challenges

(Uncontrollables)

Political

Overseas Environmental Challenges (Uncontrollables)

Legal

LogisticsGeography

Political

Economic

Domestic marketing and international marketing decisions

Reasons for entering international markets

• growth

• profitability

• achieving economies of scale

• risk spread

• access to imported inputs

• uniqueness of product or servies

• marketing opportunities due to life cycle

• spreading R&D cost

Evolution of Global marketingTypes of mkting Market

FocusOrientation M.Mix

Domestic Domestic Ethnocentric Focused on domestic markets

Export Overseas Ethnocentric Domestic, overseas marketing, centralized decisions

International Differentiating Polycentric Developing local products, decision decentralized

Multinational marketing

Consolidation of operations on regional basis

Regio-centric Intraregional product stnd, interregional pd different

Global Consolidation of operations on global basis

Geocentric Glocal decisions

Process of Internationalization

Domestic

Exporting

International

Global

Glocal

Time

Mar

ket

com

ple

xity

Some more international marketing concepts…

• Adaptation is the key..

• EP and RG concept of International marketing

Evolutionary process of global marketing

Domestic marketing :

Marketing Focus domestic

Orientation ethnocentric

Marketing Mix Decisions focussed on domestic

customers

Evolutionary process (contd)

Export marketing:

Marketing Focus overseas (targeting and entering foreign markets)

Orientation ethnocentric

Marketing Mix Decisions focussed mainly on domestic customers

overseas marketing-generally an extension of domestic marketing

decisions made at headquarters

Evolutionary process (contd)

Multinational marketing:

Marketing Focus consolidation of operations on regional basis

gains from economies of scale

Orientation regiocentric

Marketing Mix Decisions product standardization within regions but not across the

region

Adaptation

Strategy to isolate self-reference criteriaStep 1: define the business problem or goal in terms of the home-country traits, habits or normsStep 2: define the business problem or goal in terms of

the foreign country cultural traits, habits, or norms

Step 3: isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem

Step 4: redefine the problem without the SRC influence and solve for the optimum business goal situation

EPRG concept

• ethnocentric orientation

• polycentric orientation

• regiocentric orientation

• geocentric orientation

Theories of international trade

• theory of mercantilism• theory of absolute advantage• theory of comparative advantage• factor endowment theory• theory of international product life cycle• theory of competitive advantage

Emerging Opportunities in

International Markets

Trends in world trade

Trends in world trade (contd)

Leading exporters in world trade in commercial Services 2002

Leading importers in world trade in commercial services 2002

Composition of world merchandise exports

Direction of world exports

World Trade Outlook2002 2004 2005

A World Output Other emerging market and

developing economies

Commonwealth of Independent States (CIS)

3.0

4.6

5.1

4.6

6.0

6.0

4.4

5.9

5.2

B World Trade Volume (goods and services) 3.1 6.8 6.6

C World Trade Prices (in US$ terms) Manufactures Oil Non-fuel primary commodities

2.42.50.5

7.73.87.6

1.4-10.0-0.8

D Emerging Market and Developing countries; Private capital flows (net) in US$ billion)

47.0 162.9 100.9

World Economic Outlook

An overview of India’s foreign trade

Composition of India’s trade

Composition (contd)

Direction of India’s trade : exports

Direction imports (contd)

Balance of trade

Gains from international markets

• to measure the benefits derived by a nation from

exports, “terms of trade” is a widely used instrument

• terms of trade : a measure of relative changes in import

and export prices of a nation expressed as the ratio of

price index of its exports to price index of its imports

Terms of TradeNet Terms of Trade : Unit value index of exports expressed as a percentage of unit value index of imports

Gross Terms of Trade: Volume index of imports expressed as a percentage of volume index of exports

Income Terms of Trade: Product of net terms of trade and volume index of exports expressed as a percentage

Terms of Trade (base year 1995= 100)

India’s Terms of Trade (base year 1978-79= 100)

Source : DGCI&S

Key issues in India’s export growth• Developing a proactive approach to international trade• Promoting Foreign Direct Investments• Promoting Competitiveness• Simplification of procedures• Encouraging large-scale manufacturers• Reducing transaction costs• Infrastructure development

Key issues (contd)

• Entrepreneurship facilitation

• Strengthening SEZs

• Encouraging SMEs

• Devolution of power to states

• Abolition of indirect taxes for certain sectors

• Strategy for promoting services’ export

Identifying opportunities in international markets

• Extreme focus product strategy

• Products-country matrix strategy

• Growth-share matrix of exports

• Market focus strategies

World Trade Organization: international marketing implications

• Is the only international org dealing with global rules of trade between nations

• Came into existence in 1-01-1995.• Earlier GATT• Major function is to ensure smooth function of int.

trade• It is a multilateral trade organ. Aimed at evolving a

liberalized trade regime under a rule based system.

WTO

• National Govts of all member countries negotoated under th Uruguay Round to improve access to international markets so as to enable business enterprises to convert trade concessions into new marketing opportunities.

WTO…

Major implications of WTO’s multilateral trade regime

• Security of access of international markets

• Stability of access to international markets

• Implications for importers of raw materials and

other inputs

From GATT to WTO

Year Round/Name Countries Average Tariff Cut (%)

1947 Geneva 23 351949 Annecy 13 NA1951 Torquay 38 251956 Geneva 26 NA

1960-61 Dillon 26 NA1964-67 Kennedy 62 351973-79 Tokyo 102 331986-94 Uruguay 123 36

Functions of WTO

• Facilitates the implementation, administration, and

operation of the trade agreements

• Provides a forum for further negotiations among

member countries on matters covered by the

agreements as well as on new issues falling within its

mandate

• Responsible for the settlement of differences and

disputes among its member countries

Functions (contd)

• Responsible for carrying out periodic review of the

trade policies of its member countries

• Assists developing countries in trade policy issues

through technical assistance and training programmes

• Encourages cooperation within the international

organization

Principles of multilateral trading system under WTO

• Trade without discrimination• Most-Favoured Nation (MFN) treatment• National treatment

• Gradual move towards freer markets through negotiations• Increased predictability of international marketing environment• Promoting fair competition in international markets

WTO agreements• An umbrella agreement (the agreement establishing

WTO)

• Agreements for each of the broad areas of trade

covered by WTO• goods

• services

• intellectual Property

• Dispute settlement

• Review of governments’ trade policies

General Agreement on Tariffs and Trade (GATT)

• Increasing opportunities for goods in international markets• Creating marketing opportunities in the industrial section• Reduction in Tariffs• Tariffs Bindings• Creating fairer markets in agriculture sector• Elimination of non-tariff measures through the ratifications process• Binding against further increase of tariffs

• Domestic support• Export subsidies

• Opening up marketing opportunities in textiles

Standards and safety measures for international markets

• Agreement on Sanitary and Phytosanitary (SPS) Measure sets out the basic rules on food safety and plant health standards• Agreement on Technical Barriers to Trade (TBT) ensures that regulations, standards, testing, and certification procedures do not create unnecessary obstacles to trade

General elements of GATS• General Agreement on Trade in Services (GATS) are first and only set of multilateral rules governing international trade in services• The main text containing general obligations and disciplines• Annexes dealing with rules for specific sectors• Individual countries’ specific commitments to provide access to their markets and also indicting sectors where countries are temporarily not applying the ‘Most- Favoured-Nation’ principle of non-discrimination

Trade in services is much more diverse compared to trade in goods and GATS address this diversity through rules governing:

• movement of natural persons

• financial services

• telecommunications

• air transport services

Complexity of international trade in services

Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)

Lays down minimum standards for the protection of intellectual property rights as well as the procedures and remedies for their enforcement. It establishes a mechanism for consultations and surveillance at the international level to ensure compliance with these standards by member countries at the national level.

Curbing unfair marketing practices

• Agreement on anti-dumping practices (ADP) allows governments to act against dumping where there is genuine injury to the competing domestic industry

• Procedure to initiate dumping: - governments should be able to show that dumping has taken place - calculate the extent of dumping - demonstrate that dumping is causing injury or threatening the local industry

Top ten users of anti-dumping measures 1995-2003

Emergency protection from imports

• A WTO member may restrict imports of a product temporarily (take ‘safeguard’ actions) if its domestic industry is seriously injured or threatened with injury caused by a surge in imports• The WTO agreements on safeguards prohibit ‘grey- area’ measures, and it sets time limits ( a sunset clause) on all safeguard actions

Procedure of settlement of international trade disputes

• Consultation

• Panel established

• Terms of reference composition

• Panel examination

• Interim review stage

60 days Consultations, mediation, etc.45 days Panel set up and panelists appointed6 months Final panel report to parties3 weeks Final panel report to WTO members60 days Dispute settlement body adopts report (if no appeal)Total One Year (without appeal)60-90 days Appeal resort30 days Dispute settlement body adopts appeals reportTotal 15 months (with appeal)

Time frame for settlement of international trade disputes

The implications of WTO on international marketing

• Binding of concessions and commitments

• Valuation of goods for customs purposes (Agreement on Customs Valuation)

• Use of pre-shipment inspection services (Agreement on Pre-shipment Inspection)

• Import licensing precedures (Agreement on Improt Licensing Procedures)

• Rules applicable to exports

• Anti-dumping and countervailing action

Scanning the International Economic Environment

International economic institutions• World Bank Group

• International Bank for Reconstruction and

Development (IBRD)

• International Development Association (IDA)

• International Finance Corporation (IFC)

• Multilateral Investment Guarantee Agency (MIGA)

• International Centre for Settlement of Investment

Disputes (ICSID)

• International Monetary Fund (IMF)

Special Drawing Right (SDR)

An international reserve asset introduced by the IMF in

1969 SDR are allocated to members countries (as

book-keeping entries) as a percentage of their quotas

The United Nations Conference on Trade and Development (UNCTAD)

Established in 1964 UNCTAD aimed at integrating developing countries into the world economy Basic functions includes:

• serve as the focal point within the United Nations for the integrated treatment of trade and development issues• undertake research, policy analysis, and data collection in order to provide substantive inputs to experts• facilitate cooperation with other organisations and donor countries and provide technical assistance to member countries

Common Fund for Commodities (CFC)

Established in 1989 with the following objectives:

• To serve as a key instrument in attaining the agreed

objectives for the integrated programme for

commodities adopted by UNCTAD

• To facilitate the conclusion and functioning of ICAs

(international commodity agreements), particularly

concerning commodities of special interests to

developing countries

GSP is a non-contractual instrument by which industrialized countries unilaterally and on the basis of non-reciprocity extend tariff concessions to developing countries

EU GSP Scheme:• Special Incentive Scheme• US GSP Scheme

Generalized System of Preferences (GSP)

World Intellectual Property Organization (WIPO)

Established in 1970 as an international organisation to protect the rights of creators and owners of intellectual property the worldover Main functions:• Advice and expertise in the drafting and revision of national legislation important for whose WIPO member states with obligations under TRIPS agreement• Comprehensive education and training programmes at national and regional levels

International Trade Centre (ITC)

Created by GATT in 1964 ITC works in six areas:

• Product and market development

• Development of trade support services

• Trade information

• Human resource development

• International purchasing and supply management

• Needs assessment and programme design for trade

promotion

International economic integration Major reasons for economic integration are:

• Neighbouring countries generally have a common

history and interest and they are more willing to

cooperate in each other’s policies

• Consumer tastes are likely t o be similar and

distribution channels can easily be established in

adjacent countries

• The distances that goods need to travel between

such countries are shortened

Preferential Trading Agreement (PTA)Member countries reduce import tariffs on identified products from one another

Free Trade Area (FTA)

Member countries remove all tariffs and non-tariff barriers among themselves but are free to maintain their own tariffs and non-tariff barriers with non-member countries.

Customs UnionIn addition to eliminating trade barriers among member countries, a common external trade policy is adopted for non-members

Types

Common Market

All restrictions on cross-border investment, movement of labour, technology transfer, management, and sharing of capital resources are eliminated to form a common market

Economic Union

The member countries in an economic union maintain a fiscal discipline, stability in exchange rates, and stability in interest rates by way of unified monetary and fiscal policy

Types (contd)

Major regional trade blocks (RTA’s)High-income and low and middle-income

economies• Asia-Pacific Economic Cooperation (APEC)• European Union (EU)• North American Free Trade Area (NAFTA)

Latin America and the Caribbean• Association of Caribbean States (ACS)• Andean Group• Group of Three• Latin American Integration Association (LAIA) • Southern Cone Common Market (MERCOSUR)

Africa• Common Market for Eastern and Southern Africa (COMESA)

• Economic Community of West African States (ECOWAS)

• Southern African Development Community (SADC

Middle East and Asia• Association of south-East Asian Nations (ASEAN)

• Bangkok Agreement

• East Asian Economic Caucus (EAEC)

• Gulf Cooperation Council (GCC)

• South Asian Association for Regional Cooperation (SAARC)

Major RTA’s (contd)

India’s participation in RTAs

• Framework Agreement on comprehensive economic cooperation between ASEAN and India• Bangladesh-India-Myanmar-Sri Lanka-Thailand economic cooperation (BIMST-EC)• Indo-Sri Lanka Free Trade Agreement• Bangkok Agreement• Framework Agreement for establishing free trade between India and Thailand• SAARC preferential trading agreement (SAPTA) South Asian Free Trade Agreement (SAFTA)

International Marketing Research

International marketing research

• a study conducted to assist decision-making in more than one country

• research that crosses national borders and involves respondents and researchers from different countries and cultures

Challenges

• overlooking cross-cultural market behaviour

• employing standardized research methodologies

across the international markets

• using English as a standard language for market

communication

• inappropriate sample selection

• misinterpretation of cross-country data

• failure to use locals to conduct field surveys

Cross-cultural marketing behaviour and research

The collective programming of the mind which distinguishes the members of one group or category from the other

Comparison of cross-cultural behaviourPower distance

• the degree of inequality among the people that are viewed equitably

Individualism vs. collectivism • the tendency of people to look after themselves and their immediate family’s interests alone

Masculinity vs. femininity• masculine societies, the dominant values emphasize work goals such as earnings, advancement, and success• feminine society are achievement of personal goals such as quality of life, care for others, and friendly atmosphere

Uncertainty avoidance • lack of tolerance of ambiguity and the need for formal rules

Cultural context

The context of a culture has crucial implications in communicating and interpreting verbal and non-verbal messages

Cultural homogeneity

• homophilous culture: countries where people share the

same beliefs, language, and religion

• heterophilous culture: countries that have a fair amount

of differentiation in language, beliefs, and religion

Comparison of cross-cultural behaviour

Process

Problem dentification

Decide Research Methodology

Workout Information Requirement

Identify Sources of Information (Both Primary and Secondary)

Prepare Research Design

Collect Primary Information

Analyse Information

Evaluation and Interpretation

International marketing research and marketing decisionsMarketing mix decision

• product policy

Type of research• focus groups and qualitative research to generate ideas

for new product

• survey research to evaluate new product ideas

• concept tasting, test marketing

• product benefit and attitude research

• product formulation and feature testing

Marketing mix decisionPricing distribution

Type of research• pricing sensitivity studies

Marketing mix decisionDistribution

Type of research• survey of shopping patterns and behaviour• consumer attitudes toward different store types• survey of distributor attitudes and policies

International marketing research (contd)

Marketing mix decisionAdvertising

Type of research• advertising pre-testing

Marketing mix decisionAdvertising post-testing, recall scores

Type of research• surveys of media habits


Marketing mix decision• Sales Promotion

Type of research• surveys of response to alternative types of promotion

Marketing mix decisionSales force

Type of research• tests of alternative sales presentations


Emic vs. Etic dilemma

EMIC

Holds that attitudes, interests, and behaviour are unique to a culture and best understood in their own terms, and emphasizes studying the research problem in each country’s specific context

ETIC

Emphasizes identifying and assessing universal attitudinal and behavioural concepts and developing ‘pan-cultural’ measures

Decision-making Process for

International Markets

Segmentation of international markets• division of the market of potential customers into homogeneous sub-groups• a small firm can compete more effectively in specific market segments as it concentrates its resources on the target segment• for a market segment to be effective, it must be:

- measurable- substantial- accessible- differentiable- actionable

Types

• geographic segmentation: dividing markets into

geographical subsets

• demographic segmentation: dividing markets on the

basis of demographic characteristics (age, gender,

family size, education, etc.)

World Bank’s classification on the basis of 2002 per capita gross national income (GNI)

• Low-income countries : US$ 735 or less

• Lower middle-income countries: US$ 736-2935

• Upper middle-income countries : US$ 2936-9075

• High-income countries : US$ 9076 or more

Country segmentation on the basis of income

Segmentation of Indian market on the basis of household income

Group Annual Income

• Rich : Above Rs. 2,15,000

• Consuming : Rs.45,000 – 2,15,000

• Climbers : Rs. 22,000 – 45,000

• Aspirants : Rs. 16,000 – 22,000

• Destitutes : Less than Rs. 16,000

Segmentation of international markets on the basis of core values

Strivers (12%): place higher emphasis on material and professional goals

Devouts (22%): place more value on traditions and duty

Altruists (18%): more interested in social issues and social welfare

Intimates (15%): place more value on close personal relationships and family above all

Fun Seekers (12%): pays more emphasis on fun and enjoyment in life

Creatives (10%): this market segment has strong interest in education, knowledge, and technology

Segmentation on the basis of international marketing opportunity

• Existing markets

• Latent markets

• Incipient markets

Segmentation on the basis of market attractiveness

• Platform countries

• Emerging markets

• Growth markets

• Maturing markets

• Established markets

Selection of international markets• preliminary screening of international markets

- market size

- accessibility to international markets

• tariff barriers

- on the basis direction of trade

• tariff

- on the basis of purpose: protective vs. revenue tariffs

- on the basis of time length: tariff surcharge vs.

countervailing duty

-on the basis of tariff rates : specific, ad valorem,

and combined

- on the basis of production and distribution points:(i) single stage sales tax(ii) value added tax (VAT)(iv) cascade tax(v) excise tax(vi) turnover tax

Selection (contd)

• Non-tariff marketing barriers

- government participation in trade

- customs and entry procedure

- product requirements

• Quotas

- absolute quota

- tariff quota

- voluntary quota

Selection (contd)

Selection and targeting international markets

• Trade analysis method

• Analogy method

Tools for international market analysis

• Growth-share (Boston Consulting Group) matrix

• Market attractiveness / company strength matrix

Entering International Markets

Concept of international market entry• mode of entry: an institutional mechanism by which a

firm makes its products or services available

consumers in international markets.

• mode of entry determined by:

- the ability and willingness of the firm to commit

resources

- the firms’ desire to have a level of control over

international operations

- the level of risk the firm is willing to take

Modes of international market entry

Production in home countryexports: production is carried out in home country and finished goods are shipped to the overseas markets for saleindirect exports: process of selling products to an export intermediary in the company’s home country who in turn sells the products in the overseas marketsdirect exports: process of selling the firm’s products directly to an importer in the overseas market

Modes (contd)

complementary exporting: use of distribution channels of an overseas firm to make the product available in the overseas market

provide offshore services: to overseas clients with the help of information and communication technology

Production in a foreign country

• contractual entry modes

international licensing: process by which a domestic company allows a foreign company to use its intellectual property and specific business skills for a compensation (royalty)

international franchising: transfer of intellectual property and other assistance over an extended period of time with greater control compared to licensing

Modes (contd)

overseas turnkey projects: conceptualize, design, install, construct, and carry out primary testing of manufacturing facilities or engineering structures for an overseas client organisation

types : built and transfer (BT), built, operate, and transfer (BOT), built, operate, own (BOO)

international management contracts: a company provides its technical and managerial expertise for a specific duration to an overseas firm

Modes (contd)

international strategic alliance: the relationship between two or more firms that cooperate with each other t o achieve common strategic goals but do not form a separate company

international contract manufacturing: a contractual arrangement under which a firm’s manufacturing operations are carried out in a foreign countries

Modes (contd)

Investment entry modes

assembly in overseas markets: refers to exporting various

components of the product in completely knocked down

(CKD) condition and assembles them overseas

international joint ventures: equity participation of two or

more firms resulting into formation of a new entity

Modes (contd)

Factors for selecting partners for cooperation

• the alliance partner should have some strength which

can be translated into business values for the alliance

• the alliance partners should be committed to

cooperative goals

• it is preferable that the alliance partner should have

multi-cultural business environment

Wholly owned foreign subsidiaries• to have complete control and ownership of

international operations a firm opts for foreign

direct investment through:

1. acquiring a foreign company and all its resources in

a foreign market (acquistion)

2. the establishment of production and marketing

facilities by a firm on its own from scratch (green field)

Factors (contd)

Factors affecting the selection of entry mode

External factors• Market size• Market growth• Government regulations• Level of competition• Level of risk

• political• economic• operational

• Production and shipping costs

Internal factors

• ompany objectives

• availability of company resources

• level of commitment

• international experience

• flexibility

Factors affecting the selection of entry mode (contd)

Product Strategy for International Markets

• core : the core benefit or problem solving services

offered by the product

• packaging : the features, quality, design, packaging,

branding, and other attributes integral to a product’s

core benefit

• augmented : the support services and other

augmented components such as warranties,

guarantees and after sales service

Product

Identification of products for international markets

• a firm has to carry out preliminary screening for

markets and products by conducting market research

poorly conceived product often leads to marketing

failures

Developing products for international markets

• ethnocentric approach

• polycentric approach

• regiocentric approach

• geocentric approach

Product standardization• product standardization : the process of marketing a product in overseas markets with little change except for some cosmetic changes such as modified packaging and labelling• benefits - projecting a global product image- catering to customers globally- cost savings in terms of economies of scale in production- designing and monitoring various components of marketing mix economically- facilitating the development of a product as a global brand

Factors favouring product standardisation in international markets

• high level of technology intensity

• formidable adaptation costs

• convergence of customer needs worldwide

• country of origin impact

Product adaptation• product adaptation: making changes in a product in response to the needs of the target market is termed product adaptation or customization

• benefits• enables a firm to tap markets, which are not accessible due to mandatory requirements• fulfills the needs and expectations of customers in varied cultures and environments• helps in gaining market share• increases sales leading to economies of scale

Factors influencing product adaptation in international markets

Mandatory factors

• government regulations• standards for electric current• operating systems• measurement systems• packaging and labelling regulations

Factors (contd)

Voluntary• consumer demographics• culture• local customs and traditions• condition of use• price

The International Product Life Cycle

MNC ManufacturesProduct in DevelopedCountries; Exports toDeveloping Countries

MNC MovesProduction toDevelopingCountry; BeginsImporting toHome Country

DevelopingCountry CompetitorExports Product To MNC HomeCountry; Competeswith MNC Imports

Developing CountryMarkets Remain ViableTarget Markets forMNC; MNC HomeCountry Market IsDiminishing

Sales

Introduction and Growth Stages:

Early Maturity:

LateMaturity

Decline

Time

International Product Life Cycle, continued

• The Product Introduction Stage Products are developed and marketed in developed countries


• The Growth Stage Increasing competition and rapid product adoption Marketed primarily in developed countries Product is exported to developing countries


• The Maturity Stage Product is adopted by most target consumers Sales are leveling off Profits decline due to intense competition Manufacturing operations move to developing countries to take

advantage of cheap labor New competitors: firms from developing countries


• The Decline Stage Products are rapidly losing ground to new technologies and

product alternatives Decrease in sales and profits Product lifecycle is extended through sales to consumers in

developing countries

Dimensions of the International Product Mix

• Product length Total number of brands

• Product width Total number of product lines

• Product depth Total number of different offerings for a product category

New Product Development• Substantial risk and costs• Complex in international markets

Competition can appropriate the product/service idea and deliver final product or service to the market more swiftly than the initial developer

International consumers might not respond as anticipated Local and/or home-country government might impose

restrictions on product testing Technological infrastructure of individual markets may be

substandard and unable to support the product

Generating New Product Ideas

• Most product and service firms are driven by the marketing concept Product development decisions are based on identifying the

needs, wants, and desires of consumers

• Technology firms focus on the products Focus on research and development

Product Ideas• Consumers• Competitive Analyses• Channel Members• Employees• Top Management• Inventors• Consultants• University Research

Screening Ideas• Consider:

Fit with target consumers and the overall mission of the organization

The extent to which product offers unique benefits The extent to which target market is large and/or is likely to

grow Fit between new product requirements and resources, skills,

experience of the firm

Developing and Evaluating Product Concepts

• Develop detailed description of product

• Ask consumers to evaluate and indicate willingness to buy

• Use: Focus Groups Conjoint Analysis

Product Business Analysis

• Estimate: Project costs Return on investment Cash flow Fixed/variable costs

Product Development

• Create prototypes• Create brand identity and marketing mix• Coordinate strategy across international

subsidiaries

Test Marketing• Involves testing new product performance in a

limited area of a national or regional target market• Provides estimate of product performance in the

respective country or region• Expensive• Time consuming• Open to competitive sabotage

Types of Test Marketing• Simulated Test Marketing

Test marketing simulating purchase environment where samples of target consumers are observed during the decision-making process

• Controlled Test Marketing Test marketing that involves offering a new product to a group of

stores and evaluating market reaction

• Test Marketing Full-blown test marketing Focus on cities appropriate for the test; involves selecting

distributors and the ancillary marketing infrastructure Most costly Leaves the company most exposed to competitive sabotage

Launching Product Internationally

• Quality of launch High service quality On-time shipment Appropriate product availability Quality sales force and support Quality and amount of promotion

International Launch Decisions

• Timing of launch• Consumers and countries• Marketing mix decisions

Product mix Place Price Promotion

Degree of Product/Service Newness

• New product to existing market• New product to existing company• New line • New item in an existing product line • Modification of an existing company

product• Innovation

Product Diffusion• Product Factors

Relative advantage compared to competitive products Compatibility with the needs of the consumers Observability, or communicability to other consumers Trialability – the ability of consumers to experience the product with

only minimal effort • Country (Market) Factors – the country may be

a Lead country – wealthy industrialized country where the product is

adopted first Lag country – developing country that adopts the product later

Adopters• Innovators

Risk takers who can afford to pay a higher price during the introduction stage (2.5% of the total market)

Primarily consumers in developed countries

• Early adopters Consumers who purchase the product early in the lifecycle stage

and who tend to be opinion leaders in their community (13.5% of the total market) Primarily consumers in developed countries

Adopters, continued• Early majority

Consumers who enjoy status of being among the first to purchase a popular product (34% of the total market)

Consumers are primarily from developed countries

• Late majority Consumers who adopt popular products when the risk associated with

them is minimal (34% of the total market) Consumers are from both developed and developing countries

• Laggards The last consumers to adopt a product; they are risk averse and

conservative in their spending (16% of the total population) Consumers are primarily from developing countries

New product launch

waterfall approach: the launch of a new product in international markets in a phased manner

sprinkler approach: simultaneous product launch in various international markets

International product strategy

International competitive posture matrix

Product Strength Geo Cov

• kings-- High High

• barons High Low

• crusaders Low High

• commoners Low Low

Develop new product

Do not change promotion

Straight adaptation

Product adaptation

Communication adaptation

Dual adaptation

Product Invention

Do not change product

Adapt product

Adapt promotion

ProductPr

omot

ion

International product strategies

Building Brands in International Markets

Benefits of branding• provides a marketing edge to the brands so as to maintain their prices at relatively higher levels than the competitors’• secure better margins• facilitate coping with market competition• increase the life of a product• serve as an important tool in international marketing as the image of the brand crosses national boundaries• facilitates the forging of an emotional relationship between consumers and products

Brands in international marketing• it is important to understand the cultural traits of the

target markets

• the failure to recognize the repercussions of the

brand name in international markets proved

detrimental to brand image.

• a firm should carefully research the linguistic and

cultural repercussions while taking a decision on ext ending its brand name in international markets

Strategies for building brands

• brand based on a tangible product component

• brand based on an intangible product component

- feature based

- user imagery based

• balance brand based on tangible-intangible product component

Strategy for building global brands

• dominates the domestic market, which generates

cash flow to enter new markets

• meets a universal consumer need

• demonstrates balanced country-market coverage

• reflects a consistent positioning worldwide

• benefits from positive country of origin effect

• focus is on the product category

International brand building strategyB

rand

D

evel

opm

ent

Inde

x

High

Low

Build Category

Maintain leadership

Secure trial Build market share

HighLowCategory Development Index

David Aaker’s Model of Brand Equity

Brand awareness Perceived Quality

Brand Loyalty

Brand Packaging

Brand Association

Brand equity

International Brand Equity-Kapferer

Physique Reflection

Self Image

Culture

Personality

Relationship

customer

Firm

Internal facet

External facet

International Logistics and Distribution

International logistics

• conceptulization, design, and implementation of a

system to direct flow of goods and services across

national border

• components- materials management

- physical distribution

Channels of international distribution

• a set of interdependent organisations networked

together to make the products or services available to

the end consumers in international markets

International marketing channels

• agents- broker/commission agent- importer’s buying agent- country controlled buying agent- buying office

• merchant intermediaries- merchant exporter- international trading companies- export / trading house

Criteria for selection of international distribution channels

• international marketing objectives of the firm• financial resources• organisational structure• experience in international Markets• firm’s marketing image• existing marketing channels of the firm• channel availability in the target market• speed of market entry required• legal implications

International retailing

Retail outlets in international markets

• department stores

• supermarkets

• convenience stores

• specialty stores

• discount stores

• superstores

• hypermarkets

Cross-country comparison of organized retail sector

Country Size (US$

Billion)

Traditional channel

(In percentage)

Modern channel

(In percentage)US 2325 15 85Taiwan 115 19 81Malaysia 20 45 55Thailand 22 60 40Brazil 100 64 36Indonesia 75 70 30Poland 55 80 20China 325 80 20India 180 98 2

Managing international logistics

• managing logistics in international markets is

complex due to: - physical distance

- differences in logistics systems

- compatibility of logistics systems

- differences in legal systems

- number of intermediaries involved

Constituents of physical distribution

• warehousing

• inventory

• packing and unitisation

• information and communication technology

• transportation

Transportation

• modes of transport

- air transportation

- road transportation

- rail transportation

- ocean transportation

• types of ocean cargo

- bulk

- break bulk

- neo-bulk

- containerized

Ocean transportation

• on the basis of decks- single deck vessel- tween-deck vessel- shelter deck vessels- container vessels

• on the basis of vessel size- handy-size

- handy-max- panamax- cape-size

Types of commercial vessels

• on the basis of type of cargo- tankers- bulk carriers- neo-bulk carriers

- general cargo vessels- barges- combination carriers

Types of commercial vessels (contd)

• charter vessels do not have any fixed itinerary or fixed sailing schedule • these can be hired or engaged to ship a firm’s cargo on charter basis as per the terms and conditions of the charter party • the contract made between the charterer and the ship owner is known as charter party that contains details of the ship, routes, met hods of cargo handling, port of call

Charter shipping

Forms of chartering

• voyage charter

• time charter

• bare boat charter

• back-to-back charter

• trip time charter

• contract of affreightment

Contract terms used in vessel chartering• gross terms: the ship owner is responsible for the cost of loading, stowing, trimming, and unloading of the vessel• net terms: The ship owner is not responsible for cost of loading and discharge• free in and out: the charterer has to arrange the stevedores and to load/discharge the cargo on his own account• liner shipping: regular scheduled vessel services between two ports• container: transport equipment to facilitate handling and carriage of goods by one or more modes of transport

• benefits of transporting the cargo by containers

- facilitates door-to-door delivery

- reduces cost of packing as the container acts as a strong protective cover

- reduces the documentation work

- lowers warehousing and inventory costs

- prevents pilferage and theft

- reduces susceptibility to cargo damage

Containerisation and multimodal transportation

Pricing Decision forInternational Markets

Pricing in developing countries

• lower production and technology base

• relatively low share in international markets makes

them marginal suppliers in most product categories

with little bargaining power

• majority of products sold as commodities with

marginal value addition

Factors influencing pricing decisions in international markets

• cost

• competition

• irregular or unaccounted payments in exports-

imports

• purchasing power of customers

• buyers’ behaviour

• foreign exchange fluctuations

Terms of payment in international transactions

• advance payment

• open account

• consignment

• documentary credit

• documentary credit without letter of credit

- sight draft (documents against payment)

- usance or time draft (documents against

acceptance)

Terms of payment (contd)

• documentary credit with letter of credit

- revocable

- confirmed

- unconfirmed

Types of credit

• sight

• term credits

- acceptance credit

- deferred payment credit

• revolving

• back to back

Important terms of delivery

• EXW (Ex Works) named place • FCA (Free Carriers) named place• FAS (Free Alongside Ship) named port of shipment • FOB (Free on Board) named port of shipment• CFR (Cost and Freight) named port of destination • CIF (cost, Insurance, and Freight) named port of destination • CIP (Carriage and Insurance Paid to) named place of

destination

Terms of delivery (contd)

• CPT (carriage Paid To) named place of destination• DAF (Delivered at Frontier) named place• DES (Delivered Ex Ship) named port of destination • DEQ (Delivered Quay) named port of destination• DDU (Delivered Duty Unpaid) named place of destination • DDP (Delivered Duty Paid) named place of destination

• selling a product or commodity below the cost of production or at a lower price in overseas markets as compared to its price in domestic markets.

• types of dumping

- sporadic dumping

- predatory dumping

- persistent dumping

Dumping

• price setting and trade financing are tied together in one transaction involving reciprocal commitments other than cash payments• importing country’s inability to pay in hard currency• importing country’s regulations to conserve hard currency• importing country’s concern about balance of trade• exploring opportunities in new markets• gaining access to capital goods markets in countries with shortage of hard currency

Counter trade

• barter

• simple Barter

• clearing Arrangement

• switch Trading

• counter Purchased

• buy-back (compensation)

• offset

Types of counter trade

Transfer pricing

• price of an international transaction between related

parties

• market based (Arm’s Length) transfer pricing

• non-market pricing

• pricing at direct manufacturing cost

• import or export of goods and marketing them

through

unauthorized channels

• parallel importing

• re-importing

• lateral re-importing

Grey marketing

Communication Decision for International Markets

• effective communication is crucial to a firm’s success

in international markets

• marketing communication mix involves advertising,

sales promotion, public relation, personal selling, and

direct and interactive marketing

Marketing communication

Factors influencing international marketing communication mix

• market size

• cost of promotional activity

• resource availability

• media availability

• type of product and its price sensitivity

• mode of entry into international market

• market characteristics

Consumer response hierarchy models AIDA model

Attention

Interest

Desire

Action

Adoption model

Awareness

Interest

Evaluation

Trial

Adoption

• using the same advertising strategy across the

country

• advertisement with no change

• advertisement with changes in illustration

• benefits

• economies of scale

• projection of uniform image in international markets

Standardized advertising

• modification in the advertisement message, copy or content• helps to reduce difference in cultural values among the countries• difficulties in language translation• variations in the level of education of the target groups• media availability• social attitudes towards advertising• regulatory framework of the target market

Communication adaptation

• direct marketing: selling products and services to the customers without using any market intermediary• direct mailing: sending letters, brochures or catalogues, e- mails, faxes, or even product samples directly to the consumers, who may, in turn, purchase the product through mail• door-to-door marketing: selling door to door• multi-level marketing: involves a revolutionary distribution system with little spending on advertising and infrastructure• personal selling: involves personal meeting of a firm’s representatives with the customer

Tools of international marketing communication

India’s competitiveness and information and communication technology

• skilled manpower

• cost competitiveness

• mature destination for IT outsourcing

• international trade fairs are organized gatherings where

the buyers and the sellers meet and establish

communication• types

- general trade fairs

- specialized trade fairs- consumer fairs- minor trade fairs- solo exhibitions

Tools (contd)

• catalogue shows: display of catalogues generally accompanied by trade samples often organised by government organisations or industry association• trade missions: groups of business people travelling abroad to promote their business by meeting foreign companies or foreign government officials• sales promotion: tools used as short-term incentives to induce a purchase decision such as trade and consumer promotion• public relations: aim at building corporate image and influencing media and other target groups to have a favourable publicity

Tools (contd)

Factors influencing international communication decisions

• culture

• language

• education

• media Infrastructure

• government regulations

Framework for international product-promotion strategies

• provides a good insight into marketing decisions• offers adapation alternatives:

- straight adaptation- product extension-promotion adaptation- product adaptation-promotion

extension- dual adaptation

Framework of Export-import Policy

India’s Export-Import (EXIM) Policy

• formulated and implemented by the Ministry of

Commerce and Industry,Government of India

• other concerned ministries include Finance,

Agriculture, and Textiles, and Reserve Bank of

India

Principal objectives of India’s Exim policy

• to facilitate sustained growth in exports in order to attain a share of at least 1% of global merchandise trade• to stimulate sustained economic growth by providing firms an access to essential raw materials, intermediates, components, consumables, and capital goods required for augmenting production and providing services

Principal objectives (contd)

• to enhance the technological strength and efficiency of the Indian agriculture sector, industry, and services, to improve their competitive strength while generating new employment opportunities, and to encourage the attainment of internationally accepted standards of quality• to provide consumers with good quality products and services at internationally competitive prices while at the same time create a level playing field for the domestic producers

Items prohibited for imports

• tallow, fat, and / or oils, rendered or unrendered of any

animal origin

• animal rennet

• wild animals, including their body parts and products

and ivory

• beef and products containing beef in any form

Items prohibited for exports• wild animals• birds• tallow• wood products• beef• sandalwood products• certain species of sea shells• peacock feathers including handicrafts and other articles made from the feathers• manufactured articles• shavings of shed antlers of deer• human skeleton

Export promotion schemes and incentives

• schemes for concessional imports are aimed at

removing the anti-export bias inherent in the system

of indirect taxation and to encourage exports

• several schemes have been established which allow

importers to benefit from tariff exemptions,

especially on inputs

Export promotion schemes

• duty drawback is an export incentive to refund customs duty paid on imports of inputs used in manufacture of goods subsequently exported

• drawback comprises:

- customs allocation

- central excise allocation

• export promotion capital goods (EPCG) scheme allows for the import of capital goods at concessional rate of duty subject to an appropriate export obligation accepted by the exporter

• all industry rate: average industry drawback rates

fixed by Ministry of Finance from time to time

• brand rates: drawback incentive for exporters of

manufactured goods determined on case to case

basis for individual exporters on particular brands

Types

• duty exemption passbook scheme (DEPB) grant credit on post-export basis as specified percentage of freight on board value of exports made in freely convertible currency• duty-free replenishment certificate (DFRC) provides post-export remission of duty (basic and special additional duty, which is equal to excise duty) on imported inputs used for the manufacture of export products

Duty remission schemes

• assistance to states for infrastructure development for exports and other allied activities (ASIDE)• export promotion industrial park (EPIP) scheme gives assistance to the states to create infrastructure facilities for export-oriented production (export promotion industrial park)• critical infrastructure balance (CIB) scheme provides assistance to states to facilitate balancing of capital investments for relieving bottlenecks in infrastructure for export production and conveyance

Schemes to promote export production and related infrastructure

Creation of enclaves for export production and promotion

• Free Trade Zones (FTZ) and Export Processing Zones

(EPZs develop infrastructure for export production at

internationally competitive prices and environment

• EPZs are set up at Kandla, Santacruz, Falta, Noida, Cochin,

Chennai, Vishakhapatnam

Creation of enclaves for export production and promotion (contd)

• special economic zones (SEZs)are duty-free enclaves to be treated as foreign territory for trade operation duties and tariffs so as to provide an internationally competitive and hassle-free environment for export production. • agri-export zones (AEZ) scheme involves comprehensive package of services in an identified zone by all related state and Central Government agencies, state agricultural universities, and related organisations so as to facilitate production and exports of agro products

EOU, STP, EHTP

• Export-Oriented Units (EOU) are complimentary to

EPZ scheme for units located in domestic tariff area

• Software Technology Parks (STPs)/electronic

Hardware Technology Parks (EHTPs) facilitate export-

oriented production of computer software, hardware, and

electronic hardware

Export Houses/Trading Houses/Star Trading Houses

• give recognition to the established exporters and large export houses to build up the marketing infrastructure and expertise required for export promotion• benefits

- license/certificate/permission and customs clearances for both imports and exports on self-

declaration basis- fixation of input / output norms on a priority bias- priority finance or medium and long-term capital requirement as per conditions notified by the RBI- enhancement in normal repatriation period from 180-360 days

• market development assistance (MDA)isassistance given to exporters and export promotion organizations for market exploration and export promotion on cost –sharing basis• market access initiative (MAI) scheme to support market promotion efforts to exporters and export promotion organisations based on focus product-focus country approach• India brand equity fund (IBEF Trust) offers financial assistance by way of medium-term loans for promotion of generic products and Indian brands

Other export schemes

International Trade Finance and Risk Management

• international markets are becoming increasingly competitive and overseas buyers often demand credits from the exporters • exporting firms require finance right from the time of procuring inputs or raw materials for export production to the time they receive the final payment from the overseas buyers • countries around the world offer export credit at concessional terms

Need for trade finance

• pre-shipment credit is a loan or advance granted by a bank for financing the purchase, processing, manufacturing, or packing of goods prior to shipment

Types of export credit

• in order to make the credit available to the exporters at internationally competitive rates, banks (authorized dealers) also extend credit in foreign currency at LIBOR/ EURO Libor / EURIBOR related rates of interest

Export credit in foreign currency

• exporters procure export finance as pre-shipment credit in rupees and post-shipment credit either in rupees or discounting/rediscounting of export bills under Export Bills Abroad (EBR) scheme• pre-shipment credit in foreign currency and discounting or rediscounting of the export bills in foreign currency under the EBR scheme

Pre-shipment credit in foreign currency (PCFC) scheme

• exporters have the option to avail of post-shipment export

credit in either foreign currency or domestic currency

• post-shipment credit has to be in foreign currency if the

pre-shipment credit has already been availed of in foreign

currency in order to liquidate the pre-shipment credit

• the scheme covers bills with usance period upto 180 days

from the date of shipment

Post-shipment export credit in foreign currency

• purchase of receivables by the factor at a discounted price• benefits

- facilitates expansion of sales in international markets by offering prospective customers the same terms and conditions as local competitors- facilitates immediate payment against receivables and increases working capital- credit investigations, collection of account receivables from the importer, and other bookkeeping services are carried out by the factors- in the event of buyer’s default or refusal to pay, factors assume credit risk

Factoring

• a mechanism for financing exports forfaiting discounts receivables by negotiating bills drawn under a letter of credit or co-accepted bills of exchange

• benefits- by discounting export receivables evidenced by bills of exchange or promissory notes- on a fixed rate basis (discount)- without recourse to the exporter- carrying medium to long-term maturities (usually over 120 days)- up to 100% of the contract value

Forfaiting

Financing to overseas importers

• buyer’s credit is extended by a bank in India to an overseas buyer enabling him to pay for machinery or equipment that he may be importing from India for a specific project• line of credit is extended by a bank in India to an overseas organization for facilitating imports from India

Risks in international transactions

• an international transaction involves a number of risks that adversely affect a firm’s smooth operation• managers operating in international markets need to develop a thorough understanding of these risks and the various options available to minimize them

Types of risks in international transactions

• commercial risks- non-payment by the importer at the end of credit period or after some specified period after the expiry of credit term- non-acceptance of goods by the importer despite its compliance with the export contract- insolvency of the purchaser

• economic risks- import restrictions- local content requirements- exchange controls- foreign exchange risk

Types of risks (contd)

• political risk- confiscation- expropriation- nationalization- domestication

• transit risks- maritime- extraneous- war- strike

• total loss - actual total loss occurs when goods are completely damaged or destroyed or undergo

such a marked change that they no longer remain marketable

- constructive total loss (CTL) the cost of saving, repairing, or reconditioning of insured goods is greater than the value of goods

• partial loss- general average (GA) is a loss specific to marine cargo insurance- particular average is partial losses or damage that is not covered by general average and particular charges

Types of cargo losses

International business risks

• measuring international business risk

- Business Environment Risk Intelligence (BERI) Index- EIUs Business Environment Ranking

• managing international business risk

- Credit Risk Insurance- Marine Cargo Insurance

Export Procedure and Documentation

• export procedures and documentation are crucial to

international marketing, as both exporters and

importers are situated in two different countries and

are governed by different legislative frameworks

• export documentation facilitates international

transactions and protects the interest of the

exporters and importers

Export procedures and documetation

• commercial documents are used by ‘custom of trade’ in international commerce by exporters and importers in discharge of their respective legal and other incidental responsibilities under sales contract.• regulatory documents are prescribed by different government departments / bodies for compliance of formalities under relevant laws

Types of export documents

• commercial invoice is a document of content that provides:

- identification of shipment- detailed description of goods- description of quantity

• a packing list provides details of how the goods are packed, the contents of different boxes, cartons, or bales, and details of the weights and measurement of each package in the consignment• transport documents documents that evidence shipment of goods, such as bill of lading, combined transport document, waybill, or consignment note

Commercial documents

• marine bill of lading (B/L)- a transport document issued by the shipping company to the shipper for accepting the goods for the carriage of merchandise

• airway bill (AWB)

- issued by the carrier as an evidence of contract of carriage

• a bill of lading serves three purposes:- it is the receipt of cargo by the shipping company- a contract of carriage (or transport) - a document of title

Bill of lading

• on board or shipped bill of lading

• received for shipment bill of lading

• clean bill of lading

• dirty (clause) bill of lading

• stale bill of lading

• through bill of lading

• trans-shipment bill of lading

Types of bill of lading

• used as an evidence of the origin of goods in the importing country • includes the details of the goods covered and the country where the goods are grown, produced or manufactured

Certificate of origin

• inspection certificate is related to quality of goods • insurance certificate provides protection to the cargo-owner, an insurance cover is necessary while the cargo is in transit from the consignor to the consignee• mate’s receipt is a cargo receipt issued by the master of the vessel for every shipment taken on board• bill of exchange is an unconditional order in writing prepared and signed by the exporter addressed to the importer requiring the importer to pay a certain sum of money to the exporter or his / her nominee• shipment advice advice is sent to the importer informing of the details of the shipment

Types of certificates of origin

• shipping bill / bill of export is the principal document required by customs authority mentioning details of shipment for exports• bill of entry is a document needed for customs clearance of imported cargo

Regulatory documents

Procedure for export-import• compliance with legal framework• obtaining import-export code number• registration with export promotion council• registration with sales tax and central excise authorities• concluding an export deal• arranging export finance• appointing C& F Agent• procuring manufacturing of goods•arranging cargo insurance • port procedures and customs clearance• presentation of documents at the negotiating bank• claiming export incentives• receiving payment and export incentives

http://www.dgft.gov.in/


Electronic processing of export documents

• use information technology in the field of international business has facilitated computerized generation and processing of export documents• for electronic filing and processing of documents, Indian customs and central excise electronic commerce / electronic data interchange (EC /EDI) gateway has been created, popularly known as ICEGATE

Systems components of ICEGATE

• Indian Customs EDI system (ICES)

• The Message Exchange Servers (MES)

• ICEGATE and ICENET (Indian Customs and Central

Excise Gateway and Indian Customs and Central

Excise Network)

Institutional Infrastructure forExport Promotion

Export promotion

• public policy measures which actually on potentially

enhance exporting activity at the company, industry,

or national level

• to create awareness about exporting as an instrument of

growth and market expansion

• to reduce and remove barriers to exporting

• to create promotional incentives

• to provide various forms of assistance to potential and

actual exporters

Functions of export promotion programmes

Institutional framework for export promotion in IndiaTier level Bodies Responsibilities

Tier I Department of Commerce

frames trade policy

Tier II Advisory Bodies coordinating discussion between industry & govt. for bringing in required changes

Tier III Commodity Organisations

assist the export effort of a specific product group

Tier IV Service Organisations facilitate and assist exporters to expand markets

Tier V Government Trading Organisations

handle export import of specific commodity

Tier VI State Export Promotion Agencies

facilitate export promotion from the states

Department of Commerce• the primary government agency responsible for evolving and directing foreign trade policy and programmes, maintaining commercial relations with other countries, and developing and regulating export-oriented industries

• functional divisions• economic division• trade policy division• foreign trade territorial division• export product division• export industries division• export service division• directorate general of foreign trade (DGFT)• directorate general of commercial intelligence and statistics

Advisory bodies

• provide an effective mechanism for continued interaction with trade and industry and increased coordination among various departments and ministries concerned with export promotion• Board of trade• Export promotion board

Commodity organizations

• these organisations look at sector-specific

exports and perform a wide range of functions

right from product development to export

marketing

• engineering

• project

• electronics and computer software

• plastics and linoleums

• basic chemicals, pharmaceuticals, and cosmetics

• chemicals and allied products

• gems and jewellery

• leather

• sports goods

• cashew

Export Promotion Councils

• shellac• apparel• synthetic and rayon• Indian silk• carpet• handicrafts• wool and woollens• cotton textiles• handloom• powerloom• export oriented units (EOUs) and special economic zones (SEZs)

Export Promotion Councils (contd)

• major functions- provide commercially useful information and assistance to the members in developing and increasing their exports- offer professional advice to the members in areas such as technology upgradation, quality and design improvement, standards and specifications, product development, innovation, etc.- organize visits of delegations of its members abroad to explore overseas market opportunities- organize participation in trade fairs, exhibitions, and buyer-seller meets in Indian and abroad


• Tea Board

• Coffee Board

• Coir Board

• Central Silk Board

• All-India Handlooms and Handicraft Board

• Rubber Board

• Cardamom Board

• Tobacco Board

• Spices Board

Commodity boards

• Agriculture and Processed Food Products Export

Development Authority (APEDA)

• Marine Products Export Development Authority

(MPEDA)

Autonomous bodies

• Indian Institute of Foreign Trade

• Indian Council of Arbitration

• India Trade Promotion Organization

• National Centre for Trade Information

• Export Credit Guarantee Corporation(ECGC)

• Export-Import Bank of India

• Indian Institute of Packaging

• Federation of Indian Export Organizations (FIEO)

Service institutions

Government participation in foreign trade

• the Government of India has set up a number of corporations to supplements the efforts of the private sector in the field of foreign trade:

- State Trading Corporation (STC)

- Minerals and Metals trading Corporation (MMTC)

- Spices Trading Corporation Limited

- Meal Scrap Trading Corporation (MSTC)

States’ involvement in promoting exports• States’ cell in the Ministry of Commerce• institutional infrastructure for export promotion by state governments• apex-level organisations under the chairmanship of chief ministers /chief secretaries to consider and sort out the problems faced by the exporters/importers in their respective states• most state governments nominate a sernior officer at the level of Commissioner of Industries/Secretary of Industries as its ‘Niryat Bandhu’

Emerging Issues

• accelerated growth of global markets• breaking down of marketing boundaries

- economic liberalization - path to free markets - death of distance

• emerging new marketing barriers• emergence of global customer segment• product proliferation and shortening product life cycles• growing strength of retailers• emergence of knowledge economy• increasing customer sophistication• market beyond the urban middle class

Emerging issues in international marketing

Global e-marketing• physical marketplace to virtual market space

- problem recognition- information search- evaluation of alternatives- purchase decision- post purchase behaviour

• reverse marketing- reverse promotion- reverse advertising- reverse pricing- reverse product design- reverse segmentation

Cross-country comparison of e-readiness (2004)

Types of e-marketing models

• Business to Business (B2B)

• Business to Consumers (B2C)

• Consumers to Business (C2B)

• Consumers to Consumers (C2C)

m-marketing

• the conduct of marketing activities through the use of mobile technology such as mobile phones, personal digital assistant (PDA), and telematics

• facilitates customers’ interaction with location-specific context and worldwide web

• enables marketing communication through mobile devices and text applications such as SMS

Customer relationship marketing (CRM)• process of creating and maintaining business relationship by a firm with its customers • identifies key customers in terms of long-term potential profits• analyzes the expectations of customers and the sellers• finds out strategies to work more closely with the customers• identifies the changes required in the operating procedures• customizes the marketing mix• establishes an institutional mechanism for regular interactions with the customers

A glance at India’s strengths• India produces 3 million graduates and 700,000 post- graduates• India has the second best developed entrepreneurial culture in the world• 10% of researchers and 15% of scientists engaged in the pharma/biotech R&D in the US are of Indian origin• one third of the start-ups in silicon valley are by Indians• India is among the select group of six nations with satellite launch capabilities• 3500 firms operating in 39 software parks export over US$ 8 billion worth of IT products and services• over 70 MNCs have set up R&D facilities in India in the past five years

Services

• India’s strategic strength in offering services to international markets lies both in individual and corporate services• major potential for remote servicing to individual customers lies in telemedicine, e-learning, record keeping, and tax advisory services• tourism, education, and health and nursing are the services targeted mainly at individual customers

India’s strengths in international markets• Indian firms have about 440 investments in the UK

making India the 8th largest investor in the UK.

• 1,441 Indian companies have operations in Singapore

• 92 Indian-American owned companies in the USA

• generated business of US$ 2.2 billion and provided

employment to about 19,000 people in 2002

• seven Indian companies are listed on the NYSE and

three on the NSDAQ, while over 15 companies are

traded on the London Stock Exchange

Foreign direct investment (FDI)

• India offers talent and low cost that fits well

with the perspective of global corporations

• increase profits and ensure business

continuity through multi-country strategies

• India is fast emerging as one of the largest

consumer markets in the world

FDI Confidence Index

Short vs. medium-term attractiveness of emerging markets