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INTERNATIONAL MARKETING NOTES International Marketing Definition: International marketing is the performance of !

siness acti"ities #esigne# to plan$ price$ promote$ an# #irect the flo% of compan&'s goo#s ( ser"ices to cons!mers in more than one nation for profit)

A#aptation of the controlla les *marketing mi+ elements, to the !ncontrolla le elements #etermines the !ltimate o!tcome of the marketing enterprise) Domestic -ncontrolla les . /olitical 0 Legal o /olitical #ecisions in"ol"ing #omestic foreign polic& o An& co!ntr& has a right to restrict foreign tra#e %hen it a#"ersel& affects the sec!rit& or econom& of the co!ntr& o 1on"ersel& there ma& e positi"e effects %hen there are changes in foreign polic& an# co!ntries are gi"en fa"ore# treatment *M2N, . Domestic Economic 1limate o 3ome ase# !ncontrolla le element o Direct impact on the capacit& to in"est in plants an# facilities o 1apital generate# in the home co!ntr& an# then mo ili4e# o Internal economic con#itions %ill res!lt in restrictions against foreign in"estment in or#er to strengthen the #omestic econom& . 1ompetition o In the home co!ntr& 5 Eg) Ko#ak ( 2!6i 2oreign -ncontrolla les . /olitical 0 Legal 2orces o E)g) 1hina 5 comm!nist legal s&stem %here all the #eals %ere #one %ith the state to a commercial legal s&stem . Le"el of Technolog& o Technical e+pertise ma& "ar& o Technical Kno%le#ge o Special training . Alien Stat!s of 2oreign !sinesses o 2oreigner control the !siness o Alien in the c!lt!re of the host co!ntr& o E)g) 1oke . 1!lt!ral 2orces

. Distri !tion . 1ompetiti"e forces *Soft Drink, 2or Glo al marketing to e a s!ccess en"ironmental a#6!stments are nee#e#) SR1 5 Self Reference 1riterion 7 -nconscio!s reference to ones o%n c!lt!ral "al!es$ e+periences an# kno%le#ge 1!lt!re 8al!es Meanings 3istor& 9eliefs S&m ols E)g) 7 8icks 0 German& Mahara6a Mac Stages of International Marketing . No #irect foreign Marketing o No acti"it& in c!lti"ating c!stomers o!tsi#e #omestic market o Distri !tors 0 Dealers 0 2oreign 1!stomers coming #irectl& to the firm o :e /ages *In#ication, . Infre;!ent 2oreign Marketing o /ro#!ct s!rpl!s in #omestic market o No intention of maintaining contin!o!s market representation o 2e% companies fir this mo#el as c!stomers al%a&s look for long term commitment . Reg!lar 2oreign Marketing o Marketing goo#s on a contin!o!s asis to foreign markets o O"erseas Mi##lemen 0 O%n Sales force 0 Sales s! si#iar& o A#aptation of the pro#!ct to the foreign market . International Marketing 0 M!ltinational Marketing o 2!ll& committe# ( in"ol"e# in international marketing o Markets all o"er the %orl# o /ro#!ction ( marketing acti"ities o!tsi#e the home market o The compan& form!lates a !ni;!e strateg& for e"er& co!ntr& %ith %hich it con#!cts !siness E)g) 9alsara 5 Mint 0 1inamint

. Glo al Marketing o At this stage$ companies treat the %orl#$ incl!#ing their home market as one o Ma+imi4e ret!rns thro!gh glo al stan#ar#i4ation of its !siness acti"ities

o Efficienc& of scale & #e"eloping a stan#ar#i4e# pro#!ct$ of #epen#a le ;!alit&$ to e sol# at a reasona le price to a glo al market o The compan& stan#ar#i4es its logo$ image$ store$ processes o :here"er necessar& #!e to c!lt!ral #ifferentiation a#aptations are ma#e *M!lti#omestic ( Glo al Marketing can e+ist sim!ltaneo!sl&,

International tra#e in"ol"es "ol!ntar& e+change of goo#s$ ser"ices$ assets$ or mone& et%een resi#ents of t%o #ifferent co!ntries or et%een #ifferent co!ntries) The f!n#amental ;!estion that arises for most of !s at the tho!ght of international tra#e is %h& sho!l# a !siness firms of one co!ntr& sho!l# to the another co!ntr&$ %hen the in#!stries of that co!ntr& also pro#!ce goo#s an# market them) :hat is the asis of international !siness< A n!m er of theories ha"e een #e"elope# to e+plain the asis for international tra#e) The #ifferent tra#e theories incl!#e theor& of a sol!te a#"antage$ theor& of comparati"e a#"antage$ an# classical tra#e theor&) These theories #isc!ss an# anal&4e #ifferent n!ances of tra#e for the tra#ing partners an# #eal %ith the financial #&namics of the tra#ing acti"it& et%een t%o co!ntries Theor& of a sol!te a#"antage The Scottish economist A#am Smith first e+plaine# the theor& of a sol!te a#"antage in =>>?) 3e arg!e# that a co!ntr& has an a sol!te a#"antage in the pro#!ction of a goo# %hen it can pro#!ce more of that goo# %ith a gi"en amo!nt of reso!rces than another co!ntr&) A simple economic mo#el can e !se# to ill!strate the principle of a sol!te a#"antage) The follo%ing economic mo#el is ase# on the follo%ing ass!mptions an# is 6!st an e+ample: . There are onl& t%o co!ntries$ A!stralia an# 1hina) . These t%o co!ntries each pro#!ce onl& %heat an# cloth) . Each co!ntr& has the same amo!nt of reso!rces *lan#$ la or an# capital,$ ho%e"er the ;!alit& #iffers) . Reso!rces are transfera le et%een the pro#!ction of %heat an# cloth) . /ro#!ction costs for each co!ntr& are fi+e#) . There are no tra#e arriers$ s!ch as tariffs et%een the t%o co!ntries) Ta le = A sol!te A#"antage 7 /ro#!ction efore Speciali4ation :heat *!nits, 1loth *!nits, A!stralia @A BA 1hina C BC Total o!tp!t @C DC Ta le = sho%s the pro#!ction for each co!ntr& efore speciali4ation) :ith a gi"en amo!nt of reso!rces A!stralia can pro#!ce @A !nits of %heat an# BA !nits of cloth) :hile 1hina can pro#!ce C !nits of %heat an# BC !nits of cloth) In this e+ample A!stralia pro#!ces more %heat %hile 1hina can pro#!ce more cloth) A!stralia then has an a sol!te a#"antage in the pro#!ction of %heat an# 1hina an

a sol!te a#"antage in the pro#!ction of cloth) Ta le B /ro#!ction gains after speciali4ation :heat *!nits, 1loth *!nits, A!stralia ?A*E@A, A *7BA, 1hina A *7C, CA *EBC, Total o!tp!t ?A *EBC, *net gain, CA *EC, *net gain, :hen each co!ntr& speciali4es in the pro#!ction of the goo#s the& ha"e a comparati"e a#"antage in$ greater pro#!ction of oth goo#s co!l# occ!r) This is ill!strate# in Ta le B$ %ere the pro#!ction of %heat has increase# & BC !nits an# pro#!ction of cloth & C !nits) It is ;!ite realistic to think that one co!ntr& has an a sol!te a#"antage o"er another co!ntr& in the pro#!ction of some goo#s) 2inlan# has #one this recentl& & speciali4ing in the pro#!ction an# #istri !tion of Nokia telephones) 1riticism: Accor#ing to this theor& e"er& co!ntr& sho!l# e a le to pro#!ce certain pro#!cts at lo% cost compare# to other co!ntries an# sho!l# pro#!ct certain other pro#!cts at comparati"el& high price than other co!ntries) International tra#e takes place onl& !n#er s!ch con#ition) 9!t$ in realit& most of the co!ntries #o not ha"e a sol!te a#"antage of pro#!cing at lo%est cost an# commo#it&$ &et the& participate in international !siness)

Theor& of comparati"e a#"antage A#am SmithFs theor& of a sol!te a#"antage is a simple e+planation of the enefits of international tra#e) 3o%e"er$ if one co!ntr& has an a sol!te a#"antage in the pro#!ction all goo#s$ can there e enefits from tra#e) In =G=>$ Da"i# Ricar#o$ a classical economist #e"elope# the principal of comparati"e a#"antage to e+plain this sit!ation) The principal is ase# on the relati"e efficiencies of pro#!ction %here each co!ntr& has a comparati"e a#"antage in pro#!cing the commo#it& in %hich it has the lo%er opport!nit& cost) Opport!nit& costs are %hat m!st e gi"en !p in or#er to cons!me or pro#!ce another goo#) 2or e+ample$ going on an o"erseas holi#a& ma& in"ol"e gi"ing !p the p!rchase of a ne% car) The comparati"e a#"antage principle can e ill!strate# !sing Ta les @ an# D) Ta le @ 1omparati"e a#"antages: pro#!ction efore speciali4ation :heat *!nits, 1loth *!nits, A!stralia BA =A 1hina C C Total O!tp!t BC =C In Ta le @$ A!stralia has an a sol!te a#"antage in the pro#!ction of oth %heat an# cloth) 9& !sing the theor& of comparati"e a#"antage$ oth co!ntries can gain from speciali4ation an# tra#e) Ta le D Opport!nit& costs Opport!nit& cost 1o!ntr& = !nit of %heat = !nit of cloth A!stralia A)C *=A0BA, !nits of cloth B *BA0=A, !nits of %heat 1hina = *C0C, !nits of cloth = *C0C, !nits of %heat 2rom Ta le D:

. A!stralia has a comparati"e a#"antage in the pro#!ction of %heat since it has to gi"e !p onl& A)C !nits of cloth to pro#!ce an e+tra !nit of %heat$ %hile 1hina m!st gi"e !p = !nit of cloth to pro#!ce an e+tra !nit of %heat) So it is more practical for A!stralia to speciali4e in the pro#!ction of %heat) . 1hina has a comparati"e a#"antage in the pro#!ction of cloth since it has to gi"e !p onl& = !nit of %heat to pro#!ce an e+tra !nit of cloth$ %hile A!stralia m!st gi"e !p B !nits of %heat to pro#!ce an e+tra !nit of cloth) 1onse;!entl& it is more practical for 1hina to speciali4e in the pro#!ction of cloth) A!stralia has a comparati"e a#"antage in the pro#!ction of %heat an# 1hina cloth) Tra#e et%een the t%o co!ntries sho!l# e eneficial eca!se of the #ifferent opport!nit& costs for these commo#ities) Ta le C /ro#!ction le"els after speciali4ation :heat *!nits, 1loth *!nits, A!stralia DA *EBA, A *7=A, 1hina A *7C, =A *EC, Total o!tp!t DA *E=C, *net gain, =A *7C, *net gain, 2rom Ta le C %e can see that total o!tp!t has increase# %hen co!ntries speciali4e in the pro#!ction of goo#s an# ser"ices ase# on comparati"e a#"antage) As oth co!ntries are !sing their reso!rces more efficientl&$ tra#e %ill lea# to higher stan#ar# of li"ing than %o!l# e other%ise possi le) A mo#ern approach to comparati"e a#"antage Michael /orter The 1omparati"e A#"antage of Nations *Lon#on$ Macmillan =HHA,$ s!ggests that instea# of #ifferent factor en#o%ments eing the asis for international tra#e m!ch of the %orl#Fs tra#e is taking place et%een nations %ith similar factor en#o%ments) 2actor en#o%ments an# comparati"e a#"antages are important in co!ntries that ha"e in#!stries ase# on nat!ral reso!rces an# %here pro#!ction #oes not rel& on high le"els of technolog& or %here the la or force is relati"el& !nskille#) /orter s!ggests that it is competiti"e a#"antage * ase# on lo%er costs$ technological inno"ation an# pro#!ct #ifferentiation, rather than comparati"e a#"antage that is ecoming an important factor in #etermining the pattern an# #irection of international tra#e) Transnational corporations are pla&ing a "er& important role in this #e"elopment eca!se the& are a le to coor#inate their pro#!ction acti"ities & mo"ing reso!rces pro#!ction components$ in"estment f!n#s$ technolog& an# la or across the %orl#) Ass!mptions an# Limitations a) It ass!mes co!ntries are onl& #ri"en & the ma+imi4ation of pro#!ction an# cons!mption) ) It ass!mes onl& t%o co!ntries are engage# in the pro#!ction an# cons!mption of t%o goo#s) c) It ass!mes no transportation costs) In realit&$ transportation costs are a ma6or e+pense of international tra#e) #) It ass!mes la or is the onl& reso!rce for pro#!ction an# is mo ile %ithin each nation !t cannot e transferre#) e) It ass!mes speciali4ation #oes not res!lt in gains in efficienc&) In fact$ speciali4ation res!lts in increase# kno%le#ge of a task an# f!t!re impro"ements) The Opport!nit& 1ost Theor& Gottfrie# 3ar erler propose# the opport!nit& cost theor& in =H?H) The limitations of the comparati"e cost theor& pro#!ce# the asis of this theor&) The opport!nit& cost is the "al!e of alternati"es$ %hich ha"e to e forgone in or#er to o tain a partic!lar thing) 2or e+ample Rs) =AAA is in"este# in the e;!it& of Rama Ne%s /rint Limite# an# earne# a #i"i#en# of ?I in =HHH$ the opport!nit& cost of this in"estment is =AI interest$ ha# this

amo!nt een #eposite# in a commercial ank for a term of one &ear) Another e+ample is that$ In#ia pro#!ces te+tile garments & !tili4ing its h!man reso!rces %orth of Rs) = illion an# e+ports to the -S in =HHH) The opport!nit& cost of this pro6ect is$ ha# In#ia #e"elope# soft%are packages & !tili4ing the same h!man reso!rces an# e+porte# the same to -SA in =HHH$ the %orth of the e+ports %o!l# ha"e een Rs) =A illion) Opport!nit& cost approach specifies the cost in terms of the "al!e of the alternati"es$ %hich ha"e to e forgone in or#er to f!lfill a specific act) Th!s$ this theor& pro"i#es the asis for international !siness terms of e+porting a partic!lar pro#!ct rather than other pro#!cts) The pre"io!s e+ample s!ggests that it %o!l# e profita le to In#ia to #e"elop an# e+port soft%are packages rather than te+tile garments to -SA) :e slightl& mo#if& the pre"io!s e+ample) 2or e+ample$ ass!me that In#ia earne# Rs) =C illion & e+porting the same soft%are packages to -K in =HHH rather than to -SA) This theor& s!ggests that the opport!nit& cost of In#ia's soft%are e+ports to -SA in =HHH is Rs) =C illion) This) This theor& also pro"i#es asis for international !siness of e+porting a pro#!ct to a partic!lar co!ntr& rather to another co!ntr&)

Other theories of International Tra#e =) The /ro#!cti"it& Theor& It is critici4e# that most of the comparati"e cost theories are not applica le to #e"eloping co!ntries) 3ence$ 3) M&int propose# pro#!cti"it& theor& an# the "ent for s!rpl!s theor&) The pro#!cti"it& theor& points to%ar# in#irect an# #irect enefits) This theor& emphasi4es that the process of speciali4ation in"ol"es a#apting an# reshaping the pro#!ction str!ct!re of a tra#ing co!ntr& to meet the e+port #eman#s) 1o!ntries increase pro#!cti"it& in or#er to !tili4e these gains of e+ports) This theor& enco!rages the #e"eloping co!ntries to go for cash crops$ increase & enhancing the efficienc& of h!man reso!rces$ a#apting latest technolog& etc) Limitations 5 3o%e"er$ this theor& has also certain limitations) The& are: La o!r pro#!cti"it& #i# not increase after certain le"el) Increase in %orking ho!rs Increase in the proportion of gainf!ll& emplo&e# la o!r in proportion to #isg!ise# !nemplo&e# la o!r) B) The 8ent for S!rpl!s Theor& International tra#e a sor s the o!tp!t of !nemplo&e# factors) If the co!ntries pro#!ce more than the #omestic re;!irements$ the& ha"e to e+port the s!rpl!s to other co!ntries) Other%ise$ a part of the pro#!cti"e la o!r of the co!ntr& m!st cease an# the "al!e of its ann!al pro#!ce #iminishes) Th!s$ in the a sence of foreign tra#e$ the& %o!l# e s!rpl!s pro#!cti"e capacit& in the co!ntr&) This s!rpl!s capacit& is taken & another co!ntr& an# in t!rn gi"es the enefit !n#er international tra#e)

Appropriateness of this Theor& for De"eloping 1o!ntries: Accor#ing to this theor&$ the factors of pro#!ction of #e"eloping co!ntries are f!ll& !tili4e#) The !nemplo&e# la o!r of the #e"eloping co!ntries is profita l& emplo&e# %hen the "ent for s!rpl!s is e+porte#) International tra#e permits for more efficient !se of capital an# la o!r) 3ence) J)S) Mill #escri e# this theor& as$ Kser"ing relic of the Mercantile Theor&)L @) Mill's Theor& of Reciprocal Deman# 1omparati"e cost a#"antage theories #o not e+plain the ratios at %hich commo#ities are e+change# for another) J)S) Mill intro#!ce# the concept of KReciprocal #eman#L to e+plain the #eterminations of the e;!ili ri!m terms of tra#e) Reciprocal #eman# in#icates a co!ntr&'s #eman# for one commo#it& in terms of the other commo#it&M it is prepare# to gi"e !p in e+change) Reciprocal #eman# #etermines the terms of tra#e an# relati"e share of each co!ntr&) N!alit& of a pro#!ct e+porte# & co!ntr& A E;!ili ri!m O 77777777777777777777777777777777777777777777777777777 N!alit& of another /ro#!ct e+porte# & co!ntr& 9 Ass!mptions: Ass!mptions of this theor& are: E+istence of t%o co!ntries$ tra#e in onl& t%o goo#s$ oth the goo#s are pro#!ce# !n#er the la% of constant ret!rns$ a sence of the transportation costs$ e+istence of perfect competition an# e+istence of f!ll emplo&ment) Mo#ern Tra#e Theories Mo#ern theories foc!s on the concept of economies of scale as oppose# to the ass!mption of constant ret!rns of scale incorporate# in other theories) This ma& mean that as a compan& pro#!ces on a larger scale$ a"erage costs fall *internal economies of scale,$ !t also that costs *the esta lishment of goo# infrastr!ct!re$ the presence of %ell7 traine# emplo&ees$ etc), %ill #ecline if n!mero!s other !sinesses are esta lishe# in the "icinit& *e+ternal economies of scale,) The compan&Fs earnings increase #isproportionatel& to the increase in !se of all factors of pro#!ction *e)g) la o!r$ machiner&$ capital,) The compan& then gains an e"er7increasing a#"antage o"er other firms in its sector an# there & en#s perfect competition$ %hich %as an ass!mption of tra#itional theories) It sho!l# e clear that if economies of scale$ regar#less of their ase$ largel& #etermine international competiti"eness$ it is mainl& inci#ental factors or e"en chance that %ill #eci#e %h& one co!ntr&$ for e+ample$ has a strong aircraft in#!str& as a res!lt of internal economies of scale an# another co!ntr& has ac;!ire# an# electronics in#!str& as a res!lt of e+ternal economies of scale) A secon# implication of economies of scale is that e"en if co!ntries ha"e compara le s!ppl& str!ct!res *so that there are no comparati"e cost a#"antages an#$ accor#ing to tra#itional theor&$ no reason for speciali4ation either,$ there are still reasons %h& one co!ntr& speciali4es in one pro#!ct an# another in something else) If the& #o so$ pro#!ction costs can e re#!ce# in oth co!ntries & economies of scale$ an# e"er&one in"ol"e# in international tra#e can enefit) 3o%e"er$ economies of scale nee# not incl!#e all stages of pro#!ction) The& ma& act!all& e important at the s! 7process stage of pro#!ction eca!se pro#!ction can e consi#ere# as a series of s! 7acti"ities ranging from #esign to assem l&) The compan& can create economies of scale & concentrating on a fe% s! 7acti"ities s!ch as #esign an# pro#!ction of certain components or assem l&) Other s! 7acti"ities then take place else%here$ e)g) a roa#) An# %hen it comes to e+plaining the location of these s! 7 acti"ities$ companies often resort to the concept of comparati"e costs *as !se# &

tra#itional theorists,: la o!r7intensi"e assem l& takes place %here la o!r is cheap$ an# the #esign takes place %here there is plent& of technological kno%7ho%)

INTERNATIONAL MARKETING DE1ISIONS International Marketing presents a more comple+ task than #omestic marketing eca!se of the !ncontrolla le international marketing en"ironment an# their heterogeneit&) 3ence$ tho!gh the asic marketing #ecisions to e ma#e are similar in international an# #omestic marketing$ making international marketing #ecision is generall& more challenging) In international marketing$ a compan& has to make$ roa#l& fi"e strategic #ecisions) =) International marketing #ecision: The first #ecision a compan& has to make$ is %hether to take !p international marketing or not) This #ecision is ase# on a serio!s consi#eration of a n!m er of important factors$ s!ch as the present an# f!t!re o"erseas opport!nities$ present an# f!t!re #omestic market opport!nities$ the reso!rces of the compan& in terms of skills$ e+perience$ pro#!ction an# marketing capa ilities an# finance$ compan& o 6ecti"es etc) B) Market Selection Decision: Once it has een #eci#e# to #o international marketing$ the ne+t important step is the selection of the most appropriate market) 2or this p!rpose$ a thoro!gh st!#& of potentials of the "ario!s o"erseas markets an# their respecti"e marketing en"ironment is essential) 1ompan& reso!rces an# o 6ecti"es ma& not permit a compan& to #o !siness in all the o"erseas markets) 2!rther$ some markets are not potentiall& goo#$ an# it ma& e s!ici#al to %aste compan& reso!rces in s!ch markets) A proper selection of the o"erseas markets therefore is "er& important) @) Entr& an# Operating Decisions: Once the market selection #ecision has een ma#e$ the ne+t important task is to #etermine the appropriate mo#e of entering the foreign market s!ch as e+port$ contract man!fact!ring$ #irect man!fact!ring plant etc) on the asis of this #ecision$ proper arrangements m!st e ma#e to contin!e the acti"ities of marketing) D) Marketing Mi+ Decision: As in the #omestic marketing$ the s!ccess highl& #epen#s !pon the applica ilit& of proper Marketing Mi+$ in International marketing alsoM Marketing Mi+ pla&s a ma6or role) The elements of marketing mi+ 5 pro#!ct$ promotion$ price an# ph&sical #istri !tion sho!l# e s!ita l& #esigne# so that the& ma& e a#apte# to the characteristics of the o"erseas market) INTERNAL AND EPTERNAL INTERNATIONAL MKTG 1ON1E/T The ke& #ifference et%een #omestic an# international marketing is the m!lti7 #imensionalit& an# comple+it& of foreign co!ntr& markets a co!ntr& ma& operate in) Kno%le#ge an# a%areness of these comple+it& an# implications for international marketing is m!st) SLE/T *Social$ Legal$ Economical$ /olitical an# Technological,The important en"ironmental anal&sis mo#el =) SO1IAL AND 1-LT-RAL Infl!ences a) SO1IAL: Difference in social con#itions$ religion an# c!lt!re #etermines %hether the

c!stomers are similar or #issimilar across the glo e) McDonal#'s ha# to !n#erstan# the same in In#ia %hen the& ha# to enter s!ch h!ge market %ith its !rger) In =HHC 0 ? In#ia's "egetarian market %as DAI) These "egetarians preferre# that the !rger sho!l# e ma#e in a clean an# separate kitchen) Also their lo"e for spic& foo# %as re;!ire# to e consi#ere#) Among the non7"eg) eaters$ their #isliking to%ar#s pork an# eef among mean eater %as "er& %ell kno%n) McDonal#'s reali4e that the& nee# to ser"e In#ians more than 6!st !rger$ a !rger that satisfies In#ians taste) ) 1-LT-RE: 1!lt!re #escri es the kin# of eha"io!r consi#ere# accepta le in societ&) The prescripti"e characteristic of c!lt!re simplifies a cons!mer's #ecision7making process & limiting pro#!ct choices to those %hich are sociall& accepta le) The same feat!re creates pro lems for those pro#!cts$ %hich are not in time %ith c!lt!re) . 1oca 1ola ha# to %ith#ra% its B liters ottle from Spain market as Spaniar#s %ere not ha"ing refrigerator ha"ing larger compartments) . Johnson's floor %a+ %as #oome# to fail!re in Japan as it ma#e the %oo#en floors "er& slipper& an# Johnson faile# to take into acco!nt the c!stom of not %earing shoes insi#e the home) . 1oca 1ola %hen intro#!ce# in china the name so!n#e# like KKOOKE 5 KO-LAL meant thirst& mo!th$ f!ll of can#le %a+) So the& ha# to change the name to KKEE KO- KEELEL %hich meant K6o&f!l taste an# happiness)L . In Japan$ :hite face is associate# %ith #eath of mask) . The si4e of refrigerators in -SA is "er& ig compare# to In#ian refrigerators$ as %omen there elie"e in storing "egeta les an# other eata le items$ %hich can e cons!me# till longer perio# of time) E"en the "al!e an# eliefs associate# %ith color "ar& significantl& et%een #ifferent c!lt!res) 9l!e consi#ere# as feminine an# %orm in 3ollan#$ is seen as masc!line an# col# in S%e#en) Green is a fa"orite color in M!slims$ !t in Mala&sia$ it is associate# %ith illness) :hite is associate# %ith #eath an# mo!rning in 1hina$ Korea an# in some tra#itions in In#ia) Altho!gh$ the same color e+presses happiness an# is color of %e##ing #ress of the ri#e in English co!ntr&) S!ch #ifferences s!ggest that same marketing mi+ can not e !se# for all markets) B) Legal En"ironment: Legal s&stems "ar& oth in content an# interpretations) A s!ccessf!l marketer %ill mo#if& his marketing strategies in accor#ance %ith s!ch "ariations) La%s affect the marketing mi+ in terms of pro#!cts$ price$ #istri !tion an# promotional acti"ities ;!ite #ramaticall&) 2or man& firms s!ch la%s are !r#ensome reg!lations) 2or e)g) in German& en"ironmental la%s mean a firm is responsi le for the retrie"al an# #isposal of packaging %aste it creates an# m!st pro#!ce packaging %hich is rec&cla le) In 1ana#a$ if the information #oes not appear in oth 2rench an# English$ the goo#s ma& e confiscate#) An international Marketer sho!l# learn a o!t the a#"ertising$ packaging$ an# la eling reg!lations in foreign markets) In#ia has een seen & man& firms to e an attracti"e emerging market ha"ing man& legal #iffic!lties$ !rea!cratic #ela&s an# lots of official proce#!res) Man& MN1s ha"e fo!n# it #iffic!lt to reak s!ch har# str!ct!re) 2oreign companies are often "ie%e# %ith s!spicion) 3o% e"er$ some firms ha"e een inno"ati"e in o"ercoming #iffic!lties) @) E1ONOMI1 EN8IRONMENT: The economic sit!ation "aries from co!ntr& to co!ntr&) There are "ariations in the le"els

of income an# li"ing stan#ar#s$ interpersonal #istri !tion of income$ economic organi4ation$ occ!pational str!ct!re an# so on) These factors affect market con#itions) The le"el of #e"elopment in a co!ntr& an# the nat!re of its econom& %ill in#icate the t&pe of pro#!cts that ma& e markete# in it an# the marketing strateg& that ma& e emplo&e# in it) In high income co!ntries there is a goo# market for a large "ariet& of cons!mer goo#s) 9!t in lo%7income co!ntries %here a large segment #oes not ha"e s!fficient income e"en for their asic necessities$ the sit!ation is ;!ite #ifferent) D) /OLITI1AL EN8IRONMENT: The political en"ironment of international marketing incl!#es an& national or international political factor that can affect the organi4ation's operations or its #ecision7making) The ten#encies of go"ernments to change reg!lations can serio!sl& affect an international strateg& pro"i#ing oth opport!nities an# threat) *=HHB's li erali4ation polic& & Narsimha Rao Go"t), An !nsta le political climate can e+pose firms to man& commercial$ economic an# legal risks) /olitical risk is #efine# as eing: KA risk #!e to a s!##en or gra#!al change in a local political en"ironment that is #isa#"antageo!s to foreign firms an# markets)L C) TE13NOLOGI1AL EN8IRONMENT: The Technological En"ironment is perhaps the most #ramatic force no% shaping o!r #estin&) An international marketer sho!l# "er& %ell keep in his min# the change taking place in technolog& an# there & affecting the pro#!ct) Ne% technologies create ne% markets an# opport!nities) 3o%e"er$ e"er& ne% technolog& replaces an ol# technolog&) Perograph& h!rt car on7paper in#!str&$ comp!ter h!rt t&pe%riter in#!str&$ an# e+amples are so on) An& international marketer$ %hen ignore# or forgot ne% technologies$ their !siness has #ecline#) Th!s$ the marketer sho!l# %atch the technological en"ironment closel&) 1ompanies that #o not keep !p %ith technological changes$ soon fin# their pro#!cts o!t#ate#) The -nite# States lea#s the %orl# in research an# #e"elopment spen#ing) Scientists to#a& are researching a %i#e range of promising ne% pro#!cts an# ser"ices ranging from solar energ&$ electric car$ an# cancer c!res) All these researches gi"e a marketer an opport!nit& to set his pro#!cts as per the c!rrent #esire# stan#ar#) The challenge in each case is not onl& technical !t also commercial that means man!fact!re a pro#!ct that can e affor#e# & mass cro%#) M-LTINATIONAL 1OR/ORATIONS *MN1s, A M!ltinational 1orporation is a !siness !nit %hich operates sim!ltaneo!sl& in #ifferent part of %orl# either & man!fact!ring or marketing or oth & keeping its hea#;!arter else%here as a strategic ner"e centre) Altho!gh MN1 took irth in the earl& =G?As$ it %as after the Secon# :orl# :ar that the M!ltinationals ha"e gro%n rapi#l&) Generall&$ an MN1 meets fi"e criteria) =) It operates in man& co!ntries at #ifferent le"els of economic #e"elopment) B) Its local s! si#iaries are manage# & nationals) @) It maintains complete in#!strial organi4ations incl!#ing R ( D an# man!fact!ring facilities$ in se"eral co!ntries) D) It has #irect in"estment ase in #ifferent co!ntries) C) It #eri"es from BA I to CA I or more of its net profits from foreign operations) 1LASSI2I1ATIONS O2 MN1S

/&rami# Mo#el -m rella Mo#el Inter0 1onglomerate MN1 MN1 MN1 a) /&rami# Mo#el MN1: These organi4ations ha"e strong 3ea#;!arters an# %eak s! si#iaries) 3ea# N!arter is r!#e$ arrogant an# gi"es no po%ers to its s! si#iaries) The #ecision making capacit& is also not centrali4e#) 2or E)g) Siemens$ Johnson ( Johnson$ I9M$ McDonal#s$ Marks ( Spencer etc) This mo#el of MN1 is "er& po%er conscio!s) ) -m rella Mo#el MN1: This mo#el is "er& goo# among others) There is a relationship of m!t!al help et%een the 3ea# ;!arter an# the s! si#iar&) I#eas an# mone& flo% freel&) Making mone& an# !sing po%er is not the primar& motto of the organi4ations) 3ea# ;!arters gi"e f!ll free#om to the s! si#iaries) 9oth 3N an# s! si#iaries are "er& strong) E)g) / ( G$ /rice %ater ho!se$ K/MG etc) /ro lems: These organi4ations are "er& image conscio!s) If an&thing #amages their image$ strong actions are taken for that) c) Inter conglomerate Mo#el MN1: 2or s!ch organi4ations$ mone& is main aim) In"estment an# Rate of In"estments are "er& high) No lo&alt& to%ar#s an& s! si#iar& co!ntries) E)g) 3LL$ -nile"er etc) 1ompanies enter an& segment an# a#apt the approach of M!lti segments$ M!lti markets$ M!lti pro#!cts an# M!lti co!ntries) S!ch companies tr& to ac;!ire monopol& an# take o"er its competitors there & re#!cing competition) E)g) 9rooke 9on# an# Lipton are taken o"er & 3LL) 3o% MN1s e+pan# their !siness: =) International Licensing: MN1 permits the #omestic compan& to !se its tra#emark$ ran# name or technical kno%7ho% for man!fact!ring an# marketing p!rpose) The license is gi"en against pa&ment of fee %hich acts as so!rce of income to the MN1s) E)g) 9ran# CCC is the license# !ser of 9ritish American To acco compan&) In In#ia it is man!fact!re# & IT1 *the licensee,) It has the market of ?AA cr) An# compan& pa&s CI of the total sales to 9AT *licensor, as license fees) The 9AT #oes not pro"i#e an& ra% material !t 6!st the ran# name is gi"en) This compan& took DC &ears to esta lish) The licensor generall& keeps s!per"isor in the plant of licensee) B) International 2ranchising: the licensor not onl& pro"i#es the ran# name !t also the ra% material) E)g) McDonal#s) *S&r!p 5 pharmace!tical companies$ printe# circ!it oar#s to electronic items$ essence 5 col# #rink companies */epsi gi"es its essence to /!n6a Agro,) @) T!rnke& pro6ects: MN1s !n#ertake to complete the %hole pro6ect an# han#o"er the same %hen rea#& to the host co!ntr&) S!ch pro6ect ma& e s!pplie# on ten#er asis) S!ch pro6ects pro"i#e ne% opport!nit& to e+pan# the !siness acti"ities) D) Joint 8ent!res: KLike marriage$ in#ing et%een home co!ntr& representati"e an# host co!ntr& representati"e$ to set !p a pro6ect either in home co!ntr& or host or @r# co!ntr& %ith a commitment of 6oint risk taking an# 6oint profit sharing)L E)g) Mo#i L!ft 5 Mo#i an# L!fthansa

S!ccessf!l J8s: In#o G!lf fertili4er 5 9irla gro!p$ Ta6 gro!p of hotels %ith R!ssian go"ernment) C) 1olla orations: It #eals %ith an& one part of management f!nction$ either finance or technolog& colla oration) *it is not possi le to ha"e colla oration in cons!mer pro#!cts an# 2M1G) It happens generall& %ith me#icines$ technological pro#!cts), E)g) 9a6a6 5 Ka%asaki$ 3ero 3on#a $Kinetic 3on#a 1olla orations are time o!n# an# not permanent) Merits of M!ltinational 1orporations: =) 1hange an# progress: MN1s are sai# to e the agents of change an# progress$ on %orl# %i#e) B) Ena les ma+im!m !se of reso!rces) @) To the host co!ntries$ the plants$ e;!ipments$ an# technical kno% ho% necessar& for its operations %hich is not a"aila le other%ise is ma#e a"aila le thr! MN1s) D) MN1s create emplo&ment opport!nities in the host co!ntries) Local recr!itment of J!nior Managers creates a pool of managerial talent in the host co!ntr&) C) Goo#s are ma#e a"aila le at cheaper price #!e to economies of scale) ?) MN1s contri !te enormo!sl& to technolog& transfer et%een rich an# poor co!ntries) >) MN1s stim!late #omestic emplo&ment) G) 3elps remo"al of monopol& an# impro"e the ;!alit& of #omestic ma#e pro#!cts) H) /romotes e+ports an# re#!ce imports & raising #omestic pro#!ctions) =A) /ro"i#es enefits of R ( D) DEMERITS O2 MN1s *St!#ents please ela orate the follo%ing points, =) /ro"i#es o!t7#ate# technolog&) B) MN1s e+ploit local la o!r & pa&ing relati"el& lesser rates) @) MN1s in"ol"ement often res!lts in the lack of #e"elopment of local research an# #e"elopment) D) -se of capital7intensi"e technolog& re#!ces 6o s in local co!ntr&) C) MN1s r!in #omestic companies) ?) A#"erse effect on life st&le 0 c!lt!re in host co!ntries) >) 1harge "er& high fees) Some of the In#ian MN1s: IO1$ Ran a+&$ Dr) Re##&$ :ipro$ Infos&s$ ONG1$ 3in#!stan /etrole!m$ an# 9harat /etrole!m) TRADE 9LO1 Along %ith tra#e arriers$ there are tra#e locs among the co!ntries of the %orl#) These locs offer special concessions to mem ers of the gro!p !t impose restrictions on the imports from the non7mem er co!ntries) As a res!lt$ these tra#e locs are harmf!l to the gro%th of free international tra#e) Efforts sho!l# e ma#e to remo"e s!ch tra#e locs so as to ha"e free tra#e among the nations of the %orl#) -nfort!natel&$ efforts in this #irection & :TO are not effecti"e) Tra#e locs are gro!ps of co!ntries that ha"e esta lishe# special preferential arrangements go"erning tra#e et%een mem ers) Altho!gh in some cases the preferences7s!ch as lo%er tariff #!ties or e+emptions from ;!antitati"e restrictions the general p!rpose of s!ch arrangements is to enco!rage e+ports & loc mem ers to one another7sometimes calle# intra7tra#e) O9JE1TI8ES O2 TRADE 9LO1S *REASONS O2 2ORMING T)9), To remo"e or at least to re#!ce tra#e arriers among the mem er7co!ntries of the

gro!p) To impose common e+ternal tariff an# non7tariff arriers on non7mem er co!ntries) To ring integration of economies of mem er co!ntries thro!gh free transfer of la o!r$ capital an# other factor of pro#!ction) To maintain cor#ial economic$ political$ c!lt!ral an# social relations among the mem ers of the gro!p) To pro"i#e assistance to mem er co!ntries of the gro!p in all possi le %a&s in sol"ing their c!rrent economic pro lems) TQ/ES O2 E1ONOMI1 INTEGRATION 0 TRADE 9LO1S 2REE TRADE AREA: In 2ree Tra#e Area all arriers to the tra#e of goo#s an# ser"ices among mem er co!ntries are remo"e#) In an i#eal free tra#e area$ no #iscriminator& tariffs$ ;!otas$ s! si#ies o a#ministrati"e impe#iments %o!l# e allo%e# to #istort tra#e et%een mem er co!ntries) Each co!ntr& ho%e"er$ is allo%e# to #etermine its o%n tra#e policies %ith regar# to non7mem ers) 2or e)g) there is a free tra#e agreement kno%n as NA2TA *The North American 2ree Tra#e Agreement, et%een three co!ntiesM -SA$ 1ana#a an# Me+ico) 1!stom -nion: A 1!stom -nion represents the ne+t stage in economic cooperation) Mem er co!ntries here not onl& remo"e tra#e restrictions for mem ers !t also a#opt a !niform commercial polic& *1ommon e+ternal tariff, against non7mem ers) A c!stoms !nion rings more economic integration as compare# to free tra#e area) 1!stom -nion e+ists et%een 2rance an# Monaco$ Ital& an# San Marino$ to name some e+amples) 1ommon Market: A 1ommon Market is a step ahea# of c!stom !nion) It eliminates all tariffs an# other restrictions on internal tra#e$ a#opts a set of common e+ternal tariffs an# remo"es all restrictions on free flo% of capital an# la or among mem er nations) Th!s$ a common market is a common marketplace for goo#s as %ell as for ser"ices) -nlike a c!stom -nion$ a common Market allo%s free mo"ement of factors necessar& to pro#!ction) Latin America possesses three common markets: The 1entral American 1ommon Market *1A1M,$ the An#ean 1ommon Market$ an# the So!thern 1one 1ommon Market) Economic -nion: It is a step ahea# to common market) It has all feat!res of common market an# also !niformit& in respect of monetar& an# fiscal polic& of mem er co!ntries) Mem er co!ntries are e+pecte# to p!rs!e common fiscal an# monetar& policies)

DETAILS O2 IM/ORTANT TRADE 9LO1S =) Association of So!th East Asian Nations The Association of So!theast Asian Nations or ASEAN %as esta lishe# on G A!g!st =H?> in 9angkok & the fi"e original Mem er 1o!ntries$ namel&$ In#onesia$ Mala&sia$ /hilippines$ Singapore$ an# Thailan#) 9r!nei Dar!ssalam 6oine# on G Jan!ar& =HGD$ 8ietnam on BG J!l& =HHC$ Laos an# M&anmar on B@ J!l& =HH>$ an# 1am o#ia on @A April =HHH) O9JE1TI8ES

The ASEAN Declaration states that the aims an# p!rposes of the Association are: *i, To accelerate the economic gro%th$ social progress an# c!lt!ral #e"elopment in the region thro!gh 6oint en#ea"ors) *ii, To promote regional peace an# sta ilit& thro!gh a i#ing respect for 6!stice an# the r!le of la% in the relationship among co!ntries in the region an# a#herence to the principles of the -nite# Nations 1harter) *iii, To maintain close cooperation %ith the e+isting international an# regional organi4ations %ith similar aims) :ORKING O2 ASEAN The mem er co!ntries of ASEAN ha"e /referential Tra#ing Arrangements */TA,$ %hich re#!ces tariffs on pro#!cts tra#e# among mem er co!ntries) In =HHB$ ASEAN #e"elope# a 1ommon Effecti"e /referential Tariffs *1E/T, plan to re#!ce tariffs s&stematicall& for man!fact!re# an# processe# pro#!cts) The mem ers ha"e also esta lishe# a series of co7operati"e efforts to enco!rage 6oint participation in in#!strial$ agric!lt!ral an# technical #e"elopment pro6ects an# to increase foreign in"estments in their economies) These efforts incl!#e an ASEAN finance corporation$ the ASEAN In#!strial Joint 8ent!res /rogramme *AJI8, etc) ASEAN nations ha"e intro#!ce# some programmes for greater #i"ersification in their economies) In#ia an# ASEAN In#ia is intereste# in maintaining close economic relations %ith the mem ers of ASEAN$ as these co!ntries are closer to In#ia) The ASEAN co!ntries are offering co7operation to In#ia in the fiel# of tra#e$ in"estment$ science an# technolog& an# training of personnel) Also$ In#ia's tra#e %ith ASEAN co!ntries is satisfactor& in recent &ears) B) LA2TA *LATIN AMERI1AN 2REE TRADE ASSO1IATION, LA2TA %as esta lishe# in 2e r!ar& =H?A !n#er the Treat& of Monte"i#eo) The mem er co!ntries of the association are Argentina$ 9ra4il$ 1ol!m ia$ 1hile$ Ec!a#or$ Me+ico$ /arag!a&$ /er!$ -r!g!a&$ 8ene4!ela an# 9oli"ia) The main o 6ecti"e of the association is to !il# !p a common market for So!th American co!ntries an# there & to ring a o!t a gra#!al re#!ction in tra#e arriers among mem er co!ntries) LA2TA as a tra#e loc %ants to stim!late intra7Latin American tra#e an# also to increase Latin American's #eclining share in %orl# tra#e) 3o%e"er$ LA2TA co!l# not emerge as a po%erf!l economic !nion #!e to non7 cooperation among the mem er co!ntries) The mem er co!ntries ha"e een competing among themsel"es for promoting their e+ports) /olitical insta ilit& among the mem er co!ntries is another ca!se responsi le for making this !nion %eak an# ineffecti"e) D!e to lack of !n#erstan#ing an# m!t!al tr!st$ the integration among the mem er co!ntries is not effecti"e) In recent &ears$ the Latin American #e t crisis has ero#e# some of the in#!strial progress that the co!ntries ha# ma#e an# has force# them to rel& on primar& pro#!ct e+ports to patch !p their #e t) In =HGH$ An#ean co!ntries ma#e a rene%e# effort to re"i"e regional co7operation %ith ne% meas!res) LA2TA %as replace# *rename#, & the Latin American Integration Association *LAIA, %ith the signing of the Monte"i#eo Treat& of =HGA) The achie"ements of LAIA are also mo#erate) An Fa#"ising ankF is a correspon#ent of a ank %hich iss!es a letter of cre#it$ an#$ on ehalf of the iss!ing ank$ the a#"ising ank notifies the eneficiar& of the terms of the cre#it$ %itho!t engagement on its part to pa& or g!arantee the cre#it) @) E-RO/EAN -NION: As a ma6or center of po%er in the glo al econom&$ the E!ropean -nion *E-, is secon# onl& to the -nite# States) In BAAB$ GD/ of E- %as -SR GC@= n) This constit!te# B?)?

I of the glo al GD/ as compare# to @B)C I for the -S an# =B)B I for Japan) To#a& after a n!m er of Eastern E!ropean 1o!ntries 6oine# the E-$ it is a loc of BC co!nties %ith a pop!lation of o"er DCA mn) The E- also incl!#es German&$ -K$ 2rance$ Ital& an# Spain$ %hich are respecti"el& @r#$ Dth$ Cth$ >th$ an# Hth largest economies in the %orl#) Th!s E- presents an enormo!s e+port an# in"estor market that is oth mat!re an# sophisticate#) In BAAD$ E- acco!nte# for @C)= I of glo al merchan#ise e+ports as compare# to ==)= I & the -S$ "al!e# at -SR @$@AA n) A o!t the E-: The E- is an organi4ation of E!ropean 1o!ntries #e#icate# to increasing economic integration an# strengthening cooperation among its mem ers) The E- has its hea#;!arters in 9r!ssels$ 9elgi!m) The !nion consists of BC mem ers namel&$ 9elgi!m$ Denmark$ 2rance$ German&$ Greece$ Irelan#$ Ital&$ L!+em o!rg$ Netherlan#s$ /ort!gal$ -K$ Spain$ A!stria$ 2inlan#$ S%e#en$ 14ech Rep! lic$ 3!ngar&$ Lat"ia$ Malta$ /olan#$ Slo"akia$ 1&pr!s$ Estonia$ Lith!ania an# Slo"enia) O 6ecti"es of the E-: Its principal goal is to promote an# e+pan# cooperation among mem ers states in economics$ tra#e$ social iss!es$ foreign policies$ sec!rit&$ #efence$ an# 6!#icial matters) Another ma6or goal of the E- is to implement the Economic an# Monetar& -nion$ %hich intro#!ce# a single c!rrenc&$ the E!ro for the E- mem ers) The Single Market an# 1ommon 1ommercial /olic&: The single market refers to the creation of a f!ll& integrate# market %ithin the E-$ %hich allo%s for free mo"ement of goo#s$ ser"ices an# factors of pro#!ction) The E-$ in con6!nction %ith Mem er States$ has a n!m er of policies #esigne# to assist the f!nctioning of the market) Some of the policies are gi"en elo%: 1ompetition /olic&: The main competition lie# in energ& an# transport sector) The !nion #esigne# this strateg& to pre"ent price fi+ing$ coll!sion *secret agreement,$ an# a !se of monopol&) 2ree mo"ement of goo#s: A c!stom !nion co"ering all tra#e in goo#s %as esta lishe# an# a common c!stoms tariff %as a#opte# %ith respect to co!ntries o!tsi#e the !nion) Ser"ices: An& mem er nation has a right to pro"i#e ser"ices in other Mem er States) 2ree mo"ement of persons: An& citi4en of E- mem er state can li"e %ork in an& other E- mem er state 1apital: There are no restrictions on the mo"ement of capital an# on pa&ments %ith the E- an# et%een mem er states an# thir# co!ntries) Tra#e et%een the E!ropean -nion an# In#ia In#ia %as one of the first Asian nations to accor# recognition to the E!ropean 1omm!nit& in =H?B) The E- is In#ia's largest partner an# iggest so!rce comm!nit& in =H?B) The E- is In#ia's largest tra#ing partner an# iggest so!rce of 2DI) It is a ma6or contri !tor of #e"elopmental ai# an# an important so!rce of technolog&) O"er the &ears$ E- 5 In#ia tra#e has gro%n from D)D n to BG)D n -SR) Top items of tra#e et%een In#ia an# EIn#ia's e+ports to E- I In#ia's Imports from E- I Te+tile an# clothing @C Gemstones an# 6e%eller& @= Leather an# leather pro#!cts BC /o%er generating e;!ipment BG Gemstones an# 6e%eller& =B 1hemical pro#!cts =C Agric!lt!re pro#!cts =A Office machiner& =A 1hemical pro#!cts H Transport e;!ipment ? In#ia is E-'s =>th largest s!pplier an# BAth largest #estination for e+ports) In#ia's strength lies in its tra#itional e+ports like te+tiles$ agric!lt!re an# marine pro#!cts$ gems an# 6e%eller&$ leather an# electronics pro#!cts)

Tariff an# non7tariffs ha"e een re#!ce#$ !t compare# to International stan#ar#s the& are still high) -n#er the 9ilateral tra#e et%een In#ia an# E-$ it acco!nts for B?I of In#ia's e+ports an# BCI of its imports) -n#er the same tra#e there is an agreement on s!garcane) The E- has !n#ertaken to !& an# import a specific ;!antit& of s!garcane$ ra% or %hite$ from In#ia at g!arantee# price$ the prices are fi+e# ann!all&) @) T3EORQ O2 INTERNATIONAL /ROD-1T LI2E 1Q1LE *I/L1, The International /ro#!ct Life 1&cle *I/L1, theor& e+plains tra#e in a conte+t of comparati"e a#"antage$ #escri es the #iff!sion process of an inno"ation across national o!n#aries) The life c&cle egins %hen a #e"elope# co!ntr&$ ha"ing a ne% pro#!ct to satisf& cons!mer nee#s$ %ants to e+ploit its technological reakthro!gh & selling a roa#) Other a#"ance# nations soon start !p their o%n pro#!ction facilities an# efore long LD1s #o the same) Efficienc& shifts from #e"elope# co!ntries to #e"eloping nations) 2inall&$ a#"ance# nations$ no longer cost7effecti"e$ import pro#!cts from their former c!stomers) The a#"ance# nation ecomes a "ictim of its o%n creation) Stages an# characteristics There are C #istinct stages in the I/L1 stage A thro!gh D) The gi"en elo% ta le sho%s the ma6or characteristics of the I/L1 stages$ %ith the -S as the #e"eloper of the inno"ation in ;!estion) The ne+t e+hi it sho%s three life7c&cle c!r"es for the same inno"ation: One for the initiating co!ntr&$ one for the other a#"ance# co!ntries an# one for LD1s) 2or each c!r"e$ net e+port res!lts %hen the c!r"e is a o"e the hori4ontal lineM if !n#er the hori4ontal line$ net import res!lts for that partic!lar co!ntr&) As the inno"ation mo"es thro!gh time$ #irections of all three c!r"es change) Time is relati"e$ as the time nee#e# for a c&cle to e complete# "aries from one kin# of pro#!ct to another) I/L1 stages an# characteristics for the initiating co!ntr& STAGE IM/ 0 EP/ TARGET MARKET 1OM/ETITORS /RDTN 1OST *=, Local Inno"ation None -SA 2e%: Local 2irms Initiall& 3igh *B, O"erseas inno"ation Increasing e+port -SA ( A#"ance# Nations 2e%: Local 2irms Decline o%ing to economies of scale *@, Mat!rit& Sta le e+port A#"ance# Nations ( LD1s A#"ance# Nations Sta le *D, :orl#%i#e imitation Decline e+port LD1s A#"ance# nations Increase o%ing to lo%er eco) Of scale) *C, Re"ersal Increasing import -SA A#"ance# nations ( LD1s Increase o%ing to comparati"e #isa#"antage Stage = 5 Local Inno"ation: Stage =$ on the left of the "ertical importing 0 e+porting a+is$ represents a reg!lar an# highl& familiar pro#!ct life c&cle in operation %ithin its original market) Inno"ations are most likel& to occ!r in highl& #e"elope# co!ntries eca!se cons!mers in s!ch co!ntries are affl!ent an# ha"e relati"el& !nlimite# %ant) 2rom the s!ppl& si#e$ firms in a#"ance# nations ha"e oth the technological kno%7ho% an# a !n#ant capital to #e"elop ne% pro#!cts) Stage B 5 O"erseas Inno"ation: As soon as the ne% pro#!ct is %ell #e"elope#$ its original market %ell c!lti"ate#$ an# local #eman#s a#e;!atel& s!pplie#$ the inno"ating firm %ill look to o"erseas markets in or#er to e+pan# its sales an# profit) Th!s$ this stage

is kno%n as a K/ioneeringL or KInternational Intro#!ctionL stage) The technological gap is first notice# in other a#"ance# nations eca!se of their similar nee#s an# high7income le"els) 1ompetition in this stage comes from !s!all& -S 2irms$ since firms in other co!ntries ma& not ha"e m!ch kno%le#ge a o!t inno"ation) /ro#!ction cost ten#s to e #ecreasing at this stage eca!se & this time the inno"ating firm %ill normall& ha"e impro"e# the pro#!ction process) S!pporte# & o"erseas sales$ aggregate pro#!ction costs ten# to #ecline f!rther eca!se of increase# economies of scales) A lo% intro#!ctor& price is not necessar& eca!se of the technological reakthro!ghM a lo% price is not #esira le eca!se of hea"& an# costl& marketing effort nee#e# to e#!cate cons!mers in other co!ntries a o!t the ne% pro#!cts) Stage @ 5 Mat!rit&: Gro%ing #eman# in a#"ance# nations pro"i#e a mo"ement for firms there to commit themsel"es to starting local pro#!ction$ often %ith the help of their go"ernment's protecti"e meas!res to preser"e infant in#!stries) Th!s$ these firms can s!r"i"e an# s!ccee# in spite of relati"e inefficienc&) De"elopment in competition #oes not mean that the initiating co!ntr&'s e+port le"el %ill imme#iatel& s!ffer) The inno"ating firm's sales an# e+port "ol!mes are kept sta le eca!se LD1s are no% eginning to generate a nee# for the pro#!ct) Intro#!ction of the pro#!ct in LD1s help offset an& re#!ction in e+port sales to a#"ance# co!ntries) Stage D 5 :orl#%i#e imitation: This stage means to!gh times for the inno"ating nation eca!se of its contin!o!s #ecline in e+ports) There is no more ne% #eman# an&%here to c!lti"ate) The #ecline %ill certainl& affect the -S inno"ating firm's economies of scale$ an# its pro#!ction cost th!s egin to rise again) 1onse;!entl&$ firms in other a#"ance# nations !se their lo%er prices to gain more cons!mer acceptance a roa# at the e+penses of the -S firm) As the pro#!ct ecomes more an# more %i#el& a%are$ imitation picks !p at a faster pace) To%ar#s the en# of this stage$ -S e+port #eclines to nothing an# an& -S pro#!ction still remaining is asicall& for local cons!mption) Stage C 5 Re"ersal: The ma6or characteristics of this stage are pro#!ct stan#ar#i4ation an# comparati"e #isa#"antage) The inno"ating co!ntr&'s comparati"e a#"antage has #isappeare# an# %hat is left is comparati"e #isa#"antage) This #isa#"antage is ro!ght a o!t eca!se the pro#!ct is no more capital7intensi"e or technolog&7intensi"e !t instea# has ecome la or7intensi"e for LD1s) LD1s no% can esta lish s!fficient pro#!cti"e facilities to satisf& their o%n #omestic nee#s as %ell as to pro#!ce for iggest market in the %orl#) 2or e)g) the lack an# %hite tele"isions are no% no more man!fact!re# in -SA as man& Asian firms can pro#!ce them m!ch less e+pensi"el& than an& -S firms) 8ALIDITQ O2 T3E I/L1 Se"eral pro#!cts ha"e conforme# to the characteristics #escri e# & the I/L1) 2or e)g) at one time the -S !se# to e an e+porter of t&pe%riters$ cash registers$ 90: Tele"isions etc) !t %ith passage of time$ these simple machines are no% eing importe#$ %hile -S firms e+ports onl& the sophisticate#$ electronic "ersion of s!ch machines) Marketing Strategies: 2or in#!stries s!ffering the imitation stage or mat!rit& stage things are likel& to get %orse rather than etter) 1ompanies can !n#erstan# the implications of the I/L1 an# a#6!st marketing strategies accor#ingl&) I) /ro#!ct /olic&: I) a) A!tomation: The I/L1 emphasi4es the importance of cost a#"antage) If for inno"ating firms it is #iffic!lt to match la or costs in lo%7%age nations *it happens

generall& %ith co!ntries like -S %here la or cost is too high, the firms can c!t la or costs thro!gh a!tomation an# ro otics) 2or e)g) I9M has con"erte# its Kent!ck& plant into one of the most a!tomate# plants there & c!tting la or costs) I) ) O!tso!rcing: Another %a& to c!t the cost of pro#!ct is to o!tso!rce the pro#!ct) O!tso!rcing is the practice of !&ing the parts or %hole pro#!ct from other man!fact!rers %hile allo%ing a !&er to maintain its o%n ran# name) Another mo#ifie# "ersion of o!tso!rcing is ha"ing "ario!s components pro#!ce# !n#er contract in #ifferent co!ntries) That %a&$ a firm takes a#"antage of the most a !n#ant factor of pro#!ction in each co!ntr& efore assem ling components into final pro#!cts for %orl#%i#e #istri !tion) I9M's /1 s&stem consists of components ma#e in lo%7cost co!ntries7monochrome monitor in So!th KoreaM 2lopp& #isk #ri"es in Singapore$ an# printer$ ke& oar#$ po%er s!ppl& in Japan) The final assem l& takes place in -SA) I) c) man!fact!ring in other co!ntr&: the inno"ator ma& !se local man!fact!ring in other co!ntries as an entr& strateg&) The compan& not onl& can minimi4e transportation costs !t can also slo% #o%n potential local competition) I) #) Ne% Technolog&: Once in the mat!rit& stage$ the inno"ator's comparati"e a#"antage is goneM the firm sho!l# s%itch from pro#!cing simple "ersions to pro#!cing ne% technologies in or#er to remo"e itself from c!tthroat competition) II) /ricing /olic&: Stage 5 =: At this stage$ firm can affor# to eha"e as a monopolist$ charging a premi!m price for its inno"ation) 9!t this price m!st e a#6!ste# #o%n%ar# in the secon# an# thir# stage of I/L1 to #isco!rage potential ne% comers an# to maintain market share) 2or e)g) I9M %as slo% in re#!cing prices for its /1 mo#els) The& elie"e# that the I9M /1 %as too comple+ for Asian imitators) This pro"e# to e a costl& error as the asic /1 har#l& change# for se"eral &ears) As a res!lt other Asian companies came o!t %ith their o%n ran#s) Stage 5 D: In the last stage$ it is not practical for the inno"ating firm to maintain lo% price #!e to competitor's cost a#"antage) 9!t the firm's a o"e7the7market price is feasi le onl& if it is accompanie# & top7;!alit& pro#!ct) III /romotion /olic&: /romotion an# pricing are highl& relate# in I/L1) In the starting$ the marketer m!st plan for a non7price# promotional strateg& s!ch as pro"i#ing technical s!pport$ or offering after7sales7ser"ice or gi"ing %arrant& for a partic!lar perio# after the pro#!ct is offere#) The concentration sho!l# e to%ar#s meeting cons!mer's #eman#) /ositioning is another important point at the eginning) The marketer sho!l# tr& to position the pro#!ct as a high7;!alit& pro#!ct ha"ing goo# rep!tation) One thing the compan& m!st ne"er #o is to allo% its pro#!ct to ecome a commo#it& item %ith prices as the onl& !&ing moti"e as s!ch pro#!cts can easil& e #!plicate# & other firms) Thro!gh o!t fo!r stages pro#!ct #ifferentiation$ not price is most important for protecting a compan& from the cro%#e#$ lo%7profit market segment) I8 /lace: A strong #ealer net%ork can pro"i#e the inno"ating firm %ith a goo# #efensi"e strateg&) 9eca!se of its monopol& sit!ation at the eginning$ the firm is in a goo# position to e a le to select onl& the most ;!alifie# agents an# the net%ork sho!l# e e+pan#e# f!rther as the pro#!ct ecomes more #iff!se#) GM's ol# polic& of limiting its #ealer from carr&ing se"eral GM ran#s ina#"ertentl& enco!rage# those #ealers to start carr&ing imports$ there & creating alternati"e channel for GM %hich threatene# the e+isting channel) Once a pro#!ct is in the final stage of its life c&cle$ the inno"ating firm sho!l# stri"e to

ecome a specialist not a generalist$ & concentrating its efforts in caref!ll& selecte# market segments$ %here it can #isting!ish itself from foreign competitors) To achie"e #istinction in pro#!ct$ the inno"ating firm can a## pro#!ct feat!res or offer more ser"ice) /ORTERS NATIONAL DIAMOND 2OR 1OM/ETATI8E AD8ANTAGE Accor#ing to /orter$ as a r!le competiti"e a#"antage of nations is the o!tcome of D interlinke# a#"ance# factors an# acti"ities in an# et%een companies in these cl!sters) These can e infl!ence# in a pro7acti"e %a& & go"ernment) 2actor 1on#itions The sit!ation in a co!ntr& regar#ing pro#!ction factors$ like skille# la or$ infrastr!ct!re$ etc)$ %hich are rele"ant for competition in partic!lar in#!stries) These factors can e gro!pe# into h!man reso!rces *;!alification le"el$ cost of la or$ commitment etc),$ material reso!rces *nat!ral reso!rces$ "egetation$ space etc),$ kno%le#ge reso!rces$ capital reso!rces$ an# infrastr!ct!re) The& also incl!#e factors like ;!alit& of research on !ni"ersities$ #ereg!lation of la or markets$ or li;!i#it& of national stock markets) These national factors often pro"i#e initial a#"antages$ %hich are s! se;!entl& !ilt !pon) Each co!ntr& has its o%n partic!lar set of factor con#itionsM hence$ in each co!ntr& %ill #e"elop those in#!stries for %hich the partic!lar set of factor con#itions is optimal) This e+plains the e+istence of so7calle# lo%cost7 co!ntries *lo% costs of la or,$ agric!lt!ral co!ntries *large co!ntries %ith fertile soil,$ or the start7!p c!lt!re in the -nite# States *%ell #e"elope# "ent!re capital market,) /orter points o!t that these factors are not necessaril& nat!re7ma#e or inherite#) The& ma& #e"elop an# change) /olitical initiati"es$ technological progress or socio7c!lt!ral changes$ for instance$ ma& shape national factor con#itions) A goo# e+ample is the #isc!ssion on the ethics of genetic engineering an# cloning that %ill infl!ence kno%le#ge capital in this fiel# in North America an# E!rope) 3ome Deman# 1on#itions Descri es the state of home #eman# for pro#!cts an# ser"ices pro#!ce# in a co!ntr&) 3ome #eman# con#itions infl!ence the shaping of partic!lar factor con#itions) The& ha"e impact on the pace an# #irection of inno"ation an# pro#!ct #e"elopment) Accor#ing to /orter$ home #eman# is #etermine# & three ma6or characteristics: their mi+t!re *the mi+ of c!stomers nee#s an# %ants,$ their scope an# gro%th rate$ an# the mechanisms that transmit #omestic preferences to foreign markets) /orter states that a co!ntr& can achie"e national a#"antages in an in#!str& or market segment$ if home #eman# pro"i#es clearer an# earlier signals of #eman# tren#s to #omestic s!ppliers than to foreign competitors) Normall&$ home markets ha"e a m!ch higher infl!ence on an organi4ationFs a ilit& to recogni4e c!stomers' nee#s than foreign markets #o) Relate# an# S!pporting In#!stries The e+istence or non7e+istence of internationall& competiti"e s!ppl&ing in#!stries an# s!pporting in#!stries) One internationall& s!ccessf!l in#!str& ma& lea# to a#"antages in other relate# or s!pporting in#!stries) 1ompetiti"e s!ppl&ing in#!stries %ill reinforce inno"ation an# internationali4ation in in#!stries at later stages in the "al!e s&stem) 9esi#es s!ppliers$ relate# in#!stries are of importance) These are in#!stries that can !se an# coor#inate partic!lar acti"ities in the "al!e chain together$ or that are concerne# %ith complementar& pro#!cts *e)g) har#%are an# soft%are,) A t&pical e+ample is the shoe an# leather in#!str& in Ital&) Ital& is not onl& s!ccessf!l %ith shoes an# leather$ !t

%ith relate# pro#!cts an# ser"ices s!ch as leather %orking machiner&$ #esign$ etc) 2irm Strateg&$ Str!ct!re$ an# Ri"alr& The con#itions in a co!ntr& that #etermine ho% companies are esta lishe#$ are organi4e# an# are manage#$ an# that #etermine the characteristics of #omestic competition 3ere$ c!lt!ral aspects pla& an important role) In #ifferent nations$ factors like management str!ct!res$ %orking morale$ or interactions et%een companies are shape# #ifferentl&) This %ill pro"i#e a#"antages an# #isa#"antages for partic!lar in#!stries) T&pical corporate o 6ecti"es in relation to patterns of commitment among %orkforce are of special importance) The& are hea"il& infl!ence# & str!ct!res of o%nership an# control) 2amil&7 !siness ase# in#!stries that are #ominate# & o%ner7managers %ill eha"e #ifferentl& than p! licl& ;!ote# companies) /orter arg!es that #omestic ri"alr& an# the search for competiti"e a#"antage %ithin a nation can help pro"i#e organi4ations %ith ases for achie"ing s!ch a#"antage on a more glo al scale) The role of go"ernment in the Diamon# Mo#el of /orter The role of go"ernment in the Diamon# Mo#el of /orter is to act as a catal&st an# challengerM it is to enco!rage 7 or e"en p!sh 7 companies to raise their aspirations an# mo"e to higher le"els of competiti"e performance) The& m!st enco!rage companies to raise their performance$ to stim!late earl& #eman# for a#"ance# pro#!cts$ to foc!s on speciali4e# factor creation an# to stim!late local ri"alr& & limiting #irect cooperation an# enforcing anti7tr!st reg!lations) Diff!sion of inno"ation This e+tension of the pro#!ct life c&cle %as #e"elope# & E"erett M) Rogers in =H?B an# simpl& looks %ho a#opts pro#!cts at the #ifferent stages of the life c&cle) Rogers i#entifie# fi"e t&pes of p!rchasers as the pro#!ct mo"es thro!gh its life c&cle stage) 3e s!ggeste#: =) Inno"ator %ho make !p B)CI of all p!rchases of the pro#!ct$ p!rchase the pro#!ct at the eginning of the life c&cle) The& are not afrai# of tr&ing ne% pro#!cts that s!it their lifest&le an# %ill also pa& a premi!m for that enefit) B) Earl& A#opters make !p =@)CI of p!rchases$ the& are !s!all& opinion lea#ers an# nat!rall& a#opt pro#!cts after the inno"ators) This gro!p of p!rchasers are cr!cial eca!se a#option & them means the pro#!ct ecomes accepta le$ sp!rring on later p!rchasers) @) Earl& Ma6orit& make !p @DI of p!rchases an# ha"e een sp!rre# on & the earl& a#opters) The& %ait to see if the pro#!ct %ill e a#opte# & societ& an# %ill p!rchase onl& %hen this has happene#) The& earl& ma6orit& !s!all& ha"e some stat!s in societ&) D) Late Ma6orit& make !p another @DI of sales an# !s!all& p!rchase the pro#!ct at the late stages of ma6orit& %ithin the life c&cle) C) Laggar#s make !p =?I of total sales an# !s!all& p!rchase the pro#!ct near the en# of its life) The& are the S%ait an# see' gro!p) The& %ait to see if the pro#!ct %ill get cheaper) -s!all& %hen the& p!rchase the pro#!ct a ne% "ersion is alrea#& on the market) Some ma& call Laggar#s$ argain h!ntersT 1-LT-RAL 2A1TORS =) 3O2STEDES T3EORQ

Accor#ing to Geert 3ofste#e$ there is no s!ch thing as a !ni"ersal management metho# or management theor&$ "ali# across the %hole %orl#) E"en the %or# FmanagementF has #ifferent origins an# meanings in co!ntries thro!gho!t the %orl#) Management is not a phenomenon that can e isolate# from other processes taking place in societ&) It interacts %ith %hat happens in the famil&$ at school$ in politics$ an# go"ernment) It is o "io!sl& also relate# to religion an# to eliefs a o!t science)

The fi"e 1!lt!ral Dimensions of 3ofste#e The c!lt!ral #imensions mo#el of Geert 3ofste#e is a frame%ork that #escri es fi"e sorts *#imensions, of #ifferences 0 "al!e perspecti"es et%een national c!lt!res: /o%er #istance) The #egree of ine;!alit& among people %hich the pop!lation of a co!ntr& consi#ers as normal) In#i"i#!alism "ers!s collecti"ism) The e+tent to %hich people feel the& are s!ppose# to take care for$ or to e care# for & themsel"es$ their families or organi4ations the& elong to) Masc!linit& "ers!s femininit&) The e+tent to %hich a c!lt!re is con#!ci"e to #ominance$ asserti"eness an# ac;!isition of things) 8ers!s a c!lt!re %hich is more con#!ci"e to people$ feelings an# the ;!alit& of life) -ncertaint& a"oi#ance) The #egree to %hich people in a co!ntr& prefer str!ct!re# o"er !nstr!ct!re# sit!ations) Long7term "ers!s short7term orientation) Long7term: "al!es oriente# to%ar#s the f!t!re$ like sa"ing an# persistence) Short7term: "al!es oriente# to%ar#s the past an# present$ like respect for tra#ition an# f!lfilling social o ligations) To !n#erstan# management in a co!ntr&$ one sho!l# ha"e oth kno%le#ge an# empath& %ith the entire local scene) 3o%e"er$ the scores of the !ni;!e statistical s!r"e& that 3ofste#e carrie# o!t sho!l# make e"er& o#& a%are that people in other co!ntries ma& think$ feel$ an# act "er& #ifferentl& from &o!rself$ e"en %hen confronte# %ith asic pro lems of societ&) 3IG3 AND LO: 1ONTEPT 1-LT-RE The general terms Uhigh conte+tU an# Ulo% conte+tU *pop!lari4e# & E#%ar# 3all, are !se# to #escri e roa#7 r!sh c!lt!ral #ifferences et%een societies) 3igh conte+t refers to societies or gro!ps %here people ha"e close connections o"er a long perio# of time) Man& aspects of c!lt!ral eha"ior are not ma#e e+plicit eca!se most mem ers kno% %hat to #o an# %hat to think from &ears of interaction %ith each other) Qo!r famil& is pro a l& an e+ample of a high conte+t en"ironment) Lo% conte+t refers to societies %here people ten# to ha"e man& connections !t of shorter #!ration or for some specific reason) In these societies$ c!lt!ral eha"ior an# eliefs ma& nee# to e spelle# o!t e+plicitl& so that those coming into the c!lt!ral en"ironment kno% ho% to eha"e) 3igh 1onte+t . Less "er all& e+plicit comm!nication$ less %ritten0formal information . More internali4e# !n#erstan#ings of %hat is comm!nicate#

. M!ltiple cross7c!tting ties an# intersections %ith others . Long term relationships . Strong o!n#aries7 %ho is accepte# as elonging "s %ho is consi#ere# an Uo!tsi#erU . Kno%le#ge is sit!ational$ relational) . Decisions an# acti"ities foc!s aro!n# personal face7to7face relationships$ often aro!n# a central person %ho has a!thorit&) E+amples: Small religio!s congregations$ a part& %ith frien#s$ famil& gatherings$ e+pensi"e go!rmet resta!rants an# neigh orhoo# resta!rants %ith a reg!lar clientele$ !n#ergra#!ate on7camp!s frien#ships$ reg!lar pick7!p games$ hosting a frien# in &o!r home o"ernight) Lo% 1onte+t . R!le oriente#$ people pla& & e+ternal r!les . More kno%le#ge is co#ifie#$ p! lic$ e+ternal$ an# accessi le) . Se;!encing$ separation77of time$ of space$ of acti"ities$ of relationships . More interpersonal connections of shorter #!ration . Kno%le#ge is more often transfera le . Task7centere#) Decisions an# acti"ities foc!s aro!n# %hat nee#s to e #one$ #i"ision of responsi ilities) E+amples: large -S airports$ a chain s!permarket$ a cafeteria$ a con"enience store$ sports %here r!les are clearl& lai# o!t$ a motel) 1-LT-RAL DIMENSIONS: The ma6or elements of c!lt!re are material c!lt!re$ lang!age$ aesthetics$ e#!cation$ religion$ attit!#es an# "al!es an# social organisation) Material c!lt!re Material c!lt!re refers to tools$ artifacts an# technolog&) 9efore marketing in a foreign c!lt!re it is important to assess the material c!lt!re like transportation$ po%er$ comm!nications an# so on) Inp!t7o!tp!t ta les ma& e !sef!l in assessing this) All aspects of marketing are affecte# & material c!lt!re like so!rces of po%er for pro#!cts$ me#ia a"aila ilit& an# #istri !tion) 2or e+ample$ refrigerate# transport #oes not e+ist in man& African co!ntries) Material c!lt!re intro#!ctions into a co!ntr& ma& ring a o!t c!lt!ral changes %hich ma& or ma& not e #esira le) Lang!age Lang!age reflects the nat!re an# "al!es of societ&) There ma& e man& s! 7c!lt!ral lang!ages like #ialects %hich ma& ha"e to e acco!nte# for) Some co!ntries ha"e t%o or three lang!ages) In Vim a %e there are three lang!ages 7 English$ Shona an# N#e ele %ith n!mero!s #ialects) In Nigeria$ some ling!istic gro!ps ha"e engage# in hostile acti"ities) Lang!age can ca!se comm!nication pro lems 7 especiall& in the !se of me#ia or %ritten material) It is est to learn the lang!age or engage some one %ho !n#erstan#s it %ell) Aesthetics Aesthetics refer to the i#eas in a c!lt!re concerning ea!t& an# goo# taste as e+presse# in the arts 7m!sic$ art$ #rama an# #ancing an# the partic!lar appreciation of colo!r an# form) African m!sic is #ifferent in form to :estern m!sic) Aesthetic #ifferences affect #esign$ colo!rs$ packaging$ ran# names an# me#ia messages) 2or e+ample$ !nless e+plaine#$ the ran# name 2A81O %o!l# mean nothing to :estern importers$ in Vim a %e most people %o!l# instantl& recognise 2A81O as the ran# of hortic!lt!ral pro#!ce) E#!cation

E#!cation refers to the transmission of skills$ i#eas an# attit!#es as %ell as training in partic!lar #isciplines) E#!cation can transmit c!lt!ral i#eas or e !se# for change$ for e+ample the local !ni"ersit& can !il# !p an econom&Fs performance) The -N agenc& -NES1O gathers #ata on e#!cation information) 2or e+ample it sho%s in Ethiopia onl& =BI of the "ia le age gro!p enrol at secon#ar& school$ !t the fig!re is H>I in the -SA) E#!cation le"els$ or lack of it$ affect marketers in a n!m er of %a&s: . . a#"ertising programmes an# la elling . . girls an# %omen e+cl!#e# from formal e#!cation *literac& rates, . . con#!cting market research . . comple+ pro#!cts %ith instr!ctions . . relations %ith #istri !tors an#$ . . s!pport so!rces 7 finance$ a#"ancing agencies etc) Religion Religion pro"i#es the est insight into a societ&Fs eha"io!r an# helps ans%er the ;!estion %h& people eha"e rather than ho% the& eha"e) Religion can affect marketing in a n!m er of %a&s: . . religio!s holi#a&s 7 Rama#an cannot get access to cons!mers as shops are close#) . . cons!mption patterns 7 fish for 1atholics on 2ri#a& . . economic role of %omen 7 Islam . . caste s&stems 7 #iffic!lt& in getting to #ifferent costs for segmentation0niche marketing . . 6oint an# e+ten#e# families 7 3in#!ism an# organi4ational str!ct!resM . . instit!tion of the ch!rch 7 Iran an# its effect on a#"ertising$ U:esternU images . . market segments 7 Ma&lasia 7 Mala&$ 1hinese an# In#ian c!lt!res making market segmentation . . ensiti"it& is nee#e# to e alert to religio!s #ifferences) Attit!#es an# "al!es 8al!es often ha"e a religio!s fo!n#ation$ an# attit!#es relate to economic acti"ities) It is essential to ascertain attit!#es to%ar#s marketing acti"ities %hich lea# to %ealth or material gain$ for e+ample$ in 9!##hist societ& these ma& not e rele"ant) Also UchangeU ma& not e nee#e#$ or e"en %ante#$ an# it ma& e etter to relate pro#!cts to tra#itional "al!es rather than 6!st ne% ones) Man& African societies are risk a"erse$ therefore$ entreprene!rialism ma& not al%a&s e rele"ant) Attit!#es are al%a&s prec!rsors of h!man eha"io!r an# so it is essential that research is #one caref!ll& on these) Social organisation Refers to the %a& people relate to each other$ for e+ample$ e+ten#e# families$ !nits$ kinship) In some co!ntries kinship ma& e a tri e an# so segmentation ma& ha"e to e ase# on this) Other forms of gro!ps ma& e religio!s or political$ age$ caste an# so on) All these gro!ps ma& affect the marketer in his planning) There are other aspects of c!lt!re$ !t the a o"e co"ers the main ingre#ients) In one form or another these ha"e to e taken acco!nt of %hen marketing internationall&)

STRATEGIES TO ENTER GLO9AL MARKETS There are a "ariet& of %a&s in %hich organisations can enter foreign markets) E+porting E+porting is the most tra#itional an# %ell esta lishe# form of operating in foreign markets) E+porting can e #efine# as the marketing of goo#s pro#!ce# in one co!ntr& into another) The a#"antages of e+porting are: . man!fact!ring is home ase# th!s$ it is less risk& than o"erseas ase# . gi"es an opport!nit& to UlearnU o"erseas markets efore in"esting in ricks an# mortar . re#!ces the potential risks of operating o"erseas) The #isa#"antage is mainl& that one can e at the Umerc&U of o"erseas agents an# so the lack of control has to e %eighe# against the a#"antages) 2or e+ample$ in the e+porting of African hortic!lt!ral pro#!cts$ the agents an# D!tch flo%er a!ctions are in a position to #ictate to pro#!cers) 9esi#es e+porting$ other market entr& strategies incl!#e licensing$ 6oint "ent!res$ contract man!fact!re$ o%nership an# participation in e+port processing 4ones or free tra#e 4ones) Licensing: Licensing is #efine# as Uthe metho# of foreign operation %here & a firm in one co!ntr& agrees to permit a compan& in another co!ntr& to !se the man!fact!ring$ processing$ tra#emark$ kno%7ho% or some other skill pro"i#e# & the licensorU) It is ;!ite similar to the UfranchiseU operation) 1oca 1ola is an e+cellent e+ample of licensing) In Vim a %e$ -nite# 9ottlers ha"e the licence to make 1oke) Licensing in"ol"es little e+pense an# in"ol"ement) The onl& cost is signing the agreement an# policing its implementation) Licensing gi"es the follo%ing a#"antages: . Goo# %a& to start in foreign operations an# open the #oor to lo% risk man!fact!ring relationships . Linkage of parent an# recei"ing partner interests means oth get most o!t of marketing effort . not tie# !p in foreign operation an# . Options to !& into partner e+ist or pro"ision to take ro&alties in stock) The #isa#"antages are: . . Limite# form of participation 7 to length of agreement$ specific pro#!ct$ process or tra#emark . . /otential ret!rns from marketing an# man!fact!ring ma& e lost . . /artner #e"elops kno%7ho% an# so licence is short . . Licensees ecome competitors 7 o"ercome & ha"ing cross technolog& transfer #eals an# . . Re;!ires consi#era le fact fin#ing$ planning$ in"estigation an# interpretation) Those %ho #eci#e to license o!ght to keep the options open for e+ten#ing market participation) This can e #one thro!gh 6oint "ent!res %ith the licensee) Joint "ent!res Joint "ent!res can e #efine# as Uan enterprise in %hich t%o or more in"estors share o%nership an# control o"er propert& rights an# operationU)

Joint "ent!res are a more e+tensi"e form of participation than either e+porting or licensing) In Vim a %e$ Oli"ine in#!stries has a 6oint "ent!re agreement %ith 3J 3ein4 in foo# processing) Joint "ent!res gi"e the follo%ing a#"antages: . . Sharing of risk an# a ilit& to com ine the local in7#epth kno%le#ge %ith a foreign partner %ith kno%7ho% in technolog& or process . . Joint financial strength . . Ma& e onl& means of entr& an# . . Ma& e the so!rce of s!ppl& for a thir# co!ntr&) The& also ha"e #isa#"antages: . . /artners #o not ha"e f!ll control of management . . Ma& e impossi le to reco"er capital if nee# e . . Disagreement on thir# part& markets to ser"e an# . . /artners ma& ha"e #ifferent "ie%s on e+pecte# enefits) If the partners caref!ll& map o!t in a#"ance %hat the& e+pect to achie"e an# ho%$ then man& pro lems can e o"ercome) O%nership: The most e+tensi"e form of participation is =AAI o%nership an# this in"ol"es the greatest commitment in capital an# managerial effort) The a ilit& to comm!nicate an# control =AAI ma& o!t%eigh an& of the #isa#"antages of 6oint "ent!res an# licensing) 3o%e"er$ as mentione# earlier$ repatriation of earnings an# capital has to e caref!ll& monitore#) The more !nsta le the en"ironment the less likel& is the o%nership path%a& an option) /ricing pro#!cts Three asic factors #etermine the o!n#aries of the pricing #ecision 7 the price floor$ or minim!m price$ o!n#e# & pro#!ct cost$ the price ceiling or ma+im!m price$ o!n#e# & competition an# the market an# the optim!m price$ a f!nction of #eman# an# the cost of s!ppl&ing the pro#!ct) In a##ition$ in price setting cognisance m!st e$ taken of go"ernment ta+ policies$ resale prices$ #!mping pro lems$ transportation costs$ mi##lemen an# so on) :hilst man& agric!lt!ral pro#!cts are at the merc& of the market *price takers, others are not) These incl!#e high "al!e a##e# pro#!cts like ostrich$ croco#ile pro#!cts an# har#%oo#s$ %here #eman# o!tstrips s!ppl& at present) Transfer pricing Transfer pricing is more appropriate to those organisations %ith #ecentralise# profit centres) Transfer pricing is !se# to moti"ate profit centre managers$ pro"i#e #i"isional fle+i ilit& an# also f!rther corporate profit goals) Across national o!n#aries the s&stem gets complicate# & ta+es$ 6oint "ent!res$ attit!#es of go"ernments an# so on) There are fo!r asic approaches to transfer pricing) . . Transfer at cost: fe% practise this$ %hich recognises foreign affiliates contri !te to profita ilit& & operating #omestic scale economies) /rices ma& e !nrealistic so this metho# is sel#om !se#) Other%ise it is asicall& !se# for increasing corporate profita ilit&) . . Transfer at #irect cost pl!s o"erhea#s an# margin) Similar to that in transfer at cost) /rofits are sho% at e"er& stage) . . Transfer at a price #eri"e# from en# market prices: "er& !sef!l strateg& in %hich market ase# transfer prices an# foreign so!rcing are !se# as #e"ices to enter markets too small for s!pporting local man!fact!rers) This gi"es a "al!a le foothol#) /rices are re;!ire# to e competiti"e in the international market)

. . Transfer at an UarmFs lengthU: this is the price that %o!l# ha"e een reache# & !nrelate# parties in a similar transaction) The pro lem is i#entif&ing a point UarmFs lengthU price for all pro#!cts other than commo#ities) /ricing at UarmFs lengthU for #ifferentiate# pro#!cts res!lts not in a specific price !t prices$ %hich fall in a pre#etermina le range) Glo al pricing There are three possi le glo al pricing policies 7 e+tension *ethnocentric,$ a#aptation *pol&centric, an# in"ention *geocentric,) E+tension: The same glo al price) A "er& simple metho# !t #oes not respon# to market sensiti"it&) A#aptation : Different prices in #ifferent markets) The onl& control is setting transfer prices %ithin the corporate s&stem) It pre"ents pro lems of ar itrage %hen the #isparities in local market prices e+cee# the transportation an# #!t& costs separating markets) Inno"ation : A mi+ of a, an# ,) This takes cognisance of an& !ni;!e market factor *s, like costs$ competition$ income le"els an# local marketing strateg&) In a##ition it recognises the fact that hea#;!arters price coor#ination is necessar& in #ealing %ith international acco!nts an# ar itrage an# it s&stematicall& seeks to em race national e+perience) /ricing Strategies: Skimming /rice strateg&: Skimming price strateg& is strateg& in %hich the man!fact!rer charges a "er& high price in the initial stage of the /L1 from the cons!mers) The e+porter has also to inc!r "er& high promotional e+penses since the pro#!ct the ne%l& intro#!ce# in the market) In this strateg&$ the e+porter keeps his profit margin "er& high) This t&pe of strateg& is !se# in case of fashiona le an# no"elt& items$ perisha le items an# cons!mer #!ra les %hich are intro#!ce# for the first time in the market) This t&pe of strateg& is partic!larl& !sef!l if the e+porter enters in the international market for a short term an# his main moti"e is profit ma+imi4ation) It is not possi le for an& e+porter to follo% this e+port pricing strateg& for a long time) It is !se# to match the #eman# an# s!ppl& of earl& a#opters an# reinforce c!stomers perception of high "al!e pro#!cts) /enetration /rice strateg&: In this t&pe of pricing strateg&$ the e+porter charges a lo%er price in the initial stages since the main o 6ecti"e of the e+porter is to capt!re a large market share an# create ran# lo&alt& among the cons!mers) In the later stages$ the e+porter raises the prices of the pro#!ct an# reco"ers the losses s!ffere# in the initial perio#) This pricing strateg& can e follo%e# in case of pro#!cts %here the e+porter is ass!re# of large market an# contin!o!s sale) It is !se# & organi4ations %ho ha"e non #ifferentiate# pro#!cts or ha"e large marketing s&stems in place) Market 3ol#ing strateg&: in this t&pe of strateg&$ the goal is to maintain the market share) It is !se# for price a#6!stment against competitors) 3ere$ the organi4ation !s!all& keeps a similar price %ith that of the competitors in the initial stage) S!ch t&pe is also re;!ire# #!e to the price an# c!rrenc& fl!t!ations in #ifferent co!ntries) 1ost pl!s pricing: There are asicall& t%o t&pes !n#er this hea#ing$ the historical acco!nting cost metho# an# the estimate# f!t!re cost metho#) The former incl!#es #irect an# in#irect costs an# has the #isa#"antage of ignoring #eman# an# competiti"e position in the target market) Estimate# cost approaches are ase# on ass!mptions of pro#!ction "ol!me *#epen#ing on process, %hich %ill e a principal factor #etermining costs) Again #iffic!lties ma& lie in tr&ing to estimate pro#!ction le"els) In realit&$ costs ma& e a !sef!l starting point !t sho!l# ne"er e !se# as a final ar iter)

/rice escalation One ma6or feat!re of international pricing is the increase on the price #!e to the application of #!ties$ increase in costs of transportation an# #istri !tion margin increase$ increase %ith the length of #istri !tion channel$ etc) D!mping: It is the sale of an importe# goo# or pro#!ct at a price lo%er than normall& charge# in #omestic market or co!ntr& of origin than the co!ntr& of sale) It is !s!all& #one & organi4ations to capt!re the market share) There are anti #!mping legislations !se# & the go"ernment to protect local in#!stries since it affects #e"elopment of local econom&$ as it cannot e pre#icte#) To e con"icte#$ oth price #iscrimination an# in6!r& m!st e pro"e#) GENERI1 STRATEGIES If the primar& #eterminant of a firmFs profita ilit& is the attracti"eness of the in#!str& in %hich it operates$ an important secon#ar& #eterminant is its position %ithin that in#!str&) E"en tho!gh an in#!str& ma& ha"e elo%7a"erage profita ilit&$ a firm that is optimall& positione# can generate s!perior ret!rns) A firm positions itself & le"eraging its strengths) Michael /orter has arg!e# that a firmFs strengths !ltimatel& fall into one of t%o hea#ings: cost a#"antage an# #ifferentiation) 9& appl&ing these strengths in either a roa# or narro% scope$ three generic strategies res!lt: cost lea#ership$ #ifferentiation$ an# foc!s) These strategies are applie# at the !siness !nit le"el) The& are calle# generic strategies eca!se the& are not firm or in#!str& #epen#ent) The follo%ing ta le ill!strates /orterFs generic strategies:

1ost Lea#ership Strateg& This generic strateg& calls for eing the lo% cost pro#!cer in an in#!str& for a gi"en le"el of ;!alit&) The firm sells its pro#!cts either at a"erage in#!str& prices to earn a profit higher than that of ri"als$ or elo% the a"erage in#!str& prices to gain market share) In the e"ent of a price %ar$ the firm can maintain some profita ilit& %hile the competition s!ffers losses) E"en %itho!t a price %ar$ as the in#!str& mat!res an# prices #ecline$ the firms that can pro#!ce more cheapl& %ill remain profita le for a longer perio# of time) The cost lea#ership strateg& !s!all& targets a roa# market) Some of the %a&s that firms ac;!ire cost a#"antages are & impro"ing process efficiencies$ gaining !ni;!e access to a large so!rce of lo%er cost materials$ making optimal o!tso!rcing an# "ertical integration #ecisions$ or a"oi#ing some costs altogether) If competing firms are !na le to lo%er their costs & a similar amo!nt$ the firm ma& e a le to s!stain a competiti"e a#"antage ase# on cost lea#ership) 2irms that s!ccee# in cost lea#ership often ha"e the follo%ing internal strengths: . Access to the capital re;!ire# to make a significant in"estment in pro#!ction assetsM this in"estment represents a arrier to entr& that man& firms ma& not o"ercome) . Skill in #esigning pro#!cts for efficient man!fact!ring$ for e+ample$ ha"ing a small component co!nt to shorten the assem l& process) . 3igh le"el of e+pertise in man!fact!ring process engineering) . Efficient #istri !tion channels) Each generic strateg& has its risks$ incl!#ing the lo%7cost strateg&) 2or e+ample$ other firms ma& e a le to lo%er their costs as %ell) As technolog& impro"es$ the competition ma& e a le to leapfrog the pro#!ction capa ilities$ th!s eliminating the competiti"e

a#"antage) A##itionall&$ se"eral firms follo%ing a foc!s strateg& an# targeting "ario!s narro% markets ma& e a le to achie"e an e"en lo%er cost %ithin their segments an# as a gro!p gain significant market share) Differentiation Strateg& A #ifferentiation strateg& calls for the #e"elopment of a pro#!ct or ser"ice that offers !ni;!e attri !tes that are "al!e# & c!stomers an# that c!stomers percei"e to e etter than or #ifferent from the pro#!cts of the competition) The "al!e a##e# & the !ni;!eness of the pro#!ct ma& allo% the firm to charge a premi!m price for it) The firm hopes that the higher price %ill more than co"er the e+tra costs inc!rre# in offering the !ni;!e pro#!ct) 9eca!se of the pro#!ctFs !ni;!e attri !tes$ if s!ppliers increase their prices the firm ma& e a le to pass along the costs to its c!stomers %ho cannot fin# s! stit!te pro#!cts easil&) 2irms that s!ccee# in a #ifferentiation strateg& often ha"e the follo%ing internal strengths: . Access to lea#ing scientific research) . 3ighl& skille# an# creati"e pro#!ct #e"elopment team) . Strong sales team %ith the a ilit& to s!ccessf!ll& comm!nicate the percei"e# strengths of the pro#!ct) . 1orporate rep!tation for ;!alit& an# inno"ation) The risks associate# %ith a #ifferentiation strateg& incl!#e imitation & competitors an# changes in c!stomer tastes) A##itionall&$ "ario!s firms p!rs!ing foc!s strategies ma& e a le to achie"e e"en greater #ifferentiation in their market segments) 2oc!s Strateg& The foc!s strateg& concentrates on a narro% segment an# %ithin that segment attempts to achie"e either a cost a#"antage or #ifferentiation) The premise is that the nee#s of the gro!p can e etter ser"ice# & foc!sing entirel& on it) A firm !sing a foc!s strateg& often en6o&s a high #egree of c!stomer lo&alt&$ an# this entrenche# lo&alt& #isco!rages other firms from competing #irectl&) 9eca!se of their narro% market foc!s$ firms p!rs!ing a foc!s strateg& ha"e lo%er "ol!mes an# therefore less argaining po%er %ith their s!ppliers) 3o%e"er$ firms p!rs!ing a #ifferentiation7foc!se# strateg& ma& e a le to pass higher costs on to c!stomers since close s! stit!te pro#!cts #o not e+ist) 2irms that s!ccee# in a foc!s strateg& are a le to tailor a roa# range of pro#!ct #e"elopment strengths to a relati"el& narro% market segment that the& kno% "er& %ell) Some risks of foc!s strategies incl!#e imitation an# changes in the target segments) 2!rthermore$ it ma& e fairl& eas& for a roa#7market cost lea#er to a#apt its pro#!ct in or#er to compete #irectl&) 2inall&$ other foc!sers ma& e a le to car"e o!t s! 7segments that the& can ser"e e"en etter) A 1om ination of Generic Strategies 7 St!ck in the Mi##le< These generic strategies are not necessaril& compati le %ith one another) If a firm attempts to achie"e an a#"antage on all fronts$ in this attempt it ma& achie"e no a#"antage at all) 2or e+ample$ if a firm #ifferentiates itself & s!ppl&ing "er& high ;!alit& pro#!cts$ it risks !n#ermining that ;!alit& if it seeks to ecome a cost lea#er) E"en if the ;!alit& #i# not s!ffer$ the firm %o!l# risk pro6ecting a conf!sing image) 2or this reason$ Michael /orter arg!e# that to e s!ccessf!l o"er the long7term$ a firm m!st select onl& one of these three generic strategies) Other%ise$ %ith more than one single generic

strateg& the firm %ill e Ust!ck in the mi##leU an# %ill not achie"e a competiti"e a#"antage) /orter arg!e# that firms that are a le to s!ccee# at m!ltiple strategies often #o so & creating separate !siness !nits for each strateg&) 9& separating the strategies into #ifferent !nits ha"ing #ifferent policies an# e"en #ifferent c!lt!res$ a corporation is less likel& to ecome Ust!ck in the mi##le)U 3o%e"er$ there e+ists a "ie%point that a single generic strateg& is not al%a&s est eca!se %ithin the same pro#!ct c!stomers often seek m!lti7#imensional satisfactions s!ch as a com ination of ;!alit&$ st&le$ con"enience$ an# price) There ha"e een cases in %hich high ;!alit& pro#!cers faithf!ll& follo%e# a single strateg& an# then s!ffere# greatl& %hen another firm entere# the market %ith a lo%er7;!alit& pro#!ct that etter met the o"erall nee#s of the c!stomers) Generic Strategies an# In#!str& 2orces These generic strategies each ha"e attri !tes that can ser"e to #efen# against competiti"e forces) The follo%ing ta le compares some characteristics of the generic strategies in the conte+t of the /orterFs fi"e forces)