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Subject code & name

FALL 2016
MK0018 &

Roll No.


Q-1 ) Differentiate between


The General Agreement on Tariffs and Trade (GATT) was based on conventions and
not considered as an international institution. It was set up in 1947. At that time, it
comprised only 23 countries. Negotiations for the GATT started in the late 1940s
with an aim to reconstruct a multilateral system of world trade through the
elimination of discrimination, the reduction of tariffs and the dismantlement of other
trade barriers. These negotiations were deliberated in order to increase the
economic activities to compensate the damages of World War II. The GATT was a
subsidiary agreement under the International Trade Organisation (ITO) Charter.
The most important GATTs round was the Uruguay Round on Multilateral Trade
Negotiations concluded in 1994, in which the scope of multilateral trade
negotiations on goods, services and intellectual property rights were discussed.
Even in goods, agriculture and textiles sector, which were outside the ambit of the
GATT, were brought into the fold of the multilateral trade negotiations. The basic
principle underlying these agreements was to have an open trading system based
on multilaterally agreed rules. Thus, the Uruguay Round led to the establishment of
the World Trade Organisation (WTO) in 1995 as a successor institution to the GATT.
Evidently, the basic objective behind strengthening the rule-based system of the
world trade under the umbrella WTO is to ensure that the global markets remain
open and their market access is not restricted. Table describes the difference
between the GATT and the WTO.

Difference between GATT and WTO

Q-2 )Write short notes on

the following:
A. International franchising
B. International contract
A. International franchising
Franchising is a special form of licensing in which the franchisor makes a total marketing
programme available, including the brand name, logo, products and method of operation.
Franchising is defined by International Franchising Association as the contractual relationship
between the franchisor and the franchisee in which the franchisor offers a continuing interest in

the business of the franchisee in such areas as know-how and training and where the
franchisee operates under a common trade name, format and/or procedure, owned or controlled
by the franchisor and in which the franchisee has or will make a substantial capital investment in
his/her business from his/her own resources
In reality, franchising is a contractual agreement between a franchisor and a franchisee, which
allows the franchisee to conduct a given form of business under an established name. Usually,
the franchise agreement is more comprehensive than a regular licensing agreement, in as much
as the total operation of the franchise is prescribed. While licensing works well for
manufacturers, franchising is often suited to the global expansion efforts of service and retailing
Most food chains such as McDonalds, Pizza Hut and KFC (Kentucky Fried Chicken) are
expanding in the international markets through franchising. There could be various types of
franchising such as franchising for product, manufacturing, business, business format and
Benefits of international franchising are:
Name recognition and global branding
Reputation building
Economies on advertising
Support to various franchisers across the world
Rapid expansion with minimal investment

However, the major limitations of international franchising are:

Complexity in control of franchisee in various countries, Which may lead to the loss of the
companys image and reputation.
Transfer of intellectual property rights to franchisee may give rise to a Competitor
B. International contract manufacturing
Under contract manufacturing, the internationalizing firm gets manufacturing or assembly of
products from a third party in the foreign markets. As part of the agreement, the overseas
contract manufacturer customises the products on behalf of their client. In a number of cases,
the overseas manufacturer also handles the ordering and shipment processes for the client. As
a result, the client does not have to maintain manufacturing facilities, purchase raw materials or
hire labour to produce the finished goods.
International contract manufacturing is common in a large number of industries such as
pharmaceuticals, garments and automotive parts. The terms of contract manufacturing
arrangements may vary from case to case.
The benefits of international contract manufacturing are:
Low expenses on manufacturing
Lower capital requirements
Access to outside expertise

However, a major limitation of contract manufacturing includes reliance on external
manufacturers who may not fulfil their market commitment in terms of time and product quality.
Therefore, selection of the right partner to outsource product manufacturing is important. The
partner needs to possess both the capacity and resources to meet the requirements of the
international markets. However, contract manufacturing provides opportunities to small
manufacturers, especially from developing countries, to enter international markets.

Q-3) What are the stages in which international markets are

screened and analysed?
4 Stages
Screening potential markets

This is the first step in deciding on which markets to enter.

Step 1: Obtain export statistics that indicate product exports to various countries.
Export Statistics Profile (ESP) from the Directorate General of Commercial
Intelligence and Statistics can assist. If ESPs are not available for a certain product,
the firm should consult the Customs Statistical Service, Foreign Trade Report, Export
Information Data Reports or Annual Worldwide Industry Reviews.
Step 2: Identify five to ten large and fast growing markets for the firms product.
Examine all these for the past 35 years.
Step 3: Identify some smaller but fast emerging markets there may be fewer
competitors than established markets. If the market is just beginning to open up,
there may be fewer competitors than established markets.
Step 4: Target three to five of the most statistically promising markets for further

Assessing targeted markets

Here we assess the relative suitability of each of the markets under
Step 1: Examine trends for company products as well as trends regarding related
products that could influence demand.
Step 2: Ascertain the sources of competition including the extent of industrys
production and the major foreign countries the firm is competing against in each
targeted market.
Step 3: Analyse factors affecting marketing and use of the product in each market
such as end user sector, channels of distribution, cultural idiosyncrasies and
business practices

Step 4: Identify any foreign barriers (tariff or non-tariff) for the product being
imported into the country.
Step 5: Identify any government incentives to promote export of the product or

Q- 4) What is counter-trade? Describe the

various types of counter-trade.
Explanation of the concepts

Counter-trade is one of the oldest forms of trade wherein the buyer pays something
other than money for purchase of goods and services. It is a practice that requires a
seller as a condition of sale to commit contractually to reciprocate and undertake
certain business initiatives that compensate and benefit the buyer. Counter-trade
has been on the rise, primarily due to its inherent advantages vis--vis monetary
transaction, such as:

It provides a trade financing alternative to those countries that have an

international debt and liquidity problems.
It helps to access new markets where payment problems exist.
It helps promote bilateral trade agreements between the governments

Types of counter-trade
There are several types of counter-trade such as barter, counter-purchase, buyback, offsets and clearing agreements. They are discussed below:
Barter Barter is the most ancient and simplest form of counter-trade. It is a
one-time direct and simultaneous exchange of products of equal value (one
product for another). By eliminating the need for money as a medium of
exchange, barter makes it possible for cash-tied countries to buy and sell.
Although price must be considered in any counter-trade, it is only implicit in
the case of barter.
Counter-purchase Under counter-purchase, there are two contracts or a
set of parallel cash sales agreements, each paid in cash. Unlike barter, which
is a single transaction with an exchange price only implied, a counterpurchase involves two separate transactions each with its own cash value.
Thus, the buyer pays with hard currency whereas the supplier agrees to buy
certain products within a specified period. Therefore, money does not need to
change hands. In fact, the practice allows the original buyer to earn back the

Buy-back Buy-back is often used in international sale of plant and

machinery wherein the seller undertakes the obligation to buy back the
products made from the plant and machinery supplied, over an agreed upon
period. Unlike counter-purchase, which involves two unrelated products, the
two contracts in a buy back are highly related.
Offsets Offsets are widely used in government purchases such as aircraft
and military equipment wherein the importing government faces payment
problems in hard currency. Partial payments are sometimes made under
offsets and the foreign supplier is often required to make investment to
assemble or manufacture in the importing country and purchase local
components as an exchange for the right to sell its products.
Clearing agreements It is clearing account barter with no currency
transaction required. With a line of credit being established in the central
banks of two countries, the trade in this case is continuous and the exchange
of products between two governments is designed to achieve an agreed-on
value or volume of trade tabulated or calculated in nonconvertible clearing
account units.

Q- 5) Briefly discuss the role of sales promotion and

personal selling in international marketing.
Sales promotion
Personal Selling

Sales promotion is an important tool of marketing communication because it is
directed at consumers, and it involves such activities like couponing, sampling,
premiums, consumer education and demonstration activities, cents-off packages,
point-of-purchase materials and direct mail. Sales promotion directed at
intermediaries known as trade promotion includes activities like trade shows and
exhibits, trade discounts and co-operative advertising. For example, attendance at
an appropriate trade shows is one of the best ways to make contracts with
government officials and decision makers, or to work with present intermediaries or
attract new ones.
Objectives of sales promotions
Promotion includes providing information about the attributes of the product and
communicating messages aimed at satisfying its shareholders, government dealers
and the like. The main objectives of sales promotion activities are as under:
To provide information about the product, its attributes, colour, size, design,
uses, price, packaging and so on to the customers and dealers.
To increase the companys sales.
To reduce seasonal decline by offering customers and middlemen attractive
discounts and gifts
To develop preferences and conviction of buyers in favour of the product.

To keep the memory of the product alive in the minds of the customers.

Nature of sales promotion

Sales promotion consists of those promotion activities other than advertising,
personal selling and publicity. As such, promotional activities that do not fall under
the other three activities of the promotion mix are considered sales promotion.
Qantas, for example, offers its passengers Connection Cards that could be used to
purchase London Fog coats at wholesale rates.

Restrictions on sales promotions

Although sales promotion is generally received enthusiastically in developing and
LDCs, yet the activity is still largely unutilised. It may be, more, due to legal barriers
than psychological barriers. In sales promotion, the tools frequently used, either
singly or in combination, include:
point-of-purchase advertising, including displays
premiums: product gifts on purchase of various types: self-liquidating; direct
"on-pack" or "in-pack"; continuity premiums tie-in premiums and fulfilment
specialty advertising, gifts to consumers to build goodwill that will generate
future purchases
coupons, sampling, deals
sweepstakes and contests
co-operative advertising between retailer, manufacturer or trade association
booklets and brochures
trade shows and exhibits
directories and yellow pages
trade incentives or price reductions in the form of promotional allowances
Most European companies have a limit on the value of the premium given. A local
manufacturer in Greece sued Colgate for giving away razor blades with shaving
creams. Austria considers premiums to be a form of discriminatory treatment
towards buyers. In France, it is illegal to offer premiums that are conditional on the
purchase of another product. Austria has a discount law prohibiting cash reductions
that give preferential treatment to different groups of customers. Discounts in
Scandinavian countries are restricted. Also, the United States does not allow
alcoholic beverages as free samples. Germany restricts door-to-door free samples

B. Personal Selling
In the early stages of internationalisation, exporters rely heavily on personal
contacts. The marketing of industrial goods, especially of highly priced items and

services requires strong personal selling efforts. In some cases, personal selling may
be truly international, for example Boeing. However, in most cases, personal selling
takes place at the local level. Personal selling can be developed in the same fashion
as advertising.
The selling process is typically divided into several stages. The first step, that is,
prospecting, is the process of identifying potential purchasers and assessing their
probability of purchase. Successful prospecting requires problem-solving techniques
that involve understanding and matching the customers needs and the companys
products in developing a sales presentation. The next two steps, the approach and
the presentation, involve one or more meetings between the seller and buyer. In
international selling, it is absolutely essential for the sales person to understand
cultural norms and proper protocol. During the presentation, the salesperson must
deal with objections. Objections may be of a business or personal nature.
However, a successful sale does not end there; the final step of the selling process
involves following up with the customer to ensure his/her ongoing satisfaction with
the purchase.

Q-6) Write short notes on the following:

a. Bill of Exchange
b. Packing list
c. Air way bill
d. Certificate of origin
e. Consular invoice
Bill of exchange A Bill of Exchange (B/E) is an unconditional order in writing by
the exporter to the importer asking the importer to make the payment of a certain
amount. The exporter is called the drawer and the importer is called the drawee
here. When a draft bill is drawn on a foreign firm, it is termed as a foreign draft or
bill of exchange. It is prepared either in an international currency or Indian rupee
depending on the terms of the contract. Accordingly, the bill is known by the name
of the currency in which it is drawn. For example, the bill drawn in US dollars is
known as Dollar Bill and when prepared in rupees it is termed as Rupee Bill.
A B/E or draft is of two types (a) Sight Draft and (b) Usance Draft or Usance Bill.
When a drawer, that is, exporter, expects the drawee, that is, importer, to make the
payment immediately after the draft is presented to him/her, it is called a sight
draft. When the exporter has agreed to give time to foreign buyer for payment,
he/she draws a Usance bill, that is, draft which is drawn for payment at a date later
than the date of presentation. A B/E is prepared in two copies, each of them equally
valid. When one copy is used the other becomes null and void. A B/E is generally
used along with a Letter of Credit to provide more safety to the exporter.

Packing list It is required mainly by the carrier and customs authority. This list
contains information regarding the packing of goods, contents of different boxes
and cartons, and details of weight and measurement of all the packets. This helps in
loading and handling of goods; it also helps the customs and the importer to check
the details of the goods in a consignment.
Air way bill (AWB)/air consignment note
The receipt issued by an airline company or its agent for carriage of goods is called
air way bill or air consignment note. It is not a document for title and it is not issued
in a negotiable form. The goods are delivered to the consignee mentioned in the
AWB after identifying himself/herself as the party named in the air way bill as
consignee/receiver against payment of charges, if any. It is, therefore, desirable to
consign the goods in the name of a foreign correspondent bank, as it will enable you
to retain control over goods until the payment is made/documents are accepted for
The air way bill consists of three originals and six to eleven copies. It is a nonnegotiable document. Original 1 (green) is retained by the carrier issuing AWB for
accounting purposes. Original 2 (pink) accompany the consignment to the final
destination. Original 3 (blue) is given to the shipper as proof of receipt of goods for
shipment. Another reason for processing the export documents is that they are
required for operational purposes. The customs authorities are entrusted with the
primary responsibility of verifying that all the requirements of the regulations in
force in the country have been complied with by the exporter.
Certificate of origin These certificates, as the name implies, are documents
which certify the place of origin of the merchandise. This certificate is required by
Commonwealth countries and also by developed countries that have offered
concessions to the developing countries under the Generalized System of
Preferences (GSP). This certificate can be obtained by the authorised agencies. The
Government of India has authorised Federation of Indian Chamber of Commerce and
Industry (FICCI), the Export Promotion Councils (EPC) and various other trade
associations to issue certificates of origin.
Consular invoice This invoice is verified by the importing countrys
counsel/embassy present in the exporting country. For example Middle Eastern