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PAN AFRICAN INSTITUTE FOR DEVELOPMENT-

WEST AFRICA (PAID-WA) BUEA

DEPARTMENT OF BUSINESS AND MANAGEMENT


STUDIES

LECTURE NOTES FOR INTERNATIONAL


MARKETING

PROGRAMME: BSC

COURSE TITLE: INTERNATIONAL MARKETING


COURSE CODE: MAMA224

TOTAL CREDITS: 6

BY

Mr. NGANG PEREZ


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PAN AFRICAN INSTITUTE FOR DEVELOPMENT-
WEST AFRICA (PAID-WA) BUEA

COURSE OUTLINE FOR INTERNATIONAL MARKETING


PROGRAMME: MBA MARKETING MANAGEMENT

COURSE TITLE: INTERNATIONAL MARKETING

COURSE CODE: MAMA224


TOTAL CREDITS: 6

TOTAL LECTURE HOURS: 30 HRS

LECTURER: Mr NGANG Perez M.

A. COURSE OVERVIEW AND OUTLINE

1. Course Description: This course trains students on how to appropriately apply the marketing mix in
the international arena. Topics to be covered include entry methods and possible barriers, cultural
influences and public relations.
2. Course Objectives: By the end of this course, student should be able to:
 Pedagogic Objectives

 To develop junior managerial reading skills with the goal of acquiring the ability to understand
and synthesize readings and business cases presented in a class
 To build confidence and teamwork skills as junior marketers facing the international market
 To establish the foundational knowledge on entry international markets

Learning Objectives

 To grasp the preliminary knowledge and tools, in the field of international business
 To gain knowledge on the effects of globalization in the twenty first century international market
 To improve the understanding of cultural tolerance in international marketing

3. Course Schedule and Topics


This course will cover the following topics in 8 learning sessions with one session per week as
follows:

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WEEK 1: SESSION 1/CHAPTER 1: INTRODUCTION TO INTERNATIONAL MARKETING
Date:
Topics
 Background to International Marketing
 Scope of Marketing
 The Three Principles of Marketing
 Evolution of International/Global Marketing:
 Dynamics of International Marketing:
 Difference between domestic and international marketing
 The International Competitive Landscape
 International Marketing Process
 Characteristics of best practice in international marketing

WEEK 2: SESSION 2/CHAPTER 2: THE INTERNATIONAL MARKETING ENVIRONMENT


Date:
Topics
 Environmental Influences on International Marketing
 Social/cultural environment
 Legal environment
 Economic environment
 Political Environment
 Technological environment

WEEK 3: SESSION 3/CHAPTER 3: THE INTERNATIONAL MARKETING RESEARCH


Date:
Topics
 Marketing Research goes Global
 The importance of international marketing research
 The International Market Research Framework
 The Primary and Secondary Research Process
 Determining the Research Technique

WEEK 4: SESSION 4/CHAPTER 4: THE INTERNATIONAL MARKET ENTRY STRATEGIES


Date:
Topics
 International Market Entry Modes
 Export Entry Mode
 Counter Trade Entry Mode
 Specialized Entry Modes
 Importing Entry Mode
 Acquisition Entry Mode

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WEEK 5: SESSION 5/CHAPTER 5: INTERNATIONAL PRODUCT PLANNING AND
MANAGEMENT
Date:
Topics
 Characteristics of Global Products
 International product life cycle
 Product and Culture
 Branding and Packaging
 Packaging
 Labeling
 After Sales Service

WEEK 6: SESSION 6/CHAPTER 6: PRICING IN INTERNATIONAL MARKETS


Date:
Topics
 The Concept of Direct, Indirect and Opportunity Cost
 Components of Price
 Factors Influencing International Pricing
 The Process of Price Setting
 International Price Quotation and Payment Term

WEEK 7: SESSION 7/CHAPTER 7: INTERNATIONAL PROMOTION STRATEGY


Date:
Topics
 What is Promotion?
 Promotion methods
 Below the line (BTL) promotion
 Above the line (ABL) promotion
 Trade Fair
 International Price Quotation and Payment Term

WEEK 8: SESSION 8/CHAPTER 8: INTERNATIONAL DISTRIBUTION STRATEGY


Date:
Topics
 What Is a Distribution Channel?
 The Importance of Distribution Intermediaries in Business
 International Logistics
 Distribution structures
 Factors Influencing Channel Decisions in International Market
 Challenges in managing an international distribution strategies:

4. General Course Review and Final Exam Preparation


Date:
Topics
 Chapter 1 Introduction to International Marketing
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 Chapter 2 The International Marketing Environment
 Chapter 3 The International Marketing Research
 Chapter 4 The International Market Entry Strategies
 Chapter 5 International Product Planning And Management
 Chapter 6 Pricing In International Markets
 Chapter 7 International Promotion Strategy
 Chapter 8 International Distribution Strategy

5. Other Requirements
 Required Text Books
1) I. Doole & R. Lowe (2004). International Marketing Strategy: Analysis, Development and
Implementation 4nd Edition. Thomson Learning
2) M. Czinkota & I. Ronkainen (2010). “Principles of International Marketing, 9th Edition.
Cengage Learning
3) U.C. Mathur, (2008) “International Marketing Management: Text and Cases,” SAGE
Publications Inc
 Important weblinks

1) https://www.smartling.com/international-marketing/
2) https://www.ama.org/publications/JournalOfInternationalMarketing/Pages/About.aspx
3) https://www.marketingprofs.com/topic/articles/international-marketing

B. COURSE EVALUATION
 Written Assignment 15%
 Graded Quiz 10%
 Discussion Assignment 5%
 Final Exams taken on Campus 70% total 100%

C. COURSE NOTES AND PRESENTATION (NEXT PAGE)

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CHAPTER ONE

INTRODUCTION TO INTERNATIONAL MARKETING

Background to International Marketing


Today the corporate world cannot survive with restricting themselves within the domestic boundaries. As the
consumers across countries become more universal in nature, the need to look at the whole world as a market
is growing. The aim of this course is tointroduce the students to International Marketing, which explains how
International Markets operate in an International Environment. An elementary approach is used in the module,
which emphasizes the reasons for undertaking International Market analysis and their interpretation. An
international perspective is maintained throughout the text. The objective of the problems is to enhance the
student’s understanding of analytical techniques- more emphasis on policy and managerial implications of
International Marketing. This course focuses on International skills required to be an effective international
marketer. It will develop the student’s ability to identify and appreciate effective ways of getting the objective
fulfilled. It also develops practical applications ability and knowledge and how these can be used in the
decision-making process.

Learning Objectives from the lesson:

1. Understanding of international marketing.


2. Distinguish between international and domestic marketing.
3. The various management orientations.
4. Why is international marketing required?
5. Benefits of international marketing.

We live in a global marketplace. As you read this chapter, you may be sitting in a chair imported from Brazil
or at a desk imported from Denmark. You may have purchased these items form IKEA, the Swedish global
furniture retailer. The computer on your desk could be a sleek new IBM ThinkPad designed and marketed
worldwide by IBM and manufactured in Taiwan by Acer, Inc., or perhaps a Macintosh designed and
marketed worldwide by Apple and manufactured in Ireland. Your shoes are likely to be from Italy, and the
coffee you are sipping is form Latin America or Africa.
1.1 Defining Marketing:
The Chartered Institute of Marketing offers the following definition for marketing: “Marketing is the
management process responsible for identifying, anticipating and satisfying customer requirements

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profitably.” In short Marketing is “Meeting needs profitably”. Marketing has been defined by different authors
in different ways which can be broadly classified into three
 Product Oriented Definition: The emphasis is given on products.
In1985 AMA redefined marketing as “Marketing is the process of planning and executing the conception,
pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and
organizational goals.”
 Customer- Oriented Definition: Here the emphasis is on customers and their satisfaction. In the words
of Philip Kotler “Marketing is the human activity directed at satisfying needs and wants through an
exchange process.”
 Value Oriented Definition (Modern Definition): In 2004 the American Marketing Association defined
“Marketing is an organizational function and a set of processes for creating, communicating and
delivering value to customers and for managing customer relationships in ways that benefit the
organization and its stakeholders.”
1.2 Scope of Marketing
The scope of marketing can be understood by discussing what is marketing, how it works, what is marketed
and who does the marketing.
Peter Drucker, a leading management theorist, puts it this way, there will always, one can assume, be need for
some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and
understand the customer so well that the product or services fits him and sells itself. Ideally marketing should
result in a customer who is ready to buy. All that should be needed then is to make the product or service
available.
What is marketed?
Marketing people market 10 types of entities; let’s take a quick look at these;
GOODS: physical goods constitute the bulk of most countries production and marketing efforts.
SERVICES: services include the work of airlines, hotels, cars rental firms, barber and beauticians,
maintenance and repair people, and accountants, bankers, lawyers ,engineers doctors, software programmers,
and management consultants.
EVENTS: Marketers promote time-based events, such as major trade shows, artistic performances, and
company anniversaries. Global sporting events such as the Olympics and the World cup are promoted
aggressively to both companies and fans.
EXPERIENCES: By orchestrating several services and goods, a firm can create, stage and market
experiences. Veega land, Black Thunder etc represents this kind of experiential marketing.
PERSONS: Celebrity marketing is a major business, Artists, Musicians, CEOs, physicians, high- profile
lawyers and financiers, and other professionals all get help from celebrity marketers.
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PLACES: Cities, states, regions, and whole nations compete actively to attract tourists, factories, company
headquarters, and new residents. Place marketers include economic development specialists, real estate agents,
commercial banks, local business associations, and advertising and public relations agencies.
PROPERTIES: Properties are intangible rights of ownership of either real property (real estate) or financial
property (stocks and bonds). Properties are bought and sold, and these exchanges require marketing.
ORGANIZATIONS: Organizations actively work to build a strong, favorable, and unique image in the minds
of their target publics.
INFORMATION: Information is essentially what books, schools, and universities produce, market, and
distribute at a price to parents, students, and communities.
IDEAS: Every market offering includes a basic idea. Social marketers are busy promoting such ideas as
“Friends Don’t Let Friends Drive Drunk” and “A Mind Is a Terrible Thing to Waste.”
Therefore marketing is a process by which individuals and groups obtain what they need & want by creating
and exchanging products and value with others. “International Marketing” refers to such exchanges across
national boundaries for the satisfaction of human needs and wants
1.2.1 The Three Principles of Marketing
The essence of marketing can be summarized in three great principles. The first identifies the purpose and task
of marketing, the second the competitive reality of marketing, and the third the principal for achieving the first
two is the focus.
a. Customer Value and the Value Equation
The task of marketing to create customer value that is greater than the value created by competitors. Expanding
or improving product and / or service benefits, by reducing the price, or by a combination of these elements,
can increase value for the customer. Companies with a cost advantage can use price as a competitive weapon.
Knowledge of the customer combined with innovation and creativity can lead to a total offering that offers
superior customer value. If the benefits are strong enough and valued enough by customers, a company does
not need to be the low-price competitor to win customer.
b. Competitive or Differential Advantage
The second great principle of marketing is competitive advantage. A competitive advantage is a total offer,
vis-à-vis relevant competition that is more attractive to customers. The advantage can exist in any element of
the company’s offer; the product, the where
V= value
B= perceived benefits – perceived costs (for example, switching costs)
P= price
Price, the advertising and point of sale promotion, or the distribution of the product. One of the most powerful
strategies for penetrating a new national market is to offer a superior product at a lower price. The price
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advantage will get immediate customer attention, and, of those customers who purchase the product, the
superior quality will make an impression.
c. Focus
The third marketing principle is focus, or the concentration of attention. Focus is required to succeed in the
task of creating customer value at a competitive advantage. All great enterprise, large and small, is successful
because they have understood and applied this great principle. IBM succeeded and became a great company
because it was more clearly focused on customer needs and wants than any other company in the emerging
data-processing industry. One of the reasons IBM found itself in crisis in the early 1990s was that its
competitors had become much more clearly focused on customer needs and wants. Dell and Compaq, for
example, focused on giving customers computing power at low prices; IBM was offering the same computing
power at higher prices.
1.3 Evolution of Global Marketing:
Firms, depending on their level of involvement in foreign markets, pass through the following five evolutionary
phases.
1. Domestic marketing:
Domestic marketers tend to be ethnocentric (focus is solely on domestic market) & pay little attention to
changes taking place in the global market place. However, as I will always a firms that refuses to go
international, international will come and meet them. As such, domestic marketing firms produce and sell
products and services only in their home country.
Firms that keep focus only on their domestic markets may be vulnerable to the sudden changes forced on them
from foreign competition, when foreign firms enter the markets or even when foreign firms develop better or
cheaper products.
2. Export marketing:
Exporting firms fulfill unsolicited / solicited orders from foreign countries. For growth in export marketing,
however, a company requires physical, financial and managerial resources. When a firm attempts to export it
faces many issues that include difficulties in import/export restrictions, cost and availability of shipping,
exchange rate fluctuations, collection of money, development of distribution channels etc.
Export marketers still tend to take ethnocentric (a belief in or assumption of the superiority of the social or
cultural group that a person belongs to) approach, since they mostly make products in their home countries and
have no direct involvement in the foreign markets.
3. International marketing:
An international marketing firm has polycentric orientation with emphasis on product and promotional
adaptation in foreign markets whenever necessary. They make strategic decisions that are tailored to suit the

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cultures of the foreign countries. The company may establish an independent foreign subsidiary in each and
every foreign market it services– such efforts are also called multi-domestic marketing.
4. Multinational marketing:
More involvement than international marketing many international marketing in multinational marketing
Multinational firms are those that sell products or services in many countries.
• Economies of scale in product development, manufacturing, and marketing are achieved by
multinational firms by consolidation of some of their activities on regional basis.
• In this region-centric approach product planning may be standardized within a region (e.g. a group of
contiguous and similar countries).
5. Global marketing:
Global marketing firms sell goods and services in most countries around the world. Through global operations
firms achieve reduction of cost inefficiencies and duplication of efforts among their national and regional
subsidiaries. Global operations allow opportunities for the transfer of products, brands, and other ideas across
subsidiaries.
Opportunities to operate worldwide are supported by the emergence of global customers, and improved
linkages among national marketing infrastructures leading to the development of a global marketing
infrastructure
1.4 Dynamics of International Marketing:
Modern marketers have to deal with customers who are changing with channels of distribution that are
changing and with the technological advances that are changing the nature of their products & services and
requiring them to operate imaginatively & effectively in the emerging markets.
The basic nature of Marketing does not change from domestic to international marketing, but marketing outside
national boundaries poses special problems, such as dealing with multiple environments, managing operations
in distant markets, optimizing businesses in more than one country, dealing with foreign nationals etc.
International marketing therefore, unlike domestic marketing, requires operating simultaneously in more than
one kind of environment, coordinating these operations, and using the experience gained in one country for
making decisions in another country.
The demands are tough and the stakes are high. International marketers not only must be sensitive to different
marketing environments internationally, but also must be able to balance marketing moves worldwide to seek
optimum results for the company.
1.5 Differences between international and domestic marketing
There are many factors within the international environment which substantially increase the challenge of
international marketing. These can be summarized as follows:
1 Culture: often diverse and multicultural markets
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2 Markets: widespread and sometimes fragmented
3 Data: difficult to obtain and often expensive
4 Politics: regimes vary in stability – political risk becomes an important variable
5 Governments: can be a strong influence in regulating importers and foreign business ventures
6 Economies: varying levels of development and varying and sometimes unstable currencies
7 Finance: many differing finance systems and regulatory bodies
8 Stakeholders: commercial, home country and host country
9 Business: diverse rules, culturally influenced
10 Control: difficult to control and coordinate across markets.
1.6 The International Competitive Landscape
A major difference for managers operating on international markets is the impact all these currents and cross-
currents have on the competitive landscape. Wilson and Gilligan (2003) define marketing as ‘getting the
competitive advantage and keeping it’. The task of achieving this in a competitive environment where firms
are subject to local, regional and global competition can be immensely challenging. This is especially so if
indigenous local competitors are supported by the government of the country.
Across international markets, advanced countries are seeing significant competition from both emerging
markets and less developed countries who are exploiting modern technology and their own low labour costs to
compete in markets no longer so protected by tariff walls. The birth of global brand names is no longer the
domain of the West.
The complexity of competition is also heightened by the strategic use of international sourcing of components
by multinationals and global firms to achieve competitive advantage.
Given the nature of the challenges and opportunities identified above and the speed of change within the
international environment, this means that substantially different pressures are being placed upon management
than if they were purely operating in domestic markets. It follows from this that the manager of international
marketing needs a detailed knowledge and understanding of how particular environmental variables impact on
a firm’s international marketing operations.
Perlmutter (1995) identified nine cross-cultural management incompetences which led to failure across a
spread of country markets. He defined these core incompetences as: ‘the bundle of activities and managerial
skills that are mismatched in a great variety of countries where firms do business’.
The first three are interrelated and relate to the failure to be market driven.
1 Inability to find the right market niches.
2 Unwillingness to adapt and update products to local needs.
3 Not having unique products that are viewed as sufficiently higher added value by customers in local markets.
4 A vacillating commitment. It takes time to learn how to function in countries such as Japan.
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5 Assigning the wrong people. Picking the wrong people or the wrong top team in an affiliate.
6 Picking the wrong partners. There is a list of difficulties in building alliances; a main limitation is picking
partners who do not have the right bundle of capabilities to help reach the local market.
7 Inability to manage local stakeholders. This includes incompetence in developing a satisfactory partnership
relationship with unions and governments.
8 Developing mutual distrust and lack of respect between HQ and the affiliates at different levels of
management.
9 Inability to leverage ideas developed in one country to other countries worldwide.
If such mistakes are not to be made in your marketing strategies it is essential to ensure that the company has
a robust and rigorous approach to its international marketing planning processes. Approaches to achieving this
will be discussed in the following sections.
1.7 Situation analysis
Situation analysis is the process by which the company develops a clear understanding of each individual
market and then evaluates its significance for the company and for other markets in which the business
operates. As the international business environment becomes more competitive, dynamic and complex, there
is a greater need for individual managers to be aware not simply of their immediate situation, but also of the
possible impact of changes taking place in surrounding areas too. Individual national markets can be both
surprisingly similar and surprisingly dissimilar in nature, and it is important to understand these linkages and
the implications of the changes which take place.
Figure 1: Some typical stakeholders of multinational enterprises

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A thorough analysis of the situation in which the firm finds it serves as the basis for identifying opportunities
to satisfy unfulfilled customer needs. In addition to identifying the customer needs, the firm must understand
its own capabilities and the environment in which it is operating.
The situation analysis thus can be viewed as an analysis of the external environment and an internal analysis
of the firm itself. The external environment can be described in terms of macro-environmental factors that
broadly affect many firms, and micro-environmental factors closely related to the specific situation of the firm.
The situation analysis should include past, present, and future aspects. It should include a history outlining
how the situation evolved to its present state and an analysis of trends in order to forecast where it is going.
Good forecasting can reduce the chance of spending a year bringing a product to market only to find that the
need no longer exists.
If the situation analysis reveals gaps between what consumers want and what currently is offered to them, then
there may be opportunities to introduce products to better satisfy those consumers. Hence, the situation analysis
should yield a summary of problems and opportunities. From this summary, the firm can match its own
capabilities with the opportunities in order to satisfy customer needs better than the competition.
There are several frameworks that can be used to add structure to the situation analysis:
 5 C Analysis - company, customers, competitors, collaborators, climate. Company represents the
internal situation; the other four cover aspects of the external situation
 PEST analysis - for macro-environmental political, economic, societal, and technological factors. A
PEST analysis can be used as the "climate" portion of the 5 C framework.
 SWOT analysis - strengths, weaknesses, opportunities, and threats - for the internal and external
situation. A SWOT analysis can be used to condense the situation analysis into a listing of the most
relevant problems and opportunities and to assess how well the firm is equipped to deal with them.
1.8 Marketing Strategy:
Once the best opportunity to satisfy unfulfilled customer needs is identified, a strategic plan for pursuing the
opportunity can be developed. Market research will provide specific market information that will permit the
firm to select the target market segment and optimally position the offering within that segment. The result is
a value proposition to the target market. The marketing strategy then involves: Segmentation, Targeting (target
market selection), Positioning the product within the target market, Value proposition to the target market.
Marketing Mix Decisions
Detailed tactical decisions then are made for the controllable parameters of the marketing mix. The action
items include: Product development (specifying, designing, and producing the first units of the product),
Pricing decisions, Distribution contracts, Promotional campaign development.

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International Marketing Process
Five steps of the international marketing process:
The international marketing process comprises of five steps which marketers have to take as part of their
integrated marketing effort;
1. Analyzing international marketing opportunities to identify unfulfilled or under fulfilled needs that a
marketer may satisfy through its products or services. This analysis can be done through information seeking
and analysis or through market research (secondary or primary data collection and analysis). A marketer may
have a product or service concept developed first and looks for the needs in the market that can be satisfied by
these products or services. The marketer may also first identify unfulfilled or under fulfilled needs in the market
and then develop a suitable product or service offer to satisfy these identified needs.
2. Once the marketer has identified the potential opportunities in the first step now is the time to select the
groups of potential international customers (target markets) to whom to sell the products or services.
This step also involves identifying the potential buyers, demand measurement & forecasting, market
segmentation, market targeting & market positioning.
This step also requires the marketers to decide what key benefits in a product or service to offer to the selected
target customers and on what aspects to differentiate from the competition.
3. Since a firm needs to offer best value to the potential customers to makes its products and services more
salable compared with competitors, firms have to adopt appropriate business and marketing strategies.
4. The fourth step in the marketing process is developing the international marketing mix, product, place,
price & promotion. Marketing mix identifies four key areas for developing a well-coordinated marketing
strategy.
5. Developing a good marketing program is not good enough for success. A firm also needs to manage the
international marketing effort properly. Quite often firms fail not because they did not have a viable marketing
program, but that they failed in properly implementing their well-designed plans. Generally firms also need
proper analysis, planning, implementation and control of their marketing programs.
1.9 Characteristics of best practice in international marketing
It is apparent, therefore, that firms and organizations planning to compete effectively in world markets need a
clear and well-focused international marketing strategy that is based on a thorough understanding of the
markets which the company is targeting or operating in. International markets are dynamic entities that require
constant monitoring and evaluation. As we have discussed, as markets change so must marketing techniques.
Innovation is an important competitive variable, not only in terms of the product or service but throughout the
marketing process. Countertrading, financial innovations, networking and value-based marketing are all
important concepts in the implementation of a successful international strategy.

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The challenge, then, of international marketing is to ensure that any international strategy has the discipline of
thorough research and an understanding and accurate evaluation of what is required to achieve the competitive
advantage. Doole (2000) identified three major components to the strategies of firms successfully competing
in international markets:
■ A clear international competitive focus achieved through a thorough knowledge of the international markets,
a strong competitive positioning and a strategic perspective which was truly international.
■ An effective relationship strategy achieved through strong customer relations, a commitment to quality
products and service and a dedication to customer service throughout international markets.
■ Well-managed organizations with a culture of learning. Firms were innovative and willing to learn, showed
high levels of energy and commitment to international markets and had effective monitoring and control
procedures for all their international markets.

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CHAPTER TWO

THE INTERNATIONAL MARKETING ENVIRONMENT

The key difference between domestic marketing and marketing on an international scale is the
multidimensionality and complexity of the many foreign country markets a company may operate in. An
international manager needs a knowledge and awareness of these complexities and the implications they have
for international marketing management.
2.1 Environmental Influences on International Marketing

2.2 Social/cultural environment


The social and cultural influences on international marketing are immense. Differences in social conditions,
religion and material culture all affect consumers’ perceptions and patterns of buying behavior. It is this area
that determines the extent to which consumers across the globe are either similar or different and so determines
the potential for global branding and standardization. A failure to understand the social/cultural dimensions of
a market are complex to manage, as McDonald’s found in India. It had to deal with a market that is 40 per cent
vegetarian, had an aversion to either beef or pork among meat-eaters and a hostility to frozen meat and fish,
but with the general Indian fondness for spice with everything. To satisfy such tastes, McDonald’s discovered
it needed to do more than provide the right burgers. Customers buying vegetarian burgers wanted to be sure
that these were cooked in a separate area in the kitchen using separate utensils and sauces like McMasala and
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McImli were developed to satisfy the Indian taste for spice. Interestingly however, these are now innovations
they have introduced into other markets.
2.3 Legal environment
Legal systems vary both in content and interpretation. A company is not just bound by the laws of its home
country but also by those of its host country and by the growing body of international law. This can affect
many aspects of a marketing strategy – for instance advertising – in the form of media restrictions and the
acceptability of particular creative appeals. ). Product acceptability in a country can be affected by minor
regulations on such things as packaging and by more major changes in legislation. It is important, therefore,
for the firm to know the legal environment in each of its markets. These laws constitute the ‘rules of the game’
for business activity. The legal environment in international marketing is more complicated than in domestic
markets since it has three dimensions:
(i) local domestic law;
(ii) international law;
(iii) domestic laws in the firm’s home base.
• Local domestic laws. These are all different! The only way to find a route through the legal maze in
overseas markets is to use experts on the separate legal systems and laws pertaining in each market targeted
• International law. There are a number of international laws that can affect the organization’s activity.
Some are international laws covering piracy and hijacking, others are more international conventions and
agreements and cover items such as the International Monetary Fund (IMF) and World Trade Organization
(WTO) treaties, patents and trademarks legislation and harmonization of legal systems within regional
economic groupings, e.g. the European Union.
• Domestic laws in the home country. The organization’s domestic (home market) legal system is
important for two reasons. First, there are often export controls which limit the free export of certain goods
and services to particular marketplaces, and second, there is the duty of the organization to act and abide by its
national laws in all its activities, whether domestic or international.
India is regarded by many firms as an attractive emerging market beset with many legal difficulties,
bureaucratic delay and lots of red tape. For example, shoes cannot be imported in pairs but have to be imported
one at a time – which causes huge problems for shoe manufacturers who need to import shoes as production
samples. The way many of them overcome the problem is by importing the left shoe via Madras and the right
shoe via Mumbai. Companies such as Mercedes Benz, Coca-Cola and Kellogg have found the vast potential
of India’s market somewhat hard to break into. Its demanding consumers can be difficult to read and local
rivals can be surprisingly tough. Political squabbles, bureaucratic delays and infrastructure headaches are also
major obstacles.

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2.4 Economic environment
The purchasing power of people in a country is a crucial factor in determining the demand for products.
Marketers must pay close attention to major trends in income and consumer spending patterns. In short, the
economic conditions of a country – the nature of the economy, the stage of development of the economy,
economic resources, the level and distribution of income, etc. are all very important factors in marketing.
Further economic factors like inflation, productivity, shortages, unemployment etc have a tremendous impact
on prices and incomes. Hence, marketers must incorporate these factors while preparing marketing programs.
This understanding is important at a world level in terms of the world trading infrastructure such as world
institutions and trade agreements developed to foster international trade, at a regional level in terms of regional
trade integration and at a country/ market level. Firms need to be aware of the economic policies of countries
and the direction in which a particular market is developing economically in order to make an assessment as
to whether they can profitably satisfy market demand and compete with firms already in the market.
2.5 Political Environment
The political environment of international marketing includes any national or international political factor that
can affect the organization’s operations or its decision making. Politics has come to be recognized as the major
factor in many international business decisions, especially in terms of whether to invest and how to develop
markets. Politics is intrinsically linked to a government’s attitude to business and the freedom within which it
allows firms to operate. Unstable political regimes expose foreign businesses to a variety of risks that they
would generally not face in the home market. This often means that the political arena is the most volatile area
of international marketing. The tendencies of governments to change regulations can have a profound effect
on international strategy, providing both opportunities and threats.
Political Factors include:
A. Laws
There are laws in some countries that will greatly affect your ability to do business in them or prohibit it
altogether. One such example is Thailand which has specific laws stating no foreign person or company can
own more than 49% of business in Thailand, so you must be willing to take on a Thai partner in order to do
business there. You must be aware of laws like this if part of your product marketing strategy includes
manufacturing or distributing your wares in a foreign target market country.
B. Licensing and Permits
There is a chance that the only way you can do business in a foreign country is to give out an expensive permit
or license of another business in that country to manufacture and sell your product for you. Governments do
these things as a way of making sure a larger percentage of income from sales stays in the home country. An
example of this is Pepsi’s license to Heineken to bottle and sell Pepsi products in the Netherlands.

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C. Taxes
Taxes are another way that governments can cash in on foreign businesses operating and selling products in
their country, so their citizens’ spending does not allow much money to leave the country. Taxes can and do
impact your ability to make a profit selling goods and services in a foreign country and will shape your
international marketing strategy because of that. High tax rates on goods sold, like those in the USA, can make
it hard for a business to stay on the right side of that fine line between profit and loss.
D. Fees
When you market your products for sale in a foreign country, you may be subject to pay certain fees for the
right to do that. These fees can be a one-time deal or recurring, and they can also be quite high in some
circumstances if they involve what might be considered luxury items.
E. Tariffs
Tariffs have long been used to balance trade between countries and to protect national companies from losing
business to foreign competitors. This can be a big factor when it comes to international trade and marketing
your company’s products or services for sale. An example of this is China’s 105.4% tariff on chicken that is
shipped from the USA; it is easy to see how a high tariff like this can push a country’s citizens toward buying
domestically raised chicken.
F. Currency risks
There are always risks when doing business in the currency of a foreign country that you are marketing your
product or services to. If you have your money tied up in a foreign currency and economic events fall just right,
your company could stand to lose millions.
G. Other Political Risks and Restrictions
• Investment restrictions: Many countries have strict requirements on who can own businesses and do
other business-related investments in their country. Your marketing department needs to be aware of these
things. For instance in Malaysia, if you are an agricultural business and you want to buy land to produce fruits
and vegetables to sell there, any land purchase over $163,000 is subject to approval by the government and
may come with other restrictions too.
• Operational restrictions: Just how much operational control you will have over your overseas business
remains to be seen, and that is a concern for some. Because of some of the restrictions that have been discussed
and other requirements for doing business in a foreign country, chances are your business will need an
international management team. This will affect the operational control of your business and has to be factored
into any marketing decisions that your company makes.
• Discriminatory restrictions: Discriminatory practices in a foreign country may inhibit or prohibit
marketing your goods and services to that country too. The USA has imposed import quotas on Japan in protest
at non-tariff barriers which they view as being imposed unfairly on US exporters. They have also imposed
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bans on imports from Libya and Iran in the past. Such barriers tend to be such things as special taxes and tariffs,
compulsory subcontracting, or loss of financial freedom.
2.6 Technological environment
Technology is a major driving force both in international marketing and in the move towards a more global
marketplace. The impact of technological advances can be seen in all aspects of the marketing process. The
ability to gather data on markets, management control capabilities and the practicalities of carrying out the
business function internationally have been revolutionized in recent years with the advances in electronic
communications. Satellite communications, the Internet and the World Wide Web, client–server technologies,
ISDN and cable as well as email, faxes and advanced telephone networks have all led to dramatic shrinkages
in worldwide communications. Shrinking communications means, increasingly, that in the international
marketplace information is power.
The technological changes result in changes in consumption pattern and marketing systems. A new technology
may improve our lives in one area while creating environmental and social problem in another area. The
marketers should monitor the following trends in technology: the pace of change, the opportunities for
innovation, varying research and development budgets, and increased regulation. He should watch the trends
in technology and adopt the latest technology so as to stay alive in the field.

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CHAPTER THREE

THE INTERNATIONAL MARKETING RESEARCH

Changes in the global environment are presenting organizations with both new opportunities and challenges.
Rapid advances in technology, increasing international trade and investment, growing wealth and affluence
across the globe, and a convergence of consumer tastes and preferences are compelling businesses to expand
their globalization strategies and tactics. In essence, the global economy is forcing organizations to adapt to a
new international order
The process of international marketing research shares many commonalities with its domestic counterpart,
namely the familiar steps of problem definition, methodology design, fieldwork, and final report and
recommendations. The major differences between the two involve disparities that spring from political, legal,
economic, social, and cultural differences across countries, and the problem of comparability of research results
3.1 MARKETING RESEARCH GOES GLOBAL
As organizations become more global in their operations, how will these companies continue to be able to
carry on a meaningful dialog with their customers as they become ever more dispersed around the globe?
Which countries represent the best opportunities for the organization's products and services? How will these
firms design consumer-based strategies that are customized for distant international market segments? Market
research is the functional link between marketing management and an organization's ultimate customer-base.
Continual change and uncertainty in the global market is causing seismic shifts in the role of marketing
research. Clearly, as globalization increases, firms will need to know how to better utilize market research
approaches that enable them to stay close to these worldwide and diverse customer segments.
3.1.1 The importance of international marketing research
Market research is the vital link between the organization and its customers. The objective of sound market
research is to interpret consumer behavior and translate the perspective of key customers into actionable
marketing strategies. Without this open dialog with customers, companies are unable to keep in touch with
vital consumer behavior trends and the many influences that affect the customers of an organization. In today's
consumer environment of over-choice and over-communication, growth can only be realized by organizations
that are very skilled at crafting well-targeted strategies directed at specific micro-niches of the larger macro
market. Companies that go to market without first uncovering specific segment needs and perceptions risk
facing the monumental cost of marketing failure. For example, with a new consumer product launch, typically
costing $25 million or more, the risk of not incorporating consumer behavior into marketing strategy is
considerable.

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Since the mid-1990s, the international research business has grown tremendously. In 1995, the top 25 global market
research organizations had aggregate revenues of only $5.7 billion, and 45% of their revenues came from outside the
companies' home countries. By 2004, revenues had grown 133%, to $13.3 billion, while out-of-home-country share grew
to 67% (Marketing News, 2005). As illustrated by these figures, it is clear that spending on international market research
projects is on the rise in the U.S. and other countries.
It has been estimated that it costs six times as much to attract a new customer as it does to keep a current customer. This
fact demands that organizations increasingly must stay in touch with their best customers. The most actionable method
employed by market-driven organizations to keep pulse with their valued customers is the effective use of market
research. Only by having an open dialog with their customers can companies learn about the subtle shifts in buying
preferences that, without proper management, ultimately lead to company and/or brand defection.
As more organizations pursue global business strategies, they will require and demand international sources of market
information. In order to compete effectively in the 21st century, these businesses will need specialized, targeted
information about buyers in dispersed international markets. In the domain of business-to-business market, there is ample
justification for conducting international market research in support of the design, execution, and interpretation of a wide
variety of global marketing strategies.
Companies that pursue multi-domestic and global marketing strategies face a wide variety of strategic questions relating
to foreign market entry. According to Rydholm (1996), prior to pursuing international marketing strategies, managers
should ask:

• Have international sales been increasing as a percentage of overall revenue?


• Are international markets growing faster than domestic markets?
• Does the organization have the same competitive position outside the home market?
• Are the fundamental needs of foreign customers known?
• What is the interaction of the four P's in foreign markets?
• Can the Internet help with research design?
The answers to these and other questions can help organizations prioritize their need for international marketing research.
While it makes sense for increasing numbers of companies to go global, making the correct decisions regarding target
markets, brands, and other strategic marketing mix variables is both challenging and problematic. Furthermore, the
Internet may not necessarily be the optimum medium for conducting international market research projects, despite its
rapid growth and acceptance by certain consumers.
3.1.2 Think globally, learn locally
As stated by Craig and Douglas (2005), effective and timely market research is an essential tool for developing
strategy in a rapidly changing global marketplace. The authors contend that international market research is
increasingly needed to address a wide variety of global marketing challenges including correctly positioning
new products, avoiding product formulation errors, accurately understanding cultural challenges, identifying
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appropriate promotion messages, being cognizant of geographical differences, and examining language and
translation problems.

In order to make effective marketing strategy decisions, marketers who are increasingly drawn to the global
marketplace because of the opportunity it represents need a reliable and valid source of information. Craig and
Douglas (2005) discuss three major information needs relative to international market research. These
represent;

(1) Information needed for international market entry. This includes information concerning macro issues
(e.g., the political, legal, and regulatory environment of each foreign coun-try) and micro issues (e.g.,
product or service sales potential, market growth rate, and competitive intensity).

(2) Information needed for local market planning. These issues primarily surround strategies and tactics
related to developing the appropriate marketing mix.

(3) Information related to global rationalization. This involves evaluating and integrating data previously
collected in order to monitor changes in the international environment.

To accomplish these critical information objectives, marketers require an international market research
framework.
3.2 The International Market Research Framework

Figure 2: The international market research framework. Adapted and modified from Douglas and Craig (2000)

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Through the use of marketing research practices, international product and service providers can develop the
most effective international marketing strategies that will lead to sustainable competitive advantage. Fig. 2
illustrates the international market research process within the context of the four familiar stages of the
domestic research process: setting objectives, designing methodology, collecting data, and reporting findings.
The four traditional stages of the market research process are shown providing the larger context for cross-
cultural market research. Although these stages are not unique to the international setting, they provide the
backdrop which highlights the potential challenges posed by international research designs. For example,
information requirements at the corporate, regional, and local levels will likely vary widely between different
countries. Tactical decisions that may help the product or service in one country may not fit within the broader
strategic goals of the organization. Similarly, examining previous data and collecting secondary data may be
much more difficult in some countries, depending on the state of the market research infrastructure present.
Additionally, within the methodology step, the unit of analysis has four different levels ranging from local to
global. Clearly, the unit of analysis varies between traditional studies and projects conducted across
international boundaries. It is much easier to design a questionnaire focused on a single local market, as
opposed to a study that represents a global unit of analysis. Further, conducting fieldwork across country lines
poses many challenges. Analyzing data, incorporating new knowledge, and modifying business strategies are
more difficult and time consuming when the unit of analysis includes a larger worldwide context. Each step of
the traditional research process when applied to the international setting holds a potential for significant
challenges.
3.2.1 Setting research objectives
Like its domestic counterpart, the international market research process begins with a clear understanding of
the specific research objectives. Determining what information is required, and at what level, is the necessary
first step. As in domestic research, information may be required for decision making at different levels in the
organization, from the corporate level relating to strategic issues, down to local operating units where concerns
are often more tactical (Craig & Douglas, 2005). Projects at the management level cover broad issues such as
brand awareness and tracking, while those at the decision making level may involve more tactical issues like
local pricing, packaging, and other marketing mix decisions. If the research problem is not clearly articulated,
the research collected will not adequately answer the specific problem. Unfocused research studies rarely, and
only then by accident, relate to the management problem under consideration. Another flaw of studies
conducted without critical thinking concerning objectives is that the resulting research design may well elicit
unusable information. For example, a project with the objective of obtaining customer impressions on a
corporate merger will not elicit information on why customers are defecting to competitive brands.
Research objectives will vary from firm to firm because of the views of management, the corporate mission,
and the marketing situation. In addition, the information needs of firms are closely linked with the level of
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existing international expertise. The firm may therefore wish to start out by determining its internal level of
readiness to participate in the global market. This includes a general review of corporate capabilities such as
personnel resources and the degree of financial exposure and risk that the firm is willing and able to tolerate.
Existing diagnostic tools can be used to compare a firm’s current preparedness on a broad-based level.
Knowing its internal readiness, the firm can then pursue its objectives with more confidence.
a. Going International: Exporting
The most frequent objective of international market research is that of foreign-market opportunity analysis.
When a firm launches its international activities, basic information is needed to identify and compare key
alternatives. The aim is not to conduct a painstaking and detailed analysis of the world on a market-by-
market basis but instead to utilize a broad-brush approach. Accomplished quickly at low cost, this can narrow
down the possibilities for international marketing activities. There are 193 countries in the world, and an
evaluation of each one is difficult and time-consuming. There are two ways to evaluate foreign markets,
country ranking and clustering, and both should be used. Indexing and ranking countries by their market
appeal to a specific business or project is the first step. Clustering countries into similar groups for screening
and evaluation is essential for further development and planning of strategies once a specific country is chosen.
Such an approach should begin with a cursory analysis of general market variables such as total and per capita
GDP, GDP growth, mortality rates, and population figures. Although these factors in themselves will not
provide detailed market information, they will enable the researcher to determine whether the corporation’s
objectives might be met in those markets. Such cursory evaluation will help reduce the number of markets to
be considered to a more manageable number—for example, from 193 to 25.
Next, the researcher will require information about each individual market for a preliminary evaluation. This
information typically identifies the fastest-growing markets, the largest markets for a particular product, market
trends, and market restrictions. Although precise and detailed information for each product probably cannot be
obtained, it is available for general product categories.
b. Going International: Importing
When importing, firms shift their major focus from supplying to sourcing. Management must identify markets
that produce desired supplies or materials or that have the potential to do so. Foreign firms must be evaluated
in terms of their capabilities and competitive standing.
The importer needs to know, for example, about the reliability of a foreign supplier, the consistency of its
product or service quality, and the length of delivery time. Information obtained through the subsidiary office
of a bank or through one’s embassy can be very helpful. Information from business rating services and
recommendations from current customers are also very useful in evaluating the potential business partner.
In addition, government rules must be scrutinized as to whether exportation from the source country is possible.
For example, India may set limits on the cobra handbags it allows to be exported, and laws protecting cultural
25
heritage may prevent the exportation of pre-Columbian artifacts from Latin American countries. The
international manager must also analyze domestic restrictions and legislation that may prohibit the importation
of certain goods into the home country. Even though a market may exist in the United States for foreign
umbrella handles, for example, quotas may restrict their importation in order to protect domestic industries.
Similarly, even though domestic demand may exist for ivory, its importation may be illegal because of
worldwide legislation enacted to protect wildlife. Firms must also consider the risks of imports, such as
disruption or terrorism. Such occurrences can cause major dislocations in corporate planning and order
fulfillment.
3.2.2 Designing research methodology
The second major step in the international market research process involves designing the methodology.
Whether domestic or international in focus, this is the critical step of any research project. In order to construct
the most effective methodology, researchers must have a broad perspective of the many methodological options
available. Variations range from primary to secondary research, qualitative and quantitative, experimental
research, test markets, observations, and surveys, just to name a few. In the international context, the specific
unit of analysis is critical and relates to the research design stage. For example, corporate decisions would
require more of a global or regional approach; in contrast, tactical marketing mix decisions would require more
of a local unit of analysis.
Designing the primary methodology is specifically related to how the data will be collected from respondents
and analyzed. In this chapter, we employ a narrow definition of methodology as it relates to the specific data
collection method that will be utilized (e.g., in-person, telephone, mail, Internet survey). The sampling plan
and measurement equivalence concepts are also much more complicated in an international market research
environment. This critical stage in the process requires adequate time and attention to address the many details
that are involved with international projects. Instrument translation, primary research method (e.g., in-person,
telephone, mail, or Internet survey), and data analysis technique issues pose many challenges for international
market researchers due to their varying levels of presence, acceptance, and utilization across worldwide
markets.
3.2.3 Collecting data and reporting findings
Once the appropriate data collection methodology is selected, fieldwork must be conducted. Essentially, this
executes the research design developed during stage two. The next step involves analyzing the findings and
providing a management report, along with a summary of the strategic recommendations. The new knowledge
should be incorporated into the organization's database and business strategies should be appropriately
modified. This process repeats itself as needed through the information feedback loop to address future
information requirements.

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The presence of an adequate market research infrastructure offers a distinct advantage to developed countries
and rapidly growing markets. Characteristics comprising market research infrastructure consist of a variety of
tools, data sources, methodology options, and the like, all of which help in executing market research projects.
3.2.4 Sources of Data
Secondary data for international marketing research purposes are available from a wide variety of sources. The
major ones are briefly reviewed here.
a. Governments
Of all data sources, governments typically have the greatest variety of data available. This information provided
by governments addresses either macro or micro issues or offers specific data services. Macro information
includes population trends, general trade flows between countries, and world agricultural production. Micro
information includes materials on specific industries in a country, their growth prospects, and their foreign
trade activities.
Specific data services might provide custom-tailored information responding to the detailed needs of a firm.
Alternatively, some data services may concentrate on a specific geographic region.
b. International Organizations
International organizations often provide useful data for the researcher. The Statistical Yearbook produced by
the United Nations (UN) contains international trade data on products and provides information on exports and
imports by country. Because of the time needed for worldwide data collection, the information is often dated.
Additional information is compiled and made available by specialized substructures of the UN. Some of these
are the UN Conference on Trade and Development (http://www.unctad.org), which concentrates primarily on
international issues surrounding developing nations, such as debt and market access; the UN Center on
Transnational Corporations; and the International Trade Centre (http://www.intracen.org). The World Atlas,
published by the World Bank (http://www.worldbank.org), provides useful general data on population, growth
trends, and GDP figures. The World Trade Organization (http://www.wto.org) and the Organization for
Economic Cooperation; and Development (OECD) (http://www. oecd.org) also publish quarterly and annual
trade data on their member countries. Organizations such as the International Monetary Fund
(http://www.imf.org) and the World Bank publish summary economic data and occasional staff papers that
evaluate region- or country-specific issues in depth.
c. Trade Associations
Associations such as world trade clubs and domestic and international chambers of commerce (for example,
the American Chamber of Commerce abroad) can provide valuable information about local markets. Often,
files are maintained on international trade issues and trends affecting international marketers. Useful
information can also be obtained from industry associations. These groups, formed to represent entire industry
segments, often collect from their members a wide variety of data that are then published in an aggregate form.
27
The information provided is often quite general in nature because of the wide variety of clientele served. It can
provide valuable initial insights into international markets, since it permits a benchmarking effort through
which the international marketer can establish how it is faring when compared to its competition. For example,
an industry summary that indicates firm average exports to be 10 percent of sales, and export sales growth to
take place mainly in Asia, allows a better evaluation of a specific firm’s performance by the international
marketer.
3.3 The Primary Research Process
Primary research is conducted to fill specific information needs. The research may not actually be conducted
by the firm with the need, but the work must be carried out for a specific research purpose. Primary research
therefore goes beyond the activities of secondary data collection, which often cannot supply answers to the
specific questions posed.
Conducting primary research internationally can be complex due to different environments, attitudes, and
market conditions. Yet, it is precisely because of these differences that such research is necessary. Nonetheless,
at this time, marketing research is still mainly concentrated in the industrialized nations of the world. Global
marketing research expenditures were estimated to be $18.9 billion in 2004. Of that amount, more than 80
percent was spent in the United States and in the European Union.
Primary research is essential for the formulation of strategic marketing plans. One particular area of research
interest is international market segmentation. Historically, firms segmented international markets based on
macro variables such as income per capita or consumer spending on certain product categories. Increasingly,
however, firms recognize that segmentation variables, such as lifestyles, attitudes, or personality, can play a
major role in identifying similar consumer groups in different countries, which can then be targeted across
borders. One such group could consist, for example, of educationally elite readers who read Scientific
American, Time, Newsweek, The Financial Times, and The Economist. Members in this group are likely to
have more in common with one another than with their fellow citizens. Alternatively, in marketing to women,
it is important to understand the degree to which they have entered the workforce in a country and how women
in different economic segments make or influence purchase decisions. In order to identify these groups and to
devise ways of meeting their needs, primary international market research is indispensable.
3.3.1 Determining Information Requirements
Specific research questions must be formulated to determine precisely the information that is sought. The
following are examples of such marketing questions:
• What is the market potential for our furniture in Indonesia?
• How much does the typical Nigerian consumer spend on soft drinks?
• What will happen to demand in Brazil if we raise our product price along monthly inflation levels?
• What effect will a new type of packaging have on our “green” consumers in Germany, France, and England?
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Only when information requirements are determined as precisely as possible will the researcher be able to
develop a research program that will deliver a useful product.
3.4 Challenges of conducting international marketing research
Due to the complexities of conducting and managing market research projects across national boundaries,
many factors exist that, if not adequately addressed, can negatively impact project management and,
consequently, project deliverables. These factors can impact any and, for that matter, all of the traditional
market research steps discussed previously. For example, varying cultural norms across different countries or
continents may impact research objectives, as well as pose significant challenges in the data collection phase
of the project. Similarly, language barriers have a considerable impact on data collection and, ultimately,
incorporating the new learning into the organization for maximum benefit.
a. Cultural challenges
Conducting market research in an international market requires a great deal of new learning. From a managerial
perspective, this includes a more comprehensive understanding of native culture. Cultural elements such as
social institutions, gender roles, language, religion, aesthetics, education, and time orientation are closely
intertwined with national culture and have a major impact on the acceptability and adoption of new products
and services. The effect of culture is multifaceted in the sense that cultural values that are important to one
group of people may mean little to another. Cultural differences deeply affect adoption of products and services
and other forms of market behavior. Clearly, cultural forces have taken on strategic importance that cannot be
ignored when marketing new and/or existing products and services. Social factors embody a culture's
fundamental organization, including its groups and institutions, its system of social infrastructure, and the
process by which resources are distributed. Naturally, social structure affects market research decisions
including the cost of conducting the research, reaching the target markets, collecting the data, etc.
The target market's knowledge of and familiarity with product service offerings also plays a critical role in
conducting research. Market research specialists demand certain levels of educational and technological skills.
Although a country may have a huge population, only a small segment of that population may be equipped
with the knowledge necessary to employ research tools either at work or at home. In a technologically
sophisticated domestic market, businesses have more opportunities to modify existing products/services to
include new technological designs and features, and develop entirely new products/services and technologies.
Research companies operating in a sophisticated market, where the customer group is large and profitable,
have the advantage over companies operating in markets that lack such sophistication.
b. Language
c. Translation
d. Cultural norms
e. Time zones
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f. Foreign holidays
g. Market research infrastructure
h. Currency fluctuations
i. Data collection challenges
j. Legal issues
3.5 Determining the Research Technique
Selection of the research technique depends on a variety of factors. First, the objectivity of the data sought
must be determined. Standardized techniques are more useful in the collection of objective data than of
subjective data. Unstructured data will require more open-ended questions and more time than structured data.
Since the willingness and ability of respondents to spend the time and provide a free-form response are heavily
influenced by factors such as culture and education, the prevailing conditions in the country and segments to
be studied need to be understood in making these decisions. Whether the data are to be collected in the real
world or in a controlled environment also must be decided. Finally, a decision needs to be made as to whether
the research is to collect historical facts or gather information about future developments. This is particularly
important for consumer research because firms frequently desire to determine consumers’ future intentions to
purchase a certain product.
Cultural and individual preferences, which vary significantly among nations, play a major role in determining
research techniques. Once the structure of the type of data sought has been determined, a choice must be made
among the types of research instruments available. Each provides a different depth of information and has its
unique strengths and weaknesses.
a. Interviews
Interviews with knowledgeable persons can be of great value to a corporation desiring international marketing
information. Because bias from the individual may be part of the findings, the intent should be to obtain in-
depth information rather than a wide variety of data. Particularly when specific answers are sought to very
narrow questions, interviews can be most useful.
b. Focus Groups
Focus groups are a useful research tool resulting in interactive interviews. A group of informed persons is
gathered for a limited period of time (two to four hours). Usually, the ideal size for a focus group is seven to
ten participants. A specific topic is introduced and thoroughly discussed by all group members. Because of the
interaction, hidden issues are sometimes raised that would not have been addressed in an individual interview.
The skill of the group leader in stimulating discussion is crucial to the success of a focus group.
Discussions are often recorded on tape and subsequently analyzed in detail. Focus groups, like in-depth
interviews, do not provide statistically significant information; however, they can be helpful in providing
information about perceptions, emotions, and other non-overt factors. In addition, once individuals are
30
gathered, focus groups are highly efficient in terms of rapidly accumulating a substantial amount of
information. With the advances occurring in the communications field, focus groups can also be carried out
internationally, with interaction between groups.
c. Observation
Observation techniques require the researcher to play the role of a nonparticipating observer of activity and
behavior. Observation can be personal or impersonal—for example, mechanical. Observation can be obtrusive
or in obtrusive, depending on whether the subject is aware or unaware of being observed. In international
marketing research, observation can be extremely useful in shedding light on practices not previously
encountered or understood. This aspect is particularly valuable for the researcher who is totally unfamiliar with
a market or market situation, and can be quickly achieved through, for example, participation in a trade mission.
Finding employees with personal experience and observations about international markets can be very
beneficial for employers.
Conducting observations can also have its pitfalls. For example, people may react differently to the discovery
that their behavior has been observed. The degree to which the observer has to be familiarized or introduced
to other participants may vary.
d. Surveys
Survey research is useful in providing the opportunity to quantify concepts. In the social sciences, the cross-
cultural survey is generally accepted as a powerful method of hypothesis testing. Surveys are usually conducted
via questionnaires that are administered personally, by mail, or by telephone. Use of the survey technique
presupposes that the population under study is able to comprehend and respond to the questions posed. Also,
particularly in the case of mail and telephone surveys, a major precondition is the feasibility of using the postal
system or the widespread availability of telephones. In many countries, only limited records are available about
dwellings, their location, and their occupants.

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CHAPTER FOUR

THE INTERNATIONAL MARKET ENTRY STRATEGIES

4.0 International Market Entry Modes

In international marketing, there are some traditional international-expansion entry modes. Beyond importing,
international expansion is achieved through exporting, licensing arrangements, partnering and strategic
alliances, acquisitions, and establishing new, wholly owned subsidiaries, also known as green field ventures.
Each mode of market entry has advantages and disadvantages. Firms need to evaluate their options to choose
the entry mode that best suits their strategy and goals. These modes fall under four main aspects: exports,
contractual entry modes, foreign investment and counter trade.

4. 1 Export Entry Mode

Exporting is typically the easiest way to enter an international market, and therefore most firms begin their
international expansion using this model of entry. Exporting is the sale of products and services in foreign
countries that are sourced from the home country. It is an effective entry strategy for companies that are just
beginning to enter a new foreign market. It’s a low-cost, low-risk option compared to the other strategies.
These same reasons make exporting a good strategy for small and midsize companies that can’t or won’t make
significant financial investment in the international market. There exists direct and indirect exporting

a. Direct Export: Here a company takes full responsibility for making its goods available in the
target market by selling directly to the end users, normally through its own agents. Direct export is
feasible when the exporter desires to be greatly involved in international business and at the same time
possesses the capacity to do so. For example, in the case of air crafts and similar industrial products,
direct export is more convenient.
b. Indirect Export: This mostly happens when the exporting company does not possess the
necessary infrastructure to involve itself in direct export. Here the company sells its products through
intermediaries who in turn sell the products to the end users. Most often these intermediaries are
distributors. Distributors are export intermediaries who represent the company in the foreign market.
Often, distributors represent many companies, acting as the “face” of the company in that country,
selling products, providing customer service, and receiving payments. Companies use distributors
because distributors know the local market and are a cost-effective way to enter that market.
However, using distributors to help with export can have its own challenges. For example, some companies
find that if they have a dedicated salesperson who travels frequently to the country, they’re likely to get more
sales than by relying solely on the distributor. Often, that’s because distributors sell multiple products and
sometimes even competing ones and making sure that the distributor favors one firm’s product over another
product can be hard to monitor. However, the Internet is increasingly providing a more efficient way for foreign
companies to find local distributors and enter into commercial transactions.
The advantage of this mode of entry is that firms avoid the expense of establishing operations in the new
country. Firms must, however, have a way to distribute and market their products in the new country, which
they typically do through contractual agreements with a local company or distributor. When exporting, the
firm must give thought to labeling, packaging, and pricing the offering appropriately for the market. In terms
of marketing and promotion, the firm will need to let potential buyers know of its offerings, be it through
advertising, trade shows, or a local sales force. Among the disadvantages of exporting are the costs of
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transporting goods to the country, which can be high and can have a negative impact on the environment. In
addition, some countries impose tariffs on incoming goods, which will impact the firm’s profits. The Internet
has also made exporting easier. Even small firms can access critical information about foreign markets,
examine a target market, research the competition, and create lists of potential customers. Even applying for
export and import licenses is becoming easier as more governments use the Internet to facilitate these
processes.

4.2 Counter Trade Entry Mode

Counter trade is a sort of bilateral trade where one set of goods is exchanged for another set of goods. Here a
seller provides a buyer with deliveries and contractually agrees to purchase goods from the buyer equal to the
agreed percentage of the original sale contract value.

4.3 Specialized Entry Modes

Besides the more general modes of internationalizing like exportation and importation, companies can also
choose to pursue more specialized modes of entry—namely, contractual modes or investment modes.
Contractual modes involve the use of contracts rather than investment. There are two main contractual entry
modes; licensing and franchising.

1. Contractual Entry Modes


Contractual entry modes are common in cases of intangible products such as technology, patents, etc. When a
company develops a particular technology through its own research and development program, it will want to
recover its cost of research and development. Thus it sells the technology either to a domestic or foreign firm.
This is often known as technical collaboration or technical joint venture. Technical collaboration often takes
two forms as can be seen below:

a. Licensing
Licensing is defined as the granting of permission by the licenser to the licensee to use intellectual property
rights, such as trademarks, patents, brand names, or technology, under defined conditions. Through licensing,
a firm transfers its intangible property such as expertise; know how, blue-prints and manufacturing design to
another firm. The possibility of licensing makes for a flatter world, because it creates a legal vehicle for taking
a product or service delivered in one country and providing a nearly identical version of that product or service
in another country. Under a licensing agreement, the multinational firm grants rights on its intangible property
to a foreign company for a specified period of time. The licenser is normally paid a royalty on each unit
produced and sold. Although the multinational firm usually has no ownership interests, it often provides
ongoing support and advice. Most companies consider this market-entry option of licensing to be a low-risk
option because there’s typically no up-front investment.

b. Franchising
Similar to a licensing agreement, under a franchising agreement, the multinational firm grants rights on its
intangible property, like technology or a brand name, to a foreign company for a specified period of time and
receives a royalty in return. The difference is that the franchiser provides a bundle of services and products to
the franchisee. For example, McDonald’s expands overseas through franchises. Each franchise pays
McDonald’s a franchisee fee and a percentage of its sales and is required to purchase certain products from the

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franchiser. In return, the franchisee gets access to all of McDonald’s products, systems, services, and
management expertise.

2. Investment Entry Modes


Beyond contractual relationships, firms can also enter a foreign market through one of two investment
strategies: a joint venture or a wholly owned subsidiary.

a. Joint Venture
An equity joint venture is a contractual, strategic partnership between two or more separate business entities
to pursue a business opportunity together. The partners in an equity joint venture each contribute capital and
resources in exchange for an equity stake and share in any resulting profits. (In a nonentity joint venture, there
is no contribution of capital to form a new entity.). A good example here is Vitrac, an Egyptian Company.

b. Wholly Owned Subsidiaries


Firms may want to have a direct operating presence in the foreign country, completely under their control. To
achieve this, the company can establish a new, wholly owned subsidiary (i.e., a Greenfield venture) from
scratch, or it can purchase an existing company in that country. Some companies purchase their resellers or
early partners (as Vitrac Egypt did when it bought out the shares that its partner, Vitrac, owned in the equity
joint venture). Other companies may purchase a local supplier for direct control of the supply. This is known
as vertical integration.

Establishing or purchasing a wholly owned subsidiary requires the highest commitment on the part of the
international firm, because the firm must assume all of the risk—financial, currency, economic, and political.

4.4 Importing Entry Mode

Importing involves the sale of products or services in one country that are sourced in another country. In many
ways, importing is a stealth form of internationalization. Firms often claim that they have no international
operations and yet—directly or indirectly—base their production or services on inputs obtained from outside
their home country. For example, Pacific Cycle doesn’t make a single Schwinn or Mongoose bicycle in the
United States but instead imports them entirely from manufacturers in Taiwan and China. Firms that engage
in importing must learn about customs requirements, informed compliance with customs regulations, entry of
goods, invoices, classification and value, determination and assessment of duty, special requirements, fraud,
marketing, trade finance and insurance, and foreign trade zones. Importing can take many forms—from the
sourcing of components, machinery, and raw materials to the purchase of finished goods for domestic resale
and the outsourcing of production or services to nondomestic providers.

4.5 Acquisition Entry Mode

An acquisition is a transaction in which a firm gains control of another firm by purchasing its stock, exchanging
the stock for its own, or, in the case of a private firm, paying the owners a purchase price. In our increasingly
flat world, cross-border acquisitions have risen dramatically. In recent years, cross-border acquisitions have
made up over 60 percent of all acquisitions completed worldwide. Acquisitions are appealing because they
give the company quick, established access to a new market. However, they are expensive, which in the past
had put them out of reach as a strategy for companies in the undeveloped world to pursue. What has changed
over the years is the strength of different currencies. The higher interest rates in developing nations have
strengthened their currencies relative to the dollar or euro. If the acquiring firm is in a country with a strong
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currency, the acquisition is comparatively cheaper to make. When deciding whether to pursue an acquisition
strategy, firms examine the laws in the target country. For example, a business may consider China a
disadvantage because it has many restrictions on foreign ownership, but then, even a developed-world country
like the United States has laws addressing acquisitions. For example, you must be an American citizen to own
a TV station in the United States. Likewise, a foreign firm is not allowed to own more than 25 percent of a US
airline. Acquisition is a good entry strategy to choose when space is needed, which is particularly the case in
certain industries (e.g., wireless telecommunications). Acquisition is also a good strategy when an industry is
consolidating. Nonetheless, acquisitions are risky. Many studies have shown that between 40 percent and 60
percent of all acquisitions fail to increase the market value of the acquired company by more than the amount
invested.

Other international expansion modes include partnerships and strategic alliances, outsourcing and global
sourcing.

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CHAPTER FIVE

INTERNATIONAL PRODUCT PLANNING AND MANAGEMENT

After the global market entry strategies have been identified and one or more segments have been targeted, it
is essential to plan a way to reach the target(s). To achieve this task, marketers use positioning, a process
whereby a company establishes an image for its product in the minds of consumers relative to the image of
competitors’ product offerings. In today’s global market environment, many companies find it increasingly
important to have a unified global positioning strategy.
5.1 Characteristics of Global Products
Can global positioning work for all products? One study suggests that global positioning is most effective for
product categories that approach either end of a “high-touch/high-tech” continuum. Both ends of the continuum
are characterized by high levels of customer involvement and by a shared “language” among consumers.

1) High Tech Positioning:

Personal computers, video and stereo equipment, and automobiles are examples of product categories where
high-tech positioning has proven effective. Such products are frequently purchased on the basis of concrete
product features, although image may also be important. Buyers typically already possess or wish to acquire
considerable technical information. High-tech products may be divided into three categories: technical
products, special-interest products, and demonstrable products.
i) Technical Products: Computers, chemicals, tires, and financial services are just a sample of the product
categories whose buyers have specialized needs; require a great deal of product information and who share a
common “language.”
ii) Special-Interest Products: While less technical and more leisure or recreation oriented, special-interest
products also are characterized by a shared experience and high involvement among users. Again, the common
language and symbols associated with such products can transcend language and cultural barriers. Fuji
bicycles, Adidas sports equipment, and Canon cameras are examples of successful global special- interest
products.
iii) Products that Demonstrate Well: Products that “speak for themselves” in advertising of features and
benefits can also travel well

2) High-Touch Positioning

Marketing of high-touch products requires less emphasis on specialized information and more emphasis on
image. Like high-tech products, however, high touch categories are highly involving for consumers. Buyers’
high-touch products also share a common language and set of symbols relating to themes of wealth,
materialism, and romance.
The three categories of high-touch products are:
i) Products that solve a Common Problem: At the other end of the price spectrum from high-tech, products
in this category provide benefits linked to “life’s little moments.” Ads that show friends talking over a cup of
coffee in a cafe or quenching thirst with a soft drink during a day at the beach put the product at the center of
everyday life and communicate the benefit offered in a way that is understood worldwide.

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ii) Global Village Products: Channel fragrances, designer fashions, mineral water, and pizza are all examples
of products whose positioning is strongly cosmopolitan in nature. Fragrances and fashions have traveled as a
result of growing worldwide interest in high-quality, highly visible, high-price products that often enhance
social status. However, the lower- priced food products just mentioned show that the global village category
encompasses a broad price spectrum.
iii) Products that use Universal Themes: Some advertising themes and product appeals are thought to be
basic enough that they are truly transnational. Additional themes are materialism (keyed to images of well-
being or status), heroism (themes include rugged individuals or self-sacrifice), play (leisure/recreation), and
procreation (image of courtship and romance).

5.2 Product saturation level in global market:

Product saturation level is one of the most essential factor in global business and marketing world. We are
going to disclose the nine points of product saturation with the view of time and
I. Product design: - Product design is the key factor of success in global market so it is needed to keep
in mind that single design may be same in global setting. It needs modification due to change of time and
customs changing level in internationally.

2. Product Preferences: - Product preferences depend on color and taste based because same color or taste
may not be suitable for another customs or nation so product must give preference on the basis of particular
custom or nation(s).

3. Product cost:- Product cost is one of the major factors of the global market so when designing, you must
keep in mind how you provide the cheapest cost either in manufacturing or selling matter.

4. Product Law & Regulation: - Product design should never violate the law and regulation of any nation or
international treaty between nations. If it violates then be ready to bear great loss globally as well as locally.

5. Local Like Design: - Product designs must carry the local-made signs on it because, it provides
opportunities for the people to identify themselves with the product through their culture especially during
days of national festival as well capturing nationalism

6. Self-Produce Design: - Self-produce design means that, manufacturing units must cover the interest of the
nationals where it is situated. If possible more and more local employees should be used to design certain
local products.

7. Nontariff Barriers:- Non tariff barriers means the product design have to cross the boundaries of many
nations so it have to obey the local government and respect the laws of other countries and policies which
they apply when designing

8. Alternative Strategic Communication: - Product design must have the alternative strategic source of
communication, such that when the principal source of communication fail or is less effective, an immediate
alternative should be available.
9. Product Compatibility: - One last important issue to consider is the aspect of product compatibility. It is
very important for every product to be compatible with similar products in the environment in which it is used.
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5.3 International Product Life Cycle

Product life cycle theory divides the marketing of a product into four stages: introduction, growth, maturity
and decline. When product life cycle is based on sales volume, the introductory and growth often become one
stage. For internationally available products, these three remaining stages include the effects of outsourcing
and foreign production. When a product grows rapidly in a home market, it experiences saturation when low-
wage countries imitate it and flood the international markets. Afterward, a product declines as new, better
products or products with new features repeat the cycle.
General PLC Theory
When a product is first introduced in a particular country, it sees rapid growth in sales volume because market
demand is unsatisfied. As more people who want the product buy it, demand and sales level off. When demand
has been satisfied, product sales decline to the level required for product replacement. In international markets,
the product life cycle accelerates due to the presence of "follower" economies that rarely introduce new
innovations but quickly imitate the successes of others. They introduce low-cost versions of the new product
and precipitate a faster market saturation and decline.
Growth
An effectively marketed product meets a need in its target market. The supplier of the product has conducted
market surveys and has established estimates for market size and composition. He introduces the product, and
the identified need creates immediate demand that the supplier is ready to satisfy. Competition is low. Sales
volume grows rapidly. This initial stage of the product life cycle is characterized by high prices, high profits
and wide promotion of the product. International followers have not had time to develop imitations. The
supplier of the product may export it, even into follower economies
Maturity
In the maturity phase of the product life cycle, demand levels off and sales volume increases at a slower rate.
Imitations appear in foreign markets and export sales decline. The original supplier may reduce prices to
maintain market share and support sales. Profit margins decrease, but the business remains attractive because
volume is high and costs, such as those related to development and promotion, are also lower.
Decline
In this final phase of the product life cycle, sales volume decreases and many such products are eventually
phased out and discontinued. The follower economies have developed imitations as good as the original
product and are able to export them to the original supplier's home market, further depressing sales and prices.
The original supplier can no longer produce the product competitively but can generate some return by cleaning
out inventory and selling the remaining products at discontinued-items prices.

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5.4 Product and Culture:

Culture is the way that we do things around here. Culture could relate to a country (national culture), a distinct
section of the community (sub-culture), or an organization (corporate culture). It is widely accepted that you
are not born with a culture, and that it is learned. So, culture includes all that we have learned in relation to

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values and norms, customs and traditions, beliefs and religions, rituals and artifacts (i.e. tangible symbols of a
culture, such as the Sydney Opera House or the Great Wall of China).

Values and Attitudes

Values and attitudes vary between nations, and even vary within nations. So if you are planning to take a
product or service overseas make sure that you have a good grasp of the locality before you enter the market.
This could mean altering promotional material or subtle branding messages. There may also be an issue when
managing local employees. For example, in France workers tend to take vacations for the whole of August,
whilst in the United States employees may only take a couple of weeks’ vacation in an entire year.
 In 2004, China banned a Nike television commercial showing U.S. basketball star LeBron James in a
battle with animated cartoon kung fu masters and two dragons, because it was argued that the ad insults Chinese
national dignity.
Variety in Educational Standards
The level and nature of education in each international market will vary. This may impact the type of message
or even the medium that you employ. For example, in countries with low literacy levels, advertisers would
avoid communications which depended upon written copy, and would favor radio advertising with an audio
message or visual media such as billboards. The labeling of products may also be an issue.
 In the People’s Republic of China a nationwide system of public education is in place, which
includes primary schools, middle schools (lower and upper), and universities. Nine years of education is
compulsory for all Chinese students.

 In Finland school attendance is compulsory between the ages of 7 and 16, the first nine years of
education (primary and secondary school) are compulsory, and the pupils go to their local school. The
education after primary school is divided to the vocational and academic systems, according to the old German
model.

 In Uganda schooling includes 7 years of primary education, 6 years of secondary education (divided
into 4 years of lower secondary and 2 years of upper secondary school), and 3 to 5 years of post-secondary
education.

Social Organizations

This social organization relates to how a national society is organized. For example, what is the role of women
in a society? How is the country governed – centralized or decentralized? The level influence of class or casts
upon a society needs to be considered. For example, India has an established caste system – and many Western
countries still have an embedded class system. So social mobility could be restricted where caste and class
systems are in place. Whether or not there are strong trade unions will impact upon management decisions if
you employ local workers.

Technology and Material Culture


Technology is a term that includes many other elements and it’s a function of education. It includes questions
such as is there energy to power our products? Is there a transport infrastructure to distribute our goods to
consumers? Does the local port have large enough cranes to offload containers from ships? How quickly does

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innovation diffuse? Also of key importance, do consumers actually buy material goods i.e. are they
materialistic?

Law and Politics
As with many aspects of Terpstra and Sarathy’s Cultural Framework, the underpinning social culture will
drive the political and legal landscape. The political ideology on which the society is based will impact upon
your decision to market there. For example, the United Kingdom has a largely market-driven, democratic
society with laws based upon precedent and legislation, whilst Iran has a political and legal system based
upon the teachings and principles Islam and a Sharia tradition.

Aesthetics
Aesthetics relate to your senses, and the appreciation of the artistic nature of something, including its smell,
taste or ambience. For example, is something beautiful? Does it have a fashionable design? Was an advert
delivered in good taste? Do you find the color, music or architecture relating to an experience pleasing? Is
everything relating to branding aesthetically pleasing?

Language
With language one should consider whether or not the national culture is predominantly a high context culture
or a low context culture. The concept relates to the balance between the verbal and the non-verbal
communication.

In a low context culture spoken language carries the emphasis of the communication i.e. what is said is what
is meant. Examples include Australia and the Netherlands.

In a high context culture verbal communications tend not to carry a direct message i.e. what is said may not be
what is meant. So with a high context culture hidden cultural meaning needs to be considered, as does body
language. Examples of a high context cultures include Japan and some Arabic nations.
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Religion
The nature and complexity of the different religions an international marketer could encounter is pretty
diverse. The organization needs to make sure that their products and services are not offensive, unlawful or
distasteful to the local nation. This includes marketing promotion and branding.

 In China in 2007 (which was the year of the pig) all advertising which included pictures of pigs was banned.
This was to maintain harmony with the country’s Muslim population of around2%. The ban included pictures of
sausages that contained pork, and even advertising that included an animated (cartoon) pig.
5.4.1 Demand-Pull Innovation and Invention-Push Innovation

Most product designs fall under one of two categories: demand-pull innovation or invention-push innovation.
Demand-pull happens when there is an opportunity in the market to be explored by the design of a product.
This product design attempts to solve a design problem. The design solution may be the development of a new
product or developing a product that’s already on the market, such as developing an existing invention for
another purpose.

Invention-push innovation happens when there is an advancement in intelligence. This can occur through
research or it can occur when the product designer comes up with a new product design idea.

5.4.2 Standardization Vs Adaptation

a. Standardization

Standardizing a communication policy consists of operating a communication in all the foreign markets which
is identical to the one in the domestic market, with the existing socio-cultural differences. Furthermore, the
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company will use the same promotional arguments, the same positioning, the same advertising messages, the
same concepts, the same images, the same slogans ... The global trade marks which use this strategy include
Coca-Cola, Perrier and Benetton.

When a standardized communication campaign is envisaged, this is generally considered as the media of
television, and to a lesser extent hoardings. However, in the case of hoardings, or a television advertisement,
the text and the script have to be translated into the language of the country. Communication campaigns are
rarely completely standardized. Additionally, countries with the same language- for example the United States,
United Kingdom, South Africa, Australia ... which all speak English often differ on a cultural level. It would
be risky not to take these differences into account.

b. Factors favoring standardizing communication


e. Limited budget. A standardized campaign costs less than an adapted one. For this reason, SMEs which
often have limited budgets, tend to standardize their communication.
f. The industrial nature of the product. Advertising will be generally easier to standardize for industrial
products than for goods for consumption. In truth, industrial products are more alike: they tend to be
bought and used for the same purpose and reasons in every country, all the more so as their
sophistication and technical complexity increases. The sales claims tend to be universal.
g. Market harmonization and uniform performance. For some products, termed global, the differences
in market consumption will seem to blur, as these products are used in the same way. All over the
world, but especially in Europe, America and Japan, those sections of the population which consume
these world-wide products share the same needs, sales expectations and motivations, the same cultural
values, sales behavior and require their products to have the same qualities. Luxury products, certain
clothes, music CDs, the hotel industry and transport are all examples of universal products.

These sections of the population (jet-set, young people,) are defined on the basis of criteria such as life style
rather than by ethnicity or nationality, have their equivalents in many countries. For example, in their lifestyle
and aspirations, young people in France more resemble other young people, be they German, Japanese or
American rather than their own parents. To use clichés, they all wear the same clothes, eat hamburgers and
drink Coca-Cola, listen to the same music, and surf the internet, this is commonly referred to as the international
youth market because they demonstrate similar characteristics. The emergence of the "World Customer"
concept, the harmonization of lifestyles and values and the dilution of senses of cultural identity are favored
by a certain number of factors such as: technical advances, such as cable and satellite television, telematics,
computers, telecommunications, methods of transport; allocation of education and communication
;consequences of travel and technology; globalization of advertising agencies and media which facilitates the
transmission of international campaigns.

Companies which sell international products to consumers of different nationalities, where the characteristics
and expectations are the same or nearly similar, can conduct a single promotional campaign possibly with
minor adaptations (e.g. translations). The essence and advertising message can be effectively standardized and
transmitted to all markets. The slogans highlight the attributes of common dimensions, or evoke social and
human situations sensitive to the consumer in an area with an identical profile.

c. Advantages of standardization

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Economies on the scale of design, creation of advertising, and production of advertisements (and therefore
lowering the fees of the agency).

Faster set up time for advertising campaigns and a more rapid penetration of markets due to good international
co-ordination. This characteristic is particularly useful when launching a product simultaneously in several
countries.

Reinforces the image of the product or company as a consequence of the international co-ordination resulting
from an international campaign.

Single coherent global image. An identical advertising standpoint in many markets allows the product,
company and brand to possess a uniform image. This limits confusions as the consumer is internationally
mobile and there are possible overlaps in the media (cable television enables consumers to watch foreign
television programs).

Excellent monitoring of communication

Lack of opposition between communication agencies, as they are responsible for setting up a single
communication campaign. It is no longer a question of deciding which of them performs best and is the most
creative, since once all the creative work has been produced it is for everything.

d. Drawbacks of standardization
 Possible loss of advertising effectiveness. Communication, based on the lowest common denominator
of the target markets is rather poor. But standardization can prove to be unadaptable if it holds on to
local specifications. It can create negative reactions on the part of the consumers as it does not cater to
them, which risks them turning to local competitors. It can result in losses in important shares of the
market, and damage to the image of the product in the long term.
 Little reactivity, no flexibility in the execution.
 Lack of motivation for local agencies. As the personnel at the company and the agencies have no
connection with the development of the communication, they can consider this campaign as being
irrelevant to them. And often they will not be effectively committed to its production and establishment.

5.5 Branding and Packaging

The Meaning of Branding: Branding is the practice of giving a specified name to a product, or group of
product of one seller. It is the process of finding and fixing the means of identification for a product. In other
words, naming a product like as in naming a new born baby is known as branding. Parents have children and
manufacturers also have products be they goods or services. As such the manufacturers must be eager to know
the character and the capacity of their products upon their manufacturing. Thus branding is the management
process by which products are named, that is branded.

According to the American Marketing Association, a brand is a name, term, sign, symbol r a combination of
them, intended to identify the goods and services of one seller or group of sellers and to differentiate them
from those of competition.

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Moreover, according to William J. Stanton, all trademarks are brands and thus include the following “the word,
letter or number which may be pronounced; they may also include pictorial designs”

5.5.1 The 3 Cs of Branding

Clarity: Strong brands are clear about what they are, and what they are not. They understand their unique
promise of value. And this promise of value sets them apart from their competitors. It differentiates them and
allow them to attract and build loyalty among a desirable set of consumers.

Consistency: In addition to being clear about who they are, strong brands are also consistent. This aspect of
consistency denotes the fact that, they are always what they say they are.

Constancy: It is not enough to be clear and consistent if you are not always visible to your target audience.
Strong brands are constant; they are always there for their customers and their prospects.

5.5.2 The Purpose of Branding


 A brand is a massive asset
 A brand is a promotional tool
 A brand is a weapon to protect the market (weapon of competition)
 A brand is an antidote for middle man survival
 A brand is a mean of Identification for customers

5.5.3 Significance/Advantages of Branding

a. Advantages of Branding
 Easy to advertise
 Easy to identify the product
 Creation of separate market
 Provide opportunity to increase price for the same product
 Easy to expand the product mix
 Personal contacts with consumers
b. Advantages to Middleman
 Easy to understand the needs and wants of consumers
 Less risk involved
 No need of advertisement and sale promotions
 Increase in sales
 Increase in profits
c. Advantages to Consumers
 Easy to recognize
 Assurance of quality product
 Minimum fluctuation price
 Improved and customized packaging
 Mental satisfaction
 It demonstrate social status and sense of well being

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5.5.4 Branding Decision
 Individual names
 Blanket family names
 Separate family name for all product
 Corporate name combined with all product name

5.5.5 Identifying the Brand

Every full and complete brand must be able to demonstrate the following aspects to its customers and the entire
market at large to give its self the unique it deserves

 Brand: This is the name, term design. Symbol or other features that identifies one marketer’s products
as distinct from those of other marketers
 Brand Name: This refers to the part of brand that can be spoken off, including letters, word an
numbers
 Brand Mark: It refers to that part of a brand that is made up of words such as the symbol and the
design
 Trade Mark: Officially it is the legal designation of exclusive use of a brand
 Trade Name:

5.5.6 Types of Brands

Manufacturer Band- a brand initiated by producers to ensure that producers are identified with their products
at the point of purchase

Private Distributor Brand- a brand initiated and owned by a reseller

Generic Brands- a brand indicating only the product category

Other important aspect abound when it comes Selecting a Brand Name, examining the types of branding
policies, understanding co-branding and brand licensing

Co-branding refers to several different marketing arrangements: Co-branding, also called brand partnership, is
when two companies form an alliance to work together, creating marketing synergy. As described in Co-
Branding: The Science of Alliance: the term co-branding is relatively new to the business vocabulary and is
used to encompass a wide range of marketing activity involving the use of two (and sometimes more) brands.
Thus co-branding could be considered to include sponsorships, where Marlboro lends it name to Ferrari or
accountants Ernst and Young support the Monet exhibition."

”Co-branding is an arrangement that associates a single product or service with more than one brand name,
or otherwise associates a product with someone other than the principal producer. The typical co-branding
agreement involves two or more companies acting in cooperation to associate any of various logos, color
schemes, or brand identifiers to a specific product that is contractually designated for this purpose. The object
for this is to combine the strength of two brands, in order to increase the premium consumers are willing to
pay, make the product or service more resistant to copying by private label manufacturers, or to combine the
different perceived properties associated with these brands with a single product.
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5.6 Packaging

Packaging has defined as an activity which is concerned with protection, economy, and convenience and
promotion consideration for a product. According to William J Stanton, Packaging may be defined as the
general group of activities in product planning which involves designing and producing the container or
wrapper of a product

5.6.1 Reasons for the Growth of Packaging

 Self Service: The package must perform many of the sales tasks, attract attention, describe the product
features, create consumer confidence and make favorable overall impression
 Consumer Affluence: Rising consumer affluence means consumers are willing to pay a little more for
the convenience, appearance, dependability and prestige of better package
 Company and Brand Image: Package contribute to instant recognition of the company or brand
 Innovation Opportunity

5.6.2 Purpose of Packaging

 Product protection
 Product attractiveness
 Product identification
 Product convenience
 Effective sales tools
 Channel co-operation
 Segmentation

5.6.3 Function of Packaging

 Utilitarian Function
 Profit function
 Communication
o It makes product identification and differentiation both easy and effective
o Package features communicates product message and motivates consumer to buy
o A change in product package design and message considerably facilitates implementation of
product/brand repositioning strategy of a company
o Package repeats the selling message
o It promotes the product at the point of purchase and usually helps in the purchase decision
process
o Purchase and marketing

5.6.4 Types of packaging

 Consumer packaging
 Family packaging
 Re-use packaging
 Multiple packages
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 Transit packaging

5.6.5 Advantages of Packaging

a. Advantages to Manufacturers
i. To keep the product safe
ii. To minimize the possibilities of adulteration
iii. To facilitate storages
iv. To help in advertising and sales promotion
v. To facilitate distribution
vi. To increase the demand
vii. To increase the profits
b. Advantages to Middlemen
i. Helpful in storage
ii. Helpful in handling
iii. Helpful in presenting at the product before the consumers
iv. Helpful in increasing sales and profits
c. Advantages to Consumers
i. Minimum possibility of adulteration
ii. Helpful in providing necessary information about the product
iii. Availability of information about the product
iv. Instruction for the use of the product
v. Easy in handling

5.7 Labeling

A label is that part of a product, which carries verbal information about the product or seller. It may be a small
slip or printed statement describing the product. It may be part of a package or it may be attached to the product.
It convey verbal information about the product and seller.

According to William J Stanton, the label is part of the product which carries verbal information about the
product or the seller (manufacturer or middlemen). A label may be part of the package or it may be a tag
attached directly to the product

5.7.1 Functions of Labeling

 It enables the producer to give clear instruction about the users of product
 Price variation caused by middlemen are avoided because the price is printed and visible to all
 It helps to maintain the relationship between the manufacturer and the buyers
 It encourages producers to make only standard products
 Buyers can easily identify the products

5.7.2 Classification of Labels

 Brand labels
 Grade labels
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 Descriptive illustrative labels

5.7.3 Role/Purpose of Labeling in Packaging

 To bring home the product features


 To facilitate the exchange process
 To encourage the self service
 To promote product related services
o Product support services
o Product credit services
o Product Guarantee and warrantees

5.8 After Sales Service

It is important to know that when it comes to the aspect of customer service management, after sales service is
an integral part of it. Moreover, it suffices to know that the customers are one of the principal assets of every
business. Sales professionals must try their very best to satisfy customers for them to come back again to their
organization.

5.8.1 What is After Sales Service?

After sales service refers to various processes which make sure customers are satisfied with the products and
services of the organization. The needs and demands of the customers must be fulfilled for them to spread a
positive word of mouth. In the current scenario, positive word of mouth plays an important role in promoting
brands and products. After sales service makes sure products and services meet or surpass the expectations of
the customers. After sales service includes various activities to find out whether the customer is happy with
the products or not? After sales service is a crucial aspect of sales management and must not be ignored.

5.8.2 Why after Sales Service?

After sales service plays an important role in customer satisfaction and customer retention. It generates loyal
customers. Customers start believing in the brand and get associated with the organization for a longer duration.
They speak well about the organization and its products. A satisfied and happy customer brings more
individuals and eventually more revenues for the organization. After sales service plays a pivotal role in
strengthening the bond between the organization and customers.

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CHAPTER SIX

PRICING IN INTERNATIONAL MARKETS

6.1 The Concept of Direct, Indirect and Opportunity Cost

A part of being a component the marketing mix, the price is what the customer pays. It includes direct and
indirect costs as well as opportunity costs. Direct costs are cash outlays a customer makes in order to obtain
something. An example would be admission to a national park. Direct costs are, in many cases, a relatively
small part of the total cost. Indirect costs are costs associated with obtaining something. An example would be
the cost of driving to a national park, food and entertainment along the way, etc. The total of the indirect costs
is often more, sometimes much more, than the direct cost. The total cost is obtained by adding the direct and
indirect costs. Opportunity costs are what we give up when we do something. They can have various types of
value, sometimes monetary, sometimes not. Opportunity costs include other things you could be doing instead
of going to a national park. Examples might include going to a baseball game (which would be non-monetary)
and not working overtime on Saturday in order to go to a national park (which would be monetary).The price
the park visitor pays to go to a national park is the total of all costs, including direct, indirect, and opportunity.
The perceived benefits of going to a national park have to be at least as great as the total of the costs if a
potential park visitor is going to make a decision to go to a park.

6.2 Components of Price

The price variable is made up of two components viz costs and profit. The cost component is further subdivided
as fixed and variable.

6.2.1 Factors Influencing International Pricing:

6.2.1.1 Factors internal to an international firm

1. strategic objectives·
 Cost leader, differentiation, focus·
 Gain market share, protect market share, to maintain status quo·
 Revenue, profit or market share maximization
2. Marketing mix policies·
 Product, place & promotion
3. costs·
 Short term vs long term cost focus·
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 full cost, variable cost, marginal cost pricing
4. organizational considerations·
 Transfer pricing·
 cost vs profit center

6.2.1.2 Factors external to an international firm

1) Nature of market (buyer or seller)


2) Level of market development/sophistication
3) Market demand and consumers ability to buy
4) Competitive situation & consumer surplus
5) Product life-cycle-stage

6.2.1.3 Factors contributing the selection of final price:

1. Psychological effects of price


2. Influence of other marketing mix elements
3. Company pricing policies
4. Costs
5. Impact of price on other parties
o Distributors or dealers
o Company sales force
o Competitors

6.2.2 The Process of Price Setting

The marketing manager uses the parameters suggested by the economists for arriving at a price. These
parameters may be enumerated as under: 1. Costs 2. Demand and supply 3. Economic, legal and political
conditions

1. Costs: Costs represent the base line for setting the price. In other words, costs represent the price floor
beyond which prices cannot be dropped. As already explained costs are made up of two components, fixed
costs and variable costs. Fixed costs represent the un-escapable element of cost, whereas, the variable cost
represent the escapable costs. The variable costs are also sometimes interpreted as marginal costs or
incremental costs.

2. Demand & Supply: For a marketing manager, the upper limit is demonstrated by the demand and supply
conditions as they exist in the market. The demand conditions are interpreted from the market conditions and
the consumer behavior whereas, the supply conditions are interpreted by an analysis of the competition. The
prices charged by the competitors, and the attributes and quantity sold by the competitors, set the supply
parameters. Thus for example, the prices being charged for garments by the Italians and the South Asians will
determine broadly the range that can be charged by the apparel exporters.

3. Economic, Legal and Political conditions: These represent parameters outside the market forces which
influence the price structure. The Government, it has been noted, can through its policy, in fact modify the
market conditions, making them lopsided. Thus, in countries where the economic policies are directed by the
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Government, the economic and political conditions have an important bearing on price structures. Taxes and
duty drawbacks represent excellent examples for the same.

6.2.2 International Price Quotation and Payment Term

6.2.2.1 Quotations and Pro Forma Invoices

Many export transactions, particularly initial export transactions, begin with the receipt of an inquiry from
abroad that is followed by a request for a quotation. A pro forma invoice is a quotation prepared in the format
of an invoice; it is the preferred method in the exporting business.

A quotation describes the product, states a price for it, sets the time of shipment, and specifies the terms of sale
and terms of payment. Because the foreign buyer may not be familiar with the product, the description of the
product in an overseas quotation usually must be more detailed than in a domestic quotation. The description
should include the following 15 points: 1. Seller’s and buyer’s names and addresses, 2. Buyer’s reference
number and date of inquiry, 3. Listing of requested products and a brief description, 4. Price of each item (It is
advisable to indicate whether items are new or used and to quote the price in U.S. dollars to reduce foreign
exchange risk.), 5. Appropriate total cubic volume and dimensions packed for export (in metric units where
appropriate), 6. Appropriate gross and net shipping weight (in metric units where appropriate), 7. Trade
discount (if applicable), 8. Delivery point, 9. Terms of sale, 10. Terms of payment, 11. Insurance and shipping
costs, 12. Validity period for quotation, 13. Total charges to be paid by customer, 14. Estimated shipping date
from for example a U.S. port or airport to the port of destination and 15. Currency of sale.

Pro forma invoices are not used for payment purposes. In addition to the 15 items previously mentioned, a pro
forma invoice should include two statements—one that certifies the pro forma invoice is true and correct, and
another that indicates the country of origin of the goods. The invoice should also be clearly marked “pro forma
invoice.”

Pro forma invoices are models that the buyer uses when applying for an import license, opening a letter of
credit, or arranging for funds. In fact, it is a good practice to include a pro forma invoice with any international
quotation, regardless of whether it has been requested. When final commercial invoices are being prepared
before shipment, it is advisable to check with your local Export Assistance Center for any special invoicing
provisions that may be required by the importing country. If a specific price is agreed on or guaranteed by your
company, the precise period during which the offer remains valid should be specified.

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CHAPTER SEVEN

INTERNATIONAL PROMOTION
7.1 What is Promotion?

Promotion is another P of the marketing mix - promotion is about communicating, informing and developing
an image (of the company or a product) with both current customers and potential customers. Businesses
promote themselves and products for a number of reasons: 1. Increase and maintain demand for their product(s)
2. Increase and maintain the market share of their product(s) 3. Make noise and raise awareness for their
product(s) 4. Create or enhance a brand image

7.2 Promotion methods

There are two promotional techniques businesses may use: Below the line (BTL) and above the line (ATL).The
technique and method a business decides to use to promote its product depends on a number of factors: 1. the
type of product, 2. their budget, 3. the products stage in the product life cycle, 4. The target audience (who the
business wants to reach) and 5. Legal issues (whether a business is allowed to promote their product in a certain
way, e.g. tobacco and drugs)

7.2.1: Below the line (BTL) promotion

Below the line promotion includes promotion methods which are more personal, traditional and allow the
company to take control. They can include:

PR - public relations - when a business communicates directly with its public through press releases and
speaking at conferences

Sales promotions - such as 50% extra free, buy one get one free or coupons and gifts

Sponsorship - where a business will pay to be associated with another product, person or event. Sports persons
are often sponsored by sports companies.

Direct sales - when a representative of the business will visit potential customers on a one-on-one basis

7.2.2: Above the line (ABL) promotion

Above the line promotion includes promotion methods using "mass media", for example TV and the internet.
Such techniques are usually seen as impersonal, designed to reach as many people at as little cost as possible.
They can include:

TV, Radio and Cinema promotions - allows businesses to target a large group of people

Newspapers - allow advertisers to reach specific groups of people

The web - allows businesses to reach a large international audience at a very low cost.

Outdoor/transport - advertisements on the side of busses, outside shops and on billboards enable

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Direct Mail- Mail sent directly from you to your customers can be highly customized to suit their nature and
needs. You may want to build a mailing list of your current and desired customers. Collect addresses from
customers by noticing or informing addresses on their checks, asking them to fill out information cards, etc.
Keep the list online and up-to-date.

Advertising- Advertising is a form of communication for marketing and used to encourage or persuade an
audience (viewers, readers or listeners; sometimes a specific group) to continue or take some new action. Most
commonly, the desired result is to drive consumer behavior with respect to a commercial offering, although
political and ideological advertising is also common.

Personal Selling- Personal selling is where businesses use people (the “sales force”) to sell the product after
meeting face-to-face with the customer. The sellers promote the product through their attitude, appearance and
specialist product knowledge. They aim to inform and encourage the customer to buy, or at least trial the
product. A good example of personal selling is found in department stores on the perfume and cosmetic
counters. A customer can get advice on how to apply the product and can try different products. Products with
relatively high prices, or with complex features, are often sold using personal selling. Great examples include
cars, office equipment (e.g. photocopiers) and many products that are sold by businesses to other industrial
customers. This in another sense is like building a network.

Trade Fair- A trade fair (trade show, trade exhibition or expo) is an exhibition organized so that companies
in a specific industry can showcase and demonstrate their latest products, service, study activities of rivals and
examine recent market trends and opportunities. In contrast to consumer fairs, only some trade fairs are open
to the public, while others can only be attended by company representatives (members of the trade, e.g.
professionals) and members of the press, therefore trade shows are classified as either "Public" or "Trade
Only". A few fairs are hybrids of the two; one example is the Frankfurt Book Fair, which is trade-only for its
first three days and open to the general public on its final two days. They are held on a continuing basis in
virtually all markets and normally attract companies from around the globe. For example, in the U.S. there are
currently over 2500 trade shows held every year, and several online directories have been established to help
organizers, attendees, and marketers identify appropriate events.

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CHAPTER EIGHT

INTERNATIONAL DISTRIBUTION STRATEGY

8.1 What Is a Distribution Channel?

A channel is a passageway that allows or facilitates the operations certain activities. Business is understood to
be an exchange process. Marketing through its distribution channels help this exchange process to take place.
A marketing channel can be defined as a group of exchange relationships, which create customer value in
acquiring, consuming and disposing of products and services.

International marketing involves coordinating the firm’s marketing activities in more than one nation. The
international marketing strategy is effectively realized by choosing the suitable international marketing
channel. The channel is the medium through which the firm’s global marketing strategy is communicated
among the customers scattered all around the globe.
Marketing Channels are set of interdependent organizations involved in the process of making a product or
service available for use or consumption.
A major focus of channels of distribution is delivery. It is only through distribution that public and private
goods and services can be made available for use or consumption. The emergence and arrangement of a wide
variety of distribution oriented institutions and agencies, typically called intermediaries because they stand
between productions on the one hand and consumption on the other can be explained in the following terms:
8.2 The Importance of Distribution Intermediaries in Business

1) Intermediaries can improve the efficiency of the process.


2) They help in the proper arrangement of routes of transactions.
3) They help in the searching process.
4) They help in the sorting process.

Internationally operating companies have to partner with these distributors to gain access to their unique
expertise and knowledge. Channel innovation depends on many factors like level of economic development of
the country in which the firm is operating, local demographic/geographic factors, social norms, government
actions and competitive pressures. A properly designed distribution channel will help a company achieve a
sustainable competitive advantage. Channel structure varies depending on the customer.
Transactions between parties that do not involve the ultimate consumer are considered wholesale transactions.
There are two types of wholesale intermediaries: merchant intermediaries and functional intermediaries.
Merchant intermediaries buy products and resell them. Functional intermediaries negotiate and just expedite
exchange among producers and resellers. They charge fees and/or commission. An international firm must take
adequate care when entering into agreements with distributors. This can make or mar its chances of success.
A firm can choose direct or indirect channel based on requirements. It can similarly go for selective or intensive
distribution depending on the need.
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International Logistics
International logistics is defined as ‘the designing and managing of a system that contracts the flow of materials
into, though, and out of the international corporation. It encompasses the total movement concept by covering
the entire range of operations concerned with product movement. Components of Logistics Management will
include fixed facilities, location, Transportation, Inventory management, Order processing, Materials handling
and warehousing.
Moreover, the international channel is affected by the method of exporting. Direct exporting and indirect
exporting are the two ways of exporting. Important foreign intermediaries are; importers, distributors,
wholesalers, retailers, multiple channels, government departments, state buying organizations, joint ventures
and licenses.

8.3 Distribution structures:

Looking at the diagram below:

Channel 1 contains two stages between producer and consumer - a wholesaler and a retailer. A wholesaler
typically buys and stores large quantities of several producers’ goods and then breaks into bulk deliveries to
supply retailers with smaller quantities. For small retailers with limited order quantities, the use of wholesalers
makes economic sense.

Channel 2 contains one intermediary. In consumer markets, this is typically a retailer. The consumer electrical
goods market in the UK is typical of this arrangement whereby producers such as Sony, Panasonic, Canon etc.
sell their goods directly to large retailers such as Comet, Tesco and Amazon which then sell onto the final
consumers.

Channel 3 is called a "direct-marketing" channel, since it has no intermediary levels. In this case the
manufacturer sells directly to customers. An example of a direct marketing channel would be a factory outlet
store. Many holiday companies also market direct to consumers, bypassing a traditional retail intermediary -
the travel agent.

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8.4 Factors Influencing Channel Decisions in International Market are as Follows:

International marketing channels deal with mediums through which goods and services pass to reach their
foreign consumers. This implies that manufacturers and consumers must be located in either the manufacturers
or consumers country or having presence in both countries.

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The choice of the channel to use is a fundamental decision for the manufacturer where a number of factors and
objectives have to be considered as a basis for such decision. The international marketer needs a clear
understanding of market characteristics and must have established operating policies before beginning the
selection of channel middlemen. The following points should be addressed prior to the selection process:

1) Identify specific target markets within and across countries.

2) Specify marketing goals in terms of volume, market share, and profit margin requirements.

3) Specify financial and personnel commitments to the development of international distribution.

4) Identify control, length of channels, terms of sale, and channel ownership.

There are a number of factors both objective and subjective and varying from company to company which
govern choice or selection of channel of distribution. But there are some which stand out and influence channel
of distribution choice in all cases. They are as follows:

1) Factors Relating to Product Characteristics: Products manufactured by a company itself is a governing


factor in the selection of the channel of distribution. Product characteristics are as follows:

i) Industrial/Consumer Product: When the product being manufactured and sold is industrial in nature, direct
channel of distribution is useful because of the relatively small number of customers, need for personal
attention, salesman’s technical qualifications and after-sale servicing etc. However, in case of a consumer
product indirect channel of distribution, such as wholesalers, retailers, is most suitable

ii) Perishability: Perishable goods, such as, vegetables, milk, butter, bakery products, fruits, sea foods etc.
require direct selling as they must reach the consumers as easily as possible after production because of the
dangers associated with delays in repeated handling.

iii) Unit Value: When the unit value of a product is high, it is usually economical to choose direct channel of
distribution such as company’s own sales force than middlemen. On the contrary, if the unit value is low and the
amount involved in each transaction is generally small, it is desirable to choose indirect channel of
distribution, i.e. through middlemen.

iv) Style Obsolescence: When there is high degree of sty obsolescence in products like fashion garments, it
is desirable to sell direct to retailers who specialize in fashion goods.

v) Weight and Technicality: When the products are bulky, large in size and technically complicated, it is
useful to choose direct channel of distribution.

vi) Standardized Products: When the products are standardized, each unit is similar in shape, size, weight,
colour and quality etc. it is useful to choose indirect channel of distribution. On the contrary, if the product is
not standardized and is produced on order, it is desirable to have direct channel of distribution.

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vii) Purchase Frequency: Products that are frequently purchased need direct channel of distribution so as to
reduce the cost and burden of distribution of such products.

viii) Newness and Market Acceptance: For new products with high degree of market acceptance, usually
there is need for an aggressive selling effort. Hence indirect channels may be used by appointing wholesalers
and retailers as sole agents. This may ensure channel loyalty and aggressive selling by intermediaries.

ix) Seasonally: When the product is subject to seasonal variations, such as wool and textiles in India, it is
desirable to appoint sole selling agents who undertake the sale of production by booking orders from retailers
and direct mails to dispatch goods as soon as they are ready for sale as per the order.

x) Product Breadth: When the company is manufacturing a large number of product items, it has greater
ability to deal directly with customers because the breadth of the product line enhances its ability to clinch
the sale.

2) Factors Relating to Company Characteristics:


The choice of channel of distribution is also influenced by company’s own characteristics as to its size, financial
position, reputation, past channel experience, current marketing policies and product mix etc. In this
connection, some of the main factors are as follows:

i) Financial Strength: A company which is financially sound may engage itself in direct setting. On the
contrary, a company which is financially weak has to depend on intermediaries and, therefore, has to select
indirect channel of distribution, such as Wholesalers, retailers, with strong financial background.

ii) Marketing Policies: The Policies relevant to channel decision may relate to delivery, advertising, after-
sale service and pricing, etc. For example, a company which likes to have a policy of speedy delivery of
goods to ultimate consumers may prefer direct selling and thus avoid intermediaries and will adopt a speedy
transportation system

iii) Size of the Company: A large-sized company handling a wide range of products would prefer to have a
direct channel for selling its products. On the contrary, a small-sized company would prefer indirect selling by
appointing wholesalers, retailers etc.

iv) Past Channel Experience: Past Channel experience of the company also influences the choice of selection
of channel distribution. For instance, an old and established company with its past good experience of working
with certain kinds of intermediaries will like to opt for the same channel. However, different will be the case
in reverse situation.

v) Product Mix: The wider is the company’s product mix, the greater will be its strength to deal with its customers
directly. Similarly, consistency in the company’s product mix ensures greater homogeneity or uniformity and
similarity in its marketing channels.

vi) Reputation: It is said that reputation travels faster than the man. It is true in the case of companies also
who wish to select channel of distribution. In case of companies with outstanding reputation like Tata Steel,
Bajaj Scooters, Hindustan Levers etc indirect channel of distribution (wholesalers, retailers, etc.) is more
desirable and profitable.

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3) Factors Relating to Market or Consumer Characteristics:

Market or consumer characteristics refer to buying habits, location of market, size of orders, etc. They influence
the channel choice significantly. They are:
i) Consumer Buying Habits: If the consumer expects credit facilities or desires personal services of the
salesman or desires to make all purchases at one place, the channel of distribution may be short or long
depending on the capacity of the company for providing these facilities. If the manufacturer can afford those
facilities, the channel will be shorter, otherwise longer

ii) Location of the Market: When the customers are spread over a wide geographical area, the long channel
of distribution is most suitable. On the contrary, if the customers are concentrated and localized, direct selling
would be beneficial.

iii) Number of Customers: If the number of customers is quite large, the channel of distribution may be
indirect and long, such as wholesalers, retailers, etc. On the contrary, if the number of customers is small or
limited, direct selling may be beneficial.

iv) Size of Orders: Where customers purchase the product in large quantities, direct selling may be preferred.
On the contrary, where customers purchase the product in small quantities frequently and regularly, such as
cigarettes, matches, etc., long (wholesalers, retailers, etc.) of distribution may be preferred.

4) Factors Relating to Middlemen Considerations:


The choice of the channel of distribution is also influenced by the middlemen considerations. They may include
the following:

i) Sales Volume Potential: In selecting channel of distribution, the company should consider the capability
of the middlemen to ensure a targeted sales volume. The sales volume potential of the channel may be
estimated through market surveys.

ii) Availability of Middlemen: The company should make efforts to select aggressively oriented
middlemen. In case they are not available, it is desirable to wait for some time and then to pick up. In such
cases, the company should manage its own channel so long the right types of middlemen are not available.

iii) Middlemen’s Attitude: If the company follows the resale price maintenance policy, the choice is limited.
On the contrary, if the company allows the middlemen to adopt their own price policy, the choice is quite wide.
Quite a large number of middlemen would be interested in selling company’s products.
iv) Services Provided by Middlemen: If the nature of product requires after-sale services, repair services,
etc., such as automobiles, cars, scooters etc, only those middlemen should be appointed who can provide such
services, otherwise the company will adopt direct selling channel.

v) Cost of Channel: Direct selling generally is costlier and thus distribution arranged through middlemen is
more economical.

5) Factors Relating to Environmental Characteristics:


The environmental factors which include competitors’ channels, economic conditions, legal restrictions, fiscal
structure etc., as given below, affect significantly the channel choice.

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i) Economic Conditions: When economic conditions are bright such as inflation, it is desirable to opt for
indirect channel of distribution because there is an all-round mood of expectancy, market tendencies are bullish
and favorable. On the contrary, if the market is depressed (such as deflation), shorter channel may be preferred.

ii) Legal Restrictions: The legislative and other restrictions imposed by the state are extremely formidable
and give final shape to the channel choice. For example, in India M.R.TP. Act, 1969 prevents channel
arrangements that tend to substantially lessen competition, create monopoly and are otherwise prejudicial to
public interest. With these objectives at the backdrop, it prevents exclusive distributorship, territorial
restrictions, resale price maintenance etc.

iii) Competitors’ Channel: This also influences the channel choice decision. Mostly, in practice, similar types
of channels of distribution used by the competitors are preferred.

iv) Fiscal Structure: Fiscal structure of a country also influences the channel choice decision. For example,
in India, State Sales Tax rates vary from state to state and form a significant part of the ultimate price payable
by a consumer. As a result, it becomes an important factor in evolving channel arrangements. Differences in
the sales tax rates in two different states would not only bring about difference in the price payable by a
consumer but also in the distribution channel selected.

8.5 Challenges in managing an international distribution strategies:

Many companies today distribute goods throughout their local region or across the country with considerable
success, and some may be considering expanding into an international market to increase sales. The fact is that
managing international distribution channels can be profitable and rewarding for many companies, but it can
also be challenging on several different levels. By spending some time analyzing what is involved in managing
international distribution channels, you may make a more informed decision about expansion that is right for
your company.

1. The Right Market for Your Products: First, you should carefully consider the benefit associated with
finding an international market that is similar to your own. Reaching into international markets can be difficult
to do because your products may appeal to a different target audience, marketing messages may be skewed
when they reach a foreign audience or are translated into a foreign language and more. Examples of similar
international markets that may be compatible include New Zealand and Australia or Singapore, Malaysia and
Hong Kong. Do your research and find out if the desired market does have a demand for your goods. Choosing
the right international market is imperative for success as your company expands. Talk to local retailers and
their customers to establish if the market is worth the investment
2. Other Logistical Concerns: In addition to selecting the right international market to invest in, there
are other logistical concerns to consider when managing international distribution channels. For example, you
must consider if you will sell your goods online or through local retailers.

8.5.1 Selling Online to International Markets

Online distribution only requires you to ship goods overseas direct to the customer. But international freight
can cause issues and lost stock can be a time consuming nightmare to deal with. Consider insurance.

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a. Supplying International Retailers: While selling big orders to international retailers sounds good it
also brings with it some administrative issues. The lack of transparency, trust and distance between
you and the retailer can cause communication issues and in a lot of cases the retailer will ignore your
account leaving you with little hope in recovering what’s owed to you.

Get in front of you desired retailers as much as possible. Establish a good business relationship with them
before entering into a risky business deal. Consider getting a local distributor. Someone who can go door
knocking when it comes time to do the debt collection.

b. Managing Multiple Currencies: You must also navigate the challenges associated with working
with multiple currencies. Fluctuating currencies rates are not manageable on spreadsheets. Consider a
good cloud based inventory management and sales management system to handle this for you.

As you can see, there are many factors to consider when you are evaluating the pros and cons of managing
international distribution channels. Thanks to innovations in technology, shipping services and more,
expanding a company’s operations into international areas is easier to do than ever before, and many
companies are finding great levels of success from these efforts. However, you do want to carefully consider
each of these points so that you make the best decision possible for your business.

8.5.2 Management of physical distribution of goods

(a) Order Processing: A company receives orders from other companies, middlemen, or directly from
customers through mail, e-mail, fax, phone, or salesmen. Order processing is an importation component of
the distribution system. It is considered as a key to customer service and satisfaction.

Order processing mainly includes: Receiving order, Recording order, Filing order, Executing order or
assembling of products for dispatch, Credit and collection.

Thus, it is concerned with processing the orders quickly, accurately, and efficiently. The time period from the
receipt of an order to the date of dispatch of products must be as short as possible. Ideally, the order recycle
time should be completed within 8 days. But, the use of computer and computer networks, for speedy and
accurate order processing, can save time, money and efforts for the company and increases customer
satisfaction. It is often called as electronic data processing that minimizes possibility of error and omission.
Every firm should establish the standard order procedure.

The physical distribution must be customer-oriented. It starts with customer order. Note that order processing
affects customer service in two ways – reordering time (interval between two orders) and consistency of
delivery time (delivering products within the fixed time). Rapid order processing enables a company to attain
economy in other areas of physical distribution.

(b) Warehousing: In today’s context, production is made in expectation of demand. Therefore, products are to
be stored or preserved safely for the future demand. And also, all the production is not sold directly.
Warehousing plays an important role for balancing demand and supply. For example, most of the agricultural
products are produced seasonally, but have demand throughout the year.

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It facilitates both continuous production and continuous marketing of the production. Warehousing service can
contribute to customer satisfaction. Be clear that storage and warehousing are not similar terms, though are
closely related.

Storage is marketing activity that involves holding and preserving products from the time of their production
until their sale. Warehousing embraces storage plus a broad range of functions, such as assembling, breaking
the bulk, dispatching as per need of middlemen, sorting/classification, providing market intelligence, preparing
product for reshipping, etc. Warehousing involves more activities.

(b.1) Classification of Warehouses:

Warehouses may be classified on two bases, on the basis of commodity and on the basis of ownership. Let’s
have overview of different warehouses.

 On the Basis of Commodity: On the basis of commodity stored, there can be:

1. Special Commodity Warehouses, which provide facility for storing special types of commodities, e.g.,
cotton warehouses, potato warehouses, grain warehouses, tanks for liquid products, explosive product
warehouses, etc.
2. Cold Storage Warehouses which provide facility for storing perishable products, e.g., fish, flowers,
vegetable, fruits, etc.

(b.2) On the Basis of Ownership: According to the ownership, there may be various types of warehouses,
like:

1. Private Warehouses which are owned by individuals, or firms. They are owned by retailers and
wholesalers, or by manufacturers. Retailers and wholesalers store finished products while manufacturers store
raw materials, provision, tools-equipment’s, and finished products.
2. Cooperative Warehouses which are owned on cooperative basis by two or more private parties to utilize
storage facility jointly.
3. Public Warehouses which are owned by local authorities such as municipality, or by the state and central
governments. Such warehouses are used by public/traders as well as by government. Traders can use these
warehouses on the rents fixed by the government. Government uses these warehouses to buy and maintain
stock of certain essential commodities.
4. Household Warehouses which are temporary in nature owned by household/family to store and protect
furniture, paintings, furs, tapestry, etc.
5. Bonded Warehouses which are used to store product until payment is made or documents are cleared.
They are situated near the Port for export and import business.

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Many companies set up their distribution centers in each of regions around the market and integrate its
distribution network with them for smooth, safe, and speedy delivery of products. The latest technology is used
for maximum consumer benefits. Warehouses offer a number of direct advantages to manufacturers and sellers,
and indirect advantages to customers.

8.6 Selection and Appointment of Foreign Sales Agents

Selling a product through an overseas agent is a very successful strategy. Sales agents are available on
commission basis for any sales they make. The key benefit of using an overseas sales agent is that you get the
advantage of their extensive knowledge of the target market. Sales agent also provides support to an exporter
in the matter of transportation, reservation of accommodation, appointment with the government as and when
required. It is, therefore, essential that one should very carefully select overseas agent.

8.6.1 Merits of Appointing a Sales Agent

There are various types of merits associated when appointing a sales agent for export purpose are as follow: 1.
Sales agent avoids the recruitment, training, time and payroll costs of using own employees to enter an overseas
market, .2. An agent is a better option to identify and exploit opportunities in overseas export market, 3. An
agent already has solid relationships with potential buyers, hence it saves the time of the exporter to build own
contacts 4. An agent allows an exporter to maintain more control over matters such as final price and brand
image - compared with the other intermediary option of using a distributor.

8.6.2 Demerits of Appointing a Sales Agent

There are also certain disadvantages associated with appointing a sales agent for export purpose which are as
follows:1. After-sales service can be difficult when selling through an intermediary, 2. There is a risk for
exporter to lose some control over marketing and brand image.

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