ADARSH INSTITUTE OF MANAGEMENT

OF INFORMATION TECHNOLOGY

BANGALORE CENTRAL UNIVERSITY

NAME: Madan B
SUBJECT: INTERNATIONAL MARKETING
1. Differentiate between domestic and internationalmarketing?

Domestic marketing is the production, promotion, distribution, and sale of goods and services
in a local market while international market is the production, promotion, distribution, and
sale of goods and services in a global market.

Definition of Domestic Marketing:

Domestic Marketing refers to the marketing activities employed on a national scale.

Marketing strategies were undertaken to cater customers of a small area, generally within the
local limits of a country. It serves and influences the customers of a specific country only.

Domestic Marketing enjoys a number of privileges like easy to access data, fewer
communication barriers, deep knowledge about consumer demand, preferences and taste,
knowledge about market trends, less competition, one set of economic, social & political
issues, etc. However, due to the limited market size, the growth is also limited.

Definition of International Marketing:

International Marketing is when the marketing practices are adopted to cater the global
market. Normally, the companies start their business in the home country, after achieving the
success they precede their business to another level and become a transnational company,
where they seek to enter in the market of several countries. So, the company must be known
about the rules and regulations of that country.

International marketing enjoys no boundaries, keeping the focus on the worldwide customers.
However, some disadvantages are also associated with it, like the challenges it faces on the
path of expansion and globalisation. Some of which are socio-cultural differences, changes in
foreign currency, language barriers, differences in buying habits of customers, setting and
international price for the product and so on.

Differences between Domestic and International Marketing

 The significant differences between domestic and international marketing are

explainedbelow:
 The activities of production, promotion, advertising, distribution, selling and customer
satisfaction within one’s own country is known as Domestic marketing. International
marketing is when the marketing activities are undertaken at the internationallevel.
 Domestic marketing caters a small area, whereas International marketing covers a
largearea.
 In domestic marketing, there is less government influence as compared to the
international marketing because the company has to deal with rules and regulations of
numerouscountries.
 In domestic marketing, business operations are done in one country only. On the other
hand, in international marketing, the business operations conducted in multiple
countries.
 In international marketing, there is an advantage that the business organisation can
have access to the latest technology of several countries which is absent in case
domesticcountries.
 The risk involved and challenges in case of international marketing are very high due
to some factors like socio-cultural differences, exchange rates, setting an international
price for the product and so on. The risk factor and challenges are comparatively less
in the case of domesticmarketing.
 International marketing requires huge capital investment, but domestic marketing
requires less investment for acquiringresources.
 In domestic marketing, the executives face fewer problems while dealing with the
people because of similar nature. However, in the case of international marketing, it is
quite difficult to deal with customers of different tastes, habits, preferences, segments,
etc.
 International marketing seeks deep research on the foreign market due to lack of
familiarity, which is just opposite in the case of domestic marketing, where a small
survey will prove helpful to know the market conditions.
2. Explain the significance of internationalmarketing?

Definition of International Marketing:

According to Cateora and Graham, “international marketing is the performance of

business activities designed to plan, price, promote and direct the flow of a company’s goods
and services to consumers or users in more than one nation for aprofit.”

According to Terpstra and Sorathy, “international marketing consists of finding and

satisfying global customer needs better than the competition, both domestic and international
and of coordinating marketing activities within the constraints of the global environment.

Importance of International Marketing:

1. Important to expand target market: Target market of a marketing organisation will be

limited if it just concentrate on domestic market. When an organisation thinks globally, it
looks for overseas opportunities to increase its market share and customerbase.

2. Important to boost brand reputation: International marketing may give boost to a brand’s
reputation. Brand that sold internationally is perceived to be better than the brand that sold
locally. People like to purchase products that are widely available. Hence, international
marketing is important to boost brandreputation.

3. Important to connect business with the world: Expanding business into an international
market gives a business an advantage to connect with new customers and new business
partners. Apple - the tech giant designs its iPhone in California; outsources its manufacturing
jobs to different countries like - Mongolia, China, Korea, and Taiwan; and markets them
across the world. Apple have not restricted its business to a nation, rather expanded it to
throughout the world. The opportunities for networking internationally are limitless. The
more "places" a business is, the more connections it can make with theworld.

4. Important to open door for future opportunities: International marketing can also open door
for future business opportunities. International marketing not only increases market share and
customer base, it also helps the business to connect to new vendors, a larger workforce and
new technologies and ways of doing business. For example – American organisations
investing in Japan have found programs like – Six Sigma and Theory Z which are helpful in
shaping their businessstrategies.
Simple Features:

1. Marketing activities are undertaken across theborders.

2. It is directed to facilitate exchange between the firm and the customers of foreign
countries.
3. It is aimed at satisfying needs of international/global customers.
4. International marketing decisions are taken with reference to the global business
environment.
5. It involves two or morenations.
6. Tailor-made marketing mix is necessary for each of thenations.
7. It is more complex and, hence, difficult.
8. Role of international trade agencies seem very critical in marketing products in other
countries.
9. It offers attractive opportunities along with challenges andthreats.

All other characteristics of modern marketing are also applicable to international marketing,
etc.
3. Explain the various factors which affect internationalmarketing?

Factors involved in international marketing environment are broadly classified into three
categories as stated in the figure given below. This environment regulates organizational
activities in such a way that it becomes favourable for the entrepreneurs to identify the threats
and opportunities lying ahead.

The three factors that have a major impact in the marketing environment are given below

Global factors

The global factors that are outside of the control of individual organizations, but that can
affect the way that businesses operate can be considered as the global factors affecting the
international marketing environment. These factors include cultural and social influences,
legal issues, demographics, and political conditions, as well as changes in the natural
environment and technology. Some major organizations involved in this level of international
marketing are the UNO, World Bank, and the WTO.

Domestic factors

Factors related to the personal affairs or internal affairs of a country that affect the economy
of the country participating in the international marketing are considered as domestic factors.
These include the political scenario and the approach by the government and its attitude
towards international trade, business ethics, availability and quality of infrastructure, raw-
materials, and other technological and ecological factors. The level of participation by
governmental bodies at the central and state level in a country is one of the major factors that
the fate of marketingenvironment.

Organizational factors

The internal factors that influence the decision-making process in a company are considered
as organizational factors. These include the events, factors, people, systems, structures and
conditions inside the organization that are generally under the control of the company. The
internal environment influences the organizational activities, and also the attitudes and
behaviour of employees. Changes in the leadership style inside the organization can also have
a profound impact on the organization. Marketing environment is changing rapidly. Every
factor, right from the domestic level, organizational level, to the global level is interrelated.
Geographic Description of Market

Geographical analysis is when a business divides its market on the basis of geography. There
are several ways that a market can be geographically divided. Here, an organization decides
the marketing strategies or approaches that would make international marketing possible in a
specific geographic market on the basis of the climate, lifestyle, location, and language of
that region. Geographic markets differ in size depending onlocation.

There are three major ways to divide a market on the basis of Geography −

 Population density
 Climate
 Language
4. Short noteson

I. ExportHouses:

Export house is defined as a registered exporter holding a valid export house certificate
issued by the direct general of foreign trade ofindia.

Objectives Of Export House: To make available supplies of essential commodities to

consumers at reasonable prices on a regular basis. To ensure a fair price of the produce to the
farmers so that there may be an adequate incentive to increase production. To minimize price
fluctuations. To arrange for supply of fertilizers and insecticides. To undertake the
procurement and maintenance of buffer stock and their distribution whenever and wherever
necessary. To arrange for storage, transportation, packaging and processing.

Eligibility: Manufacturer Exporter, Merchant Exporter, Service Providers ,Export Oriented

Units (EOU’s) ,Special Economic Zones (SEZ’s) ,Software Technology Parks (STP’s)

Types: Export House, The Foreign Trade Policy encourages Small Scales Industries / Tiny
Sectors / Cottage Sectors / ISO units and many more categories of exporters by giving double
weightage while determining the eligibility criteria. Trading House-A trading house is an
exporter, importer and also a trader that purchases and sells products for other businesses.
Trading houses provide a service for businesses. Star Trading House- Manufacturing
companies or industrial houses with annual turnover of 300 cr. – 1000 cr. Shall be recognised
as star trading house or Super star trading house.

II. JointVenture:

A joint venture is a business entity created by two or more parties, generally characterized
by shared ownership, shared returns and risks, and shared governance. Companies typically
pursue joint ventures for one of four reasons: to access a new market, particularly
emergingmarkets; to gain scale efficiencies by combining assets and operations; to share risk
for major investments or projects; or to access skills andcapabilities.

According to Gerard Baynham of Water Street Partners, there has been a lot of negative press
about joint ventures, but objective data indicate that they may actually outperform wholly
owned and controlled affiliates. He writes, "A different narrative emerged from our recent
analysis of U.S. Department of Commerce (DOC) data, collected from more than 20,000
entities. According to the DOC data, foreign joint ventures of U.S. companies realized a 5.5
percent average return on assets (ROA), while those companies’ wholly owned and
controlledaffiliates(thevastmajorityofwhicharewhollyowned)realizedaslightlylower
5.2 percent ROA. The same story holds true for investments by foreign companies in the
U.S., but the difference is more pronounced. U.S.-based joint ventures realized a 2.2 percent
average ROA, while wholly owned and controlled affiliates in the U.S. only realized a 0.7
percentROA."

Most joint ventures are incorporated, although some, as in the oil and gas industry, are
"unincorporated" joint ventures that mimic a corporate entity. With individuals, when two or
more persons come together to form a temporary partnership for the purpose of carrying out a
particular project, such partnership can also be called a joint venture where the parties are
"co-venturers".

The venture can be a business JV (for example, Dow Corning), a project/asset JV intended to
pursue one specific project only, or a JV aimed at defining standards or serving as an
"industry utility" that provides a narrow set of services to industry participants.

III. Merger:

A merger is an agreement that unites two existing companies into one new company. There
are several types of mergers and also several reasons why companies complete
mergers. Mergers and acquisitions are commonly done to expand a company’s reach, expand
into new segments, or gain market share. All of these are done to increase shareholder value.
Often, during a merger, companies have a no-shop clause to prevent purchases or mergers by
additionalcompanies.

Types of Mergers

Conglomerate

This is a merger between two or more companies engaged in unrelated business activities.
The firms may operate in different industries or in different geographical regions. A pure
conglomerate involves two firms that have nothing in common. A mixed conglomerate, on
the other hand, takes place between organizations that, while operating in unrelated business
activities, are actually trying to gain product or market extensions through themerger.
Companies with no overlapping factors will only merge if it makes sense from a shareholder
wealth perspective, that is, if the companies can create synergy. A conglomerate merger was
formed when The Walt Disney Company merged with the American Broadcasting Company
(ABC) in 1995.

Congeneric

A congeneric merger is also known as a Product Extension merger. In this type, it is a

combining of two or more companies that operate in the same market or sector with
overlapping factors, such as technology, marketing, production processes, and research
anddevelopment (R&D). A product extension merger is achieved when a new product line
from one company is added to an existing product line of the other company. When two
companies become one under a product extension, they are able to gain access to a larger
group of consumers and, thus, a larger market share. An example of a congeneric merger is
Citigroup's 1998 union with Travelers Insurance, two companies with complementing
products.

Market Extension

This type of merger occurs between companies that sell the same products but compete in
different markets. Companies that engage in a market extension merger seek to gain access to
a bigger market and, thus, a bigger client base. To extend their markets, Eagle Bancshares
and RBC Centura merged in2002.

Horizontal

A horizontal merger occurs between companies operating in the same industry. The merger is
typically part of consolidation between two or more competitors offering the same products
or services. Such mergers are common in industries with fewer firms, and the goal is to create
a larger business with greater market share and economies of scale since competition among
fewer companies tends to be higher. The 1998 merger of Daimler-Benz and Chrysler is
considered a horizontalmerger.

Vertical

When two companies that produce parts or services for a product merger the union is referred
to as a vertical merger. A vertical merger occurs when two companies operating at different
levels within the same industry's supply chain combine their operations. Such mergers are
done to increase synergies achieved through the cost reduction which results from merging
with one or more supply companies. One of the most well-known examples of a vertical
merger took place in 2000 when internet provider America Online (AOL) combined with
media conglomerate Time Warner.

IV. Licensing:

Licensing is a business arrangement in which one company gives another company

permission to manufacture its product for a specified payment. Licensing generally involves
allowing another company to use patents, trademarks, copyrights, designs, and other
intellectual in exchange for a percentage of revenue or a fee. It’s a fast way to generate
income and grow a business, as there is no manufacturing or sales involved. Instead,
licensing usually means taking advantage of an existing company’s pipeline and
infrastructure in exchange for a small percentage ofrevenue.

An international licensing agreement allows foreign firms, either exclusively or non-

exclusively, to manufacture a proprietor’s product for a fixed term in a specific market. To
summarize, in this foreign market entry mode, a licensor in the home country makes limited
rights or resources available to the licensee in the host country. The rights or resources may
include patents, trademarks, managerial skills, technology, and others that can make it
possible for the licensee to manufacture and sell in the host country a similar product to the
one the licensor has already been producing and selling in the home country without
requiring the licensor to open a new operation overseas. The licensor’s earnings usually take
the form of one-time payments, technical fees, and royalty payments, usually calculated as a
percentage ofsales.

Key Points:

 Licensing is a business agreement involving two companies: one gives the other
special permissions, such as using patents or copyrights, in exchange forpayment.
 An international business licensing agreement involves two firms from different
countries, with the licensee receiving the rights or resources to manufacture in the
foreigncountry.
 Rights or resources may include patents, copyrights, technology, managerial skills, or
other factors necessary to manufacture thegood.
  Advantages of expanding internationally using international licensing include: the
ability to reach new markets that may be closed by trade restrictions and the ability to
expand without too much risk or capitalinvestment.
 Disadvantages include the risk of an incompetent foreign partner firm and lower
income compared to other modes of internationalexpansion.

V. Franchising:

Franchising is an arrangement where franchisor (one party) grants or licenses some rights
and authorities to franchisee (another party). Franchising is a well-known marketing strategy
for businessexpansion.

A contractual agreement takes place between Franchisor and Franchisee. Franchisor

authorizes franchisee to sell their products, goods, services and give rights to use their
trademark and brand name. And these franchisee acts like a dealer. In return, the franchisee
pays a one-time fee or commission to franchisor and some share of revenue. Some
advantages to franchisees are they do not have to spend money on training employees; they
get to learn about businesstechniques.