Prof Vasanth Kiran AIT, Bangalore

INTERNATIONAL MARKETING MANAGEMENT

  

   


Framework of International Marketing Developing Global Vision through Marketing Research Global Marketing Management Planning & Organization Product & Services for Customers Marketing Entry Strategies Pricing Decisions Recent Trends in Indias Foreign Trade International Retailing

Framework of International Marketing

      

Definition Scope and challenges Difference between international marketing and domestic marketing The dynamic environment of international trade Transition from domestic to international markets Orientation of management and companies Introduction to Balance Of Payments (BOP)

Definition


International marketing is the performance of business activities designed to plan, price, promote and direct the flow of a companys goods and services to consumers or users in more than one nation for a profit.

Scope and challenges

International marketing task  Environmental adaptation needed  The self-reliance criterion (SRC) and ehtnocentrism : major obstacles  Developing global awareness


International Marketing Task

Marketing decision factors Political / Legal forces Aspects of foreign environmen t Cultural forces Political / Legal forces Domestic environment (Uncontrollable) (Controllable) Price Promotion Product Channels of distribution EUE - Country Market B Competitive forces Foreign Environment (Uncontrollable) Economic forces Environmental uncontrollables - Country Market A

Competitive structure

Research

Aspects of domestic environment

Geography & Infrastructure

Environment Climate Structure of distribution

Levels of Technology EUE - Country Market C

Environmental adaptation needed



  

Must be able to interpret the influence and impact of each of the uncontrollable environmental elements on the marketing plan for each foreign market in which they hope to do the business The task of cultural adjustment is the most challenging Cultural conditioning is like iceberg not aware of the ninetenths of it Foreign marketers must constantly guard against measuring and assessing the fixed values and assumptions in their study of the market systems of different people, their potential and economic structures, religions, and other elements of culture. They must take specific steps to make themselves aware of the home-cultural reference in their analyses and decision making

Self Reliance Criterion

 

SRC is an unconscious reference to ones own cultural values, experiences, and knowledge as a basis for decisions and it is closely associated with ethinocentricism Ethnocentrism is the reaction based on meanings, values, symbols and behaviour relevant to own culture and usually different from those of the foreign culture Framework / steps for analysis
Define the business problem or goal in home-country cultural traits, habits, or norms Define the business problem or goal in foreign country cultural traits, habits, or norms through consultation with natives of the target country. Make no value judgments Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem Redefine the problem without the SRC influence and solve for the optimum business goal situation

Developing global awareness

 

Tolerance of cultural difference Knowledge of cultures, history, world market potential and global economic / / social / political trends Strategies for global awareness
Select individual managers for their demonstrated global awareness Personal relationship in other countries Previously established social ties Successful long-term business relationship with foreign customers Have a culturally diverse senior executive staff or board of directors

Difference between international marketing and domestic marketing

     

The only difference between international marketing and domestic marketing is that in former case the activities takes place in more than one country. In more than one country accounts for the complexity and diversity found in international marketing operations Marketing concepts like processes and principles are universally applicable and marketers task is the same whether outside or inside the country Business goal is to make profit by promoting, pricing and distributing products for which there is a market. The answer lies not with different concepts of marketing but with the environment within which marketing plans must be implemented. The uniqueness of foreign marketing comes from the range of unfamiliar problems and the variety of strategies necessary to cope with different levels of uncertainty encountered in foreign markets Competition, legal restraints, government controls, weather, fickle consumers, and any number of uncontrollable elements can frequently do, affect the profitable outcome of the good, sound marketing plans Generally, a marketer cannot control or influence these uncontrollable elements, but instead must adjust or adapt to them in a manner consistent with successful outcome.

The dynamic environment of international trade



Trade barriers an international marketers minefield

Barriers to trade, both tariff and non-tariff areas

The 20th century to 21st century  World trade and multinationals  The first decade of the 21st century and beyond


Trade Barriers - Tariff

To encourage development of domestic industry and protect existing industry, government establish trade barriers A Tariff is a tax imposed by a government on goods entering at its borders. It can be used as a revenue generating tax or to discourage the import of goods or for both the reasons. Tariffs 1.Increase inflationary pressures, special interest privileges, Government control & political considerations in economic matters, tariff begets tariffs 2.Weaken BOP positions, Supply demand patterns and international relations 3.Restrict Manufacturers supply sources, choices available to consumers and competition. 4.Arbitrary 5.Discriminatory 6.Require constant administration & supervision

Trade Barriers - Strategy for development

To encourage development of domestic industry and protect existing industry, government establish trade barriers
Tariff Increase Weaken Restrict Arbitrary Discriminatory Require constant administration Non-Tariff Specific limitations on trade Customs & administrative entry procedures Standards Governmental participation in trade Charges on imports others

Trade Barriers Non-Tariffs

Imports are restricted in a variety of ways other than tariffs, i.e., Non-tariff barriers include quality standards on imported products, sanitary and health standards, quotas, embargoes, boycotts and antidumping penalties, etc.  Specific limitations on trade  Customs and Administrative Entry Procedures  Standards  Government participation in trade  Charges on imports  others

NT specific limitations on trade Quotas  Import licensing requirements  Proportional restrictions of foreign to domestic goods  Minimum import price limits  Boycotts & Embargoes


NT Customs & administrative entry procedures

Valuation systems  Antidumping practices  Tariff classification  Documentation requirements  Fees



NT Standards Standards disparities  Intergovernmental acceptances of testing methods & standards  Packaging, labeling, marking standards


NT Governmental participation in trade Government procurement policies  Export subsidies  Countervailing duties  Domestic assistance programs


NT Charges on imports & others

Charges on imports  Prior import deposit requirements  Administrative fees  Special supplementary duties  Import credit discriminations  Variable levies  Border taxes Others  Voluntary Export Restraints (VERs)  Orderly Marketing Agreements (OMAs)

IMF & World Bank Group

Two global institutions created  To assist nations in becoming and remaining economically stable  To help in maintaining stability in the financial markets  By assisting countries which are seeking economic development and restructuring Five institutions of World Bank Group extending following services:  Lending money to the governments of developing countries to finance development projects in education, health & infrastructure  Providing assistance to the governments for developmental projects of poorest developing countries  Lending directly to the private sector by LT loans, equity investments & other financial assistance  Providing investors with investment guarantees against noncommercial risk  Promoting increased flow of international investments by providing facilities for conciliation & arbitrage

World Bank Group

The World Bank is a vital source of financial and technical assistance to developing countries around the world. We are not a bank in the common sense. We are made up of two unique development institutions owned by 185 member countries Two Unique Developmental Institutions  IBRD International Bank for Reconstruction & Development  IDA International Development Association Three affiliates  IFC International Finance Corporation  MIGA Multilateral Investment Guarantee Agency  ICSID International Centre for Settlement of Investment Disputes

Transition / Stages of international marketing involvement

1. 2. 3. 4. 5.

No direct foreign marketing Infrequent foreign marketing Regular foreign marketing International marketing at this point a company becomes international or multinational firm Global marketing at this stage companies treat the world, including their home market, as one market. Market segmentation decisions are no longer focused on national borders Market segments are defined as
Income levels Usage patterns Other patterns often span countries and regions

Strategic orientation / concepts



Domestic market extension orientation

Companies seeking sales extension of its domestic products into foreign markets illustrates this orientation to international marketing

Multi domestic market orientation

When a company recognizes the importance of differences in overseas markets and the importance of offshore business to the organization, its orientation toward international business may shift to a multi-domestic market strategy

Global marketing orientation

A company guided by this is generally referred to as global company, its marketing activity is global and its market coverage is the world

The orientation of IM
Successful international marketer possess the best qualities of  Anthropologist a person who study the human behaviour in a society  Sociologist  Psychologist  Diplomat  Lawyer  Prophet  Business person Assignment No.1  Visit rbi.org.in website and submit the BOP positions of India Due date of submission on or before 12.02.2008 Assignment No.2  Global awareness about recent FDI information in respect of your industry in India Assuming you are the Head of a company Due date of submission on or before 23.02.2008

Balance Of Payments (BOP)



Definition
A nations BOP is the statement of records of all financial transactions between its residents and those of the rest of the world during a given period of time usually one year in dual currencies

    

Scope Items covered under BOP Relevance for international marketing BOP equilibrium Instruments of trade policy

BOP - Meaning
  

It is a statistical statement for a given period showing Transaction in goods and services between an economy and the rest of the world Changes of ownership and other changes in that countrys monetary gold, Special Drawing Rights (SDR) and claims on and liabilities to the rest of the world Unrequited transfers and counterpart entries that are needed to balance, in the accounting sense, any entries for the foregoing transactions and changes which are not mutually offsetting

Components / Items covered under BOP



Current Account A record of all merchandize exports, imports and services plus unilateral transfers of funds. It is important from the angle of international business Capital Account A record of direct investments, portfolio investment and short term capital movements to and from countries Unilateral Transfer Account another term for gifts and it includes private remittances, governments grants, repatriation and disaster relief Official Reserve Account A record exports and imports of gold, increases or decreases in foreign exchange, and increases and decreases of liabilities to foreign banks

BOP Equilibrium & Disequilibrium

  

BOP of a country is said to in equilibrium when the demand for foreign exchange is exactly equivalent to supply of it It is regarded as being in disequilibrium when it shows surplus or deficit There will be deficit in the BOP when the demand for the foreign exchange exceeds its supply & there will be surplus when the supply of foreign exchange exceeds the demand There are number of factors causing equilibrium & disequilibrium in BOP, but broadly it is Economic factors
Development disequilibrium Cyclic disequilibrium Secular disequilibrium Structural disequilibrium

Political factors Social factors

Corrections of Disequilibrium


Automatic Corrections this will work well under the gold standard, since at present no country is on gold standards it is irrelevant However, theory of automatic correction states that if the market forces of demand and supply are allowed to have a free play, in course of time, the equilibrium is automatically restored. Deliberate measures It refers to correction of disequilibrium by means of measures deliberately taken 1. Monetary measures 2. Trade measures 3. Miscellaneous

Corrections of Disequilibrium
Automatic Correction Deliberate Measures

Monetary Measures 1. 2. 3. Monetary contraction/expansion Devaluation & revaluation Exchange control

Trade Measures

Miscellaneous 1. 2. 3. Foreign loans Incentives for foreign investments Tourism development

Export Promotion 1. Abolition/reduction of export duties 2. Export subsidies 3. Export Incentives

Import Control 1. Import duties 2. Import quotas 3. Import prohibitions

Factors effecting BOP Problems

 

Large trade deficit Fall in invisible surplus, caused by

Sharp increase in the invisibles payments due to the increase in the debt service Set back to the invisibles receipts, mainly the emergent remittances and travel income

 

Sensitive behaviour of foreign creditors, including NRI foreign currency depositiors The declining role of concessional external finance

Major Problems of Indias Export Sector

           

Lack of integrated approach Problem recognition & action lags Technological factors High costs Poor quality image Unreliability Supply problems Faceless presence Infrastructural bottlenecks Structural weakness Uncertainties, procedural complexities and institutional rigidities Inadequacy of trade information system

Government Influence of international Trade

    

Policies of governments of home country & foreign countries will have profound impact on international trade Impose trade barriers for variety of reasons Tariff rates are generally high in developing countries compared to developed countries Non-tariff trade barriers will also effect the foreign trade substantially Foreign trade in India is regulated mostly by Foreign Trade (Development and Regulation Act, 1992
Its objective is to provide for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India and for all matters connected with or incidental thereto

Export Import Policy or foreign Trade Policy with its objective to accelerate the countrys transition to internationally oriented vibrant economy with a view to derive maximum benefit from expanding global market opportunities

Cultural environment of global markets



History & geography : the foundation of culture

Historical perspective in global business Geography and global market Dynamics of global population World trade routes

Cultural dynamics in assessing global markets

Culture gets in the way Origin of culture Elements of culture values, rituals, symbols, beliefs & thought process Cultural knowledge Factual Vs Interpretive, cultural sensitivity & tolerance Cultural change borrowing, similarities, resistance, planned & unplanned, consequence of innovation

Culture, Management style, and business systems

Required adaptation degree of adaptation, imperatives, electives & exclusives Management style around the world authority & decision making, Management objectives & aspiration, communication styles, formality & tempo, Negotiation emphasis Gender bias in international business Business ethics Corruption, western focus on bribery, bribery, ethically & socially responsible decisions Cultures influence on strategic thinking

Political environment of global markets

 

Stability of government policies, political parties & nationalism Political risks of global business confiscation, expropriation & domestication, economic risks, political sanctions, political & social activists, violence & terrorism, cyberterrorism Assessing political vulnerability
Politically sensitive products & issues Forecasting political risk

Reducing political vulnerability

Joint ventures Expanding the investment base Licensing Planned domestication Political payoffs Government encouragement

Legal environment of global markets



Bases for legal systems

Common & code law Islamic law Marxist-socialist law

 

Jurisdiction in international legal disputes International disputes

Resolution Conciliation Arbitration Litigation

Protection of intellectual property rights

Counterfeiting & privacy Inadequate protection Prior use & registration International conventions

Commercial law within country

Marketing laws Green marketing legislation antitrust

Cyber-law
Cyber-squatters, taxes, jurisdiction of disputes and validity of contracts