International Marketing
Q 1. a) Discuss the process of evolution of marketing across national boundaries right up to the stage of GLOCBL.
Ans: Evolution to glocal marketing
Global marketing is not a revolutionary shift, it is an evolutionary process. While the following does not apply to all companies, it does apply to most companies that begin as domestic-only companies.
Domestic marketing
A marketing restricted to the political boundaries of a country, is called "Domestic Marketing". A company marketing only within its national boundaries only has to consider domestic competition. Even if that competition includes companies from foreign markets, it still only has to focus on the competition that exists in its home market. Products and services are developed for customers in the home market without thought of how the product or service could be used in other markets. All marketing decisions are made at headquarters.
Export marketing
Generally, companies began exporting, reluctantly, to the occasional foreign customer who sought them out. At the beginning of this stage, filling these orders was considered a burden, not an opportunity.
International marketing
If the exporting departments are becoming successful but the costs of doing business from headquarters plus time differences, language barriers, and cultural ignorance are hindering the company’s competitiveness in the foreign market, then offices could be built in the foreign countries. Sometimes companies buy firms in the foreign countries to take advantage of relationships, storefronts, factories, and personnel already in place. These offices still report to headquarters in the home market but most of the marketing mix decisions are made in the individual countries since that staff is the most knowledgeable about the target markets. Local product development is based on the needs of local customers
Multinational marketing
At the multi-national stage, the company is marketing its products and services in many countries around the world and wants to benefit from economies of scale. Consolidation of research, development, production, and marketing on a regional level is the next step. An example of a region is Western Europe with the US. But, at the multi-national stage, consolidation, and thus product planning, does not take place across regions; a regiocentric approach.
Global marketing
When a company becomes a global marketer, it views the world as one market and creates products that will only require weeks to fit into any regional marketplace. Marketing decisions are made by consulting with marketers in all the countries that will be affected. The goal is to sell the same thing the same way everywhere.
Global marketing
It is a synergy of Global and local competency of marketing activities.
Q 1. b) Describe with the help of examples how Indian companies have successfully pursued internationalization of their marketing activities.
Ans: In the last decade some Indian pharmaceutical firms have successfully internationalised their operations and emerged as a major producers and suppliers of generic drugs all over the world. This paper presents a study of internationalisation motives and strategies adopted by Indian pharmaceutical firms.
Although India currently represents just US $6 billion of the $550 billion global
pharmaceutical industry, its share is increasing at 10 % a year. The organised sector of
India’s pharmaceutical industry consists of 250 to 300 companies, which accounts for 70 % of the market, with the top ten companies representing 30%.
The Indian pharmaceutical industry has developed wide ranging capabilities in the
complex field of drug process development and production technology. It is well ahead
of other developing countries in process R&D capabilities and the range of
technologically complex medicines manufactured.
The Indian government adopted a new Patents Act in 1970, which laid the foundations
of the modern Indian pharmaceutical industry. It removed product patents for
pharmaceuticals, food and agro-chemicals, allowing patents only for production
processes. The statutory term for production processes was shortened to five years from grant or seven years from application. The 1970 Patent Act greatly weakened intellectual property protection in India, particularly for pharmaceutical innovations. It started the era of reverse engineering where firms developed new products by changing their production processes. Trained manpower, comparative ease of imitation and a strong chemistry base among Indian research institutes supported manufacturers and gave the Indian pharmaceutical industry its current profile.
There are 3 developments which are pushing expansion of the Indian pharmaceutical
industry into overseas markets;
a. Opportunities opened in the US generic market due to the Hatch-Waxman Act,
b. Increasing outsourcing by MNC pharmaceutical firms and
c. strengthening of patent laws in the domestic market. These three developments are
creating new challenges and opportunities for Indian industry and internationalization is one of route adopted by Indian to succeed in this new environment.
Liberalisation facilitated the ability of Indian firms to exploit this opportunity to market generics drugs to the US and other Western economies. Indian firms are preparing themselves to take a share of this increasing global market. Indian drug manufacturers currently export their products to more than 65 countries worldwide; the US being the largest customer. However Indian firms face some difficult challenges such as non tariff barriers, decreasing profits in the generics market, competitive threats from big pharma MNCs and reputation in western markets. For example, US regulation disqualifies Indian firms from bidding for government contracts and Indian firms have to submit separate applications for each state even when firms have FDA approved products and facilities.
Furthermore, stronger patent protection under the new patent law of 1999 has shut
down the avenues for exploitation of generics opportunity in domestic market, but
promised large rewards to Indian firms that could leverage their reverse engineering
capabilities in advanced markets. The stronger patent law restrict reverse engineering of newly patented molecule, thus affecting an important source of growth for Indian firms.
Also MNC pharmaceutical firms have entered India after 2005 and using the same
resource base as Indian firms to compete in the Indian domestic market further
increasing pressure on profit margins of Indian firms.
The contract research and manufacturing services (CRAM) market has emerged as huge opportunity for the Indian pharmaceutical industry. According to Frost and Sullivan (2005), the global outsourcing market is worth $37 billion and growing at almost 11%; 50% of the contract manufacturing market is in North America, 40% in Europe and just 10% in Asia and the rest of the world. Indian firms possess requisite capabilities to cater for the requirements of outsourcing markets, still India accounts for barely 1.5% of the global CRAM industry. Due to untested patent protection law and lack of data protection MNC firms are reluctant to outsource early stage R&D work to Indian firms.
Therefore Indian firms are trying to increase their share in the outsourcing market by
moving closer to the market.
Geographically the overseas acquisition by Indian pharmaceutical firms continues to be directed at developed countries specifically the US and Europe .
Indian companies have already established manufacturing plants in the US, Europe, Brazil, Russia and China.
The major Indian companies such as Ranbaxy, Dr. Reddy’s Laboratories, Wockhardt and others have established their own brand image in the international market and are taking steps to consolidate their activities. Indian firms are compensating for the spiralling cost of selling and marketing in advance countries by setting wholly owned subsidiaries or acquiring local firm. Thus reinforcing the argument that Indian firms internationalization through acquisition is directed towards acquiring new knowledge in different areas such as R&D capabilities, regulatory skills and distribution networks.
Q 2. Answer the following questions giving suitable examples.
a) How do political and economic stabilities affect marketing?
Ans: Political and economic risk is always a factor in international marketing due to the unavoidable differences between the laws, customs and policies of foreign governments. As foreigners entering new markets, we often lack the local market knowledge and culture.
To understand these differences and must depend on outside sources for information and forecasts.
In most Westernized nations, a vast library of economic statistics and political analysis is publicly available for review. These countries tend to have well-developed and predictable economies and relatively stable governments. Developing countries offer less transparency and access to accurate economic or industry statistics may not exist at all.
By understanding the elements of political and economic risk, it is easier to define a model for risk management and decision-making and to collect appropriate data for analysis and marketing strategy. This article will review the various components of economic and political risk and offer a method used for quantifying and comparing the "riskiness" of doing business in different countries.
Political Risk
Political risk is the risk that a government will unexpectedly change the roles of the game under which businesses in that country operate. Political risk is often characterized by the stability (or instability) of the government and the presence, or lack thereof, of an independent judiciary and legal system. The relationship with other countries is also very important in determining the level of political risk involved in entering a new market. Political differences between countries can create significant and unexpected business challenges, including international or home-country sanctions, consumer boycotts or even violent attacks against the country or firms that trade there.
b) Self-reference criterion is a big stumbling block for global marketer. Explain.
Ans: Self Reference Criterion
Having sold a product successfully in the domestic market a firm may assume that the product will, without adaptation, also be successful in foreign markets. Frequently this assumption leads to failure. The SRC refers to the assumption that what is suitable for the home market will be suitable for the foreign market and therefore there is no need to test whether or not the product should be altered. That’s why Self-reference criterion is a big stumbling block for global marketer.
Q 3. Differentiate between.
A) National brands and global brands
Ans: Global products is a commercial product which is marketed worldwide with a single brand name is called global product. Like Coca Cola.
National products are the products marketed in a national territory. Like TATA salt.
B) High context culture and low context culture
Ans: The general terms "high context" and "low context" (popularized by Edward Hall) are used to describe broad-brush cultural differences between societies.
High context refers to societies or groups where people have close connections over a long period of time. Many aspects of cultural behavior are not made explicit because most members know what to do and what to think from years of interaction with each other. Your family is probably an example of a high context environment.
Low context refers to societies where people tend to have many connections but of shorter duration or for some specific reason. In these societies, cultural behavior and beliefs may need to be spelled out explicitly so that those coming into the cultural environment know how to behave.
High Context
Less verbally explicit communication, less written/formal information
More internalized understandings of what is communicated
Multiple cross-cutting ties and intersections with others
Long term relationships
Strong boundaries- who is accepted as belonging vs who is considered an "outsider"
Knowledge is situational, relational.
Decisions and activities focus around personal face-to-face relationships, often around a central person who has authority.
Examples:
Small religious congregations, a party with friends, family gatherings, expensive gourmet restaurants and neighborhood restaurants with a regular clientele, undergraduate on-campus friendships, regular pick-up games, hosting a friend in your home overnight.
Low Context
Rule oriented, people play by external rules
More knowledge is codified, public, external, and accessible.
Sequencing, separation--of time, of space, of activities, of relationships
More interpersonal connections of shorter duration
Knowledge is more often transferable
Task-centered. Decisions and activities focus around what needs to be done, division of responsibilities
c) Command allocation and market allocation
Ans: Market allocation or market division schemes are agreements in which competitors divide markets among themselves. In such schemes, competing firms allocate specific customers or types of customers, products, or territories among themselves. For example, one competitor will be allowed to sell to, or bid on contracts let by, certain customers or types of customers. In return, he or she will not sell to, or bid on contracts let by, customers allocated to the other competitors. In other schemes, competitors agree to sell only to customers in certain geographic areas and refuse to sell to, or quote intentionally high prices to, customers in geographic areas allocated to conspirator companies.
The method for allocation of resources in which the main commanding economy determines the allocation of existing resources for the other economies like Soviet Union.
d) International companies and transnational companies
Ans: A MNC (Multinational Company) is one that has the ability to control their operations in more than one country, even if it doesn't own the operations directly. A TNC (Transnational Company) on the other hand is one that has outlets/opeations in more than one country.
Trans-National Corporations (TNCs) sometimes referred to as multinational companies, are enterprises that control economic assets in other countries — generally this means controlling at least a 10% share of such an asset1. These companies command enormous financial resources, possess vast technical resources and have extensive global reach.
Despite their impact in developing economies, however, TNCs are not development agencies. They are profit-seeking organizations. These dual roles of funding source and profit seeker — unrelated roles that are neither conflicting nor complementary — have made TNCs object of great controversy. Do they help or hinder? Do they give or take? Are their benign or malign? Are they stakeholders or exploiters? Can they be persuaded to be good world citizens or are they indifferent to their impact?
Q 4. a) Elaborate the benefits that accrue to partners of regional agreement s and treaties.
Ans:
11/1/2005
Does Business Benefit from the Proliferation of Regional Trade Agreements?
November 2005 In the wake of slow-paced and limited WTO negotiations, Canada is negotiating an increasing number of investment treaties. The relative immediacy of deeper tariff cuts and investment protections seems like an obvious justification to this activity. But this growing array of agreements may cost businesses more than the purported liberalization is worth.
Regional trade agreements (RTAs) are an essential element in the landscape of international trade, and their significance is only increasing. Recent years have seen a proliferation of RTAs around the world, with new agreements being negotiated at an accelerated pace. As of January 2005, 312 RTAs have been notified to GATT/WTO, of which approximately 170 are currently in force. In the last 10 years alone, 196 new RTAs have been notified, and it is estimated that a further 65 RTAs are currently in force but have not yet been notified. But are so many RTAs a good thing?
The Canadian Perspective As an industrialized country with a medium-sized economy, Canada has historically depended on trade for much of its economic prosperity. As a result, Canada has actively entered into, and conducted negotiations on, a wide variety of RTAs. Canada is a Party to seven RTAs, 22 bilateral investment treaties, and is currently negotiating six RTAs.
Benefits Arising From Regional Trade Agreements RTAs quickly and efficiently reduce tariff and non-tariff barriers to the movement of goods and services in a way and at a pace not currently possible solely from the multilateral system.
RTAs permit flexibility not available in multilateral agreements. Canada and Chile have agreed not to impose anti-dumping duties on products riginating in either country. This is the only free trade agreement in the Americas that has taken this innovative step.
RTAs, like NAFTA, protect Canadian investments abroad by requiring the Parties to afford to investors of the other Parties non-discriminatory treatment and most favoured nation treatment with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.
NAFTA also allows investors to submit complaints of Chapter 11 violations to binding arbitration.
RTAs also allow for more focused and specialized negotiations involving certain industries or issues that are important to each country involved. For instance, the automobile industry is crucial to the Canadian economy. Article 403 of NAFTA therefore contains specific provisions dealing with automobiles.
Reduce tariffs and restrictions on trade between two or more nations within a certain region.
An FTA is a group of two or more customs territories which has eliminated tariffs and other trade restrictions on substantially all trade.
A Customs Unions is two or more customs territories which have an FTA and which also apply a common external tariff on goods from non-members.
A regional economic integration agreement is the next step: it can include the free movement of capital as
Q 4. b) Write short notes on
1) ASEAN
Ans: ASEAN
The Association of Southeast Asian Nations commonly abbreviated ASEAN is a geo-political and economic organization of 10 countries located in Southeast Asia, which was formed on 8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand Since then, membership has expanded to include Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam.
The members of the summit are all 10 members of ASEAN together with China, Japan, South Korea, India, Australia and New Zealand who combined represent almost half of the world's population.
Its aims include the acceleration of
1. Economic growth,
2. Social progress,
3. Cultural development among its members,
4. The protection of the peace and stability of the region, and
5. To provide opportunities for member countries to discuss differences peacefully.
Objectives of ASEAN
1. To promote networking amongst relevant law enforcement authorities in ASEAN Countries to curb illegal trade in wild fauna and flora.
2. To promote research, monitoring and information exchange on CITES-related issues.
3. To encourage industry groups, trade associations/ traders and local communities to comply with legality and sustainability requirements of national regulations.
4. To encourage greater regional cooperation on specific issues by:
5. To seek sufficient technical and financial assistance through collaborative initiatives by:
2) Andean Group
Ans: Andean Group A regional economic grouping comprising Colombia, Peru (suspended from 1992 to 1993), Bolivia, Chile (from 1969 to 1977), Venezuela, and Ecuador. Formally established by the Cartagena Agreement of 1969 – hence its official name, Acuerdo de Cartagena – it was an attempt to enhance the competitive edge of the member states in their economic relations with the more developed economies of the Latin American region.
3) NAFTA
Ans: Implementation of the North American Free Trade Agreement (NAFTA) began on January 1, 1994. This agreement will remove most barriers to trade and investment among the United States, Canada, and Mexico.
Under the NAFTA, all non-tariff barriers to agricultural trade between the United States and Mexico were eliminated. In addition, many tariffs were eliminated immediately, with others being phased out over periods of 5 to 15 years. This allowed for an orderly adjustment to free trade with Mexico, with full implementation beginning January 1, 2008.
The agricultural provisions of the U.S.-Canada Free Trade Agreement, in effect since 1989, were incorporated into the NAFTA. Under these provisions, all tariffs affecting agricultural trade between the United States and Canada, with a few exceptions for items covered by tariff-rate quotas, were removed by January 1, 1998.
Mexico and Canada reached a separate bilateral NAFTA agreement on market access for agricultural products. The Mexican-Canadian agreement eliminated most tariffs either immediately or over 5, 10, or 15 years. Tariffs between the two countries affecting trade in dairy, poultry, eggs, and sugar are maintained
Q 5. a) Discuss the various sources of market information used by global marketers.
Ans: There are a number of such sources available to the global marketer, and the following list is by no means conclusive:
Trade associations
National and local press Industry magazines
National/international governments
Websites
Informal contacts
Trade directories
Published company accounts
Business libraries
Professional institutes and organizations
Omnibus surveys
Previously gathered marketing research
Census data
Public records
Q 5. Discuss the problems faces by global market researchers?
Ans:A much practiced international marketing research is Desk research is a euphemism for collecting secondary data.
International Marketing Research follows the same path as domestic research, but there are a few more problems that may arise. Customers in international markets may have very different customs, cultures, and expectations from the same company. In this case, secondary information must be collected from each separate country and then combined, or compared. This is time consuming and can be confusing. International Marketing Research relies more on primary data rather than secondary information. Gathering the primary data can be hindered by language, literacy and access to technology.
the role of secondary research or desk research, in identifying suitable overseas markets as well as products
Market research enable businesses to analyse potential targets according to a number of key factors and issues.
Market characteristics
These may include factors such as size/growth and segmentation of markets, customer concentration, import sensitivity & growth, seasonal/cyclical trends, and quality issues.
Competitive conditions
This will cover factors such as the degree and concentration of competitors (domestic and foreign), the complexity of distribution systems, the availability of substitutes and barriers to new entrants to markets.
Financial & economic conditions
This will include basic issues such as the cost of doing business in a particular market but also will require analysis of pricing practices/payment terms, tariffs and other barriers to trade, foreign exchange, currency stability and the provision of concessional finance.
Cultural, political & legal factors
Cultural issues (including language), political stability and legal systems are vital factors in market identification. More specific but no less significant are foreign investment and consumer/environmental legislation, registration & licensing procedures, labour laws and intellectual property protection.
Market prioritisation
Analysis of the factors listed above, should help firms to rank potential markets in priority order.
Above all, businesses should focus on the influences on demand for products/services, on the acceptance of products/services, on government regulation and the major sources of competition.
So it may be untargeted, and difficult to use to make comparisons (e.g. financial data gather on Australian pensions will be different to data on Italian pensions).
Q 6. a) Differentiate between Joint ventures and Global strategic partnerships.
Ans: Why Joint Ventures?
As there are good business and accounting reasons to create a joint venture (JV) with a company that has complementary capabilities and resources, such as distribution channels, technology, or finance, joint ventures are becoming an increasingly common way for companies to form strategic alliances. In a joint venture, two or more "parent" companies agree to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control.
Important Factors to be Considered Before a Joint Venture is Formed
screening of prospective partners
joint development of a detailed business plan and shortlisting a set of prospective partners based on their contribution to developing a business plan
due diligence - checking but it's good business practice to verify the facts through interviews with third parties)
development of an exit strategy and terms of dissolution of the joint venture
most appropriate structure (e.g. most joint ventures involving fast growing companies are structured as strategic corporate partnerships)
availability of appreciated or depreciated property being contributed to the joint venture; by misunderstanding the significance of appreciated property, companies can fundamentally weaken the economics of the deal for themselves and their partners.
special allocations of income, gain, loss or deduction to be made among the partners
compensation to the members that provide services the credentials of the other party ("trust and verify" - trust the information you receive from from the prospective partner.
Global strategic partnerships
a type of contractual alliance between two commercial enterprises that is not a formal legal partnership
A strategic partnership often puts together public and private entities for commercial purposes.
Q 6. b) Discuss in detail, trade fair route to enter new markets.
Ans: Participation in international trade fairs provides exporters with an excellent opportunity to promote their products and to establish ontacts with potential business relations. The training “Effective Trade Fair Participation” offers Small Medium Enterprises and BSO staff the opportunity to become familiar with the necessary knowledge, tools and skills to prepare, execute and give follow-up, to international trade fairs in
At the end of the training the participant:
has gained improved knowledge of tools to communicate with an European export market;
is able to prepare and manage an individual trade fair participation in Europe;
has improved his/her skills in identifying suitable exhibitions, selecting the right exhibitors and in dealing with trade fair organizations, stand constructors, customs etc.
has gained improved knowledge on issues like project management, budgeting, stand layout and design, visitor’s promotion and PR, stand behaviour, evaluation and follow-up;
has collected information on new concepts on how exhibitions are being organised
is familiar with CBI’s mission and website.
Target audience The training is meant for exporters who are active in a variety of sectors among which the garment sector and which task it is to manage the exports to European markets. Focus is on the people within the exporting company who are responsible for the organisation of participations in international trade fairs. Experience in this field is necessary in order to fully participate in the workshop. Additionally the participants should have some experience in exports and international business and are conversant with the English language
Q 6. c) What impact does currency fluctuation has on pricing of products on international markets?
Ans: the financial risk of reduced profitability due to strong rupee can be seen in two ways.
The first one is it will bring down margins of local companies. Most Indian IT companies have a natural hedge, given that 60 to 70 per cent of the expenses are not rupee-denominated. Our analysis reveals that every one per cent appreciation of rupee against the US dollar reduces our margins by 30 bps.”
“The second impact is on the translation of foreign assets like receivables and cash and bank balances. An appreciation in rupee results in translation losses. To a large extent, companies can protect against this loss by taking forward cover,” added Mr Srinivas.
It was pointed out that if the rupee continues to strengthen against the dollar, the way it has done in the last two years, profitability of the IT sector will be affected. However, the behaviour of the rupee has to be seen against the basket of currencies and not in isolation to the dollar. For example, while the rupee has appreciated against the dollar, it has depreciated against the euro and the pound, which to a small extent, has helped cut losses. Indian companies will have to focus on growing revenue.
If the rupee has appreciated vis-a-vis the dollar, it as depreciated vis-a-vis other currencies. One balances out the other.
Q 7. a) Describe briefly Duty entitlement passbook Scheme and export promotion capital goods schemes available to exporters under foreign trade policy 2004-09.
Ans: A Duty Remission Scheme enables post export replenishment/ remission of duty on inputs used in the export product. Duty remission schemes consist of
(a) DFRC (Duty Free Replenishment Certificate) and
(b) DEPB ( Duty Entitlement Passbook Scheme).
The objective of DEPB is to neutralise the incidence of Customs duty on the import content of the export product. The neutralisation shall be provided by way of grant of duty credit against the export product. The DEPB scheme will continue to be operative until it is replaced by a new scheme which will be drawn up in consultation with exporters .
EPCG: EXPORT PROMOTION CAPITAL GOODS
An advantageous scheme for procurement of Capital Goods
The EPCG scheme allows import of capital goods (including CKD/SKD thereof as well as computer software systems and spares, jigs, fixtures, dies and moulds) at 3.09% Customs duty as against the normal total of 21.523%, thus providing a duty saved value of more than 20% of the import value. This is subject to an Export Obligation (EO) equivalent to 8 times of duty saved, to be fulfilled over a period of 8 years reckoned from the date of issuance of license. For large projects, SSI etc. there are more relaxed norms of EO.
The scheme covers manufacturer exporters with or without supporting manufacturer(s) / vendor(s), merchant exporters tied to supporting manufacturer(s) and Service Providers.
Actual user conditions: Import of capital goods are subject to Actual User condition till the export obligation is completed.
Export obligation: The export obligation needs to be fulfilled by the export of goods capable of being manufactured or produced by the use of the capital goods imported under the scheme. In addition upto 50% of the EO can also be fulfilled by any alternate product of the company or even group company. Deemed Exports like supplies to Power Projects, Projects funded by WB/ADB/JBIC etc, EOUs etc. can also be utilized to fulfill the EO
Indigenous Sourcing: A person holding an EPCG license may source the capital goods from a domestic manufacturer instead of importing them. The domestic manufacturer supplying capital goods to EPCG license holders shall be eligible for refund of Excise Duty paid by him. In addition the indigenous supplier can import his own raw material duty free and other benefits which can be discussed.
Q 7. b) Consider yourself to be a fabricator of ladies garments aspiring to export to USA and Europe. Which of the following option would you exercise and why?
1) Direct exporting
2) Indirect exporting
Ans: Direct exporting is Direct exporting
With direct exporting the exporter handles every aspect of the exporting process.
Market research
Foreign distribution
Collections
Direct methods of exporting give your firm:
More control over the export process
Potentially higher profits
A closer relationship to the overseas market
Direct methods of exporting require a significant commitment.
They are not cheap and require substatial resources.
Reorganizing the company to support the export effort may be necessary.
Methods of direct exporting include going through:
Sales Representatives
Distributors
A Foreign Retailer
Direct sales to the End User
Indirect exporting
Indirect methods of exporting requires less marketing investment, but you lose substantial control over the marketing process.
Methods of indrect exporting include:
Filling orders from domestic buyers who then export the product.
Seeking out domestic buyers who represent foreign customers.
Exporting through an Export Management Company (EMC)
Exporting through an Export Trading Company (ETC)
Franchising
Licensing
Contract manufacturing
Piggyback marketing
Remarketer
Q 1. a) Discuss the process of evolution of marketing across national boundaries right up to the stage of GLOCBL.
Ans: Evolution to glocal marketing
Global marketing is not a revolutionary shift, it is an evolutionary process. While the following does not apply to all companies, it does apply to most companies that begin as domestic-only companies.
Domestic marketing
A marketing restricted to the political boundaries of a country, is called "Domestic Marketing". A company marketing only within its national boundaries only has to consider domestic competition. Even if that competition includes companies from foreign markets, it still only has to focus on the competition that exists in its home market. Products and services are developed for customers in the home market without thought of how the product or service could be used in other markets. All marketing decisions are made at headquarters.
Export marketing
Generally, companies began exporting, reluctantly, to the occasional foreign customer who sought them out. At the beginning of this stage, filling these orders was considered a burden, not an opportunity.
International marketing
If the exporting departments are becoming successful but the costs of doing business from headquarters plus time differences, language barriers, and cultural ignorance are hindering the company’s competitiveness in the foreign market, then offices could be built in the foreign countries. Sometimes companies buy firms in the foreign countries to take advantage of relationships, storefronts, factories, and personnel already in place. These offices still report to headquarters in the home market but most of the marketing mix decisions are made in the individual countries since that staff is the most knowledgeable about the target markets. Local product development is based on the needs of local customers
Multinational marketing
At the multi-national stage, the company is marketing its products and services in many countries around the world and wants to benefit from economies of scale. Consolidation of research, development, production, and marketing on a regional level is the next step. An example of a region is Western Europe with the US. But, at the multi-national stage, consolidation, and thus product planning, does not take place across regions; a regiocentric approach.
Global marketing
When a company becomes a global marketer, it views the world as one market and creates products that will only require weeks to fit into any regional marketplace. Marketing decisions are made by consulting with marketers in all the countries that will be affected. The goal is to sell the same thing the same way everywhere.
Global marketing
It is a synergy of Global and local competency of marketing activities.
Q 1. b) Describe with the help of examples how Indian companies have successfully pursued internationalization of their marketing activities.
Ans: In the last decade some Indian pharmaceutical firms have successfully internationalised their operations and emerged as a major producers and suppliers of generic drugs all over the world. This paper presents a study of internationalisation motives and strategies adopted by Indian pharmaceutical firms.
Although India currently represents just US $6 billion of the $550 billion global
pharmaceutical industry, its share is increasing at 10 % a year. The organised sector of
India’s pharmaceutical industry consists of 250 to 300 companies, which accounts for 70 % of the market, with the top ten companies representing 30%.
The Indian pharmaceutical industry has developed wide ranging capabilities in the
complex field of drug process development and production technology. It is well ahead
of other developing countries in process R&D capabilities and the range of
technologically complex medicines manufactured.
The Indian government adopted a new Patents Act in 1970, which laid the foundations
of the modern Indian pharmaceutical industry. It removed product patents for
pharmaceuticals, food and agro-chemicals, allowing patents only for production
processes. The statutory term for production processes was shortened to five years from grant or seven years from application. The 1970 Patent Act greatly weakened intellectual property protection in India, particularly for pharmaceutical innovations. It started the era of reverse engineering where firms developed new products by changing their production processes. Trained manpower, comparative ease of imitation and a strong chemistry base among Indian research institutes supported manufacturers and gave the Indian pharmaceutical industry its current profile.
There are 3 developments which are pushing expansion of the Indian pharmaceutical
industry into overseas markets;
a. Opportunities opened in the US generic market due to the Hatch-Waxman Act,
b. Increasing outsourcing by MNC pharmaceutical firms and
c. strengthening of patent laws in the domestic market. These three developments are
creating new challenges and opportunities for Indian industry and internationalization is one of route adopted by Indian to succeed in this new environment.
Liberalisation facilitated the ability of Indian firms to exploit this opportunity to market generics drugs to the US and other Western economies. Indian firms are preparing themselves to take a share of this increasing global market. Indian drug manufacturers currently export their products to more than 65 countries worldwide; the US being the largest customer. However Indian firms face some difficult challenges such as non tariff barriers, decreasing profits in the generics market, competitive threats from big pharma MNCs and reputation in western markets. For example, US regulation disqualifies Indian firms from bidding for government contracts and Indian firms have to submit separate applications for each state even when firms have FDA approved products and facilities.
Furthermore, stronger patent protection under the new patent law of 1999 has shut
down the avenues for exploitation of generics opportunity in domestic market, but
promised large rewards to Indian firms that could leverage their reverse engineering
capabilities in advanced markets. The stronger patent law restrict reverse engineering of newly patented molecule, thus affecting an important source of growth for Indian firms.
Also MNC pharmaceutical firms have entered India after 2005 and using the same
resource base as Indian firms to compete in the Indian domestic market further
increasing pressure on profit margins of Indian firms.
The contract research and manufacturing services (CRAM) market has emerged as huge opportunity for the Indian pharmaceutical industry. According to Frost and Sullivan (2005), the global outsourcing market is worth $37 billion and growing at almost 11%; 50% of the contract manufacturing market is in North America, 40% in Europe and just 10% in Asia and the rest of the world. Indian firms possess requisite capabilities to cater for the requirements of outsourcing markets, still India accounts for barely 1.5% of the global CRAM industry. Due to untested patent protection law and lack of data protection MNC firms are reluctant to outsource early stage R&D work to Indian firms.
Therefore Indian firms are trying to increase their share in the outsourcing market by
moving closer to the market.
Geographically the overseas acquisition by Indian pharmaceutical firms continues to be directed at developed countries specifically the US and Europe .
Indian companies have already established manufacturing plants in the US, Europe, Brazil, Russia and China.
The major Indian companies such as Ranbaxy, Dr. Reddy’s Laboratories, Wockhardt and others have established their own brand image in the international market and are taking steps to consolidate their activities. Indian firms are compensating for the spiralling cost of selling and marketing in advance countries by setting wholly owned subsidiaries or acquiring local firm. Thus reinforcing the argument that Indian firms internationalization through acquisition is directed towards acquiring new knowledge in different areas such as R&D capabilities, regulatory skills and distribution networks.
Q 2. Answer the following questions giving suitable examples.
a) How do political and economic stabilities affect marketing?
Ans: Political and economic risk is always a factor in international marketing due to the unavoidable differences between the laws, customs and policies of foreign governments. As foreigners entering new markets, we often lack the local market knowledge and culture.
To understand these differences and must depend on outside sources for information and forecasts.
In most Westernized nations, a vast library of economic statistics and political analysis is publicly available for review. These countries tend to have well-developed and predictable economies and relatively stable governments. Developing countries offer less transparency and access to accurate economic or industry statistics may not exist at all.
By understanding the elements of political and economic risk, it is easier to define a model for risk management and decision-making and to collect appropriate data for analysis and marketing strategy. This article will review the various components of economic and political risk and offer a method used for quantifying and comparing the "riskiness" of doing business in different countries.
Political Risk
Political risk is the risk that a government will unexpectedly change the roles of the game under which businesses in that country operate. Political risk is often characterized by the stability (or instability) of the government and the presence, or lack thereof, of an independent judiciary and legal system. The relationship with other countries is also very important in determining the level of political risk involved in entering a new market. Political differences between countries can create significant and unexpected business challenges, including international or home-country sanctions, consumer boycotts or even violent attacks against the country or firms that trade there.
b) Self-reference criterion is a big stumbling block for global marketer. Explain.
Ans: Self Reference Criterion
Having sold a product successfully in the domestic market a firm may assume that the product will, without adaptation, also be successful in foreign markets. Frequently this assumption leads to failure. The SRC refers to the assumption that what is suitable for the home market will be suitable for the foreign market and therefore there is no need to test whether or not the product should be altered. That’s why Self-reference criterion is a big stumbling block for global marketer.
Q 3. Differentiate between.
A) National brands and global brands
Ans: Global products is a commercial product which is marketed worldwide with a single brand name is called global product. Like Coca Cola.
National products are the products marketed in a national territory. Like TATA salt.
B) High context culture and low context culture
Ans: The general terms "high context" and "low context" (popularized by Edward Hall) are used to describe broad-brush cultural differences between societies.
High context refers to societies or groups where people have close connections over a long period of time. Many aspects of cultural behavior are not made explicit because most members know what to do and what to think from years of interaction with each other. Your family is probably an example of a high context environment.
Low context refers to societies where people tend to have many connections but of shorter duration or for some specific reason. In these societies, cultural behavior and beliefs may need to be spelled out explicitly so that those coming into the cultural environment know how to behave.
High Context
Less verbally explicit communication, less written/formal information
More internalized understandings of what is communicated
Multiple cross-cutting ties and intersections with others
Long term relationships
Strong boundaries- who is accepted as belonging vs who is considered an "outsider"
Knowledge is situational, relational.
Decisions and activities focus around personal face-to-face relationships, often around a central person who has authority.
Examples:
Small religious congregations, a party with friends, family gatherings, expensive gourmet restaurants and neighborhood restaurants with a regular clientele, undergraduate on-campus friendships, regular pick-up games, hosting a friend in your home overnight.
Low Context
Rule oriented, people play by external rules
More knowledge is codified, public, external, and accessible.
Sequencing, separation--of time, of space, of activities, of relationships
More interpersonal connections of shorter duration
Knowledge is more often transferable
Task-centered. Decisions and activities focus around what needs to be done, division of responsibilities
c) Command allocation and market allocation
Ans: Market allocation or market division schemes are agreements in which competitors divide markets among themselves. In such schemes, competing firms allocate specific customers or types of customers, products, or territories among themselves. For example, one competitor will be allowed to sell to, or bid on contracts let by, certain customers or types of customers. In return, he or she will not sell to, or bid on contracts let by, customers allocated to the other competitors. In other schemes, competitors agree to sell only to customers in certain geographic areas and refuse to sell to, or quote intentionally high prices to, customers in geographic areas allocated to conspirator companies.
The method for allocation of resources in which the main commanding economy determines the allocation of existing resources for the other economies like Soviet Union.
d) International companies and transnational companies
Ans: A MNC (Multinational Company) is one that has the ability to control their operations in more than one country, even if it doesn't own the operations directly. A TNC (Transnational Company) on the other hand is one that has outlets/opeations in more than one country.
Trans-National Corporations (TNCs) sometimes referred to as multinational companies, are enterprises that control economic assets in other countries — generally this means controlling at least a 10% share of such an asset1. These companies command enormous financial resources, possess vast technical resources and have extensive global reach.
Despite their impact in developing economies, however, TNCs are not development agencies. They are profit-seeking organizations. These dual roles of funding source and profit seeker — unrelated roles that are neither conflicting nor complementary — have made TNCs object of great controversy. Do they help or hinder? Do they give or take? Are their benign or malign? Are they stakeholders or exploiters? Can they be persuaded to be good world citizens or are they indifferent to their impact?
Q 4. a) Elaborate the benefits that accrue to partners of regional agreement s and treaties.
Ans:
11/1/2005
Does Business Benefit from the Proliferation of Regional Trade Agreements?
November 2005 In the wake of slow-paced and limited WTO negotiations, Canada is negotiating an increasing number of investment treaties. The relative immediacy of deeper tariff cuts and investment protections seems like an obvious justification to this activity. But this growing array of agreements may cost businesses more than the purported liberalization is worth.
Regional trade agreements (RTAs) are an essential element in the landscape of international trade, and their significance is only increasing. Recent years have seen a proliferation of RTAs around the world, with new agreements being negotiated at an accelerated pace. As of January 2005, 312 RTAs have been notified to GATT/WTO, of which approximately 170 are currently in force. In the last 10 years alone, 196 new RTAs have been notified, and it is estimated that a further 65 RTAs are currently in force but have not yet been notified. But are so many RTAs a good thing?
The Canadian Perspective As an industrialized country with a medium-sized economy, Canada has historically depended on trade for much of its economic prosperity. As a result, Canada has actively entered into, and conducted negotiations on, a wide variety of RTAs. Canada is a Party to seven RTAs, 22 bilateral investment treaties, and is currently negotiating six RTAs.
Benefits Arising From Regional Trade Agreements RTAs quickly and efficiently reduce tariff and non-tariff barriers to the movement of goods and services in a way and at a pace not currently possible solely from the multilateral system.
RTAs permit flexibility not available in multilateral agreements. Canada and Chile have agreed not to impose anti-dumping duties on products riginating in either country. This is the only free trade agreement in the Americas that has taken this innovative step.
RTAs, like NAFTA, protect Canadian investments abroad by requiring the Parties to afford to investors of the other Parties non-discriminatory treatment and most favoured nation treatment with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.
NAFTA also allows investors to submit complaints of Chapter 11 violations to binding arbitration.
RTAs also allow for more focused and specialized negotiations involving certain industries or issues that are important to each country involved. For instance, the automobile industry is crucial to the Canadian economy. Article 403 of NAFTA therefore contains specific provisions dealing with automobiles.
Reduce tariffs and restrictions on trade between two or more nations within a certain region.
An FTA is a group of two or more customs territories which has eliminated tariffs and other trade restrictions on substantially all trade.
A Customs Unions is two or more customs territories which have an FTA and which also apply a common external tariff on goods from non-members.
A regional economic integration agreement is the next step: it can include the free movement of capital as
Q 4. b) Write short notes on
1) ASEAN
Ans: ASEAN
The Association of Southeast Asian Nations commonly abbreviated ASEAN is a geo-political and economic organization of 10 countries located in Southeast Asia, which was formed on 8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand Since then, membership has expanded to include Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam.
The members of the summit are all 10 members of ASEAN together with China, Japan, South Korea, India, Australia and New Zealand who combined represent almost half of the world's population.
Its aims include the acceleration of
1. Economic growth,
2. Social progress,
3. Cultural development among its members,
4. The protection of the peace and stability of the region, and
5. To provide opportunities for member countries to discuss differences peacefully.
Objectives of ASEAN
1. To promote networking amongst relevant law enforcement authorities in ASEAN Countries to curb illegal trade in wild fauna and flora.
2. To promote research, monitoring and information exchange on CITES-related issues.
3. To encourage industry groups, trade associations/ traders and local communities to comply with legality and sustainability requirements of national regulations.
4. To encourage greater regional cooperation on specific issues by:
5. To seek sufficient technical and financial assistance through collaborative initiatives by:
2) Andean Group
Ans: Andean Group A regional economic grouping comprising Colombia, Peru (suspended from 1992 to 1993), Bolivia, Chile (from 1969 to 1977), Venezuela, and Ecuador. Formally established by the Cartagena Agreement of 1969 – hence its official name, Acuerdo de Cartagena – it was an attempt to enhance the competitive edge of the member states in their economic relations with the more developed economies of the Latin American region.
3) NAFTA
Ans: Implementation of the North American Free Trade Agreement (NAFTA) began on January 1, 1994. This agreement will remove most barriers to trade and investment among the United States, Canada, and Mexico.
Under the NAFTA, all non-tariff barriers to agricultural trade between the United States and Mexico were eliminated. In addition, many tariffs were eliminated immediately, with others being phased out over periods of 5 to 15 years. This allowed for an orderly adjustment to free trade with Mexico, with full implementation beginning January 1, 2008.
The agricultural provisions of the U.S.-Canada Free Trade Agreement, in effect since 1989, were incorporated into the NAFTA. Under these provisions, all tariffs affecting agricultural trade between the United States and Canada, with a few exceptions for items covered by tariff-rate quotas, were removed by January 1, 1998.
Mexico and Canada reached a separate bilateral NAFTA agreement on market access for agricultural products. The Mexican-Canadian agreement eliminated most tariffs either immediately or over 5, 10, or 15 years. Tariffs between the two countries affecting trade in dairy, poultry, eggs, and sugar are maintained
Q 5. a) Discuss the various sources of market information used by global marketers.
Ans: There are a number of such sources available to the global marketer, and the following list is by no means conclusive:
Trade associations
National and local press Industry magazines
National/international governments
Websites
Informal contacts
Trade directories
Published company accounts
Business libraries
Professional institutes and organizations
Omnibus surveys
Previously gathered marketing research
Census data
Public records
Q 5. Discuss the problems faces by global market researchers?
Ans:A much practiced international marketing research is Desk research is a euphemism for collecting secondary data.
International Marketing Research follows the same path as domestic research, but there are a few more problems that may arise. Customers in international markets may have very different customs, cultures, and expectations from the same company. In this case, secondary information must be collected from each separate country and then combined, or compared. This is time consuming and can be confusing. International Marketing Research relies more on primary data rather than secondary information. Gathering the primary data can be hindered by language, literacy and access to technology.
the role of secondary research or desk research, in identifying suitable overseas markets as well as products
Market research enable businesses to analyse potential targets according to a number of key factors and issues.
Market characteristics
These may include factors such as size/growth and segmentation of markets, customer concentration, import sensitivity & growth, seasonal/cyclical trends, and quality issues.
Competitive conditions
This will cover factors such as the degree and concentration of competitors (domestic and foreign), the complexity of distribution systems, the availability of substitutes and barriers to new entrants to markets.
Financial & economic conditions
This will include basic issues such as the cost of doing business in a particular market but also will require analysis of pricing practices/payment terms, tariffs and other barriers to trade, foreign exchange, currency stability and the provision of concessional finance.
Cultural, political & legal factors
Cultural issues (including language), political stability and legal systems are vital factors in market identification. More specific but no less significant are foreign investment and consumer/environmental legislation, registration & licensing procedures, labour laws and intellectual property protection.
Market prioritisation
Analysis of the factors listed above, should help firms to rank potential markets in priority order.
Above all, businesses should focus on the influences on demand for products/services, on the acceptance of products/services, on government regulation and the major sources of competition.
So it may be untargeted, and difficult to use to make comparisons (e.g. financial data gather on Australian pensions will be different to data on Italian pensions).
Q 6. a) Differentiate between Joint ventures and Global strategic partnerships.
Ans: Why Joint Ventures?
As there are good business and accounting reasons to create a joint venture (JV) with a company that has complementary capabilities and resources, such as distribution channels, technology, or finance, joint ventures are becoming an increasingly common way for companies to form strategic alliances. In a joint venture, two or more "parent" companies agree to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control.
Important Factors to be Considered Before a Joint Venture is Formed
screening of prospective partners
joint development of a detailed business plan and shortlisting a set of prospective partners based on their contribution to developing a business plan
due diligence - checking but it's good business practice to verify the facts through interviews with third parties)
development of an exit strategy and terms of dissolution of the joint venture
most appropriate structure (e.g. most joint ventures involving fast growing companies are structured as strategic corporate partnerships)
availability of appreciated or depreciated property being contributed to the joint venture; by misunderstanding the significance of appreciated property, companies can fundamentally weaken the economics of the deal for themselves and their partners.
special allocations of income, gain, loss or deduction to be made among the partners
compensation to the members that provide services the credentials of the other party ("trust and verify" - trust the information you receive from from the prospective partner.
Global strategic partnerships
a type of contractual alliance between two commercial enterprises that is not a formal legal partnership
A strategic partnership often puts together public and private entities for commercial purposes.
Q 6. b) Discuss in detail, trade fair route to enter new markets.
Ans: Participation in international trade fairs provides exporters with an excellent opportunity to promote their products and to establish ontacts with potential business relations. The training “Effective Trade Fair Participation” offers Small Medium Enterprises and BSO staff the opportunity to become familiar with the necessary knowledge, tools and skills to prepare, execute and give follow-up, to international trade fairs in
At the end of the training the participant:
has gained improved knowledge of tools to communicate with an European export market;
is able to prepare and manage an individual trade fair participation in Europe;
has improved his/her skills in identifying suitable exhibitions, selecting the right exhibitors and in dealing with trade fair organizations, stand constructors, customs etc.
has gained improved knowledge on issues like project management, budgeting, stand layout and design, visitor’s promotion and PR, stand behaviour, evaluation and follow-up;
has collected information on new concepts on how exhibitions are being organised
is familiar with CBI’s mission and website.
Target audience The training is meant for exporters who are active in a variety of sectors among which the garment sector and which task it is to manage the exports to European markets. Focus is on the people within the exporting company who are responsible for the organisation of participations in international trade fairs. Experience in this field is necessary in order to fully participate in the workshop. Additionally the participants should have some experience in exports and international business and are conversant with the English language
Q 6. c) What impact does currency fluctuation has on pricing of products on international markets?
Ans: the financial risk of reduced profitability due to strong rupee can be seen in two ways.
The first one is it will bring down margins of local companies. Most Indian IT companies have a natural hedge, given that 60 to 70 per cent of the expenses are not rupee-denominated. Our analysis reveals that every one per cent appreciation of rupee against the US dollar reduces our margins by 30 bps.”
“The second impact is on the translation of foreign assets like receivables and cash and bank balances. An appreciation in rupee results in translation losses. To a large extent, companies can protect against this loss by taking forward cover,” added Mr Srinivas.
It was pointed out that if the rupee continues to strengthen against the dollar, the way it has done in the last two years, profitability of the IT sector will be affected. However, the behaviour of the rupee has to be seen against the basket of currencies and not in isolation to the dollar. For example, while the rupee has appreciated against the dollar, it has depreciated against the euro and the pound, which to a small extent, has helped cut losses. Indian companies will have to focus on growing revenue.
If the rupee has appreciated vis-a-vis the dollar, it as depreciated vis-a-vis other currencies. One balances out the other.
Q 7. a) Describe briefly Duty entitlement passbook Scheme and export promotion capital goods schemes available to exporters under foreign trade policy 2004-09.
Ans: A Duty Remission Scheme enables post export replenishment/ remission of duty on inputs used in the export product. Duty remission schemes consist of
(a) DFRC (Duty Free Replenishment Certificate) and
(b) DEPB ( Duty Entitlement Passbook Scheme).
The objective of DEPB is to neutralise the incidence of Customs duty on the import content of the export product. The neutralisation shall be provided by way of grant of duty credit against the export product. The DEPB scheme will continue to be operative until it is replaced by a new scheme which will be drawn up in consultation with exporters .
EPCG: EXPORT PROMOTION CAPITAL GOODS
An advantageous scheme for procurement of Capital Goods
The EPCG scheme allows import of capital goods (including CKD/SKD thereof as well as computer software systems and spares, jigs, fixtures, dies and moulds) at 3.09% Customs duty as against the normal total of 21.523%, thus providing a duty saved value of more than 20% of the import value. This is subject to an Export Obligation (EO) equivalent to 8 times of duty saved, to be fulfilled over a period of 8 years reckoned from the date of issuance of license. For large projects, SSI etc. there are more relaxed norms of EO.
The scheme covers manufacturer exporters with or without supporting manufacturer(s) / vendor(s), merchant exporters tied to supporting manufacturer(s) and Service Providers.
Actual user conditions: Import of capital goods are subject to Actual User condition till the export obligation is completed.
Export obligation: The export obligation needs to be fulfilled by the export of goods capable of being manufactured or produced by the use of the capital goods imported under the scheme. In addition upto 50% of the EO can also be fulfilled by any alternate product of the company or even group company. Deemed Exports like supplies to Power Projects, Projects funded by WB/ADB/JBIC etc, EOUs etc. can also be utilized to fulfill the EO
Indigenous Sourcing: A person holding an EPCG license may source the capital goods from a domestic manufacturer instead of importing them. The domestic manufacturer supplying capital goods to EPCG license holders shall be eligible for refund of Excise Duty paid by him. In addition the indigenous supplier can import his own raw material duty free and other benefits which can be discussed.
Q 7. b) Consider yourself to be a fabricator of ladies garments aspiring to export to USA and Europe. Which of the following option would you exercise and why?
1) Direct exporting
2) Indirect exporting
Ans: Direct exporting is Direct exporting
With direct exporting the exporter handles every aspect of the exporting process.
Market research
Foreign distribution
Collections
Direct methods of exporting give your firm:
More control over the export process
Potentially higher profits
A closer relationship to the overseas market
Direct methods of exporting require a significant commitment.
They are not cheap and require substatial resources.
Reorganizing the company to support the export effort may be necessary.
Methods of direct exporting include going through:
Sales Representatives
Distributors
A Foreign Retailer
Direct sales to the End User
Indirect exporting
Indirect methods of exporting requires less marketing investment, but you lose substantial control over the marketing process.
Methods of indrect exporting include:
Filling orders from domestic buyers who then export the product.
Seeking out domestic buyers who represent foreign customers.
Exporting through an Export Management Company (EMC)
Exporting through an Export Trading Company (ETC)
Franchising
Licensing
Contract manufacturing
Piggyback marketing
Remarketer
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