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ASSIGNMENT- Set 1
Marks 60
Note: Each Question carries 10 marks. Answer all the questions.
Although I always advocate Letter of Credit, with the world turning into a digitally
connected global village, both the buyer and seller have, however, found various
means of transacting commensurate with their needs and comfort.
The reasons why I feel a L/C is a very important tool for export-import
transactions is primarily due to the factors involved in international dealings such
as distance, different laws in respective countries and absence of face to face
interactions between the buyer and seller sitting in two far-flung areas on the
globe. It is a fact that the exporter or importer, who are located in different
countries, may not know each other. As such many a time the problem of buyer's
creditworthiness hampers trade between the two.
Moreover, they felt that it gives them the ability not only to structure the delivery
schedule according to their interests, but also in obtaining pre-export finance to
finance the production or the purchase of the goods.
However, many importers whom I have met were unanimous on the benefits of
L/Cs because the bank acts on behalf of the buyer who is the holder of Letter of
Credit by ensuring that the seller or the exporter will not be paid until the bank
receives a confirmation that the goods have been shipped.
Having said that, several exporters and importers have been successful too
without Letter of Credits. Cash in advance, documentary collection or draft, open
account, and other payment mechanisms are also popular amongst the exim
community.
Since I always argue for L/Cs as the safest and more secure payment mode, I
would definitely like readers to share their views on: 'Do you really think L/C is
the safest and secure means of transaction?' or 'Which payment method do you
mostly use?' or 'What according to you is the safest means of export-import
payment method?'
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In domestic markets customer characteristics such as age, sex, social class, etc.
and attitudes toward a certain product or brand are often used as bases for
segmentation. In international markets an extra dimension has to be considered,
i.e. country characteristics. For instance, every country has its own specific
social, cultural, economic, technological, political, legal and environmental
characteristics affecting marketing strategies and customer/market responses.
In their approaches they do not take into account that there may be groups of
customers in different countries that are alike and can form one cross-national
segment. However, this is recognized by Hassan and Katsanis who identified
three main segmentation methods (Hassan & Katsanis, 1991):
In the remaining part of this paragraph the following segmentation strategies will
be discussed:
At first sight, this segmentation strategy leaves little room for standardization of
the international marketing strategy.
The Middle East or the developed countries are often used by managers to
address specific groups of countries. Sethi and Holton, however, question the
way country groups are identified. They propose a two-step method. In the first
step variables that could describe countries are grouped in clusters which must
have within group similarities and between group differences. The second step
is comparing and grouping the countries based on variable cluster score, that is
clustering the countries based on the variables distinguished in step one.
Frank, Massy and Wind (1972) proposed a slight modification towards a Cross
national segmentation strategy. In two steps they identify segments of both
countries and customers.
First, individual or groups of countries are identified. This composition of socalled macro-segments enables an initial screening and selection of countries,
which on the basis of national market characteristics, legal and political
constraints, provide potentially attractive market opportunities. The analysis of
buying patterns is limited to only these macro-segments which passed this initial
screening. Then within each macro-segment the market can be subdivided based
on customer characteristics such as social classes, age, sex, etc. The appropriate
bases for segmentation may be the same across all macro-segments, but may
also differ from macro-segment to macro-segment. In the first case segments are
similar and thereby form an adaption to the international environment and
homogenization of customers preferences.
It should be noted that defining segments in this way ignores the differences that
exist between countries in terms of possible micro-segments. The next approach
pays attention to this problem.
To identify these inter-country segments, the following three steps can be used:
1. Select countries.
2. Select in-country segments.
3. Select inter-country segments.
The first two steps are discussed earlier, but the third step, search for
comparable in-country segments across boundaries which can form one intercountry segment, is new.
Note that Jains approach is still very country oriented. The following approach of
Kreutzer is more focused on customer similarities across boundaries.
In 1988, Kreutzer was one of the first to argue that segmentation should be
incorporated in the process of standardizing marketing programs and marketing
processes (Kreutzer, 1988). He argues that before it is possible to determine a
companys or products standardization potential, a standardization-oriented
segmentation has to be accomplished. This segmentation centres on the tracking
down of the target group to be handled by standardized marketing.
Segmentation has to answer two important questions:
groups are formed and handled trans-nationally with the same marketing
concept. Kreutzer noted that trans-national does not necessarily mean global,
but rather a large regional unit, for example Europe.
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Q5. What are the factors that affect the pricing strategy of an
international firm? What different pricing strategies can the firms
adopt?
6.
What are star export houses? Mention the various special
strategic packages for status holders.
ASSIGNMENT- Set 2
Marks 60
Note: Each Question carries 10 marks
Always sell as close to the market as possible. The fewer intermediaries one has
the better, because every intermediary needs some percentage for his share in
his business, which means less profit for the exporter and higher prices for the
customer. All goods for export must be efficiently produced. They must be
produced with due regard to the needs of export markets. It is no use trying to
sell windows which open outwards in a country where, traditionally, windows
open inwards.
Sell Experience: If a person cannot easily export his goods, may be he can sell
his experience. Alternatively, he can concentrate on supplying goods and
materials to exporters' who already have established an export trade. He can
concentrate on making what are termed 'own brand' products, much demanded
by buyers in overseas markets which have the manufacturing know-how or
facilities.
On-Time Deliveries: Late deliveries are not always an exporters fault. Dock
strikes, go-slows, etc. occur almost everywhere in the world. If one enters into
export for the first time, he must ensure of fast and efficient delivery of the
promised consignment.
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The first and the foremost question you as a prospective exporter has to decide
is about the kind of business organisation needed for the purpose. You have to
take a crucial decision as to whether a business will be run as a sole proprietary
concern or a partnership firm or a company. The proper selection of organisation
will depend upon
formed by just two persons subscribing to its share capital. However, the number
of its shareholders cannot exceed fifty, public cannot be invited to subscribe to
its capital and the member's right to transfer shares is restricted. On the other
hand, a public limited company has a minimum of seven members. There is no
limit to maximum number of its members. It can invite the public to subscribe to
its capital and permit the transfer of shares. A public limited company offers
enormous potential for growth because of access to substantial funds. The
liquidity of investment is high because of easiness of transfer of shares.
However, its formation can be recommended only when the size of the business
is large. For small business, a sole proprietary concern or a partnership firm will
be the most suitable form of business organisation.In case it is decided to
incorporate a private limited company, the same is to be registered with the
Registrar of Companies.
Merchant Exporter i.e. buying the goods from the market or from a manufacturer
and then selling them to foreign buyers.
Manufacturer Exporter i.e. manufacturing the goods yourself for export Sales
Agent/Commission Agent/Indenting Agent i.e. acting on behalf of the seller and
charging commission Buying Agent i.e. acting on behalf of the buyer and
charging commission
Open a current account in the name of the organisation in whose name you
intend to export. It is advisable to open the account with a bank which is
authorised to deal in Foreign Exchange.
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The trade practices in the buyers' country with special reference to your product,
information like whether importers import and distribute the product/high sea
sales, whether agent is required to book orders from actual users etc. In case
your item requires after sales service, the manner in which it can be offered. The
prices at which your product sells in the retail/wholesale market, the duty
structure and any other cost element to arrive at the landed cost. Information on
the margins at which the product is sold. This information will help you in
evolving a pricing strategy.
The various factors that rule the market viz. Quality, Price, Delivery, Brand
Name, Credit Terms, etc. Role of advertising and publicity and reference to the
product and the country.
Q2. Discuss briefly the various techniques to assess country risk. Give
examples to illustrate your answer.
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Q4.
Q6.