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The International Monetary Fund executive board approved the SDDS and GDDS in
1996 and 1997 respectively and subsequent amendments were published in a revised
"Guide to the General Data Dissemination System". The system is aimed primarily at
statisticians and aims to improve many aspects of statistical systems in a country. It is
also part of the World Bank Millennium Development Goals and Poverty Reduction
Strategic Papers.
The IMF established a system and standard to guide members in the dissemination to
the public of their economic and financial data. Currently there are two such systems:
General Data Dissemination System (GDDS) and its superset Special Data
Dissemination System (SDDS), for those member countries having or seeking access to
international capital markets.
The primary objective of the GDDS is to encourage IMF member countries to build a
framework to improve data quality and increase statistical capacity building. This will
involve the preparation of meta data describing current statistical collection practices
and setting improvement plans. Upon building a framework, a country can evaluate
statistical needs, set priorities in improving the timeliness, transparency, reliability and
accessibility of financial and economic data.
technology is improved. Currently, Internet connections are slower than desired so that
downloading pictures and other information may take longer than consumers are willing
to wait. "Glitches" in online ordering systems may also frustrate consumers, who are
unable to place their orders at a given time or have difficulty navigating through a
malfunctioning site. The lack of non-English language sites in some areas may also be
off-putting to consumers, and registering domain names in some countries is difficult.
Further, shipping small packages across countries may be inefficient due to high local
postage rates and inefficiencies in customs processing. Most of these obstacles may be
overcome within next few years.
Other obstacles may, however, have considerably greater staying power. First, there
are legal problems, as several different countries may seek to impose their jurisdiction
on advertising and laws of product assortment and business practices. Further, the
maintenance of databases, which are essential to delivering on the promises of e-
commerce, may conflict with the privacy rules of some countries – this is currently a hot
issue of contention between the United States and the European Union. Finally, there
are issues of taxation and collection. While the Clinton Administration has sought to get
the WTO to go along with a three year tax "moratorium" on Internet purchases much
like the one observed in the U.S., strong opposition is expected. A great attraction of e-
commerce in Europe is that people may order from other countries and thus evade local
sales taxes, which can be prohibitive (e.g., 25% in Denmark and 16% in Germany).
Some firms will ship to customers in neighbouring countries without collecting sales
taxes or duties, with the responsibility of paying falling on the consumer. Although most
consumers who order and do not arrange to pay for these taxes get away with it, fines
for those caught through random checks can be severe.
3 Locus of the site
Some firms have chosen to maintain a global site, with reference only to local sales or
support offices; others, in contrast, have unique sites for each country. In some cases,
global sites will hyperlink surfers to a country or region relevant to the site. Note that
some confusion exists since many sites outside the U.S. maintain the ".com"
designation rather than their countries’ respective suffix (e.g., ".de" for Germany, ".se"
for Sweden, and ".au" for Australia). Some firms have experienced problems getting
their banks to accept credit card charges in more than one currency, and thus it may be
difficult to indicate precise prices in more than one denomination (one site based in
Britain offered its American customers to be as accurate as possible, based on current
exchange rates, although the charge could be off "by a few pennies.")
4 Lifecycle stages across the World
It has been suggested that Europe runs some five years behind the U.S. in electronic
commerce, but some sources dispute this, suggesting that lack of success among
American retailers may have other origins, such as inadequate adaptation (for example,
some British users are put off by American English). There are, however, some factors
which cause most countries run behind. Even in Europe, Internet access penetration
rates are lower than they are in the U.S., and the slower speed associated with
downloading Asian characters is discouraging. In some countries, credit card
penetration is lower, and even in European countries with high penetration rates,
consumers are reluctant to use them. Further, the fact that consumers in most countries
have to pay a per minute phone charge discourages the essential casual and relaxed
browsing common in the U.S. so long as unlimited cable or hardwired access is not
offered.
The Liverpool Cotton exchange, for one, relied on the skills of its experts to manually
classify raw fibre purchases for its clients. It still holds the "standards" for length, colour
and trash content. As well as the demands of modem machinery, the lack of
standardised measuring and cotton classification procedures has resulted in
commercial conflict and legal disputes about the true nature of traded cotton. Now,
computer based high volume instrument listing systems of raw cotton (HVI systems) are
available. The system can handle large numbers of bales, reduce variation in
classification and the need for highly trained bate classifiers.
For cotton exporters the system offers the following advantages:
· enhanced objectivity in classification
· improve communication if similar systems are used by sellers or buyers
· reduced conflict and need for arbitration
· enhanced competitiveness against synthetic fibres
· improved integration with modern spinning machines
· reduced costs on training of experts and in measuring time.
The system can process 2000 bales per day and give a printout on the seven
parameters of grading. These include length and length uniformity, strength and
elongation, micronaire or fineness, leaf and colour. Manufacturers include SPINLAR
INC. of Knoxville, USA.
Service
In agricultural machinery, processing equipment and other items which are of
substantial value and technology, service is a prerequisite. In selling to many
developing countries, manufacturers have found their negotiations at stake due to the
poor back-up service. Often, this is no fault of the agent, distributor or dealer in the
foreign country, but due to exchange regulations, which make obtaining spare parts
difficult. Many organisations attempt to get around this by insisting that a Third World
buyer purchases a percentage of parts on order with the original items. Allied to this
problem is the poor quality of service due to insufficient training. Good original
equipment manufacturers will insist on training and updating as part of the agency
agreement. In order to illustrate the above points, cotton can be used as an example.
Cotton is a major foreign exchange earner for Zimbabwe. In 1990/91, 52,000 tons were
sold overseas at a value of Zim $ 238 million. As the spinners, particularly those in the
export market are in a highly competitive industry, it is essential that the raw material is
as clean as possible. Also today’s spinning equipment is highly technical and the
spinner wishes to avoid costly breakdowns by all means.
Product strategies
There are five major product strategies in international marketing.
Product communications extension
This strategy is very low cost and merely takes the same product and communication
strategy into other markets. However it can be risky if misjudgements are made. For
example, CPC International believed the US consumer would take to dry soups, which
dominate the European market. It did not work.
Extended product – communications adaptation
If the product basically fits the different needs or segments of a market it may need an
adjustment in marketing communications only. Again this is a low cost strategy, but
· private capital flows were expected to play only a limited role in financing payments
imbalances, and widespread use of controls would prevent instability in such flows;
· temporary official financing of payments imbalances, mainly through the IMF, would
smooth the adjustment process and avoid unduly sharp correction of current account
imbalances, with their repercussions on trade flows, output, and employment.
In the current system, exchange rates among the major currencies (principally the U.S.
dollar, the euro, and Japanese yen) fluctuate in response to market forces, with short-
run volatility and occasional large medium-run swings (Figure 1). Some medium-sized
industrial countries also have market – determined floating rate regimes, while others
have adopted harder pegs, including some European countries outside the euro area.
Developing and transition economies have a wide variety of exchange rate
arrangements, with a tendency for many but by no means all countries to move toward
increased exchange rate flexibility (Figure 2).
This variety of exchange rate regimes exists in an environment with the following
characteristics:
· partly for efficiency reasons, and also because of the limited effectiveness of capital
controls, industrial countries have generally abandoned such controls and emerging
market economies have gradually moved away from them. The growth of international
capital flows and globalization of financial markets has also been spurred by the
revolution in telecommunications and information technology, which has dramatically
lowered transaction costs in financial markets and further promoted the liberalization
and deregulation of international financial transactions;
· international private capital flows finance substantial current account imbalances, but
the changes in these flows appear also sometimes to be a cause of macroeconomic
disturbances or an important channel through which they are transmitted to the
international system;
· developing and transition countries have been increasingly drawn into the integrating
world economy, in terms of both their trade in goods and services and of financial
transactions.
Lessons from the recent crises in emerging markets are that for such countries with
important linkages to global capital markets, the requirements for sustaining pegged
exchange rate regimes have become more demanding as a result of the increased
mobility of capital. Therefore, regimes that allow substantial exchange rate flexibility are
probably desirable unless the exchange rate is firmly fixed through a currency board,
unification with another currency, or the adoption of another currency as the domestic
currency (dollarization).
Flexible exchange rates among the major industrial country currencies seem likely to
remain a key feature of the system. The launch of the euro in January 1999 marked a
new phase in the evolution of the system, but the European Central Bank has a clear
mandate to focus monetary policy on the domestic objective of price stability rather than
on the exchange rate. Many medium-sized industrial countries, and developing and
transition economies, in an environment of increasing capital market integration, may
also continue to maintain market-determined floating rates, although more countries
could may adopt harder pegs over the longer term. Thus, prospects are that:
· exchange rates among the euro, the yen, and the dollar are likely to continue to exhibit
volatility, and schemes to reduce volatility are neither likely to be adopted, nor to be
desirable as they prevent monetary policy from being devoted consistently to domestic
stabilization objectives;
· several of the transition countries of central and eastern Europe, especially those
preparing for membership in the European Union, are likely to seek to establish over
time the policy disciplines and institutional structures required to make possible the
eventual adoption of the euro.
The approach taken by the IMF continues to be to advise member countries on the
implications of adopting different exchange rate regimes, to consider the choice of
regime to be a matter for each country to decide and to provide policy advice that is
consistent with the maintenance of the chosen regime (Box 3).
Q. 6 Discuss the various International product and pricing decisions. (10 marks)
Sol.Merchant banking unit-8 page 180
Production decisions
In decisions on producing or providing products and services in the international market
it is essential that the production of the product or service is well planned and
coordinated, both within and with other functional area of the firm, particularly
marketing. For example, in horticulture, it is essential that any supplier or any of his "out
grower" (sub-contractor) can supply what he says he can. This is especially vital when
contracts for supply are finalized, as failure to supply could incur large penalties. The
main elements to consider are the production process itself, specifications, culture, the
physical product, packaging, labelling, branding, warranty and service.
pricing decisions :Price has become one of the most important marketing variables.
Despite the increased role of non-price factors in the modern marketing process, price
is a critical marketing element, especially in markets characterized by monopolistic
competition or oligopoly. Competition and buyers that are more sophisticated has forced
many retailers to lower prices and in turn place pressure on manufacturers. Further,
there has been increasing buyer awareness of costs and pricing, and growing
competition within the channels, which in turn provides the consumer with even more
awareness of the pricing process.
In setting the price of a product, the company should follow a six-step procedure. First,
the company carefully establishes its marketing objective(s), such as survival, maximum
current profit, maximum current revenue, maximum sales growth, maximum market
skimming or product-quality leadership. Second, the company determines the demand
schedule, which shows the probable quantity purchased per period at alternative price
levels. The more inelastic the demand, the higher the company can set its price. Third,
the company estimates how its costs vary at different output levels, production levels,
different marketing strategies, differing marketing offers, and target costing based on
market research. Fourth, the company examines competitors’ prices as a basis for
positioning its own price. Fifth, the company selects one of the following pricing
methods: markup pricing, target return pricing, perceived-value pricing, value-pricing,
going-rate pricing, and sealed-bid pricing. Sixth, the company selects its final price,
expressing it in the most effective psychological way, coordinating it with the other
marketing mix elements, checking that it conforms to company pricing policies, and
making sure it will prevail with distributors and dealers, company sales force,
competitors, suppliers, and government.
Companies will adapt the price to varying conditions in the marketplace. Geographical
pricing is one marketplace adjustment based on a company decision related to pricing
distant customers. Price discounts and allowances are a second area for adjustment
where the company establishes cash discounts, quantity discounts, functional
discounts, seasonal discounts, and allowances. Promotional pricing provides a third
marketplace option, with the company deciding on loss-leader pricing, special-event
pricing, cash rebates, low interest financing, longer payment terms, warranties and
service contracts and psychological discounting. Discriminatory pricing, the fourth
option, enables the company to establish different prices for different customer
segments, product forms, brand images, places, and times. Lastly, product-mix pricing,
enables the company to determine price zones for several products in a product line, as
well as differential pricing for optional features, captive products, byproducts, and
product bundles.
When a firm considers initiating a price change, it must carefully consider customer and
competitor reactions. Customer reactions are influenced by the meaning customers see
in the price change. Competitor reactions flow either from a set reaction policy or from a
fresh appraisal of each situation. The firm initiating the price change must also
anticipate the probable reactions of suppliers, middlemen, and governments.
To summarize, pricing involves the customer demand schedule, the cost function, and
competitors’ prices. The question is how should a company integrate cost-, demand-,
and competition-based pricing considerations? In setting a price, a firm, for example
Kodak, will have to consider the following cost-, demand-, and competition-based
pricing decisions:
Cost-based pricing decisions: Marginal analysis and break-even analysis are the two
primary methods in cost-based pricing decisions:
· What is the impact of a 5 percent cost increase in the price of silver on film costs?
· Should Kodak attempt to purchase silver futures to reduce the volatility of silver costs?
· What is the impact on film manufacturing and marketing costs of a 10 percent demand
reduction?
Demand-based pricing decisions: Among the variables, here are the type of demand for
the product (prestige, price-oriented, etc.), changes in buyer attitude toward price with
changes in the economic environment (uncontrollable variables), and the elasticity of
demand.
· Are the short- and long-range effects of price increases the same?
· Among the major questions here are: Will all competitors raise their prices by the same
percentage? Will competitors react to cost increases more slowly to try to increase their
market share? Will some competitors try to absorb much of the cost increases to induce
brand switching?
The pricing of services is a very tough decision. In the absence of a tangible and
quantifiable product, it is very difficult to arrive at a logical pricing decision. Hence, when
setting a price, you have to consider eight objectives:
1. Survival- Adjust price levels so that the firm can increase sales volume to match
expenses.
2. Profit- Identify cost and price levels that allow the firm to maximize the profit.
3. Return On Investment (ROI)- Identify price levels that enable the firm to yield targeted
ROI.
4. Market share- Adjust price levels so that the firm can maintain or increase sales
relative to competitors sales.
6. Status quo- Identify price levels that help stabilize demand and sales.
7. Product quality- Set prices to recover research and development expenditure and
establish high quality image.