MK0009 – International Marketing

Assignment Set- 1

1. International marketing is basically an extension of

domestic marketing. Do you agree or disagree with this
statement? Justify your answer.

Answer: International marketing is simply the application of

marketing principles to more than one country. However, there is a
crossover between what is commonly expressed as international
marketing and global marketing, which is a similar term.

International Marketing is the performance of business activities

that direct the flow of a company’s goods and services to
consumers or users in more than one nation for a profit.

The international market goes beyond the export marketer and

becomes more involved in the marketing environment in the
countries in which it is doing business.

International Marketing is a multinational process of planning and

executing the conception, pricing, promotion, and distribution of
ideas, goods, and services and to create exchanges that satisfy
individual and organizational objectives.

International 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 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.

The biggest obstacle these marketers face is being blindsided by

emerging international marketers. Because domestic marketers do
not generally focus on the changes in the global marketplace, they
may not be aware of a potential competitor who is a market leader
in other countries. These marketers can be considered ethnocentric,

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as they are most concerned with how they are perceived in their
home country.

Generally, four distinctive approaches dominate strategic thinking in

international marketing as against domestic marketing. These are:

Ethnocentric or Domestic Marketing Extension Concept:

In this concept, the assumption is that the home country marketing

practices will succeed elsewhere without adaptation. Ethnocentrism
is a natural result of the observation that most people are more
comfortable with and prefer the company of people who are like
themselves, sharing similar values and behaving in similar ways. It
is not unusual for a person to consider that what ever they believe is
the most appropriate system of belief, or that however they behave
is the most appropriate and natural behavior. In fact in such
organizations, international marketing is viewed as secondary to
domestic operations and very little special effort is made for
international marketing.

Polycentric or Multi-Domestic Marketing Concept:

This is the opposite of ethnocentrism. Polycentrism is the principle

of organisation of a region around several political, social or
financial centres. In intercultural competence the term polycentrism
is understood as attitude and openness towards other cultures,
opinions and ways of life: when intercultural actions and correlations
are interpreted not only with the background of own cultural
experiences, but when the independence of other cultures is
recognized and appreciated and when cultural values are relativized
and seen in the whole context. This in the way of non-
ethoncentrism, opposite to ethnocentrism. Management of such
multinational firms place importance on international operations as
a source for profits and the management believes that each country
is unique and allows each to develop its own marketing strategies
locally.

Regiocentric: Regiocentrism orientation is an attitude or

orientation toward internationalization with the focus on regional
orientation. In this concept, the organisation sees the world as one
market and develops a standardized marketing strategy for the
entire world.

Geocentric: Regiocentric and Geocentric are synonymous with a

Global Marketing Orientation where a uniform, standardized
marketing strategy is used for several countries, countries in a
region, or the entire world.

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The Domestic Market Extension Concept: The domestic
company that seeks sales extension of its domestic products into
foreign markets illustrates this orientation to international
marketing. It views its international operations as secondary to an
extension of its domestic operations. The primary motive is to
dispose of excess domestic production. Domestic business is its
priority and foreign sales are seen as a profitable extension of
domestic operations. While foreign markets may be vigorously
pursued the orientation remains basically domestic. Its attitude
toward international sales is typified by the belief that if it sells in
Peoria it will sell anywhere else in the world. Minimal, if any, efforts
are made to adapt the marketing mix to foreign markets. The firm’s
orientation is to market to foreign customers in the same manner
the company markets to domestic customers. It seeks markets
where demand is similar to the home market and its domestic
product will be acceptable. This Domestic Market Expansion
Strategy can be very profitable. Large and small exporting
companies approach international marketing from this perspective.

2. Discuss the factors which need to be considered in

making product related decisions in international markets.

Answer: 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 these decisions are very critical. The
factors which need to be considered in making product related
decisions in international markets are:

Specification: Specification is very important in products. Some

markets will not take produce unless it is within their specification.
Specifications are often se by the customer, but agents, standard
authorities (like the EU or ITC Geneva) and trade associations can
be useful sources, found, generally, that there are no consistent
standards for product quality and grading , making it difficult to do
international trade regionally.

Culture: Product packaging, labeling, physical characteristics and

marketing have to adapt to the cultural requirements when
necessary. Religion, values, aesthetics, language and material
culture all effect production decisions. Effects of culture on
production decisions have been dealt with already in chapter three.

Physical product: The physical product is made up of a variety of

elements. These elements include the physical product and the
subjective image of the product. Consumers are looking for benefits
and these must be conveyed in the total product package, Physical
characteristics include range, shape, size, colour, quality, quantity
and compatibility. Subjective attributes are determined by
advertising, self image, labeling and packaging, In manufacturing or

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selling produce cognizance has to be taken of cost and country legal
requirements.

Again a number of these characteristics is governed by the

customer or agent For example, in beef products sold to the EU
there are very strict quality requirements to be observed in fish
products, the Japanese demand more “exotic” types than, say,
would be sold in the UK. In sophisticated markets like seed, the
variety and range is so large that constant watch has to be kept on
the new strains and varieties in order to be competitive.

Packaging: Packaging serves many purposes. It protects the

product from damage which could be incurred in handling and
transportation and also has a promotional aspect. It can be very
expensive. Size, unit type, weight and volume are very important in
packaging. Costs of packaging have always to be weighed against
the advantage gained by it.

Increasingly, environmental aspects are coming into play. Packaging

which is non-degradable-plastic, for example-is less in demanded.
Bio-degradable, recyclable, reusable, expensive and demanding for
many developing countries.

Labeling: Labeling not only serves to express the contents of the

product, but may be promotional. The EU is now putting very
stringent regulations in force on labeling, even to the degree that
the pesticides and insecticides used on horticultural produce have
to be listed. This could be very demanding for producers, especially
small scale, ones where production techniques may not be
standardized. Government labeling regulations vary from country to
country. Labels may have to be multilingual, especially if the
product is a world brand. Translation could be a problem with many
words being translated with difficulty. Again labeling is expensive,
and in promotion terms non-standard labels are more expensive
than standard ones. Requirements for crate labeling etc. for
international transportation will be dealt with later under
documentation.

Branding and trademarks: It is difficult to protect a trademark or

brand, unless all countries are members of a convention. Brand
“piracy” is widespread in many developing countries. Other aspects
of branding include the promotional aspects. A family brand of
products under the Zeneca (ex ICI) label or Sterling Health are likely
to be recognized worldwide, and hence enhance the “subjective”
product characteristics.

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Warranty: Many large value agricultural products like machinery
require warranties. Unfortunately not everyone upholds them. It is
common practice in Africa that it the original equipment has not
been bought through an authorized dealer, in the country, that
dealer refuses to honour the warranty. This is unfortunate, because
not only may the equipment have been legitimately bought
overseas; it also actually builds up consumer resistance to the
dealer. When the consumer is eventually offered a choice, the
reticent dealer will suffer.

Product strategies: There are five major product strategies in

international marketing:

i) 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
misjudgments are made. For example CPC International
believed the US consumer would take to dry soups, which
dominate the European market. It did not work.

ii) 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 different product
functions have to be identified and a suitable communications
mix developed.

iii) Product adaptation – communications extension. The product

is adapted to fit usage conditions but the communication
stays the same. The assumption is that the product will serve
the same function in foreign markets under different usage
conditions.

iv) Product adaptation – communications adaptation. Both

product and communication strategies need attention to fit
the peculiar need of the market.

v) Product invention. This needs a totally new idea to fit the

exclusive conditions of the market. This is very much a
strategy which could be ideal in a third world situation. The
development costs may be high, but the advantage.

The choice of strategy will depend on the most appropriate

product/market analysis and is a function of the product itself
defined in terms of the function or need it serves, the market
defined in terms of the condition under which the product is used,
the preferences of the potential customers and the ability to buy the
product in questions, and the costs of adaptation and manufacture

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to the company considering these product – communications
approaches.

3. Write short notes on – a) International distribution

objectives b) e-commerce.

Answer: a) International distribution objectives

There can be different objectives for different firms. Some of them

are as under:

Interrelated objectives: A firm’s distribution objectives will

ultimately be highly related-some will enhance each other while
others will complete. For example, as we have discussed generally
entail less intensity and lesser reach. Cost has to be traded off
against speed of delivery and intensity. (it is much more expensive
to have a product available in convenience stores than in
supermarkets, for examples).

Narrow vs wide reach: The extent to which a firm should seek

narrow (exclusive) vs, wide (intense) distribution depends on a
number of factors. One issue is the consumer’s likelihood of
switching and willingness to search. For example, most consumers
will switch soft drink brands rather than walking from a vending
machine to a convenience store several blocks away, so intensity of
distribution is essential here. However , for sewing machines,
consumers will expect to travel at least to a department for discount
store, and premium brands may have more credibility if they are
carried only in full service specially stores. Retailers involved in a
more exclusive distribution arrangement are likely to be more
“loyal” – i.e. they will tend to recommend the product to the
customer and thus sell large quantities, carry larger inventories and
selections and provide more services.

Distribution Opportunities: Distribution provides a number of

opportunities for the marketer that may normally be associated with
other elements of the marketing mix. For example, for a cost, the
firm can promote its objective by such activities as in-store
demonstrations/samples and special placement (for which the
retailer is often paid). Placement is also an opportunity for
promotion e.g., airlines know the they, as “prestige accounts,” can
get very good deals from soft drink makers who are eager to have
their products offered on the airlines. Similarly, it may be useful to
give away, or sell at low prices, certain premiums (e.g., T-shirts or
cups with the corporate logo.) It may even be possible to have
advertisements printed on the retailer’s bags (e.g., “Got milk?”)

Other opportunities involve “parallel” distribution (e.g., having

products sold both through conventional channels and through the

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Internet or factory outlet stores). Partnership and joint promotions
may involve distribution (e.g., Burger King Sell’s clearly branded
Hershey pies).

Deciding on a strategy: In view of the need for markets to be

balanced, the same distribution strategy is unlikely to be successful
for each firm. The question, than, is exactly which strategy should
one use? It may not be obvious whether higher margins in a
selective distribution setting will compensate for smaller unit sales.
Here, various research tools are useful. In focus groups it is possible
to assess what consumers are looking for and which attributers are
more important. Scanner data, indicating how frequently various
products are purchased and items whose sales correlate with each
other may suggest the best placement strategies.

It may also, to the extent ethically possible, be useful to observe

consumers in the field using products and making purchase
decisions, one can observe factors such as (1) how much time is
devoted to selecting a product in a given category, (2) how many
compared or are substitutes (e.g., frozen yogurt vs. cookies in a
mall), (4) what are “complementing” products that may cue the
purchase of others if placed nearby. Channel members – both
wholesalers and retailers – may have valuable information, but their
comments should be viewed with suspicion, as they have their own
agendas and may distort information.

3b) E-commerce

E Commerce is one of the most important facets of the Internet

to have emerged in the recent times. Ecommerce or electronic
commerce involves carrying out business over the Internet with
the assistance of computers, which are linked to each other
forming a network. To be specific ecommerce would be buying
and selling of goods and services and transfer of funds through
digital communications.

The benefits of E-commerce:

Ecommerce allows people to carry out businesses without the

barriers of time of distance. One can log on to the Internet at any
point of time, be it day or night and purchase or sell anything one
desires at a single click of the mouse.

The direct cost-of-sale for an order taken from a web site is lower
than through traditional means (retail, paper based), as there is

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 no human interaction during the on-line electronic purchase
order process. Also, electronic selling virtually eliminates
processing errors, as well as being faster and more convenient
for the visitor.

Ecommerce is ideal for niche products. Customers for such

products are usually few. But in the vast market place i.e. the
Internet, even niche products could generate viable volumes.

Another important benefit of Ecommerce is that it is the cheapest

means of doing business.

The day –to-day pressures of the marketplace have played their

part in reducing the opportunities for companies to invest in
improving their competitive position. A mature market, increased
competitions have all reduced the amount of money available to
invest. If the selling price cannot be increased and the
manufactured cost cannot be decreased then the difference can
be in the way the business is carried out. Ecommerce has
provided the solution by decimating the cost, which are incurred.

From the buyer’s perspective also ecommerce offers a lot of

tangible advantages.

1. Reduction in buyer’s sorting out time.

2. Better buyer decisions

3. Less time is spent in resolving invoice and order

discrepancies.

4. Increased opportunities for buying alternative products.

The strategic benefit of making a business ‘ecommerce enabled’, is

that it helps reduce the delivery time, labour cost and the cost
incurred in the following areas:

1. Document preparation

2. Error detection and correction

3. Reconciliation

4. Mail preparation

5. Telephone calling

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 6. Data entry

7. Overtime

8. Supervision expenses

Operational benefits of commerce include reducing both the time

and personnel required to compete business processes, and
reducing strain on other resources. It’s because of all these
advantages that one can harness the power of ecommerce and
convert a business to e-business by using powerful turnkey
ecommerce solutions made available by e-business solution
providers.

The Internet has created a new economic ecosystem, the e-

commerce marketplace, and it has become the virtual main street
of the world. Providing a quick and convenient way of exchanging
goods and services both regionally and globally, e-commerce has
boomed. Today, e-commerce has grown into a huge industry with
consumer electronic, from books and media distribution to sports &
fitness. With more than 70% of Americans using the Internet on a
daily basis for private and/or business use and the rest of the world
also beginning to catch on, e-commerce’s global growth curve is not
likely to taper off anytime soon.

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 MK0009 – International Marketing

Assignment Set- 2

1. Discuss the relative advantage and disadvantages of

standardization vs. localization of advertising, with suitable
examples.

Answer: Advantages of standardization are:

i. Economies of scale in production and marketing

ii. Consumer mobility – the more consumers travel, the more it
the demand
iii. Technology
iv. Image, for example “Japanese”, “made in”.

The latter can be a factor both to aid or to hinder global marketing

development. Nagashima1 (1977) found the “made in USA” image
has lost ground to the “made in Japan” image.

The advantages of standardization in manufacturing are cost

effectiveness and integration. Standardization of lathe cutting tool
stock sizes and tool post mounts for instance allow tool post
manufacturers to cover a huge of lathe designs and uses with a
single product, whereas otherwise a potentially huge range of tool
post products might be required to furnish the functionality of a
given tool post design to diverse lathes and cutting tool dimensions.

The basic potential disadvantage of standardization in

manufacturing is that it may lock in obsolescence. Tool stock
developments may for instance render tool posts designs obsolete
for the advantages of new tools, or a given tool post mount design
may for instance preclude using the advantages offered by new tool
post designs, which thus makes the lathes obsolete. Because good
system designs can exercise foresight to ensure long term non-
obsolescence, there are usually general advantages to be realized
from standardization wherever a fitting, universal vision for
standardization can be conceived.

2. What are some of the obstacles that come in the way of

charging a uniform price across different markets?

Answer: Foreign exchange is currency bought or sold in the foreign

exchange market. The “market” is the total of persons who buy and
sell and involves various financial and other institutions. The “spot”
market is for the immediate delivery or in the interbank market
within two business days, of foreign exchange. The forward market

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is for future delivery. The principal players are the banks (Inter-bank
market) and others including the London International Futures
Exchange (LIFE).

The foreign exchange market is very dynamic. The price of one

currency in any other currency is the result of forces of supply and
demand in the foreign exchange market. The demand for one
currency may be due to consumers wishing to buy from overseas, or
a belief that one country’s currency is stronger than another’s. In
Africa, where exchange controls occur in some countries, this can
lead to an official or unofficial black market. Also, currency
allocation is a feature which tends to slow down business or hinder
its development.

If a country sells more than it buys, its currency value will rise and
vice versa. If foreign exchange rates were set simply by money
exchanged for goods and services, then forecasting exchange rates
would be easy. However, short and long terms capital flows,
speculative purchases and sales distort the picture.

Governments intervene to dampen fluctuation in exchange rates.

Often they get involved in extensive trading to stem the rise in
currency value, so exports are not harmed.

Exchange rates are very difficult to forecast due to a multitude of

factors. Forecasts are, therefore, a continuation of economic
analysis and judgment.

In forecasting foreign exchange rates it is important to take account

of purchasing power parity (PPP), that is, one unit of currency should
buy the same amount of goods and services as it bought in an
equilibrium period, despite differential rates of inflation. The lower
the level of inflation, the greater will be the PPP effect. If prices in
local currency rise faster or more slowly than prices in the rest of
the world, and equal adjustment of the exchange value of the
currency in the opposite direction will restore equilibrium to relative
price levels.

Unfortunately as levels of inflation are difficult to predict and foreign

exchange transactions are other than solely for purchasing goods
and services, the PPP is not a very reliable forecasting technique.
Other factors affect the foreign rate of exchange other than just
PPP. These are:

Economic factors – balance of payments, monetary and fiscal policy,

inflation, real and nominal interest rates, government controls and
incentives, etc.

- Political factors – philosophy of leaders, elections.

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 - Psychological factors – expectations, forward market prices,
and traders’ attitudes.

One of the issues in analyzing a county’s competitive position is the

critical adjustment of the exchange value of a country’s currency.
The index is a trade weighted index (based on world trade share).
Indices are issues by various bodies like the IMF.

Three basic factors determine the boundaries of the pricing decision

– the price floor, or minimum price, bounded by product cost, the
price ceiling or maximum price, bounded by competitions and the
market and the optimum price, a function of demand and the cost of
supplying the product. In addition, in price setting cognizance must
be taken of government tax policies, resale prices, dumping
problems, transportations costs, and middlemen and so on.

In setting prices, it must be made clear what the objectives and

policy are. Few organization can now be pure profit maximizes -
there is hardly a sector of industry where competition or potential
competition is not prevalent. Three frequently encountered prices
polices are as follows:

Skimming: The market skimming pricing strategy is a deliberate

attempt to reach a market segment that is willing to pay a premium
price for a product. In such instances, the product must create high
value for buyers. This pricing strategy is often used in the
introductory phase of the product life cycle, when both production
capacity and competition are limited. By setting a deliberately high
price, demand is limited to early adopters who are willing are able
to pay the price. One goal of this pricing strategy is to maximize
revenue on limited volume and to match demand to available
supply. Another goal of market skimming pricing is to reinforce
customers’ perceptions of high product value. When this is done,
the price is part of the total product positioning strategy.

Penetration Pricing: Penetration pricing uses price as

competitive weapon to gain market position. The majority of
companies using this type of pricing in international marketing are
located in the Pacific Rim. Scale-efficient plants and low-cost labor
allow these companies to blitz the market. It should be noted that a
first-time exporter is unlikely to use penetration pricing. The reason
is simple: Penetration pricing often means that the product may be
sold at a loss for a certain length of time. Companies that are new to
exporting cannot absorb such losses. They are not likely to have the
marketing system in place (including transportation, distribution,
and sales organizations) that allow global companies such as Sony
to make effective use of a penetration strategy. However, a
company whose product is not penetrable may wish to use

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penetration pricing to achieve market saturation before the product
is copies by competitors.

In the U.S. process, cost is typically determined after design,

engineering, and marketing decisions have been made in sequential
fashion if the cost is too high, and the process cycles back to square
one the square one-the design stage.

Market Holding: The market holding strategy is frequently

adopted by companies that want to maintain their share of the
market. In single-country marketing, this strategy often involves
reacting to price adjustments by competitors. For example, when
one airline announces special bargain fares, most competing carried
marketing, currency fluctuations often trigger price adjustments.

Market holding strategies dictate that source country currency

appreciation will not be automatically passed on in the form of
higher prices. If the competitive situation in market countries is
price sensitive, manufacturers must absorb the cost of currency
appreciation by accepting lower margins in order to maintain
competitive prices in country markets.

A strong home currency and rising costs in the home country may
also force a company to shift its sourcing to in-country or third-
country manufacturing or licensing agreements, rather than
exporting from the home country, to maintain market share. IKEA,
the Swedish home furnishing company, sourced 50 percent of its
products in the United States in 1992 compared with only 10
percent in 1989.

3. Your have just taken over as General Manager of a

Company that is planning to launch a chain of Indian fast
food restaurants in the US market. Which aspects of the
marketing strategy are impacted by cultural differences and
how would you deal with them?

Answer: Consumption patterns, living styles, and the priority of

need are all dictated by culture. Culture prescribes the manner in
which people satisfy their desires. Not surprisingly, consumption
habits vary greatly. The consumption of beef provides a good
illustration. Some Thai and Chinese do not consume beef at all,
believing that it is improper to eat cattle that work on farms, thus
helping to provide foods such a rice and vegetables. In Japan, the
per capita annual consumption of beef has increased to eleven
pounds, still a very small amount when compared to the more than
100 pounds consumed per capita in the United States and
Argentina.

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The eating habits of many people seem exotic to Americans. This
Chinese eat such things as fish stomachs and bird’s nest soup
(made from bird’s saliva). The Japanese eat uncooked seafood, and
the Iraqis eat dried, salted locusts as snacks while drinking.
Although such eating habits may seem repulsive to Americans and
Europeans, consumption habits in the West are just as strange to
foreigners. The French eat snails. Americans and Europeans use
honey (bee expectorate, or been spit) and blue cheese or Roquefort
salad dressing, which is made with a strong cheese with bluish
mold. No society has a monopoly on unusual eating habits when
comparisons are made among various societies.

Food preparation methods are also dictated by culture preferences.

Asian consumers prefer their chicken broiled or boiled rather than
fried. Consequently, the Chinese in Hotel distasteful.

Not only does culture influence what is to be consumed, but it also

affect what should not purchased. Muslims do not purchase chicken
unless they have been halalled, and like jews, no consumption of
pork is allowed. They also do not smoke or use alcoholic beverages,
a habit shared by some strict Protestants. Although these
restrictions exist in Islamic countries, the situation is not entirely
without market possibilities. The marketing challenge is to create a
product that fits the needs of particular culture.

Unless marketers remain flexible in their own attitudes by accepting

differences in basis patterns of thinking, local business tempo,
religious practices, political structure, and family loyalty, they are
hampered, if not prevented, from reaching satisfactory conclusions
to business transactions. In such situations obstacles take any
forms, but is not unusual to have one negotiator’s business
proposition accepted over another’s simply because “that one
understands us.” Adaptation is a key concept in international
marketing and willingness to adapt is a crucial attitude. Adaptation
is required on small mattes as well as large ones. In fact, the small,
seemingly insignificant situations are often the most crucial. More
than tolerance, affirmative acceptance of an alien culture is
required. Through such affirmative acceptance adaptation becomes
easier because empathy for another’s point of view naturally leads
to ideas for meeting cultural differences.

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