INTERNATIONAL

MARKETING

 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.

 "At its simplest level, international

marketing involves the firm in making one
or more marketing mix decisions across
national boundaries. At its most complex
level, it involves the firm in establishing
manufacturing facilities overseas and
coordinating marketing strategies across
the globe.

Doole and Lowe (2001

 Marketing consists of two processes

1.Technicalincludesnonhuman factors such
as product, price, brand , cost etc. The basic
principles regarding these remain same.
2.Social--- it involves human elements
namely behavior , attitude , values ,
customs etc.
THUS INTERNATIONAL MARKETING DIFFERS
FROM
DOMESTIC MARKETING IN TERMS OF
SOCIAL PROCESS

International mktg vs.

domestic
mktg
1.Different legal systems

2.Different monetary systems

3.Greater degrees of risk
4.Differences in market characteristics
5. Differences in procedures and documentation
6.Sovereign political entities

SIMILARITIES
1. BOTH NEED TO SATISFY CUSTOMERS
2. BOTH NEED TO BUILD GOODWILL
3.R N D REQUIRED IN BOTH FOR
PRODUCT DEVELOPMENT AND
IMPROVEMENT

MOTIVATION TO EXPORT

1.Advantage of selling in bulk

2.Relative profitability
3.Reducing business risk
4.Increased productivity
5.Insufficiency of domestic demand
6.Technological improvement
7.Obtaining imported inputs

DEGREE OF COMMITMENT

1.No involvement
Product reaches the market either through
the foreign buyers or via domestic
intermediaries.
2.Temporary involvement
The firm gets involved to dispose temporary
surpluses or utilize excess capacity.
3.Continued involvement
Serious commitment to export
4.Global involvement
Having establishments in a no. of countries

Entering Foreign Markets

Nonequity modes of market entry
Exporting
Selling some regular production overseas
Requires little investment
Relatively free of risk
Indirect exporting
Direct exporting

Equity modes of market entry

Wholly owned subsidiary
Joint venture
Strategic alliance

Indirect Exporting
Exporting of goods and services through
various home-based exporters
Manufacturers export agents
sell for manufacturer
Export commission agents
buy for overseas customers

ADVANTAGES OF INDIRECT EXPORTING

1.Capital not tied up.
2.Manufacturer is free to concentrate upon
production.
3. No need to spend on marketing
research.
4.Sales and credit risk taken by merchant
exporter.

Indirect Exporting,

contd.

Disadvantages
Commission to export agents,
commission agents, export merchants
Foreign business can be lost if
exporters decide to change their
sources and supply
Firm gains little experience from
transactions

Direct Exporting
Exporting of goods and services by the
producing firm
Sales company option
Business established to market goods
and services
Internet has made direct exporting
much easier
Cost of trial low

 ADVANTAGES OF DIRECT EXPORTING

1.Personal contact with end users and/or
retailers enable to have a knowledge of their
requirements hence adapt product accordingly.
2.Price control and credit terms can be
determined.
3.Goodwill can be developed in case of success.
4.Shorter chain of distribution thus lower price
for ultimate consumer.
5.Better after sales service can be given.

Exporting
Turnkey Project used for export of
Technology
Management expertise
Capital equipment (some cases)

After trial run, facility is turned over

to purchaser
Exporter of a turnkey project may be
Contractor that specializes in designing and
erecting plants in a particular industry
Company that wishes to earn money from its
expertise
Producer of a factory

Exporting,

contd

Licensing
A contractual arrangement: one firm sells access to its
patents, trade secrets, or technology to another
Licensee pays fixed sum and sales royalties (2%-5%)

Popular because
Courts have begun upholding patent infringement
claims
Patent holders have become vigilant in suing
violators
Foreign governments have been pressed to enforce
their patent laws

Franchising
Franchising
Form of licensing in which one firm
contracts with another to operate a
certain type of business under an
established name according to specific
rules

Contracts
Management Contract
Arrangement by which one firm provides
management in all or specific areas to
another firm

Contract Manufacturing
Arrangement in which one firm contracts
with another to produce products to its
specifications but assumes responsibility for
marketing
16-18

Equity-Based Modes of Entry

Wholly Owned Subsidiary
Joint Venture
Strategic Alliance

Wholly Owned Subsidiary

Wholly Owned Subsidiary
build a new plant (greenfield investment)
acquire a going concern
purchase distributor, to obtain a
distribution network familiar with products

Joint Venture
Joint Venture
Cooperative effort among two or more
organizations that share common interest in
business enterprise
corporate entity formed by international
company and local owners
corporate entity formed by two
international companies for the purpose of
doing business in a third market
a corporate entity formed by a
government
16-21

Strategic Alliances
Partnerships between competitor,
customers, or suppliers that may take
various forms
Aims to achieve
Faster market entry and start-up
Access to new
Products
Technologies
Markets
Cost-savings by sharing
Costs
Resources
Risks

Strategic Alliances,
May be Joint Ventures
Pooling alliances driven
by similarity and
integration
Trading alliances driven
by contribution of
dissimilar resources
Alternatives to mergers
and acquisitions

contd.

Future of Alliances
Many fail or are taken
over by a partner
Difficult to manage
Different strategies
Different operating practices
Different organizational
cultures

Allow partner to
acquire technological
or other competencies
Regardless, will
continue to be
important strategic
tool

Channel of Distribution
Links producer with foreign user
Product and its title pass from
producer to user

Channel of Distribution
Members: Indirect Exporting
Indirect Export Channel Members
Sell for manufacturer
Buy for overseas customers
Buy and sell for own account
Purchase on behalf of foreign middlemen
or users

MODES OF PAYMENT IN
INTERNATIONAL MARKETING
1.PAYMENT IN ADVANCE
Here a bank draft or advice is already
recd. By the exporter . Applicable in
a)Where there is heavy demand for
goods
b)Where the goods are tailor made
for the customer

2.

DOCUMENTARY BILLS

They serve as a bridge between

a)exporters unwillingness to part with the
goods till he is paid for
b) importers unwillingness to part with the
money unless he is sure of receiving the
goods
In this method the exporter agrees to
submit the documents along the bill of
exchange.

 Two types of payments

1.Documents against payment ---D/P Bills
In this the exporters bank will send the
documents to the correspondent bank in the
buyers country which will present the documents
to the buyer and on payment will deliver the
documents to him to take possession of goods.
2. Documents against acceptance---D/A Bills
In this the correspondent bank will give the bill of
exchange to be signed by the buyer to indicate
the acceptance of the payment obligation .On the
due date of payment bank will present again.

3.LETTER OF CREDIT
Letter of Credit and Parties of it
A letter of credit can be defined as an
understanding under which a bank
acting at the request of a customer
undertakes to pay to a third party a
fixed amount by a given date which is
agreed on by both the customer and the
third party. Letters of credit are used
mostly in international trade
transactions of major value, for deals
between a supplier in one country and a
customer in another.

 There are 4 parties to a letter of credit. They are

1. Applicant It is the importer who has bought
the goods and wants to pay for those goods by
opening letter of the credit through bank.
2. Issuing Bank It is the bank which opens the
letter of credit on the request of the importer.
3. Beneficiary It is the exporter who has sold the
goods and in whose favor letter of credit is
opened.
4. Advising Bank It is the bank which informs
the exporter about the letter of credit being
opened at the request of issuing

TYPES OF LETTER OF
CREDIT

 1. Revocable Letter of Credit It is one

which can be canceled by the issuing bank
at the request of the applicant, without the
consent of the beneficiary.
2. Irrevocable Letter of Credit It is one
which cannot be canceled by the issuing
bank, and consent of beneficiary is
necessary before revoking it.
3. Revolving Letter of Credit It is one
whereby the credit available to the
beneficiary gets returned after being
utilized once, in simple words same letter of
credit is used for multiple dealings with the
same importer.

 4. Transferable Letter of Credit It is the

one where the beneficiary or exporter can
transfer his rights to a third party.
5. Deferred Letter of Credit It is a letter of
credit that allows the issuing bank to make
the payment to the beneficiary or exporter
in installments the amount and time of
which are fixed.
6. Back to Back Letter of Credit It is a
letter of credit which is opened with
another letter of credit as the security. It is
primarily used in international transactions.

 An unconditional order issued by a

person or business which directs
the recipient to pay a fixed sum of
money to a third party at a future
date. The future date may be either
fixed or negotiable. A bill of
exchange must be in writing and
signed and dated also called draft.

International product
management
Standardization v/s adaptation

Factors in favor of standardization

1.Economies of scale
Production
Marketing communications
Research and development
2.Homogeneity of market
3.Culutral insensitivity
4.Image important

 5.When a firm sells a smaller proportion

of its output then incremental costs may
exceed the incremental sales value
Factors in favor of standardization
1.Legal requirements
a)health and safety law
b)economic law
2.Technical requirements
3.Culture bound
4.Level of consumer purchasing power

FIRMS APPROACH
1ETHNOCENTRISM
Overseas operations are considered
secondary to domestic operations
Often a means of disposing surpluses
Less marketing research
Little or no changes in marketing mix
Less consideration of customer needs
Centralized strategy

 2.Polycentrism
Subsidiaries are established
Separate plans ,objectives , policies for
different countries
Adaptations done
Decentralized strategy

 3.Geocentrism
Organization considers the entire world
as one market
Standardization and adaptation done as
required
Integrated marketing strategy

Two dimensional matrix of

marketing products
AIRCRAFTS
COMPUTERS

Advantages of standardized marketing

high

TELECOM
PHARMA

low

MEDICAL
EQUIPMENT

low

PROCESSED FOOD

low
Need of localized marketing

high

PACKAGING AND LABELLING

Factors affecting packaging

1.Method of transport
2.Regulations to be observed
E g. Netherlands forbids the use of straw
packing
South Africa and New Zealand insist that
the timber used should be free from
diseases.
3.Environmental and infrastructural
conditions to be considered
4.Nature of goods

Information on label
1.Name and address of
manufacturer
2.clear description of product
composition
3.Net weight
4.Usable till
5.Instructions for use