INTERNATIONAL MARKETING

MANAGEMENT

PGDM-VI TRIMESTER

FACULTY INCHARGE:-
MR. RAJESH SHARMA
SENIOR ASST. PROF.,MARKETING,
UIMS,JAIPUR

1
 INTRODUCTION
AIMS AND OBJECTIVES OF IMM.
A clear understanding of the basic concepts of
international business/global business management, in
the light of the business scenario in this 21st century
globalized business environment. Why global business is
studied as a different field, yet encompassing itself into
the body of marketing management.
Understanding of the complex and a dynamic definitions
related to international marketing/ trade etc.

2
 Contd..
Understanding the concept of globalization & why it is
important and its definition.
Why globalization is referred in the context of
international business.
A brief historical background from modern times to
assess the role of globalization being not new in this 21st
century global business scenario.
 Overall competitive scenario, when markets and
business worldwide are facing a paradigm shift from
monopoly to oligopoly.

3
 Contd..
Corporate examples from India and other world markets
towards understanding of the global business/ international
marketing management.
Important mergers and acquisitions by Indian companies
abroad.
Exposure of the students to the global business activities.
Focus on managing international business, operational as
well as strategic.
Understanding the macro international business
environment, strategies to enter foreign market.
Understanding of the global business policy and regulatory
measures in the light of emerging markets.
Understanding the concept of international trade, balance
of trade and balance of payments. Definitions and
importance on the terms.

4
 Continued…
IMPORTANT Books

Global Marketing Management by

Warren. J. Keegan

5
 Other Important References:
Global Marketing Management-Kotabe Makadi
International Marketing Management-
Varshney and Bhattacharya.
The Worldly Philosophers- Robert. H.
Heilbrowner
History of Economic Thought- Eric Roll
Economic Theory- Eric Roll

6
 Definition of Globalization

Globalization means integrating the economy of the

country with the world economy. Under this process-
goods, services, capital, labor and resources move
freely from one nation to another, further implying one
single market in a global village.
Further, the thrust of globalization has been to
increase the domestic and external competition
through extensive application of market mechanism
and facilitating forging of dynamic relationships with
the foreign investors and suppliers of technology.

7
 Contd..

Role of globalization and its effect in the business

environment.

8
 DEFINITION OF INTERNATIONAL
BUSINESS

International business is the activity of engaging in

business operations across national
boundaries/borders.
International business is the field of study that
concerns itself with the development, strategy and
management of multinational enterprises in the
global context of complex and dynamic business
environments.
Actually the complete gamut of the whole context
and interest in international business lies in
multinational enterprises, culture and
communications-as also the special skills that are
required to operate in global business environment.
9
 DEFINITION OF MULTINATIONAL
ENTERPRISES

A corporation that has production operations in more

than one country, (e.g.:- Toyota having manufacturing
facility in India as also other parts of the world.) for
various reasons such as- securing supplies of raw
materials, utilizing cheap labor sources, servicing
local markets and bypassing protectionist barriers.
Important critical comment on multinationals and its
gravity in the light of marketing products in the ‘Third
World’ market.

10
 DEFINITION OF FOREIGN
INVESTMENT
Investment in the domestic economy by foreign
individuals or companies is called foreign
investment in generic terms.
Foreign investment takes the form of:-
Direct investment in productive enterprises
Investment in financial instrument such as portfolio of
shares.
Important critical comment on foreign investment
in the light of ‘societal marketing concept’ under
the principles of marketing management concepts.
Foreign investment is increasingly important in the
economy of the modern business world-
explanation as to how?

11
 FOREIGN DIRECT INVESTMENT(FDI)

The acquisition abroad of physical assets such as plant

and equipment, with operating control residing in the
parent co-operation.

12
 DOMESTIC MARKET
Part of a nation’s internal market
representing the mechanism for issuing
and trading securities of entities domiciled
within that nations.

13
 Continued..
 Brief Historical Background of International
Business/Trade relations-
-- International business and trade has been there
from times immemorial,
-- Man is a social animal– wants different kinds of
goods/ commodities- required for the standard of
living.
-- The country is not self-sufficient in developing all
the products/ commodities etc.
-- Hence dependent on other country-
-- Thus international business and trade exists-
International trade is between nations, business
is between companies.

14
 Continued..
Fundamental Questions that companies
tackle:
-- What market presence should be achieved
in own country/ continent.
-- Globally presence – yes/ no
-- Knowledge of Competitors.
-- What strategies to be adopted?
-- What resources to deploy?

15
 Continued..
Factors that reinforces to take
interest in International Marketing in
Modern Times
-- Income growth of the consumers
-- Lower trade barriers
-- Desire for new products, around the world
-- Search for new markets/new avenues/new
segments

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 Continued..

-- Demand for new styled goods/ services–

innovative goods.
-- Integration of telecommunication
facilities/communication
-- Faster means of travel, transport,
technology.
-- Move towards reduction of international
marketing barriers.

17
 Continued..
Definition of Global Industry:
A global industry is an industry, where the
strategic positions of competitors in major
geographic or national markets are
fundamentally affected by their overall
global positions.

18
 Continued..
Definition of Global Firm:
A global firm is one that is operating in more
than one country- captures research and
development, production, logistical,
marketing and financial advantages in its
costs and reputation that are not available to
purely domestic competitors.
-- They rely on technological innovation.
-- Enhance their capabilities through
technology.

19
 Continued..

Need/Factors for International

Marketing:

1. Business Factors
2. Competitive Factors

20
 Continued..
BUSINESS FACTORS:
-- Profitability
-- Achieving Economies of Scale
-- Growth Factors
-- Marketing due to life-cycle
-- Uniqueness of Product / Services
-- Access to imported inputs
-- Spreading R and D cost

21
 Continued..

In Continuance:
Competitive Factors/ Other Factors:
-- The company’s domestic market might be
attacked by global firm’s offering better
products or at lower prices.
-- Counterattack by the domestic firm in the
competitors home market.
-- Company discovering, some markets
presenting higher profit opportunities than the
domestic market.
-- Company wanting larger customer base in
order to achieve economies of scale.

22
 Continued..
In Continuance:
-- Company wanting to reduce dependence
on anyone market.
-- Reducing risk

23
 Continued..

Major decisions in International

Marketing:
The Major decisions are encircled as a step
by step calibrated process:
1. Deciding whether to go abroad?
2. Deciding which market to enter?
3. Deciding how to enter?
4. Deciding on the marketing program?
5. Deciding on the marketing organization?

24
 Continued..
Major Concerns while Entering Foreign
Market:
1. Unstable Government, if any.
2. Foreign Exchange problems.
3. Foreign government entry requirements/
entry barriers.
4. Trade / Tariff barriers.
5. Corruption in the respective country
government, if any.

25
 Continued..
6. Technological pirating.
(Explanation: A company locating its plant
abroad worries about foreign managers
learning how to make its product and
breaking away to compete openly or
clandestinely- for example in the diverse
area such as machinery, electronics,
chemicals, pharmaceuticals etc.)
7. High cost of product manufacturing and
communication adaptation.

26
 Continued..
Environmental Differences when
marketing overseas:
1.Language
2. Tastes and Fashions
3. Religion
4. Physical Environment (temperature/
humidity etc)
5. Power sources
6. Security arrangements
7. Family structure and size

27
 Continued..
In Continuance:
8. Times at which business is done
9. What is polite and impolite
10. Social priorities
11. Literacy levels
12. Communication infrastructure
13. Distribution facilities
14. Methods of transaction

28
 Continued..
In Continuance:
15. Political differences
16. Legal differences
17. Regulatory differences
18. Different technical standards (may be
operating in the country)
19. Different taxation policy
20. Economic complications/situations – at
a particular time

29
 Continued..
What to study finally – when company’s
going abroad:
1. Study each foreign market carefully
2. Study about the economic laws of
targeted countries
3. Know about the politics of that country
4. Know about the culture
5. Adapt that country’s products and
communication to foreign tastes

30
 Continued..
Domestic VS International Marketing

-- Definition of Domestic Marketing

-- Definition of International Marketing
NB: Basic tenets of marketing concepts is
applied whether it is domestic or
international marketing. It revolves
around the controllable and
uncontrollable factors that governs the
pragmatic marketing scenario.
Continued….
31
 Continued..
In Continuance:
Uncontrollable Factors:

1. Macro Environment- Uncontrollable Factors are:

-- Economic
-- Political
-- Logistics (controllable to a certain extent only, especially
in the domestic market )
-- Competition
-- Legal Affairs
-- Socio-cultural
-- Geography

32
 Continued..
In Continuance:
Micro Environment-the Controllable Factors:
-- Product
-- Price (subject to certain limitations, taking
competitors offer prices into consideration)
-- Place
-- Promotion

33
 Management’s Orientation
Management’s orientation towards
international marketing- EPRG
Concept:

E---- Ethnocentric
P---- Polycentric
R---- Regiocentric
G--- Geocentric

34
 Continued..
Importance of Global Marketing and
the EPRG Concept:
The importance of global marketing can
be gauged from the fact that:

-- Maximum growth potential

opportunities to be tapped.
-- Companies should go global/ motivation
required to go global.

35
 Continued..
Management’s orientation- the EPRG concept
revolves around the grand fact that any
company’s response to global market
opportunities depend greatly on the
management’s assumptions and beliefs, as
to how it views the new market
opportunity, how it plans to enter the
foreign market, how it views the culture,
preferences of consumers in a foreign
market etc…..

36
 Continued..
In Continuance:
The Ethnocentric Orientation:
-- It is a belief which considers- one’s own country/
culture, products as superior
-- It views similarities in all markets/ foreign country
market.
-- Product’s/ services/ management practices/
methods that is being offered/ followed in one’s
own country/ successful in one’s own country will
be acceptable in other world markets, anywhere.
-- Adaptation of the product is not required.
-- Shades of egoism encircled herewith

37
 Continued..
In Continuation:
Criticism of Ethnocentrism
-- Ethnocentric oriented companies ignore foreign
market and therefore loose great opportunities.
-- the product of the ethnocentric oriented company
might be of a very high quality, and might be accepted
in other world markets- (this is accepted in the first
instance, subject to certain limitation), but will the
marketing methods/ practices that is being followed in
the home country does not need any adaptation in any
form? For example if a- Benz Car or a Lincoln or a
Ferrari or a BMW is to be marketed in a ‘Third World’
country. A critical examination is required.

38
 Continued..
In Continuation:
The Polycentric Orientation:
-- Opposite of Ethnocentrism .
-- It views each country as unique.
-- Each subsidiary is to develop its own
unique business.
-- Each subsidiary to develop its own
marketing strategies to succeed in its own
right.

39
 Continued..
In Continuation:
The Regiocentric Orientation:
-- Management views regions as unique.
-- Management seeks to develop an
integrated regional strategy, to market
product/services- in the particular
identified region.
-- Regions are considered to be one- i.e.
consumers having one taste, choices,
preferences, one regional identity etc.
-- NAFTA, EU, SAARC etc are examples.
40
 Continued..
In Continuation:
The Geocentric Orientation:
-- The Company views the entire world as a potential
market.
-- Company strives to develop integrated world market
strategies.
-- It views similarities and differences in markets and
countries.
-- It seeks to create a global strategy- responsive to local
needs and wants.

41
 Continued..
Definition of Global Localization:
The concept of global localization refers to
the explicit fact that – a successful global
marketer should have the ability to think
‘globally’ and act ‘locally’.

42
 Continued..
Drivers for Global Integration (in the light
of Globalization)
-- Technology
-- Culture
-- Market Needs
-- Cost
-- Free Markets
-- Economic Integration
-- Management’s vision
-- Strategic Intent
-- Global Strategy and Action

43
 International Trade

“Of all sorts of luggage man is the most

difficult to be transported”. – Adam Smith

44
 Continued..
In Continuation:
International trade defined:
Simply explained international trade refers to
trade between countries/nations/state’s. It is
always compared with inter-regional trade-
meaning trade between different regions
within the same country.
NB: Here little attention is given to the
company level marketing methods and
strategies

45
 International trade contd..
In continuation:
The Fundamental basis of International
Trade:
It lies on the fact that different countries of
the world are endowed by nature with
different elements of productive powers.
Factor endowments are unevenly
distributed among the countries of the
world. For example- West Bengal in India for
the production of Jute, Arab countries for oil
resources etc.
46
 Continued..
In continuation:
Is International Trade Inevitable?

International trade is inevitable when there

are marked differences in the countries
regarding materials, natural resources,
natural vegetation, climate, soil etc.

47
 Continued..
In Continuation:
Other Factors affecting International Trade:
1. Stage of economic development
2. Accumulation of capital by a nation
3. Foreign investments by a nation
4. Technological progress
5. Trade
6. Finance regulations
7. Political affiliations- etc.

48
 International Trade Theories
The Theories are:
A. Theory of ‘Mercantilism
B. Theory of Absolute advantage (of Adam Smith)
C. Theory of Comparative advantage/
comparative cost (of David Ricardo)
D. Modern theory of international trade or Factor
Endowment theory
E. Theory of International Product life-cycle
F. Theory of Competitive Advantage

49
 Continued..
A. Theory of Mercantilism:

-- An economic doctrine that flourished in the 17th and 18th

centuries.
-- It sought to maximize national wealth- in the form of nation’s
bullion reserves - especially in gold.
-- To this end tariff’s were applied to imports in the hope of
creating a ‘balance of trade’ surplus, and adding to bullion
reserves.
-- Exports were viewed favorably so long as they brought in gold
for the country.

GIST: Nations should accumulate financial wealth in the form of

gold by encouraging exports and discouraging imports.

50
 Continued..
B. Theory of Absolute Advantage:
-- Forwarded by the great classical
economist, Adam Smith.
-- Repudiated the mercantile notions of
international trade.
-- Advocated the theory of Free Trade.
-- Advocated that the real wealth of a nation
is measured by the level of improvement in
the quality of living of a nation’s people.

51
 Continued..
Gist of the Absolute advantage theory:

If one country has an absolute advantage

over another in one line of production
and the other country has an absolute
advantage over the first country in
another line of production, then both
countries would gain by trading.
NB: A country’s advantage can be:-
A. Natural Advantage
B. Acquired Advantage

52
 Continued..
C. Theory of Comparative Advantage
-- Forwarded by David Ricardo./
-- Extension of the theory of Absolute
advantage
-- Also known as the theory of comparative
cost.
-- The theory forwards that- a country tends to
specialize in the production of those
commodities in which it possesses a
comparative advantage by virtue of its
climate, natural resources, skill of its people,
capital equipment etc.
53
 Continued..
Gist of the comparative advantage
theory

Any two countries can very well gain by

trading even if one of the countries is
having an absolute advantage in both
the goods over another, provided the
extent of absolute advantage is
different in the two commodities in
question.

54
 Continued..
D. Modern theory of International Trade
-- Also called Factor Endowment Theory or factor
proportions theory.
-- Forwarded by Heckscher and Bertil Ohlin.
-- The immediate cause of International trade is the
difference in commodity prices, which in turn is due to
the differences in factor prices.
-- Thus goods are purchased from outside because it is
cheaper to buy them outside.

55
 Continued..
Gist of the Modern theory of
International trade:
A nation will export that commodity
whose production requires intensive
use of the nation’s abundant and
cheap factors, and import the
commodity whose production requires
intensive use of the nation’s scarce
and expensive factors.

56
 Continued..
E. Theory of International Product Life
Cycle
-- Revolves around the concept of international
marketing of product/services
-- Two paradigms on which the theory is
based:--
A. Shifting of market in the light of the size of
the market
B. Reaching the economies of scale by
location of production facilities.

57
 Continued..
F. Theory of Competitive Advantage:
-- Forwarded by ‘Michael Porter’
-- Concentrates on a firm’s home country
environment as the main source of
competencies and innovations.
-- Forwarded the famous ‘Diamond Model’

58
 Continued..
The Diamond Model
Attributes of the Diamond model revolves
around:
A. Factor / Input conditions
B. Demand Conditions
C. Firm’s supporting industries
D. Firm’s Strategy, structure and rivalry
E. Chance i.e. occurrences that are beyond
the control of firm
F. Government- its policies regarding trade
etc.
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 Module --2
The World Economy – An Overview
- Brief Historical background of the World
Economy
a. World Economic scenario has undergone a
drastic change, if we look it critically from the
economic paradigm’s point of view.
b. The development of economies of the different
regions/ countries of the world, has a strategic
effect from the angle of international business
scenario.
c. Finally we reach the year– 1945 (End of the
second World War)

60
 Continued..
Year – 1945 and after (till late 1991)
--Signaled the end of ‘The Second World War’.
-- The World divided into bi-polar world.
-- Start of the Cold War, meaning silent war
-- Cold war was but a silent war among the two
economic systems – Capitalism and Socialism, led
by USA and erstwhile USSR.
-- Fall of Socialism by 1991
-- Mixed Economic System

61
 Continued..
Changes found in the World Economy
-- Emergence of global markets
-- New opportunities for the marketer’s
-- Global Competitors in the market place
-- Heavy Competitive environment
-- New players in the product line
-- Integration of the world economy
-- Globalization effects in the macro
environment of business.
-- Increased volume of capital movements

62
 The World Economy– The Macro Dimensions of
the Environment
-- Economic Environment
-- Social Environment
-- Cultural Environment
-- Political Environment
-- Legal Environment
-- Technological Environment
NB:Most important of all, is the Economic
Environment from a global marketer’s point of
view. The Economic environment has the
shades of opportunity. And opportunity is
business. Business is for profit, and profit is
successful marketing.

63
 Continued..
-- Relationship between productivity and
employment
-- The greatest economic change is the
end of the Cold War

NB: The success of the capitalist

market system has caused the
overthrow of communism as an
economic and political system, and
the role of ‘Mixed Economic’ system
has a role to play in the current
business scenario/ trade relations.

64
 Continued..
The Economic Systems
The economic systems criteria has been
divided into three forces:
A. The Capitalist market allocation
economic system.
B. Socialist pattern of command
allocation economic system
C. Mixed economic system.

65
 Continued..
Brief Explanations of the economic systems:

The Capitalist Economic system:

--The capitalist economic system, believed in the
fundamental fact of free market allocation system,
where the role of the state in a market economy is to
promote competition and ensure consumer protection.
-- It is the capitalist who will decide – What to produce?
How to produce? and For whom to produce?
NB:-- Basically the whole concept of ‘Capitalism’ is
designed around the concept of ‘Laissez Faire’-
meaning ‘Leave us alone’

66
 Continued..
Capitalism continued:
--Under capitalism, all farms, factories and
other means of production are the property
of private individuals and firms. They are free
to use them, with a view to making profit or
not to use them, if it so suits them.
-- Desire for profit is the main motive behind
the capitalist economy system.
-- In a capitalist economy everyone is free to
take up any line of production he likes and is
free to enter into any contract with other
fellow citizens for his profit.

67
 Continued..
Socialism Defined:
Based on the command allocation system
or the so called Central Plan allocation
system, socialism is an alternative to
capitalism. In a nutshell, it implies social
ownership of means of production. Here
the major instruments of production is
under the state control, so that the
economy is run for social benefit rather
than private profit.
Continued-----

68
 Continued..
Under Socialism as an economic system it is
the State that decides:
-- Which products are required
-- Which products are not required
-- How to make these required products

69
 Continued..
Mixed Economic System:
It is neither pure capitalism nor pure socialism,
but a mixture of the previous two economic
systems.
-- The characteristics of both capitalism and
socialism is found in this economic system.
-- It is operated both by private enterprise as well
as public enterprise.
-- The private enterprise is not permitted to
function freely and uncontrolled through price
mechanism’s– the government intervens to
regulate and control private enterprise in
several ways.

70
 Continued..
How Mixed Economy?
-- Control and regulation of the
government over the private
enterprise through its monetary and
fiscal policies.
-- The government institutes:
a. Price Control
b. Licensing System
c. Import control
d. Exchange control
e. Control over capital issues.

71
 Continued..
Stages of Economic Development/
Market development:
In brief, the importance of the stages of
economic and subsequent market
development, rests on the fact that it
provides a useful basis for global market
segmentation and target marketing. It is a
first hand knowledge for a global marketer
towards meeting the desired goals.

72
 Continued..
FOUR STAGES of Economic/Market
Development:
-- Stage 1. Low Income Countries
-- Stage 2. Lower Middle Income Countries
or Lesser Developed Countries.
-- Stage 3. Upper – Middle Income
Countries or the Industrializing
Countries.
-- Stage 4. High Income Countries.

73
 Continued…

Characteristics of LOW- INCOME countries :

1. Political instability
2. Heavy reliance on foreign aids
3. High birth rates
4. Limited industrialization
5. High population growth
6. Low literacy levels
7. Very limited markets for products
NB: Importance of chief characteristics from
purchasing power point of view, as also the
probable growth in the market place.

74
 Continued..
The BEM Concept :
BEM refers to “big emerging markets”- an
international marketing concept forwarded by
Jeffrey E. Carten, in his famous treatise- ‘The
Big Ten’. BEM’s are those markets that are
growing at a faster rate than the world average
market growth, from the current stage where it
is at present. And here the marketers sees a
wonderful opportunity for growth in their
profitability and related issues. The BEM’S are
well positioned to move towards the next stage
of development – economic as well as market.

75
 Continued…
Income and purchasing power parity

-- The chief role of the income from

consumerism/ consumer buying behavior.
-- Explanation of the concept

76
 Continued..
Balance of Payments :
-- Balance of Payment or BOP, is a
comprehensive record of economic
transactions of the residents of a country
with the rest of the world during a given
period of time.
-- The system generally adopted for
recording transactions is the ‘Double
Entry Book- Keeping System’

77
 Continued..
Importance of BOP:
Every nation carrying out economic
transactions with foreign countries prepare
its BOP accounts periodically :
-- To know/taking stock of its assets and
liabilities.
-- To know its receipts from and payment
obligations to the rest of the world.

78
 Continued..
Main Purpose of BOP:
The main purpose of BOP is to present an
account of all receipts and payments on
account of goods exported, services
rendered, and capital received by residents
of a country – and goods imported, services
received and capitals transferred by the
residents of the country.

79
 Continued..

Division of BOP :-- Into two categories:

A. CURRENT ACCOUNT

B. CAPITAL ACCOUNT

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 Continued..
CURRENT ACCOUNT : (what is
recorded)
- Imports
- Exports
- Expenses on travel
- Transportation
- Insurance
- Investment income
NB: All these are related to current
transactions

81
 Continued..
CAPITAL ACCOUNT: (What is recorded)

- Borrowing and lending of capital

- Repayment of capital
- Sale and purchase of securities and other
assets to and from foreigners – individuals
and governments
NB: Export of commodities to foreign
countries adds to the foreign receipts,
while imports adds to the payments,
that a resident have to make to the
foreigners.

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 Continued..
IF, EXPORT > IMPORT it is favorable balance
of trade

IF, IMPORT> EXPORT it is unfavorable

balance of trade.
Balance of Trade : The difference between
the value of commodity exports and
imports is known as the Balance of Trade.

83
 Continued..
TRADE PATTERNS :
 Merchandise trade. i.e. trade in
commodities- a visible trade
 Services trade, i.e. intangible items for
example human resources skills etc, is an
invisible trade.

84
 Continued..
DEGREE OF ECONOMIC COOPERATION: (Four
degrees)
a. FTA,(Free Trade Association) meaning to
remove all internal barriers to trade among the
member nations
b. Customs Union, meaning establishing a
common external barriers.
c. Common Market, meaning eliminating the
barriers to the flow of factors of production
such as labor and capital within the market.
d. Economic Union, meaning fulfilling the all the
chief characteristics of an economic union.

85
 Continued…
Chief Characteristics of an
ECONOMIC UNION
1. Unified central bank.
2. Common policies on agriculture.
3. Social services and welfare.
4. Transport services requirement.
5. Regional development.
6. Taxation policy.
7. Single currency
8. Construction and building infrastructure.
9. Political unity requirements.

86
 Continued..
Importance of Stages of Economic Development :
-- For a global marketer or a multinational company,
when interested to enter a new foreign market, the
stage in which that targeted region/country is matters
most- in designing a marketing plan and strategy.
-- The stage of economic development of a particular
country is directly related to the stage of market
development in that country.
-- The reference is towards the Income and the
purchasing power parity, context – revolving round
the international marketing opportunities.

87
 Continued..
International Trade Alliances :
 GATT and WTO
IBRD (The World Bank) and IMF
-- EU (The European Union)
-- NAFTA
-- SAFTA
-- G8
-- G10 and GAB i.e. General
Agreement to Borrow
-- OPEC

88
 Continued..
The Autonomous and Accommodating items
in Balance of Payment :
--The autonomous items include all visible or
invisible items such as exports, imports,
remittances, reparations etc which enter
the balance of payments regardless of its
position or with motives quite other than to
put balance of payments into positive
balance. …..Continued…. next slide.

89
 Continued…

They are in both current and capital

accounts.
NB:-- Accommodating items are
meant to offset balance of payments
deficit or surplus. They include
movement of monetary gold from the
central bank or sale of foreign currency
or increase in foreign liabilities to meet
import bill or taking foreign loan to
finance deficit etc. Continued…………..

90
 Continued…
Accommodating movements may be made
by private or public authorities and may be
automatic, unplanned or unforeseen.
However, they take place only when other
items in the Balance of Payments are
such as to leave a gap to be filled.

91
 SDR and Its Importance
SDR Defined :--
--Special Drawing Right’s or SDR’s were
created as a new and additional form of
international reserves/liquidity in 1970,
under the International Monetary Fund.
-- Countries receive SDR’s as per their share
in reserve assets, and have an automatic
right to draw them from the IMF- over and
above other drawing facilities.
Continued…..

92
 Continued..
 -- A deficit country uses SDR’s for settling
deficit by exchanging SDR’s for whatever
currency it requires.
 -- Other countries accept SDR’s as gold or
convertible currencies. Its value is based on
the values of a ‘Standard Basket’ of five
major currencies.

93
 SDR Continued..
Basket Value of SDR—
The value of the SDR was initially defined as equivalent to
0.888671 grams of fine gold—which, at the time, was also
equivalent to one U.S. dollar. After the collapse of the
Bretton Woods system in 1973, however, the SDR was
redefined as a basket of currencies, today consisting of the
euro, Japanese yen, pound sterling, and U.S. dollar.
The basket composition is reviewed every five years by
the Executive Board to ensure that it reflects the relative
importance of currencies in the world’s trading and
financial systems.

94
 Continued..
GATT- General Agreement on Tariff’s and Trade
-- A trade treaty that operated from 1948 until 1995,
when it was replaced by World Trade Organization
(WTO).
-- GATT was technically an agreement, rather than
an organization, among various countries called
contracting parties.
-- Secretariat at Geneva.------- Continued…

95
 Continued..
Objectives of GATT:
A. Establishing Standards for the non-
discriminatory commercial policies of
the contracting parties.
B. Settling trade disputes and
encouraging mutual consultation
between nations.
C. Discouraging non-tariff barriers and
sponsoring tariff reductions.
D. Meeting the above through a series of
multilateral negotiations and rounds.
96
 THE WTO
-- Set up in 1995, following the conclusion
of the long-running URUGUAY round of
trade negotiations and talk.
-- A body of organizing framework for the
smooth application of free trade rules
among the interested member nations.

97
 Continued…
Primary functions of WTO:--
A. Administering WTO agreements.
B. Act as a forum for trade negotiations.
C. Handling trade disputes between
member nations.
D. Monitoring the national trade policies of
its members.
E. Providing technical assistance and
training for developing member
countries.
F. To act in coordination with other
international organizations.
98
 Continued…
Of Particular Importance– WTO
As far as the dispute settlement process of
WTO is concerned , countries may complain
to the WTO about the behavior of another
member, and a disputes panel will then
adjudicate. A country that does not abide
by the findings of the panel can be subject
to countermeasures.

99
 Continued…
IMPORTANT
It should never be forgotten that
companies/firms/corporations/business
enterprises are not allowed to make
complaints to the WTO. They must
persuade a government to do so, for it
falls under the world trade laws of WTO, to
be accepted by one and all, and the
international economic protocol so desires,
to be respected in toto. NB: WTO is also
charged with advancing the agenda
of free-trade with new trade rounds.
100
 Continued…
IBRD-International Bank for
reconstruction and Development
-- A specialized agency of the United Nations,
known as the World Bank, with headquarters
in Washington DC, its function is to finance
development in member countries by making
loans to governments or under government
guarantee.
-- Set up in 1944 under Bretton Woods
agreement to facilitate reconstruction after
world war II.
-- All members of World Bank should belong
to the IMF.

101
 Continued…

IMF- The International Monetary Fund

-- Established in 1945, to promote international
monetary harmony, monitor exchange rates and
monetary policies and to provide credit for countries
experiencing problems in terms of deficits in their
‘balance of payments’.
-- The members of IMF have a quota, known as the SDR
or the special drawing rights.
-- IMF is funded through quotas paid by members.

102
 Continued…
GAB and G-10
Refers to ‘General Agreement to Borrow’ .
Members of GAB are:
1. Belgium
2. Canada
3. France
4. Germany
5. Italy
6. Japan
7. The Netherlands
8. Sweden
9. Switzerland
10. The United Kingdom and the US

103
 SAARC
SAARC: --
 South Asian Association for Regional
Cooperation. The first South Asian
summit held in Dhaka, Bangladesh in
December 1985, culminated in the
formation of the South Asian
Association for Regional Co-
operation.
 Members of SAARC are: India,
Bangladesh, Pakistan,Sri Lanka,
Bhutan, Nepal and Maldives.

104
 Continued…
-- The charter of SAARC provides for annual
meetings of the Heads of State and of
Governments, and a six monthly meeting of a
Council, of Ministers, which is the organizations
highest policy making body.
-- A permanent secretariat of the state has been
set up at Kathmandu in Nepal.
-- The chairmanship of the organization remains
with the country which had hosted the last summit
and is transferred to the new host at the time of
the next summit.

105
 The EEC
EEC or the European Economic Community :
--Created under separate treaties signed on
March 25, 1957– it became effective from
January 1, 1958.
-- EEC is currently a bloc of 15 west European
industrial nations, which through a network of
agreements are seeking to pool their economies,
while retaining their separate national identities.
…. Continued….

106
 Continued…
-- The ultimate goal is a complete customs
union, with free flow of goods, service and
labor- among all members.
-- Members of EEC currently are-
Belgium, France, Germany, Italy,
Luxembourg, Netherlands, Denmark,
Ireland, United Kingdom, Greece, Portugal
-- Headquarters of EEC is located in
Brussels, Belgium.

107
 European Union
The European Union (EU) is an economic and
political union of 27 member states which are
located primarily in Europe. The EU traces its
origins from European Coal & Steel Community
(ECSC) and the European Economic
Committee(EEC) formed by six countries in the
1950s.

The Maastricht Treaty established the European

Union under its current name in 1993. The last
amendment to the constitutional basis of the EU,
the Treaty of Lisbon , came into force in 2009.

108
 The EU has developed a single market through a standardised
system of laws which apply in all member states including the
abolition of passport controls within the Schengen area . It
ensures the free movement of people, goods, services , and
capital , enacts legislation in justice and home affairs, and
maintains common policies on trade, agriculture, fisheries, and
regional development.
With a combined population of 500 million inhabitants, in 2010
the EU generated an estimated 28% (US$16.106 trillion) of the
global economy, or 21% (US$14.793 trillion) when adjusted in
terms of purchasing power parity.

109
 What is Purchasing Power
Parity?
It’s the economic theory that continuously adjusts exchange
rates between countries in order to denote the purchasing
power of each currency. Thus, PPP refers to the basket of basic
goods that can be bought with the currency of a given country.
This theory is based on the 'law of one price', which states that
the same product(s)should be priced identically in different
markets. Hence, a country witnessing inflation requires a
devaluation of its currency in the foreign exchange market, so
as to equalize the PPP. Moreover, PPP is known to influence
only the long-term exchange rates between countries.

110
 Purchasing power parity (PPP) allows you to
compare the standard of living between
countries by taking into account the impact of
their exchange rates. This is best illustrated
using an example. Using the official exchange
rate, China's 2006 GDP was $2.527 trillion
compared to $13 trillion for the U.S. That means
that, for each of the 1.4 billion people living in
China, the GDP per capita would be $1,943,
about the same standard of living as some of the
poorest countries in the world: Uganda or Burma.

111
 However, the cost of living in China is lower than in the U.S.
because their currency is held at a rate to keep it cheaper
than the dollar. As a result, it is cheaper to produce goods,
which also makes consumer items cheaper to buy. Therefore,
it is not really fair to compare China's production in dollar
terms without taking its cheaper currency into account.
Purchasing power parity solves that problem. China's GDP,
using PPP, is $10.2 trillion, which makes it the world's third
largest economy, after the U.S. and the EU. That makes
China's GDP per capita is $7,800 per person, the same as
Ukraine.

112
 ASEAN
ASEAN Association of South East Asian
Nations : The ASEAN was formed on August
8, 1967 by Indonesia, Thailand, the
Philippines, Malaysia and Singapore- to
promote active collaboration and mutual
assistance in matters of common interest
in the economic, social, cultural, technical,
scientific and development fields.
Currently under ASEAN, there are 10
members.

113
 OPEC
OPEC Organization of Petroleum Exporting
Countries :
OPEC was formed on November14, 1960,
to control production and pricing of crude
oil. It has been successful in determining
world oil prices and in advancing member’s
interest in trade and development dealings
with industrialized oil consuming nations.
…. Continued..

114
 Continued…
Membership of OPEC is open to any country
having a substantial net exports of crude
petroleum, which has fundamentally similar
interests to those of member countries.
Members are– Algeria, Indonesia, Iran,
Kuwait, Libya, Nigeria, Iraq, Qatar, Saudi
Arabia, United Arab Emirates (UAE),
Venezuela.
Headquarters located at Vienna, Austria.

115
 OAPEC

OAPEC- Organization of Arab Petroleum

Exporting Countries
The OAPEC was established in 1968, to
safeguard the interests of its members
and encourage co-operation in economic
activity within the petroleum industry.
Its members are --- Algeria, Bahrain,
Egypt, Iraq, Kuwait, Libya, Qatar, Saudi
Arabia, Syria and the UAE.
Headquarters at Kuwait.

116
 Group of Eight/G-8
G-8- Group of Eight originally consisted of the seven
wealthiest nations of the world- The USA, UK, Japan,
Germany, France, Italy and Canada. However with the
admission of Russia at G-7 summit at (DENVER – June
21, 1997) the group was renamed as G-8 in May, 1998.
The heads of governments of G-8 countries meet
annually at different venues to discuss economic
matters and world problems.
G8 Summit 2011 - 26 May,2011 - 27 May,2011
Deauville, France -

117
 NAFTA
NAFTA- North American Free Trade Agreement :
-- A trade agreement between US, Canada and
Mexico. The objectives of NAFTA is to promote
economic growth and expand trade and
investment among member nations.
-- To meet economic challenges in the decades to
come.
-- Gradual elimination of trade barriers.
-- Protection of the Intellectual Property
Rights.

118
 Continued…
Social and Cultural Environment:
--Culture has a major influence, in
international marketing/ global business
environment.
-- In global marketing scenario the concept
of consumer buying behavior has a definite
role to play.
-- Society and culture affects the consumers
decision making process
-- Trend conscious consumers, dictates
global marketing of products and services.

119
 Continued…
Examples of affects of culture in global
marketing: (The American Culture)
-- Eating breakfast or sand-witch while
moving in a train.
-- Drinking coffee in public places etc.
NB: Marketing industrial or consumer goods
in targeted foreign markets is looked from
the angle of the stage of economic
development - the targeted county is in.
Reference is here to Stage 1 to Stage 4,
where the targeted market falls.

120
 MODULE - 3

International Entry and Expansion

Strategies

121
 Continued..
Decision Criteria for entry :

-- Major decisions in International Marketing

-- Decision criteria for international business

122
 Continued..
Major Decisions in International
Marketing
1. Deciding whether to go abroad or not?
2. Deciding which market to enter?
3. Deciding how to enter the market?
4. Deciding on the marketing program.
5. Deciding on the marketing organization.

123
 Continued..

Decision Criteria for International

Business
This rests on the following specific questions:
-- Importance of the international macro
environment. The importance and scope.
-- Advantages and Disadvantages that have
to gained/lost, opportunities to be tapped.

124
 Continued..
The Decision criteria’s are as follows :
1. Political Risk
2. Market Access
3. Factor Cost and Conditions
4. Shipping Consideration
5. Country Infrastructure
6. Foreign Exchange
7. Creating a Product Market Profile (The Nine
W’s)
8. Market Selection Criteria

125
 Continued..

The NINE W’s of creating a Product Market

Profile :
1. Who buys our Product?
2. Who does not buy our product?
3. What need or function does our product serve?
4. What problem does our product solve?
5. What are customer’s currently buying to
satisfy the need/problem?
6. What price are they paying?
7. When is our product purchased?
8. Where is our product purchased?
9. Why is our product purchased?

126
 Continued..
Strategies for Entering foreign market:

-- It refers to the different routes that is

undertaken to enter a foreign market
OR
-- The Modes of Entry
OR
-- Stages of Foreign Market entry

127
 Continued..
Different routes to enter a foreign market are
the following:
1. EXPORTING – A. Indirect Exporting
-- B. Direct Exporting
2. FOREIGN PRODUCTION
-- A. Licensing
-- B. Contract
Manufacturing/Management
Contract
-- C. Local Assembly/Investment

128
 Continued…
Indirect Exporting is one when a third
party arranges the documentation,
shipping and selling of an organization’s
goods abroad.
-- Refers to the lowest level of commitment
to international marketing
(The third party refers to independent
middlemen – of four types )

129
 Continued…
Indirect Export through four routes:
1. Domestic-based export merchant–
here the middlemen buys the
manufacturers products and sells them
abroad on its own account.
2. Domestic-based export agent– here
the agent seeks and negotiates foreign
purchases for a commission. Agents can
be in the form of individuals or a group of
people involved or trading companies

130
 Continued…
3. Co-operative Organization– exporting
on behalf of several producers and is partly
under administrative controls.
4. Export Management Company–
manages export for its client for a fee.

131
 Continued…
Advantages of Indirect Export :
1. Involves less investment
2. No spending on export department
3. No foreign/overseas sales force required
4. No foreign contacts required
5. Less risk
6. First hand knowledge of the foreign
market, through the middlemen
7. Fewer mistake by the seller.

132
 Continued…

Direct Export:

As foreign sales grow, an organization often

begins to make a limited commitment,
frequently documenting itself/ deciding to
handle their own exports.

133
 Continued…
Methods of Direct Export :
1. Domestic based export department.
2. Setting up an overseas sales branch
office/depot/subsidiary.
3. Appointing and utilizing the service of
export sales representatives.
4. Foreign brand distributors or agent

134
 Continued…
Foreign Production:
A. Licensing represents a simple way for a
manufacturer to become involved in
international marketing. Here the licensor
licenses a foreign company to use a
manufacturing process, trademark, patent,
trade secret, or other item of value for a fee or
royalty.The licensor gains entry into the
foreign market at little risk; the licensee gains
production expertise or a well-known product
or name without having to start from scratch.

135
 Continued…
B. Management Contract -- A company
can enter a particular foreign market
through the management contract route.
Here a company can sell a management
contract to a party to manage a foreign
business such as hotel, hospital etc for a
fee. It is a low-risk method of getting into a
foreign market, since it yields income from
the beginning.

136
 Continued…

C. Contract Manufacturing : An entry

method, where the firm engages local
manufacturers to produce the product.
Contract manufacturing’s disadvantage is
that there is less control over the
manufacturing process. Finally it offers
the company a chance to start faster,
with less risk, and with the opportunity
to form a partnership or buy out the
local manufacturer later.

137
 Continued…
D. Joint Ventures: Joint ventures are a part of
foreign investment. It represents an extensive
form of participation and commitment towards
international marketing. Here foreign investors
may join with local investors to create a joint
venture in which they share ownership and
control. Forming a joint venture might be
necessary or desirable for economic or political
reasons. The foreign firm might lack the
financial, physical, or managerial resources to
undertake the venture alone or the particular
foreign government might require joint
ownership as a condition for entry.

138
 Continued…
E. Direct Investment --(Ownership and Control
/Manufacturing Facilities)
The foreign investment is another route through
ownership or through a manufacturing facilities
presence.The foreign company can buy part or full
interest in a local company or build its own
facilities. As a company gains experience in export,
and if the foreign market appears large enough,
foreign production facilities offer distinct
advantages- by securing cost economies, gaining a
better image in the host country, developing
deeper relationship with the government,
customers, local suppliers etc.
Foreign investments are undertaken in the
light of long term strategic goals and
ambitions of the company.

139
 Continued…
Investment in Developing Countries:

--Rapidly growing economies, Expanding purchasing

power and Expanding markets etc of the
developing countries, provides opportunities for the
foreign companies to enter a new market. It is
linked with the basic tenets of the need of
international marketing and the opportunities that
any developing country offers.
-- Foreign investments in the developing country can
be through joint ventures, through equity stakes in
another company, mergers and acquisitions etc.

140
 Continued…
Market Expansion Strategies

1. Targeting few segments in few countries.

2. Country concentration and segment
diversification.
3. Country Diversification and market
segmentation concentration.
4. Country and segment diversification.

141
 Continued…
Stages of Development Models
It refers to the stages in the evolution of the
global corporation from a domestic player
to international player to multinational
player to a global player to transnational
player.

142
 Module- 5

Developing product for International

Market

143
 Continued…
BASIC CONCEPTS

Product Defined :
-- A product is often considered in a
marketing sense that can be offered to a
market for attention, acquisition, use or
consumption – that may satisfy a want or
need. Continued……

144
 Continued …
-- A product is something tangible that can
be described in terms of physical
attributes, such as shape of the product,
dimensions of the given product, important
components in making of the product, form
color and so on.
-- A product is also intangible, which
cannot be touched and felt, only
experienced of its benefits, for example-
engineering services, restaurant services,
hotel services etc.
145
 Continued…
Marketing of Products
Products that are marketed include:
-- Physical Goods such as automobiles,
books etc.
-- Services such as engineering services,
marketing services.
-- Persons such as Amitabh Bacchan,
Aishwarya Rai, Sachin Tendulkar etc.
-- Places such as Delhi, Agra, Jodhpur etc.
-- Organizations such as AIIMS, Escort
Heart Research Institute, NGO’s etc.

146
 Continued…
The best way to define a product is to
describe it as a bundle of UTILITIES or
SATISFACTION

A PRODUCT OFFER GIVES

-- Status Symbol- in the case with highly
niche product category
-- Benefits– whether it is any generic
product or any niche product

147
 Continued …
FIVE LEVELS OF A PRODUCT

1. Core Benefits– The fundamental benefit

or service that the consumer is actually
buying.
2. Generic Product– The basic version of
the product. For example a ‘car’, a solution
for easy transportation. A car can be of
many designs and models, and from
different manufacturers and of different
brand names.
148
 Continued …
3.Expected Product– what the buyers
expect from a product offer, in terms of a set
of attributes and conditions.
4. Augmented Products– Expectation of
additional services and benefits by the
consumer, that distinguishes a company’s
offer from the competitors product.
5. Potential Product– meaning all the
changes and transformations that the
product may undergo in future. It is nothing
but a possible evolution of the product. It is
distinguishing the market offer.

149
 Continued …
-- Focus is the Product offer.
-- Product is the most crucial element of the
marketing program.
-- A company’s product defines its business.
-- Pricing, quality, promotion, communication
and distribution policies has importance in
product offering.
-- Firm’s competitors and customers are
determined by the products it offers.
--Research and Development

150
 Continued…
Important: Whenever, we as a consumer
buy any product, to satisfy our need or
want, we are actually looking for a solution.
We thus end up buying a solution and
return with a brand. Brand is always
associated with any product offering –
tangible and intangible. This is a generic
fundamental fact enshrined with any
particular product being marketed or
sold in any part of the world.

151
 Continued…
Brand Defined:
A particular product, or a line of products,
offered for sale by a single producer or
manufacturer and made easily
distinguishable from other similar products
by a unique identifying name and or a
symbol or term.

152
 Continued…
Brand Image :
The perception of a product formed in the
mind of the consumer which is the result of
the symbols and meanings associated with
a particular brand. Advertising is often
employed to create brand image: e.g.
automobile advertising on television
commonly sells a lifestyle rather than a
mode of transportation.

153
 Continued…

Brand Marketing :

A strategy in which each of a firm’s product’s is

marketed independently, generally under the
direction of a brand manager.

154
 Continued…
Brand Name :

That part of a brand consisting of the actual

letters or words; i.e. that part which can
actually be vocalized, which comprises the
name of the product or service as distinct
from other identifying signs, symbols, and
designs incorporated into the overall
design.

155
 Continued…
Brand Position :

A products niche in the marketplace. The

term ‘position’ refers to the products
relationship to competing brands and is
generally measured in terms of how the
consumer perceives the various attributes
attached with the brand.

156
 Continued…
Brand Positioning / Positioning :
Efforts aimed at establishing a product or
service in a particular niche or segment of
the market place.
Brand positioning is also referred to as
market positioning- where the strategy
usually includes those promotional
strategies which differentiate the product
from competitors and which vividly
establish the products image in the minds
of the potential customers. Also known as
Positioning, product positioning or
target positioning.
157
 Continued …
Products – Local, National, International
and Global

The concept of products, when taken from an

international marketing perspective rests
on the fact that any product, whether it is a
national product of one country for use in
the same country– can it be marketed into
another foreign market? Can it be modified
into as per the requirements of the now
target country or for…. Continued….

158
 Continued …
any other world market? These enigmatic
questions revolves around the EPRG
concept of global marketing management,
as also the stage of economic
development / market development
the particular targeted country is in, at the
particular period of time.
-- Should the company focus on the
production of products for each particular
market ?

159
 Continued…

LOCAL PRODUCTS :

-- Products available in the portion of the

national market
--Sometimes hailed under the category of
regional products
-- These products may be new products that
the company is introducing.
-- Local products are products exclusively
distributed in a particular region.

160
 Continued …
National products
-- Product that is offered in a single national
market
-- Product specially developed for a particular
country.
-- Products that are not sold outside the
home country.

161
 Continued …
International Products :
-- Offered in multinational and regional
markets.
-- A multiregional product can become an
international product.
[The Gist is that initially a product can be a
great player in a regional market, and having
the quality to become an international player,
it can come out of the regional market, and
can also be a player and thus marketed into
other targeted world markets- through the
route of acquisition or joint venture or any
other specific route.]

162
 Continued …

Global Products and Global Brands

-- The global products are offered in global
markets and in every part of the world –
and in every economic development
stage country.
-- Some products are specially designed to
target all the world market.
-- Some products specially made for a
particular national market, can also be
marketed in other country market.
163
 Continued…
Important:
The concept of Global Products revolves
around the concept of Global Brands.
Please Note:
A product is not a brand. Any Global brand
like the generic concept of brand has a
general perception and image.

164
 Continued…
Examples of Global Brand:
VOLVO
MERCEDES BENZ
AUDI
BMW
VOLKSWAGEN
TOYOTA
HONDA
MARLBORO
COKE

165
 Continued…
A Global brand has :
-- SIMILAR IMAGE
-- SIMILAR POSITIONING
-- GUIDED BY THE SAME STRATEGIC
PRINCIPLES
-- MARKETING MIX MAY VARY FROM
COUNTRY TO COUNTRY

166
 Continued…
Only Difference between a global product
and global brand is that --- it does not carry
the same name and image from country to
country.
-- A great global product can be sold in the
home country by a different name and the
similar product can be sold in other world
market by a different name.

167
 Continued…

Should a global product be turned into a

global brand?
For this:
-- Name should be standardized
-- Image should be standardized

Please Note: The definition of standardized

product follows in the slides concerning
‘IPLC’ segment, later

168
 Continued …

International Product Life cycle

169
 Continued…
IPLC Theory

The international product life cycle

theory (IPLC) describes the ‘diffusion
process of an innovation’ across
national boundaries.

170
 Continued…
The Whole game of IPLC, has the following
characteristics:
--The International product life cycle begins
when a developed country, having a new
product to satisfy consumer needs, wants to
exploit its technological breakthrough by
selling abroad.

-- Other advanced nations soon start up their

own production facilities, and before long less
developed countries do the same.

171
 Continued…
Continued from last slide…
-- Efficiency/comparative advantage,
thus shifts from developed countries
to developing nations.

-- Finally, advanced nations, no longer

cost effective, import products from
their former customers.

172
 Continued…
The understanding
The entire result of the great game of the
stages encircled with its particular
characteristics- is governed by the fact
that in the end the initiating country and
the advanced nations become a victim of
its own creation.
NB: The IPLC is examined from the marketing
perspective, and marketing implications for
both innovators and initiators are taken from
the paradoxical angle of marketing only.

173
 Continued…
Stages of IPLC
The stages of international product life cycle
begins from Stage 0 to Stage 4.
STAGE 0 --- Local Innovation
STAGE 1 --- Overseas Innovation
STAGE 2 --- Maturity
STAGE 3 --- Worldwide Imitation
STAGE 4 --- Reversal

174
 Continued…
The generic diagram concerning the IPLC
may be referred.

NB: The curves in the IPLC shows curves for

the same innovation: one for the initiating
country, one for other advanced nations,
and one for the Less developed countries.
-- For each curve, net export results when
the curve is above the horizontal line, and
when the curve is under the horizontal
line, net import results from that country.

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 Continued…
Why USA as a initiating country?
As far as the curves related to the international
product life cycle is concerned, it has been
universally accepted that a developed nation
having all the technical knowhow, expertise etc
that is required to develop a product--- after
identifying the need and demands of a
particular product a company in a particular
country, initiates that product in its home
market initially. This is the beginning of the
diffusion of the innovation process concerning
the international product life-cycle.
Continued……………

176
 Continued…
Why USA…….?
Since many of the products found in the
world’s markets were originally created in the
USA, before being introduced and refined in
other countries and in most instances,
regardless of whether a product is intended for
later export or not, an innovation is initially
designed with an eye to capture the US market,
the largest consumer nation in the world.

177
 Continued…

Stages of International Product Life

Cycle (IPLC) and their Characteristics

178
 Continued…
Stage 0 – Local Innovation

-- Represents a life cycle stage when any

initiating country takes the first leap in
manufacturing the product for the first
time in the world, thereby beginning the
story of the familiar life-cycle stage, in
operation within its original market.
-- Innovations are most likely to occur in a
highly developed countries because
consumers in such countries are affluent
and have relatively unlimited wants.

179
 Continued…
Stage 0 …………….
-- At this stage firms in advanced
nations have both the technical know-
how as well as abundant capital to
develop new products.

180
 Continued…
Stage 1 : Overseas Innovation
As soon as the new product is developed
and initiated by the initiating country
following syndromes will happen:
-- Original market will get well cultivated.
-- there will be demand for the all new offering.
-- Local demands of the product will be
adequately supplied.
-- Many prospective consumers/user of the
product will come to learn about the utilities
and satisfaction to be derived from the
product.

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 Continued…
Important:
It is at this stage only that, the innovating
firm will look to overseas market in order to
expand its sales and profit.
-- Stage 1 is also called as the
‘Pioneering Stage’ or ‘International
introduction’ stage.

182
 Continued…

In the Stage 1, the technological gap is first

noticed in other Advanced nations due to
their similar needs and high income levels.
(Concept of the Stages of Economic
Development runs here)

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 Continued…

Competition in Stage 1
--Competition at this stage usually
comes from US firms, since firms in
other countries may not have much
knowledge about the innovation.
-- Production costs tend to decrease
at this stage for the competitive
firms, because by this time the
innovating firm will normally have
improved the production process.
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 Continued…
-- Aggressive overseas sales also help
decline the production costs.
-- The scenario gives the intangible
feeling of the ‘Economies of Scale’.
-- the price of the product at this stage is
high, since because of the
technological breakthrough, costs need
to be recovered, in addition to the
recovering of the price incurred in
marketing efforts.

185
 Continued…

The final word for Stage 1 is that– there

will be more exports from the USA, and
increase in imports by other developed
nations.

186
 Continued…
Stage 2 – Maturity
-- Growing demand in advanced nations,
will lead firms to conceptualize the
product, and learn to make it in their
home country.
-- Local production will start in
advanced nations

187
 Continued…
Stage 2 …… continued..
-- Competition grows more at this stage.
-- More players in the market place.
-- Innovating firm’s sales see the light of
the start of suffering, at the cost of
advanced nations products, but still the
export level remains stable.
-- The LDC’s now enter the imitation field.
-- Introduction of the product in LDC’s helps
offset any reduction in export sales to
advanced nations.
188
 Continued…

Stage 3 – World Wide imitation

-- This stage is generally considered as
the beginning of heavy competition
among the advanced nations firms.
-- This is the stage where copy cats work,
in the form of re-engineering, me-too
products, made in different forms and
styles, having the same USP’s,
differentiation is tried at every angle of
the product make……
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 Continued…
-- Tough times for the initiating nation.
-- Loss of market share for the initiating
firm- to products from other advanced
nations and LDC’s.
-- No more new demand anywhere for
the initiating country to cultivate.
-- Effect on the economies of scale for
the initiating nation.

190
 Continued…
-- Now the production cost for the
initiating nation rises, on account of
the new players using the comparative
advantage philosophy.
-- Firms in other advanced nations use
their lower prices, coupled with
product differentiation techniques in
place.
-- Worldwide imitation is faster at this
stage.

191
 Continued…
-- The initiating country’s export declines very
fastly and rapidly reaching nil.

The Final word for Stage 3--- At this stage US

production or the initiating nation production still
remaining, is basically cornered from the world
market- and is left for the local consumption only.
Once an initiating country, now only a small player
in its national market – facing competition from
products from other advanced nations. A great
paradox of the business macro environmental
scenario.

192
 Continued…
A great paradox of the business macro
environmental scenario. The greatest
Example for stage 3:

Among the 30 different companies selling

cars in the U.S.A., with several more on the
rise, of these only two players – General
Motors and Ford are US firms. The rest are
from Western Europe, Japan, South Korea,
and others/

193
 Continued…

Stage 4– Reversal
-- In this stage two functional characteristics
makes appearance
A. Product Standardization
B. Comparative Disadvantage

194
 Continued…
-- The innovating country’s comparative
advantage becomes country’s
disadvantage.
-- The product is no longer capital –
intensive or technology – intensive.
-- The above becomes a comparative
advantage for LDC’s, for they possess
those advantage – looking from all
point of scale in the development of
international business, married to the
‘Economies of Scale’.
195
 Continued…
The final word for Stage 4:
The Less Developed countries are the
last IMITATORS. They establish
sufficient productive facilities to
satisfy their own domestic needs as
well as to produce for the biggest
market in the world, USA. And also
targeting other advanced nations
market. Finally targeting world
market.

196
 Continued…
STANDARDIZED PRODUCT Defined

A product developed for one national

market and then exported with no
change to international markets.

197
 Continued…

The Moral of the Whole Game of

International Product Life Cycle

The initiating nation becomes a victim

of
its own creation

198
 Continued…

PRODUCT POSITIONING

199
 Continued…

Positioning defined

A marketing strategy that will position a

company’s products and services against
those of its competitors in the mind of the
consumers.

200
 Continued…
Achieving Positioning Success

To achieve positioning success, three

generic competitive strategies are
employed which a particular company
can follow.
The three winning strategies are:
1. Cost Leadership-- the company tries
to achieve lowest costs of production and
distribution.
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 Continued…

2. Differentiation--- making use of specific

marketing mixes.
3. Focus--- paying attention to a few market
segments.
Differentiation defined- Differentiation is
the act of designing a set of meaningful
differences to distinguish the company’s
offer from competitor’s offer.

202
 Continued…
Criteria for different positioning
1. Important- Product delivers a highly
valued benefit to a sufficient number of
buyers.
2. Distinctive: The difference is either isn’t
offered by others or is offered in more
distinctive way by the company.
3. Superior: The difference is superior in
other ways to obtain the same benefit.

203
 Continued…
4. Communicable: The difference is
communicable and visible to buyers.
5. Pre-emptive: The difference cannot be
easily copied by competitors.
6. Affordable: The buyer can afford to pay
the price for the difference.
7. Profitable : The product is profitable for
the company.

204
 Continued…
International Market positioning
The above criteria for differential
positioning is summed up in the context of
international marketing management also.
Thus the general strategies for product
positioning in international marketing /
global business are:
Continued….

205
 Continued…
1. ATTRIBUTE OR BENEFIT
2. QUALITY / PRICE
3. USE / USER
4. HIGH-TECH POSITIONING
5. HIGH-TOUCH POSITIONING
NB: 1,2 and 3 are considered to be general
product positioning tenets, whereas 4
and 5 are two special positioning that is
considered for international product.

206
 Continued…
Attributes in the form of
a. Features
b. Performance
c. Durability
d. Reliability
e. Reparability
f. Style
g. Design.

207
 Continued…
Importance of high-tech positioning
High tech positioning can be applied under
two categories of product offers.
1. Technical Products such as Computers,
Chemical, Technical Financial products
requiring special; care and expertise
while selling, etc.
2. Special Interest Products such as
bicycles, Adidas Shoes etc.

208
 Continued…
High-Touch Positioning
Here more emphasis is given on IMAGE.
Examples:
A. Products solving a common problem,
such as thirst problem solved by a cola
drink, coffee drink, etc. a birthday cake, a
birthday card etc. This category actually
uses ‘products important’ from day to day
particular important moments / special
moments of life.

209
 Continued…
B. Global Village Products – i.e. those
products that enhance the consumers all
over the world. Examples can be: Levis
Jeans or other Jeans brands, Marlboro , Mc
Donald, Ferrari, Harley-Davidson etc.
NB: Global Village products are mostly
those products that has a
cosmopolitan touch, in its essence,
and the users have mostly
cosmopolitan nature/culture outlook.

210
 Continued…
C. Products with a universal theme-
those product category that have a
universal acceptance such as:

--- Photographic Cameras- Yashika,

Canon, Sony, Panasonic
--- Electronic Gadgets etc – Casio
Calculating instruments, defence related
electronic gadgets,

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 Continued…
Product Design Considerations:
Product design is a key factor in determining
success in global marketing.
Questions that arise concerning product
design decisions:
1. Should there be an adaptation of the
product for various national
markets?
2. Should a company offer a single
design for the global market?

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 Continued…
Important factors to be considered in
product design:
1. PREFERENCES and TASTES / CHOICES.
2. COST – (talking about the economies of
scale)
3. LAWS and REGULATIONS – (i.e. compliance
with laws and regulations in different
countries, where the product is to be made)
4. COMPATABILITY – (i.e. understanding the
products compatibility with the environment)

213
 Continued…

Geographic Expansion in International

Marketing
(THE STARTEGIES)

214
 Continued…
Introduction
Companies can pursue three generic basic global
strategies to penetrate foreign markets:
1. STRAIGHT EXTENSION i.e. adapting the same product or
communication policy used in their home market.
2. ADAPTATION STRATEGY i.e. adapting as per the market
situation. This enables the firm to cater to the needs and
wants of its foreign customers.
3. INVENTION STRATEGY i.e. products are designed from
scratch for the global market place.

215
 Continued…
Please Note--- The three basic strategies above
are further clubbed into five distinguished
strategic options:
A. Strategy 1– Product and Communication
Extension- Dual Extension.
B. Strategy 2 – Product Extension and
Communications Adaptation.
C. Strategy 3– Product Adaptation-
Communication Extension.
D. Strategy 4 – Product Adaptation and
Communication Adaptation (Dual Adaptation)
E. Strategy 5 – Product Invention

216
 Continued…
Strategy 1. Product and Communication
Extension – Chief Characteristics
A. Marketing a standardized product using a
uniform communications strategy- i.e.
companies pursuing this strategy sell
exactly the same product with the same
advertising and promotional appeals as
used in the home country.
Continued……

217
 Continued…
B. Best strategy for the new entrants in the
global arena.
C. Best strategy for the small companies with
limited / few resources.
D. Dual Extension also works when company
targets a ‘global segment’ with similar needs.
Important: Generally speaking, a standardized
product policy coupled with a uniform
communication strategy offers substantial
savings coming from economies of scale.
NB: This strategy is basically product driven
rather than market driven.

218
 Continued…
Strategy 2- Product Extension and
Communications adaptation
Chief Characteristics: Due to differences in
the cultural or competitive environment:
A. Same product is often used to offer
benefits or functions, that dramatically
differ from those in the home market.
B. Gaps between the foreign and home
market drive companies to market the
same product using customized
advertising campaigns.

219
 Continued…
D. Customized advertising campaigns is
adopted for this strategy for different
country market.
E. This strategy entails ‘the economies of
scale’ on the manufacturing side.
F. Potential savings of the firm is spent on
advertising front.

220
 Continued…
Strategy 3 – Product Adaptation-
Communications Extension
Chief Characteristics:
A. Firms adapt their product, but market it
using a standardized communications
strategy.
B. Local market circumstances favour the
case of product adaptation.
C. Company’s expansion strategy is also the
reason for strategy 3. Continued………..

221
 Continued…
Strategy 4- Product adaptation and
communications adaptation (Dual
Adaptation)
Important: Demand for a dual
adaptation strategy. Why?
Because of:
1. Difference in cultural environment
2. Differences in physical environments

222
 Continued…
Strategy 5– Product Invention
Product invention means creating something
new. It can take two forms:
1. Backward Invention, reintroducing
earlier product offers that are well
adapted to a foreign country’s need.
2. Forward Invention, creating new
products to meet a need in another
country.

223
 Continued…

Standardization versus Customization

A recurrent theme in global marketing is
whether companies should aim for a
standardized product offer or customized or
country tailored product strategy.

224
 Continued…
Standardization means:
--- Offering a uniform product on a regional
or world wide basis.
--- Minor alternations are usually made to
meet local regulations or market conditions
-- A standardized / uniform product
capitalizes on the common platform
requirements across countries.

225
 Continued…
Customization means
Under customization process management
focuses on cross-border differences in the
needs and wants of the firms target
customers. Under customization,
appropriate changes are made to match
local market conditions.

226
 Continued…
New Product Development
Definition of New Product–
Any product offer that consumers regard as an
addition to their available choice can be
regarded as a ‘new product’. A new product
can be:
-- an original invention.
-- a modification of an existing item.
-- the firm’s own version of a product already
supplied by a competitor or
-- merely a change in how an item is packaged
and presented.

227
 Continued…
Process of product development
The process begins with the ‘Idea
Generation’
--- In considering the feasibility of an idea it is
necessary to define the concept of the
intended new item such as :
a. What it will do?
b. The benefits it will provide to customers
c. Its market position.
d. How will it differ from current or possible
future products offered by competing
businesses.

228
 Continued…
International Test Marketing/Testing in
national market
Introduction: Prior to committing itself to
marketing a new consumer product on a
global scale, a company will usually select
a number of areas in different parts of the
world where it can test its entire marketing
program.

229
 Continued…
Factors calling for testing new product
1. Testing lowers the risk of subsequent
failures.
2. Establishes or refutes the validity of the
basic concept of the new product.
3. Provides a basis for forecasting future
sales.

230
 Continued…
Most important:
Each group of companies in which the
item is to be sold, the company needs
to identify towns, cities, or rural
locations that possess characteristics
as near as possible to the averages for
the region as a whole.

231
 DUMPING
Dumping takes place when a firm or an
industry sells products in the world market
at prices below the cost of production.
REASONS
Generally a company dumps when it wants
to dominate a world market. After the
lower prices of the dumped goods have
succeeded in driving out all the
competition, the dumping company can
exploit its position by raising the prices of
its product.

232
 Continued…
Important: Whatever the motivation for
dumping may be –
A. Disposal of surplus stock or
B. Penetration of markets etc.
Dumping is basically an unfair trading
practice under WTO regulations. Hence
the governments of affected countries
are allowed to impose special import
taxes on offending products.

233
 Gray Market
Important characteristics
-- Gray market channels refer to the legal export /
import transactions involving genuine products into a
country by intermediaries other than the authorized
distributors.

-- From the importers side it is known as ‘Parallel

Imports’.

-- Distributors, wholesalers and retailers in a

foreign market obtain the exporters product
from other business entity. Thus the exporters
legitimate distributors and dealers face
competition from others who sell the product at
reduced prices in that foreign market.

234
 Continued…
Conditions necessary for Gray Market:
Three Conditions are required:
1. Products must be available in other markets.
2. Trade barriers such as tariff, transportation costs
and legal restrictions must be low enough for
parallel importers to move the products from one
market to another.
3. Price differentials among various markets must be
great enough to provide the basic motivation for
gray markets.

235
 Continued…
Role of Services in global economy

SERVICE DEFINED– A service is an act or

performance that one party can offer to
another that is essentially intangible and
does not result in the ownership of
anything. Its production may or may not
be tied to a physical products
Examples: Restaurant / Hotel services,
Engineering services, services required
for manufacturing a product etc.
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 Continued…
Outsourcing of Service activities: It
refers to service procurement activities on
a global basis in the same way they
procure components and finished products.
-- Because the production and consumption
of some services do not need to take place
at the same location or at the same time,
global sourcing of services is a viable
strategy.

237
 Continued…
Outsourcing of service activities relates
to:
-- Reducing costs and improving the corporate
focus, that is concentrating on the core
activities of the firm.
-- Reducing time to implement internal
processes.
-- Sharing risk in an increasingly uncertain
business environment.
-- Improving customer service.
-- Improving access to expertise not available
in-house.
238
 APPENDIX--a
Important Comment on ‘New’ Product
Inventing and bringing to the market a
completely new product can be enormously
expensive, and the risk of failure is high. For it
has been seen that the majority of new
inventions with a commercial application are
financially unsuccessful. Hence there is a
strong incentive for firms to develop current
product offerings, introduce complimentary
products, diversify product lines and duplicate
competitors best selling items rather than
invest in basic technical research leading to
completely new product concepts.

239
 APPENDIX-- b
Standardization versus Customization
While the standardization has a product
driven orientation– lower your costs via
mass production- customization is inspired
by a market driven orientation- increase
customer satisfaction by adapting the
product to local needs.

240