INTERNATIONAL MARKETING

UNIT 1

DEFINITIONS OF MARKETING AND INTERNATIONAL MARKETING

American Marketing Association defines - "marketing is the process of planning and

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

“International marketing is the multinational process of planning and executing the

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

According to Kotler, "Global marketing is concerned with integrating and standardizing

marketing actions across a number of geographic markets."

SCOPE OF INTERNATIONAL MARKETING

1. Export – It is a function of international business whereby goods produced in one country

are shipped to another country for further sale or trade.

2. Import – Goods or services brought into one country from another for use or sale.

3. Re-export – Import of semi-finished goods, further processing, and export of finished

goods.

4. Management of international operations

 Operating marketing and sales facilities abroad,
 Establishing production or assembly facilities in foreign countries, and
 Monitoring the operations and practices of other MNCs and agencies.

INTERNATIONAL MARKETING CONCEPTS

• Domestic Marketing:
Marketing that is targeted exclusively at the home-country market is called domestic
marketing. A purely domestic company operates only domestically. When it reaches growth
limits, it diversifies into new markets, products and technologies within the country instead of
entering foreign markets.
• Export Marketing:
This is the first stage when the firm steps out of the domestic market and explore
market opportunities outside the country. In export marketing, the main aim of the firm is to
expand the market size. Firm produces all its goods in the home country and exports the
surplus production to other countries.
• International Marketing:
In export marketing, It extorts the surplus products produced in the domestic country
through agents and there are no direct marketing efforts in the foreign market. Now the firm
realises the difficulties in selling the products in foreign markets without full-fledged
marketing efforts in those countries. In international marketing focus changes from just
exporting to marketing in foreign countries.
Company establishes subsidiaries in the foreign countries to undertake marketing
operations. These subsidiaries may be working either through direction from the headquarters
in the domestic country or independently, but the key positions in such concerns are manned
by nationals of domestic country.
When the firm decides to pursue market opportunities outside the home country, it
extends marketing, manufacturing, and other activities outside the home country. The
marketing strategy of the firm is an extension; that is, products, promotion, pricing, and
business practices developed for the home-country market are 'extended' into markets around
the world.
• Multinational Marketing
It is the adaptation of the domestic marketing mix suitable to the market differences in
market environment in each country of operation. The only way to succeed internationally is
to adapt to the different aspects of each national market. Subsidiaries are formed in each
country or group of countries to handle all marketing operations in that country/region.
• Global Marketing
In multinational marketing , marketing mix is different from country to country and
subsidiaries operate just as independent units. As a result, the firm fails to realise the
economies of scale possible through world scale operations. Although the world is not a
homogeneous market, the possibilities to identify the groups of consumers across the globe
with similar values, needs and behaviour patterns who can be satisfied with a single
standardised product and marketing mix.

DIFFERENCE BETWEEN DOMESTIC AND INTERNATIONAL MARKETING

1. Domestic marketing is the production, promotion, distribution, and sale of goods and
services in a local market while international market is the production, promotion,
distribution, and sale of goods and services in a global market.
2. Domestic marketing is less risky and easier to conduct while international marketing is
more risky and more complex.
3. Domestic marketing requires lesser financial resources while international marketing
requires huge financial resources.
4. Domestic marketing deals with only a single market while international marketing deals
with several different countries and markets.
5. Although both use all the basic marketing principles, international marketing is more
challenging and requires more commitment from the company because of the
uncertainty and differences in laws and regulations in the global market while domestic
marketing deals only with the laws and regulations of one country.
6. Domestic marketing deals only with one set of consumers while international marketing
deals with different types of consumers with different tastes.
7. In domestic marketing, the company can have the same policies and strategies while
international marketing requires different strategies in the promotion of their products.

KEY ISSUES / CHALLENGES OF GLOBAL MARKETING

Typically, marketing includes the following activities: -

o Market research.
o Concept & idea generation.
o Product design.
o Prototype development & test marketing
o Positioning
o Choice of brand name
o Selection of packaging material, size and labelling
o Choice of advertising agency
 o Development of advertisement copy
o Execution of advertisements
o Recruitment and posting of sales force
o Pricing
o Sales Promotion
o Selection and management of distribution channels.

CUSTOMER VALUE

Customer Value is the perception of what a product or service is worth to a Customer versus
the possible alternatives. Worth means whether the Customer feels s/he or he got benefits and
services over what s/he paid.

In a simplistic equation form, Customer Value is Benefits-Cost (CV=B-C).

Competitive Advantage is an advantage over competitors gained by offering consumers

greater value, either through lower prices or by providing more benefits that justify higher
prices.

Differential Advantage means a Competitive Advantage that customers perceive as creating

superior value with respect to competition.

Conceptually, the essence of Marketing Management is to build and sustain Differential

Advantage through advanced Brand Management, close customer relationships and upgraded
service quality standards.

THE BENEFITS OF MARKETING INTERNATIONALLY:

 Increased Revenue Potential

 Increased Economic of Scale
 Focus on Growing Markets
 Explore Areas with Less Competition
 Increased Network Opportunity
 Branding

 Market Expansion
The most obvious advantage of marketing internationally is the expansion of a company's
market. Expanding the places where a company does business and advertises its products and
services opens up a larger customer base and potentially greater profit margins. While small
businesses may find that marketing internationally is cost prohibitive, technology such as
social media and online newspapers and advertising services have made the process of
international marketing even more attractive. Customers can now buy from virtually
anywhere in the world via the Internet, making market expansion through international
marketing a highly useful skill for businesses to master.
 Brand Reputation

International marketing can have a unique advantage of helping to boost a brand's reputation.
Right or wrong, customers perceive a brand that's selling in multiple markets to be of higher
quality and better service than brands that just sell locally. Major technology companies,
global automobile models and multinational banks are proof of this. People are keen to buy
products that are widely available.
 Global Networking

Expanding into a global market gives a business the distinct advantage of connecting with
new customers and new business partners. A company doing business in Eastern Europe, for
instance, may find a cheaper workforce, less-stringent tax laws or even less-expensive modes
of advertising in local newspapers, television stations and radio programs. In other words, the
opportunities for networking internationally are limitless. The logic behind this is simple: the
more "places" your business is, the more connections it can make.
 Opening the Door for Future Opportunities

International marketing can also open the door to future business expansion opportunities.
Not only does global marketing expand a company's sales base, it also helps the business to
connect to new vendors, a larger workforce and new technologies and ways of doing
business. American companies investing in Japan, for instance, have found programs such as
Six Sigma and Theory Z to be highly useful in shaping their business strategies. Being in a
new market improves the business's efficiency and helps open the management's eyes to
previously undiscovered opportunities for growth.

DRIVERS AND RESTRAINERS OF GLOBAL MARKTING

DRIVING FORCES / FACTORS

The important forces driving globalisation are as follows:

1. Liberalisation: One of the most important factors which have given a great forward
thrust to globalisation since the 1980’s is the formation of universal economic
policy resulting in liberalisation of economy in many countries. The immediate result of
liberalisation in globalisation of business. Now many business firms can involve
themselves is international trade as the restrictions imposed by various countries is
highly restricted under GATT/WTO

2. MNC’s: The companies which have taken a complete advantage of trade liberalisation
caused under GATT/WTO are MNC’s (Multi – National Companies). Sony, Philips,
Coco Cola, Pepsi, Procter & Gamble, etc are some famous examples for MNC’s. These
companies combine their resources and objectives to achieve profit in globel
market. According to the world Investment Report 1997, there were about 44,500
MNC’s in the world with nearly 2.77 lakhs foregin collaborations. Hence MNC’s is an
important factor inducing Globalisation.

3. Technology:

4. Transportation and Communication revolutions:

5. Product development and efforts:

6. Rising aspirations and wants:

7. World economic trends: The world economic conditions are changing fast. There, is a
great difference in the growth rates of economies/ markets between developing nations
and developed nations. In developed nations the economies have become stagnant, due
to saturation on the other hand, the developing nations are experiencing tremendous
growth rate in various business sector. Cheap labour, high investment in research and
development, improvements in technology are some of the factors which have driven the
developing nations towards achieving high growth rate in business.

8. Regional Integration:

9. Leverages: Leverage is simply some type of advantage that a company enjoys by

conducting business in more than one country. A global company can experience three
important types of leverages.

10. Scale economies:

11. Resource Utilisation:

RESTRAINING FORCES

There are also several factors which restrain Globalisation trend. They are
1. External Factors
2. Internal Factors
1. External Factors: These are government policies and controls which prevents cross-

border business.

2. Internal Factors: These are collection of factors that exists within the organisation
that prevents Globalisation. One such factor is called as management myopia or near
sightedness. The company with an aim to make immediate profit, engage itself in
short-term plan and target local markets for business. This is called as management
myopia. This acts against Globalisation of business.

PARTICIPANTS IN INTERNATIONAL MARKETING

There are different categories of participants in International Marketing. Important categories

are the following.

Private Firms: The bulk of the international transactions are carried out by private firms .

MNCs account for a large part of the international marketing. About one-third of the
international trade is estimated to be intracompany transfer, i.e. trade between affiliates or
divisions of the MNCs located in different countries. Besides, they market large quantities of
products to international customers.

Transnational corporations (TNCs) are incorporated or unincorporated enterprises

comprising parent enterprises and their foreign affiliates. A parent enterprise is defined as an
enterprise that controls assets of other entities in countries other than its home country,
usually by owning a certain equity capital stake.

• Nestlé
• Unilever.
• Cadbury
Other Large Firms: Besides MNCs, there are a large number of firms active in international
marketing. Although they do not qualify to be regarded as MNCs, many of them have
manufacturing and other operational facilities foreign countries.

SMEs: Small and medium enterprises also play a very significant role in international
business. A very large number of them do considerable business abroad.

Trading Companies: Trading companies are businesses working with different kinds of
products which are sold for consumer, business or government purposes. Trading
companies buy a specialized range of products, maintain a stock or a shop, and deliver
products to customers.

Individuals: A large number of individuals also do international marketing. One of the very
significant contributions of the world wide web and the internet is the empowerment of
individuals and small firms to start business and to expand their business horizon.

INTERNATIONAL MARKETING

UNIT 2

Market coverage strategies

The market coverage strategy is determined by consideration of external and internal factors.
A company should decide whether it should concentrate on one or a few markets or should
spread over all the markets.

Definition: Market Coverage Strategy

Market coverage strategy is an approach to capture a planned market share by following
either of the following approaches:

• Concentrated Marketing Strategy

• Undifferentiated Marketing Strategy

• Differentiated Marketing Strategy

 1. Concentrated Marketing Strategy is to focus on few segments of the market and
achieve maximum penetration in them. Example is Niche marketing like Haier entry
in US by introducing small refrigerators for hostel students in US

2. Undifferentiated Marketing Strategy is to focus on the entire market as a whole with

single marketing mix. Example is Maggi Noodles, same product is marketed in entire
India and targeting adults and kids alike.

3. Differentiated Marketing Strategy involves market segmentation and treating each

segment differently according to the heterogeneity of market. Example:
Differentiation based of geography, demography, price etc. Example is iPhone
launched in cheaper version and premium version

Differentiation Can Be On Following Parameters

1. Geographically
2. Demographically
3. Psychographically
4. Nature of the customers

Concentrated Marketing is a strategy whereby a product is developed and marketed for a very
well defined and specific segment of the consumer population. Concentrated marketing is
particularly effective for small companies with limited resources because it enables the
company to achieve a strong market position in the specific market segment it serves without
mass production, mass distribution, or mass advertising.

NICHE MARKETING

Concentrating all marketing efforts on a small but specific and well defined segment of the
population. Niches do not 'exist' but are 'created' by identifying needs, wants, and
requirements that are being addressed poorly or not at all by other firms, and developing and
delivering goods or services to satisfy them. As a strategy, niche marketing is aimed at being
a big fish in a small pond instead of being a small fish in a big pond. Also called
micromarketing.

MARKET ENTRY / EXPANSION STRATEGIES

There are 2 basic Strategic Frameworks for Market Entry / Expansion Strategies which are all
dependent on Product type and the Product Lifecycle.
These frameworks have been developed built upon the theories of Innovation Diffusion
Models in monopoly and a competitive Game Theory frameworks based on theories of
Business Economics.

Market-Entry-Framework

The Waterfall Strategy/ Waterfall Approach

In a Waterfall strategy, the business is spread in international markets sequentially. First a

firm enters a new market and establishes an identity in the same. Establishing an identity
involves estimation of potential market size and revenue patterns, identification of target
segment, creation of brand awareness, identification and creation of possible distribution
channels and finally formulation and implementation of sales strategy. All these strategies at
individual stage is dependent on the product type and the life cycle.

Once the product identity is established in the new market, the learning from the same is
utilized to expand into another new market, somewhat with similar structure, sequentially.
Learning is an iterative process in such a strategy formulation and it is a less risky process of
expansion of business.

Typically, products with a longer product life-cycle or in the maturity phase would follow a
Waterfall Strategy, for expansion into new markets.

The Sprinkler Strategy/ Shower Approach

Markets are approached simultaneously in the sprinkler strategy. While this is a more risky
strategic framework for entering new markets, typically it is more suitable for products with a
shorter life cycle (like Technology products) or are at the Introduction and Growth Stage of
the Product Life Cycle. In such a strategic framework, markets are entered simultaneously
and often a Skimming Product Pricing strategy is used to generate as much profits as possible
from sales. Experiences from market responses are limited to individual markets and the
same are not replicated in the other markets.

ORGANISING FOR INTERNATIONAL MARKET

Built-In Export Department Export organisation is built into the regular domestic system. The
built-in export department is suitable under certain conditions, such as when export business
is small, the company is new to international marketing, the management philosophy is not
oriented towards growth in overseas business, the company resources are limited etc.

Export Sales SubsidiaryFirms with large export business mayestablish export subsidiary
companies anddivorce international marketing activitiesfrom domestic operations because
ofcertain advantages associated with it.In terms of internal organization and thespecific
activities performed, the salessubsidiary differs very little from aseparate export department.
International Division An export department or export subsidiary may be suitable for
handling large exports but they may not be sufficient for managing the non-exporting
international market entry modes. So companies having foreign subsidiaries whose role is not
confined to sales alone tend to establish an international division to manage the international
business
 INTERNATIONAL MARKETING

UNIT 3

PRODUCT

A product is anything that can be offered to a market for attention, acquisition, use or
consumption that might satisfy a want or need.

COMPONENTS /LEVEL OF PRODUCT

• Core product
• Tangible product
• Augmented Product

Core product

It is the most fundamental level of the product.

Core benefit the consumer derives from the product.

Tangible product

It is the actual form with all its attributes, in which the product is offered to the consumer.

Augmented Product

It refers to certain additional services or benefits offered with the product such as installation,
delivery and credit facilities, after sales service, warranty etc.

INTERNATIONAL PRODUCT DECISIONS

• Market segmentation decision

• Product mix decision(product variants/type)
• Product specifications
• Positioning decision
• Communication decision
INTERNATIONAL PRODUCT STRATEGIES

Standardisation Vs Adaptation

• In international markets, success depends on satisfying the market demands. The

product or service must be suitable and acceptable for its purpose.
• According to Doole & Lowe (1999, p.296), “The main issue for a company about
to commence marketing internationally, is to assess the suitability of the existing
products for international markets.”
• Product policy abroad: firm must decide which aspects of a product need to be
adapted and which can be standardised.

INTERNATIONAL PRODUCT LIFE CYCLE

1. Export strength is evident by innovator country: Products are normally

innovatedin the developed countries because they possess the resources to do so. The
firms have the technological know how and sufficient capital to invest on the research
and development activities. The need of adaptation and modification also forces the
production activities to be located near the market to respond quickly towards the
changes. The customers are affluent in the developed countries who may prefer to buy
the new products. Thus, the manufacturers are attracted to produce the goods in the
developed country. The goods are marketed in the home country. After meeting the
demand of the home country, the manufacturers start exploring foreign market and
exporting goods to them. This phase exhibits the introduction and growth stage of the
'product life cycle.
2. Foreign production starts: The importing firms in the middle income country realise
the demand potential of the product on the home market. The manufacturers also
become familiar in producing the goods. The growing demand of the products attracts
the attention of many firms. They are tempted to start production in theircountry and
gradually start exporting to the low income country. The large production in the
middle income country reduces the export from the innovating country. This shows
the maturity stage of product life cycle where the production activities start shifting
from innovating country to other countries.
3. Foreign production becomes competitive in export market: The firms in low
income country also realise the demand potential in the domestic market. They start
 producing the products in their home country by exploiting cheap labour. They gain
expertise in manufacturing the commodity. They become more efficient in producing
the goods due to low cost of production. Gradually they start exporting the goods to
other countries. The export from this country replaces the export base of innovating
country, whose export has been already declining. This exhibits the declining stage of
product life cycle for the innovator country. In this stage, the product gets widely
disseminated and other countries start imitating the product. This is the third phase of
product life cycle where the products start becoming standardised.
4. Import Competition begins: The producers in the low income importing country
gain sufficient experience in producing and marketing the products. They attain the
economies of scale and gradually become more efficient than the innovator country.
At this stage, the innovator country finds the import from this country advantageous.
Hence, the innovator country finally becomes the importer of that product. In this
fourth stage of product life cycle the product becomes completely standardised.
The IPLC theory presents the following implications for international product planners:

 Innovative products carry significant export potential;

 The marketer whose products face declining sales in one foreign market may find
another foreign market with encouraging demand for his product; and
 Innovative products improve the staying power of the international firm.

INTERNATIONAL PRODUCT PLANNING

PRODUCT ADAPTATION

The design process has an objective. It's not to create usable and useful products (though
these are both important considerations when designing products), but rather to create
products people use. Adoption is the process by which people become users of a product and
it is adoption which will enable users to discover that a product is usable and useful and
enable them to become long-term users of a product.

PRODUCT STANDARDISATION

Product standardization strategy refers to a uniform representation of all aspects of the

product such as the quality, the materials that had been used, product name and packaging for
all markets, regardless of the location around the world. In the contrast, the most challenging
decision that a company may face in internationalization is the degree of standardization or
adaptation in its operations. The question of standardization or adaptation affects all avenues
of a business’ operations, such as R&D, finance, production, organizational structure,
procurement, and the marketing mix. Whether a company chooses to standardize or adapt its
operations depends on its attitudes toward different cultures. These attitudes are defined by
three orientations toward foreign culture: ethnocentric, polycentric and geocentric.

Further, standardization is a practice of setting identical characteristics for a particular

good or service. Also, it suggests a standardized approach as a “one size fits all” approach.

Product standardization is an efficient method to reduce costs and increase quality. By

minimizing the differences in your products, you are able to rapidly increase production,
streamline distribution, decrease raw material costs and reinforce product branding. The best
product standardization strategies allow you to balance the need for targeted adaptation with
the cost savings of standardization.

Examples:

Piston industry – Standard sizes of pistons are produced for different products. Like Federal-
Mougal is producing pistons for many industries like Maruti as well as large scale
manufactures like BMW etc…

Nut & Bolt industry – Standard nuts & bolts are produced. So that they can be easily
available in the market in case of requirements.

INTERNATIONAL PRODUCT COMMUNICATION STRATEGIES

Product Invention: – Creating new products or services for foreign markets.

Product Adaptation: – Adapting a product to meet local conditions or wants in foreign

markets.

Straight Product Extension: – Marketing a product in a foreign market without any change

PRICING FOR INTERNATIONAL MARKETS / INTERNATIONAL PRICING

Right price is one of the important determinants of business success. The uniqueness of price
in the marketing mix is that it is the only element that generates revenue. At the outset one
may think that price must cover at least the full cost of production and marketing.

TYPES OF COSTS IN EXPORT MARKETING

1. Production costs

2. Selling and delivery costs

Productions Costs 1. Fixed costs 2. Variable costs

PRICING OBJECTIVES

1. Market penetration

2. Market share

3. Market skimming
4. Fighting competition

5. Preventing new entry

6. Shorten pay-back period

7. Early cash recovery

8. Meeting export obligation

9. Disposal of surplus

10. Optimum capacity utilization

11. Return on investment

12. Profit maximization

FACTORS AFFECTING PRICING

International marketing objectives
Costs
Competition
Product differentiation
Exchange rate
Market characteristics
Government factor
PRICING METHODS
1. COST BASED PRICING
Cost based pricing, also known as cost plus pricing, is a common method of pricing. Under
this method the price includes ascertain percentage of profit margin on the sum total of the
full cost of production, marketing costs and an allocation of the over heads. That is, price =
(fixed costs + variable costs +over heads + marketing costs)+specified percentage of the total
costs.
2. MARKET ORIENTED PRICING
This is a very flexible policy in the sense that it allows the prices to be changed in accordance
with the changes in market conditions. The product may be priced high when demand
conditions are very good and the price may be lowered when the market is sluggish if that
helps increasing sales. This method is sometimes referred to as what the traffic will bear
method.
3. BREAK EVEN PRICE
Break-even price is the price for a given level of output at which there is neither any loss nor
profit. Break-even analysis helps to understand the minimum sales required to avoid any loss
and also the profit or loss at various levels of sales. The break-even point (BEP) is the point
of sales at which there is neither any loss nor any profit.
4. MARGINAL COST PRICING
Marginal cost pricing approach is common in evaluating the profitability of new orders in
case of firms with excess capacity. Under the marginal cost pricing, the relevant cost
considered for pricing is the variable cost, the fixed cost is excluded from the calculation of
the cost of the product.
5. CREATIVE PRICING
Marginal costing may give scope for creative pricing. Creative pricing means taking
advantage of the flexibility between the lower limit of break-even price and the upper limit of
the competitor’s price for similar product.
6. TRANSFER PRICING
Transfer pricing or intra company pricing refers to the pricing of goods transferred from
operations or sales units in one country to the company’ s unit elsewhere. The appropriate
basis for intra company transfers often depends on the nature of the subsidiaries, the market
conditions and government policies and regulations.
7. RETROGRADE PRICING
When an export order is received with the buyer specifying the price or when the exporter has
to accept prevailing market price, retrograde pricing will help to find out its profitability.
Retrograde pricing is the process of working backwards from a given market price to
ascertain whether the export will be profitable.

INCOTERMS

What are 'Incoterms'?

Incoterms, or "international commercial terms," are trade terms published by the International
Chamber of Commerce (ICC). They are commonly used to ease domestic and international
trade by helping traders to understand one another.

Incoterms were first developed in 1936 and are updated periodically to conform to current
trade practices. Because of these updates, contracts should specify which version of
Incoterms they are using (e.g., Incoterms 2010). Trade terms used in different countries may
appear identical on the surface, but they can have a different meaning when used
domestically. Incoterms are internationally recognized and prevent confusion in foreign trade
contracts by clarifying the obligations of buyers and sellers. Some of them are given below.

FCA – Free carrier

FAS – Free Alongside Ship

FOB – Free On Board

CFR – Cost And Freight

CIF – Cost, Insurance and Freight

CPT – Carriage Paid To

CIP – Carriage and Insurance Paid To

DAF – Delivered At Frontier

DES – Delivered Ex Ship

DEQ – Delivered Ex Quay

DDU – Delivered Duty Unpaid

DDP - Delivered Duty Paid

INTERNATIONAL MARKETING OF SERVICES

Why Is International Service Marketing Important?

The international business environment has changed drastically thanks to globalization and
market liberalization. Widespread use of electronic channels in marketing and product
distribution has intensified competition in global markets. As such, service businesses
targeting foreign growth are embracing international marketing strategies to remain
competitive.

International Audience

Services are intangible products generally delivered through interactive channels. They are
offered either as primary products or as supplementary components, according to the
Management Study Guide. For example, legal representation is a primary service while
computer networking is complimentary. International service marketing looks to create
awareness of new and existing services in the target markets and public domains of foreign
countries.

Cultural Expectations

International service marketing enables businesses to acknowledge cultural differences when

advertising in foreign countries. For example, when the American Family Life Assurance Co.
(AFLAC) introduced its famous “Duck” ad campaign in Japan it used a stuffed doll because
the use of live animals in commercials was not common practice there. The campaign went
on to gain iconic status when AFLAC created the ManekiNeko Duck from the combination
of the Duck and ManekiNeko, a famous white cat associated with luck in some Asian
countries. AFLAC’s efforts to meet the expectations of Japanese society underscored the
significance of aligning service marketing to cultural sensitivities.

International Networks

Service businesses that build and maintain international networks build close relationships
with customers. This allows them to raise sales while expanding their market presence
abroad. Taking advantage of Internet-based promotional and networking platforms, such as
social media, lets them reap maximum benefits in market penetration strategies. Digital
platforms are particularly useful for small and medium-size service companies engaging in
international promotion because they are fairly affordable and easily accessible.

Promoting Differentiation

International service marketing is an important platform for brand differentiation among

service companies offering similar and related products in foreign markets. Indeed, brand
recognition enables service companies to stand out and remain competitive. That makes
promotional campaigns that engages the audience while establishing brand awareness as
critical as the investment required to operate on an international basis.

INTERNATIONAL MARKETING

UNIT 4
Marketing environment

Promotional strategies
1. Push strategy

A push promotional strategy involves taking the product directly to the customer via
whatever means, ensuring the customer is aware of the brand at the point of purchase.

“Taking the product to the customer”

Examples of push tactics

 Trade show promotions to encourage retailer demand

 Direct selling to customers in showrooms or face to face
 Negotiation with retailers to stock your product
 Efficient supply chain allowing retailers an efficient supply
 Packaging design to encourage purchase
 Point of sale displays

2. Pull strategy

A pull strategy involves motivating customers to seek out the brand in an active process.

“Getting the customer to come to you”

Examples of pull tactics

o Advertising and mass media promotion

o Word of mouth referrals

o Customer relationship management

o Sales promotions and discounts

Push and pull marketing strategies

The origin of these two terms refers to the supply chain and how the demand for the product
is generated.

Push strategy explained

The term ‘push strategy’ describes the work a manufacturer of a product needs to perform to
get the product to the customer. This may involve setting up distribution channels and
persuading middlemen and retailers to stock your product. The push technique can work
particularly well for lower value items such as fast moving consumer goods (FMCGs), when
customers are standing at the shelf ready to drop an item into their baskets and are ready to
make their decision on the spot. This term now broadly encompasses most direct promotional
techniques such as encouraging retailers to stock your product, designing point of sale
materials or even selling face to face. New businesses often adopt a push strategy for their
products in order to generate exposure and a retail channel. Once your brand has been
established, this can be integrated with a pull strategy.

Pull strategy explained

‘Pull strategy’ refers to the customer actively seeking out your product and retailers placing
orders for stock due to direct consumer demand. A pull strategy requires a highly visible
brand which can be developed through mass media advertising or similar tactics. If customers
want a product, the retailers will stock it – supply and demand in its purest form, and this is
the basis of a pull strategy. Create the demand, and the supply channels will almost look after
themselves.

Combination of push and pull strategies

A successful strategy will usually have elements of both the push and pull promotional
methods. If you are starting a new business and intend to sell a product through retailers,
you’ll almost certainly need to persuade outlets to purchase and stock your product. You’ll
also need to raise brand awareness and start building valuable word of mouth referrals. If you
have designed a product around the customer and have considered all elements of the
marketing mix, both of these aspects should be achievable.

INTERNATIONAL MARKETING COMMUNICATION

The important steps in developing an effective communication are the following:

Identifying the target Audience

Even for the same product the target audience may be different in different countries. For
example, certain consumer durables which are used even by the low income group in the
advanced countries may be used only by high income groups in the developing countries. In
several cases the need satisfaction by the product varies between markets. For example,
bicycles are basic means of transportation in countries like India and the important category
of consumers are small farmers, blue-collar workers and students. In some of the advanced
countries, bicycles are used for sporting and exercising and hence the target audience is
different. Again the decision-making roles of different categories of people are not the same
in all markets. All these indicate that the target audience may not be the same in all markets.

Determining Communication Objectives:

The communication objectives also may be different in some cases. For example, when the
product is in the introduction stage in a market the emphasis of communication could be on
consumer education and creation of primary demand. In a market where the product is at
other stages of the life cycle, the communication objectives would be different. If there is a
serious new competition in one market, fighting competition could be a major objective of
advertising in that market at that time.
Determining the message:

Formulating the message will require solving four problems: what to say (message content),
how to say it logically (message structure), how to say it symbolically (message format), and
who should say it (message source).

Budget Decisions:

The size of the total promotional expenditure and the apportioning of this amount to the
different elements of the promotion mix are very important but difficult decisions.

The common methods used to set promotion budgets are the following:

1. Affordable Method: Set the budget at what the company thinks it can afford.
2. Percentages of Sales Method: A certain percentage of sales is set apart for promotion.
3. Objective and Task Method: Involves determining the communication objectives and
the tasks involved in achieving the objectives and estimating the expenditure
requirements for performing these tasks.
4. Competitive Parity Method: The budget is set at that level which matches the
promotional expenditure of the competitors.

Communication mix decision:

Difference in the marketing environment may necessitate variations in the communication

mix because a channel or medium that is very effective in one market may not be so effective
in another market. Some channels which are effective in certain markets may not be available
or underdeveloped in some other markets. More about the communications mix is given in
the next section.

Communication Mix:

The communication mix, also called promotion mix, has four major elements (or tools or
channels) namely advertising, sales promotion, personal selling and public relations. Which
communication tool or tools should be used or the nature of the mix is determined by the
marketing environment and the company’s objectives and resources.

Advertising:
Advertising is defined as any paid form of non-personal presentation and promotion of ideas,
goods or services by an identified sponsor. Advertising regulation differ between countries.

The relative effectiveness of different media may be different in different countries.

Similarly, media availability and efficiency may also vary.

Mass Media Advertising and Direct Advertising:

Given the resources constraints and the small volume of business of Indian exporter, in many
cases direct advertising is preferable to mass media advertising.

Mass media are media which reach large number of the general public like TV, newspapers,
magazines etc.

Direct advertising is marketing communication addressed directly to the specific customers

targeted.

Indian exporters would have difficulties to compete with the large mega-budget mass media
advertisers in the foreign markets

ROLE OF EXPORT PROMOTION ORGANIZATIONS

Export promotion organizations like Export Promotion Councils (EPC), Export Development
Authorities, Commodity Boards, India Trade Promotion Organization (ITPO), Exim Bank
etc., can play a very important role in promoting Indian products abroad.

These organizations undertake export marketing communication by:

(i) Advertising

(ii) Sales Promotion

(iii) Public Relations.

Export marketing communication by these organizations is not for the benefit of any
particular firm. These organizations aim at promoting the Indian products.

These organizations can be instrumental in:

(i) Creating awareness about India’s export potentials.

(ii) Impressing foreigners about India’s industrial advance and technical capability.
(iii) Improving the quality image of India.

The role of these organizations assumes greater importance in the light of the small sizes and
resources of the Indian exporters.

Apart from the publicity for the Indian products by advertising and public relations, they play
a very important role in sales promotion .The Export Promotion Councils, Trade
Development Authorities and Commodity Boards sponsor trade fairs. These organizations
also help in the participation of Indian exporters in the fairs held abroad.

The export promotion organization could be of help to the exporters in formulating

communication strategies. They can also play an important role in sponsoring buyer seller
meets.

The strategic market entry support scheme of the Export-Import Bank of India helps Indian
firms in identifying products with export potential and right market segments and in
formulating suitable promotion strategy.

The Darjeeling logo promoted by the Tea Board and the feature on the Darjeeling tea
telecasted in some foreign countries helped to boost the image and sale of the Darjeeling tea
and to check the sale of bogus products.

In short, export promotion organizations can play an important role in promoting abroad the
Indian products.

TRADE FAIRS AND EXHIBITIONS

Trade fairs and exhibitions, by bringing potential buyers and suppliers in contact and
imparting information about the relevant development around the world, play an important
role in International marketing. In certain cases they have a special significance. For example,
in Libya, where media advertisement for products is not permitted, the annual Tripoli
International Trade Fair is very important means to promote business. Friendly countries are
also permitted to hold single country /single product exhibition and trade fair.

A trade fair, as its name implies, is target directed. It is staged for the purpose of
selling goods or demonstrating new ideas and techniques. An exhibition on the other and, is
not specifically for trade but for the public.

There are two type fairs, viz.,

(i) General fairs, also known as horizontal fairs; and

(ii) Specialized fairs, also known as vertical fairs and solo fairs.

At a general fair, the goods displayed cover many different fields. A specialized fair
concentrates on products of a particular industry or group of industries. Within that industry
or group, a large number of products may be on display.

The general fairs attract visitors of all ages, tastes and types and, therefore, is a good
place to show consumer goods or new products that needs to be seen and accepted. National
pavilions are often built for general fairs and in them the government organizes an exhibition
that gives the visitors a good idea of country’s industry, agriculture, ways of life and tourist
attraction as well as products it wishes to sell abroad. In other words, the purpose is largely to
build up an image of the country in the public mind.

If the product that an exporter, actual or potential, wishes to display is one that
interests a specific group of buyers and especially if it is technical in nature, the specialized
fair is probably the better choice. Many prefer the specialized fair because it is not open to
general public or open only at specific times and people who come have both an interest and
some knowledge of the product.

PERSONAL SELLING IN INTERNATIONAL MARKETING

In today’s world marked by complex technologies and multiple choices, both product & sales
and service outlets, the customer is increasingly becoming dependent on the salesperson. The
customer wants to be sure that he or she is getting value for his or her money. And finally
wants to be reassured that whenever service is required, the sales person will be there. In
other words, it is the salesperson who provides competitive product information to the
customer, helps the latter to apply the product to his or her situation and also reassure the
customer on prices and service. It is through these activities that the salesperson provides a
competitive advantage to the firm or enterprise.

Personal selling is the personal communication of information to persuade prospective

customer to buy something “ a product, service idea, or something else. This is in contrast to
the mass, impersonal communication of advertising, sales promotion and other promotional
tools.
Personal selling may involve personally contacting, for promotion, the prospective final
consumers and/or the members of the channels of distribution.

IMPORTANCE AND ADVANTAGES OF PERSONAL SELLING

Personal selling is one of the most effective methods of marketing of marketing

communication. The goal of all marketing efforts is to increase profitable sales by offering
want satisfaction to the market over the long-run. Personal selling is by far the major
promotional method or tool used to reach this goal. More than ever, sales people today are a
dynamic power in the business world.

In some situations, personal selling can be an effective method to overcome certain

marketing barriers.

Personal selling has contributed to export success of some Indian products. For
example, one of the most important factors which contributed to the sales success of the
Super max shaving blades in London was the door-to-door sales.

The efforts of sales people have a direct impact on such diverse activities as:

1. The success of new products.

2. Keeping existing products in strong market positions.

3. Constructing manufacturing facilities

4. Opening new business and keeping them open

5. Generating sales orders that result in shipping products to consumers all over the
world

6. As personal selling involves direct dialogue with the customers it is the most effective
promotional method.

7. Personal selling also helps in getting feedback about the product and company’s
marketing efforts.

8. Personal selling also helps in the marketing intelligence.

9. Personal selling makes customer grievance handling easy.

10. For firms which cannot compete in advertising with mega-budget advertisers,
personal selling is an effective alternative.

11. Personal selling can be an effective supplement or follow up to the lead provided by
advertising or other communication methods.

12. One great advantage of personal selling is its flexibility as“ it could be made suitable
to each customer or situation.

13. Another merit of personal selling is its personal touch.

14. Unlike mass media advertising or some other promotion methods, personal selling has
a specific focus.

15. Personal selling is the most effective method in explaining product features and
clarifying customer doubts.

16. Another very important feature of personal selling is that it results in the actual sale.
Advertisements can attract attention and arouse desire, but usually they do not arouse buying
of complete the sale.

LIMITATIONS OF PERSONAL SELLING

(i) A major limitation of personal selling is its high costing advanced countries.

(ii) The success depends to a large extent on the ability and sincerity of the sales
personnel.

(iii) If a sales person quits suddenly it may cause dislocations and related problems

INTERNATIONAL DISTRIBUTION STRATEGIES

DIRECT EXPORTING

Direct exporting involves selling directly to your target customer in-market. You can do this
by selling in regular market - or by setting up a branch office or subsidiary in the target
country.

Selling directly to customers’ means there’s nobody else in the export chain taking a share of

Advantages of direct exporting

 You’re in control of pricing.

 You’re in full control of your brand.
 You can get a direct understanding of buyers’ and end users’ needs, which allows you
to customise and improve your offerings.
 You own and maintain all customer relationships.
 It’s easier for you to identify possible new opportunities.
 Some customers may prefer dealing direct with you, rather than through an
intermediary.

Disadvantages of direct exporting

 You’ll have to commit a lot of time, energy, staff resources and money.
 Many customers see suppliers with local presences as a lower-risk option – so if you
don’t have a local presence, you may be at a disadvantage.
 You might need local language capability for after-sales commissioning and service.

INDIRECT EXPORTING

Indirect exporting – by selling to, or through, a channel partner - is a relatively cheap and
straightforward way to enter a new market. This is the most common approach for companies
doing business internationally.

Channel partners can include agents or distributors based in your target export market. Using
them can be a quick way to get your products and services to the end user, since you’ll be
selling through their existing networks or customer base.

Advantages of indirect exporting

  Your initial market entry and sales growth can be fast, using your partner’s existing
channels and / or customer base.
 You benefit from your channel partner’s existing knowledge and networks.
 Your channel partner’s local presence is reassuring for buyers.
 If you’re working with a distributor, they will usually take title to the goods - and the
risk of any unsold stock.
 Sales, marketing and other costs can be shared between you and your channel partner
(the specifics will depend on your agreement with them).

Disadvantages of indirect exporting

 You won’t have direct control over pricing.

 You may not have direct control over branding or marketing.
 Customers often effectively belong to the channel partner, not to you.
 You still need to provide sales support if you want growth to continue.

According to Business Dictionary, the four basic types of marketing intermediaries are
agents, wholesalers, distributors and retailers.

Agents. ...

Wholesalers. ...

Distributors. ...

Retailers.
What Is International Logistics?

According to the Council of Logistics Management, logistics is the management process of

'planning, implementing, and controlling the physical and information flows concerned with
materials and final goods from the point of origin to the point of usage.' International logistics
involves the management of these resources in a company's supply chain across at least one
international border.

INTERNATIONAL MARKETING

UNIT 5

Foreign Trade Policy

Key Highlights:

 Increase exports to USD 900 billion by 2019-20, from USD 466 billion in 2013-14
 Raise India’s share in world exports from 2 percent to 3.5 percent
  Merchandise Export from India Scheme (MEIS) and Service Exports from India
Scheme (SEIS) launched
 Higher level of rewards under MEIS for export items with High domestic content and
value addition
 Incentives extended to units located in SEZs
 Export obligation under EPCG scheme reduced to 75% to Promote domestic capital
goods manufacturing
 FTP to be aligned to Make in India, Digital India and Skills India initiatives.
 Duty credit scrips made freely transferable and usable For payment of custom duty,
excise duty and service tax.
 Export promotion mission to take on board state Governments
 Unlike annual reviews, FTP will be reviewed after two-and-Half years
 Higher level of support for export of defence, farm Produce and eco-friendly
products.

Export Promotion Measures in India

A number of institutions have been set up by the government of India to promote exports.
The export and import functions are looked after by the Ministry of Commerce. The
Government formulates the export-import policies and programmes that give direction to the
exports.

Exim policies aim at export assistance such as export credit, cash assistance, import
replenishment, licensing, free trade zones, development of ports, quality control and pre-
shipment inspection, and guidance to Indian entrepreneurs to set up ventures abroad.

1. International Presence

The Director of Exhibitions makes arrangements for participation in international exhibitions,

holds Indian exhibitions abroad, runs show rooms in foreign countries and, sets up Trade
centres outside India.

2. Export Promotion Council

The Director of Commercial Intelligence is concerned with commercial publicity through

various media, monthly publications, directories of foreign importers of Indian products,
country-wise.
There are 22 export promotion councils for different products, offering services of export
promotion such as price, quality, packing, marketing, transport etc. They conduct market
surveys, publish reports on foreign trade, administer various export promotion schemes,
develop trade contacts, quality control, joint participation in trade fairs and exhibitions.

3. Setting up of Commodity boards to promote exports

Commodity Boards are set up to help export of the traditional items. There are seven
Commodity Boards apart from All India Handloom and Handicraft Board under the
Commerce ministry. They advise the government on its policies, signing trade agreements,
fixing quota, etc.

4. Trade reps

There are Trade Representatives abroad who conduct market surveys, furnish information on
exports-imports, settle trade disputes and pass on information about the rules and regulations
for imports.

5. Indian Institute of Foreign Trade

The Indian Institute of Foreign Trade (IIFT) was set up by the Government in co-operation
with trade, industry, universities, educational and research institutions. It is an autonomous
body, set up to train people in international trade, conduct research, survey and organize
training programmes.

6. Participation

To promote, organize and participate in the international trade fairs, Government set up Trade
Fair Authority of India in 1977. It sets up showrooms and shops in India and abroad. It assists
in development of new items for diversification and expansion of India’s exports. They
publish journals namely, Journal of Industry & Trade, UdyogVyaparPatrika, Indian Export
Service Bulletin and Economic and Commercial news.

7. Trade development Authority

In addition to the above, we have Trade Development Authority to collect information,

conduct research and render export finance and help in securing and implementing export
orders.
8. Financing for export

The Export Credit Guarantee Corporation (ECGC) covers both commercial and political risks
on export credit transactions. Its head office is in Mumbai and branches are in Delhi, Calcutta
and Chennai. In 1982, the Government set up EXIM Bank with head office in Mumbai,
branch offices in other major cities in India and abroad.

EXIM Bank finances exports and imports of machinery, finances joint ventures, provides
loan, undertakes merchant banking functions such as underwriting stocks, shares and bonds
or debentures, develops and finance export oriented industries, undertakes techno marketing
studies and, promotes international trade.

9. Advisory Councils

Some of the State Governments have set up specialized Export Trade Corporations which
undertake export promotion. They are established in Andhra Pradesh, Bihar, Karnataka, Uttar
Pradesh, Madhya Pradesh, Himachal Pradesh. There are also Advisory Councils like Board
of Trade, Export-Import Advisory Council, etc.

10. Technical assistance and Training

The Small Industries Development Organization (SIDO) with 26 small industries service
institutions, provide techno-managerial assistance like motivating entrepreneurs to export,
provide information on export-import and offer consultancy services with respect to export
procedure, documentation and export incentives.

It also provides training programmes to educate entrepreneurs on exports, conduct seminars,

meetings, holds discussions with export promotion agencies and publish small industry
export bulletin, besides liaising with the export promotion organizations for solving the
problem of small scale exporters.

Export and Import Procedure in India

India ranks 19th in terms of overall export of merchandize and 12th in terms of overall import
of merchandize when compared to other countries. With more trade liberalization deals to be
signed by the pro-business Indian Government, there is plenty of opportunity for establishing
a successful import or export business. To undertake an import or export business, the
Entrepreneur must have a strong understanding of all documentation pertaining to import or
export transactions. In this article, we cover basic export procedure and import procedure in
India along with the necessary documentation.

EXPORT AND IMPORT PROCEDURE

To being exporting or importing goods from India, the business or individual must obtain an
Import Export Code or IE Code from the Directorate General of Foreign Trade. IE Code can
be obtained by the business after obtaining PAN and opening a bank account. IndiaFilings
can help you obtain IE Code.

Commercial Invoice

Commercial invoice is issued by the seller to the buyer containing the terms of the transaction
like date of transaction, seller details, buyer details, value, shipping terms and more. Customs
duty is levied on the shipment usually based on the commercial invoice raised by the seller.

Air Waybills

An airway bill is a proof of shipment of goods by air. Air waybills serve as a proof of receipt
of goods for shipment by the air cargo agent, an invoice for the air shipment, a certificate of
insurance and a guide to the air cargo agent for handling, dispatch and delivery of the
consignment. A typical airway bill contains details about the shipper and the consignee, the
departure airport and destination airport, description of the goods, sign and seal of the carrier.

Bill of Lading

Bill of Lading is provided by shipping agency for goods shipped by them. Bill of lading
usually contains information pertaining to the shipper, consignee, carrying vessel, ports of
loading and discharge, place of receipt and deliver, mode of payment and name of the carrier.

Bill of Exchange

Bill of exchange is used when an importer agrees to pay the exporter in future on a date on or
before that is mutually agreed upon. Bill of exchange is an important written document in
wholesale trade wherein large amount of money is involved. Bill of exchange can be
classified as bill of exchange after date and bill of exchange after sight. Bill of exchange after
date is when the due date for payment is counted from the date of drawing. Bill of exchange
after sight is when the due date for payment is counted from the date of acceptance of the bill.
Certificate of Origin

Certificate of origin is usually requested by the Customs Authority while clearing Customs.
Certificate of Origin is used to establish the origin of the product and is issued by the
Chamber of Commerce of the Exporter’s country. Certificate of origin usually contains the
name and address of the exporter, details of the goods, package number or shipping marks
and quantity, as applicable.

Packing List

Packing list contains detailed information about the goods being shipped, quantity, weight
and packing specifications. Packing list must contain description of the goods and have
details regarding the shipping marks.

Letter of Credit

Letter of Credit is an arrangement wherein a Bank on the request of it customer agrees to

make payment to a beneficiary on receipt of documents from beneficiary as per the terms
stipulated in the Letter of Credit. Letter of Credit or LC is used extensively in international
and domestic trade transactions.

METHODS OF QUALITY CONTROL AND PRE-SHIPMENT INSPECTION

Methods of quality control and Pre-shipment inspection:

Export Inspection Council (EIC) has recognized three systems of pre-shipment inspection,
namely:

(a) Self-Certification: Under this system, a manufacturing unit certifies its own products and
issues exporters: certificate for export. This facility is extended to the exporters:

Having good reputation and goodwill in the market;

Fulfilling stringent norms prescribed for product quality, design and peg a development, raw
materials and bought out components;

Having quality control laboratory, process Control, meteorological control and independent
quality audit facility.
The manufacturing units, which have been recognized under this system, have to pay a
nominal yearly fee at the rate of 0.1% of FOB value subject to minimum of Rs. 2,500/- and
maximum of Rs. 1 lakh in a year to the concerned EIA. Such units are recognised for a period
of one year, which may be extended, provided r. the manufacturing unit continues to fulfil the
recognised norms.

(b) In-Process Quality Control (IPQC): Under this system, stage by stage inspection of
products like chemicals and engineering goods is done during the process of production. The
inspection includes:

Raw materials and bought out components control,

Process Control,

Product control,

Packing and packaging control.

Over 800 units all over India are operating under this system.

Certain units under IPQC System have been given option to issue Certificate of Inspection
themselves provided they get registered themselves as 'Export Worthy Units' with the
concerned EIA.

(c) Consignment-wise Inspection: Under this system, each individual consignment is

subject to compulsory inspection by the EIA.
Trade finance signifies financing for trade, and it concerns both domestic and international
trade transactions. A trade transaction requires a seller of goods and services as well as a
buyer. Various intermediaries such as banks and financial institutions can facilitate these
transactions by financing the trade.