International marketing

INTERNATIONALMARKETING
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CHAPTER 1 – INTRODUCTION
International Marketing is a marketing carried on across national boundaries. It is the marketing
across the national frontiers. When a country crosses its national frontiers to market its product,
it is indulging in international marketing. It refers to the strategy process & implementation of
the marketing activities in the international arena.
It is the performance of business activities designed to plan, price, promote & direct the flow of
company`s goods & services to consumers or users in more than one nation for a profit.
International marketing is different from domestic marketing in as much as the exchange takes
place beyond the frontiers, thereby involving different marketing & consumers who might have
different needs, wants & behavioral attributes.
International marketing is a business mechanism by which goods produced in one country are
marketed in other countries by following trade practices, policies & rules of the countries by the
contracting parties.
Subash C, Jain terms international marketing as “it refers to exchanges across nation boundaries
for satisfaction of human needs & wants.”
Definition of International Marketing
International Marketing can be defined as exchange of goods and services between different
national markets involving buyers and sellers.
According to the American Marketing Association, “International Marketing is the
multi‐national process of planning and executing the conception, prices, promotion and
distribution of ideal goods and services to create exchanges that satisfy the individual and
organizational objectives.”
International marketing is the performance of business activities designed to plan, price,
promote, and direct the flow of company’s goods & services to consumers in more than one
nation for profit.
Elements of International Marketing
 Across the national boundaries
International marketing is marketing across the national boundaries irrespective of differences in
culture, languages, monetary systems, trade policies etc.
 Performance of all the marketing activities
As in domestic, international marketing also involves all such functions like product planning &
development, pricing, distribution, promotion & related activities.
 Flow of goods & services

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International marketing involves the process of flow of goods & services, either exchanged under
a barter deal or on value.
 Environmental differences
International marketing has to meet challenges in various markets due to environmental
differences in climate, physical environment, culture, affluence, location & life style of
consumers.
Objective of International Marketing
 To bring countries closer for trading purposes & to encourage large scale free trade
among the countries of the world.
 To bring integration of economies of different countries & thereby to facilitate the
process of globalization of trade.
 To establish trade relations among the nations & thereby to maintain cordial relations
among nations for maintaining world peace
 To facilitate & encourage social & culture exchanges among different countries of the
world.
 To provide better life & welfare to people from different countries of the world. In
addition, to provide assistance to countries facing natural calamities & other emergency
situations.
 To provide assistance to developing countries in their economic & industrial growth &
thereby to remove / reduce gap between the developed & developing countries.
 To ensure optimum utilization of resources at global level
 To encourage world export trade & to provide benefits of the same to all participating
countries
 To offer the benefit of comparative cost advantages to all countries participating in
international marketing
 To keep international trade free & fair / beneficial to all participation countries by
reducing / removing trade barriers.
Scope of International Marketing
 Establishing a branch in foreign market for processing, packaging or assembling the
goods according to the needs of the markets. Sometimes complete manufacturing is
carried out by branch through direct investments.
 Joint Ventures & Collaborations
International marketing includes establishing joint ventures & collaboration in foreign countries
with some foreign firms for manufacturing &/or marketing the product. Under these
arrangements, the company work in collaboration with foreign firm in order to exploit the
foreign markets.
 Licensing Arrangements

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Under this system, the company establishes licensing arrangements with the foreign whereby
foreign enterprises are granted the right to use the exporting company`s knowhow, viz. patents,
processes or trademarks according to the terms of agreements with to without financial
investments.
 Consultancy Services
The scope of international marketing also includes offering consultancy services. The exporting
company offers consultancy services by undertaking turnkey projects in foreign countries. For
this purpose, the exporting company sends its consultants & experts in foreign countries who
guide & direct the manufacturing activities on the spot.
 Technical & Managerial Know-how
The scope of international marketing also includes the technical & managerial know-how
provided by the exporting company to the importing company. The technicians & managerial
personnel of the exporting company guide & train the technicians & managers of the importing
company.
Features ofInternational Marketing
 Large Scale Operations
International marketing is always conducted on a large scale. It is done on wholesale basis, to get
the advantages of large scale operations regarding transportations, handling & warehousing.
 Dominance of MNCs & developed countries
MNCs having worldwide contacts dominate the scene of international marketing. MNCs conduct
business more efficiently & economically. MNCs adopt global approach which is needed in
international marketing. Besides MNCs, industrially developed nations also dominate
international marketing because of their competitive & productive capacity. Developed countries
supply goods to all countries & earn huge profits.
 International Restrictions
There are various trade restrictions due to protective policies followed by different countries.
Trade barriers are adopted practically by all countries.
 Presence of Trading Blocs
Certain nations of a region have come together to form trading bloc for their mutual benefits,
economic development & to reduce or eliminate trade barriers among member nations.
International marketing is influenced by the presence of such trading blocs.
 Foreign Exchange Regulations
 Three-faced competition

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Suppliers have to face competition from three angles in international marketing. They have to
face competition from the other suppliers of the exporter`s country, from the local producers of
importing country & from the exporters of competing nations.
 International Forums
International trade is regulated by international forums like WTO & UNCTAD. International
marketers should have a deep knowledge of the forums rules & regulations
 International Marketing Research
In international markets, it is required to know how customers dealers & competitors. In
international marketing, marketing research is a must due to different social, cultural, economic
& political environment of far off markets.
 Sensitive & Flexible
International marketing is very sensitive & flexible in character. Due to political & economic
reasons, a product may suddenly become unpopular or market may come down quickly. The sale
at the international level may be affected by competitors or due to the introduction of a new
product by a competitor.
 Advanced Technology
International marketing is very dynamic & competitive. Thus, organization must be able to sell
goods of bets quality, at competitor’s price. Advanced countries dominate international
marketing because they use advanced or sophisticated technology in production & marketing of
goods. Due to their ability to sell superior quality goods at competitive prices, the advanced
countries are capable of increasing their exports & thereby capturing world market.
 Lengthy & time-consuming
It is so due to long distances, restrictions imposed by different countries, payment difficulties
because of use of different currencies & lengthy procedural formalities
 Wide scope
International marketing has a wide scope. The important areas covered in international marketing
are product planning, product development, pricing, packaging, advertising, branding, marking,
labelling, communication, procedural formalities, sales promotions, international marketing
research etc.
 Long term marketing planning
International marketing needs long term marketing planning, the need for long term planning is
because the marketing situations is different in different countries.
 Advantages to all participating countries

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It helps in having smooth & good relations between countries & thereby ensures world peace.
But the advantages are not shared in fair proportion by all participating countries.
Needfor International Marketing
 International interdependence of countries & growing world population
 No uniform geographic & climatic conditions in all countries
 No uniform production cost in the countries
 Increasing needs of consumers for production & better standard of living to people
 Need of developing closer economic & cultural cooperation between different countries
 Problem of surplus production & scarce production in some countries
 Bridging the gap between developed & developing nations in terms of exchange of goods
& services transfer of technical know-how & skills
 Economic growth of developing countries & peace in the world
 Optimum use of resources
 Technological development
 Increase foreign exchange earnings by more & more exports thereby improving the BOP
Advantages of International Marketing
 Better standard of living
International marketing provides a better standard of living to people in different countries &
raises their welfare. It brings income to the people & thereby provides a higher standard of
living.
 Optimum use of resources
International marketing helps in optimum use of resources. Surplus resources or production can
be exported to other countries.
 Quick industrial development
International marketing helps in quick industrial development of developed & developing
countries. The developed countries give aid, capital, goods & technology to the developing
countries & developing countries supply raw materials &labour to the developed countries.
 Raises the real income & national well-being
In international marketing, every country specializes in the production of that commodity to
which it is best suited to produce, export its surplus produce & import those commodities which
it can get cheaper from other countries.
 Lower prices
International marketing decreases the price of goods & services, all over the world due ot
specialization.

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 Technological development
International marketing through specialization, decreases the prices of goods & services,
increases their demand, thereby consumption, which helps in further specialization &
technological developments.
 Availability of foreign exchange
A country earns forex due to exports & use it for paying essential imports. International
marketing helps in easy availability of forex for import of capital goods, modern technology &
other essential requirements.
 International co-operation & world peace
Due to trade relations, international marketing brings countries close which leads ot co-operation
among the countries.
 Build cultural relations
International marketing alters the quality of life of people. It exchanges goods & services among
the countries & develops closer social & cultural relations between various countries.
 Expansion of tertiary sector
International marketing increases exports, thereby industrial development.
 Special benefits during emergency
 Removal of deficit
International marketing helps in removal of deficit in balance of trade & payments of
participating countries through exports promotion & import substitution.
 Benefits of comparative cost differences
International marketing helps in getting the benefits of comparative cost differences, as
suggested in the theory of comparative costs. The benefits of division of labour& specialization
at the international level are also through international marketing.
Problems in International Marketing
As is said that, “lifeis not bed of roses”, international business is not all that lovely. It has its
problems. The impor‐tant problems include:
• Political Factors:
Political instability is the major factor that discourages the spread of international business. For
example, in the Iran Iraq war, Iraq‐Kuwait war, dismantling of erstwhile USSR, Civil War in
Fiji, Malaysia. and Sri Lanka, military coups in Pakistan, Afghanistan, frequent changes in
political parties in power and thereby changes in government policies in India etc., created
political risks for the growth of international business. Also, latest Indo‐Pak Summit at Agra in
July, 2001 ended in a no compromise situation, which affects international business.

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 HugeForeign Indebtedness:
The developing countries with less purchasing power are lured into a debt trap due to the
operations of MNCs in these countries. For example, Mexico, Brazil, Poland, Romania, Kenya,
Congo, and Indonesia.
• Exchange Instability:
Currencies of countries are depreciated due to imbalances in the balance of payments, political
instability and foreign indebted‐ ness. This, in turn, leads to instability in the exchange rates of
domestic currencies in terms of foreign currencies. For example, Zambia, India, Pakistan,
Philippines depreciated their currencies many times. This factor discourages the growth of
international business.
• Entry Requirements:
Domestic governments impose entry requirements to multina‐tionals. For example, an NINC
can enter Eritrea only through a jointventure with a domestic company. However, with the
establishment of world Trade Organization (WTO), many entry requirements by the host
governments are dispensed with.
• Tariffs, Quotas and Trade Barriers :
Governments of various countries impose tariffs, import and export quotas and trade barriers in
order to protect domestic business. Further, these barriers are imposed based on the political
and diplomatic relations between or among Govern‐ments. For example, China, Pakistan and
USA (before 1998) imposed tariffs, quotas and barriers on imports from India. But the erstwhile
USSR and present Russia liberalized imports from India.
• Corruption:
Corruption has become an international phenomenon. The higher rate bribes and kickbacks
discourage the foreign investors to expand their operations.
• Bureaucratic Practices of Government :
Bureaucratic attitudes and practices of Government delay sanctions, granting permission and
licenses to foreign compa‐nies. The best example is Indian Government before 1991. These
practices make the MNCs to enter other countries.
However, the benefits of international business outweigh the problems. Added to this,
globalization is the order of the day. Most of the countries eliminated the barriers and paved the
way for the growth and expansion of international business. In fact, international business,
during the third millennium (2001 and beyond) is just an extension to interregional business
within a country.
Distinguish betweenDomestic Marketing & International Marketing
Points Domestic Marketing International Marketing
Meaning It is concerned with
identifying anticipating &
satisfying the local
It is concerned with
identifying, anticipating &
satisfying the needs of

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consumer`s needs. consumers in foreign
countries.
Scope It has a narrow scope & is
restricted to the political
boundaries of a country.
It has a wider scope as it
includes the entire world as a
market.
Risk Risk is comparatively less. It
is subject to commercial risk.
Risk is comparatively higher.
It is subject to political &
commercial risks.
Trade barriers No trade barriers Trade barriers like tariffs,
quotas, etc.
Competition Sellers face competition
mainly from domestic
manufacturers / traders
Competition is severe & three
faced i.e. form the other
suppliers of exporters
country, from local producers
of importer`s country & from
exporters of other countries.
Trading Blocs No influence of trading blocs. There is influence of trading
blocs.
Methods of Payments Normally by cash or cheque. Normally by Letter of Credit
or by documentary bills of
exchange.
Procedure & Formalities It involves relatively simple
procedures & formalities.
It involves lengthy &
complicated procedures &
formalities.
Currency Use of single currency Use of multiple currency
Scale of Operations Scale of operations is
comparatively less as goods
are sold within the country
Scale of operations is much
larger as goods are sold in
many countries.
Exchange of Goods Free exchange of goods are
allowed within the country
There are certain restrictions
in exchange of goods.
Language / Culture Involves only one country &
mostly one language & one
culture.
It involves many countries &
thus there are different
languages & culture.
Mobility of Factors of
Production
Free mobility of factors of
production
Lower mobility of factors of
production
Monetary System One monetary & economic
system
Different monetary &
economic system
Realization of Sales
Proceeds
No time limit for realization
of domestic sales proceeds
In India, international
proceeds must be realized
within 180 days
Transport Costs Low High
Basis ofInternational Trade
International trade involves voluntary exchange of goods, services, assets, or money between
residents of two different countries or between different countries. The fundamental question that

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arises for most of us at the thought of international trade is why should a business firms of one
country should to the another country, when the industries of that country also produce goods
and market them. What is the basis of international business?
A number of theories have been developed to explain the basis for international trade. The
different trade theories include theory of absolute advantage, theory of comparative advantage,
and classical trade theory. These theories discuss and analyze different nuances of trade for the
trading partners and deal with the financial dynamics of the trading activity between two
countries
 Theory of comparative advantage
Adam Smith's theory of absolute advantage is a simple explanation of the benefits of
international trade. However, if one country has an absolute advantage in the production all
goods, can there be benefits from trade.
In 1817, David Ricardo, a classical economist developed the principal of comparative
advantage to explain this situation. The principal is based on the relative efficiencies of
production where each country has a comparative advantage in producing the commodity in
which it has the lower opportunity cost.
Opportunity costs are what must be given up in order to consume or produce another good. For
example, going on an overseas holiday may involve giving up the purchase of a new car. The
comparative advantage principle can be illustrated using Tables 3 and 4.
Table 3 Comparative advantages: production before specialization
Wheat (units) Cloth (units)
Australia 20 10
China 5 5
Total Output 25 15
In Table 3, Australia has an absolute advantage in the production of both wheat and cloth. By
using the theory of comparative advantage, both countries can gain from specialization and
trade.
Table 4 Opportunity costs
Opportunity cost
Country 1 unit of wheat 1 unit of cloth
Australia 0.5 (10/20) units of cloth 2 (20/10) units of wheat
China 1 (5/5) units of cloth 1 (5/5) units of wheat
From Table 4:

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• Australia has a comparative advantage in the production of wheat since it has to give up
only 0.5 units of cloth to produce an extra unit of wheat, while China must give up 1 unit
of cloth to produce an extra unit of wheat. So it is more practical for Australia to
specialize in the production of wheat.
• China has a comparative advantage in the production of cloth since it has to give up only
1 unit of wheat to produce an extra unit of cloth, while Australia must give up 2 units of
wheat to produce an extra unit of cloth. Consequently it is more practical for China to
specialize in the production of cloth.
Australia has a comparative advantage in the production of wheat and China cloth. Trade
between the two countries should be beneficial because of the different opportunity costs
for these commodities.
Table 5 Production levels after
specialization
Wheat (units) Cloth (units)
Australia 40 (+20)
0
(‐10)
China 0 (‐5)
1
0
(+5
)
Total output 40 (+15) (net gain)
1
0 (‐5)(net gain)
From Table 5 we can see that total output has increased when countries specialize in the
production of goods and services based on comparative advantage. As both countries are using
their resources more efficiently, trade will lead to higher standard of living than would be
otherwise possible.
International Business Environment
INTERNAL AND EXTERNAL INTERNATIONAL MKTG CONCEPT
The key difference between domestic and international marketing is the multi‐dimensionality
and complexity of foreign country markets a country may operate in. Knowledge and awareness
of these complexity and implications for international marketing is must.
The important environmental analysis model SLEPT (Social, Legal, Economical, Political and
Technological)
1. Social & Cultural Influences
a. SOCIAL: Difference in social conditions, religion and culture determines
whether the customers aresimilar or dissimilar across the globe.
McDonald’s had to understand the same in India when they had to enter such
huge market with its burger. In 1995 / 6 India’s vegetarian market was 40%.
These vegetarians preferred that the burger should be made in a clean and
separate kitchen. Also their love for spicy food was required to be considered.
Among the non‐veg. eaters, their disliking towards pork and beef among mean

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eater was very well known. McDonald’s realize that they need to serve Indians
more than just burger, a burger that satisfies Indians taste.
b. CULTURE: Culture describes the kind of behaviour considered acceptable in
society.
The prescriptive characteristic of culture simplifies a consumer’s decision‐making
process by limiting product choices to those which are socially acceptable. The
same feature creates problems for those products, which are not in time with
culture.
• Coca Cola had to withdraw its 2 liters bottle from Spain market as
Spaniards were not having refrigerator having larger compartments.
Johnson’s floor wax was doomed to failure in Japan as it made the wooden floors
very slippery and Johnson failed to take into account the custom of not wearing
shoes inside the home.
• Coca Cola when introduced in china the name sounded like “KOOKE –
KOULA” meant thirsty mouth, full of candle wax. So they had to change
the name to “KEE KOU KEELE” which meant “joyful taste and
happiness.”
• In Japan, White face is associated with death of mask.
• The size of refrigerators in USA is very big compared to Indian
refrigerators, as women there believe in storing vegetables and other
eatable items, which can be consumed till longer period
of time.
Even the value and beliefs associated with color vary significantly between
different cultures. Blue considered as feminine and worm in Holland, is seen as
masculine and cold in Sweden. Green is a favorite color in Muslims, but in
Malaysia, it is associated with illness. White is associated with death and
mourning in China, Korea and in some traditions in India. Although, the same
color expresses happiness and is color of wedding dress of the bride in English
country.
Such differences suggest that same marketing mix can not be used for all markets.
2. Legal Environment:
Legal systems vary both in content and interpretations. A successful marketer will modify his
marketing strategies in accordance with such variations. Laws affect the marketing mix in terms
of products, price, distribution and promotional activities quite dramatically. For many firms
such laws are burdensome regulations.
For e.g. in Germany environmental laws mean a firm is responsible for the retrieval and disposal
of packaging waste it creates and must produce packaging which is recyclable.
In Canada, if the information does not appear in both French and English, the goods may be
confiscated. An international Marketer should learn about the advertising, packaging, and
labeling regulations in foreign markets.
India has been seen by many firms to be an attractive emerging market having many legal
difficulties, bureaucratic delays and lots of official procedures. Many MNCs have found it
difficult to break such hard structure. Foreign companies are often viewed with suspicion.
However, some firms have been innovative in overcoming difficulties.

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3. Economic Environment:
The economic situation varies from country to country. There are variations in the levels of
income and living standards, interpersonal distribution of income, economic
organization,occupational structure and so on. These factors affect market conditions.
The level of development in a country and the nature of its economy will indicate the type of
products that may be marketed in it and the marketing strategy that may be employed in it. In
high income countries there is a good market for a large variety of consumer goods. But in
low‐income countries where a large segment does not have sufficient income even for their basic
necessities, the situation is quite different.
4. Political Environment:
The political environment of international marketing includes any national or international
political factor that can affect the organization’s operations or its decision‐making. The
tendencies of governments to change regulations can seriously affect an international strategy
providing both opportunities and threat. (1992’s liberalization policy by Narsimha Rao Govt.)
An unstable political climate can expose firms to many commercial, economic and legal risks.
Political risk is defined as being: “A risk due to a sudden or gradual change in a local political
environment that is disadvantageous to foreign firms and markets.”
5. Technological Environment:
The Technological Environment is perhaps the most dramatic force now shaping our destiny. An
international marketer should very well keep in his mind the change taking place in technology
and thereby affecting the product.
New technologies create new markets and opportunities. However, every new technology
replaces an old technology. Xerography hurt carbon‐paper industry, computer hurt typewriter
industry, and examples are so on. Any international marketer, when ignored or forgot new
technologies, their business has declined. Thus, the marketer should watch the technological
environment closely. Companies that do not keep up with technological changes, soon find their
products outdated.
The United States leads the world in research and development spending. Scientists today are
researching a wide range of promising new products and services ranging from solar energy,
electric car, and cancer cures. All these researches give a marketer an opportunity to set his
products as per the current desired standard. The challenge in each case is not only technical but
also commercial that means manufacture a product that can be afforded by mass crowd.
Stages of International Marketing
 No direct foreign Marketing
 No activity in cultivating customers outside domestic market
 Distributors / Dealers / Foreign Customers coming directly to the firm
 Web Pages (Indication)
 Infrequent Foreign Marketing
 Product surplus in domestic market
 No intention of maintaining continuous market representation
 Few companies fir this model as customers always look for long term commitment

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 Regular Foreign Marketing
 Marketing goods on a continuous basis to foreign markets
 Overseas Middlemen / Own Sales force / Sales subsidiary
 Adaptation of the product to the foreign market
 International Marketing / Multinational Marketing
 Fully committed & involved in international marketing o Markets all over the world
 Production & marketing activities outside the home market
 The company formulates a unique strategy for every country with which it conducts
business E.g. Balsara – Mint / Cinamint
 Global Marketing
 At this stage, companies treat the world, including their home market as one
 Maximize returns through global standardization of its business activities
 Efficiency of scale by developing a standardized product, of dependable quality, to be
sold at a reasonable price to a global market
 The company standardizes its logo, image, store, processes
 Wherever necessary due to cultural differentiation adaptations are made
International Business Approach
International business approaches are similar to the stages of internationalization or
globalization. Douglas Wind and Pelmutter advocated four approaches of international business.
They are:
1. Echnocentric Approach
 The domestic companies normally formulate their strategies.
 Their product design and their operations towards the national markets, customers and
competitors. But, the excessive production more than the demand for the product, either
due to competition or due to changes in customer preferences push the company to export
the excessive production to foreign countries.
 The domestic company continues the exports to the foreign countries and views the
foreign markets as an extension to the domestic markets just like a new region.
 The executives at the head office of the company make the decisions relating to exports
and, the marketing personnel of the domestic company monitor the export operations
with the help of an export department.
 The company exports the same product designed for domestic markets to foreign
countries under this approach. Thus, maintenance of domestic approach towards
international business is called ethnocentric approach.
2. Polycentric Approach
 The domestic companies, which are exporting to foreign countries using the ethnocentric
approach, find at the latter stage that the foreign markets need an altogether different
approach. .
 Then, the company establishes a foreign subsidiary company and decentralists all the
operations and delegates decision making and policy‐making authority to its executives.

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 In fact, the company appoints executives and personnel including a chief executive who
reports directly to the Managing Director of the company.
 Company appoints the key personnel from the home country and the people of the host
country fill all other vacancies.
3. Regiocentric Approach
 The company after operating successfully in a foreign country, thinks of exporting to the
neighboring countries of the host country.
 At this stage, the foreign subsidiary considers the regions environment (for example,
Asian environment like laws, culture, policies etc.) for formulating policies and
strategies.
 However, it markets more or less the same product designed under polycentric approach
in other countries of the region, but with different market strategies.
4. Geocentric approach
 Under this approach, the entire world is just like a single country for the company.
 They select the employees from the entire globe and operate with a number of
subsidiaries.
 The head‐ quarter coordinates the activities of the subsidiaries.
 Each subsidiary functions like an independent and autonomous company in formulating
policies, strategies, product design, human resource policies, operations etc.
Trade Barriers
It refers to the government policies & measures which obstruct the free flow of goods & services
across national borders. Trade barriers are imposed on exports & imports.
Objectives of Trade Barriers
 To protect domestic industries or certain other sector of economy from foreign
competition
 To guard or protect the economy against dumping by rich countries with surplus
production
 To promote indigenous R&D & to promote new industries
 To conserve the forex resources of the country
 To make the BOP position more favourable
 To curb conspicuous consumption
 To counteract trade barriers imposed by other countries
 To encourage the use of domestic production in the domestic market & thereby to make
the country strong & self-sufficient
 To mobilize revenue for the government
 To discriminate against certain countries
 To make the economy self-reliant.

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Types / forms of Trade Barriers
I. Tariff Barriers
Tariff refers to the duties or taxes imposed on internationally traded products when they cross the
international borders.
Types of Tariffs:
a. On the basis of the origin & destination of goods crossing the national
boundary:
 Export duties
It is a tax imposed on a commodity originating from the duty-levying destined for some other
country.
 Import Duties
It is tax imposed on a commodity originating abroad & destined for the duty-levying country.
 Transit Duties
It is a tax imposed on a commodity crossing the national frontier originating from & destined for
other countries.
b. On the basis of quantification of the tariff:
 Specific Duties
It is a flat sum per physical unit of the commodity imported or exported. It is a fixed amount of
duty levied upon each unit of the commodity imported.
 Ad-Valorem Duties
They are levied as a fixed percentage of value of the commodity imported / exported.
 Compounded Duties
When a commodity is subject to both specific duty & ad-valorem duty, tariff is a compounded
duty.
c. On the basis of application between different countries:
 Single column Tariff / Uni-lateral Tariff:
It provides a uniform rate of duty for all like commodities without making any discrimination
between countries.
 Double Column Tariff:
It discriminates between countries because there are two rates of duty on some or all
commodities.
 Triple-Column Tariff:
It consists of 3 autonomously determined tariff schedules the general, the intermediate & the
preferential. The general & intermediate tariffs are similar to the maximum & minimum rates
under the double column tariff system. The preferential rate was generally applied in the case of
trade between the mother country & its colonies.
d. On the basis of purpose they serve
 Revenue Tariff
Sometimes the main intention of the government in imposing tariffs may be to obtain revenue.
When raising the revenue is the primary motive, the rates of duty are generally low lest imports
be highly discouraged.

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 Protective Tariff:
It is intended mainly to give protection to the domestic industries from foreign competition.
Naturally the duty rates are very high inorder to curtail imports.
 Countervailing Duties:
They may be imposed on certain imports when they have been subsidized by foreign
governments. They are generally penalty duties in addition to the regular rates.
 Anti-Dumping Duties:
They are imposed to imports when are being dumped on the domestic markets at a price either
below the production costs or substantially lower than their domestic prices. They are generally
penalty duties in addition to the regular rates.
Advantages / Benefits of Tariff Barriers
 Imports from abroad are discouraged or even eliminated to considerable extent.
 Protection is given to home industries & manufacturing activities. This facilitates
increase in the domestic production.
 Consumption of foreign goods reduces to a considerable extent & the attraction for
imported goods is brought down considerably.
 Tariffs give substantially revenue to the government.
 Tariffs remove or at least reduce the deficit in the balance of trade & balance of payments
of a country.
 Tariffs encourage research & development activities within the country. They create
favourable atmosphere for industrial development & generation of employment
opportunities.
 Tariffs may be used to influence the political & economic policies of other countries.
 Tariffs avoid competition fromforeign manufacturers & this may lead to monopolistic
tendencies among domestic industries.
II. Non-Tariff Barriers
Non-tariff barriers to trade (NTBs) or sometimes called "Non-Tariff Measures (NTMs)"
are trade barriers that restrict imports, but are unlike the usual form of atariff; And Tariff Barriers
restricts Exports. Some common examples of NTB's are anti-dumping measures
and countervailing duties, which, although called non-tariff barriers, have the effect of tariffs
once they are enacted. Example of Tariff Barrier is Export Duty.
Some of non-tariff barriers are not directly related to foreign economic regulations but
nevertheless have a significant impact on foreign-economic activity and foreign trade between
countries.
Trade between countries is referred to trade in goods, services and factors of production. Non-
tariff barriers to trade include import quotas, special licenses, unreasonable standards for the
quality of goods, bureaucratic delays at customs, export restrictions, limiting the activities of
state trading, export subsidies, countervailing duties, technical barriers to trade, sanitary and
rules of origin, etc. Sometimes in this list they include macroeconomic measures affecting trade.
A non-tariff barrier is any barrier other than a tariff that raises an obstacle to free flow of goods
in overseas markets. Non-tariff barriers, do not affect the price of the imported goods, but only
the quantity of imports.

VEDA TUTORIALS 17
Types of Non-Tariff Barriers
a. Quota System:
Under this system, a country may fix in advance, the limit of import quantity of a commodity
that would be permitted for import from various countries during a given period. The quota
system can be divided into the following categories:
 Tariff/Customs Quota: Certain specified quantity of imports is allowed at duty
free or at a reduced rate of import duty. Additional imports beyond the specified
quantity are permitted only at increased rate of duty. A tariff quota, therefore,
combines the features of a tariff and an import quota.
 Unilateral Quota: The total import quantity is fixed without prior consultations
with the exporting countries.
 Bilateral Quota: In this case, quotas are fixed after negotiations between the quota
fixing importing country and the exporting country.
 Multilateral Quota: A group of countries can come together and fix quotas for
exports as well as imports for each country.
b. Import Licensing:
It is useful for restricting the total quantity to be imported. In this system, imports are allowed
under license. Importers have to approach the license authorities for permission to import certain
commodities. Foreign exchange for imports are provided against such license issued.
c. Consular Formalities:
A number of importing countries demand that the shipping documents should include consular
invoice certified by their consulate stationed in the exporting country. The purpose of consular
formalities is to restrict imports to some extent & not to allow free imports commodities which
are not necessary or harmful to national economy or social welfare.
d. Preferential Arrangements through trading blocs:
Some nations form trading groups for preferential arrangements in respect of trade amongst
themselves. Imports from member countries are given preferences, whereas, those from other
countries are subject to various tariffs and other regulations.
e. Customs Regulations:
Customs regulations & administrative regulations are very complicated to many countries & are
used as invisible tariffs for discouraging imports.
f. State Trading:
In some countries like India, certain items are imported or exported only through canalizing
agencies like MMTC. Individual importers or exporters are not allowed to import or export
canalized items directly on their own.
g. Foreign Exchange Regulations:
The importer has to ensure that adequate foreign exchange is available for import of goods by
obtaining a clearance from exchange control authorities prior to the concluding of contract with
the supplier.

VEDA TUTORIALS 18
h. Prior Import Deposits:
The importers are asked to deposit even 100% of import value of the goods in advance with a
specific authority. Then, the importers are given permission to import goods.
Effects of Barriers on International Trade
I. Effects / Impact of Tariff:
a. Protective Effect:
An import duty is likely to increase the price of the imported goods. This increase in the price of
imports is likely to reduce imports & increase the demand for domestic goods. Import duties may
also enable the domestic industries to absorb higher production costs. Thus, as a result of the
protection accorded by the tariff, the domestic industries are able to expand the output.
b. Consumption Effect:
The increase in prices resulting from the import duty usually reduces the consumption capacity
of the people.
c. Redistribution Effect:
If the import duty causes an increase in the price of the domestically produced goods, it amounts
to redistribution of income between the consumers & producers in favour of the producers.
d. Revenue Effect:
A tariff revenue increased revenue for the government.
e. Income & Employment Effect:
Tariff may cause a switch over from spending on foreign goods to spending on domestic goods.
This higher spending within the country may cause an expansion of domestic income &
employment.
f. Competitive Effect:
The competitive effect of tariff is, in fact, an anti-competitive effect in the sense that protection
of domestic industries from foreign competition, may enable the domestic industries to obtain
monopoly power with all its associated evils.
g. Balance of Payments Effects:
Tariffs by reducing the volume of imports, may help the country to improve its BOP position.
II. Effect / Impact of Quotas:
a. Price Effect:
As quotas limit the total supply, it may cause an increase in the domestic prices.
b. Consumption Effect:
If quotas leads to an increase in prices, it may compel people to reduce their consumption of the
commodity subject to quotas or some other commodities.
c. Protective Effect:
By protecting domestic industries against foreign competition to some extent, quotas encourage
the expansion of domestic industries.
d. Redistributive Effect:
Quotas will also have redistributive effect, if the fall in supply due to the impact restrictions
enables the domestic producers to raise prices. The rise in prices will result in redistribution of
income between the producers & consumers in favour of the producers.
e. Revenue Effect:
Quotas may also have a revenue effect. As quotas are administered by means of license,
government may obtain some revenue by charging a license fee.

VEDA TUTORIALS 19
Tariff Barriers Non-Tariff Barriers
Meaning It means duties & taxes
imposed on imported goods
It means quantitative
restrictions imposed to
restrict imports
Kinds Import duties, specific duties,
ad-valorem duties,
countervailing duties,
protective duties etc.
Quotas, import licensing,
consular formalities, foreign
exchange restrictions etc.
Effects Affects the prices of imported
goods.
Affects the quantity of
imported goods
Revenue Brings huge revenue to the
government
Do not bring revenue to the
government.
Protection Do not provide direct
protection to home industries
Provide direct protection to
home industries
Formation of monopoly
groups
Is not encouraged Is encouraged
Effectiveness Not very effective Very effective to restrict
imports
Flexibility Less flexible More flexible
Effects on imports Indirectly restricts imports Directly restricts imports
Assessment of costs It is easier for importers to
assess the costs under tariff
systems
It is difficult to assess costs.
Time required Charging import duties takes
less time
Import licensing & other
formalities takes more time.
Specific Duty Ad-Valorem Duties
Meaning It is imposed on each unit of a
commodity imported or
exported
It is duty levied on total value
of commodity imported or
exported.
Convenience It is easy to calculate &
administer because the
number of units imported or
exported is multiplied by the
rate of duty
It is difficult to calculate
because it is requires proper
assessment of the value of
goods imported or exported.
Popularity It is not very popular though
it has advantages over ad
valorem duty
It is very popular & most of
the countries charge tariffs
based on this system only.
Suitability It is levied on such goods
whose quantification is
possible
It is levied on such goods
whose quantification in terms
of numbers is not possible
Method of Charges Duty charges depends upon
the value of imported goods
which is judged on the basis
of model & make
Duty charge on flat rate basis
limited to the physical
features of the commodity

VEDA TUTORIALS 20
specifications
Main Considerations Physical units of commodity
is considered & value is not
considered.
The value of goods is
considered & physical units
of commodity is not
considered.
TRADE BLOC
Along with trade barriers, there are trade blocs among the countries of the world. These blocs
offer special concessions to members of the group but impose restrictions on the imports from
the non‐ member countries. As a result, these trade blocs are harmful to the growth of free
international trade. Efforts should be made to remove such trade blocs so as to have free trade
among the nations of the world. Unfortunately, efforts in this direction by WTO are not effective.
Trade blocs are groups of countries that have established special preferential arrangements
governing trade between members. Although in some cases the preferences‐such as lower tariff
duties or exemptions from quantitative restrictions the general purpose of such arrangements is
to encourage exports by bloc members to one another‐sometimes called intra‐trade.
Objectives of Trading Blocs
 To remove or at least to reduce trade barriers among the member‐countries of the group.
To impose common external tariff and non‐tariff barriers on non‐member countries.
 To bring integration of economies of member countries through free transfer of labour,
capital and other factor of production.
 To maintain cordial economic, political, cultural and social relations among the members
of the group.
 To provide assistance to member countries of the group in all possible ways in solving
their current economic problems.
Types of Trading Blocs
1. FREE TRADE AREA: In Free Trade Area all barriers to the trade of goods and services
amongmember countries are removed. In an ideal free trade area, no discriminatory
tariffs, quotas, subsidies o administrative impediments would be allowed to distort trade
between member countries. Each country however, is allowed to determine its own trade
policies with regard to non‐members. For e.g. there is a free trade agreement known as
NAFTA (The North American Free Trade Agreement) between three counties; USA,
Canada and Mexico.
2. Custom Union: A Custom Union represents the next stage in economic cooperation.
Membercountries here not only remove trade restrictions for members but also adopt a
uniform commercial policy (Common external tariff) against non‐members. A customs
union brings more economic integration as compared to free trade area. Custom Union
exists between France and Monaco, Italy and San Marino, to name some examples.
3. Common Market: A Common Market is a step ahead of custom union. It eliminates all
tariffsand other restrictions on internal trade, adopts a set of common external tariffs and
removes all restrictions on free flow of capital and labor among member nations. Thus, a
common market is a common marketplace for goods as well as for services. Unlike a
custom Union, a common Market allows free movement of factors necessary to

VEDA TUTORIALS 21
production. Latin America possesses three common markets: The Central American
Common Market (CACM), the Andean Common Market, and the Southern Cone
Common Market.
Economic Union: It is a step ahead to common market. It has all features of common
market and also uniformity in respect of monetary and fiscal policy of member countries.
Member countries are expected to pursue common fiscal and monetary policies.
Positive & Negative Effects (implications) of Trade Blocs in International Marketing
A. Positive Effects of Trading Blocs
 Economics Integration:
Trading blocs represent various forms of economic integration in the region. It is process that
unifies different types of independent economies into a larger entity.
 Co-operative Spirit:
Co-operative spirit & co-ordination among nations has developed through creation of trading
blocs. Trading blocs also discourage discrimination in any form & application of trade
restrictions.
 Expansion of Markets:
Formation of trading blocs broadens the scope of regional markets. Due to reduction or
elimination of trade barriers among member nations within the countries of the trading blocs.
 Growth & Development of Region:
Trading blocs helps in the growth & development of the region. Due to trading blocs, the
individual companies of member nations can enter into joint ventures & mergers to consolidate
their position.
 Uniform Policies:
Member countries within a bloc have to function under common parameters & uniform policies.
This has ensured reduction in transaction costs & time & better control on the entry & exit of
goods. Even national policies are tailored to meet the requirements of the trading blocs.
 Increase in trade:
The policies & systems of trading blocs has generated better prospects or traders in that region,
with the result that there is enhanced trade activity within a bloc. This has contributed to the
rapid increase in the export & import activities of member nations & in their trade revenues.
Trading blocs helps to increase the exports of member nations due to rapid industrialization. The
growth in the region generates more income, which leads to more purchasing power & hence
more imports.
 Product & Market Development:
Removal of trade barriers has encouraged countries to move from unilateral to multilateral
trading. It basically implies that markets have expanded. This has resulted in greater
competition& has brought a greater variety of enterprises & products.
 Benefits to consumers of member countries:
Consumers of member-nations can be greatly benefitted due to the formation of trading blocs.
Greater trade activity would obviously benefit the consumers of that region. They now have
access to a wider variety of products competitive prices. Besides, the purchasing power of the
people have lastly improved because of better employment opportunities.
 Free transfer of resources / factors:

VEDA TUTORIALS 22
Trading blocs may allow its member nations for an unrestricted or free transfer of resources or
factors of production like labour& capital, across the borders of member nations, as is being
done by EU.
 Creates cordial / better relations:
Trading blocs bring economic, political & cultural integration of member nations. This helps to
build & maintain better economic, political & social relations between members of the bloc. This
helps in avoiding disputes, peaceful relations among member nations.
B. Negative Effects / Impacts of Trading Blocs
 Common External Barriers:
The member countries of the trading blocs may impose common external barriers on non-
members. The common external barriers in the form of tariffs & non-tariff makes it difficult for
non-members to trade with members of a trading blocs. By keeping the world market out,
members may suffer way of not getting access to a wider & better spread.
 Collective Bargaining by Member Nations:
Collective bargaining of the members of a trading bloc with members on trade related issues /
matters put the non-members disadvantage.
 Affects Competition:
Formation of trading blocs affects free & fair competition at global level. Competition among
member countries is reduced. But non-members countries have to face collective competition
from members of the trading blocs.
 Affects Global / International Trade:
Trading blocs create barriers in the growth of global trade artificially.
 Problems for non-members:
The non-members nations of a trading bloc face many problems like high tariffs, import
restrictions etc.
 Loss of political sovereignty:
The political sovereignty of individual countries is lost due to trading blocs, since the national
policies of the member countries would be forced upon them externally by dominating members
of the trading blocs.
WTO & Trade Liberalization
The World Trade Organization (WTO) is an intergovernmental organization which
regulates international trade. The WTO officially commenced on 1 January 1995 under
the Marrakech Agreement, signed by 123 nations on 15 April 1994, replacing the General
Agreement on Tariffs and Trade (GATT), which commenced in 1948. The WTO deals with
regulation of trade between participating countries by providing a framework for negotiating
trade agreements and a dispute resolution process aimed at enforcing participants' adherence to
WTO agreements, which are signed by representatives of member governmentsand ratified by
their parliaments. Most of the issues that the WTO focuses on derive from previous trade
negotiations, especially from the Uruguay Round (1986–1994).
The WTO is attempting to complete negotiations on the Doha Development Round, which was
launched in 2001 with an explicit focus on developing countries. As of June 2012, the future of
the Doha Round remained uncertain: the work programme lists 21 subjects in which the original
deadline of 1 January 2005 was missed, and the round is still incomplete. The conflict between
free trade on industrial goods and services but retention of protectionism on farm subsidies to

VEDA TUTORIALS 23
domestic agricultural sector (requested by developed countries) and the substantiation of fair
trade on agricultural products (requested bydeveloping countries) remain the major obstacles.
This impasse has made it impossible to launch new WTO negotiations beyond the Doha
Development Round. As a result, there have been an increasing number of bilateral free trade
agreements between governments. As of July 2012, there were various negotiation groups in the
WTO system for the current agricultural trade negotiation which is in the
condition of stalemate.
The WTO's current Director-General is Roberto Azevêdo, who leads a staff of over 600 people
in Geneva, Switzerland. A trade facilitation agreement known as the Bali Package was reached
by all members on 7 December 2013, the first comprehensive agreement in the organization's
history
Objectives of WTO
 Trade without discrimination:
It is through the application of Most Favoured Nation (MFN) principle. According to MFN
clause, a member nation of WTO must give the same preferential treatment to other member
nations which it gives to any other member nations.
 Settlement of disputes:
Settlement of disputes between the member countries through consultation, conciliation &
through dispute settlement procedure, as a last resort.
 Raising Standard of Living:
Raising standard of living of the people of member countries & creation of full employment of
the citizens of member countries.
 Optimum utilization of the world`s productive resources:
Ensuring optimum use of world`s resources & thereby expanding world production & trade of
goods & services.
 Growth of underdeveloped countries or Less DevelopedCountries (LDCs)
Recognizes the need for positive efforts designed to ensure that developing countries, especially
the LDCs get a better share of growth in international trade.
Functions of WTO
 Administration & implementation of various agreements signed at the Uruguay
Conference & thereafter by WTO
 Supervising the implementation of tariff cuts averaging 37%as agreed by the member
nations
 Examination of the foreign trade policies of the member nations & to bring these policies
in line with the WTO guidelines.
 Collection of information about export-import trade, statistics related to imports &
exports & policies & measures taken by the member countries.
 Settlement of trade disputes through WTO Dispute Settlement Body
 Consultancy services to member countries
 Provision of common platform for free & fruitful communication, dialogue, exchange &
negotiations

VEDA TUTORIALS 24
 Technical assistance & training programmes co-operating with other international
negotiations.
GATT WTO
Birth 1947 1995.
Revised version of GATT
1947
Origin 3rd pillar of Bretton Woods
Institutions
Successor to GATT (A
Replacement)
Institution Only set of rules with no
institutional foundation
Permanent body with
Secretariat
Membership 23 (original) 135 (21st May 1999)
Objective World Trade Liberalization Same with well-defined rules
Coverage Trade in Goods Addl. Areas like Investment
Services, Agriculture,
Textiles
Cross Retaliation Not Allowed Allowed
Structure Provisional Agreement Permanent Commitment
Dispute Settlements Slow & ineffective Quick & Automatic
Working Ad-hoc Rule-based
Details of Important Trading Blocs
1. Association of South East Asian Nations (ASEAN)
The Association of Southeast Asian Nations or ASEAN was established on 8 August 1967 in
Bangkok by the five original Member Countries, namely, Indonesia, Malaysia, Philippines,
Singapore, and Thailand. Brunei Darussalam joined on 8 January 1984, Vietnam on 28 July
1995, Laos and Myanmar on 23 July 1997, and Cambodia on 30 April 1999.
OBJECTIVES
The ASEAN Declaration states that the aims and purposes of the Association are:
(i) To accelerate the economic growth, social progress and cultural development in the
region through joint endeavors.
(ii) To promote regional peace and stability through abiding respect for justice and the
rule of law in the relationship among countries in the region and adherence to the
principles of the United Nations Charter.
(iii) To maintain close cooperation with the existing international and regional
organizations
with similar aims.
WORKING OF ASEAN
The member countries of ASEAN have Preferential Trading Arrangements (PTA), which
reduces tariffs on products traded among member countries. In 1992, ASEAN developed a
Common Effective Preferential Tariffs (CEPT) plan to reduce tariffs systematically for
manufactured and processed products.
The members have also established a series of co‐operative efforts to encourage joint
participation in industrial, agricultural and technical development projects and to increase foreign

VEDA TUTORIALS 25
investments in their economies. These efforts include an ASEAN finance corporation, the
ASEAN Industrial Joint Ventures Programme (AJIV) etc. ASEAN nations have introduced some
programmes for greater diversification in their economies.
India and ASEAN
India is interested in maintaining close economic relations with the members of ASEAN, as
these countries are closer to India. The ASEAN countries are offering co‐operation to India in
the field of trade, investment, science and technology and training of personnel. Also, India’s
trade with ASEAN countries is satisfactory in recent years.
2. LAFTA (LATIN AMERICAN FREE TRADE ASSOCIATION)
LAFTA was established in February 1960 under the Treaty of Montevideo. The member
countries of the association are Argentina, Brazil, Columbia, Chile, Ecuador, Mexico, Paraguay,
Peru, Uruguay, Venezuela and Bolivia.
The main objective of the association is to build up a common market for South American
countries and thereby to bring about a gradual reduction in trade barriers among member
countries. LAFTA as a trade bloc wants to stimulate intra‐Latin American trade and also to
increase Latin American’s declining share in world trade. However, LAFTA could not emerge as
a powerful economic union due to non‐ cooperation among the member countries. The member
countries have been competing among themselves for promoting their exports. Political
instability among the member countries is another cause responsible for making this union weak
and ineffective. Due to lack of understanding and mutual trust, the integration among the
member countries is not effective.
In recent years, the Latin American debt crisis has eroded some of the industrial progress that the
countries had made and has forced them to rely on primary product exports to patch up their
debt. In 1989, Andean countries made a renewed effort to revive regional co‐operation with new
measures. LAFTA was replaced (renamed) by the Latin American Integration Association
(LAIA) with the signing of the Montevideo Treaty of 1980. The achievements of LAIA are also
moderate.
An 'advising bank' is a correspondent of a bank which issues a letter of credit, and, on behalf of
the issuing bank, the advising bank notifies the beneficiary of the terms of the credit, without
engagement on its part to pay or guarantee the credit.
3. EUROPEAN UNION:
As a major center of power in the global economy, the European Union (EU) is second only to
the United States. In 2002, GDP of EU was US$ 8531 bn. This constituted 26.6 % of the global
GDP as compared to 32.5 % for the US and 12.2 % for Japan. Today after a number of Eastern
European Countries joined the EU, it is a bloc of 25 counties with a population of over 450 mn.
The EU also includes Germany, UK, France, Italy and Spain, which are respectively 3rd, 4th, 5th,
7th, and 9th largest economies in the world. Thus EU presents an enormous export and
investorarket that is both mature and sophisticated.
In 2004, EU accounted for 35.1 % of global merchandise exports as compared to 11.1 % by the
US, valued at US$ 3,300 bn.
About the EU: The EU is an organization of European Countries dedicated to increasing
economicintegration and strengthening cooperation among its members. The EU has its
headquarters in Brussels, Belgium. The union consists of 25 members namely, Belgium,

VEDA TUTORIALS 26
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, UK,
Spain, Austria, Finland, Sweden, Czech Republic, Hungary, Latvia, Malta, Poland, Slovakia,
Cyprus, Estonia, Lithuania and Slovenia.
Objectives of the EU: Its principal goal is to promote and expand cooperation among members
states ineconomics, trade, social issues, foreign policies, security, defence, and judicial matters.
Another major goal of the EU is to implement the Economic and Monetary Union, which
introduced a single currency, the Euro for the EU members.
The Single Market and Common Commercial Policy: The single market refers to the creation
of a fullyintegrated market within the EU, which allows for free movement of goods, services
and factors of production. The EU, in conjunction with Member States, has a number of policies
designed to assist the functioning of the market. Some of the policies are given below:
Competition Policy: The main competition lied in energy and transport sector. The union
designed thisstrategy to prevent price fixing, collusion (secret agreement), and abuse of
monopoly.
Free movement of goods: A custom union covering all trade in goods was established and a
commoncustoms tariff was adopted with respect to countries outside the union.
Services: Any member nation has a right to provide services in other Member States.
Free movement of persons: Any citizen of EU member state can live work in any other EU
member state Capital: There are no restrictions on the movement of capital and on payments
with the EU andbetween member states and third countries.
Trade between the European Union and India
India was one of the first Asian nations to accord recognition to the European Community in
1962. The EU is India’s largest partner and biggest source community in 1962. The EU is
India’s largest trading partner and biggest source of FDI. It is a major contributor of
developmental aid and an important source of technology. Over the years, EU – India trade has
grown from 4.4 bn to 28.4 bn US$.
Top items of trade between India and EU
India’s exports to EU % India’s Imports from EU %
Textile and clothing 35 Gemstones and jewellery 31
Leather and leather products 25 Power generating equipment 28
Gemstones and jewellery 12 Chemical products 15
Agriculture products 10 Office machinery 10
Chemical products 9 Transport equipment 6
 India is EU’s 17th largest supplier and 20th largest destination for exports.
 India’s strength lies in its traditional exports like textiles, agriculture and marine
products, gems and jewellery, leather and electronics products.
 Tariff and non‐tariffs have been reduced, but compared to International standards they
are still high.
 Under the Bilateral trade between India and EU, it accounts for 26% of India’s exports
and 25% of its imports.
 Under the same trade there is an agreement on sugarcane. The EU has undertaken to buy

VEDA TUTORIALS 27
and import a specific quantity of sugarcane, raw or white, from India at guaranteed price,
the prices are fixed annually.
MULTINATIONAL CORPORATIONS (MNCs)
A Multinational Corporation is a business unit which operates simultaneously in different part of
world either by manufacturing or marketing or both by keeping its headquarter elsewhere as a
strategic nerve centre.
Although MNC took birth in the early 1860s, it was after the Second World War that the
Multinationals have grown rapidly.
Generally, an MNC meets five criteria.
1. It operates in many countries at different levels of economic development.
2. Its local subsidiaries are managed by nationals.
3. It maintains complete industrial organizations including R & D and manufacturing
facilities, in several countries.
4. It has direct investment base in different countries.
5. It derives from 20 % to 50 % or more of its net profits from foreign operations.
Jacques Maisonrouge, president of IBM world trade corporations defines an MNC as a
company thatmeets five criteria:
1) It operates in many countries at different levels of economic developments.
2) Nationals manage its local subsidiaries.
It maintains complete industrial organizations, including R and d and manufacturing facilities in
several countries.
4) It has a multinational central management.
5) It has multinational stock ownership.
James C. Baker also defines MNC’s as a company:
1) Which has direct investment base in several countries.
2) Which generally derives from 20% to 50% or more its net profits from foreign
operations.
3) Whose management makes policy decisions based on the alternatives available anywhere
in the world.
A significant share of the world’s industrial investment, production, employment and trade are
accounted for by these more than 65000 MNC’s with over 8,00,000 affiliates.
Characteristics of MNC`s
 Large Size:
MNC`s are very huge in size. The worth of their assets, sales, profits in multi-crores which is
sometimes more than the GDP of many nations.
 Worldwide activities:
The head office of the parent company is located in one of the country but the activities are
spread all over the world. The parent company holds 51% to 100% of the subsidiary.
 Multinational Management:

VEDA TUTORIALS 28
Activities of MNC`s are managed at international level. The managing committees of these
corporations have experts from various countries of the world.
 Multinational ownership:
Share in capital of these corporations are held by the citizens of many countries. Buying &
selling of these shares take place at international level.
 Huge financial resources:
Resources of MNC`s are huge. Their stock of capital in millions & billions. So they have large
capital base.
 Varied activities:
The scope of MNC`s are not confined to one activity.
 Oligopoly form of market:
Oligopoly form of market is one in which the number of seller are limited, M+NC`s generally
involve themselves in the production of those goods which have small number of producers.
 Advanced technology:
MNC`s use new & updated production techniques. They spend a lot of money on R&D.
 Brand reputation:
MNC`s enjoy marketing superiority due to well reputed brands, international image & control
over the prices of the product.
 Transfer of resources:
The resources, techniques, managerial & technical know-how, raw materials etc. are transferred
from the parent corporation to its subsidiary companies in other countries.
Merits of MNC`s
Multinationals offer advantages to host countries as well as to the countries of their origin as
explained below: ‐
Advantages of the MNC’s to the host countries: ‐
1. Raise the rate of investment:
MNC’s raise the rate of investment in the host countries andthereby bring rapid industrial growth
accompanied by massive employment opportunities in different sectors of the economy.
2. Facilitate transfer of technology:
Multinationals act as agents for the transfer of technology todeveloping countries and thereby
help such countries to modernize there industries. They remove technological gaps in developing
countries by providing techno‐managerial skills.
3. Accelerate industrial growth:
Multinationals accelerate industrial growth in host countriesthrough collaborations, joint
ventures and establishment of subsidiaries and branches. They facilitate economic growth
through financial, marketing and technological services. MNC’s are rightly called “messengers
of progress”.
4. Promote export and reduce imports:
MNC’s help the host countries to reduce the imports andpromote the exports by raising domestic

VEDA TUTORIALS 29
production. Marketing facilities at global level are provided by MNC’s due to their global
business contacts.
5. Provide services to professionals:
MNC’s provide the services of the skilled professionalmanagers for managing the activities of
the enterprises in which they are involved/interested. This raises overall managerial efficiency or
enterprises connected with multinationals. MNC’s bring managerial revolution in host countries.
6. Facilitate efficient utilization of resources:
Multinationals facilitate efficient utilization ofresources available in host countries. This leads to
economic development.
7. Provide benefits of R and D activities:
Multinationals has enormous resources at their disposal.Some are utilized for R and D activities.
The benefits of R and D activities are passed on to the enterprises operating in the host countries.
8. Support enterprises in host countries:
MNC’s support to enterprises in the host countries inorder to support their own operations
indirectly. This is how MNC’s support enterprises in the host countries to grow. Even consumers
get new goods and services due to the operations of MNC’s.
9. Break domestic monopolies:
MNC’s raise competition in the host countries and thereby breakdomestic monopolies.
Advantages of MNC`s to Countries of their Origin
1) Facilitate inflow of foreign exchange:
MNC’s collect funds from the enterprises of other countries in the form of fees, royalty, and
service charges. This money is taken to the country of their origin. MNC’s make their home
countries rich by facilitating inflow of foreign exchange from other countries.
2) Promote global co‐operation:
MNC’s provide co‐operation to poor or developing countries to develop their industries. The
countries of their origin participate in such international co‐ operation, which is beneficial to all
countries‐ rich and poor.
3) Ensure optimum utilization of resources:
MNC’s ensure optimum utilization of natural and other resources available in their home
countries. This is possible due to their worldwide business contacts.
4) Promote bilateral trade relations:
MNC’s facilitate bilateral trade relations between their home countries and the other countries
with which they have business relations.
Demerits of MNC`s
1) Provide outdated technologies:
MNC’s design the technologies, which can be used in differentcountries. They don’t supply
technology to poor countries for industrial development but for profit maximization. The
technologies designed for profit maximization and not purely for meeting the needs of
developing countries. The technologies supplied may be costly and may be outdated and obsolete
or may not be suitable for the needs of developing countries.
2) Harm the national interests:
The activities of MNC’s in the host countries may be harmful tothe national interests as MNC’s
are solely guided by the profit maximization. They ignore the interests of host countries. MNC’s
even make profits at the cost of developing countries.
3) Charge heavy fees:

VEDA TUTORIALS 30
MNC’s charge heavy fees and service charges from the enterprises in thehost countries. They
repatriate profits of their subsidiaries to their home countries. This leads the outflow of countries.
4) Developmonopolies:
MNC’s restrict competition and acquire monopoly power in certain areasin the host countries.
5) Use resources recklessly:
MNC’s use the resources in the host countries in a very recklessmanner, which leads to fast
reduction of non‐renewable natural resources.
6) Dominate domestic policies:
MNC’s use their money power for political purposes. They takeundue interest in political matters
in the host countries. MNC’s are being openly termed as an extension of the imperialistic forces.
7) Adverse effects on life style/culture in the host countries:
MNC’s create demand for goodsand services in developing countries through advertising and
sales promotion techniques. As a result, people purchase costly/ luxury goods which are not
really useful nor within their capacity to purchase. MNC’s create adverse effects on the cultural
background of many developing countries.
8) Interfere in economic and political systems:
They put indirectly pressures for the formulationof policies that are favorable to them. They even
topple the government in the host countries if its policies are against the MNC’s and their
operations.
9) Avoid tax liabilities:
Transfer pricing enables multinational corporations to avoid taxes bymanipulating prices in the
case of intra company transactions.
10) Lead to brain drain in developing countries:
Multinationals are now entering in countries likeIndia in a bigger way. They hire qualified
technocrats and managerial experts. These people work for a few years in India, acquire
experience and relocated as experts in Singapore, Korea or the United States for managing the
activities of MNC’s. This leads to brain drain in developing countries.
CLASSIFICATIONS OF MNCS
Pyramid Model Umbrella Model Inter/ Conglomerate
MNC MNC MNC
a. Pyramid Model MNC:
These organizations have strong Headquarters and weak subsidiaries. HeadQuarter is rude,
arrogant and gives no powers to its subsidiaries. The decision making capacity is also not
centralized. For E.g. Siemens, Johnson & Johnson, IBM, McDonalds, Marks & Spencer etc. This
model of MNC is very power conscious.
b. Umbrella Model MNC:
This model is very good among others. There is a relationship of mutual helpbetween the Head
quarter and the subsidiary. Ideas and money flow freely.
Making money and using power is not the primary motto of the organizations. Head quarters
give full freedom to the subsidiaries. Both HQ and subsidiaries are very strong. E.g. P & G, Price
water house, KPMG etc.

VEDA TUTORIALS 31
Problems: These organizations are very image conscious. If anything damages their image,
strong actions are taken for that.
c.Inter conglomerate Model MNC:
 For such organizations, money is main aim.
 Investment and Rate of Investments are very high.
 No loyalty towards any subsidiary countries. E.g. HLL, Unilever etc.
 Companies enter any segment and adapt the approach of Multi segments, Multi markets,
Multi products and Multi countries.
 Such companies try to acquire monopoly and take over its competitors there by reducing
competition. E.g. Brooke Bond and Lipton are taken over by HLL.
How MNCs expand their business:
i. International Licensing:
MNC permits the domestic company to use its trademark, brand name ortechnical know‐how for
manufacturing and marketing purpose. The license is given against payment of fee which acts as
source of income to the MNCs. E.g. Brand 555 is the licensed user of British American Tobacco
company. In India it is manufactured by ITC (the licensee). It has the market of 600 cr. And
company pays 5% of the total sales to BAT (licensor) as license fees. The BAT does not provide
any raw material but just the brand name is given. This company took 45 years to establish. The
licensor generally keeps supervisor in the plant of licensee.
ii. International Franchising:
The licensor not only provides the brand name but also the raw material.E.g. McDonalds. (Syrup
– pharmaceutical companies, printed circuit boards to electronic items, essence – cold drink
companies (Pepsi gives its essence to Punjab Agro).
iii. Turnkey projects:
MNCs undertake to complete the whole project and handover the same whenready to the host
country. Such project may be supplied on tender basis. Such projects provide new opportunity to
expand the business activities.
iv. Joint Ventures:
“Like marriage, binding between home country representative and host countryrepresentative, to
set up a project either in home country or host or 3rd country with a commitment of joint risk
taking and joint profit sharing.”
E.g. ModiLuft – Modi and Lufthansa
Successful JVs: Indo Gulf fertilizer – Birla group, Taj group of hotels with Russian government.
v. Collaborations:
It deals with any one part of management function, either finance or technology collaboration. (it
is not possible to have collaboration in consumer products and FMCG. It happens generally with
medicines, technological products.)
E.g. Bajaj – Kawasaki, Hero Honda ,Kinetic
Honda Collaborations are time bound and not
permanent.
FOREIGN DIRECTINVESTMENT (FDI)
A foreign direct investment (FDI) is a controlling ownership in a business enterprise in one
country by an entity based in another country.

VEDA TUTORIALS 32
Foreign direct investment is distinguished from portfolio foreign investment, a passive
investment in the securities of another country such as public stocks and bonds, by the element
of "control". According to the Financial Times, "Standard definitions of control use the
internationally agreed 10 percent threshold of voting shares, but this is a grey area as often a
smaller block of shares will give control in widely held companies. Moreover, control of
technology, management, even crucial inputs can confer de facto control."
The origin of the investment does not impact the definition as an FDI, i.e., the investment may be
made either "inorganically" by buying a company in the target country or "organically" by
expanding operations of an existing business in that country.
Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities,
reinvesting profits earned from overseas operations and intra company loans". In a narrow sense,
foreign direct investment refers just too building new facilities.
The numerical FDI figures based on varied definitions are not easily comparable. As a part of the
national accounts of a country, and in regard to the GDP equation
Y=C+I+G+(X-M)
[Consumption + gross Investment + Government spending + (exports - imports)], where, I is
domestic investment plus foreign investment, FDI is defined as the net inflows of investment
(inflow minus outflow) to acquire a lasting management interest (10 percent or more of voting
stock) in an enterprise operating in an economy other than that of the investor. FDI is the sum
of equity capital, other long-term capital, and short-term capital as shown the balance of
payments. FDI usually involves participation in management, joint-venture, transfer of
technology and expertise.
Stock of FDI is the net (i.e., inward FDI minus outward FDI) cumulative FDI for any given
period. Direct investment excludes investment through purchase of shares. FDI is one example
of international factor movements A foreign direct investment (FDI) is a controlling ownership
in a business enterprise in one country by an entity based in another country. Foreign direct
investment is distinguished from portfolio foreign investment, a passive investment in the
securities of another country such as public stocks and bonds, by the element of "control".
According to the Financial Times, "Standard definitions of control use the internationally agreed
10 percent threshold of voting shares, but this is a grey area as often a smaller block of shares
will give control in widely held companies. Moreover, control of technology, management, even
crucial inputs can confer de facto control." yes that is fact.
Factors influencing the FDI
a. Supply Factor:
Firms invest capital in foreign countries due to lower costs of business in foreign countries.
These includes the following:
 Production costs: companies invest in foreign countries in order to get the benefits of
lower production costs like low labour costs, land prices, commercial real estate’s rents,
tax rates etc.

VEDA TUTORIALS 33
 Logistics: if the transportation cost form the domestic country to foreign market is high &
/ or the time of transportation of the products to foreign markets is long, then the firms
undertake FDI
 Availability of natural resources: companies locate their production facilities close to the
source of critical inputs.
 Availability of quality human resources at low cost: high quality human resources
contribute to high value addition to the product of service. High quality human resources
at low cost attracts FDI
 Access to key technology: in order to have access to existing key technology rather than
developing technologies firms go for FDI
b. Demand Factors:
FDI is selected by companies in order to increase the total demand for their products. These
factors include the following:
 Customer Access: certain business firms particularly fast food service oriented & retail
outlets should locate their operations close to customers.
 Marketing Advantages: companies can enjoy a number of marketing advantaged by
locating their operations in host country like lower marketing costs, accessibility to
hands-on experience regarding customer & market handling, improving customer
services etc.
 Exploitation of competitive advantage: companies which enjoy competitive advantages
through trade mark, brand name, technology etc. go for FDI in order to exploit its
competitive advantages in various foreign markets.
 Customer Mobility: companies which have one or few customer select the FDI strategy
along with their customers.
c. Political Factors:
Companies enter foreign markets through FDI in order to overcome the trade barriers imposed
by the host country &/or to avail the incentives offered by the host governments.
 Avoidance of trade Barriers: Companies establish production facilities in foreign markets
to avoid trade barriers like high export tariffs, quotas etc.
 Economic development incentives: government at local level, state level & national level
offer incentives to attract domestic & foreign investments like low tax rate, employee
training programmes, development of infrastructural facilities etc.
Reasons for FDI
 To increase sales & profits:
Companies invest capital directly in various foreign countries in order to increase sales & profits
because foreign markets offer more attractive business opportunities than domestic markets.
 To enter fast growing markets:
The fast growing markets provide better opportunities to MNC for their business growth.
 To protect foreign markets:
Some MNC`s invest in foreign countries to protect foreign markets.
 To protect domestic markets:
Some MNC`s invest & operate in foreign markets in order to avoid the competition with the
weak domestic firms. They leave the domestic markets to the less competitive domestic firms.
 To consolidate trade blocs:

VEDA TUTORIALS 34
MNC`s prefer to do business with other member countries of the trade bloc because MNC`s get
preferential treatment in doing business.
 To acquire technological & managerial knowhow:
Sometime, the technological & managerial knowhow in various foreign countries might be
superior to those of domestic country. In cases, MNC`s invest in foreign countries in order to
acquire the superior technological & managerial knowhow.
 To reduce costs:
MNC`s invest in foreign countries in order to reduce production costs & various other operations
due to availability of various inputs of raw materials, human resources etc. at lower price in
foreign countries. Domestic companies invest in foreign markets due to lower transportations
costs & energy costs.
Benefits & Costs of FDI
Benefits for Host Countries:
 Access to superior technology
 Increased competition
 Increase in domestic investment
 Access to export markets
 Export promotion strategies
 Generating employment
 Bridging host countries foreign exchange gaps
Costs for the Host Country:
 There is an import of substantial inputs from the investor`s country.
 Companies will hire expatriate managers for management position
 Investing country has controlling technologies, for which it charges a huge technology
fee.
 FDI can even wipe out local firms. Infant industries & other home industries may suffer,
if they cannot compete.
Benefits for Home Country:
 Inward flow of earnings on a long term basis.
 High salaries for employees
 Exposure to foreign markets.
Costs for Home Country:
 Initial capital outflow is very large
 Exports may decrease
 Imports may increase, if FDI is intended to serve the home country
 Employment will be lost to the home country population
 Profits are repatriated abroad. They may not stay in the country re-investment.
 Major tax havens will enjoy the money at the cost of the home country.

VEDA TUTORIALS 35
CHAPTER 2 – PRODUCT PACKAGING &
DISTRIBUTION
Packaging
Packaging is a logistical management function which is performed at factory or the warehouse &
it begins immediately post production.
It is done for –
 Product Protection
 Easy Handling & Movement
 Customer Service
Objective of Packaging
 It leads at attracting customer attention & is convenient for customer to handle the
product.
 Packaging should be light weight to reduce transportation cost especially for long
distance & thus reduces cost of storage
 Facilitates easy handling
 To identify the product
 To give new look to the product
 To assemble & arrange the product in the desired form
 To facilitate the functions of wholesalers & retailers
 To check adulteration
Functions of Packaging
 Physical Packaging: It involves protection from damage, physical efforts, contamination
& protection from environmental conditions. It is generally not economical to provide
absolute protection to the products from all possibility of damage from environmental
conditions. Higher the value of product, more protection it deserves & so on & more
expensive is the packaging. During logistical process packaged products can be damaged
in transportation, handling & storage.
 Environmental Protection: package perishability is a critical factor in design. Keeping the
contents clean, fresh & safe for expected shelf life is a primary function.
 Cube Minimization: The truck is cubed out, that means the truck is full space wise, but
not fully utilized weight wise. Cube minimization is reducing the space occupied by the
product to cut freight charge. Square shaped bottles & oral shaped containers.
 Weight Minimization: The truck is full weight wise but not fully utilized space wise.
Weight minimization is reducing the weight of the consignment to fully utilize the
capacity of the truck
 Facilitating Handling & Using: Fruit juices in tetra packs handling & consumption by
users.

VEDA TUTORIALS 36
 Facilitating Storage & Use: Ink cartridges for printers, floppies, CDs, reusable corrugated
boxes bottles & refill packs.
 Grouping Goods into Convenient Unit for Distribution: Small objects are typically
grouped together in one package for reasons of efficiency.
 Reducing Pilfering Opportunities: Package constructions are more resistant to pilferage &
some have pilfer indicating seals.
 Communications: Packages & labels communicate how to use, transport, recycle or
dispose of packages or products. Content identification – what does this contain? Product,
manufacturer, universal code etc. with high visibility – bar codes & scanners.
Essentials of Good Packaging
 Packaging enhances customer service levels.
 Lighter packaging saves transportation costs & insurance costs.
 Careful package planning helps better utilization of warehousing space
 Reduces damages & losses of the products
 Reduces requirement of special handling
 Environment friendly packs saves disposal costs & improves company image
 Reusability of packs saves costs.
Factors for Package Designin International Marketing
a. Physical Characteristics –
The physical characteristics of the product like physical state, weight stability, fragility, rigidity,
surface finish etc. affect the packaging decisions.
b. Physio-chemical characteristics –
Certain physio-chemical characteristics like the effect of moisture oxygen, light, flame, bacteria,
fungi, chemical action etc. on the product are very important factors to be considered while
making packaging decisions.
c. Language –
For the product package to perform the promotional function, the label must be printed in local
language. The purpose of the package label is achieved when a consumer can read what is
written.
d. Colour –
Consumer preferences for color differs from one country to another. In Islamic countries, green
is supposed to be favouredcolour, Greeks like both white & blue, but there are considered to be
colours of mourning & sorrow in the Far East.
e. Size –

VEDA TUTORIALS 37
Package size should be determined only on finding out the buying characteristics of the
consumers. If the buyers shop regularly at close intervals the size of the package will have to be
smaller. If the target consumer so not have freezers the preferred unit size is likely to be smaller.
f. Economy –
While packing is very important in marketing, it is costly also. There are number of cases where
the packaging cost is more than the content cost. The increasing packaging cost is a matter of
serious concern. Thus, every effort should be made to reduce the packaging costs as much as
possible without impairing the packaging requirements.
g. Containers –
The developed markets especially generally prefer disposable containers. The regulatory
agencies sometimes insist that containers should be made of material which will not have
undesirable environmental effects due to environmental pollution.
h. Length of the Distribution Channel –
A long distribution channel means a longer time between production & find consumptions.
Higher is this time difference, greater is the necessity of providing better & strong packaging.
i. Convenience –
From consumer`s viewpoint, packaging should have the convenience quality. Thus besides,
functional needs a good package should have certain characteristics like easy to open & close,
easy to dispense, easy to dispose off, easy to recycle, easy to identify easy to handle, convenient
to pack, etc.
j. Climate –
A country with humid climate will require different packaging especially for perishable items,
then what is required in a country with a cold climate.
Special Factors in Package Designs
a. Regulations in the foreign countries –
Packaging & labelling may be subject to government regulations in the foreign countries. Some
countries have specified packaging standards for certain commodities. The trend towards
requiring labelling in a country`s native language is growing.
b. Buyers Specifications –
In some cases, buyers like the importers may give the packaging specifications. Which
incorporating specifications, it should also be ensured that packaging satisfies other statutory
requirements.
c. Socio-cultural factors –
While designing the packaging for a product, socio-cultural factors relating to the importing
country like customs, traditions beliefs etc. should also be considered.
d. Retailing Characteristics –
The nature of retail outlet is very important factor in packaging design. In some of the foreign

VEDA TUTORIALS 38
markets, as a result of the spread of super markets & discount houses, a large number of products
are sold on a self-service basis. Therefore, the package has to perform many of the sales tasks &
hence, it must attract attention, describe the product features give the consumer confidence &
make a favourable overall impressions.
e. Environmental factors-
The impact of climatic factors in the place where the product originates, while the product is in
transit & while it is in the market etc. should be considered. The package should be capable of
withstanding the stresses & hazards of handling & transporting, stacking, storing etc. under
diverse conditions.
f. Disposability –
One of the qualities required of a good package is that it should be easily disposed of or recycled.
Essentials of Good Packaging
a. Colour –
Colors have aesthetical value. People in different countries & places attach different meanings to
colour.
b. Language –
The matter printed on the packages must be in English & prominent local language.
c. Size –
If the purchases are made frequently the size of the package must be smaller & vice versa. The
size should be such that it does not create problem to the dealers to stack or store the products on
their shelves.
d. Climate –
A country with humid climate will require different packaging especially for perishable items,
then what is required in a country with a cold climate.
e. Nature of the Product –
The sophisticated product like computers may require a special type of packaging. Fragile items
require special cushioning material.
f. Length of Distribution Channel –
The longer the chain of distribution, the stronger packaging is required. The time gap between
the date of the production & final consumption also determines the type of packaging.
g. Nature of Container –
Some buyers prefer disposal containers while others prefer reusable containers especially in less
developed countries.
h. Trends in Packaging –
New packaging system & material which have become fashionable should be used. Packaging
should reflect improvement in packaging technology, consumer`s life styles & preferences.
i. Mode of Transport –
Packaging requirements depend upon the mode of transport goods by air transport require light
packaging, while ship transport needs packaging in standard size as per the containers size.
j. Cost of Package –
Packaging should not be very expensive. The cost to be incurred on packaging should justify
benefits.
k. Accepted Norms –
Standard norms must be studies before designing a package for overseas markets.
l. Regulations in the Importing Country –

VEDA TUTORIALS 39
There are certain regulations imposed by importing country. Such regulations must be observed
in designing packages.
Labelling
Labelling is the process of fixing labels on the export product. A label is that part of the product
that carries information about the product & the seller. It provides written information about the
product such as features of the product, its composition, price, date of manufacture & expiry,
name of the producer etc. Its main purpose is to inform the consumer essential details in respect
of the product as regards its quantity, quality, how to use & maintain it.
Types of Labels
 Brand Label –
It is a simple label which carries only the brand name.
 Descriptive Label –
It gives details of the product such as features, uses, contents, warnings, directions for use etc.
 Grade Label –
It identifies the quality of the product with a letter, number or word.
Forms of Labels
Labels on the product may assume any of the following forms –
a. Strip of the cloth
b. Card label
c. Adhesive sticker
d. User`s manual
Contents of Label
Every label should contain the following information’s –
 Information to satisfy the legal requirements of a particular country
 Instructions for taking care of the product
 Dimensions of the product
 Instructions for the use of the product
 Country of origin
 Name & address of the manufacturer
 Lot number of the consignment
 Date of manufacture & expiry
Features of a Good Quality Label
 It includes all the relevant information
 It is printed in the language of the importer`s country
 It is appropriate to the product
 It has to be take into account the colour& shape preferences of the prospective buyers.
Purpose of Export Marking
 The exporters should properly mark the export boxes in order to ensure their proper
identification, correct handling & delivery.

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