Unit 1INTERNATIONAL MARKETINGInternational marketing (IM) or global marketing refers to marketing carried out by companies overseasor across national borderlines. This strategy uses an extension of the techniques used in the homecountry of a firm. It refers to the firm-level marketing practices across the border including marketidentification and targeting, entry mode selection, marketing mix, and strategic decisions to compete ininternational markets. According to the American Marketing Association (AMA) "internationalmarketing is the multinational process of planning and executing the conception, pricing, promotion anddistribution of ideas, goods, and services to create exchanges that satisfy individual and organizationalobjectives." In contrast to the definition of marketing only the word multinational has been added.In simple words international marketing is the application of marketing principles to across nationalboundaries. However, there is a crossover between what is commonly expressed as internationalmarketing and global marketing, which is a similar term.The intersection is the result of the process of internationalization. Many American and Europeanauthors see international marketing as a simple extension of exporting, whereby the marketing mix 4Psis simply adapted in some way to take into account differences in consumers and segments. It thenfollows that global marketing takes a more standardized approach to world markets and focuses uponsameness, in other words the similarities in consumers and segments.DIFFERENCES BETWEEN DOMESTIC MARKETING AND INTERNATIONAL MARKETINGInternational marketing strategies are developed by various multinational companies on a global level inorder to set a common brand platform for their products and brands. It is then passed on to each localor domestic market which makes adjustments for their country and manages its implementation. Such astructure ensures a global brand consistency, pricing and messaging. It also can have significant costsavings as major advertising and marketing campaigns can be developed centrally.Globalization has created new marketing behaviors, opportunities and challenges thereby makinginternational marketing somewhat different from domestic marketing. Due to deregulation andtechnological advances in transportation and communication, companies can market in, and consumerscan buy from almost any country in the world. In this situation of heightened competition, it isimportant for companies to offer products that would be of interest in the global marketplace and alsoadjust their product and service features to each country’s different cultures and values. They mustchoose what to produce, and how to price and communicate their products considering the differentlegal and political differences, language, and currency fluctuations. To sum up, when multinationalcompanies segment their target markets and position their products, cross-cultural literacy is necessary,which is a concept of globalization, requiring a company to “think globally and act locally”. Without anunderstanding of cultural and structural differences between countries, even leading globalcorporations can fail in specific markets.
INTERNATIONAL MARKETING ENVIRONMENTInternal factor , these involve (5Ms)1. Management2. Manpower3. machine4. material and5. money.External factors , these includeMacro factor and micro factors.Macro factors are the one that affect the organization indirectly, these are (pestel)1. Politicala. The political stability of the nation. Is it a democracy, communist, or dictatorial regime?b. Monetary regulations. Will the seller be paid in a currency that they value or willpayments only be accepted in the host nation currency?2. Economicala. Consumer wealth and expenditure within the country.b. National interests and inflation rate.c. Are quotas imposed on your product.d. Are there import tariffs imposed.e. Does the government offer subsidies to national players that make it difficult for you tocompete?3. socia-culturala. Language. Will language be a barrier to communication for you? Does your host nationspeak your national language? What is the meaning of your brand name in your hostcountry’s language?b. Customs: what customs do you have to be aware of within the country? This isimportant. You need to make sure you do not offend while communicating yourmessage.c. Social factors: What are the role of women and family within society?d. Religion: How does religion affect behaviour?e. Values: what are the values and attitudes of individuals within the market?4. Technologicala. The technological infrastructure of the market.b. Do all homes have access to energy (electricity)c. Is there an Internet infrastructure. Does this infrastructure support broadband or dialup?d. Will your systems easily integrate with your host countrys?5. Ecological
6. leagalwhile micro factors are those which affect the organization directly it involve1. customers2. competitors3. suppliers and4. public
Unit 2FOREIGN MARKET ENTRY MODESThe decision of how to enter a foreign market can have a significant impact on the results. Expansioninto foreign markets can be achieved via the following four mechanisms:ExportingLicensingJoint VentureDirect InvestmentExportingExporting is the marketing and direct sale of domestically-produced goods in another country. Exportingis a traditional and well-established method of reaching foreign markets. Since exporting does notrequire that the goods be produced in the target country, no investment in foreign production facilitiesis required. Most of the costs associated with exporting take the form of marketing expenses.Exporting commonly requires among four players: coordination1. Exporter2. Importer3. Transport provider4. GovernmentLicensingLicensing essentially permits a company in the target country to use the property of the licensor. Suchproperty usually is intangible, such as trademarks, patents, and production techniques. The licenseepays a fee in exchange for the rights to use the intangible property and possibly for technical assistance.Because little investment on the part of the licensor is required, licensing has the potential to provide avery large ROI. However, because the licensee produces and markets the product, potential returnsfrom manufacturing and marketing activities may be lost.Joint VentureThere are five common objectives in a joint venture: market entry, risk/reward sharing, technologysharing and joint product development, and conforming to government regulations. Other benefitsinclude political connections and distribution channel access that may depend on relationships.
Such alliances often are favorable when:1. the partners strategic goals converge while their competitive goals diverge;2. the partners size, market power, and resources are small compared to the industry leaders; and3. Partners are able to learn from one another while limiting access to their own proprietary skills.The key issues to consider in a joint venture are ownership, control, length of agreement, pricing,technology transfer, local firm capabilities and resources, and government intentions.Potential problems include:1. conflict over asymmetric new investments2. mistrust over proprietary knowledge3. performance ambiguity - how to split the pie4. lack of parent firm support5. cultural clashes6. if, how, and when to terminate the relationshipJoint ventures have conflicting pressures to cooperate and compete:1. Strategic imperative: the partners want to maximize the advantage gained for the joint venture,but they also want to maximize their own competitive position.2. The joint venture attempts to develop shared resources, but each firm wants to develop andprotect its own proprietary resources.3. The joint venture is controlled through negotiations and coordination processes, while each firmwould like to have hierarchical control.Foreign Direct InvestmentForeign direct investment (FDI) is the direct ownership of facilities in the target country. It involves thetransfer of resources including capital, technology, and personnel. Direct foreign investment may bemade through the acquisition of an existing entity or the establishment of a new enterprise.Direct ownership provides a high degree of control in the operations and the ability to better know theconsumers and competitive environment. However, it requires a high level of resources and a highdegree of commitment.The Case of EuroDisneyDifferent modes of entry may be more appropriate under different circumstances, and the mode ofentry is an important factor in the success of the project. Walt Disney Co. faced the challenge of buildinga theme park in Europe. Disneys mode of entry in Japan had been licensing. However, the firm chosedirect investment in its European theme park, owning 49% with the remaining 51% held publicly.
Besides the mode of entry, another important element in Disneys decision was exactly where in Europeto locate. There are many factors in the site selection decision, and a company carefully must define andevaluate the criteria for choosing a location. The problems with the EuroDisney project illustrate thateven if a company has been successful in the past, as Disney had been with its California, Florida, andTokyo theme parks, future success is not guaranteed, especially when moving into a different countryand culture. The appropriate adjustments for national differences always should be made.
Unit 3In International marketing, ‘global product planning’ is a term which is used to describe the completeprocess of bringing a new product or service to a new market. There two parallel paths involved in theglobal product planning process: one involves the idea generation, product design, and detailedengineering and the other involves market research and marketing analysis. Companies typically seenew product development as the first stage in generating and commercializing new products within theoverall strategic process of product life cycle management, used to maintain or grow the market share.The following are the categories of new products in terms of their newness to the company and theglobal market respectively;(a) New to the worldNew products that create an entirely new market(b) New product linesNew products that allow a company to enter an established market for the first time(c) Addition to the existing product linesNew products that supplement a company’s established product lines i.e. package sizes, flavors, etc(d) Improvements or revisions to existing productsNew products that provide improved performance or greater perceived value and replace existingproducts(e) RepositioningExisting products that are targeted to the new markets(f) Cost reductionsNew products that provide similar performance at lower costProduct Planning ProcessThe successful new product planning process consists of 8 major steps;1. Idea Generation• Internal sources• Customers• Competitors• Distributors
• Suppliers• Others2. Idea ScreeningTo spot good ideas and drop poor ones• is the product truly useful to consumers and society• availability of market• does it mesh well with company’s objectives and strategies• is it easy to advertise and distribute• availability of technology• risk exposure, profitability, cost and benefit• any other factor3. Concept Development And Testing• Product concept is a detailed version of the new product idea stated in meaningfulconsumer terms• Concept development – a new product idea is developed into alternative productconcepts• Concept Testing – calls for testing new product concepts with groups of targetcustomers4. Marketing Strategy Development• Describe target market• Planned product positioning• Planned sales and market share• Profit goals for the first few years5. Business Analysis• A review of the sales, costs and profit projections for a new product to find out whetherthese factors satisfy they company’s objectives• Sales forecast• Estimation of costs and profits6. Product Development• Development of product according to the decided specifications.7. Test Marketing• In realistic market setting8. Commercialization
• Launch of product in commercial markets.Successful new products are the ones;• They have relative advantage• Have compatibility with other technology and distribution systems• Allow trial ability / divisibility for buyers to try and learn• Can be judged through observation• Just right in terms of complexity of technology and use• Offer value for the price.PRODUCT DESIGNINGProduct design is the process of creating a new product to be sold by a business to its customers. It isthe efficient and effective generation and development of ideas through a process that leads to newproducts.In a systematic approach, product designers conceptualize and evaluate ideas, turning them intotangible products. The product designers role is to combine art, science, and technology to create newproducts that other people can use. Their evolving role has been facilitated by digital tools that nowallow designers to communicate, visualize, and analyze ideas in a way that would have taken greatermanpower in the past.Product design is sometimes confused with industrial design, and has recently become a broad terminclusive of service, software, and physical product design. Industrial design is concerned with bringingartistic form and usability, usually associated with craft design, together to mass produce goods.Product design processThere are various product design processes and they are all focused on different aspects. The processshown below is "The Seven Universal Stages of Creative Problem-Solving," outlined by Don Koberg andJim Bagnell. It helps designers formulate their product from ideas. This process is usually completed by agroup of people, designers or field experts in the product they are creating, or specialists for a specificcomponent of the product, such as engineers. The process focuses on figuring out what is required,brainstorming possible ideas, creating mock prototypes, and then generating the product. However,that is not the end of the process. At this point, product designers would still need to execute the idea,making it into an actual product and then evaluate its success by seeing if any improvements arenecessary.The design process follows a guideline involving three main sections:1. Analysis2. Concept3. Synthesis
The latter two sections are often revisited, depending on how often the design needs touch-ups, toimprove or to better fit the criteria. This is a continuous loop, where feedback is the main component.To break it down even more, the seven stages specify how the process works. Analysis consists of twostages, concept is only one stage, and synthesis encompasses the other four.AnalysisAccept Situation: Here, the designers decide on committing to the project and finding a solution to theproblem. They pool their resources into figuring out how to solve the task most efficiently.Analyze:" In this stage, everyone in the team begins research. They gather general and specific materialswhich will help to figure out how their problem might be solved. This can range from statistics,questionnaires, and articles, among many other sources.ConceptDefine: This is where the key issue of the matter is defined. The conditions of the problem becomeobjectives, and restraints on the situation become the parameters within which the new design must beconstructed.SynthesisIdeate: The designers here brainstorm different ideas, solutions for their design problem. The idealbrainstorming session does not involve any bias or judgment, but instead builds on original ideas.Select: By now, the designers have narrowed down their ideas to a select few, which can be guaranteedsuccesses and from there they can outline their plan to make the product.Implement: This is where the prototypes are built, the plan outlined in the previous step is realized andthe product starts to become an actual object.Evaluate: In the last stage, the product is tested, and from there, improvements are made. Although thisis the last stage, it does not mean that the process is over. The finished prototype may not work as wellas hoped so new ideas need to be brainstormed.Demand-pull innovation and invention-push innovationMost product designs fall under one of two categories: demand-pull innovation or invention-pushinnovation.Demand-pull happens when there is an opportunity in the market to be explored by the design of aproduct. This product design attempts to solve a design problem. The design solution may be thedevelopment of a new product or developing a product thats already on the market, such as developingan existing invention for another purpose.Invention-push innovation happens when there is an advancement in intelligence. This can occurthrough research or it can occur when the product designer comes up with a new product design idea.
STANDARDIZATION VS ADAPTATIONSTANDARDIZATIONStandardising a communication policy consists of operating a communication in all the foreign marketswhich is identical to the one in the domestic market, with the existing socio-cultural differences.Furthermore, the company will use the same promotional arguments, the same positioning, the sameadvertising messages, the same concepts, the same images, the same slogans, ... The global trademarkswhich use this strategy include Coca-Cola, Perrier and Benetton.When a standardised communication campaign is envisaged, this is generally considered as the media oftelevision, and to a lesser extent hoardings. However, in the case of hoardings, or a televisionadvertisement, the text and the script have to be translated into the language of the country.Communication campaigns are rarely completely standardised. Additionally, countries with the samelanguage- for example the United States, United Kingdom, South Africa, Australia, ... which all speakEnglish often differ on a cultural level. It would be risky not to take these differences into account.Factors favouringstandardising communicationLimited budget. A standardised campaign costs less than an adapted one. For this reason, SMEswhich often have limited budgets, tend to standardise their communication.The industrial nature of the product. Advertising will be generally easier to standardise forindustrial products than for goods for consumption. In truth, industrial products are more alike :they tend to be bought and used for the same purpose and reasons in every country, all themore so as their sophistication and technical complexity increases. The sales claims tend to beuniversal.
Market harmonisation and uniforming performance. For some products, termed global, thedifferences in market consumption will seem to blur, as these products are used in the sameway. All over the world, , but especially in Europe, America and Japan, those sections of thepopulation which consume these world-wide products share the same needs, sales expectationsand motivations, the same cultural values, sales behaviour and require their products to havethe same qualities. Luxury products, certain clothes, music CDs, the hotel industry and transportare all examples of universal products.These sections of the population (jet-set, young people, ... ) are defined on the basis of criteria such aslife style rather than by ethnicity or nationality, have their equivalents in many countries. For example,in their lifestyle and aspirations, young people in France more resemble other young people, be theyGerman, Japanese or American rather than their own parents. To use clichés, they all wear the sameclothes, eat hamburgers and drink Coca-Cola, listen to the same music, and surf the internet,...Theemergence of the "World Customer", the harmonisation of lifestyles and values and the dilution ofsenses of cultural identity are favoured by a certain number of factors such as :technical advances, such as cable and satellite television, telematics, computers, telecommunications,methods of transport ;allocation of education and communication ;consequences of travel and technology ;globalisation of advertising agencies and media which facilitates the transmission of internationalcampaigns.Companies which sell international products to consumers of different nationalities, where thecharacteristics and expectations are the same or nearly similar, can conduct a single promotionalcampaign possibly with minor adaptations (e.g. translations). The essence and advertising message canbe effectively standardised and transmitted to all markets. The slogans highlight the attributes ofcommon dimensions, or evoke social and human situations sensitive to the consumer in an area with anidentical profile.Advantages of standardisationEconomies on the scale of design, creation of advertising, and production of advertisements (andtherefore lowering the fees of the agency).Faster set up time for advertising campaigns and a more rapid penetration of markets due to goodinternational co-ordination. This characteristic is particularly useful when launching a productsimultaneously in several countries.Reinforces the image of the product or company as a consequence of the international co-ordinationresulting from an international campaign.
Single coherent global image. An identical advertising standpoint in many markets allows the product,company and brand to possess a uniform image. This limits confusions as the consumer isinternationally mobile and there are possible overlaps in the media (cable television enables consumersto watch foreign television programmes).Excellent monitoring of communication.Lack of opposition between communication agencies, as they are responsible for setting up a singlecommunication campaign. It is no longer a question of deciding which of them performs best and is themost creative, since once all the creative work has been produced it is for everything.Drawbacks of standardisationPossible loss of advertising effectiveness. Communication, based on the lowest commondenominator of the target markets is rather poor. But standardisation can prove to beunadaptable if it holds on to local specifications. It can create negative reactions on the part ofthe consumers as it does not cater to them, which risks them turning to local competitors. It canresult in losses in important shares of the market, and damage to the image of the product inthe long term.Little reactivity, no flexibility in the execution.Lack of motivation for local agencies. As the personnel at the company and the agencies have noconnection with the development of the communication, , they can consider this campaign asbeing irrelevant to them. And often they will not be effectively committed to its production andestablishment.BRANDING AND PACKAGING
1.) BrandingBrand- a name, term, design, symbol, or other feature that identifies one marketers product asdistinct from those of other marketersBrand Name- the part of a brand that can be spoken, including letters, words, and numbersBrand Mark- the part of a brand that is not made up of words, such as a symbol or designTrademark- a legal designation of exclusive use of a brandTrade Name- the full legal name of an organization2.) Brand LoyaltyBrand Loyalty- a customers favorable attitude toward a specific brandBrand Recognition- the degree of brand loyalty in which a customer is aware that a brand exists andviews the brand as an alternative purchase if their preferred brand is unavailableBrand Preference- the degree of brand loyalty in which a customer prefers one brand over competitiveofferingsBrand Insistence- the degree of brand loyalty in which a customer strongly prefers a specific brand andwill accept no substitute3.) Brand EquityBrand Equity- the marketing and financial value associated with a brands strength in a market4.) Types of BrandsManufacturer Band- a brand initiated by producers to ensure that producers are identified with theirproducts at the point of purchasePrivate Distributor Brand- a brand initiated and owned by a resellerGeneric Brands- a brand indicating only the product category5.) Selecting a Brand Name6.)To examine three types of branding policies7.)To understand co-branding and brand licensingCo-branding refers to several different marketing arrangements:Co-branding, also called brand partnership, is when two companies form an alliance to worktogether, creating marketing synergy. As described in Co-Branding: The Science of Alliance:*2+“ "theterm co-branding is relatively new to the business vocabulary and is used to encompass a wide range ofmarketing activity involving the use of two (and sometimes more) brands. Thus co-branding could be
considered to include sponsorships, where Marlboro lends it name to Ferrari or accountants Ernst andYoung support the Monet exhibition." ”Co-branding is an arrangement that associates a single product or service with more than one brandname, or otherwise associates a product with someone other than the principal producer. The typicalco-branding agreement involves two or more companies acting in cooperation to associate any ofvarious logos, color schemes, or brand identifiers to a specific product that is contractually designatedfor this purpose. The object for this is to combine the strength of two brands, in order to increase thepremium consumers are willing to pay, make the product or service more resistant to copying by privatelabel manufacturers, or to combine the different perceived properties associated with these brands witha single product.PACKAGING
AFTER SALES SERVICECustomers are the assets of every business. Sales professionals must try their level best to satisfycustomers for them to come back again to their organization.What is After Sales Service ?After sales service refers to various processes which make sure customers are satisfied with theproducts and services of the organization.The needs and demands of the customers must be fulfilled for them to spread a positive word of mouth.In the current scenario, positive word of mouth plays an important role in promoting brands andproducts.After sales service makes sure products and services meet or surpass the expectations of the customers.After sales service includes various activities to find out whether the customer is happy with theproducts or not? After sales service is a crucial aspect of sales management and must not be ignored.Why After Sales Service ?After sales service plays an important role in customer satisfaction and customer retention. It generatesloyal customers.Customers start believing in the brand and get associated with the organization for a longer duration.They speak good about the organization and its products.A satisfied and happy customer brings more individuals and eventually more revenues for theorganization.After sales service plays a pivotal role in strengthening the bond between the organization andcustomers.After Sales Service TechniquesSales Professionals need to stay in touch with the customers even after the deal. Never ignore theircalls.Call them once in a while to exchange pleasantries.Give them the necessary support. Help them install, maintain or operate a particular product. Salesprofessionals selling laptops must ensure windows are configured in the system and customers are ableto use net without any difficulty. Similarly organizations selling mobile sim cards must ensure thenumber is activated immediately once the customer submits his necessary documents.Any product found broken or in a damaged condition must be exchanged immediately by the salesprofessional. Don’t harass the customers. Listen to their grievances and make them feel comfortable.
Create a section in your organization’s website where the customers can register their complaints. Everyorganization should have a toll free number where the customers can call and discuss their queries. Thecustomer service officers should take a prompt action on the customer’s queries. The problems must beresolved immediately.Take feedback of the products and services from the customers. Feedback helps the organization toknow the customers better and incorporate the necessary changes for better customer satisfaction.Ask the customers to sign Annual Maintenance Contract (AMC) with your organization. AMC is anagreement signed between the organization and the customer where the organization promises toprovide after sales services to the second party for a certain duration at nominal costs.The exchange policies must be transparent and in favour of the customer. The customer who comes foran exchange should be given the same treatment as was given to him when he came for the first time.Speak to him properly and suggest him the best alternative.
Unit 4PRICING IN INTERNATIONAL MARKETSPrice: A part of the marketing mix:The price is what the customer pays. It includes direct and indirect costs as well as opportunity costs.Direct costs are cash outlays a customer makes in order to obtain something. An example would beadmission to a national park. Direct costs are, in many cases, a relatively small part of the total cost.Indirect costs are costs associated with obtaining something. An example would be the cost of driving toa national park, food and entertainment along the way, etc. The total of the indirect costs is often more,sometimes much more, than the direct cost.The total cost is obtained by adding the direct and indirect costs.Opportunity costs are what we give up when we do something. They can have various types of value,sometimes monetary, sometimes not. Opportunity costs include other things you could be doing insteadof going to a national park. Examples might include mowing the lawn or going to a baseball game (whichwould be non-monetary) and not working overtime on Saturday in order to go to a national park (whichwould be monetary).The price the park visitor pays to go to a national park is the total of all costs, including direct, indirect,and opportunity. The perceived benefits of going to a national park have to be at least as great as thetotal of the costs if a potential park visitor is going to make a decision to go to a park.COMPONENTS OF PRICEThe price variable is made up of two components viz costs and profit. The cost component is furthersubdivided as fixed and variable.
FACTORS INFLUENCING INTERNATIONAL PRICING:Factors internal to an international firm1. strategic objectives· cost leader, differentiation, focus· gain market share, protect market share, to maintain status quo· revenue, profit or market share maximization2. marketing mix policies· product, place & promotion3. costs· short term vs long term cost focus· full cost, variable cost, marginal cost pricing4. organizational considerations· transfer pricing· cost vs profit centerFactors external to an international firm1. nature of market (buyer or seller)2. level of market development/sophistication3. market demand and consumers ability to buy4. competitive situation & consumer surplus5. product life-cycle-stage6. type of packaging, environmental issues7. distribution & marketing costs8. transportation costs9. government policies, tariffs, taxes & other restrictions10. country of origin image11. after-sales service, warranties & guaranties12. exchange rate fluctuation13. environmental factors14. hidden costsFactors contributing the selection of final price:1. Psychological effects of price2. Influence of other marketing mix elements3. Company pricing policies4. Costs5. Impact of price on other partiesa. distributors or dealersb. company sales forcec. competitorsManaging price escalation in foreign markets:1. Rearrange the distribution channellength of channel / exorbitant margins2. Eliminate costly features (or make them optional)no-frills versions - sell core products
3. Downsize the productsmaller version or a lesser count4. Assemble or manufacture the product in foreign marketscloser proximity to customers - lower costs5. Adapt the product to escape tariffs and taxesby shifting it to different tax classificationPricing in inflationary environments:1. Modify components, ingredients, parts and/or packaging materials2. Source materials from low-cost suppliers3. Shorten credit terms4. Include escalator clauses in long-term contracts - to hedge against inflation5. Quote prices in a stable currency6. Pursue rapid inventory turnovers7. Draw lessons from other countriesExporters strategies under varying currency conditions:When domestic currency is WEAK...1. Stress price benefits2. Expand product line and add more costly features3. Shift sourcing manufacturing to domestic market4. Exploit export opportunities in all markets5. Use a full-costing approach, but employ marginal-cost pricing to penetrate new orcompetitiveMarkets6. Speed repatriation of foreign-earned income and collections7. Minimize expenditures in local or host country currency8. Buy needed services (advertising, insurance, transportation, etc.) in domestic market9. Bill foreign customers in their own currencyWhen domestic currency is STRONG...1. Engage in non-price competition by improving quality, delivery, and after-sale service2. Improve productivity and engage in vigorous cost reduction3. Shift sourcing and manufacturing overseas4. Give priority to exports to countries with relatively strong currencies5. Trim profit margins and use marginal-cost pricing6. Keep the foreign-earned income in host country; slow down collections7. Maximize expenditures in local or host country currency8. Buy needed services abroad and pay for them in local currencies9. Bill foreign customers in the domestic currency
THE PROCESS OF PRICE SETTINGThe marketing manager uses the parameters suggested by the economists for arriving at a price. Theseparameters may be enumerated as under:1. Costs2. Demand and supply3. Economic, legal and political conditions I.1. CostsCosts represent the base line for setting the price. In other words, costs represent the price floor beyondwhich prices cannot be dropped. As already explained costs are made up of two components, fixed costsand variable costs. Fixed costs represent the un-escapable element of cost, whereas, the variable costrepresent the escapable costs. The variable costs are also sometimes interpreted as marginal costs orincremental costs.2.Demand& SupplyFor a marketing manager, the upper limit is demonstrated by the demand and supply conditions as theyexist in the market. The demand conditions are interpreted from the market conditions and theconsumer behaviourwhereas, the supply conditions are interpreted by an analysis of the competition.The prices charged by the competitors, and the attributes and quantity sold by the competitors, set thesupply parameters. Thus for example, the prices being charged for garments by the Italians and theSouth Asians will determine broadly the range that can be charged by the apparel exporters. Again, ifthe international buyer is alert he will through his awareness, bargain against the subsidies beingprovided by the Government to the exporter, thus forcing the Indian exporter to charge as per realcosts.3.Economic, Legal and Political conditionsThese represent parameters outside the market forces which influence the price structure. TheGovernment, it has been noted, can through its policy, in fact modify the market conditions, makingthem lopsided. Thus, the countries where the economic policies are directed by the Government, theeconomic and political conditions have an important bearing on price structures. Taxes and dutydrawbacks represent excellent examples for the same.The parameters explained above suggest the upper and lower limits but, the actual price liessomewhere in between. The effort of every manager is to arrive at a process that is easy and minimizesthe deviation from the chosen price, in order to ensure the resultant profit. As a result of this, variousmethods of pricing, have come into vogue which emphasise one variable as against the other variablefor example, cost plus pricing, competitive pricing. Cost plus pricing reflects an accounting thoughtrather than a managerial thought whereas competitive pricing reflects a supply side thought process.A suggested process for arriving at the price would include the following steps:• Analysis of the marketing goals• Choosing the marketing mix• Composing the marketing mix• Determining the pricing policy• Defining the pricing strategy• Arriving at a specific price.
INTERNATIONAL PRICE QUOTATION AND PAYMENT TERMQUOTATIONS AND PRO FORMA INVOICESMany export transactions, particularly initial export transactions, begin with the receipt of an inquiryfrom abroad that is followed by a request for a quotation. A pro forma invoice is a quotation prepared inthe format of an invoice; it is the preferred method in the exporting business.A quotation describes the product, states a price for it, sets the time of shipment, and specifies theterms of sale and terms of payment. Because the foreign buyer may not be familiar with the product,the description of the product in an overseas quotation usually must be more detailed than in adomestic quotation.The description should include the following 15 points:1. Seller’s and buyer’s names and addresses2. Buyer’s reference number and date of inquiry3. Listing of requested products and a brief description4. Price of each item (It is advisable to indicate whether items are new or used and to quote theprice in U.S. dollars to reduce foreign exchange risk.)5. Appropriate total cubic volume and dimensions packed for export (in metric units whereappropriate)6. Appropriate gross and net shipping weight (in metric units where appropriate)7. Trade discount (if applicable)8. Delivery point9. Terms of sale10. Terms of payment11. Insurance and shipping costs12. Validity period for quotation13. Total charges to be paid by customer14. Estimated shipping date from a U.S. port or airport15. Currency of salePro forma invoices are not used for payment purposes. In addition to the 15 items previouslymentioned, a pro forma invoice should include two statements—one that certifies the pro forma invoiceis true and correct, and another that indicates the country of origin of the goods. The invoice should alsobe clearly marked “pro forma invoice.”Pro forma invoices are models that the buyer uses when applying for an import license, opening a letterof credit, or arranging for funds. In fact, it is a good practice to include a pro forma invoice with anyinternational quotation, regardless of whether it has been requested. When final commercial invoicesare being prepared before shipment, it is advisable to check with your local Export Assistance Center forany special invoicing provisions that may be required by the importing country.
If a specific price is agreed on or guaranteed by your company, the precise period during which the offerremains valid should be specified.INTERNATIONAL TERMS OF PAYMENTMethod Usual Time ofPaymentGoodsAvailable ToBuyerRiskto SellerRisk to Buyer CommentsCASH INADVANCEBeforeshipmentAfter payment None Complete.Relies on sellerto ship exactlythe goodsexpected, asquoted andorderedSellers goodsmust bespecial in oneway oranother, orspecialcircumstancesprevail overnormal tradepractices (e.g.,goodsmanufacturedto buyer-onlyspecification).LETTER OFCREDIT (L/C)(See next twoitems.)CommericalInvoice mustmatch the L/Cexactly. Datesmust becarefullyheaded."Stale"documents areunacceptablefor collection.Letters ofCredit requiretotal accuracyin conformingto terms,conditions, anddocumentaion.Consult yourUnitedShippingAssociatemember fordeterminingfeasibility ofterms andconditions.CONFIREDIRREVOCABLECREDITAfter shipmentis made,documentspresented tothe bank.After payment Gives the sellera doubleassurance ofpayments.Depends onthe terms ofthe letter ofcredit.Assuresshipment ismade butrelies onexporter toship goods asdescribed indocuments.Terms may benegotiatedThe inclusionof a secondassurance ofpayment(usually a U.S.Bank) preventssurprises, andadds assurancethat issuingbank has been
prior to L/Cagreement,alleviatingbuyers degreeof risk.deemedacceptable byconfirmingbank. Addscost and anadditionalrequirement toseller.UNCONFIRMEDIRREVOCABLECREDITSame as above Same as above Seller hassingle bankassurance ofpayment andseller remainsdependent onforeign bank.Seller shouldcontact hisbanker todeterminewhether theissuing bankhas sufficientassests tocover theamount.Same as above Credit can bechanged onlyby mutualagreement, asstipulated in asalesagreement.Becomes openaccount withbuyers bank ascollectionagent. Foreignbank may haveproblemsmakingpayment insum ortimeliness.DRAFTS(See next twoitems.)Remittancetime frombuyers bankto sellers bankmay still takeone week toone month.Drafts, bydesign, shouldcontain termsand conditionsmutuallyagreed upon.A draft may bewritten withvirtually anyterm orconditionagreeable toboth parties.Whendeterminingdraft tenor(terms andconditions),consult withyour bankerand freightforwarder todetermine themost desirablemeans of doingbusiness in agiven country.SIGHT DRAFT On After payment If draft not Assures A draft can be
(withdocumentsagainstacceptance)presentationof draft tobuyer.to buyersbank.honored,goods must bereturned orresold.Storage,handling, andreturn freightexpenses maybe incurred.shipment butnot content,unlessinspection orcheck-in isallowed beforepayment.a collectioninstrumentused toexchangepossession andtitle to goodsfor payment.Seller isessentiallydrawing acheck againstthe bankaccount of thebuyer. Buyersbank musthave pre-approval, orseek approvalof the buyerprior tohonoring thecheck. Paybleuponpresentationof documents.TIME DRAFTS(withdocumentsagainstacceptance)On maturity ofthe draftBeforepayment, afteracceptanceRelies on buyerto honor draftuponpresentation.Assuresshipment butnot content.Time ofmaturityallows foradjustments, ifagreed to byseller.Payable basedupon theacceptance ofan obligationto pay theseller at aspecified time.Although atime draft hasmorecollectionleverage thanan invoice, itremains only apromissorynote, withconditions.OPENACCOUNTAs agreed,usually byinvoiceBeforepaymentReliescompletely onbuyer to payaccount asagreedNone All terms ofpayment,including extracharges andterms shouldbe mutually
understoodand agreedupon prior toopen accountinitiation.Companiesconductingongoingbusiness arecandidates foropen accountterms ofpayment.Seller mustmeasure notonly buyerscreditreliability butthe countrysas well.Terms Ranked from LEAST RISK to MOST RISK for the Seller
Unit 5INTERNATIONAL PROMOTION METHODPromotion is another P of the marketing mix - promotion is about communicating, informing anddeveloping an image (of the company or a product) with both current customers and potentialcustomers.Businesses promote themselves and products for a number of reasons:1. increase and maintain demand for their product(s)2. increase and maintain the market share of their product(s)3. make noise and raise awareness for their product(s)4. create or enhance a brand imagePromotion methodsThere are two advertising techniques businesses may use: Below the line (BTL) and Above the line (ATL).The technique and method a business decides to use to promote its product depends on a number offactors:1. the type of product2. their budget3. the products stage in the product life cycle4. the target audience (who the business wants to reach)5. legal issues (whether a business is allowed to promote their product in a certain way, e.g.tobacco and drugs)Below the line (BTL) promotionBelow the line promotion includes promotion methods which are more personal, traditional and allowthe company control. They can include:PR - public relations - when a business communicates directly with its public through press releases andspeaking at conferencesSales promotions - such as 50% extra free, buy one get one free or coupons and giftsSponsorship - where a business will pay to be associated with another product, person or event.Sportspersons are often sponsored by sports companies.Direct sales - when a representative of the business will visit potential customers
Above the line (ABL) promotionBelow the line promotion includes promotion methods using "mass media", for example TV and theinternet. Such techniques are usually seen as impersonal, designed to reach as many people at as littlecost as possible. They can include:TV, Radio and Cinema - allows businesses to target a large group of peopleNewspapers - allow advertisers to reach specific groups of peopleThe web - allows businesses to reach a large international audience at a very low cost.Outdoor/transport - advertisements on the side of busses, outside shops and on billboards enableDIRECT MAIL-- Mail sent directly from you to your customers can be highly customized to suit theirnature and needs. You may want to build a mailing list of your current and desired customers. Collectaddresses from customers by noticing addresses on their checks, asking them to fill out informationcards, etc. Keep the list online and up-to-date. Mailing lists can quickly become out-of-date. Noticemailings that get returned to you. This should be used carefully and it can incur substantial cost, youdont want to inundate your stakeholders with information so make the most of your message.ADVERTISING- Advertising or advertising  is a form of communication for marketing and usedto encourage or persuade an audience (viewers, readers or listeners; sometimes a specific group) tocontinue or take some new action. Most commonly, the desired result is to drive consumer behaviorwith respect to a commercial offering, although political and ideological advertising is also common.PERSONAL SELLING- Personal selling is where businesses use people (the “sales force”) to sellthe product after meeting face-to-face with the customer.The sellers promote the product through their attitude, appearance and specialist productknowledge. They aim to inform and encourage the customer to buy, or at least trial theproduct.A good example of personal selling is found in department stores on the perfume and cosmeticcounters.A customer can get advice on how to apply the product and can try different products.Products with relatively high prices, or with complex features, are often sold using personalselling. Great examples include cars, office equipment (e.g. photocopiers) and many productsthat are sold by businesses to other industrial customers.
The main advantages and disadvantages of personal selling can be summarised as follows:Advantages DisadvantagesHigh customer attentionMessage is customizedInteractivityPersuasive impactPotential for development ofrelationshipAdaptableOpportunity to close the saleHigh costLabor intensiveExpensiveCan only reach a limited number ofcustomersTRADE FAIR- A trade fair (trade show, trade exhibition or expo) is an exhibition organized sothat companies in a specific industry can showcase and demonstrate their latest products,service, study activities of rivals and examine recent market trends and opportunities. Incontrast to consumer fairs, only some trade fairs are open to the public, while others can onlybe attended by company representatives (members of the trade, e.g. professionals) andmembers of the press, therefore trade shows are classified as either "Public" or "Trade Only". Afew fairs are hybrids of the two; one example is the Frankfurt Book Fair, which is trade-only forits first three days and open to the general public on its final two days. They are held on acontinuing basis in virtually all markets and normally attract companies from around the globe.For example, in the U.S. there are currently over 2500 trade shows held everyyear, and several online directories have been established to help organizers, attendees, andmarketers identify appropriate events.
Unit 6DISTRIBUTION CHANNELDISTRIBUTION CHANNEL AND LOGISTICS DECISIONA distribution channel can have several stages depending on how many organisations are involved in it:
Looking at the diagram above:Channel 1 contains two stages between producer and consumer - a wholesaler and a retailer. Awholesaler typically buys and stores large quantities of several producers’ goods and then breaks intobulk deliveries to supply retailers with smaller quantities. For small retailers with limited orderquantities, the use of wholesalers makes economic sense.Channel 2 contains one intermediary. In consumer markets, this is typically a retailer. The consumerelectrical goods market in the UK is typical of this arrangement whereby producers such as Sony,Panasonic, Canon etc. sell their goods directly to large retailers such as Comet, Tesco and Amazon whichthen sell onto the final consumers.Channel 3 is called a "direct-marketing" channel, since it has no intermediary levels. In this case themanufacturer sells directly to customers. An example of a direct marketing channel would be a factoryoutlet store. Many holiday companies also market direct to consumers, bypassing a traditional retailintermediary - the travel agent.What is the best distribution channel for a product?What factors should be taken into account in choosing the best distribution channel? Here is asummary:Nature of the product1. Technical/complex? Complex products are often sold by specialist distributors or agents2. Customized? A direct distribution approach often works best for a product that the endconsumer wants providing to a distinct specification3. Type of product – e.g. convenience, shopping, specialty4. Desired image for the product – if intermediaries are to be used, then it is essential that thosechosen are suitable and relevant for the product.The market1. Is it geographically spread?2. Does it involve selling overseas (see further below)3. The extent and nature of the competition – which distribution channels and intermediaries docompetitors use?The business1. Its size and scope – e.g. can it afford an in-house sales force?2. Its marketing objectives – revenue or profit maximization?3. Does it have established distribution network or does it need to extend its distribution option4. How much control does it want over distribution? The longer the channel, the less control isavailable
Legal issues1. Are there limitations on sale?2. What are the risks if an intermediary sells the product to an inappropriate customer?SELECTION AND APPOINTMENT OF FOREIGN SALES AGENTSelling a product through an overseas agent is a very successful strategy. Sales agents are available oncommission basis for any sales they make. The key benefit of using an overseas sales agent is that youget the advantage of their extensive knowledge of the target market. Sales agent also provides supportto an exporter in the matter of transportation, reservation of accommodation, appointment with thegovernment as and when required. It is, therefore, essential that one should very carefully selectoverseas agent.Merits of Appointing a Sales AgentThere are various types of merits associated with appointed a sales agent for export purpose are asfollow:1. Sales agent avoids the recruitment, training, time and payroll costs of using own employees toenter an overseas market.2. An agent is a better option to identify and exploit opportunities in overseas export market.3. An agent already have solid relationships with potential buyers, hence it saves the time of theexporter to build own contacts.4. An agent allows an exporter to maintain more control over matters such as final price and brandimage - compared with the other intermediary option of using a distributor.Demerits of Appointing a Sales AgentThere are also certain disadvantages associated with appointing a sales agent for export purpose whichare as follows:1. After-sales service can be difficult when selling through an intermediary.2. There is a risk for exporter to lose some control over marketing and brand image.Important Points While Appointing a Sales Agent:Appointing right sales agent not only enhance the profit of an exporter but also avoid any of risksassociated with a sales agent. So it becomes important for an exporter to take into considerationfollowing important points before selection an appropriate sales agent for his product.1. Size of the agents company.2. Date of foundation of the agents company.3. Companys ownership and control.4. Companys capital, funds, available and liabilities.5. Name, age and experience of the companys senior executives.
6. Number, age and experience of the companys salesman.7. Oher agencies that the company holds, including those of competing products and turn-over ofeach.8. Length of companys association with other principal.9. New agencies that the company obtained or lost during the past year.10. Companys total annual sales and the trends in its sales in recent years.11. Companys sales coverage, overall and by area.12. Number of sales calls per month and per salesman by company staff.13. Any major obstacles expected in the companys sales growth.14. Agents capability to provide sales promotion and advertising services15. Agents transport facilities and warehousing capacity.16. Agents rate of commission; payment terms required.17. References on the agents from banks, trade associations and major buyers18. Some source of Information on Agents is:19. Government Departments Trade Associations.20. Chambers of Commerce.21. Banks.22. Independent Consultants.23. Export Promotion Councils.24. Advertisement Abroad.Agent v DistributorThere is a fundamental legal difference between agents and distributors and an exporter should notconfuse between the two. An agent negotiates on the behalf of an exporter and may be entitled tocreate a legal relationship between exporter and the importerA distributor buys goods on its own account from exporter and resells those products to customers. It isthe distributor which has the sale contract with the customer not the exporter. In the case of distributor,an exporter is free from any kinds of risks associated with the finance.
Unit 7EXIM POLICYExim Policy, also known as the Foreign Trade Policy is announced every 5 years by Ministry of Commerceand Industry, Government of India. It is updated every year on the 31st of March and all theamendments and improvements in the scheme are effective from the 1st of April. Exim policy deals ingeneral provisions pertaining to exports and imports, promotional measures, duty exemption schemes,export promotion schemes, special economic zone programs and other details for different sectors. TheGovernment announces a supplement to this policy each year. The Government of India also releasesthe Hand Book of Procedures detailing the procedures to be followed for each of the schemesmentioned in the Exim Policy.TRENDS IN INDIA’S FOREIGN TRADETrade PerformanceExports crossed the landmark figure of US $ 100 billion to reach US $ 103 billion during 2005-06. Duringthe current year 2006-07 exports are expected to reach the target of US $ 125 billion if the present rateof growth of exports is maintained during the last quarter of the year. The sustained growth ofmerchandise exports at more than 20 per cent during the last few years is more than twice the growthof Gross Domestic Product (GDP). If this trend continues the export target of US $ 150 billion set in theForeign Trade Policy for 2009 is likely to be achieved quite comfortably as can be.The growth performance of exports has been an outcome of a conscious and concerted effort on thepart of the Government to bring down transaction costs and facilitate trade. The vision and the roadmapprovided by the Foreign Trade Policy (2004-09) for a five year period with clearly enunciated objectives,strategies and policy initiatives has been instrumental in putting exports on a higher growth trajectory.
The export target during 2004-05 at around US $ 75 billion was sought to be doubled to US $ 150 billionby the terminal year of the Foreign Trade Policy, i.e. 2008-09. For the first time in the history of planningdoubling of exports in less than five years is being seen as an achievable target. What is even moresignificant is that exports have been conceived of as an engine for generating additional economicactivity for employment generation with special focus on rural and semi-urban areas.Exports are projected to touch the target of US $ 125 billion by the end of the current financial year2006-07 if the present rate of growth is maintained during the last quarter of the year.The exportgrowth in India is partly on account of a favourable international environment resulting from a sustainedworld GDP growth at around 5 per cent since 2003. This has led to booming trade volumes and risingcommodity prices in the world market. However, this alone does not entirely explain the 250unprecedented growth performance. Exports from India also responded to numerous reform measuresand policy initiatives. The Government made a conscious and concerted effort to reduce trade barriers,bring down transaction costs and facilitate trade. For the first time in the history of planning doubling ofexport activity within five years was set as a concrete target of the Foreign Trade Policy of theGovernment. During the first nine months of the current financial year ( April - December 2006-07)exports stood at US $ 89 billion while imports were valued at US $ 131 billion. Trade deficit wasestimated at US $ 42 billion. The aggregate foreign trade data in US Dollar and Rupee terms for theperiod April- December 2005-06 and April- December 2006-07 are given below in Table 2.1.Exports by Principal CommoditiesAccording to disaggregated data of exports by Principal Commodities available for the period April -October 2006-07, the export growth was mainly driven by petroleum products, engineeringTable 2.1 Indias Foreign Trade(Rscrore) Year Exports GrowthRate Imports GrowthRate TradeDeficit2002-03 255137 22.1 297206 21.2 -420692003-04 293367 15.0 359108 20.8 -657412004-05 375340 27.9 501065 39.5 -1257252005-06 456418 21.6 660408 31.8 -2039902005-06(Apr-Dec) 324572.34 464866.02 -140293.682006-07(P)(Apr-Dec) 408394.10 25.83 598286.68 28.70 -189892.58Year Exports GrowthRate Imports GrowthRate TradeDeficit2002-03 52719 20.3 61412 19.4 -86932003-04 63843 21.1 78150 27.3 -14307
2004-05 83536 30.8 111517 42.7 -279812005-06 103090 23.4 149166 33.8 -460762005-06(Apr-Dec) 73362.28 105118.68 -31756.402006-07(P)(Apr-Dec) 89489.08 21.98 131212.46 24.82 -41723.88(P) Provisional DataNote: 2005-06 Figures are revised figures as per the Monthly Statistics of the Foreign Trade of India forMarch, 2006Source: DGCI&S, Kolkata.goods and agriculture and allied products. The growth performance of exports by Principal Commoditiescan be seen at Table 2.2 and Graph 2.1 below:Plantation CropsExport of plantation crops grew by 26.74 per cent in rupee terms compared with the correspondingperiod of the previous year. Export of coffee registered a growth of 33.86 per cent from Rs. 893.06 croreto Rs. 1,195.44 crore and export of tea registered a growth of 20.53 per cent from Rs. 1,023.72 crore toRs. 1233.91 crore.Agriculture and Allied ProductsAgriculture and Allied Products include Cereals, Pulses, Tobacco, Spices, Nuts and Seeds, Oil Meals,Guargum Meals, Castor Oil, Shellac, Sugar & Molasses, Processed Food, Meat & Meat Products, etc.During April-October, 2006, exports of commodities under this group registered an average growth of25.29 per cent with the value of exports rising from Rs. 16,547.74 crore in the previous year to Rs.20,733.06 crore during the current year.Ores and MineralsExports of Ores and Minerals were estimated at Rs. 15,415,05crore during April-October, 2006registering a growth of 13.20 per cent over the same period of the previous year. All sub groups viz.Processed Minerals, other Ores and Minerals, and Coal have recorded positive growth of 34.91 per cent,47.76 per cent and 35.22 per cent respectively except Iron ore.Leather and Leather ManufacturesExport of Leather and Leather Manufactures recorded during April-October, 2006 a growth of 9.06 percent. The value of export increased to Rs. 7,451.72 crore from Rs. 6,832.80 crore during the same periodof the previous year. Exports of Leather Manufactures and Leather Footwear registered a growth of 3.43per cent and 18.40 per cent respectively.
Gems and JewelleryThe export of Gems and Jewellery during April-October, 2006 increased to Rs. 41,877.01 crore from Rs.1,834.12 crore during the corresponding period of last year showing a growth of 0.1 per cent.Chemicals and related ProductsThe value of exports of Chemicals and Allied Products increased to Rs. 44,621.64 crore from Rs.36,907.79 crore during the same period of the previous year registering a growth rate of 20.90 per cent.Basic Chemicals, Pharmaceuticals & Cosmetics, Rubber, Glass & Other Products and Residual Chemicalsand Allied Products and Plastic & Linoleum registered positive growth.Engineering GoodsExports of items under this group consist of Machinery, Iron & Steel, and Other Engineering items.Export from this sector during the period April-October, 2006 stood at Rs. 66,267.62 crore comparedwith Rs. 45,912.18 crore during the same period of the previous year, registering an overall growth of44.34 per cent.Electronic goods & Computer Software in physical formExports of Electronic Goods were estimated at Rs. 7,138.46 crore compared with Rs. 5,285.41 croreduring the corresponding period of last year, registering a growth of 35.06 per cent. Computer Softwarein Physical form has shown a negative growth of 62.72 per centTextiles and HandicraftsThe value of Textiles exports was estimated at Rs. 41,373.98 crore compared with Rs. 37,543.63 crore inthe corresponding period of the previous year, recording a growth of 10.20 per cent. The export ofReadymade Garments, Cotton, Yarn, Fabrics, Made Ups, etc., Manmade Textiles & Made Ups and Coir &Coir Mfrs recorded a growth of 8.08 per cent, 12.69 per cent, 18.81 per cent and 7.74 per centrespectively. Export items of Handicrafts include Metal Artware, Textiles (hand printed), Woodwaresand Zari goods. Exports of Handicrafts declined to Rs. 874.37 crore from Rs. 1,265.81 crore during the
corresponding period of the previous year registering a negative growth of 30.92 per cent. Export ofcarpets increased to Rs. 2,331.38 crore from Rs. 2,046.39 crore during the same period last yearregistering a growth of 13.93 per cent.Project GoodsThe export of Project Goods recorded a decline of Rs. 169.87 crore from Rs. 335.90 crore during theperiod April-October, 2006 registering a negative growth of 49.43 per cent..Petroleum ProductsExport of Petroleum Products increased by Rs.51,856crores during the current year 2006-07 (April-October) compared with Rs.26,811 crores during the same period last year recording a growth of 93.4per cent. As aa result of this the share of Petroleum Products in total exports increased to almost 16 percent.Cotton Raw including WasteThere was a very significant growth of Cotton Raw including Waste from Rs.664 crores during April-October 2005-06 to Rs.1,681crores during 2006-07 April-Oct. The rate of growth of exports of this itemat 153.4 per cent was the highest recorded by any group of Principal Commodities during the currentyear.Trends in Indias ImportsThe trends in Indias imports for the year2006-07 (April-October), compared with the correspondingperiod of 2005-06 are shown in Table-III. Oil Imports recorded a higher growth than non-oil importswhereas there was a decline in import of Pearls, Precious and Semi-Precious StonesImports by Principal CommoditiesAccording to disaggregated data of imports by Principal Commodities available for the period April -October 2006-07, the import growth was mainly driven by Petroleum Crude. Imports of items underbulk category comprising inter-alia Fertilizers, Wheat, News Print, Non-Ferrous Metals, MetalliferrousOres and Products recorded a substantial increase. The growth of import of Machinery and ProjectGoods was also significant. The growth performance of imports by Principal Commodities can be seen atTable 2.3 and Graph 2.2 below:FertilizersDuring April - October, 2006-07, import of Fertilizers increased to Rs.8698.47 crore from Rs. 5,321.24crore recording a growth of 63.47 per cent.
Petroleum Crude & ProductsThe import of Petroleum Crude & Products stood at Rs. 161,049.52 crore during April- October, 2006-07against Rs. 106,874.99 crore during the same period of the previous year showing a growth of 50.69 percent.Pearls, Precious and Semi-Precious StonesImport of Pearls and Precious and Semi-precious Stones during April- October, 2006-07 decreased to Rs.19,509.57 crore from Rs. 27,152.29 crore during the corresponding period of the previous yearregistering a negative growth of 28.15 per cent.Capital GoodsImport of capital goods, largely comprising Machinery, including Transport Equipment and ProjectGoods recorded a notable increase during April- October, 2006-07 over the same period of last year.Import of Machine Tools, Project Goods, Non-Electrical Machinery, Electrical Machinery and TransportEquipment registered a growth of 47.15 per cent, 127.20 per cent, 45.24 per cent, 43.89 per cent, and56.01 per cent respectively.Chemicals and Chemical MaterialsDuring April- October, 2006-07, import of Organic and Inorganic Chemicals increased to Rs. 20,840.13crore from Rs. 18.051.71 crore during the same period of last year, registering a growth of 15.45 percent. Import of Medicinal and Pharmaceutical Products also increased toRs. 3,037.09 crore fromRs.2,471.30 crore during the corresponding period of last year registering a growth of 22.89 per cent.Direction of Indias Foreign TradeThe value of Indias exports and imports from major regions/ countries are given in Table IV & Vrespectively and Graph 2.3 and 2.4.During the first 7 months of the current year, the share of Asia and ASEAN region comprising SouthAsian, East Asian, Mid-eastern and Gulf countries accounted for nearly 49.87 per cent of Indias total
exports. The share of Europe and America in Indias export stood at 22.28 per cent and 19.83 per centrespectively of which EU (25) comprises 20.74 per cent. During the period, USA continued to remain themost important country of export destination (15.47 per cent) followed by United Arab Emirates (10.06per cent),Singapore (5.45 per cent), China (5.66 per cent), Hong Kong (3.71 per cent), UK (4.46 per cent) andGermany (3.15 per cent).Asia and ASEAN accounted for 61.56 per cent of Indias total import during the period followed byEurope (19.91 per cent) and America (9.4 per cent). Among individual countries the share of China stoodhighest at (9.1 per cent) followed by USA (5.7 per cent), and Germany (3.99 per cent).During the same period, Africa accounted for the highest growth in Indias export at 73.26 per centfollowed by Asia & ASEAN (35.66 per cent), Europe (21.94 per cent) and America (21.95 per cent). Onthe other hand, Indias imports from the Asia and ASEAN region was 130.96 per cent higher than theimports in the corresponding period of the previous year.Import of Sensitive Items during 2006 - 07 (April- December)The total import of sensitive items for the period April-December 2006 has been Rs 14472 crore ascompared to Rs 12959 crore during the corresponding period last year thereby showing an increase of11.7 per cent. The gross import of all commodity during same period of current year was Rs 598287crore as compared to Rs 464866 crore during the same period of last year. Thus import of sensitiveitems constitute 2.8 per cent and 2.4 per cent of the gross imports during last year and current yearrespectively.Imports of fruits & vegetables (including nuts), cotton & silk, spices and tea & coffee have shown adecline at broad group level during the period. Imports of items viz. edible oil, food grains, products ofSSI, rubber, marble & Granite, Alcoholic beverages and milk & milk products have shown increase duringthe period under reference.In the edible oil segment, the imports has increased from Rs 6753 crores last year to Rs 7558 crores forthe corresponding period of this year. A significant feature of edible oil import is that import of crude oil
has gone up by 20.5 per cent and that of refined oil have gone down by 44.9 per cent. The growth inedible oil import is mainly due to significant increase in import of Crude Palm Oil and its fractions whichhas gone up by 44 per cent.Imports of sensitive items from Indonesia, Argentina, Australia, United States of America, China PeoplesRepublic, Malaysia, Russia, Sri Lanka DSR, Thailand, Cote D Ivory, Germany etc. have gone up whilethose from Brazil, Guinea Bissau, Egypt A RP, Japan, Benin etc. have shown a decrease.A table showing imports of sensitive items during April-December 2006 Vs April-December 2005 is givenin Table-2.6. Graph-2.5 & Graph-2.6 depict the comparative percentage share of import of sensitiveitems during April-December 2005 and April-December 2006 respectively.STEPS IN STARTING AN EXPORT BUSINESSStarting an Export Business can seem like an overwhelming task, but it doesnt have to be! The first stepin starting an Export Business is to find a Manufacturer. Your manufacturer is the linchpin in yourbusiness process. If your manufacturer can’t deliver the quality or quantity you need, then you can’tdeliver on your commitments to your customers.
So how do you find a quality Manufacturer for your export products? The following are 5 steps to helpyou find, qualify, and solidify a relationship with a great manufacturer for your export business.Time Required: VariesHeres How:Make a List of Possible ManufacturersDon’t reinvent the wheel - find lists of potential manufacturers on the internet, in trade magazines,through import-export organizations, and even at your local library. Start with the Thomas Register ofAmerican Manufacturers, GlobalSources, GlobalSpec, or Alibaba.Another source of information is trade associations (easily found through trade magazines or online).There are associations for nearly every kind product, from toys and foods to cosmetics and construction.Contact the association and ask for a list of recommended or specialized manufacturers.Do Your ResearchOnce you’ve identified a list of possible manufacturers for your specific export product, do yourhomework on each of them. Do they:1. Impress you in their marketing?2. Have great packaging?3. Enjoy a good reputation with clients and within the industry?4. Provide enough info to potential customers?5. Offer quality, convenience, and competitive pricing?6. Feel right (i.e., do you have good chemistry about them from the info you have available)?Your product and business is going to be represented by the product and packaging of yourmanufacturer - you want them to be as impressive as you are.Determine If Manufacturer is a Good FitCan the manufacturer keep up with demand of your product? One good way to find out is by checkingthe shelves of the manufacturer’s retail customers. If the retail customer doesn’t have themanufacturer’s products on their shelves, it may mean the manufacturer can’t keep up with demand.You definitely don’t want to tell your customers you can’t sell them anything because yourmanufacturer is three weeks behind. Another indicator is whether the manufacturer advertises or notbecause they certainly won’t advertise if they are at max capacity.Make First ContactIf you’ve qualified the manufacturer and are ready to begin the relationship, start with a simple requestfor information.
If the company takes forever to get back with you, or just sends you a brochure with no kind of follow-up, take the hint - they’re not worried about attracting new customers or they simply have no customerservice.If a sales rep contacts you to talk about your product and your interest in their company, and readilyanswers all of your questions and concerns, it’s probably a good indicator of how the overall companytreats its customers.Introduce Your CompanyAt this point you need to act a sales rep for your own company. Meet the manufacturer and get themexcited about your company. Lay the groundwork for a great collaborative partnership. Tell them aboutyour market, your product, your customers, and the future of your business. Make sure you cover howyou’ll finance your orders and terms. Your success translates into their success so you want to get themexcited about you. Having a solid relationship with your manufacturer can pay dividends down the road,like preferential treatment in the production schedule or flexible payment terms.PRODUCT SELECTIONA key factor in any export business is clear understanding and detail knowledge of products to beexported. The selected product must be in demand in the countries where it is to be exported. Beforemaking any selection, one should also consider the various government policies associated with theexport of a particular product.Whether companies are exporting first time or have been in export trade for a long time - it is better forboth the groups to be methodical and systematic in identifying a right product. It’s not sufficient to haveall necessary data in your mind - but equally important to put everything on paper and in a structuredmanner. Once this job is done, it becomes easier to find the gaps in the collected information and takenecessary corrective actions.There are products that sell more often than other product in international market. It is not verydifficult to find them from various market research tools. However, such products will invariably havemore sellers and consequently more competition and fewer margins. On the other hand - a nicheproduct may have less competition and higher margin - but there will be far less buyers.Fact of the matter is - all products sell, though in varying degrees and there are positive as well as flipsides in whatever decision you take - popular or niche product.Key Factors in Product Selection1. The product should be manufactured or sourced with consistent standard quality, comparableto your competitors. ISO or equivalent certification helps in selling the product in theinternational market.
2. If possible, avoid products which are monopoly of one or few suppliers. If you are themanufacturer - make sure sufficient capacity is available in-house or you have the wherewithalto outsource it at short notice. Timely supply is a key success factor in export business3. The price of the exported product should not fluctuate very often - threatening profitability tothe export business.4. Strictly check the government policies related to the export of a particular product. Thoughthere are very few restrictions in export - it is better to check regulatory status of your selectedproduct.5. Carefully study the various government incentive schemes and tax exemption like dutydrawback and DEPB.6. Import regulation in overseas markets, specially tariff and non-tariff barriers. Though a majornon-tariff barrier (textile quota) has been abolished - there are still other tariff and non-tariffbarriers. If your product attracts higher duty in target country - demand obviously falls.7. Registration/Special provision for your products in importing country. This is specially applicablefor processed food and beverages, drugs and chemicals.8. Seasonal vagaries of selected products as some products sell in summer, while others in winter.Festive season is also important factor, for example certain products are more sellable onlyduring Christmas.9. Keep in mind special packaging and labeling requirements of perishable products like processedfood and dairy products.10. Special measures are required for transportation of certain products, which may be bulky orfragile or hazardous or perishable.MARKET SELECTIONAfter evaluation of company’s key capabilities, strengths and weaknesses, the next step is to startevaluating opportunities in promising export markets. It involves the screening of large lists of countriesin order to arrive at a short list of four to five. The shorting method should be done on the basis ofvarious political, economic and cultural factors that will potentially affect export operations in chosenmarket.Some factors to consider include:1. Geographical Factorsa. Country, state, region,b. Time zones,c. Urban/rural location logistical considerations e.g. freight and distribution channels2. Economic, Political, and Legal Environmental Factorsa. Regulations including quarantine,b. Labelling standards,c. Standards and consumer protection rules,d. Duties and taxes3. Demographic Factors
a. Age and gender,b. Income and family structure,c. Occupation,d. Cultural beliefs,e. Major competitors,f. Similar products,g. Key brands.4. Market Characteristicsa. Market size,b. Availability of domestic manufacturers,c. Agents, distributors and suppliers.Foreign Market ResearchUnderstanding a market’s key characteristics requires gathering a broad range of primary and secondaryresearch, much of which you can source without cost from the internet.Primary research, such as population figures, product compliance standards, statistics and other factscan be obtained without any cost from international organizations like United Nations (UN) and WorldTrade Organizations (WTO). Analysis of export statistics over a period of several years helps an individualto determine whether the market for a particular product is growing or shrinking.Secondary research, such as periodicals, studies, market reports and surveys, can be found throughgovernment websites, international organizations, and commercial market intelligence firms.Foreign Market Selection ProcessStep 1: Gather Information on a Broad Range of Markets1. Market selection process requires a broad range of information’s depending upon the productsor services to be exported, which includes:2. The demand for product/service.3. The size of the potential audience.4. Whether the target audience can affords product.5. What the regulatory issues are that impact on exports of product.6. Ease of access to this market – proximity/freight.7. Are there appropriate distribution channels for product/service.8. The environment for doing business – language, culture, politics etc.9. Is it financially viable to export to selected market.You can gather much of the first step information yourself from a variety of sources at little or no cost.Sources of information include:1. Talking to colleagues and other exporters.2. Trade and Enterprise – web site, publications, call centre.
3. The library.4. The Internet.Step 2: Research a Selection of Markets In-DepthFrom the results of the first stage, narrow your selection down to three to five markets and undertakesome in-depth research relating specifically to your product. While doing so, some of the questions thatmay arise at this stage are:What similar products are in the marketplace (including products that may not be similar but are used toachieve the same goal, e.g. the product in our sample matrix at the end of this document is a hairremoval cream. As well as undertaking competitor research on other hair removal creams, we wouldalso need to consider other products that are used for hair removal, i.e. razors, electrolysis, wax).1. What is your point of difference? What makes your product unique? What are the key sellingpoints for your product?2. How do people obtain/use these products?3. Who provides them?4. Are they imported? If so from which countries?5. Is there a local manufacturer or provider?6. Who would your major competitors be? What are the key brands or trade names?7. What is the market’s structure and shape?8. What is the market’s size?9. Are there any niche markets, and if so how big are they?10. Who are the major importers/ stockists / distributors / agencies or suppliers?11. What are the other ways to obtain sales/representation?12. What are the prices or fees in different parts of the market?13. What are the mark-ups at different distribution levels?14. What are the import regulations, duties or taxes, including compliance and professionalregistrations if these apply?15. How will you promote your product or service if there is a lot of competition?16. Are there any significant trade fairs, professional gathers or other events where you canpromote your product or service?17. Packaging – do you need to change metric measures to imperial, do you need to list ingredients?18. Will you need to translate promotional material and packaging?19. Is your branding – colours, imagery etc., culturally acceptable?EXPORT PRICINGPricing and costing are two different things and an exporter should not confuse between the two. Priceis what an exporter offer to a customer on particular products while cost is what an exporter pay formanufacturing the same product.
Export pricing is the most important factor in for promoting export and facing international tradecompetition. It is important for the exporter to keep the prices down keeping in mind all export benefitsand expenses. However, there is no fixed formula for successful export pricing and is differ fromexporter to exporter depending upon whether the exporter is a merchant exporter or a manufacturerexporter or exporting through a canalising agency.Determining Export Pricing1. Export Pricing can be determine by the following factors:2. Range of products offered.3. Prompt deliveries and continuity in supply.4. After-sales service in products like machine tools, consumer durables.5. Product differentiation and brand image.6. Frequency of purchase.7. Presumed relationship between quality and price.8. Specialty value goods and gift items.9. Credit offered.10. Preference or prejudice for products originating from a particular source.11. Aggressive marketing and sales promotion.12. Prompt acceptance and settlement of claims.13. Unique value goods and gift items.Export CostingExport Costing is basically Cost Accountants job. It consists of fixed cost and variable cost comprisingvarious elements. It is advisable to prepare an export costing sheet for every export product.As regards quoting the prices to the overseas buyer, the same are quoted in the followinginternationally accepted terms which are commonly known as Incoterm.EXPORT DOCUMENTATIONAn exporter without any commercial contract is completely exposed of foreign exchange risks that arisesdue to the probability of an adverse change in exchange rates. Therefore, it becomes important for theexporter to gain some knowledge about the foreign exchange rates, quoting of exchange rates andvarious factors determining the exchange rates. In this section, we have discussed various topics relatedto foreign exchange rates in detail.Export from India required special document depending upon the type of product and destination to beexported. Export Documents not only gives detail about the product and its destination port but are alsoused for the purpose of taxation and quality control inspection certification.
Shipping Bill / Bill of ExportShipping Bill/ Bill of Export is the main document required by the Customs Authority for allowingshipment. A shipping bill is issued by the shipping agent and represents some kind of certificate for allparties, included ships owner, seller, buyer and some other parties. For each one represents a kind ofcertificate document.Documents Required for Post Parcel Customs ClearanceIn case of Post Parcel, no Shipping Bill is required. The relevant documents are mentioned below:Customs Declaration Form - It is prescribed by the Universal Postal Union (UPU) and international apexbody coordinating activities of national postal administration. It is known by the code number CP2/ CP3and to be prepared in quadruplicate, signed by the sender.Despatch Note- It is filled by the exporter to specify the action to be taken by the postal department atthe destination in case the address is non-traceable or the parcel is refused to be accepted.Commercial Invoice - Issued by the exporter for the full realisable amount of goods as per trade term.Consular Invoice - Mainly needed for the countries like Kenya, Uganda, Tanzania, Mauritius, NewZealand, Burma, Iraq, Ausatralia, Fiji, Cyprus, Nigeria, Ghana, Zanzibar etc. It is prepared in theprescribed format and is signed/ certified by the counsel of the importing country located in the countryof export.Customs Invoice - Mainly needed for the countries like USA, Canada, etc. It is prepared on a special formbeing presented by the Customs authorities of the importing country. It facilitates entry of goods in theimporting country at preferential tariff rate.Legalised / Visaed Invoice - This shows the sellers genuineness before the appropriate consulate orchamber or commerce/ embassy.Certified Invoice - It is required when the exporter needs to certify on the invoice that the goods are of aparticular origin or manufactured/ packed at a particular place and in accordance with specific contract.Sight Draft and Usance Draft are available for this. Sight Draft is required when the exporter expectsimmediate payment and Usance Draft is required for credit delivery.Packing List - It shows the details of goods contained in each parcel / shipment.Certificate of Inspection – It is a type of document describing the condition of goods and confirming thatthey have been inspected.Black List Certificate - It is required for countries which have strained political relation. It certifies thatthe ship or the aircraft carrying the goods has not touched those country(s).Manufacturers Certificate - It is required in addition to the Certificate of Origin for few countries toshow that the goods shipped have actually been manufactured and is available.
Certificate of Chemical Analysis - It is required to ensure the quality and grade of certain items such asmetallic ores, pigments, etc.Certificate of Shipment - It signifies that a certain lot of goods have been shipped.Health/ Veterinary/ Sanitary Certification - Required for export of foodstuffs, marine products, hides,livestock etc.Certificate of Conditioning - It is issued by the competent office to certify compliance of humidity factor,dry weight, etc.Antiquity Measurement – It is issued by Archaeological Survey of India in case of antiques.Shipping Order - Issued by the Shipping (Conference) Line which intimates the exporter about thereservation of space of shipment of cargo through the specific vessel from a specified port and on aspecified date.Cart/ Lorry Ticket - It is prepared for admittance of the cargo through the port gate and includes theshippers name, cart/ lorry No., marks on packages, quantity, etc.Shut Out Advice - It is a statement of packages which are shut out by a ship and is prepared by theconcerned shed and is sent to the exporter.Short Shipment Form - It is an application to the customs authorities at port which advises shortshipment of goods and rnequired for claiming the return.EXPORT PROCEDURE1. Registration2. Processing of Shipping Bill3. Quota Allocation4. Arrival of Goods at Docks5. System Appraisal of Shipping Bills6. Customs Examination of Export Cargo7. Stuffing / Loading of Goods in Containers8. Drawal of Samples9. Amendments10. Export of Goods under Claim for DrawbackGeneration of Shipping BillsIn India custom clearance is a complex and time taking procedure that every export face in his exportbusiness. Physical control is still the basis of custom clearance in India where each consignment ismanually examined in order to impose various types of export duties. High import tariffs and multiplicityof exemptions and export promotion schemes also contribute in complicating the documentation andprocedures. So, a proper knowledge of the custom rules and regulation becomes important for the
exporter. For clearance of export goods, the exporter or export agent has to undertake the followingformalities:RegistrationAny exporter who wants to export his good need to obtain PAN based Business Identification Number(BIN) from the Directorate General of Foreign Trade prior to filing of shipping bill for clearance of exportgoods. The exporters must also register themselves to the authorized foreign exchange dealer code andopen a current account in the designated bank for credit of any drawback incentive.Registration in the case of export under export promotion schemes:All the exporters intending to export under the export promotion scheme need to get their licences /DEEC book etc.Processing of Shipping Bill - Non-EDI:In case of Non-EDI, the shipping bills or bills of export are required to be filled in the format asprescribed in the Shipping Bill and Bill of Export (Form) regulations, 1991. An exporter need to applydifferent forms of shipping bill/ bill of export for export of duty free goods, export of dutiable goods andexport under drawback etc.Processing of Shipping Bill - EDI:Under EDI System, declarations in prescribed format are to be filed through the Service Centers ofCustoms. A checklist is generated for verification of data by the exporter/CHA. After verification, thedata is submitted to the System by the Service Center operator and the System generates a Shipping BillNumber, which is endorsed on the printed checklist and returned to the exporter/CHA. For export itemswhich are subject to export cess, the TR-6 challans for cess is printed and given by the Service Center tothe exporter/CHA immediately after submission of shipping bill. The cess can be paid on the strength ofthe challan at the designated bank. No copy of shipping bill is made available to exporter/CHA at thisstage.Quota AllocationThe quota allocation label is required to be pasted on the export invoice. The allocation number of AEPC(Apparel Export Promotion Council) is to be entered in the system at the time of shipping bill entry. Thequota certification of export invoice needs to be submitted to Customs along-with other originaldocuments at the time of examination of the export cargo. For determining the validity date of thequota, the relevant date needs to be the date on which the full consignment is presented to theCustoms for examination and duly recorded in the Computer System.Arrival of Goods at Docks:On the basis of examination and inspection goods are allowed enter into the Dock. At this stage the portauthorities check the quantity of the goods with the documents.
System Appraisal of Shipping Bills:In most of the cases, a Shipping Bill is processed by the system on the basis of declarations made by theexporters without any human intervention. Sometimes the Shipping Bill is also processed on screen bythe Customs Officer.Customs Examination of Export Cargo:Customs Officer may verify the quantity of the goods actually received and enter into the system andthereafter mark the Electronic Shipping Bill and also hand over all original documents to the DockAppraiser of the Dock who many assign a Customs Officer for the examination and intimate the officers’name and the packages to be examined, if any, on the check list and return it to the exporter or hisagent.The Customs Officer may inspect/examine the shipment along with the Dock Appraiser. The CustomsOfficer enters the examination report in the system. He then marks the Electronic Bill along with alloriginal documents and check list to the Dock Appraiser. If the Dock Appraiser is satisfied that theparticulars entered in the system conform to the description given in the original documents and asseen in the physical examination, he may proceed to allow "let export" for the shipment and inform theexporter or his agent.Stuffing / Loading of Goods in ContainersThe exporter or export agent hand over the exporter’s copy of the shipping bill signed by the Appraiser“Let Export" to the steamer agent. The agent then approaches the proper officer for allowing theshipment. The Customs Preventive Officer supervising the loading of container and general cargo in tothe vessel may give "Shipped on Board" approval on the exporter’s copy of the shipping bill.Drawal of Samples:Where the Appraiser Dock (export) orders for samples to be drawn and tested, the Customs Officer mayproceed to draw two samples from the consignment and enter the particulars thereof along with detailsof the testing agency in the ICES/E system. There is no separate register for recording dates of samplesdrawn. Three copies of the test memo are prepared by the Customs Officer and are signed by theCustoms Officer and Appraising Officer on behalf of Customs and the exporter or his agent. The disposalof the three copies of the test memo is as follows:-Original – to be sent along with the sample to the test agency.Duplicate – Customs copy to be retained with the 2nd sample.Triplicate – Exporter’s copy.The Assistant Commissioner/Deputy Commissioner if he considers necessary, may also order for sampleto be drawn for purpose other than testing such as visual inspection and verification of description,market value inquiry, etc.
Amendments:Any correction/amendments in the check list generated after filing of declaration can be made at theservice center, if the documents have not yet been submitted in the system and the shipping billnumber has not been generated. In situations, where corrections are required to be made after thegeneration of the shipping bill number or after the goods have been brought into the Export Dock,amendments is carried out in the following manners.The goods have not yet been allowed "let export" amendments may be permitted by the AssistantCommissioner (Exports).Where the "Let Export" order has already been given, amendments may be permitted only by theAdditional/Joint Commissioner, Custom House, in charge of export section.In both the cases, after the permission for amendments has been granted, the Assistant Commissioner /Deputy Commissioner (Export) may approve the amendments on the system on behalf of the Additional/Joint Commissioner. Where the print out of the Shipping Bill has already been generated, the exportermay first surrender all copies of the shipping bill to the Dock Appraiser for cancellation beforeamendment is approved on the system.Export of Goods under Claim for Drawback:After actual export of the goods, the Drawback claim is processed through EDI system by the officers ofDrawback Branch on first come first served basis without feeling any separate form.Generation of Shipping Bills:The Shipping Bill is generated by the system in two copies- one as Custom copy and one as exportercopy. Both the copies are then signed by the Custom officer and the Custom House Agent.