international marketing concepts


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international marketing concepts

  1. 1. *MARKETING collection of activities undertaken by the firm to relate profitability to its market -study its prospective buyers -develop products that satisfy customer needs and wants -set prices that appear reasonable -distribute products -inform the market -after sales-services *INTERNATIONAL MARKETING Consists of finding and satisfying global customer needs better than the competition, both domestic and international, and of coordinating marketing activities within the constraints of the global environment
  2. 2. -concerned with the micro level of the market -uses the company as the unit of analysis The multinational process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives -AMA * WHY COMPANIES ENGAGE IN INTERNATIONAL MARKETING -to expand their sales -acquire resources -diversify their sources of sales and supplies -minimize competitive risk. *MEANS OF CARRYING OUT INTERNATIONAL MARKETING OPERATIONS -merchandise exports and imports -service exports and imports -investments
  3. 3. * REASONS FOR RECENT GROWTH IN INTERNATIONAL MARKETING -expansion of technology -liberalization of government policies regarding cross border movement of goods and resources -development of supporting institutional arrangements -increased global competition *CHALLENGES FIRMS FACE IN INTERNATIONAL MARKETING -political and legal environment -Cultural environment -competitive environment
  4. 4. *PROCESS OF INTERNATIONALIZATION/STAGES OF INTERNATIONAL MARKETING 1) DOMESTIC MARKETING COMPANY Focusing solely on domestic consumers and economy 2)EXPORTING MARKETING COMPANY begins with unsolicited orders from abroad tend to engage in indirect exporting Eg:Birla Tyres 3)INTERNATIONAL /MULTINATIONAL MARKETING COMPANY Focus on consumer needs and requirements in more than one country and accordingly devises product, price and promotion strategies Eg: Samsung, LG Electronics 5)GLOBAL /WORLDWIDE MARKETING COMPANY Global product with local variations Eg:Ranbaxy
  5. 5.  INTERNATIONAL MARKETING ORIENTATION On the basis of EPRG framework, Wind Douglas and Per mutter have analyzed a company’s approach towards global opportunities 1)ETHNOCENTRIC APPROACH Develop their products on the basis of the requirements of local customers Are highly domestic centralized Eg: Hero Cycles 2)POLYCENTRIC APPROACH Each market is unique and needs to be addressed individually and differently. Firms conduct their own business research ,plan their own product adaptations, price positioning and promotion strategy to suit local needs. Eg: Ford Motors, Toyota 3)REGIOCENTRIC APPROACH Segment the market on the basis of regional similarities eg economic, political etc
  6. 6. 4)GEOCENTRIC APPROACH Manufacturers offer homogenous, identifiable services and products to integrate for worldwide operational efficiency Eg:McDonald’s,Pizza Hut TYPES OF GOVT. AND POLITICAL ECONOMIC SYSTEM 1 ) Collectivism vs. Individualism Refers to a political system that stresses the primacy of the collective goals and the needs ,welfare and benefits of a society are given more importance over that of an Individual. 2) Socialism Is a system that advocates government ownership and control of industry considered critical to the welfare of the nation. 3)Communism vs.Social Democrats Socialism can be achieved only through violent revolution and totalitarian dictatorship. Social democrats believed that socialism could be achieved by democratic means
  7. 7. 4) Individualism Every man should have freedom to pursue his economic and political aims 5) Democracy Govt is elected by the people and is administered and run by the representatives of the people 6) Totalitarianism Denies its citizens all those guarantees on which democratic nations thrive POLITICAL RISKS IN INTERNATIONAL MARKETING 1) Economic performance of the country 2) Political stability 3) Spirit of nationalism 4) Risk related to the govts trade policies 5) Risks pertaining to economic policy 6) Confiscation of international firm's assets 7) Expropriation of firm’s asset When the govt seize the firm’s investments and offer a nominal compensation for
  8. 8. the same ,such expropriated assets are managed by the public sector agencies as nationalised units 8) Nationalisation of business assets When the govt decides to move the property and assets of business from private hands to got sponsored public sector undertaking or agencies 9) Domestication Using locally manufactured raw material for manufacturing products of international firms Gradual transfer of ownership and management of international firms to local managers not permitting repatriation of funds and profit above a certain limit and insisting on profits being deployed back in the local industry. 10) Diplomatic severances and political sanctions 11) Risks pertaining to Non-Governmental organizations and social activist 12)Risks pertaining to religious and political terrorism and extremisms 13)Terrorism on net
  9. 9. INTERNATIONAL LEGAL ENVIRONMENT 1) International laws 2) Host country laws 3) Home country laws
  10. 10. INTERNATIONAL TRADE THEORY-SIGNIFICANCE AND BENEFITS OF INTERNATIONAL TRADE WHY DOES INTERNATIONAL TRADE TAKES PLACE? -entrepreneurial and labour skills differ -factor endowments are not the same -human wants are multiple and varied. No single country satisfies all of them -level of technology is different in different countries THE THEORY OF COMPARATIVE COST-CLASSICAL VIEW The classical theory of international trade is an application of the principle of division of labor known as the Theory of Comparative Cost International trade occurs due to geographical specialisation in the production of different goods due to differences in the comparative cost of production of two nations Adam Smith asserted that international trade occurred because of absolute advantage by a particular country in particular product and absolute advantage
  11. 11. enjoyed by another country in another product. The principle of comparative cost was formulated by David Ricardo Assumptions of Classical theory 1)By production cost, the classicists regarded only labour cost 2) A policy of laissez faire is advocated 3)There is perfect competition 4)All labourers were assumed to be homogenous 5)There are constant returns to scale 6) The factors of production are completely mobile within the country and perfectly immobile between different countries 7)Transport cost are zero 8) Trade takes place only in case of goods. There is no capital movement 9)It is assumed that there are only two countries 10) There are no trade cycles in the economy
  12. 12. CRITICAL EVALUATION (stated by Bertin Ohlin and Frank D. Graham) -unrealistic assumption of labour cost -static nature of theory -neglect of transport cost -assumption of fixed proportions -assumption of constant costs -Unrealistic theory -inadequate explanation of comparative cost -demand conditions ignored -Complete specialization is impossible MODERN THEORY OF INTERNATIONAL TRADE Bertil Ohlin built up his theory of international trade on the basis of the following assumptions -there are two regions only between which trade takes place -factors of production are perfectly mobile within the regions -no restrictions on the movement of goods between the two regions
  13. 13. -no transportation costs -goods transactions alone are to be considered -no qualitative differences in the factors of production in the two regions -each region possesses a paper currency system REFINEMENTS OF THE THEORY - His theory would also be applicable to more than two regions or countries - Introduced the economies of large scale production - Qualitative differences in three factors of production i.e. land,labour and capital - Introduced transport costs CRITICISM OF THE MODERN THEORY - Unrealistic character - Provides at best only a partial equilibrium analysis, not a general equilibrium system -Leontief paradox factor prices are determined not only by the supply of productive factors, but also by the demand for their services
  14. 14. - Trade even with identical factor endowments - Commodity prices determine factor prices the price of a commodity is determined by its utility to the consumers - Product differentiated - Highly static in nature - Production functions not identical - Qualitative differences in productive factors - Mobility of productive factors
  15. 15. EXPORT BUSINESS ENVIRONMENTS SIGNIFICANT CHANGES Rapid growth of world trade and investments International competitiveness, constant foreign trade deficit and present foreign exchange crisis Growth of global brands in autos,food,clothing,electronics etc The gradual opening up of major new markets,namely,China,Eastern Europe and the Arab countries Increased forming of strategic alliances between major international companies from different countries Substantial speedup of international transportation, communication and financial Transactions I] ECONOMIC ENVIRONMENT 1) Income 2) Level of economic development characters reflect the country’s attraction as an export market -size of the country’s population
  16. 16. -the country’s industrial structure There are four types of industrial structures A} subsistence economies Majority of people engage in simple agriculture B}raw material exporting economies These economies are rich in one or more natural resources but poor in other aspects e.g. Chile for tin and copper C} industrializing economies D}developed economies 3 ) levels of savings 4) Economic policies of the ruling govt II) DEMOGRAPHIC ENVIRONMENT -Population of the country and its growth rate -male/female ratio -family size -purchasing power of consumers -importance of middle class
  17. 17. III) SOCIO-CULTURAL ENVIRONMENT -culture -social structure -Religious and ethical systems -language -education -cultural change -habits and behavior IV)LEGAL ENVIRONMENT Various laws,rules,procedures and regulations made by the govt Laws relating to environment protection,ecology protection, retail price maintenance V) TECHNOLOGICAL ENVIRONMENT Opportunities for innovation, varying R&D budgets
  18. 18. PRODUCT PLANNING AND DECISIONS a bundle of physical, psychological, tangible and intangible, present and future attributes that but together bring satisfaction or benefits to the buyer beyond the price paid by him. BASIC CLASSIFICATION OF PRODUCTS 1)Industrial Products (Capital goods and raw materials) -These are the products that can be sold for use in producing other goods and services, altering the very nature of the original product. 2)Consumer Products -These products satisfy a customer’s need and do not require further processing. -three categories on the basis of buyers behaviour and on the purchase action of its consumers. a) Convenience products these are meant for day to day living and basic survival and are brought on instinct, eg., food items medicine and toiletries etc. b) Shopping products these are purchased after thorough planning in advance, where the customer may have a preconceived and predetermined brand and budget in mind.
  19. 19. c) Specialty Products these are products that are specially designed and manufactured to cater to a specific demand of customers, eg., specially designed, tailor- made dress, or a custom made sports car. PRODUCT PLANNING IN INTERNATIONAL MARKETS -refers to the process of determining the length and depth of the product line to be offered. -length will specify the number of products to be offered -depth will relate to the various shades to be adopted for the same product in different international markets. Local Products -When a product is available in a town or, at best, in a region of the nation state, it will be known as local product. -Ex: MTR Spices National Products A product that is sold and marketed only within the confines of a national state. When Dabur India offers ‘Real Fruit Juices’ and Godrej markets ‘Appy’
  20. 20. International Products - The products that are sold across many countries are called international products. - Ex: Suzuki, Honda and Hyundai Technologies. Global Products - True global market are always marketed in global markets, in all continents, and in every country -create same perception across continents by universal positioning e.g Pepsi, Pepsi's Tropicana juice Coke, Nestle , Cadburys and Sony PRODUCT EXTENSION -Companies here extend the same product marketed successfully in the home market to other parts of the world without many modifications -adopted when enough loyalty has been earned in the home market e.g.MTR spices ,Mother’s Recipes pickle PRODUCT STANDARDIZATION AND ADAPTATION -process of marketing a product in international markets by affecting little change in the basic nature of the product -product positioning and strategy also remain ,more or less, the same
  21. 21. Advantages of standardization -builds up a global brand and product image -economies of large –scale productions help achieve an economic cost -global marketing mix can be developed at an optimum cost FACTORS THAT FAVOUR STANDARDIZATION 1) High technology intensive industry - cost of putting up plants in each country in high technology oriented industry can be prohibitively expensive - may not be able to find right kind of quality staff to produce another version of the same product as per international standards e.g. industrial capital equipment, computer hardware 2) Prohibitive Adaption Costs - Mean reconverting the product once it has been standardized for one country. - Will involve making investments on alternate product manufacturing systems to meet new customers needs or to alter the promotion and communication strategy. 3) Emergence of global customers - Their tastes, preferences, needs aspirations for achieving similar standards of living and dreams of better future all converge into a global niche of common identified segmentation of sizable market universe.
  22. 22. - e.g. TV, Levi’s Jeans, McDonalds, Pizza hut, Kentucky Fried Chicken, Café coffee day are accepted as popular products by the global customers. 4) Country of origin - It has been a tradition to associate and ascribe excellence of quality of certain products to their original innovation sources or country of origin. - Eg: Swiss watches PRODUCT ADAPTATION -modifying product as per the requirements of overseas consumers. a) Global variations in physical conditions, such as geography, topography, weather, climatic conditions, availability of logistical support, earning systems and means of livelihood, per capita income and standards of living of the inhabitants of the country etc. b) Varying cultural manifestations, consumer tastes and perceptions, usages, purchasing patterns, consumptions and satisfaction drivers. c) Various levels of competition and the competitive strategies adopted by the other international marketing firms around the globe. Eg: Mattel Toys, in order to lure Indian children, offer dolls that are replicas of Indian Brides.
  23. 23. PRODUCT COMMUNICATION STRATEGIES A product can be marketed abroad only with the help of a communication strategy, which is what conveys the promotional theme to consumers abroad, allowing them to form perceptions about the product, spelling out, in turn, the quantitative and qualitative sales for the manufacturers. Keegan has identified five major product communication strategies international marketers can chose from to convey the message to customers in different foreign markets. ONE PRODUCT / ONE COMMUNICATION STRATEGY WORLDWIDE (DUAL EXTENSION) -This strategy is also known an extension of the product, -extension of communication about the product in foreign markets by international marketing firms. -Same product that is offered to the domestic customer is marketed in international markets without any significant changes in the product profile or even in the campaign themes. Eg: Pepsi, Coca Cola Cost of research and development and the expense on marketing activities can be
  24. 24. PRODUCT EXTENSION / COMMUNICATION ADAPTATION STRATEGY -Same product can be viewed differently in a foreign market, even though its basic functions remain same. -Customer may look for additional need fulfillment or an altogether different need satiation from the product. E.g.: three wheeled auto rickshaws are commercial transport vehicles in India, but in Srilanka it has been converted like a car. -Such adaptations does not change the basic construction of the product but creates an altogether different perception in the minds of the user. PRODUCT ADAPTATION / COMMUNICATION EXTENSION STRATEGY -Products are modified to suit alternate usage patterns, weather conditions and statutory requirements abroad to adopt the same communication strategy in different countries. -Eg: clothing may serve the purpose of fashion everywhere, yet the fashion designer will
  25. 25. PRODUCT / COMMUNICATION ADAPTATION STRATEGY -Strategy involves modifying both the product as well as communication to meet the tangible as well as intangible needs of customers in all countries. -Such a move is also called as dual adaptation strategy -Strategy is adapted when the conditions of use as well as condition related to environments differs from country to country. -Eg: Americans like to store enough food for the week at home. INTERNATIONAL MARKETING MIX -idea was first coined by Professor Neil H. Borden of the Harvard Business School in 1965 -the four controllable variables are a) PRODUCT Assessment of consumer needs, product standardization or adaptation, packing and packaging,branding,after sales services and warranties b) PRICE Price determination and administration, competitors pricing strategy and consumer response
  26. 26. c) PROMOTION Advertising and sales promotion, merchandising, public relations and management of sales force d) PLACE Channel selection, management, channel remuneration ,transport management MEANING OF PRODUCT PLANNING Study of product in international market includes -product planning and development -product life-cycle -branding decisions -packaging decisions NEED AND IMPORTANCE OF PRODUCT PLANNING IN INTERNATIONAL MARKET 1) Product introduction Three strategies for introducing a product are product standardization ,product adaptation and product innovation
  27. 27. 2) Packaging decisions An attractive and durable packaging not only protects the product but also acts as a silent salesman 3) Branding decisions 4) Product mix or product line decisions 5)Product positioning decisions Is the act of designing the company’s offer ao that it occupies a distinct and valued place in the target customer’s minds 6) Product labeling and marking decisions 7)Product warranty decisions A warranty attests the suppliers commitment to quality and performance of the product as stipulated at the time of sale 8)After-sales services Is provided by the seller to maintain the product in working condition PRODUCT PLANNING STRATEGIES FOR INTERNATIONAL MARKET 1) Product standardization strategy 2) Product adaptation strategy
  28. 28. 3) Product innovation strategy A company develops a totally new product for overseas markets e.g. Gillette NEW PRODUCT DEVELOPMENT PROCESS a) Idea generation b) Idea screening c) Concept testing (seeking expert advice on production and marketing of a new product) d) Business analysis (demand analysis, cost analysis and profit potential) e) Product development (actual undertaking of production by arranging necessary physical and financial resources and basic infrastructure) f) Test marketing (refers to testing of the actual product in one or two markets on a small scale) g) Commercialization(if test results are positive, the marketer can go ahead with the commercial production and marketing on a large scale)
  29. 29. INTERNATIONAL PRODUCT LIFE CYCLE Raymond Vernon emphasized that the life cycle starts with the location from where the product originates -innovator familiar with needs of the market -R&D programme promote product development and risk of innovation are perceived as low Other countries may have similar needs to those of initiating country which forms a potential export market -growth of demand in importing nations provides sufficient volume to justify local manufacturer -as production becomes abroad, exports of initiating company grow less rapidly -the mature product uses an already established technology and a lower skilled labour content -consumers are more price conscious because the products are no longer a novelty -less developed nations may become attractive production points and begin exporting the products to more advanced countries
  30. 30. BRANDING A brand is a name ,term symbol or design or a combination of them, which is intended to identify the goods or services of the seller or group of sellers and to differentiate them from those of competitors -AMA ROLE OR SIGNIFICANCE OF BRANDING IN INTERNATIONAL MARKET. 1. Facilitates Brand Recognition 2. Promotes Brand Loyalty 3. Aids in Brand extensions 4. Enhances Brand equity 5. Facilitates Advertising 6. Increases Overall Profitability 7. Help Retailers 8. Help Salesman 9. Help Consumers
  31. 31. BRANDING DECISION IN INTERNATIONAL MARKETING 1.Decision on generic or no brand 2.Decision to have manufacturer's own brand or private brand a. Manufacturer’s Brand b. Private brand 3. Decision to have local or global brand a. Local brands b. Global brand 4.Decision to have single brand or multiple brand a. Single brand b. Multiple brands MEANING OF PACKAGING AND PACKING Packaging refers to inner wrapping or container, which covers one or more units of the product. Packing is the outer casing or materials, which is used to transport the product or number of units of the product.
  32. 32. TYPES OF PACKS Depends upon various factors 1.Nature of product 2.Physical and physio-chemical properties of the product 3.Mode of transportation to be used 4.Time taken in transportation 5.Trans-shipment involved 6.Specifications of the importer 7.Legislations governing acceptable packing materials REQUISITES OF GOOD PACKAGING 1.Protection 2.Preservation 3.Convenience 4.Presentation 5.Recycling 6.Reusable
  33. 33. 7. 8. 9. Identification Lightness Conformity IMPORTANCE / FUNCTIONS OF PACKAGING IN INTERNATIONAL MARKET 1. Primary Functions a. Protection b. Preservation c. Presentation 2. Secondary Functions a. Self-service b. Handling and Transportation c. Identification d. Information e. Integrated Marketing Approach
  34. 34. FACTORS INFLUENCING PACKING DECISIONS IN INTERNATIONAL MARKET 1.General Considerations Affecting Packaging Decisions a. Physical Characteristics b. Physio-chemical Factors c. Economy d. Purpose e. Convenience f. Statutory Regulations g. Environmental Factors 2. Special Considerations Affecting Packaging Decisions In International Marketing a. Regulations b. Buyer’s Specifications c. Socio-cultural Factors d. Retailing requirements e. Environmental Factors f. Disposability
  35. 35. MEANING OF TRANSPORT PACKAGING Transport packaging is the term used internationally and often described as Distribution Packaging’ or ‘Protective Packaging’. It includes all packaging for the containment and protection of goods during handling, storage and transportation in the physical distribution process. ‘ CRITERIA FOR TRANSPORT PACKAGING 1) Transport packaging in relation to mode of transport The cycle of transport is comparatively longer and consists of different modes such as rail,truck,sea and air. 2) Transport damage in relation to packaging costs The main problem in designing packages for transport is not to have a solution which will protect the product completely and carry it to its ultimate consumer without any damage. 3) Containerization Containerization is a system of inter-model freight transport using standard intermodal containers as prescribed by the international organisation for standardisation(ISO). These can be loaded and sealed intact onto container ships, rail road cars, cargo
  36. 36. 4) Risk of Pilferage Proper transport packaging can help in reduce the rate, at least of casual pilferage in harbors and ware houses. Unit loads and particularly shipment in freight containers, make pilfering more difficult. 5) Adequate marketing is an indispensable component of transport packaging Marking is put on each packing case so that the consignment may be identified throughout transit and on reaching its destination. ROLE OF INDIAN INSTITUTE OF PACKAGING LABELLING AND MARKING IN INTERNATIONAL MARKETING PRODUCT WARRANTIES AND AFTER SALES SERVICE IN INTERNATIONAL MARKETING A warranty attests the suppliers commitment to quality and performance of the product as stipulated at the time of sale An exporter has three options while taking decisions about the warranty to be given to the oversee buyers,
  37. 37.  to offer uniform warranty in domestic market as well as in the international market To offer different warranties in domestic market and in the international market To offer different warranties in different markets After sale service is provided by the seller to maintain the product in working condition Essential especially in the case of industrial goods and consumer durables Factors to be considered while taking decisions regarding warranties 1)Nature of product Generally warranty is required for consumer durable and the industrial products, which last for a number of years and are subject to heavy wear and tear. 2)Climatic conditions The performance of certain products is affected by climatic and weather conditions 3)Competitors policy The seller must take into consideration warranties offered by competitors in the market
  38. 38. 4)Cost factor Efficient post-sales servicing requires the maintenance of a separate servicing department. 5)Estimated life of the product If the estimated life of the product is very long, it requires maintenance. Reasons for providing warranties and after sales service,  to maintain product in working condition for a longer duration  to build consumers confidence and thereby make them brand loyal  to attract consumers and increase the market share To enhance the goodwill of the company.
  39. 39. DISTRIBUTION STRATEGIES Two kinds of methods are adopted as a means of channel distribution when marketing abroad A] Indirect selling B] Direct selling A] Indirect selling -Is used when a manufacturer in India, for example, markets his product through another Indian firm that acts as the manufacturer’s sales intermediary or middlemen -the middlemen acts as the manufacturer’s external export organization -assumes responsibility for moving the product overseas -middlemen may be termed as a domestic agent if it does not take title to the goods Or domestic merchant if it does take title to the goods B] Direct selling -is employed when a manufacturer develops an overseas channel
  40. 40. Channel Indirect Channel Direct Channel Domestic Agent Domestic Merchant •Export Broker •Sales Representative •EMC •Co operative Exporter •Buying Agent •Country Controlled Buying Agent •Resident buyer •Export Merchant •Export Drop Shipper •Export Distributor •Trading Company •Foreign Distributor •Foreign retailer •State Controlled trading Company •End User
  41. 41.  FOREIGN DISTRIBUTOR Is a foreign firm that has exclusive rights to carry out distribution for a manufacturer in a foreign country -distributor purchases merchandize at a discount and then resells or distributes the merchandize to retailers or final consumers e.g. Seiko USA is a distributor for its Japanese parent(Hattori Seiko)  FOREIGN RETAILER A manufacturer may contact foreign retailers and interest them in carrying a product ,ranging from a personal visit by the manufacturer's representative to mailings catalogues, brochures and other literature to prospective retailers Body Shop - UK  STATE CONTROLLED TRADING COMPANY - for some products, particularly telecommunication, a manufacturer must contact and sell to state – controlled companies
  42. 42.  END USER A manufacturer is able to sell directly to foreign end users with no intermediary Involved -natural choice for costly industrial products  EXPORT BROKER -function of an export broker is to bring a buyer and seller together for a fee -negotiates the best terms for the seller but cannot conclude the transaction without the principal’s approval of the arrangement  SALES REPRESENTATIVE -an independent businessperson who usually retains his or her own identity by not using manufacturers name --may take possession but no title to the goods and thus assumes no risk  EXPORT MANAGEMENT COMPANY -EMC manages, under contract the entire export program of a manufacturer -is also known as a Combination Export Manager because it may function as
  43. 43. -an EMC usually solicits business in the name of the manufacturer and may even use the manufacturer’s letterhead  COOPERATIVE EXPORTER/PIGGYBACK EXPORTER/MOTHER HEN EXPORTER Is a manufacturer with his own export organization that is retained by other manufacturers to sell in some or all foreign markets -the usual arrangement is to operate as an export distributor for other suppliers  PURCHASING AGENT By residing and conducting business in the exporter’s country, the purchasing agent is in a favorable position to seek a product that matches the foreign principal’s preferences and requirements -also known as commission agent, buyer for export, commission house, and export buying agent  COUNTRY CONTROLLED BUYING AGENT
  44. 44.  RESIDENT BUYER -is an independent agent that is usually located near highly centralized production Industry -offer a favorable opportunity for a supplier to maintain a steady and continuous relationship as long as the supplier chain remains competitive  EXPORT MERCHANT -seeks outs needs in foreign markets and makes purchases from manufacturers in its own country to fill those needs -handles staple goods, undifferentiated products or those in which brands are unimportant - Export merchant resells the goods in its own name through contacts in foreign markets  EXPORT DROP SHIPPER -also known as a desk jobber or cable merchant -upon the receipt of an order from overseas, the export drop shipper in turn
  45. 45.  EXPORT DISTRIBUTOR -differs from a foreign distributor simply in location -export distributor is located in the manufacturer’s country and is authorized to sell in one or more countries abroad  TRADING COMPANY -May buy and sell as a merchant -resembles an EMC,except for the fact that it has more diverse products, offers more services, is larger and better financed, takes title to merchandize, goes beyond the role of an intermediary by engaging directly in production, physical distribution channel development,financing,and resource development FACTORS AFFECTING CHOICE OF CHANNELS 1. Middlemen Criterion 2. Self Reliance Criterion 3. Specific Country Reference Criterion
  46. 46. PRICING POLICY IN INTERNATIONAL MARKETS Price refers to the value of the goods and services expressed in terms of money.” “Price is also related to value. The price that a customer is willing to pay depends upon the perceived or actual value received.” OBJECTIVES OF PRICING  Survive  Increase Profits  Increase the Market Share  Maximize Market Skimming  Product Quality Leadership  Face Competition  Brand Loyalty and Goodwill  Achieve the Organizational Objectives
  47. 47. FACTORS THAT DETERMINE INTERNATIONAL PRICING DECISIONS  Company and Product Factors Corporate Objectives Product Life Cycle, USP, Product development cost Transportation  Market Factors Consumer’s expectations and ability to pay Need for product adaptation Distributions strategy Need for credit Competition objective  Environmental Factors Government influences Level of inflation
  48. 48. PRICING STRATEGIES  Local Pricing  Standardized Pricing  Penetration Pricing  Skimming Pricing  Competitors Pricing  Transfer Pricing COSTING/PRICING METHODS I) Cost oriented methods a] cost plus pricing -adding a certain percentage to the cost price to fix the selling price b] Mark up pricing Are calculated as a percentage of selling price c] break even pricing -the firm determines the level of sales needed to cover all of the relevant fixed and
  49. 49. variable costs. d]Target return pricing -the firm set prices in order to achieve a particular level of return on investment e] Marginal cost pricing The marketer considers only the variable costs in fixing prices f]Early cash recovery pricing -some firms may fix a price to realize early recovery of investment involved ,when market forecasts suggest that the life of the market is likely to be short II) Market oriented method a} perceived value pricing A good no of firms fix the price of their goods and services on the basis of customer’s perceived value b}Going rate pricing The benchmark for setting prices is the price set by major competitor(s) c} Sealed – bid pricing
  50. 50. d} Differentiated pricing -Firms may charge different prices for the same product or service -some types are Customer segment pricing (customer groups are charged different prices depending upon size of the order, payment terms) Time pricing (where different prices are charged at different timings or seasons) Area pricing (where different prices are charged in different market areas) Product form pricing (where different versions of the product are priced differently but not proportionately to their respective costs) e} Two part pricing Service firms often adopt two part pricing ,consisting of a fixed fee and a variable using fee e.g. telephone companies
  51. 51. BREAK EVEN ANALYSIS Assumptions and limitations of BEP Analysis  Break-even analysis is only a supply side. Does not account for demand.  It assumes that fixed costs (FC) are constant.  It assumes average variable costs are constant per unit of output.  It assumes that the quantity of goods produced is equal to the quantity of goods sold.  Method of production does not change.  No change in pricing policy.  Product mix remains the same. Advantages of BEP analysis  It is easy to understand and cheap to carry out.  It can show the profits/losses at varying levels of output.  Helps management to decide the production level.  It provides a simple picture of a business - a new business will often have to present a break-even analysis to its bank in order to get a loan.
  52. 52. EXPORT PROMOTION MEASURES IN INDIA I) IMPORT FACILITIES TO EXPORTERS • Export Promotion Capital Goods Scheme (EPCG) Scheme -Introduced by the EXIM policy of 1992-97 -enables manufacturer exporter to import machinery and capital goods for export production at concessional or no custom duties  Advance Authorization Scheme -Is issued to allow duty free import of inputs, which are physically incorporated in export product  Duty Free Import Authorization (DFIA) Scheme -is issued to allow duty free import of inputs ,fuel,oil,energy sources which are required for production of export products -issued only for products for which Standard Input and Output Norms (SION) have
  53. 53. II) DUTY REMISSION SCHEME:  Duty Entitlement Passbook (DEPB) Scheme -objective of DEPB is to neutralize the incidence of customs duty on import content of export product  Duty Drawback(DBK) Scheme -is administered by the Directorate of Drawback, Ministry of Finance -exporter is entitled to claim customs duty paid on import of raw materials, components and consumables and central excise duty paid on raw materials, components and consumables utilized in manufacture of exportable goods  Excise Duty Refund -Is a tax imposed by the central govt on goods manufactured in India -is collected at source i.e. before removal of goods from the factory premises  Central Sales Tax Exception  Service Tax Exemption  Octroi Exemption
  54. 54. III) FISCAL INCENTIVES:  Exemption from Income Tax IV) MARKETING ASSISTANCE:  Market Development Assistance (MDA) -is allowed to delegations travelling abroad for market survey sponsored by the EPC’s,CB’S and FIEO -amount granted varies from 25%-60%of the actual expenditure incurred  Market Access Initiative (MAI) -scheme is formulated on focus product-focus country approach to evolve specific market and specific product through market survey V) SUPPLY OF RAW MATERIALS  Industrial Raw Material Assistance Centre (IRMAC) -subsidiary of STC
  55. 55. VI) INSTITUTIONAL MEASURES  Indian Institute of Foreign Trade (IIFT) to provide training facilities  Indian Institute of Packaging(IIP) to upgrade packaging standards  Export Promotion Council’s (EPC) to undertake export promotion activities  Export Inspection Council (EIC) to upgrade quality standards  Export credit Guarantee Corporation (ECGC)to protect exporters against payment risks  Indian Council of Arbitration (ICA) to settle and solve disputes between importers and exporters INCOTERMS -introduced in 1936 -Purpose is to provide common interpretation for the different trade terms used in international trade GROUP E –DEPARTURES a) EXW-Ex-works -exporter delivers goods to the importer at his factory premises and all risks and
  56. 56. GROUP F-MAIN CARRIAGE UNPAID a) FCA-Free carrier -seller hands over the goods, cleared for export, in to the custody of the first carrier named by the buyer at the named place -suitable for all modes of transport b) FAS - Free alongside ship -Carriage to be arranged by the buyer -Risk and cost transfer from seller to buyer when the goods have been placed alongside the ship -Used only for maritime transport c) FOB - Free on board -Carriage to be arranged by the buyer -Risk and cost transfer from seller to buyer when the goods pass the ship’s rail -Used only for maritime transport GROUP C-MAIN CARRIAGE PAID a)CFR -Cost and freight
  57. 57. Risk transfer from seller to buyer when the goods pass the ship’s rail Cost transfer at the port of destination Used only in maritime transport. b) CIF- Cost insurance and freight Carriage and insurance to be arranged by the seller Risk transfer from seller to buyer when the goods pass the ship’s rail Cost transfer at the port of destination Used only in maritime transport. c) CPT -Carriage paid to Carriage to be arranged by the seller to the named port of destination. Risk transfer from seller to buyer when the goods are handed over to the first carrier Is the general/multimodal equivalent of CIF
  58. 58. d) CIP- Carriage and insurance paid to Carriage and insurance to be arranged by the seller to the named port of destination Risk transfer from seller to buyer when the goods are handed over to the first carrier Is the general/multimodal equivalent of CIF GROUP D-ARRIVAL a) DAF- Delivered at frontier Carriage to be arranged by the seller Risk and cost transfer from seller to buyer when the goods have been delivered at the frontier When the goods are transported by rail and road. b) DES- Delivered ex ship Carriage to be arranged by the seller Risk and cost borne by the exporter up to the arrival of the vessel at the named port
  59. 59. c) DEQ- Delivered ex quay Carriage to be arranged by the seller Exporter undertakes to make goods available at the port of destination Bears the cost of discharging them from quay. d) DDU -Delivered duty unpaid Carriage to be arranged by the seller Risk and cost transfer from the seller to the buyer when the goods are placed at the named place of the destination. e)DDP- Delivered duty paid Carriage to be arranged by the seller Seller pays for all transportation and risk till the goods are delivered. Comprehensive price quotation for buyer
  60. 60.  As of January 1, 2011 the eighth edition, Incoterms 2010, [1][2] have effect. The changes therein affect all of the five terms previously listed in section D, which are now obsolete and have been replaced with these three:  DAT (Delivered at Terminal)  DAP (Delivered at Place)  DDP (Delivered Duty Paid)  The new terms apply to all modes of transport.
  61. 61. IMPACT OF CONTRACT CONDITIONS ON EXPORT PRICE OFFERS 1) Base of export price quotation -since transport costs account for a fairly substantial proportion of total C&F/C.I.F costs, any increase in freight can substantially affect the profitability of export transactions. 2) Exchange rate variation  Quote in Indian rupees  Quote in the currency desired by the importer ,but also insert a clause that the quotation is based on present exchange partly and the change will be on the buyers account 3) Packing of export consignment 4) Guarantee Manufacturers prepare the standard guarantee clause and absorb the anticipated expenditure on guarantee/warranty provisions in price calculations 5)Price variation formula -only cost changes on account of labour and raw materials will be taken into
  62. 62. MARKET SELECTION “Research is a systematic design, collection, analysis and reporting the findings and solutions for the marketing problems of a company”. - Murthy & Bhojanna 64
  64. 64. 66
  68. 68. 70
  69. 69. “Market segmentation means breaking down the total market into self contained Market Segmentation and relatively homogenous subgroups of consumers, each possessing its own special requirements and characteristics.” - Robert Benett ESSENTIAL CHARACTERISTICS OF MARKET SEGMENTS  Measurability  Substantial  Accessible  Actionable  Differentiable
  71. 71. SELECTING THE MARKET SEGMENTS M1 M2 M3 P1 P2 P3 Single Market Specialization Product Specialization Full Market Specialization P = Product M = Market Selective Specialization Market Specialization