International Marketing Prof. Kiran Sharma K.J.Somaiya Institute of Management Studies and Research.

International International MarketingMarketing

Prof. Kiran Sharma

K.J.Somaiya Institute of Management Studies and Research

Global Perspective: Recent Events

Information technology boom of the late 1990sInformation technology boom of the late 1990s

Wars in Afghanistan and Iraq Wars in Afghanistan and Iraq

September 11th attacks on the World Trade Center and PentagonSeptember 11th attacks on the World Trade Center and Pentagon

Enron scandalEnron scandal

The high-tech bust of 2001The high-tech bust of 2001

Global Perspective: Recent Events

2003 SARS outbreak in Asia 2003 SARS outbreak in Asia

Global terrorism, e.g., Indonesia, London,India, and PakistanGlobal terrorism, e.g., Indonesia, London,India, and Pakistan

Transcending these events, international commerce continuedTranscending these events, international commerce continued

International conflict among China, Taiwan, and the United States International conflict among China, Taiwan, and the United States

Global Business Trends

1. The rapid growth of theWorld Trade Organizationand regional free tradeareas, e.g., NAFTA and theEuropean Union

1. The rapid growth of theWorld Trade Organizationand regional free tradeareas, e.g., NAFTA and theEuropean Union

2. General acceptance of thefree market system amongdeveloping countries in LatinAmerica, Asia, and EasternEurope

2. General acceptance of thefree market system amongdeveloping countries in LatinAmerica, Asia, and EasternEurope

3. Impact of the Internet andother global media on thedissolution of nationalborders, and

3. Impact of the Internet andother global media on thedissolution of nationalborders, and

4. Managing globalenvironmental resources4. Managing globalenvironmental resources

International Marketing: A Definition

International marketing is defined as theperformance of business activities designed to plan,price, promote, and direct the flow of a company’sgoods and services to consumers or users in morethan one nation for a profit

International marketing is defined as theperformance of business activities designed to plan,price, promote, and direct the flow of a company’sgoods and services to consumers or users in morethan one nation for a profit

Marketing concepts, processes, and principles are universally applicable all over the world

Marketing concepts, processes, and principles are universally applicable all over the world

The International Marketing Task

7

3. Economy

EnvironmentalUncontrollablescountry market A

Environmentaluncontrollablescountrymarket B

Environmentaluncontrollablescountrymarket C

1. Competition

1. Competition

2. TechnologyPrice Product

Promotion Place orDistribution

6. Geography andInfrastructure

Foreign Environment(Uncontrollables)

7. Structure ofDistribution

2. Economy

3. Political-Legal

Domestic environment(Uncontrollables)

(Controllables)

5. Political-Legal

4. Culture

Target Market

Environmental Adaptation Needed

Differences are in the uncontrollable environment of internationalmarketingDifferences are in the uncontrollable environment of internationalmarketing

Firms must adapt to uncontrollable environment of internationalmarketing by adjusting the marketing mix (product, price,promotion, and distribution)

Firms must adapt to uncontrollable environment of internationalmarketing by adjusting the marketing mix (product, price,promotion, and distribution)

Adaptation(of Marketing Mix)

Standardization(of Marketing Mix)

Continuum

INFLUENCED BY 7 ENVIRONMENTAL FACTORS

Developing a Global Awareness

To be globally aware is to have:To be globally aware is to have:

1. Tolerance of Cultural Differences, and

2. Knowledgeable of: (a) Culture, (b) History, (c) World Market Potential,(d) Global Economic, Social and Political Trends

Stages of International Marketing Involvement

In general, firms go through five different phases in going international:In general, firms go through five different phases in going international:

Infrequent Foreign MarketingInfrequent Foreign Marketing

No Direct Foreign MarketingNo Direct Foreign Marketing

International MarketingInternational Marketing

Regular Foreign MarketingRegular Foreign Marketing

Global MarketingGlobal Marketing

Strategic Orientation: EPRG Schema

Orientation EPRG Schema

Domestic MarketingExtension

Multi-DomesticMarketing

Global Marketing

(Ethnocentric)

(Polycentric)

(Regio/Geocentric)

Generally, four distinctive approaches dominate strategic thinking ininternational marketing:

Strategic Orientation: EPRG Schema

1. Ethnocentric or Domestic Marketing Extension Concept:

2. Polycentric or Multi-Domestic Marketing Concept:

Opposite of ethnocentrism Management believes that each country is unique andallows each to develop own marketing strategies locally.Leads to adaptation approach where products must be

adopted in response to different market conditions.

Home country is superior to rest of the world.Assumes that products and practices will succeed anywhere

in the world as they have been in home country.

Generally, four distinctive approaches dominate strategic thinking ininternational marketing:

Strategic Orientation: EPRG Schema

3. Regiocentric:

4. Geocentric:

Company views the entire world as a potential market and strives to develop integrated world market wherein a uniform, standardized marketing strategy is used for several countries, countries in a region, or the entire world.

A region becomes the relevant geographic unit.Management’s role is to develop an integrated regional

strategy.

Foreign Market-Entry Strategies

• market characteristics (such as potential sales, strategic importance, cultural differences, and country restrictions)

• company capabilities and characteristics, including the degree of near-market knowledge, marketing involvement, and

• commitment that management is prepared to make

When a company makes the commitment to go international, it must choose an entry strategy

When a company makes the commitment to go international, it must choose an entry strategy

The choice of entry strategy depends on:The choice of entry strategy depends on:

Alternative Market-Entry Strategies

• exporting • contractual agreements • strategic alliances, and • direct foreign investment

• Import regulations may be imposed to protect health, conserve foreign exchange, protect home industry, or provide revenue in the form of tariffs

• Import regulations may be imposed to protect health, conserve foreign exchange, protect home industry, or provide revenue in the form of tariffs

• A company has four different modes of foreign market entry from which to select:

• A company has four different modes of foreign market entry from which to select:

Exporting

• Exporting can be either direct or indirect

• In direct exporting the company sells to a customer in another country

• In contrast, indirect exporting usually means that the company sells to a buyer (importer or distributor) in the home country who in turn exports the product

• The Internet is becoming increasingly important as a foreign market entry method

Contractual Agreements

• Contractual agreements generally involve the transfer of technology, processes, trademarks, or human skills

• Contractual forms of market entry include:(1) Licensing: A means of establishing a foothold in foreign markets

without large capital outlays wherein patent rights, trademark rights and the rights to use technological processes are granted.

(2) Franchising: A contract in which franchisor provides a standard package of products, systems and management systems and franchisee provides market knowledge, capital and personal involvement.

Contractual agreements are long-term, non-equity associations between a company and another in a foreign marketContractual agreements are long-term, non-equity associations between a company and another in a foreign market

Strategic International Alliances

• SIAs are sought as a way to shore up weaknesses and increase competitive strengths

• SIAs offer opportunities for rapid expansion into new markets, access to new technology, more efficient production and marketing costs

• An example of SIAs in the airlines industry is that of the alliance partners made up of American Airlines, Cathay Pacific, British Airways, Canadian Airlines.

• Strategic alliances have grown in importance over the last few decades as a competitive strategy in global marketing management

• Strategic alliances have grown in importance over the last few decades as a competitive strategy in global marketing management

• A strategic international alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective

• A strategic international alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective

International Joint Ventures

• International joint ventures (IJVs) have been increasingly used since 1970s

• a means of lessening political and economic risks by the amount of the partner’s contribution to the venture

• a less risky way to enter markets• A joint venture is different from strategic alliances or

collaborative relationships in that a joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity

International Joint Ventures (contd.)

1. JVs are established, separate, legal entities;

2. they acknowledge intent by the partners to share in the management of the JV;

3. they are partnerships between legally incorporated entities such as companies, chartered organizations, or governments, and not between individuals;

4. equity positions are held by each of the partners

• Four factors are associated with joint ventures:• Four factors are associated with joint ventures:

Consortia

(1) They typically involve a large number of participants, and

(2) They frequently operate in a country or market in which none of the participants is currently active

• Consortia are similar to joint ventures and could be classified as such except for two unique characteristics:

• Consortia are similar to joint ventures and could be classified as such except for two unique characteristics:

• Consortia are developed to pool financial and managerial resources and to lessen risks.

• Consortia are developed to pool financial and managerial resources and to lessen risks.

Direct Foreign Investment

• Companies may manufacture locally to capitalize on low-cost labor, to avoid high import taxes, to reduce the high costs of transportation to market, to gain access to raw materials, or as a means of gaining market entry.

• Firms may either invest in or buy local companies or establish new operations facilities

• A fourth means of foreign market development and entry is direct foreign investment

• A fourth means of foreign market development and entry is direct foreign investment

Export Procedures and Export Procedures and DocumentationDocumentation

• Export procedures and documentation are crucial to

international marketing, as both exporters and

importers are situated in two different countries and

are governed by different legislative frameworks

• Export documentation facilitates international

transactions and protects the interest of the

exporters and importers

Export procedures and documetation

• Commercial documents are used by ‘custom of trade’

in international commerce by exporters and importers

in discharge of their respective legal and other

incidental responsibilities under sales contract.

Types of export documents

•Regulatory documents are prescribed by different

government departments / bodies for compliance of

formalities under relevant lawsEg: Commodities ( Agri) – PHYTO certificate

Pharmaceuticals –

PLANT approval( US FDA, UK MHRA, TG Australia, WHO GMP)

PRODUCT –

•Free sale certificate issued by FDA India, validity 3 years

•EXPORTS Manufacturing License (Domestic) + Certificate of Pharmaceutical Product(COPP)

•Quality Control Labs Must follow GLP (Good laboratory Procedures)

•Certificate of Analysis mentioning heavy metal content (Pb, Cd, As, Hg)

•Material Safety Data Sheet (MSDS) asked by carrier

•Bioequivalence Studies ( Atorvastatin vs. Lipitor)

•Stability/ Efficacy Studies in different temperature zones

• Commercial invoice is a document of content that provides:

- identification of shipment

- detailed description of goods

- description of quantity• Packing list provides details of how the goods are

packed, the contents of different boxes, cartons, or

bales, and details of the weights and measurement of

each package in the consignment

•Transport documents that evidence shipment of goods, such as bill of lading, combined transport document.

Commercial documents

• Marine bill of lading (B/L)- a transport document issued by the shipping company to

the shipper for accepting the goods for the carriage of

merchandise

• Airway bill (AWB)

- issued by the carrier as an evidence of contract of carriage

• Bill of lading serves three purposes:- it is the receipt of cargo by the shipping company

- a contract of carriage (or transport) - a document of title

Bill of lading

On board or shipped bill of lading

Received for shipment bill of lading

Clean bill of lading

Dirty (clause) bill of lading

Through bill of lading

Trans-shipment bill of lading

Types of Bill of lading

used as an evidence of the origin of goods in the

importing country

includes the details of the goods covered and the country

where the goods are grown, produced or manufactured

Certificate of origin

• Inspection certificate is related to quality of goods • Insurance certificate provides protection to the cargo-owner, an insurance cover is necessary while the cargo is in transit from the consignor to the consignee• Mate’s receipt is a cargo receipt issued by the master of the vessel for every shipment taken on board• Bill of exchange is an unconditional order in writing prepared and signed by the exporter addressed to the importer requiring the importer to pay a certain sum of money to the exporter or his / her nominee• Shipment advice is sent to the importer informing of the details of the shipment

Other Documents of Importance

• Shipping bill / bill of export is the principal document

required by customs authority mentioning details of

shipment for exports

• Bill of entry is a document needed for customs

clearance of imported cargo

Procedure for export-import

• compliance with legal framework• obtaining import-export code number• registration with export promotion council• registration with sales tax and central excise authorities• concluding an export deal• arranging export finance• appointing C& F Agent• manufacturing of goods• arranging cargo insurance • port procedures and customs clearance• presentation of documents at the negotiating bank• claiming export incentives( Duty Drawback)• receiving payment and export incentives

Electronic processing of export documents

• use information technology in the field of international

business has facilitated computerized generation and

processing of export documents

• for electronic filing and processing of documents,

Indian customs and central excise electronic commerce

/ electronic data interchange (EC /EDI) gateway has been

created, popularly known as ICEGATE

Terms Of payment in Terms Of payment in International International transactionstransactions

Terms Of Payments

Advance payment

Open account

Consignment (Payment after sale of goods)

Documentary credit

Documentary credit without Letter of Credit

Sight Drafts (Documents against payment)

Usance or time Draft (Documents against acceptance)

Types of credit according to methods of payments

Documentary credit with letter of credit

•Irrevocable- No change, modification or cancellation)

•Revocable – Change possible

•Confirmed

•Unconfirmed

Revolving Credit

Back to back