course international marketing

8/2/2019 Course International Marketing

1/93

INTERNATIONAL MARKETING

MANAGEMENT


2/93

Definition of Globalization

Globalization means integrating the economy of the countrywith the world economy. Under this process- goods,services, capital, labor and resources move freely from onenation to another, further implying one single market in aglobal village.

Further, the thrust of globalization has been to increasethe domestic and external competition through extensiveapplication of market mechanism and facilitating forging of

dynamic relationships with the foreign investors andsuppliers of technology.


3/93

DEFINITION OF INTERNATIONAL BUSINESS

International business is the activity of engaging inbusiness operations across national boundaries/borders.

Actually the complete gamut of the whole context andinterest in international business lies in multinationalenterprises, culture and communications-as also thespecial skills that are required to operate in global business

environment.


4/93

DEFINITION OF MULTINATIONALENTERPRISES

A corporation that has production operations in morethan one country, (e.g.:- Toyota having

manufacturing facility in India as also other parts ofthe world.) for various reasons such as- securingsupplies of raw materials, utilizing cheap laborsources, servicing local markets and bypassingprotectionist barriers.

Important critical comment on multinationals and itsgravity in the light of marketing products in theThird World market.


5/93

DEFINITION OF FOREIGN INVESTMENT

Investment in the domestic economy by foreignindividuals or companies is called foreign investmentin generic terms.

Foreign investment takes the form of:- Direct investment in productive enterprises

Investment in financial instrument such as portfolio ofshares.

Important critical comment on foreign investment in

the light of societal marketing concept under theprinciples of marketing management concepts.

Foreign investment is increasingly important in theeconomy of the modern business world-explanationas to how?


6/93

FOREIGN DIRECT INVESTMENT(FDI)

The acquisition abroad of physical assets such

as plant and equipment, with operating control

residing in the parent co-operation.


7/93

DOMESTIC MARKET

Part of a nations internal market the

representing mechanism for issuing andtrading securities of entities domiciled within

that nations.


8/93

Continued..

Brief Historical Background of InternationalBusiness/Trade relations-

-- International business and trade has been there fromtimes immemorial,

-- Man is a social animal wants different kinds of goods/commodities- required for the standard of living.

-- The country is not self-sufficient in developing all theproducts/ commodities etc.

-- Hence dependent on other country--- Thus international business and trade exists-

International trade is between nations, business isbetween companies.


9/93

Continued.. Factors that reinforces to take interest

in International Marketing in ModernTimes

-- Income growth of the consumers.

-- Lower trade barriers.

-- Desire for new products, around the world.

-- Search for new markets/new avenues/newsegments.


10/93

Continued..

-- Demand for new styled goods/ servicesinnovative goods.

-- Integration of telecommunicationfacilities/communication.

-- Faster means of travel, transport,technology.

-- Move towards reduction of internationalmarketing barriers.


11/93

Continued..

Definition of Global Industry:

A global industry is an industry, where the

strategic positions of competitors in majorgeographic or national markets are

fundamentally affected by their overall

global positions.


12/93

Continued..

Need/Factors for International Marketing:

1. Business Factors

2. Competitive Factors


13/93

Continued..

BUSINESS FACTORS:

-- Profitability

-- Achieving Economies of Scale

-- Growth Factors

-- Marketing due to life-cycle

-- Uniqueness of Product / Services

-- Access to imported inputs

-- Spreading R and D cost


14/93

Continued..

In Continuance:Competitive Factors/ Other Factors:

-- The companys domestic market might be attacked byglobal firms offering better products or at lower prices.

-- Counterattack by the domestic firm in the competitorshome market.

-- Company discovering, some markets presenting higherprofit opportunities than the domestic market.

-- Company wanting larger customer base in order toachieve economies of scale.


15/93

Continued..

In Continuance:-- Company wanting to reduce dependence

on any one market.

-- Reducing risk.


16/93

Continued..

Major Concerns while Entering ForeignMarket:

1. Unstable Government, if any.

2. Foreign Exchange problems.3. Foreign government entry requirements/entry barriers.

4. Trade / Tariff barriers.

5. Corruption in the respective countrygovernment, if any.


17/93

Continued..

6. Technological pirating.

(Explanation: A company locating its plant abroadworries about foreign managers learning how to

make its product and breaking away to competeopenly or clandestinely- for example in thediverse area such as machinery, electronics,chemicals, pharmaceuticals etc.)

7. High cost of product manufacturing andcommunication adaptation.


18/93

Continued..

Environmental Differences when marketingoverseas:

1.Language2. Tastes and Fashions3. Religion4. Physical Environment (temperature/ humidity

etc)5. Power sources6. Security arrangements7. Family structure and size


19/93

Continued..

In Continuance:8. Times at which business is done

9. What is polite and impolite

10. Social priorities

11. Literacy levels

12. Communication infrastructure

13. Distribution facilities

14. Methods of transaction


20/93

Continued..

In Continuance:15. Political differences16. Legal differences

17. Regulatory differences18. Different technical standards (may beoperating in the country)

19. Different taxation policy

20. Economic complications/situations at aparticular time


21/93

Continued..

What to study finallywhen companysgoing abroad:

1. Study each foreign market carefully

2. Study about the economic laws oftargeted countries

3. Know about the politics of that country

4. Know about the culture5. Adapt that countrys products and

communication to foreign tastes


22/93

Continued..

Domestic VS International Marketing

-- Definition of Domestic Marketing-- Definition of International MarketingNB: Basic tenets of marketing concepts is applied

whether it is domestic or international marketing.It revolves around the controllable and

uncontrollable factors that governs thepragmatic marketing scenario.

Continued.


23/93

Continued..

In Continuance:Uncontrollable Factors:

1. Macro Environment- Uncontrollable Factors are:

-- Economic-- Political-- Logistics (controllable to a certain extent only, especially

in the domestic market )-- Competition-- Legal Affairs-- Socio-cultural-- Geography


24/93

Continued..

In Continuance:Micro Environment-the Controllable Factors:

-- Product-- Price (subject to certain limitations, taking

competitors offer prices into consideration)

-- Place-- Promotion


25/93

International Trade

International trade defined:

Simply explained international trade refers to tradebetween countries/nations/states. It is always

compared with inter-regional trade- meaningtrade between different regions within the samecountry.

NB: Here little attention is given to the

company level marketing methods andstrategies


26/93

Continued..

In continuation:Is International Trade Inevitable?

International trade is inevitable when thereare marked differences in the countriesregarding materials, natural resources,natural vegetation, climate, soil etc.


27/93

GATT-General Agreement on Tariffs andTrade

-- A trade treaty that operated from 1948 until1995, when it was replaced by World Trade

Organization (WTO).-- GATT was technically an agreement, rather than

an organization, among various countries calledcontracting parties.

-- Secretariat atGeneva.------- Continued


28/93

Continued..

Objectives of GATT:A. Establishing Standards for the non-

discriminatory commercial policies of thecontracting parties.

B. Settling trade disputes and encouragingmutual consultation between nations.

C. Discouraging non-tariff barriers and sponsoringtariff reductions.

D. Meeting the above through a series ofmultilateral negotiations and rounds.


29/93

THE WTO

-- Set up in 1995, following the conclusion ofthe long-running URUGUAY round oftrade negotiations and talk.

-- A body of organizing framework for thesmooth application of free trade rulesamong the interested member nations.


30/93

Continued

Primary functions of WTO:--A. Administering WTO agreements.B. Act as a forum for trade negotiations.C. Handling trade disputes between member

nations.D. Monitoring the national trade policies of its

members.E. Providing technical assistance and training for

developing member countries.F. To act in coordination with other international

organizations.


31/93

Continued

Of Particular Importance-- WTO

--- As far as the dispute settlement processof WTO is concerned , countries maycomplain to the WTO about the behaviorof another member, and a disputes panelwill then adjudicate. A country that does

not abide by the findings of the panel canbe subject to countermeasures.


32/93

Continued

IMPORTANT

It should never be forgottenthatcompanies/firms/corporations/businessenterprises are not allowed to make complaintsto the WTO. They must persuade a governmentto do so, for it falls under the world trade laws ofWTO, to be accepted by one and all, and theinternational economic protocol so desires, to berespected in toto. NB: WTO is also chargedwith advancing the agenda of free-trade withnew trade rounds.


33/93

Continued

IBRD-International Bank for reconstruction andDevelopment

-- A specialized agency of the United Nations,known as the World Bank, with headquarters in

Washington DC, its function is to financedevelopment in member countries by makingloans to governments or under governmentguarantee.

-- Set up in 1944 under Bretton Woods agreementto facilitate reconstruction after world warII.-- All members of World Bank should belong to the

IMF.


34/93

Continued

IMF- The International Monetary Fund

-- Established in 1945, to promote internationalmonetary harmony, monitor exchange rates and

monetary policies and to provide credit forcountries experiencing problems in terms ofdeficits in theirbalance of payments.

-- The members of IMF have a quota, known asthe SDR or the special drawing rights.

-- IMF is funded through quotas paid by members.


35/93

Continued

GAB and G-10Refers to GeneralAgreement to Borrow. Members of GAB are:1. Belgium2. Canada3. France

4. Germany5. Italy6. Japan7. The Netherlands8. Sweden

9. Switzerland10. The United Kingdom and the US


36/93

SAARC

SAARC: --

-- South Asian Association for RegionalCooperation. The first South Asian summitheld in Dhaka, Bangladesh in December 1985,culminated in the formation of theSouthAsian Association for Regional Co-operation.

-- Members of SAARC are: India, Bangladesh,Pakistan, Sri Lanka, Bhutan, Nepal andMaldives.


37/93

Continued

-- The charter of SAARC provides for annualmeetings of the Heads of State and ofGovernments, and a six monthly meeting of aCouncil, of Ministers, which is the organizations

highest policy making body.-- A permanent secretariat of the state has been

set up atKathmanduin Nepal.

-- The chairmanship of the organization remainswith the country which had hosted the lastsummit and is transferred to the new host at thetime of the next summit.


38/93

The EEC

EEC or the European Economic Community :

--Created under separate treaties signed on March25, 1957 it became effective from January 1,

1958.-- EEC is currently a bloc of 15 west European

industrial nations, which through a network ofagreements are seeking to pool their

economies, while retaining their separatenational identities. . Continued.


39/93

Continued

-- The ultimate goal is a complete customsunion, with free flow of goods, service andlabor- among all members.

--Members of EEC currently are-Belgium, France, Germany, Italy,Luxembourg, Netherlands, Denmark,

Ireland, United Kingdom, Greece, Portugal-- Headquarters of EEC is located inBrussels, Belgium.


40/93

ASEAN

ASEAN Association of South East Asian Nations :The ASEAN was formed on August 8, 1967 byIndonesia, Thailand, the Philippines, Malaysia

and Singapore- to promote active collaborationand mutual assistance in matters of commoninterest in the economic, social, cultural,technical, scientific and development fields.

-- Currently under ASEAN, there are 10 members.


41/93

OPEC

OPEC Organization of Petroleum ExportingCountries :

--OPEC was formedon November14, 1960,to control production and pricing of crude

oil. It has been successful in determiningworld oil prices and in advancing membersinterest in trade and development dealingswith industrialized oil consuming nations.. Continued..


42/93

Continued

-- Membership of OPEC is open to any countryhaving a substantial net exports of crudepetroleum, which has fundamentally similar

interests to those of member countries.-- Members areAlgeria, Indonesia, Iran, Kuwait,

Libya, Nigeria, Iraq, Qatar, Saudi Arabia, UnitedArab Emirates (UAE), Venezuela.

-- Headquarters located at Vienna, Austria.


43/93

OAPEC

OAPEC- Organization of Arab PetroleumExporting Countries

-- TheOAPECwas established in 1968, to

safeguard the interests of its members andencourage co-operation in economic activitywithin the petroleum industry. Its members are ---Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya,

Qatar, Saudi Arabia, Syria and the UAE.-- Headquarters at Kuwait.


44/93

Group of Eight/G-8

G-8- Group of Eight originally consisted of theseven wealthiest nations of the world- The USA,UK, Japan, Germany, France, Italy and Canada.

However with the admission of Russia atG-7summit at(DENVER June 21, 1997)the groupwas renamed as G-8 in May, 1998.

-- The heads of governments of G-8 countries

meet annually at different venues to discusseconomic matters and world problems.


45/93

NAFTA

NAFTA- North American Free Trade Agreement :

-- A trade agreement between US, Canada andMexico. The objectives of NAFTA is to promote

economic growth and expand trade andinvestment among member nations.

-- To meet economic challenges in the decades tocome.

-- Gradual elimination of trade barriers.

-- Protection of theIntellectual Property Rights.


46/93

MODULE - 3

International Entry and ExpansionStrategies


47/93

Continued..

The Decision criterias are as follows :

1. Political Risk

2. Market Access

3. Factor Cost and Conditions

4. Shipping Consideration

5. Country Infrastructure

6. Foreign Exchange

7. Creating a Product Market Profile (The Nine Ws)

8. Market Selection Criteria


48/93

Continued..

The NINE Ws of creating a Product Market Profile :

1. Who buys our Product?

2. Who does not buy our product?

3. What need or function does our product serve?

4. What problem does our product solve?

5. What are customers currently buying to satisfy theneed/problem?

6. What price are they paying?

7. When is our product purchased?8. Where is our product purchased?

9. Why is our product purchased?


49/93

Continued..

Strategies for Entering foreign market:

-- It refers to the different routes that is

undertaken to enter a foreign marketOR

-- The Modes of Entry

OR-- Stages of Foreign Market entry


50/93

Continued..

Different routes to enter a foreign market are thefollowing:

1. EXPORTING A. Indirect Exporting-- B. Direct Exporting

2. FOREIGN PRODUCTION-- A. Licensing-- B. Contract

Manufacturing/ManagementContract

-- C. Local Assembly/Investment


51/93

Continued

Indirect Exporting is one when a thirdparty arranges the documentation,shipping and selling of an organizations

goods abroad.-- Refers to the lowest level of commitment

to international marketing

(The third party refers to independentmiddlemen of four types )


52/93

Continued

Indirect Export through four routes:

1. Domestic-based export merchanthere themiddlemen buys the manufacturers products

and sells them abroad on its own account.2. Domestic-based export agenthere the

agent seeks and negotiates foreign purchasesfor a commission. Agents can be in the form of

individuals or a group of people involved ortrading companies


53/93

Continued

3. Co-operative Organization exportingon behalf of several producers and ispartly under administrative controls.

4. Export Management Companymanages export for its client for a fee.


54/93

Continued

Advantages of Indirect Export :

1. Involves less investment

2. No spending on export department

3. No foreign/overseas sales force required4. No foreign contacts required

5. Less risk

6. First hand knowledge of the foreign market,through the middlemen

7. Fewer mistake by the seller.


55/93

Continued

Direct Export:

As foreign sales grow, an organization oftenbegins to make a limited commitment,frequently documenting itself/ deciding tohandle their own exports.

C


56/93

Continued

Methods of Direct Export :

1. Domestic based export department.

2. Setting up an overseas sales branchoffice/depot/subsidiary.

3. Appointing and utilizing the service ofexport sales representatives.

4. Foreign brand distributors or agent

C i d


57/93

Continued

Foreign Production:

A. Licensingrepresents a simple way for amanufacturer to become involved in internationalmarketing. Here the licensor licenses a foreigncompany to use a manufacturing process,trademark, patent, trade secret, or other item ofvalue for a fee or royalty.The licensor gains entryinto the foreign market at little risk; the licensee

gains production expertise or a well-knownproduct or name without having to start fromscratch.

C ti d


58/93

Continued

B. Management Contract -- A companycan enter a particular foreign marketthrough the management contract route.

Here a company can sell a managementcontract to a party to manage a foreignbusiness such as hotel, hospital etc for a

fee. It is a low-risk method of getting into aforeign market, since it yields income fromthe beginning.

C ti d


59/93

Continued

C. Contract Manufacturing : An entry method,where the firm engages local manufacturers toproduce the product.

Contract manufacturings disadvantage is thatthere is less control over the manufacturingprocess. Finally it offers the company a chanceto start faster, with less risk, and with the

opportunity to form a partnership or buy out thelocal manufacturer later.

C ti d


60/93

Continued

D. Joint Ventures: Joint ventures are a part of foreigninvestment. It represents an extensive form ofparticipation and commitment towards internationalmarketing. Here foreign investors may join with localinvestors to create a joint venture in which they shareownership and control. Forming a joint venture might benecessary or desirable for economic or political reasons.The foreign firm might lack the financial, physical, ormanagerial resources to undertake the venture alone or

the particular foreign government might require jointownership as a condition for entry.

C ti d


61/93

Continued

E. Direct Investment --(Ownership and Control/Manufacturing Facilities)

The foreign investment is another route through ownershipor through a manufacturing facilities presence.Theforeign company can buy part or full interest in a local

company or build its own facilities. As a company gainsexperience in export, and if the foreign market appearslarge enough, foreign production facilities offer distinctadvantages- by securing cost economies, gaining abetter image in the host country, developing deeper

relationship with the government, customers, localsuppliers etc.Foreign investments are undertaken in the light of long

term strategic goals and ambitions of the company.

C ti d


62/93

Continued

Investment in Developing Countries:

--Rapidly growing economies, Expanding purchasing powerand Expanding markets etc of the developing countries,

provides opportunities for the foreign companies to entera new market. It is linked with the basic tenets of theneed of international marketing and the opportunitiesthat any developing country offers.

-- Foreign investments in the developing country can be

through joint ventures, through equity stakes in anothercompany, mergers and acquisitions etc.


63/93

International Product Life cycle

C ti d


64/93

Continued

IPLC Theory

The international product life cycletheory (IPLC) describes the diffusion

process of an innovation across

national boundaries.

C ti d


65/93

Continued

The Whole game of IPLC, has the followingcharacteristics:

--The International product life cycle begins whena developed country, having a new product tosatisfy consumer needs, wants to exploit itstechnological breakthrough by selling abroad.

-- Other advanced nations soon start up their ownproduction facilities, and before long lessdeveloped countries do the same.

C ti d


66/93

Continued

-- Efficiency/comparative advantage, thusshifts from developed countries todeveloping nations.

-- Finally, advanced nations, no longercost effective, import products from

their former customers.

C ti d


67/93

Continued

Stages of IPLCThe stages of international product life cycle

begins from Stage 0 to Stage 4.

STAGE 0 --- Local InnovationSTAGE 1 --- Overseas Innovation

STAGE 2 --- Maturity

STAGE 3 --- Worldwide ImitationSTAGE 4 --- Reversal

C ti d


68/93

Continued

Stage 0 Local Innovation

--Represents a life cycle stage when any initiatingcountry takes the first leap in manufacturing the

product for the first time in the world, therebybeginning the story of the familiar life-cyclestage, in operation within its original market.

--Innovations are most likely to occur in a highly

developed countries because consumers insuch countries are affluent and have relativelyunlimited wants.

Contin ed


69/93

Continued

Stage 0 .

-- At this stage firms in advanced nationshave both the technical know-how as

well as abundant capital to developnew products.

Continued


70/93

Continued

Stage 1 : Overseas InnovationAs soon as the new product is developed and

initiated by the initiating country followingsyndromes will happen:

-- Original market will get well cultivated.-- there will be demand for the all new offering.-- Local demands of the product will be adequately

supplied.

-- Many prospective consumers/user of the productwill come to learn about the utilities andsatisfaction to be derived from the product.

Continued


71/93

Continued

Important:

It is at this stage only that, the innovatingfirm will look to overseas market in order

to expand its sales and profit.

-- Stage 1 is also called as thePioneering Stage or International

introduction stage.

Continued


72/93

Continued

In the Stage 1, the technological gap is firstnoticed in other Advanced nations due to

their similar needs and high income levels.

(Concept of the Stages of Economic

Development runs here)

Continued


73/93

Continued

Competition in Stage 1

--Competition at this stage usually comes fromUS firms, since firms in other countries may

not have much knowledge about theinnovation.

-- Production costs tend to decrease at thisstage for the competitive firms, because by

this time the innovating firm will normallyhave improved the production process.

Continued


74/93

Continued

-- Aggressive overseas sales also help declinethe production costs.

-- The scenario gives the intangible feeling of

the Economies of Scale.-- the price of the product at this stage is high,

since because of the technologicalbreakthrough, costs need to be recovered, in

addition to the recovering of the priceincurred in marketing efforts.

Continued


75/93

Continued

The final word for Stage 1 is that therewill be more exports from the USA, and

increase in imports by other developednations.

Continued


76/93

Continued

Stage 2 Maturity

-- Growing demand in advanced nations,will lead firms to conceptualize the

product, and learn to make it in theirhome country.

-- Local production will start in advanced

nations

Continued


77/93

Continued

Stage 2 continued..-- Competition grows more at this stage.

-- More players in the market place.

-- Innovating firms sales see the light of the startof suffering, at the cost of advanced nationsproducts, but still the export level remains stable.

-- The LDCs now enter the imitation field.

-- Introduction of the product in LDCs helps offsetany reduction in export sales to advancednations.

Continued


78/93

Continued

Stage 3 World Wide imitation

-- This stage is generally considered as thebeginning of heavy competition among the

advanced nations firms.-- This is the stage where copy cats work, in the

form of re-engineering, me-too products, madein different forms and styles, having the same

USPs, differentiation is tried at every angle ofthe product make

Continued


79/93

Continued

Stage 4 Reversal

-- In this stage two functional characteristicsmakes appearance

A. Product Standardization

B. Comparative Disadvantage

Continued


80/93

Continued

-- The innovating countrys comparativeadvantage becomes countrys disadvantage.

-- The product is no longer capitalintensive or

technology intensive.-- The above becomes a comparative

advantage for LDCs, for they possess those

advantage looking from all point of scale in

the development of international business,married to the Economies of Scale.

Continued


81/93

Continued

The final word for Stage 4:The Less Developed countries are the

last IMITATORS. They establish

sufficient productive facilities to satisfytheir own domestic needs as well as toproduce for the biggest market in theworld, USA. And also targeting other

advanced nations market. Finallytargeting world market.


82/93

Geographic Expansion in International

Marketing

(THE STARTEGIES)

Continued


83/93

Continued

Introduction:Companies can pursue three generic basic globalstrategies to penetrate foreign markets:

1. STRAIGHT EXTENSION i.e. adapting the same

product or communication policy used in their homemarket.

2. ADAPTATION STRATEGY i.e. adapting as per themarket situation. This enables the firm to cater to theneeds and wants of its foreign customers.

3. INVENTION STRATEGY i.e. products are designedfrom scratch for the global market place.

Continued


84/93

Continued

Please Note--- The three basic strategies above are furtherclubbed into five distinguished strategic options:

A. Strategy 1Product and Communication Extension-Dual Extension.

B. Strategy 2 Product Extension and Communications

Adaptation.C. Strategy 3 Product Adaptation- Communication

Extension.

D. Strategy 4Product Adaptation and Communication

Adaptation (Dual Adaptation)E. Strategy 5Product Invention.

Continued


85/93

Continued

Strategy 1. Product and CommunicationExtensionChief Characteristics

A. Marketing a standardized product using

a uniform communications strategy- i.e.companies pursuing this strategy sellexactly the same product with the sameadvertising and promotional appeals as

used in the home country.Continued

Continued


86/93

Continued

B. Best strategy for the new entrants in the global arena.C. Best strategy for the small companies with limited / few

resources.

D. Dual Extension also works when company targets a

global segment with similar needs.Important: Generally speaking, a standardized product

policy coupled with a uniform communication strategyoffers substantial savings coming from economies ofscale.

NB: This strategy is basically product driven rather thanmarket driven.

Continued


87/93

Continued

Strategy 2- Product Extension andCommunications adaptation

Chief Characteristics: Due to differences in thecultural or competitive environment:

A. Same product is often used to offer benefits orfunctions, that dramatically differ from those inthe home market.

B. Gaps between the foreign and home marketdrive companies to market the same productusing customized advertising campaigns.

Continued


88/93

Continued

D. Customized advertising campaigns isadopted for this strategy for differentcountry market.

E. This strategy entails the economies ofscale on the manufacturing side.

F. Potential savings of the firm is spent on

advertising front.

Continued


89/93

Continued

Strategy 3Product Adaptation- CommunicationsExtension

Chief Characteristics:

A. Firms adapt their product, but market it using astandardized communications strategy.

B. Local market circumstances favour the caseof product adaptation.

C. Companys expansion strategy is also thereason for strategy 3. Continued..

Continued


90/93

Continued

Strategy 4- Product adaptation andcommunications adaptation (DualAdaptation)

Important: Demand for a dual adaptationstrategy. Why?

Because of:

1. Difference in cultural environment

2. Differences in physical environments

Continued


91/93

Continued

Strategy 5Product InventionProduct invention means creating something

new. It can take two forms:

1. Backward Invention, reintroducingearlier product offers that are welladapted to a foreign countrys need.

2. Forward Invention, creating newproducts to meet a need in anothercountry.

Gray Market


92/93

Gray Market

Important characteristics-- Gray market channels refer to the legal export / import

transactions involving genuine products into a country byintermediaries other than the authorized distributors.

-- From the importers side it is known asParallel Imports.

-- Distributors, wholesalers and retailers in a foreignmarket obtain the exporters product from otherbusiness entity. Thus the exporters legitimatedistributors and dealers face competition fromothers who sell the product at reduced prices in thatforeign market.

Continued


93/93

Continued

Conditions necessary for Gray Market:Three Conditions are required:

1. Products must be available in other markets.

2. Trade barriers such as tariff, transportationcosts and legal restrictions must be lowenough for parallel importers to move theproducts from one market to another.

3. Price differentials among various markets mustbe great enough to provide the basicmotivation for gray markets.

course international marketing

Documents