international marketing - mba (gtu)

8/2/2019 International Marketing - MBA (GTU)

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Keyur D Vasava

Pharmacy+MBA

Dist.Narmada

"ACCEPT EVERYTHING ABOUT YOURSELF -- I MEAN EVERYTHING, YOU ARE YOU AND

THAT IS THE BEGINNING AND THE END -- NO APOLOGIES, NO REGRETS."

( 14/ 03/ 12)


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INTERNATIONAL MARKETING (IM) KEYUR DVASAVA..

Module 1. International Marketing: Nature Process and Benefits:

1. INTERNATIONAL MARKETING

Definition:

International marketing is the performance of business activities designed toplan, price, promote, and direct the flow of companys goods & services toconsumers in more than one nation for profit.

2. INTERNATIONALIZATION PROCESS

DEFINATION:

Internationalization is the process of planning and implementing products

and services so that they can easily be adapted to specific local languages

and cultures, a process called localization . The internationalization process is

sometimes called translation or localization

The process of Internationalization can be described as the process of increasing involvement in

international operations. (Welch and Luostarinen, 1988). The process essentially involves the adaption of

firm operations like strategy, structure, resources etc. to perfectly fit the international environments.

Furthermore, the degree of internationalization can be measured as foreign sales relative to total sales.

(Welch and Luostarinen, 1988).

The goal of the Internationalization process is to have a pronounced global presence in an attempt to

keep abreast with their competitors, to generate improved profitability and be known as a multinational; a
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sure sign of success and credibility. The process typically entails generalizing a product to

counterbalance and efficiently expedite the subsequent localization process. The result is an improved

quality product as well as reduced localization costs and time to market. The internationalization process

may involve the following tasks:

Reduce surplus or repetitive text.

Modify and/or settle on a final text before the localization and translation process.

Application of standard language/nomenclature.

Creation of a glossary containing original, technical or perhaps unclear terms.

Implementation of a coherent writing style.

Adherence to grammar rules

Flexible layouts that fit right-to-left or top-to-bottom scripts

Application of programming tools that support foreign language character sets. (RFIDwizards,

2007).

Several theories have been postulated over the years to maintain and enhance the essence of the

process of internationalization. According to the theories of the stage model; the process of

internationalization may be successful if a specific prescribed path is followed. Strategic decisions that the

firms have to face play a vital role in validating the above assumption.

The internationalization process is described as a gradual development taking place in distinct stages

(Melin 1992). The process can be clearly identified under two major schools: (1) the models initially

developed by Johanson and Wiedersheim-Paul (1975) and Johanson and Vahlne (1977), referred to as

the Uppsala models (U-models); and (2) the Innovation-Related Internationalization Models (I-models)

conceptualized by Cavusgil (1980). Both the I-model as well as the U-model emphasizes on firms

involvement in foreign market segments. The U-model describes the process as "a gradual acquisition,

integration and use of knowledge about foreign markets and operations and a successively increasing

commitment to foreign markets (All business, 2000). The strategic choices under the U-model are

influenced by many factors which include certain aspects which either help in or suppress exports,

information requirements and collecting informational data, foreign market selection and entry (including

the effects of cultural distance), expansion, and marketing strategies (Leonidou and Katsikeas 1996).

Due to the various factors involved, it is rather difficult to accurately assess this model. In Cavusgil's I-

model, the involvement of exports is operationalized by the ratio of sales/export, which in turn indicates a

firms reliance on foreign markets.


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In the process of internationalization; market knowledge is gradually increased and the company gets a

clear picture over time, reducing the involved uncertainties. Different companies gather a different

approach but with a similar objective in mind. If the process of internationalization is relatively slow, it is

primarily because companies either want to avoid risks or are unable to gather relevant or enough

knowledge and information.

3.TRADE THEORIES

INTL. TRADE THEORY

1)Mercantilism

countries should export more than they import - balance of trade surplus result in more gold & silver for governments trade conducted by governments Led consolidation of power trade with

colonies

import less-valued raw materials export more-valued manufacturedgoods

views trade as zero-sum game

2)Absolute Advantage

proposed by Adam Smith

countries differed in their ability to produce different goods efficientlyand should specialize in the production of goods they can produce moreefficiently

views trade as a positive sum game countries will benefit from trade ifthey have an absolute advantage in one product

3)Comparative Advantage

even if a country has an absolute advantage in both products it shouldSpecialize in production of that good in which it has a comparative

advantage

proposed by Ricardo


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4)Assumptions Comparative Advantage

Full employment

2 products and 2 countries only

Ignores role of technology and marketing

Perfect competition

Mobility of resources

Transportation costs ignored

Max efficiency - countries produce goods for other reasons

OR

INTERNATIONAL TRADEAND INTERNATIONAL MARKETING

Buying and selling of goods and services across national frontiers refers to InternationalTrade

Selling of goods to other countries refers to exports, while buying the goods from aforeign country is imports

Marketing of such goods and services across between two or more nations, isInternational Marketing

Various theories of international trade attempt to explain the reasons whytrade takes place between two or more countries

INTERNATIONAL TRADE THEORIES

Mercantilist Theory

Theory of absolute advantage

Theory of country size

Theory of comparative advantage


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Factors proportion theory

Product life cycle theory

MERCANTILIST THEORY

Theory developed - 1500 to 1800 AD

Countrys wealth measured in terms of gold holdings

Encouraged exports and discouraged imports

Imports were taxed and thus restricted

Exports were encouraged to gain maximum gold

During colonial rule, colony masters imported raw material from colonies and exportedfinished goods

The theory ignores the fact that imports are necessary at times

If the imports are restricted too much, the countrys population has to do without some ofthe commodities

THEORYOFABSOLUTEADVANTAGE

Put forward by Adam Smith

Believes that every country has an absolute advantage in supplying certain products

Hence, the country must specialise in export of those products only

It should import goods from countries, which have an absolute advantage in exporting theproducts, and hence get them at a cheaper rate

Eg. Japan has an advantage in production of high quality steel while India has huge reserves of iron and coal mines. This advantage can be used to complement each other

In practicality, it is not possible for only one country to have absolute advantage in termsof cost or otherwise for a particular product

THEORYOFCOUNTRYSIZE

It says that the size of the country decides how much and what type of products to tradein


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Larger countries have varied climates and natural resources

It makes them self sufficient, due to which they import and export less

In these countries, transportation is costlier to larger expanse of land, compared to

smaller countries

Since transport cost is less in smaller countries (due to less distance in production unitsand end markets), they have an advantage in international trade

THEORYOFCOMPARATIVEADVANTAGE

Improved version of absolute advantage theory, by David Ricardo

In case a country has an absolute advantage or absolute disadvantage in production of allthe goods it consumes, it cannot export or import each product

Hence, it needs to trade in goods in which it has a comparative advantage

It involves redirecting the resources to more efficient uses

When two countries need to consume a product, the country which produces it in lowestcost/using least resources will have a comparative advantage over the other country

FACTORS PROPORTION THEORY

It says that factors of production that are in abundance are cheaper than those in relative

scarcity

In capital abundant countries, cost of capital is low, while in labour abundant countries,manpower is available at a low cost

Hence, a country can trade in factors which are found in abundance

India exports software professionals to US of A due to cheap labour availability

Australia and Canada have abundance land and hence concentrate onagriculture

THE PRODUCT LIFE CYCLE THEORY

Stages in PLC:

Introduction

Growth


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Maturity

Decline

3. MARKETINGBARRIERS-TARIFFANDNON-TARIFFBARRIERS

WHATISTHEPURPOSEOFTARIFFS?

To protect domestic business. The idea is that by taxing imports, and thus raising the price,consumers will buy domestic products as they are free of this tax and therefore cheaper.

DEFINENONTARIFFBARRIERS?

Non-tariff barriers are blocks to trade include quotas, local-content requirements, licenses, andother types of import restrictions that depend on quantity, not price.

How would you define tariff barriers?

A tariff is a tax levied on goods imported into a country. It benefits domesticproducers and the government at the expense of consumers.

Tariff Barriers

Tariff barriers andon-tariff barriers, both includesport quotas, exchange controls,d other obstacles to trade.

some cases, these barriersfectively prevent the exporterom selling its goods in thatreign country. In other cases,ey represent an extra cost ofing business that can be built
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to the export price.

tariff : Is a tax levied by thereign government on goods

ported into that country (orport duty). The tariff increasese price at which the goods areld in the importing country anderefore makes them lessmpetitive with locally producedods.

on-Tariff Barriers

he various types of non-tariffrriers (or NTB) that impede thew of international trade includensist of: import quotas,change controls, customs delays,vernment purchasing policies,bsidies, customs calculation

ocedures, boycotts, technicalrriers, bribes and voluntarystraints.

dditional steps are continuouslying taken through the Generalreement on Tariffs and Trade or

ATTor now referred to as WTOorld Trade Organizationsince

95, to reduce trade barriers toports from non-members.

ypes of Tariffstariff may be one of the following four kinds:

) Ad valorem (2) Specific (3) Alternative
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) Compound

Ad Valorem dutye kind most commonly used, is one that is calculated as a percentage of the va

the imported goods - for example, 10, 25 or 35 per cent.

his may be based, depending on the country, either on destination (c.i.f.), or oe value of the goods at the port in the country of origin (f.o.b.).

A Specific dutya tax of so much local currency per unit of the goods imported (based on weigmber, length, volume or other unit of measurement. Specific duties are often

vied on foodstuffs and raw materials.

An Alternative dutywhere both an Ad valorem duty and A Specific duty are prescribed for a producth the requirement that the more onerous one shall be Ad valorem duty value cents per kilo.

Compound dutiese imposed on manufactured goods that contain raw materials that are themsebject to import duty. The "specific" part of the compound duty (calledmpensatory duty) is levied as protection for the local raw material industry.

OR

Tariff and Non-Tariff Barriers

Two Types of Trade Barriers

Tariff and Non-Tariff

TARIFF BARRIERS


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It refers to the duties or taxes imposed on internationally traded goods when they cross the

national borders. In other words, it is a custom duty or a tax on products that move across

borders.

CLASSIFICATIONOF TARIFF BARRIERS

On the basis of Direction

Import Tariff

Export Tariff

On the basis of Purpose

Protective

Revenue

On the basis of time length

Tariff surcharge

Countervailing duties

On the basis of Tariff rates

Specific duties

Ad valorem

Combined rates

On the basis of Production, Distribution and Consumption

Single - stage

Value-added

Cascade

Excise


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Turnover or equalisation

NON-TARIFF BARRIERS

This refers to the barriers imposed on exporting countries and also to protect the domestic

markets for making them more internationally competitive.

CLASSIFICATIONOF NON-TARIFF BARRIERS

Government participation in trade

Administrative guidance

Subsidies

Government procurement and state trading

Customs and entry procedures

Product classification

Product valuation

Documentation

License or permit

Inspection

Health and safety regulation

Product requirements


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Product standards

Packaging, labeling and marking

Product testing

Product specifications

Quotas

Two Types

1)Import quotas

A)Absolute

B)Tariff

2)Export quotas

A)Voluntary (OMA and VER)

Financial control

Exchange control


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Profit remittance retrictions

Multiple exchange rates

Prior import deposits

Credit restrictions

4. ORGANISATIONANDCONTROLFOR INTERNATIONAL MARKETING

Organization Organizational Alternatives ' Organizational separation. TheWorld Company Area, Product, or Functional Orientation? Structuring by AreaStructuring by Product Structuring by Function Choosing the OrganizationalForm International Marketing and Organization Centralization andDecentralization Corporate Headquarters The Local Subsidiary Licensee andDistributor Markets Regional Headquarters: A Halfway House Conclusions onOrganization. Controlling International Marketing Establishment of StandardsWhat Standards? How Are Standards Determined? Measurement andEvaluation of Performance Measurement = Feedback Evaluation ControllingMeans of Maintaining Control Licensee and Distributor Markets CoordinatingInternational Sales Conclusions Key Terms Index Questions Further Readings

Whereas planning helps to prepare the way for the coordination ofinternational marketing, organizational relationships provide the framework,in which coordination can occur. The task of control, by contrast, involvesimplementing the plan, actually assuring the coordination of internationalmarketing activities. In this sense, coordination equals control, although it isfacilitated by planning and organization. We will first look at organization andthen turn to a discussion of the control process.

INTERNATIONAL MARKETING CONTROL

International context of control

Obtaining performance information

Principles of a control system.

Simple process of control

Control techniques

Effective control systems

Benchmarking


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Effective control involves the measurement of inputs as well as

outputs.

Control is important because:

1. You cant manage what you cant measure adage

2. Gaining importance to measure ROI in marketing

3. Moves afoot to include branding in financial accounts.

SIMPLEPROCESSOFCONTROL

Set targets quantified objectives and/or budgets.

Determine the method(s) of measurement

Measure the results at the end of each period

Compare results against the targets and identify variances

Identify and implement any necessary corrective action.

CONTROL TECHNIQUES

Financial analysis e.g. ratio analysis, variance analysis, cash flow,monitoring capital expenditure.

Market analysis I.e. market demand, market share, marketingresources.

Sales analysis e.g. sales targets, selling costs.

Physical resources analysis analysis of plant and equipmentutilisation, other measures of productivity and product quality

Systems analysis consider the effectiveness of implementation andapplication of marketing resources.

Others. . . . . .

BENCHMARKING

Benchmark core operational standards against the very best in

business.

Process benchmarking compare one process from within the

organisation to another.


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Competitor benchmarking compares performance in key areas

against that of competitors.

Others

BALANCED SCORECARD

Assesses performance across a wider dimension other than just

financial performance. (tend to be backward looking)

Customer perspective e.g. satisfaction and retention.

Internal perspective e.g. employee behaviour, skills, quality.

Innovation and learning e.g. idea generation, product

development.

The financial perspective traditional financial measures. Takes a

shareholders perspective.

FACTORS AFFECTING ORGANIZATION STRUCTURE

The degree of involvement in international operations. The firms country and political history The businesses in which the firm is engaged the type

of product and its varietyUniversity The size and importance of the markets. The human resources capability of the firm.


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DECENTRALIZED VSCENTRALIZEDSTRUCTURES

The decentralized structure gives a high degree ofAutonomy to subsidiaries.

The centralized structure has control and strategicDecision making concentrated at headquarters.University of Coordinated Decentralization due to stronger globalpressure

Overall corporate strategy is provided fromheadquarters. Subsidiaries are free to implement it within the rangeagreed on

With headquarters.

CHALLENGES:

Understand the global forces Power barriers: struggle regional / Global


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Multicultural and infrastructure challenges forcommunication

A clearly communicated corporate vision.

Clear and long-term consistent corporate mission guiding peopleWorldwide

HR management to broaden individual perspectivesAnd develop identification with corporate goals.

University of Develop global managers withlocal mind Create a global perspective for country managers

The integration of individual thinking and activities intothe corporate agenda The Not-Invented-Here (NIH) Syndrome

CONTROL

Controls are designed to reduce uncertainty, increasepredictability and ensure separate parts are in line and insupport of common objectives

The instruments and processes needed to influencebehavior and performance of members to meet goals.

....

Module 2. International Marketing and World Environment:

1.POLITICAL FACTORS

Political factors constitute an important environment factor. Actually politics andEconomics are inter-related as one influences the other. That was the reason for earlyWriters of Economics preferred to caption their work as Political Economy. Political system,Political parties in power, political parties in the opposition, political maturity of the parties,Number of political parties, political awareness of people, political stability and the likeHave great impact on the business environment in a country. The economic policies pursuedBy a Government are to a great extent the by-product of political environment that impacts


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Businesses very often.

BASIC POLITICAL IDEOLOGIES

Political ideology refers to, the body of ideas, theories, aims and means to execute

The ideas adapt the theories and fulfill the aims that constitute a socio-political programmeFor action. Depending on the mix of different ideas, theories, aims and means, thereExists Pluralism, Democracy and Totalitarianism as alternative ideologies.

A. PLURALISM involves coexistence of different ideas, theories, aims and means. Pluralismmay be existing due to lack of convergence because the polity is made of differentinterest groups based on ethnicity, language, religion, race and so on and no one groupis dominant enough to overrule the rest.

B. TOTALITARIANISM involves, only one idea, theory, aim and means. No alternativeideology is allowed to co-exist. There is lack of tolerance. The best example is China.Former USSR was an example. But there used to be the tendency to break away.And that happened with the USSR breaking up into present Russia and over dozencountries. Of course, countries do unite even under totalitarian system do as it happenedwith Taiwan, Singapore and Hong Kong getting attached to mainland China late 1990s.China could ensure economic growth, but USSR couldnt. people want developmentultimately.

DEMOCRACY involves, a mix of pluralism and totalitarianism. There used to be individualfreedom with checks and balances. The degree of political rights and civil libertiesenjoyed however vary. Certain rights allowed, certain restricted and certain deniedtoo. India falls in this category. It is the largest democracy in the world in theory. 75%of countries have democracies of some order. Of them, 1/3rd are more pluralistic, 1/3rdare some 50:50 type and remaining 1/3rd are more totalitarian.

POLITICO- ECONOMIC SYSTEM

There are different forms of political system. Capitalism, Crony capitalism, Welfarecapitalism, Socialism, Communism and Mixed economy are the different systems. A briefsummary of each of the forms is presented below.

CAPITALISM

Capitalism is a politico-economic system wherein, private ownership and initiative,

individual freedom to produce, exchange, consume and distribute, market mechanism andconsumer sovereignty and limited role of government are found. In short capitalism may becalled as free enterprise economy where state control on businesses is not existing orminimum.

SOCIALISM

Socialistic political system is characterized by state ownership of production,


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exchange and distribution. The main features of this system are: i) Government ownershipand/or control of factors of production, ii) Government direction of production, exchangeand distribution, iii) Central Planning of resource mobilization, allocation, pricing etc. iv)Restriction private businesses, v) restriction on individual freedom and initiative, vi)government interference in income distribution, vii) government direction on physical

distribution and pricing of products, viii) consumer is not the king, only the state is allpowerful and so on.

COMMUNISM

A communist political system is nothing but 100% state control of all human activities.It is also known as state capitalism. Production, exchange, consumption and distributionare all state controlled. The difference between socialism and communism is that incommunism, consumption is also state controlled. Businesses are run almost like governmentdepartments. The dominant environment of business is, truly, the government factor.

MIXED ECONOMY

Mixed economy is said to be the golden mean of capitalism and socialism. Sideby side public and private ownership exist. This system is in vogue in India. The features ofcapitalism and socialism are jointly present in this system.Private initiative, freedom of enterprise, consumer sovereignty, individual savingand investment, profit orientation and market mechanism are all there. But it is not entirelyfree of government control. State initiative, state enterprise, state investment, social objectiveslike equal distribution, balanced development of all regions, concessions and privileges forthe less privileged, reservations for the benefit of weaker sections, etc are found.

POLITICALSTABILITY is a crucial factor. The political system, the number of parties,

ideologies of parties, animosities amongst different parties, leadership characters of politicalparties, the commitment of parties taking power to honour commitments made by previousgovernments, etc influence political stability. Political stability also means consistency inpolitical decisions, much needed for inspiring confidence in the minds of business community,both national and international. Lack of political stability is an indication of excessive riskbusinesses suffer.

POLITICAL RISK: TYPES, MEASUREMENTAND HANDLING

TYPESOF POLITICAL RISKS

Political Risks are of different types. There are micro and macropolitical risks.Micro political risk is the one that affects a particular firm or class of firms. Usually firmsowned by one class of businessmen, say, the foreigners from certain country, a particularbusiness family or region/state. Micro risk can be hedged. This happens even today.Macro political riskaffects all. There is no sparring of any business, any nationality, anytrade or industry. Cuba took-over all foreign property without exception by nationality orindustry or past behavior. Macro risk cannot be hedged, but it is bit rare now


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POLITICALRISKISAFUNCTIONOF:

(i) Probability that a given political event will affect a particular business unit or its particularproject and(ii) The magnitude of impact.of the event. A political demand, say, to halt FDI or a project or toconfiscate a business or nationalize a business unit, is the event that causes political risk. What isthe probability that all parties will jointly assemble and protest? What is the likely impact of thison the project or a business unit? Answers to these questions answer the relevance of politicalrisk.

POLITICALRISKCANBEANDHAVETOBEQUANTIFIED. FACTORSTOBECONSIDEREDINCLUDE:

(i) the countrys political and government system;(ii) track record of political parties and their relative strength; (iii) the degree of integration into the world system;(iv) the host countrys ethnic and religiousstability;(v) regional security; and(vi) key economic indicators.

Even if all parties show solidarity,the Govt. in power can contain theirrebellion using constitutional and legal measures. It must have the power andwillingness to do.

1) Handling political risk in the pre-investment planning phase

To deal with political risk, at pre-investment level, a business concern can think ofAvoidance,Insurance, Negotiate the environment, Structure the investment andPatenting.

2) Handling political risk in the post-investment operating

phase

After investment is made, through operating policies, political risk can be managed.The alternatives are: Short term profit maximization, Changing the BCR ofexpropriation, Developing local stake holders and Adaptation.

3)Handling political risk in the post-expropriation phase

In the post-expropriation phase, damage control and benefit harvesting exercises need to bepursued. Negotiation, Power leveraging, Legal recourse and Surrender are the options.

2. CULTURAL FACTORS


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Elements of Culture

Culture includes all facets of life. In order to obtain a total picture of a culture it is necessary toinvestigate every possible side of it. For facilitating an accurate study of culture, the anthropologistshave evolved a cultural scheme which embodies all the various elements of culture. The mainelements included within the meaning of the term cultureare:

1. Material Culture

Technology

Economics

2. Social Institutions

Social organization

Education

Political structures

3. Man and the Universe

Belief systems

4. Aesthetics

Graphic and plastic arts

Folklore

Music, drama and the dance

5. Language

CULTURAL FACTORS

India is a culturally diverse/complex country. The cultural mosaic is made up by a

mix of several factors in different proportions. The Nation, Religion, Social Stratifications( such as Race, Community, Caste or Tribe), Region, Language, Communication Styles,Attitudes of People (such as motivations, relationship preferences, risk preferences, etc.),Perception, Obtaining and Processing of Information by People and other culturalfactors.

THE NATION


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A nation as such may mean a particular culture. India for long time was seen as acountry of proletarian, yes-men and snake-charmers. This has now changed into a countryof professionals, yeomen doers and strategic thinkers. Indians are now regarded as English-speaking soft-mannered high achievers with professional and business acumen.Aggressiveness can often be interpreted as a sign of disrespect in India and may lead to a

complete lack of communication and motivation on the part of the Indians. One needs totake the time to get to know them as individuals in order to develop professional trust.Indians are good hosts and indulge in personal talk often.

RELIGION

Religion is integral to a culture. The Dictionary of Philosophy and Religion definesreligion, as an institution with a recognized body of communicants who gather togetherregularly for worship, and accept a set of doctrines offering some means of relating theindividual to what is taken to be the ultimate nature of reality. Religion often codifiesbehavior, such as the 10 Commandments of Christianity or the five precepts of Buddhismor the 5 times prayer a day by the Islam. Sometimes it is involved with government. Itinfluences arts and architecture. Religious symbols are worshipped and revered much

SOCIAL STRATIFICATION (RACE / COMMUNITY / CASTE / PROFESSION/ REGION)

Cultural groups exist based on affiliations. The affiliations might be ascribed oracquired membership. The ascribed membership is based on birth like genderaffiliation, age, caste, race, nationality and the like. The acquired membership isearned by ones education, profession, religion, political affiliation, life styles, andthe like.

REGION

India is fairly a big country, though only one time zone is followed. The northernstates reel under cold and hot for 6 months while the south used to have normal temperature.This variation speaks that the country is not small, though only 2.4% of world land mass it has.There are different regions. There variations in regional developments as well. Thecentral, central east, north east and extreme north-west are less developed. Political factors,insurgency problems, lack of opportunities for education, poor infrastructure because ofthe terrain features, etc combine to make these regions less developed. Lesser thedevelopment, more are the exploitation of the proletarian and weaker the governance. Inthe way fellow human are treated, particularly women, cultural richness differs. The indexof safety to person and to modesty of women is not that high in the insurgent inflicted

regions of the country.

LANGUAGE

Languages abound. There are really too many languages and too many culturalpatterns too. The demarcation of states other than those in the Hindi-belt, are languagebased. It is sacred cow and a local politician can simply pump in / blow hot venomouspassions on language veil should he want to score something over someone, by simply


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linking some frivolous issue to the language. You have to be very careful as much as I amwhen I make the statement in your lesson Language has lot of business implications.Should information brochures and advertisement messages be in as many languages orsimply a few or just one.

ATTITUDES

OF

PEOPLE

(MOTIVATIONS

, RELATIONSHIP

AND

RISK

PREFERENCES

,ETC

)

Culture is reflected by people by their attitudes. Motivation, relationship and riskpreferences are certain cultural variables.

PERCEPTION, OBTAININGAND PROCESSINGOF INFORMATIONBY PEOPLE

3. LEGAL FACTORS

INTERNATIONAL LEGAL ENVIRONMENT

An integral part of a countrys culture is the laws governingbusiness activities. Therefore, a Marketer faces as many differentlegal environments as there are countries where he or she tries topenetrate.

For instance, an Indian company having an American agent,doing business in France has to contend with three legaljurisdictions, three legal systems, three tax systems, and inaddition, theSupranational European Community laws and regulations, each ofwhich could be potentially contradicting the others.

Therefore, it is very important to understand the nuances of thedifferent systems so that the business transaction is done in thecorrect environment, or at least in an environment clearlyunderstood by the Marketer.

THE FOUR HERITAGESOFTODAYS LEGAL SYSTEMS

ISLAMIC LAW:

Pakistan, Iran, Arab Countries, and other Islamic States follow thisSystem, also called the Shariah Law. It is based on interpretationof the Koran. It encompasses religious duties as well as secular


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aspects of Law. It prescribes specific patterns of social andeconomic behaviour of all individuals. How do individuals tackleinterest on loans given out such interest is forbidden byKoran!

SOCIALIST LAW:

This is based on the fundamental tenets of the Marxist SocialistState, and cluster around the core concept of Social, Political, andEconomic Policies of the State. Properties, Contract, Arbitrationdenote different realities to Common Law.

COMMON LAW:

Derived from English Law, and prevalent in the USA, UK, Canada,and the British Commonwealth, this is based on Tradition, PastPractices, and Legal Precedence set by courts throughinterpretation of Statutes, Legislations and Past Rulings.

CODE LAW:

Code Law, where the Legal System is generally divided into threeseparate Codes - Commercial, Civil, and Criminal, is based onan all inclusive system of written rules (Codes) of Law.

LEGAL DISPUTES

Jurisdictions of Legal Disputes

International Legal Disputes can arise in three ways: Between two Governments Between a Company and a Government, and Between two Companies

In International Commercial Disputes, therefore, the question ofparamount importance is, Which Law Governs in thedispute?

Jurisdictions of Legal Disputes

The jurisdiction of the case is generally determined by:


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Jurisdiction clauses set in the contract Where the Contract was entered into Where the provisions of the Contract were performed

Legal Recourse in resolving International Disputes

CONCILIATION: Sorting out the problem is the best option. If need be,use the offices of the Chambers of Commerce, or the CommercialAttache of the local embassies.

ARBITRATION:There are various arbitration bodies, like the interAmerican Commercial Arbitration Commission, London Court ofArbitration,International Chamber of Commerce, etc.

CONCILIATION: Sorting out the problem is the best option. If need be,use the offices of the Chambers of Commerce, or the CommercialAttaches of the local embassies.

ARBITRATION:There are various arbitration bodies, like the interAmerican Commercial Arbitration Commission, London Court ofArbitration, International Chamber of Commerce, etc.

Typical Arbitration Clause: All disputes arising in connection

with this present contract shall be finally settled under the

rules of conciliation and arbitration of the ICC, by one or

more arbitrators appointed in accordance with the said

rules.

LITIGATION: A Lawsuit should be avoided unless it is absolutelynecessary.Possible consequences of a Lawsuit in a foreign country,irrespective of the outcome, are:

Creation of a poor image and damaged PR, both very difficult torebuild Face unfair treatment in a foreign court


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Difficult to obtain a judgment that would otherwise be obtainedby arbitration Very high cost and very long time taken in international legalaction

Total loss of confidentiality of business strategy and practices4)TECHNOLOGICAL FACTORS

Technological Factors.

Technology is vital for competitive advantage, and is a major driver of globalization. Considerthe following points:

1. Does technology allow for products and services to be made more cheaply and to a better

standard of quality?

2.Do the technologies offer consumers and businesses more innovative products and servicessuch as Internet banking, new generation mobile telephones, etc?

3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets,auctions, etc?

4.Does technology offer companies a new way to communicate with consumers e.g. banners,Customer Relationship Management (CRM), etc?

Once a technology is developed, it soon becomes availableeverywhere in the world. Technology is a universal factor thatcrosses national and cultural boundaries. Once a technology isdeveloped, it soon becomes available everywhere in the world.Concerning the emergence of global markets for standardizedproducts this phenomenon supports Levitts products. In hislandmark Harvard Business Review article, Levitt anticipated thecommunication revolution that has, in fact, become a driving

force behind global marketing. Satellite dishes, globe-spanningtelevision networks such as CNN and MTV, and the Internet arejust a few of the technological factors underlying the emergenceof a true global village. In regional markets such as Europe, theincreasing overlap of advertising across national boundaries andthe mobility of consumers have created opportunities formarketers to pursue pan-European product positioning.


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5) REGIONAL TRADE AREAS (RTAS)

Major regional trade blocks (RTAs)

HIGH-INCOMEANDLOWANDMIDDLE-INCOME

ECONOMIES

ASIA-PACIFIC ECONOMIC COOPERATION (APEC) EUROPEAN UNION (EU) NORTH AMERICAN FREE TRADE AREA (NAFTA)

LATIN AMERICAANDTHE CARIBBEAN

ASSOCIATIONOF CARIBBEAN STATES (ACS) ANDEAN GROUP GROUPOF THREE LATIN AMERICAN INTEGRATION ASSOCIATION (LAIA) SOUTHERN CONE COMMON MARKET (MERCOSUR)

AFRICA

COMMON MARKETFOR EASTERNAND SOUTHERN AFRICA (COMESA) ECONOMIC COMMUNITYOF WEST AFRICAN STATES (ECOWAS)

SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADC

MIDDLE EASTAND ASIA

ASSOCIATIONOFSOUTH-EAST ASIAN NATIONS (ASEAN) BANGKOK AGREEMENT EAST ASIAN ECONOMIC CAUCUS (EAEC) GULF COOPERATION COUNCIL (GCC) SOUTH ASIAN ASSOCIATIONFOR REGIONAL COOPERATION (SAARC)

INDIASPARTICIPATIONIN RTAS

FRAMEWORK AGREEMENTONCOMPREHENSIVEECONOMICCOOPERATIONBETWEEN ASEAN AND INDIA BANGLADESH-INDIA-MYANMAR-SRI LANKA-THAILAND

ECONOMICCOOPERATION (BIMST-EC) INDO-SRI LANKA FREE TRADE AGREEMENT BANGKOK AGREEMENT FRAMEWORK AGREEMENTFORESTABLISHINGFREETRADE


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BETWEEN INDIAAND THAILAND SAARC PREFERENTIALTRADINGAGREEMENT (SAPTA)SOUTH ASIAN FREE TRADE AGREEMENT (SAFTA)

INTERNATIONAL MARKETING FACTORS

Although firms marketing abroad face many of the same challenges as firms marketingdomestically, international environments present added uncertainties which must be accuratelyinterpreted. Indeed, there are a host of factors that need to be researched and evaluated whenpreparing an international marketing strategy. Key aspects of any potential foreign marketinclude: demographic and physical environment; political environment; economic environment;social and cultural environment; and legal environment.

Demographic and Physical Environment.Elements that needs to be assessedthat fit under this category include population size, growth, and distribution; climate factors thatcould impact on business; shipping distances; time zones; and natural resources (or lack thereof).

Economic Environment.Factors in this area include disposable income andexpenditure patterns; per capita income and distribution; currency stability; inflation; level ofacceptance of foreign businesses in economy; Gross National Product (GNP); industrial andtechnological development; available channels of distribution; and general economic growth.Obviously, the greater a nation's wealth, the more likely it will be that a new product or servicecan be introduced successfully. Conversely, a market in which economic circumstances provideonly a tiny minority of citizens with the resources to buy televisions may not be an ideal one fora television-based marketing campaign.

Social and Cultural Environment. This category encompasses a wide range ofconsiderations, many of which canif misunderstood or unanticipatedsignificantly underminea business's marketing efforts. These include literacy rates; general education levels; language;religion; ethics; social values; and social organization. "The ability of a country's people to readand write has a direct influence on the development of the economyand on marketing strategyplanning," observed McCarthy and Perrault. "The degree of literacy affects the way informationis deliveredwhich in marketing means promotion."Attitudes based on religious beliefs orcultural norms often shape marketing choices in fundamental ways as well. As Hiam and Schewenoted, cultures differ in their values and attitudes toward work, success, clothing, food, music,sex, social status, honesty, the rights of others, and much else." They observed that even businesspractices can vary tremendously from people to people. "For instance, haggling is never done bythe Dutch, often by Brazilians, and always by the Chinese." The company that does not take thetime to make it aware of these differences runs the risk of putting together an internationalmarketing venture that can fail at any number of points.

Legal Environment. This includes limitations on trade through tariffs or quotas;documentation and import regulations; various investment, tax, and employment laws; patent


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and trademark protection; and preferential treaties. These factors range from huge treaties (NorthAmerican Free Trade Agreement-NAFTA, General Agreement on Tariffs and Trade-GATT) thatprofoundly shape the international transactions of many nations to trade barriers erected by asingle country.

Political Environment. Factors here include system of government in targeted market;political stability; dominant ideology; and national economic priorities. This aspect of aninternational market is often the single most important one, for it can be so influential in shapingother factors. For example, a government that is distrustful of foreigners or intent on maintainingdomestic control of an industry or industries might erect legal barriers designed to severelycurtail the business opportunities of foreign firms.

..

Module 3. Research in International Marketing:

1. CONSUMER BEHAVIOR

What is Consumer Buying Behavior?Definition of Buying Behavior:

Buying Behavior is the decision processes and acts of people involved in buying and

using products.

Need to understand:

Why consumers make the purchases that they make? What factors influence consumer purchases? The changing factors in our society.

Consumer Buying Behavior refers to the buying behavior of the ultimate consumer.

A firm needs to analyze buying behavior for:

Buyers reactions to a firms marketing strategy has a great impact on thefirms success.


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The marketing concept stresses that a firm should create a Marketing Mix(MM) that satisfies (gives utility to) customers, therefore need to analyze thewhat, where, when and how consumers buy.

Marketers can better predict how consumers will respond to marketingstrategies.

Stages of the Consumer Buying ProcessSix Stages to the Consumer Buying Decision Process (For complex decisions). Actual

purchasing is only one stage of the process. Not all decision processes lead to a

purchase. All consumer decisions do not always include all 6 stages, determined by

the degree of complexity...discussed next.

THE 6 STAGESARE:

1. Problem Recognition(awareness of need)--difference between the desiredstate and the actual condition. Deficit in assortment of products. Hunger--Food.

Hunger stimulates your need to eat.Can be stimulated by the marketer through product information--did not knowyou were deficient? I.E., see a commercial for a new pair of shoes, stimulatesyour recognition that you need a new pair of shoes.

2. Information search--o Internal search, memory.o External search if you need more information. Friends and relatives

(word of mouth). Marketer dominated sources; comparison shopping;public sources etc.

A successful information search leaves a buyer with possible alternatives, the

evoked set.

Hungry, want to go out and eat, evoked set is

o chinese foodo indian foodo burger kingo klondike kates etc

3. Evaluation of Alternatives--need to establish criteria for evaluation, features

the buyer wants or does not want. Rank/weight alternatives or resume search.May decide that you want to eat something spicy, indian gets highest rank etc.If not satisfied with your choice then return to the search phase. Can you thinkof another restaurant? Look in the yellow pages etc. Information from differentsources may be treated differently. Marketers try to influence by "framing"alternatives.

4. Purchase decision--Choose buying alternative, includes product, package,store, method of purchase etc.
http://www.udel.edu/alex/chapt1.html#mixhttp://www.udel.edu/alex/chapt1.html#mix


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5. Purchase--May differ from decision, time lapse between 4 & 5, productavailability.

6. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction.Cognitive Dissonance, have you made the right decision. This can be reducedby warranties, after sales communication etc.After eating an Indian meal, may think that really you wanted a Chinese meal

instead.

Types of Consumer Buying BehaviorTypes of consumer buying behavior are determined by:

Level of Involvement in purchase decision. Importance and intensity ofinterest in a product in a particular situation.

Buyers level of involvement determines why he/she is motivated to seekinformation about a certain products and brands but virtually ignores others.

High involvement purchases--Honda Motorbike, high priced goods, products visible

to others, and the higher the risk the higher the involvement. Types of risk:

Personal risk Social risk Economic risk

The four type of consumer buying behavior are:

Routine Response/Programmed Behavior--buying low involvement frequentlypurchased low cost items; need very little search and decision effort;purchased almost automatically. Examples include soft drinks, snack foods,

milk etc. Limited Decision Making--buying product occasionally. When you need to

obtain information about unfamiliar brand in a familiar product category,perhaps. Requires a moderate amount of time for information gathering.Examples include Clothes--know product class but not the brand.

Extensive Decision Making/Complex high involvement, unfamiliar, expensiveand/or infrequently bought products. High degree ofeconomic/performance/psychological risk. Examples include cars, homes,computers, education. Spend a lot of time seeking information and deciding.Information from the companies MM; friends and relatives, store personneletc. Go through all six stages of the buying process.

Impulse buying, no conscious planning.

The purchase of the same product does not always elicit the same Buying Behavior.Product can shift from one category to the next.For example:Going out for dinner for one person may be extensive decision making (for someonethat does not go out often at all), but limited decision making for someone else. Thereason for the dinner, whether it is an anniversary celebration, or a meal with acouple of friends will also determine the extent of the decision making.


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2. PSYCHOLOGICAL AND SOCIALASPECTS

Psychological factorsPsychological factors include:

Motives--

A motive is an internal energizing force that orients a person's activities

toward satisfying a need or achieving a goal.

Actions are effected by a set of motives, not just one. If marketers can

identify motives then they can better develop a marketing mix.

MASLOW hierarchy of needs!!

o Physiologicalo Safetyo Love and Belongingo Esteemo Self Actualization

Need to determine what level of the hierarchy the consumers are apt to

determine what motivates their purchases.

Handout...Nutrament Debunked...

Nutrament, a product marketed by Bristol-Myers Squibb originally was

targeted at consumers that needed to receive additional energy from their

drinks after exercise etc., a fitness drink. It was therefore targeted at

consumers whose needs were for either love and Belonging or esteem. The

product was not selling well, and was almost terminated. Upon extensive

research it was determined that the product did sell well in inner-city

convenience stores. It was determined that the consumers for the product

were actually drug addicts who couldn't not digest a regular meal. They

would purchase Nutrament as a substitute for a meal. Their motivation to

purchase was completely different to the motivation that B-MS had originallythought. These consumers were at the Physiological level of the hierarchy.

BM-S therefore had to redesign its MM to better meet the needs of this target

market.

Motives often operate at a subconscious level therefore are difficult to

measure.

Perception--


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What do you see?? Perception is the process of selecting, organizing and

interpreting information inputs to produce meaning. IE we chose what info we

pay attention to, organize it and interpret it.

Information inputs are the sensations received through sight, taste, hearing,

smell and touch.

Selective Exposure-select inputs to be exposed to our awareness. More likely if it islinked to an event, satisfies current needs, intensity of input changes (sharp price drop).

Selective Distortion-Changing/twisting current received information, inconsistent withbeliefs.

Advertisers that use comparative advertisements (pitching one product against another),have to be very careful that consumers do not distort the facts and perceive that theadvertisement was for the competitor. A current example...MCI and AT&T...do you ever

get confused?

Selective Retention-Remember inputs that support beliefs, forgets those that don't.Average supermarket shopper is exposed to 17,000 products in a shopping visit lasting 30minutes-60% of purchases are unplanned. Exposed to 1,500 advertisement per day. Can'tbe expected to be aware of all these inputs, and certainly will not retain many.

Interpreting information is based on what is already familiar, on knowledge that is storedin the memory.

Handout...South Africa wine....

Problems marketing wine from South Africa. Consumers have strong

perceptions of the country, and hence its products.

Ability and Knowledge--

Need to understand individuals capacity to learn. Learning, changes in a

person's behavior caused by information and experience. Therefore to

change consumers' behavior about your product, need to give them new

information re: product...free sample etc.

South Africa...open bottle of wine and pour it!! Also educate american consumers aboutchanges in SA. Need to sell a whole new country.

When making buying decisions, buyers must process information.Knowledge is the familiarity with the product and expertise.

Inexperience buyers often use prices as an indicator of quality more than those who haveknowledge of a product.


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Non-alcoholic Beer example: consumers chose the most expensive six-pack, becausethey assume that the greater price indicates greater quality.

Learningis the process through which a relatively permanent change in behavior resultsfrom the consequences of past behavior.

Attitudes--

Knowledge and positive and negative feelings about an object or activity-

maybe tangible or intangible, living or non- living.....Drive perceptions

Individual learns attitudes through experience and interaction with other people.Consumer attitudes toward a firm and its products greatly influence the success or failureof the firm's marketing strategy.

Handout...Oldsmobile.....

Oldsmobile vs. Lexus, due to consumers attitudes toward Oldsmobile (as

discovered by class exercise) need to disassociate Aurora from the

Oldsmobile name.

Exxon Valdez-nearly 20,000 credit cards were returned or cut-up after the tragic oil spill.

Honda "You meet the nicest people on a Honda", dispel the unsavory image of amotorbike rider, late 1950s. Changing market of the 1990s, baby boomers aging, Hondasmarket returning to hard core. To change this they have a new slogan "Come ride with

us".

Attitudes and attitude change are influenced by consumers personality and lifestyle.

Consumers screen information that conflicts with their attitudes. Distort information tomake it consistent and selectively retain information that reinforces our attitudes. IEbrand loyalty.

There is a difference between attitude and intention to buy (ability to buy).

Personality--

All the internal traits and behaviors that make a person unique, uniqueness

arrives from a person's heredity and personal experience. Examples include:

o Workaholismo Compulsivenesso Self confidence


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o Friendlinesso Adaptabilityo Ambitiousnesso Dogmatismo Authoritarianismo Introversiono Extroversiono Aggressivenesso Competitiveness.

Traits affect the way people behave. Marketers try to match the store image

to the perceived image of their customers.

There is a weak association between personality and Buying Behavior, this may be due tounreliable measures. Nike ads. Consumers buy products that are consistent with their selfconcept.

Lifestyles--

Recent US trends in lifestyles are a shift towards personal independence and

individualism and a preference for a healthy, natural lifestyle.

Lifestyles are the consistent patterns people follow in their lives.

EXAMPLE healthy foods for a healthy lifestyle. Sun tan not considered fashionable inUS until 1920's. Now an assault by the American Academy of Dermatology.

3. SOCIALASPECTS

Social FactorsConsumer wants, learning, motives etc. are influenced by opinion leaders, person's

family, reference groups, social class and culture.

Opinion leaders--

Spokespeople etc. Marketers try to attract opinion leaders...they actually use

(pay) spokespeople to market their products. Michael Jordon (Nike,

McDonalds, Gatorade etc.)

Can be risky...Michael Jackson...OJ Simpson...Chevy Chase

Roles and Family Influences--

Role...things you should do based on the expectations of you from your

position within a group.
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People have many roles.

Husband, father, employer/ee. Individuals role are continuing to change

therefore marketers must continue to update information.

Family is the most basic group a person belongs to. Marketers must understand:

o that many family decisions are made by the family unito consumer behavior starts in the family unito family roles and preferences are the model for children's future family

(can reject/alter/etc)o family buying decisions are a mixture of family interactions and

individual decision makingo family acts an interpreter of social and cultural values for the

individual.

The Family life cycle: families go through stages; each stage creates

different consumer demands:

o bachelor stage...most of BUAD301o newly married, young, no children...meo full nest I, youngest child under 6o full nest II, youngest child 6 or overo full nest III, older married couples with dependant childreno empty nest I, older married couples with no children living with them,

head in labor forceo empty nest II, older married couples, no children living at home, head

retiredo solitary survivor, in labor force

o solitary survivor, retiredo Modernized life cycle includes divorced and no children.

Handout...Two Income Marriages Are Now the Norm

Because 2 income families are becoming more common, the decision maker

within the family unit is changing...also, family has less time for children, and

therefore tends to let them influence purchase decisions in order to alleviate

some of the guilt. (Children influence about $130 billion of goods in a year)

Children also have more money to spend themselves.

Reference Groups--

Individual identifies with the group to the extent that he takes on many of the

values, attitudes or behaviors of the group members.

Families, friends, sororities, civic and professional organizations.Any group that has a positive or negative influence on a persons attitude and behavior.


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Membership groups (belong to)Affinity marketing is focused on the desires of consumers that belong to referencegroups. Marketers get the groups to approve the product and communicate that approvalto its members. Credit Cards etc.!!

Aspiration groups (want to belong to)

Disassociate groups (do not want to belong to)Honda, tries to disassociate from the "biker" group.

The degree to which a reference group will affect a purchase decision depends on anindividuals susceptibility to reference group influence and the strength of his/herinvolvement with the group.

Social Class--

an open group of individuals who have similar social rank. US is not a

classless society. US criteria; occupation, education, income, wealth, race,

ethnic groups and possessions.

Social class influences many aspects of our lives. IE upper middle class Americans preferluxury cars Mercedes.

o Upper Americans-upper-upper class, .3%, inherited wealth, aristocraticnames.

o

Lower-upper class, 1.2%, newer social elite, from current professionalsand corporate eliteo Upper-middle class, 12.5%, college graduates, managers and

professionalso Middle Americans-middle class, 32%, average pay white collar workers

and blue collar friendso Working class, 38%, average pay blue collar workerso Lower Americans-lower class, 9%, working, not on welfareo Lower-lower class, 7%, on welfare

Social class determines to some extent, the types, quality, quantity of

products that a person buys or uses.

Lower class people tend to stay close to home when shopping, do not engage in muchpre-purchase information gathering.Stores project definite class images.

Family, reference groups and social classes are all social influences on consumerbehavior. All operate within a larger culture.


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Culture and Sub-culture--

Culture refers to the set of values, ideas, and attitudes that are accepted by a

homogenous group of people and transmitted to the next generation.

Culture also determines what is acceptable with product advertising. Culture determineswhat people wear, eat, reside and travel. Cultural values in the US are good health,education, individualism and freedom. In american culture time scarcity is a growingproblem. IE change in meals. Big impact on international marketing.

Handout...Will British warm up to iced tea?

No...But that is my opinion!!...Tea is a part of the British culture, hot with

milk.

Different society, different levels of needs, different cultural values.

Culture can be divided into subcultures:

o geographic regionso Human characteristics such as age and ethnic background.

IE West Coast, teenage and Asian American.

Culture effects what people buy, how they buy and when they buy.

3.INTERNATIONAL MARKETING RESEARCH

The scope of research:

+ Market measurement studies+ Competitive studies+ Environmental studies

International marketing research is used to make strategies andtactical decisions.

The importance of International marketing research: Beforemaking market entry, product position, or marketing mix decision,a marketer must have accurate information about the marketsize, market needs, competition, and so on.


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Marketing research provides the necessary information avoid thecostly mistakes of poor strategies or lost opportunities.

1.SOURCES OF INFORMATION

1.1. Secondary data+ Internal source+ External source1.2. Primary data

1.1. Secondary data

+ Internal source

Sales and cost records, markets,

+ External source

UN, OECD, EU, IMF, WB, IBRD, IFC

Embassy, Consulate; Non -government agencies;Universities and other educational institutionsInternet CD-ROM

The Business International Market Report.

1.1. Secondary data

The major issues are data availability, reliability and

comparability.

1.2. Primary dataPrimary data can be collected in four broad ways:+ Observation+ Focus groups+ Surveys


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+ Experiments

Observation research:Fresh data can be gathered by observing the relevant actors and

settings.

EX; The American Airlines researchers might hang aroundairports, airline offices, and travel agencies to hear travelers talkabout the different carriers and how agents handle the flightarrangement process.

The researchers can fly on American and competitors planes toobserve the quality of in-flight service and hear consumerreactions. This exploratory research might yield some useful

hypotheses about how travelers choose their air carriers.

Focus groups research: A focus group is a gathering of six toten persons who spend a few hours with a skilled interviewer todiscuss a project,service, organization, or other marketing entity. The discussion isrecorded through note taking or Audio or video tape and is

subsequently studied tounderstand consumer belief, attitudes, and behavior.

In American Airlines example, the group interviewer may startwith a broad question, such as How do you feel about airtravel?

Survey research: Survey research stands midway betweenobservational and focus group research, on the one hand. Andexperimental research on the other hand. Companies undertakesurveys to learn about peoples knowledge, beliefs, preferences,satisfaction, and so on, and to measurethese magnitudes in the population.


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Experiments research: the most scientifically valid research isexperimental research. Experimental research calls for selectingmatchedgroup of subjects, subjecting them to different treatments,

controlling extraneous variable, and checking whether observedresponse differences are statistically significant. The purpose ofexperimental research is to capture cause-and- effectrelationships by eliminating explanations of the observed findings.

Research instrument: Questionnaires

Contact methods:+ The mail questionnaire+ Telephone interviewing

+ Personal interviewing

The challenges:+ Comparability of data+ Willingness of potential respondent+ Ability of the respondent to understand and communicate.

(Challenge in survey research involves translation from onelanguage to another)

To avoid these translation errors, experts suggest the Techniqueof back-translation. First, the questionnaire is translated from thehome language into the language of the country where it will beused, by a bilingual who is a native speaker of the foreigncountry. Then this version is translated back to the homelanguage by bilingual who is native speaker of the homelanguage. Another translation technique is parallel translation, inwhich two or more translators translate the questionnaire. Theresults are compared, and differences are discussed and resolved.

Using the internet and e-mail data collection

Some problems:+ Sampling+ Language


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+ Respondent cooperation

2.THE EXPORT MARKETING RESEARCH PROCESS

Problem formulationResearch method and designData collection techniquesSampleData collectionAnalysis and interpretationreporting results

Research study report

+ Cover: topic, organization, name of author, time+ Abstract+ Table of contents+ List of figures+ List of tables

+ Chapter1.

Introduction

Problem statementObjectives of studyScope and research methodStructure of study

+ Chapter 2.Literature review

+ Chapter 3.Introduction of the company or Sector of

+ Chapter 4.Research design

+ Chapter 5.Presentation and critical discussion of results


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+ Chapter 6.Conclusions and recommendations, further research

+ References

+ Appendix

2. FOREIGNCONSUMERSANDFOREIGNMARKETS

Foreign consumers

+ How foreign consumers differ+ What they buy+ Why they buy+ Who makes the purchase decision?+ How they buy+ When they buy+ Where they buy

Foreign industrial market

+ What they buy+ Why they buy+ Who makes the purchase decision

Foreign government

+ The size of governments role as customer, however, variesfrom country to country

+ Another variable in the economic role of government is the kindof economic activity undertaken.

+ Government markets differ from consumer and industrialmarkets in what they buy, how they buy, and why they buy- andgovernment in different


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countries also vary among themselves on these dimensions.

Export market segmentation

1) It is important to note that any decision to segment onparticular basis should be evaluated in term of the following:

+ Measurability+ Accessibility+ Profitability+ Actionability

2) Base of segmentation

+ Country market level; demographic and populationcharacteristics ; socio-economic characteristics; politicalcharacteristics; cultural characteristics.

+ Customer market level: Demographic characteristics: age,gender, life cycle, religion, nationality, etc; socio-economiccharacteristics: income, occupation, education, etc.Psychographic characteristics: personality

The four strategies:

+ Increase penetration (existing product and markets)+ Develop products (new products in existing markets)+ Extend markets (existing products in new markets)+ Widen activities (new products and markets)

4.FOREIGNMARKETPORTFOLIOS: TECHNIQUEANDANALYSIS

Country attractiveness/ competitive strength matrix Using thesevariables, and some scheme for weighting them, countries areclassified into one ofthe nine cells depicting relative market investment opportunity.

+ Invest/grow countries+ Harvest/divest/license/combine countries


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+ Dominant/divest countries+ selective countries

Country attractiveness

Market size (total and segments)Market growth (total and segments)Market seasons and fluctuationsCompetitive conditions (concentration, intensity, entry barriers,etc.)Market prohibitive conditions ( tariff, non tariff barriers, importrestrictions, etc.)Economic and political stability.

Competitive strength

-Market share-Marketing ability and capacity-Product fit-Contribution margin-Image-Technology position-Product quality

-Market support-Quality of distributions and service

2.MARKET ENTRYSTRATEGIES

Market entry strategies include licensing, joint ventures, contract manufacture, ownership andparticipation in export processing zones or free trade zones.

LICENSING: Licensing is defined as "the method of foreign operation whereby a firm in one

country agrees to permit a company in another country to use the manufacturing, processing,trademark, know-how or some other skill provided by the licensor".

It is quite similar to the "franchise" operation. Coca Cola is an excellent example of licensing. InZimbabwe, United Bottlers have the licence to make Coke.

Licensing involves little expense and involvement. The only cost is signing the agreement andpolicing its implementation.


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LICENSINGGIVESTHEFOLLOWINGADVANTAGES:

Good way to start in foreign operations and open the door to low risk

manufacturing relationships

Linkage of parent and receiving partner interests means both get most out of

marketing effort Capital not tied up in foreign operation and

Options to buy into partner exist or provision to take royalties in stock.

THEDISADVANTAGESARE:

Limited form of participation - to length of agreement, specific product, process or

trademark

Potential returns from marketing and manufacturing may be lost

Partner develops know-how and so license is short

Licensees become competitors - overcome by having cross technology transferdeals and

Requires considerable fact finding, planning, investigation and interpretation.

Those who decide to license ought to keep the options open for extending market participation.This can be done through joint ventures with the licensee.

JOINTVENTURES

Joint ventures can be defined as "an enterprise in which two or more investors share ownershipand control over property rights and operation".

Joint ventures are a more extensive form of participation than either exporting or licensing. InZimbabwe, Olivine industries have a joint venture agreement with HJ Heinz in food processing.

Joint ventures give the following advantages:

sharing of risk and ability to combine the local in-depth knowledge with a foreign

partner with know-how in technology or process

Joint financial strength

May be only means of entry and

May be the source of supply for a third country.

They also have disadvantages:


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Partners do not have full control of management

May be impossible to recover capital if need be

Disagreement on third party markets to serve and

Partners may have different views on expected benefits.

If the partners carefully map out in advance what they expect to achieve and how, then manyproblems can be overcome.

OWNERSHIP: The most extensive form of participation is 100% ownership and this involves thegreatest commitment in capital and managerial effort. The ability to communicate and control100% may outweigh any of the disadvantages of joint ventures and licensing. However, asmentioned earlier, repatriation of earnings and capital has to be carefully monitored. The moreunstable the environment the less likely is the ownership pathway an option.

These forms of participation: exporting, licensing, joint ventures or ownership, are on acontinuum rather than discrete and can take many formats. Anderson and Coughlan8 (1987)

summaries the entry mode as a choice between company owned or controlled methods -"integrated" channels - or "independent" channels. Integrated channels offer the advantages ofplanning and control of resources, flow of information, and faster market penetration, and are avisible sign of commitment. The disadvantages are that they incur many costs (especiallymarketing), the risks are high, some may be more effective than others (due to culture) and insome cases their credibility amongst locals may be lower than that of controlled independents.Independent channels offer lower performance costs, risks, less capital, high local knowledgeand credibility. Disadvantages include less market information flow, greater coordinating andcontrol difficulties and motivational difficulties. In addition they may not be willing to spendmoney on market development and selection of good intermediaries may be difficult as goodones are usually taken up anyway.

Once in a market, companies have to decide on a strategy for expansion. One may be toconcentrate on a few segments in a few countries - typical are cashew nuts from Tanzania andhorticultural exports from Zimbabwe and Kenya - or concentrate on one country and diversifyinto segments. Other activities include country and market segment concentration - typical ofCoca Cola or Gerber baby foods, and finally country and segment diversification. Another wayof looking at it is by identifying three basic business strategies: stage one - international, stagetwo - multinational (strategies correspond to ethnocentric and polycentric orientationsrespectively) and stage three - global strategy (corresponds with geocentric orientation). Thebasic philosophy behind stage one is extension of programmes and products, behind stage two isdecentralization as far as possible to local operators and behind stage three is an integration

which seeks to synthesize inputs from world and regional headquarters and the countryorganization. Whilst most developing countries are hardly in stage one, they have within themorganizations which are in stage three. This has often led to a "rebellion" against the operationsof multinationals, often unfounded.

EXPORTPROCESSINGZONES (EPZ)


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Whilst not strictly speaking an entry-strategy, EPZs serve as an "entry" into a market. They areprimarily an investment incentive for would be investors but can also provide employment forthe host country and the transfer of skills as well as provide a base for the flow of goods in andout of the country. One of the best examples is the Mauritian EPZ12, founded in the 1970s.

OR

1.ENTRY AS STRATEGY

The elements of entry strategy:

+ The objectives and goals in target market;+ Needed policies and resource allocations;+ The choice of entry modes to penetrate the market;+ The control system to monitor performance in the market+ A time schedule

2. FACTORS INFLUENCING CHOICE OF ENTRY MODE

Target market

ProductAvailability of marketing organizationCompany considerationsGovernment policies

3.EXPORT ENTRY MODES

3.1. Indirect export

+ Export merchants+ Trading company+ Export commission house+ Resident buyer+ Broker+ Export management company+ Manufacturers export agent


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+ Cooperative organization:Piggyback marketing; exporting combination

3.2.Direct export

+ Home country based department:

1) Built-in department2) Separate export department3) Export sales subsidiary

+ Foreign sales branch+ Storage or warehousing facilities+ Traveling salesperson

+Foreign based distributors and agents

With direct export, manufacturer of exportable goods undertakesthe entireExport process without any intermediaries. By becoming a directexport exporter, the firm takes responsibility for the entire rangeof export activities starting with identifying customers through tocollecting payment. In order to export directly, the firm may haveto establish an export department from

Domestic sale division which could be funded on the basis itsrequirements. Employees of the department must be trained inforeign trade affaires.

Direct exporting has several advantages such as:

1. The firm is able to control the whole process of export.2. The firm can increase net profit because of operating withoutexpenditure for intermediary.3. The firm can develop closed relation with foreign partners. But,the firm is responsible for the following aspects:4. The firm has to spent time and money to success in foreignmarket.5. The firm must suffer directly risks may be occurred.


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What is involved in a typical export process?An export process involves three main functions: feasibilityanalysis, planning foreign market entry, and implementation.

These functions involve 20 steps.

FEASIBILITY

1. Analyze domestic performance of the business2. Assess the firms capability.3. Research various factors of population, economy, politic andsociety of target markets.4. Confer with experts of international trade concerning

marketing, financial, legal problems and delivery term of goodsand services.5.Select target market

PLANNING FOREIGN MARKET ENTRY

6. Conduct market research concerning section of good andspecific products to be exported.7. Make plan, strategy or entering target markets.

8. Collect knowledge about countrys requirements concerningCertificates, standards and licenses of target countries.9. Collect necessary documents concerning license, trade.Copyright protection of target countries.10. Identify internal: import taxes, quotes or other non-tariff tradebarriers of the target countries.11.Establish pricing schedule.

IMPLEMENTATION

12. Determine method of sale.13. Establish marketing methods.14. Choose sale representatives or sales methods.15. Negotiate financial problems.16. Obtain insurance of good17. Complete the required paper work.


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18. Package and label products.19. Ship products20. Get payment.

The most common mistakes made by exporters

The following are twelve most common mistakes often made bysmall firm as they begin to export or expand business on foreignmarkets:

1. Lack of full investigation of market, lack of qualified exportexpert enable to make international business strategy andmarketing plan before starting an export business;

2. Lack of support by administrative offices to overcome initialDifficulties and financial problems of exporting;

3. Inadequate care in selecting overseas sales representatives orDistributors.

4. Seeking orders from a lot corners of the world rather thanconcentrating on one or two main geographical areas;

5. Neglecting export to foreign markets when domesticMarkets booms;

6. Lack of treating international distributors and customers on anequal basis with domestic counterparts;

7. Assuming that a particular trade technique and product willautomatically be successful in many countries;

8. Unwillingness in modifying products in order to meetregulations or cultural preferences of foreign countries

9. Lack of printing information of sale, guarantee and after-saleservice in foreign language;


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10. Lack of considering the use of an export developmentcompany if the firm cannot afford its own export departmentbecause of lacking financialor other conditions;

11. Worry about expenditure for investigating newmarkets, so that lacking of definitiveness in export;

12.Lack of providing after-sale services for the product.

4.NON-EXPORT ENTRY MODES

LicensingFranchising

Assembly operationsContract manufacturingJoint ventureWholly owned plantManagement contracting

5.Naive rulePragmatic rule

The strategy ruleSELECTING THE ENTRY MODE.

Module 4. International Marketing Mix Decisions:

1..PRODUCT STRATEGIES

International Product Strategies

Although products in the international industrial market are more homogeneousthan consumer products, there are more product variations internationally thandomestically due to the greater number of international economic, cultural, andpolitical/legal variables.


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PRODUCT STRATEGYFOR INTERNATIONALMARKETS

IDENTIFICATIONOFPRODUCTSFORINTERNATIONALMARKETS

AFIRMHASTOCARRYOUTPRELIMINARYSCREENINGFORMARKETSANDPRODUCTSBYCONDUCTINGMARKETRESEARCHPOORLYCONCEIVEDPRODUCTOFTENLEADSTOMARKETINGFAILURES

DEVELOPINGPRODUCTSFORINTERNATIONALMARKETS

ETHNOCENTRICAPPROACH POLYCENTRICAPPROACH REGIOCENTRICAPPROACH GEOCENTRICAPPROACH

PRODUCTSTANDARDIZATION

PRODUCTSTANDARDIZATION : THEPROCESSOFMARKETINGAPRODUCTINOVERSEASMARKETSWITHLITTLECHANGEEXCEPTFORSOMECOSMETICCHANGESSUCHASMODIFIEDPACKAGINGANDLABELLING

BENEFITS

- PROJECTINGAGLOBALPRODUCTIMAGE- CATERINGTOCUSTOMERSGLOBALLY- COSTSAVINGSINTERMSOFECONOMIESOFSCALEINPRODUCTION- DESIGNINGANDMONITORINGVARIOUSCOMPONENTSOFMARKETINGMIXECONOMICALLY- FACILITATINGTHEDEVELOPMENTOFAPRODUCTASAGLOBALBRAND

FACTORSFAVOURINGPRODUCTSTANDARDISATION

ININTERNATIONALMARKETS

HIGHLEVELOFTECHNOLOGYINTENSITY FORMIDABLEADAPTATIONCOSTS CONVERGENCEOFCUSTOMERNEEDSWORLDWIDE COUNTRYOFORIGINIMPACT

PRODUCTADAPTATION

PRODUCTADAPTATION: MAKINGCHANGESINAPRODUCTINRESPONSETOTHENEEDSOFTHETARGETMARKETISTERMEDPRODUCTADAPTATIONORCUSTOMIZATION

BENEFITS

ENABLESAFIRMTOTAPMARKETS, WHICHARENOT


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ACCESSIBLEDUETOMANDATORYREQUIREMENTS FULFILLSTHENEEDSANDEXPECTATIONSOFCUSTOMERSINVARIEDCULTURESANDENVIRONMENTS HELPSINGAININGMARKETSHARE INCREASESSALESLEADINGTOECONOMIESOFSCALE

FACTORSINFLUENCINGPRODUCT

ADAPTATIONININTERNATIONALMARKETS

MANDATORYFACTORS GOVERNMENTREGULATIONS STANDARDSFORELECTRICCURRENT OPERATINGSYSTEMS MEASUREMENTSYSTEMS PACKAGINGANDLABELLINGREGULATIONS

VOLUNTARY

CONSUMERDEMOGRAPHICS CULTURE LOCALCUSTOMSANDTRADITIONS CONDITIONOFUSE PRICE

NEWPRODUCTLAUNCH

WATERFALLAPPROACH: THELAUNCHOFANEWPRODUCTININTERNATIONALMARKETSINAPHASEDMANNERSPRINKLERAPPROACH: SIMULTANEOUSPRODUCTLAUNCHINVARIOUSINTERNATIONALMARKETS

INTERNATIONALPRODUCTSTRATEGY

INTERNATIONALCOMPETITIVEPOSTUREMATRIX KINGS BARONS CRUSADERS COMMONERS

INTERNATIONALPRODUCTSTRATEGIES

DEVELOPNEWPRODUCT

DONOTCHANGE

PROMOTION STRAIGHT

ADAPTATION PRODUCT

ADAPTATION COMMUNICATION


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ADAPTATION DUAL

ADAPTATION PRODUCT

INVENTION

DONOTCHANGE

2. BRANDINGAND PACKAGING DECISIONS

There are four levels of branding decisions:

1. No brand versus brand2. Private brand versus manufacturers brand3. Single brand versus multiple brands

4. Local brands versus worldwide brand

Branding versus No Brand

To brand or not to brand, that is the question. Most U.S. exportedproducts are branded, but that does not mean that all productsshould be. Branding is not a cost-free proposition because of theadded costs associated with marking, labeling,packaging, and legal procedures. These costs are especiallyrelevant in the case of commodities (e.g.. salt, cement, diamonds,

produce, beef, and other agriculturaland chemical products). Commodities are unbranded orundifferentiated products which are sold by grade, not bybrands. As such, there is no uniqueness, other than gradedifferential, that can be used to distinguish the offerings of onesupplier from those of another. Branding is then probablyundesirable because brand promotion is ineffective in a practicalsense and adds unnecessary expenses to operations costs. Thevalue of a diamond, for example, is determined by the so-called

four Cscut, color, clarity, and carat weight-and not by brand.

This is why DeBeers promotes the primary demand fordiamonds in general rather than the selective demand forspecific brands of diamonds.


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No Brand

lower production costlower marketing costlower legal costmore flexibility in quality and quantity control (i.e., possibility ofless rigidity in control)good for commodities (undifferentiated items)

Private Brand

ease in gaining dealers' acceptancepossibility of larger market shareno promotional hassles andexpensesgood for small manufacturer with

unknown brand and identityMultiple Brands (in single market)utilization of market segmentationtechniquecreation of excitement amongemployeescreation of competitive spirits


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avoidance of negative connotationof existing brand gain of moreretail shelf spaceretention of customers who are

not brand loyal allowance oftrading up or down withouthurting existing brand

Local Brands

legal necessity (e.g., name alreadyused by someone else in localmarket)elimination of difficulty in

pronunciationallowance for more meaningfulnames (i.e., more localidentification!elimination of negativeconnotations.avoidance of taxation oninternational brandquick market penetration by

acquiring local bran

international marketing - mba (gtu)

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