mba iv international marketing management [12mbamm418] notes

INTERNATIONAL MARKETING MANAGEMENT 12MBAMM418

SJBIT/MBA

Module I (7 Hours)

Framework of international marketing: Definition – scope and challenges – difference

between international marketing and domestic marketing – the dynamic environment of

international trade – transition from domestic to international markets – orientation of

management and companies

Global e-marketing: The Death of Distance, communications, Targeting the individual

customers, relationship marketing, interactivity, Speed to market, living in an age of technical

discontinuities, new technologies change the rules of competition, components of the electronic

value chain.

Module II (8 Hours)

Developing a global vision through marketing research: Breadth and scope of international

marketing research – problems in availability and use of secondary data – problems in gathering

primary data – multicultural research

– a special problem – research on internet – a new opportunity – estimating market demand –

problems in analyzing and interpreting research information – responsibility for conducting

marketing research – communicating with decision makers. Identifying foreign markets –

classification based on demand – based on the stage of development – other bases for division of

world markets

Social and Cultural Environment: Basic aspects of society and culture, Approaches to cultural

factors, Impact of Social and Cultural Environment on Marketing Industrial and Consumer

Products

Module III (7 Hours)

Global marketing management – planning and organization: Global

perspective – global gateways – global marketing management – an old debate and a new view –

planning for global markets – alternative market entry strategies – organizing for global

competition

Module IV (6 Hours)

Products and services for consumers: Quality – Green marketing and product development,

products and culture – analyzing product components for adaptation– products for consumers in


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global markets, product development, product adaptation, product standardization, marketing

consumer services globally – marketing of services, brands in international markets

Products and services for businesses

Demand in global business to business markets – quality and global standards – business services

– trade shows' crucial part of business to business marketing – relationship markets in business to

business context

Module V (8 Hours)

Licensing, Strategic Alliances, FDI: Introduction, Licensing, Strategic Alliances, Manufacturing

Subsidiaries, Entry Modes and Marketing Control, Optimal Entry Strategies.

Global Distribution

Introduction, Distribution as Competitive advantage, Rationalizing Local Channels, Wholesaling,

Retailing, Global Logistics, Parallel Distribution, Global Channel Design

International retailing

International expansion of retailers – international retailing defined – retail format – variations in

different markets – general merchandise: retailing – issues in international retailing

Module VI (7 Hours)

Pricing decisions: Global Pricing Framework, Pricing Basics, Marginal Cost Pricing and its

importance, Transfer Pricing, Counter trade, Systems Pricing, Pricing and Positioning, price

quotation – INCO terms – preparation of quotations.

Promotion Decisions

Promotions – international advertising – sales promotion in international markets – international

advertising – direct mailing – personal selling – exhibition – generic promotions in international

marketing

Module VII (6 Hours)

Recent trends in India's foreign trade : Institutional infrastructure for exports promotions in

India – India's trade policy – exports assistance – exports documentation and procedures

including different stages of documentation Globalization in India, Opportunities, Constraints and

Initiatives India - A Hub for Globalization, Globalization in India - Post Liberalization, India‘s


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Strengths, Strategies for Sustainable Competitive Advantage, Potential for Made in India, Major

Globalization Initiatives from Indian Companies, WTO Regulations and their implications for

India, Undesirable effects of globalization, Government Initiatives needed to foster globalization

Module VIII (2 Hours)

The future of global marketing: Six major changes in global marketing

Contents

Sl

No:

Modules Page NO

1 Framework of international marketing 4 – 13

2 Developing a global vision through marketing research 14 - 27

3 Global marketing management – planning and

organization

28 – 38

4 Products and services for consumers 39 – 48

5 Licensing, Strategic Alliances, FDI 49 – 71

6 Pricing decisions 72 – 81

7 Recent trends in India's foreign trade 82 – 99

8 The future of global marketing 100 – 118


SJBIT/MBA

Module I (7 Hours)

Framework of international marketing: Definition – scope and challenges – difference between

international marketing and domestic marketing – the dynamic environment of international trade

– transition from domestic to international markets – orientation of management and companies

Global e-marketing: The Death of Distance, communications, Targeting the individual

customers, relationship marketing, interactivity, Speed to market, living in an age of technical

discontinuities, new technologies change the rules of competition, components of the electronic

value chain.

Framework of international marketing

International marketing is defined as the performance of business activities designed to plan,

price, promote, and direct the flow of a company‘s goods and services to consumers or users in

more than one nation for a profit

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

―International marketing is defined as the performance of business activities designed to plan,

price, promote, and direct the flow of a company‘s goods and services to consumers or users in

more than one nation for a profit.‖

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

Scope and challenges:

Important Points

1. An increasingly larger share of corporate profits are generated by international operations

2. Till last decade competition for the company comes from the local market only, now it is

not so. It comes from all the country

Global Perspective: Recent Events

1. Information technology boom

2. Enron scandals

3. September 11th attacks on the World Trade Center and Pentagon

4. Wars in Afghanistan and Iraq


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

6. 2003 SARS outbreak in Asia

7. Global terrorism, e.g., Indonesia, Israel, India, and Morocco

8. Transcending these events, international commerce continued

Global Business Trends

The rapid growth of the World Trade Organization and regional free trade

areas, e.g., NAFTA and the European Union

General acceptance of the free market system among developing countries in Latin

America, Asia, and Eastern Europe

Impact of the Internet and other global media on the dissolution of national borders, and

Managing global environmental resources

Difference between international marketing and domestic marketing

International Marketing Vs Domestic Marketing

Sovereign political entities

I. Tariffs Or Customs Duties

II. Quantitative Restrictions

III. Exchange Controls

IV. Local Taxes

Different Legal Systems

Different Monetary Systems

Lower Mobility Of Factors Of Production

Differences In Market Characteristics

Differences In Procedures And Documentation

Greater Degree Of Risk

The Difference

More than one nation, Competition, Legal constraints, Govt. Control, Ecological factors,

Consumer traditions, or any uncontrollable elements.


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Reasons for Internationalization

Growth

– Access to new markets

– Access to resources

Survival

– Against competitors with lower costs (due to increased access to resources)

• Leveraging Key Success Factors Abroad

• Follow Customers Abroad

• Pursuing Diversification

• Taking Advantage of Different Growth Rates of Economies

• Exploiting Product Life Cycle Differences

• Internationalizing for Defensive Reasons

The effects of uncontrollable and controllable both in the domestic and foreign

environments

- International marketers deals with at least two uncontrollable Elements

1. Domestic

2. International

- As the number of international market increases: uncontrollable layer increases

- Controllable elements : 4 ps (MARKETING MIX)

- Domestic Uncontrollable elements : Political & Legal, Competition, Economy, Culture &

Technology

- Foreign Uncontrollable elements : Political & Legal, Competition, Economy, Culture,

Technology, structure of distribution, Geography & infrastructure

Dynamic environment of international trade

Environmental Adaptation Needed

Differences are in the uncontrollable environment of international marketing

Firms must adapt to uncontrollable environment of international marketing by adjusting the

marketing mix (product, price, promotion, and distribution)

Adaptation

(of Marketing Mix)

Standardization

(of Marketing Mix)

Continuum

INFLUENCED BY 7 ENVIRONMENTAL FACTORS


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Developing a Global Awareness

To be globally aware is to have:

1. Tolerant of Cultural Differences, and

2. Knowledgeable of:

(a) Culture, (b) History, (c) World Market Potential,

(d) Global Economic, Social and Political Trends

Transition From Domestic To International Business

Pre – Export Behaviour

1. Firm Characteristics

2. Perceived External Export Stimuli

3. Perceived Internal Export Stimuli

4. Level Of Organizational Commitment

Motivation To Export

a. Bulk Sales

b. Relative Profitability

c. Insufficiency Of Domestic Demand

d. Reducing Business Risks

e. Legal Restrictions

f. Obtaining Imported Inputs

g. Social Responsibility

h. Increased Productivity

i. Technological Improvements

How Much Commitment

a) No Involvement

b) Temporary Involvement

c) Continued Involvement

d) Global Involvement

e) Producing For Export

Stages of International Marketing Involvement


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Generally, four distinctive approaches dominate strategic thinking in international marketing:

Orientation of management and companies

Global orientation

Strategic Orientation: EPRG

Schema Orientation EPRG Schema

Domestic

Marketing

Extension

Multi-Domestic Marketing

Global Marketing

(Ethnocentric)

(Polycentric)

(Regio/Geocentric)

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

Infrequent Foreign Marketing

No Direct Foreign Marketing

International Marketing

Regular Foreign Marketing

Global Marketing


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―A global orientation means operating as if all the country markets in a company‘s scope of

operations (including domestic market) are approachable as a single global market and to

standardize the marketing mix where culturally feasible and cost effective or to adapt the

marketing mix where culturally required and cost effective‖.

Ethnocentric or Domestic Marketing Extension Concept:

Home country marketing practices will succeed elsewhere without adaptation; however,

international marketing is viewed as secondary to domestic operations

Polycentric or Multi-Domestic Marketing Concept:

Opposite of ethnocentrism Management of these multinational firms place importance on

international operations as a source for profits Management believes that each country is unique

and allows each to develop own marketing strategies locally

Regiocentric:

Sees the world as one market and develops a standardized marketing strategy for the entire

world

Geocentric:

Regiocentric and Geocentric are synonymous with a Global Marketing Orientation where a

uniform, standardized marketing strategy is used for several countries, countries in a region, or

the entire world

Importance of International Marketing

International expansion helps firm:

Keep pace with competition

Reach a larger market

Reap higher profits

Prolong the lifecycle of their products

Levels of International Marketing

Domestic

Marketing

Export Marketing International

Marketing

Global

Marketing


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Least

international

commitment

Domestic

focus

Limited

international

commitment

Involves

direct or indirect

export

Ethnocentric

Substantial

international

commitment

Focus on

individual countries

or regions

Polycentric or

Regiocentric

Extensive

international

commitment

Focus on

segments, rather

than countries or

regions

Geocentric

Drivers of International Expansion

Competition

Regional Economic and Political Integration

Technology

Improvements in Transportation and Telecommunication

Economic Growth

Transition to Market Economy

Converging Consumer Needs

Firm-Specific Drivers

Product Life Cycle Considerations: opportunity to prolong product lifecycle by entering

growth markets.

Sales

Intro Growth Maturity Decline

Profits

Sales


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Global e-marketing: The Death of Distance

One of the powerful consequences of the widespread adoption and use of computer mediated

communication (CMC) is believed to be the world becoming ―smaller." Accounts consistently

highlight that CMC technologies such as email, video, audio or text chat, listservs and bulletin

boards create informational environments that enable the bridging of distances among

individuals and groups. The expectation that information and communication technologies lead

users to transcend the constraints of physical separation has been expressed as the death of

distance

ECONOMISTS are beginning to notice that dear oil is having an impact on trade. By making

transportation more expensive, high fuel prices are turning back the clock a bit on the process of

globalisation

Targeting the individual customers

Many startup companies have technologies that are of interest to many different market

segments. Given a startup‘s limited resources, the company needs to prioritize which customers

to target with their technology and marketing efforts.

The International Marketing Environment

7

3. ECONOMY

Environmental uncontrollables country market A

Environmental uncontrollables country market B

Environmental uncontrollables country market C

1. Competition

1. Competition

2. Technology Price Product

Promotion Place or

Distribution

6. Geography and Infrastructure

Foreign Environment (Uncontrollables)

7. Structure of Distribution

3. Economy

5. Political- Legal

Domestic environment (Uncontrollables)

(Controllables)

2 .Technology

4. Culture

5. Political- Legal

4. Culture

Target

Market


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Relationship marketing

Relationship marketing was first defined as a form of marketing developed from direct response

marketing campaigns which emphasizes customer retention and satisfaction, rather than a

dominant focus on sales transactions

Speed to market

The elapsed time from order placement to arrival on the retail sales floor. Speed to market is

increasingly a factor in competitiveness of any company in the apparel chain.

Living in an age of technical discontinuities

New Millennium and the Age of the Internet we business journalists can look back knowing we

had front-row center seats at the great events of our time. I feel privileged to have helped

chronicle this extraordinary saga.

And it's not over. The Age of the Internet is, to borrow Peter Drucker's phrase, an Age of

Discontinuity. This is not just another story to cover. We are part of this story. For the spread of

the Internet has the potential to revolutionize the practice of journalism, like nothing since

Gutenberg's printing press.

New technologies change the rules of competition

Two major findings have characterized management literature in the past decades. The first is that

radical innovation, while risky, is one of the major sources of long-term competitive advantage.

For many authors, however, the phrase ―radical innovation‖ is an ellipsis for a longer construction

that spells radical technological innovation. Indeed, investigators of innovation have focused

mainly on the disruptive effect of novel technologies on industries.

The second finding is that people do not buy products but meanings. People use things for

profound emotional, psychological, and socio-cultural reasons as well as utilitarian ones. Analysts

have shown that every product and service in consumer as well as industrial markets has a

meaning. Firms should therefore look beyond features, functions, and performance, and

understand the real meanings users give to things. The common assumption, however, is that

meanings are not a subject for innovation: they are a given. One must understand these meanings

but they cannot be innovated.


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Components of the electronic value chain

A value chain is a chain of activities that a firm operating in a specific industry performs in order

to deliver a valuable product or service for the market. The concept comes from business

management and was first described and popularized by Michael Porter in his 1985 best-

seller, Competitive Advantage: Creating and Sustaining Superior Performance.

"The idea of the value chain is based on the process view of organizations, the idea of seeing a

manufacturing (or service) organisation as a system, made up of subsystems each with inputs,

transformation processes and outputs. Inputs, transformation processes, and outputs involve the

acquisition and consumption of resources - money, labour, materials, equipment, buildings, land,

administration and management. How value chain activities are carried out determines costs and

affects profits."


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Module II (8 Hours)

Developing a global vision through marketing research: Breadth and scope of international

marketing research – problems in availability and use of secondary data – problems in gathering

primary data – multicultural research – a special problem – research on internet – a new

opportunity – estimating market demand – problems in analyzing and interpreting research

information – responsibility for conducting marketing research – communicating with decision

makers. Identifying foreign markets – classification based on demand – based on the stage of

development – other bases for division of world markets

Social and Cultural Environment: Basic aspects of society and culture, Approaches to cultural

factors, Impact of Social and Cultural Environment on Marketing Industrial and Consumer

Products

Developing a global vision through marketing research: Breadth and scope of

international marketing research

Introduction

Marketing research is traditionally defined as the systematic gathering, recording, and analyzing

of data to provide information useful in marketing decision making.

International marketing research involves two additional complications.

(i) Information must be communicated across cultural boundaries. That is , executive in

Chicago must be able to translate their research questions into terms that consumers in

Guanszhou, China can understand.

(ii) The environment within which the research tools are applied are often different in foreign

markets. Rather that acquire new and exotic method of research, the international marketing

research must develop the ability for imaginative and deft application of tried and tested

techniques in sometimes totally strange milieus.

BREDTH AND SCOPE OF INTERNATIONAL MARKETING RESEARCH

The basic difference between domestic and foreign market research is the broader scope

needed for foreign research, necessitates by higher levels of uncertainty. Research can be

divided into three types based on information needs:


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(i) General information about the country, area and/or market

(ii) Information necessary to forecast future marketing requirement by anticipating social,

economic consumer, and industry trend within specific market or countries

(iii) Specific market information used to make product, promotion, distribution, and price

decisions and to develop marketing plans.

A country‘s political stability, culture attributes and geographical characteristics are some

of the kind of information not ordinarily gathered by domestic marketing research.

THE RESEARCH PROBLEM

A marketing research study is always a compromise dictated by limits of time, cost, and the

present state of the art. The research must strive for the most accurate and reliable information

within existing constraints. A key to successful research is a systematic and orderly approach

to the collection and analysis of data. The research process should follow these steps:

(i) Define the research problem and establish research objectives.

(ii) Determine the source of information to fulfill the research objectives.

(iii) Consider the costs and benefits of the research effort.

(iv) Gather the relevant data from secondary or primary sources, or both.

(v) Analyze, interpret, and summarize the results.

(vi) Effectively communicate the results to decision makers.

DEFINING THE PROBLEM AND ESTABLISHING RESEARCH OBJECTIVES

The research process should being with a definition of the research problem and the

establishment of specific research objectives. the major difficulty here is converting a series of

often ambiguous business problem into tightly drawn and achievable research objectives.

PROBLEMS OF AVAILABILITY AND USE OF SECOUNDARY DATA

:- The problem of availability and use of secondary data are as follows:

(i) Availability of data;-detailed data on the numbers of wholesalers, retailers,

manufacturers, and facilitating services, are unavailable for many parts of the world, as are data

on population and income. Most countries simply do not have governmental agencies that

collect on a regular basis the kind of secondary data readily available in the united state.


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(ii) Reliability of data;- Available data may not have the level of reliability necessary for

confident decision making for many reasons. Official statistics are sometimes too optimistic,

reflecting national pride or politics rather that practical reality, while tax structures and fear of

the tax collector often adversely affect data.

(iii) Comparability of data:- Comparability of available data is the third shortcoming faced by

foreign marketers. In United States, current sources of reliable and valid estimates of

socioeconomic factors and business indicators are readily available. In other countries,

especially those less developed, data can be many years out of data as well as having been

collected on an infrequent and unpredictable in many of these countries makes the problem of

currency a vital one.

(iv) Validating secondary data:- many countries have similarly high standard for the

collection and preparation of data as those generally found in the United States, but secondary

data from any source, including the United States must be checked carefully and interpreted

carefully..

GATHERING PRIMARY DATA: QUANTITATIVE AND QUALITATIVE RESEARCH

:- If, after seeking all reasonable secondary data sources, research questions are still not

adequately answered, the market research must collect primary data.- that is , data collected

specially for the particular research project at hand.

In most primary data collection. The researchers questions respondents to determine what

they think about some topic or how they might behave under certain conditions. Marketing

research methods, can be grouped into two basic types: quantitative and qualitative research. In

both methods, the marketer is interested in gaining knowledge about the market.

(i) Quantitative research:- in quantitative research, usually a large number of respondents are

asked to reply either verbally or in writing to structure questions using a specific response

format or to select a response from a set of choices. Questions are designed to obtain specific

responses regarding aspects of the respondent‘s behavior, intentions, attitudes, motives and

demographic characteristics. Quantitative research provide the marketer with responses that can

be presented with precise estimations.


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(ii) Qualitative research:- In qualitative research, if questions are asked they are almost always

open-ended or in-depth, and unstructured responses that reflect the person‘s thoughts and

feelings on the subjects are sought. Direct observation of consumers in choice or product usage

situations in another important qualitative approach to marketing research.

Qualitative research is used in international marketing research to formulate and define

a problem more clearly and to determine relevant questions to be examined in subsequent

research. It is also used where interest is centered on gaining an understanding of a market,

rather the quantifying relevant aspects.

Qualitative research is also helpful in revealing the impact of socio-cultural factors on

behavior patterns and in developing research hypotheses that can be tested in subsequent studies

designed to quantify the concepts and relevant relationship uncovered in qualitative data

collection.

PROBLEMS OF GATHERING PRIMARY DATA

Most problem in collecting primary data in international marketing research stem from

cultural differences among countries, and range from the inability of respondents to

communicate their opinions to inadequacies in questionnaire translation.

(i) Ability to communicate opinions:- The ability to express attributes and opinions about a

product or concept depends on the respondent‘s ability to recognize the usefulness and value of

such a product or concept.

(ii) Willingness to respond;- Cultural differences offer the best explanation for the

unwillingness or the inability of many to respond to research surveys. The role of the male, the

suitability of personal gender-based inquiries, and other gender-related issues can affect

willingness to respond.

(iii)Sampling in Field Surveys:- The greater problem in sampling stems the lack of

demographic data and available lists from which to drawn meaningful samples. If current,

reliable lists are not available, sampling becomes more complex and generally less reliable.

(iv) Language and comprehension:-

(v) The most universal survey research problem in foreign countries is the language barrier.

Differences in idiom and the difficulty of exact respondents answer. Equivalent concept may

not exist in all language.


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MULTICULTURAL RESEARCH

As companies become global marketers and seek to standardize various parts of the

marketing mix across several countries, multicultural studies become more important. A

company need to determine to what extent adaptation of the marketing mix is appropriate. Thus

market characteristics across diverse culture must be compared for similarities and difference

before a company proceeds with standardization on any aspect of marketing strategy.

Multicultural research involves dealing with countries that have different languages,

economies, social structure, behavior, and attitude patterns. It is essential that these differences

be taken into account.

RESEARCH ON THE INTERNET

For many countries the internet provides a new and increasingly important medium for

conducting a variety of international marketing research. Indeed, a survey of marketing research

professionals suggests that the most important influences on the industry are the internet and

globalization. It has been suggested that there are at least seven different uses for the internet in

international research:-

(i) Online survey and buyer panels

(ii) Online focus groups.

(iii) Web visitor tracking

(iv) Advertising marketing lists

(v) E-mail marketing lists

(vi) Embedded research.

A vexing challenge facing international marketers will be the cross-cultural concern about

privacy and the enlistment of cooperative consumer and customer group. As more of the general

population in countries gain access to the internet. This tool will be all can be used one of

several methods of collecting data offering more flexibility across countries. Today the real

power of the internet for international marketing research is the ability to easily access volumes

of secondary data.

There are volumes of good secondary data that can be accessed from your computer that

will make international marketing research much easier and more efficient that it has ever been.

New opportunity

The chapter starts with identifying the types and categories of information which are useful in

marketing decision making on a global scale and discusses the two main ways of getting


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information by surveillance or by research. Details are given on some of the sources of

information available to marketers. The chapter then describes in some detail the process of

global marketing research and highlights the dangers and pitfalls in the process.

Uncertainty

In international marketing, the marketer is faced with a dilemma of having too much data and too

little information. There is plenty of global data from sources like the World Bank, but often a

lack of specific information on countries and markets. In helping to reduce uncertainty around

decision making, precise information is the key, getting it is quite another thing.

Whilst searching for opportunities globally, uncertainties will arise due to four main factors: lack

of knowledge of the existence of possible new market alternatives, the conditions internal and

external to the firm which will determine the consequences of a new alternative, what

consequences these conditions when known may have for the firm, and how these consequences

may be expressed in relevant terms of goal fulfilment. Uncertainty arises due to the time lapse

between the decision and the outcome of the action decided on. Carlson (1975)1 also believes that

uncertainty increases with the degree of "foreignness" of the place of outcome, the cost of

information and the learning effect, that is, when entering a foreign market knowledge of it builds

slowly, usually by experience and its attendant uncertainty.

When marketing domestically the system is fairly easy to learn. When crossing global boundaries

the whole process is exaggerated by necessary paperwork, exchange rates, cash flows and

transportation problems to name but a few. This uncertainty gives rise to the need for information.

Table 5.1 Specific information

Marketing decision Marketing intelligence

Go international or

remain domestic

Assessment of global market and firm's potential share in it, in view of

local and international competition, compared to domestic opportunities.

Which markets to

enter

A ranking of world markets according to market potential, local

competition and the political situation.

How to enter target

markets

Size of markets, international trade barriers, transport costs, local

competition, government requirements and political stability.

How to market in For each market, buyer behaviour, competitive practice, distribution


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target markets channels, media, company experience

Elements of the information system

The following constitute the elements of the global information system. Data may be specific or

general or both and used for decisions on whether to enter markets or not, in what degree and

what emphasis in terms of the marketing mix. General information includes data on the following:

· Economic - rate of growth of GNP, level of inflation, incomes

· Social - people, demographics, culture, subculture

· Political - risk, instability, attitudes to "foreigners"

· Technology - current, rate of change, infrastructure

· Resources - money, manpower, materials, acquisitions, joint ventures

· Fiscal - taxes, exchange rates

· Institutions - money markets

· Managerial - funds

ESTIMATING MARKET DEMAND

In assessing current product demand and forecasting future demand reliable historical data are

required. Despite of limitations, there are approaches to demand estimation that are usable with

minimum information. The success of these approaches relies on the ability of the researcher to

find meaningful substitute or approximations for the needed economic, geographic, and

demographic relationships.

When the desired figures are not available, a close approximation can be made using local

production figure plus imports, with adjustments for exports and current inventory levels. In a

rapidly developing economy, extrapolated figures may not reflect rapid growth and must be

adjusted accordingly. Given the greater uncertainties and data limitations associated with

foreign markets, two methods of forecasting demand are particularly suitable for international

marketers:

(i) Expert Opinion: - for many market estimation problems, particularly in foreign countries

that are new to the marketer, expert opinion is advisable. In this method, expert are polled for

their opinion about market size and growth rates. Such expert may be companies, own sales

managers or outside consultants and government officers. the key in using expert opinion to


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help in forecasting demand is triangulation, that is, comparing estimates produced by different

sources.

(ii) Analogy: - This assumes that demand for a product develops in much the same way in all

countries as comparable economic development occurs in each country.

A relationship must be established between the item to be estimated and a measurable

variable. Once a know relationship is established, the estimator then attempt to draw an analogy

between the known situation and the country in question.

PROBLEM IN ANALYZING AND INTERPRETING RESEARCH INFORMATION

After data are collected, the final steps in the research process are the analysis and interpreting

of findings in light of the stated marketing problem. There are so many factors, the researchers

must take consideration these factors and, despite their limitations, produce meaningful guides

for management decisions.

Accepting information at face value in foreign market is imprudent:- The meanings of words,

the consumer‘s attitude toward a product, the interviewer‘s attitude, or the interview situation

can distort research findings. Just as culture and tradition influence the willingness to give

information, so they also influence the information, so they also influence the information

given.

News paper circulation figures

Readership and listener ship studies

Retail outlet figures

Sales volume can all be distorted through local business practice.

To cope with such disparities, the foreign marketing researcher must possess three talented to

generate meaningful marketing information.

First, the researcher must possess a high degree of cultural understanding of the market in

which research is being conducted.

Second, a creative talent for adapting research methods is necessary. A researcher in

foreign markets often is called on to produce result under most difficult circumstances and short

deadlines.

Third, a skeptical attitude in handling both primary and secondary data is helpful.


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RESPONSIBILITY FOR CONDUCTING MARKETING RESEARCH

Depending on the size and degree of involvement in foreign marketing, a company in need of

foreign market research can rely on an outside foreign-based agency or on a domestic company

with a branch within the country in question. It can conduct using its own facilities or employ a

combination of its own research force with the assistance of an outside agency.

Many companies have executive specifically assigned to the research function in foreign

operations;

Other companies maintain separate research department for foreign operations or assign a full-

time research analyst to this activity

A trend toward decentralization of the research function is apparent. In terms of efficiency, it

appears that local analysts are able to provide information more rapidly and accurately than a

staff research department.

A comprehensive review of the different approaches to multi-country research suggests that the

ideal approach is ti have local research in each country, with close coordination between the

client company and the local research companies.

COMMUNICATING WITH DECISION MAKERS

As concert with the decision maker, it should be clearly recognized, however that getting the

information is only half problem/job. That information must also be given to decision makers in a

timely manner. High-quality international information system design will be an increasingly

important competitive tool as commerce continues to globalize, and resources must be invested

accordingly. At the most basic level, marketing research is mostly a matter of talking to

customers. Marketing decisions makers have questions about how best to serve customers, and

those questions are posed and answered often through the media of questionnaires and research

agencies. Even when both managers and customers speak the same language and are from the

same culture, communication can become garbled in either direction. That the customer

misunderstands the questions and/or managers misunderstand the answers. Throw in a

language/cultural barrier, and the changes of misinformation expand dramatically. The four kind

of company-agency-customer relationships possible are presented in overcoming the cultural

barriers


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Identifying foreign markets

Selection of markets is the first stage in International marketing. No matter how much attempt is

made, the firm will not succeed unless it is marketing the right product in the right export market.

It costs lot of time and money to find out a suitable market for a product. No firm has unlimited

resources. Proper selection of markets would avoid waste in time and effort. The time and care

taken to select the product and the market for initial export venture can minimize the risks and

make ultimate success quicker and more certain. One product may be more acceptable in some

countries than in others. It would, therefore, be better to concentrate on a few fruitful markets than

to spread too thinly. Market concentration can lead to better debt collection and cash flow and

savings in administration. Of course, after having established in one market, the firm can always

move on to the other markets. This is what Larsen and Toubro did while it entered the export

markets for the first time. They concentrated on Indonesia. After having established in Indonesia

they moved on to other nearby markets. It is easier to extend operation in other markets because

of the experience already gained in entering the first market. It is easier to increase business

where you have a stronghold rather than increase business in new areas.

In some instances products to be exported might by their very nature have only a small number of

possible customers in any one country making it essential to approach a large number of foreign

areas simultaneously. This applies to some large items such as complete cement plants or to

extremely specialized apparatus like the equipment to measure electrical voltages in the human


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muscle. So also in some cases, success might depend on high volume of production that it is

essential to aim at every possible market simultaneously.

Criteria for classifying world Markets: The basic problem that a firm has to solve in the initial

stage of planning its international marketing strategy is to identify global marketing opportunities.

To identify and shortlist markets which offer or might offer in future opportunities that can be

exploited by it, a classification scheme for segmenting the world markets is required. There are

several bases of classification, principal among then are:

Classification based on demand –

Classification on the basis of stages of demand: Keegan has produced a threefold classification of

world marketers:

1. Exiting markets

2. Latent markets

3. Incipient markets

In the existing markets, consumer needs are known and are already being serviced by some

products. The market opportunities can be assessed by estimating the consumption rate and the

share of imports in current consumption. Latent markets have potential customers but because no

one has offered a product to fill the latent need there is no existing market. Incipient markets do

not exist in the present, however conditions and trends can be identified that point towards the

emergence of future needs and preferences for product and services that will create a potent

market, which if supplied will become an existing market.

Based on the stage of development – other bases for division of world markets

Classification on the basis of Stages of Development: The world markets can be divided into four

distinct segments, viz., industrial economies, more developed developing countries, raw material

exporting economies and subsistence economies. Industrial Economies: These countries lay more

emphasis on research and development and devote their resources to production of more

sophisticated products and will therefore like to import goods of simpler technology and simpler

manufactures. These countries also have an acute shortage of labor and would, therefore tend to

import intensive products like electronics and light engineering goods. They also tend to import

spares and components and raw materials to feed their industries and many decorative articles

because of their affluence. They are very particular about preventing further pollution and,

therefore they would like to import not only anti-pollution equipment but also articles whose


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production has been banned for risks of pollution. They are willing to provide technology to set

up production and processing facilities in developing countries. They provide a large market as

they have no import restriction. In fact, the five major importing countries viz., United States, the

United Kingdom, France, Japan and Germany, account for 40 per cent of world imports

Social and Cultural Environment: Basic aspects of society and culture,

The social environment, social context, sociocultural context, or milieu, refers to the

immediate physical and social setting in which people live or in which something happens or

develops. It includes the culture that the individual was educated or lives in, and the people

and institutions with whom they interact.

The interaction may be in person or through communication media, even anonymous or one-

way, and may not imply equality of social status. Therefore the social environment is a broader

concept than that of social class or social circle.

Cultural environments consist of the influence of religious, family, educational, and social

systems within the marketing system. Marketers who intend to market products overseas must be

sensitive to foreign cultures. While the differences between our cultural background in the United

States and those of foreign nations may seem small, marketers who ignore these differences risk

failure in implementing marketing programs.

This task is not as easy as it sounds, as various features of a culture can create an illusion of

similarity. Even a common language does not guarantee similarity of interpretation. For example,

in the U.S. we purchase "cans" of various grocery products, but the British purchase "tins". The

following are a few cultural differences that may cause marketers problems in attempting to

market their products overseas.

Approaches to cultural factors

Keegan (1989) suggested a number of approaches to the study of culture including the

anthropological approach, Maslow's approach, the Self- Reference Criterion (SRC), diffusion

theory, high and low context cultures and perception. There are briefly reviewed here.

Anthropological approach

Culture can be deep seated and, to the untrained can appear bizarre. The Moslem culture of

covering the female form may be alien, to those cultures which openly flaunt the female form.


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The anthropologist, though a time consuming process, considers behaviour in the light of

experiencing it at first hand. In order to understand beliefs, motives and values, the anthropologist

studies the country in question anthropology and unearths the reasons for what, apparently,

appears bizarre.

Maslow approach

In searching for culture universals, Maslow's (1964) hierarchy of needs gives a useful analytical

framework. Maslow hypothesized that people's desires can be arranged into a hierarchy of needs

of relative potency. As soon as the "lower" needs are filled, other and higher needs emerge

immediately to dominate the individual. When these higher needs are fulfilled, other new and still

higher needs emerge. The self-reference criterion (SRC)

Perception of market needs can be blocked by one's own cultural experience. Lee

(1965)4 suggested a way, whereby one could systematically reduce this perception. He suggested

a four point approach.

a) Define the problem or goal in terms of home country traits, habits and norms.

b) Define the problem or goal in terms of the foreign culture traits, habits and norms.

c) Isolate the SRC influence in the problem and examine it carefully to see how it complicates the

pattern.

d) Redefine the problem without the SRC influence and solve for the foreign market situation.

The problem with this approach is that, as stated earlier, culture may be hidden or non-apparent.

Uneartherning the factors in b) may, therefore, be difficult. Nonetheless, the approach gives

useful guidelines on the extent for the need of standardization or adaption in marketing planning.

Diffusion theory

Many studies have been made since the 1930's to assess how new innovations are diffused in a

society. One of the most prolific writers was Everett Rogers8. In his book, "Diffusion of

Innovations" (1962) he suggested that adoption was a social phenomenon, characterized by a

normal distribution


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Impact of Social and Cultural Environment on Marketing Industrial and Consumer

Products

Potential impacts from the Proposal considered relevant to indigenous cultural heritage in

proximity to Anketell Point include:

Possible disturbance of heritage sites during vegetation clearing, infrastructure establishment or

operations;

Possible disturbance or contamination of heritage sites by the workforce during construction or

operation; and Possible restrictions or access to certain areas.

Assessment of potential impacts

A preliminary assessment of known indigenous cultural heritage sites on the DIA register within

proximity to the Proposal has identified a number of archaeological and ethnographic sites

(Figure 3.26). Information available from the DIA‘s databases indicates that a total of 12

indigenous cultural heritage surveys have been completed in proximity to the Proposal; many

completed over 15 years ago. Detailed surveys in consultation with Traditional Owners is planned

for the Proposal area. Based on previous surveys in the Proposal area and the wider Pilbara, it is

also considered likely that Aboriginal archaeological sites will be located in the vicinity of major

creeks and rivers. The DIA register identifies numerous archaeological and ethnographic sites that

are located in proximity to the Proposal. No rock shelters have been publically recorded to date.


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Module III (7 Hours)

Global marketing management – planning and organization: Global perspective – global

gateways – global marketing management – an old debate and a new view – planning for global

markets – alternative market entry strategies – organizing for global competition

Global marketing management – planning and organization: Global perspective:

Confronted with increasing global competition for expanding markets, multinational companies

are changing their marketing strategies and altering their organizational structures. Their goals

are enhance their competitiveness and to ensure proper positioning in order to capitalize on

opportunities in the global marketplace.

In fact, the flexibility of a smaller company may enable it to reflect the demands of global

markets and redefine its program more quickly than larger multinationals. Acquiring a global

perspective is easy, but the execution requires planning, organizations, and a willingness to try

new approaches-from engaging in collaborative relationships to redefining the scope of

company operations.

Global gateways

A gateway that global resource manager programs use to access resources outside a CS or

TSAF collection

GLOBAL MARKETING

Definition:

―Marketing on a worldwide scale reconciling or taking commercial advantage of global

operational differences, similarities and opportunities in order to meet global objectives.

Why global marketing?

Here are three reasons for the shift from domestic to global marketing

Saturation of Domestic Markets

For a company to keep growing, it must increase sales. Industrialized nations have, in many

product and service categories, saturated their domestic markets and have turned to other countries

for new marketing opportunities. Companies in some developing economies have found

profitability by exporting products that are too expensive for locals but are considered inexpensive

in wealthier countries.


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World Wide Competition

One of the product categories in which global competition has been easy to track is in U.S.

automotive sales. Three decades ago, there were only the big three: General Motors, Ford, and

Chrysler. Now, Toyota, Honda, and Volkswagen are among the most popular manufacturers.

Companies are on a global playing field whether they had planned to be global marketers or not.

E-Commerce

With the proliferation of the Internet and e-commerce (electronic commerce), if a business is

online, it is a global business. With more people becoming Internet users daily, this market is

constantly growing. Customers can come from anywhere. According to the book, ―Global

Marketing Management,‖ business-to-business (B2B) e-commerce is larger, growing faster, and

has fewer geographical distribution obstacles than even business-to-consumer (B2C) e-

commerce.

GLOBAL MARKETING EVOLUTION

PHASE 1

Leverage of domestic capabilities:

Foreign market entry Objective:- Economies of scale

PHASE 2

Expansion of foreign market presence

Objective :-Economies of Scope

PHASE 3

Coordination of global operations

Objective :-Exploit synergies throughout network


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Benefits Of Global Marketing:

Economies of scale in production and marketing can be important competitive advantages for

global companies

Unifying product development, purchasing, and supply activities across several countries it

can save costs

Transfer of experience and know-how across countries through improved coordination and

integration of marketing activities

Diversity of markets by spreading the portfolio of markets served brings an important stability

of revenues and operations to many global firms

Helps to establish relationships outside of the "political arena"

Helps to encourage ancillary industries to be set up to cater the needs of the global player.

Disadvantages

Differences in consumer needs, wants, and usage patterns for products

Differences in consumer response to marketing mix elements

Differences in brand and product development and the competitive environment

Differences in the legal environment, some of which may conflict with those of the home

market

Differences in the institutions available, some of which may call for the creation of entirely

new ones (e.g. infrastructure)

Differences in administrative procedures

Differences in product placement.

Global Marketing: A Old Debate and a New View

Global Marketing Management thought has undergone substantial revision

In the 1970s the argument was framed as ―standardization vs. adaptation‖

In the 1980s it was ―globalization vs. localization‖ or ―Think local, act local‖

In the 1990s it was ―global integration vs. local responsiveness‖

The basic issue is whether the global homogenization of consumer tastes allowed global

standardization of the marketing mix


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PLANNING FOR GLOBAL MARKETS

Planning is a systematized way of relating to the future. It is an attempt to manage the

effects of external, uncontrollable factors on the firm‘s strengths, weakness, objectives and

goals to attain a desired end. Planning is the job of making things happen that might not

otherwise occur.

The difference between planning for a domestic company and for an international company

Domestic Planning International Planning

1. Single language and nationality 1. Multilingual/multinational/multicultural factors

2. Relatively homogeneous market 2. Fragmented and diverse markets

3. Data available, usually accurate and collection easy

3. Data collection a large task requiring significantly higher budgets and personnel allocation

4. Political factors relatively unimportant

4. Political factors frequently vital

5. Relative freedom from government interference

5. Involvement in national economic plans; government influences business decisions

6. Individual corporation has little effect on environment

6. "Gravitational" distortion by large companies

7. Chauvinism helps 7. Chauvinism hinders

8. Relatively stable business environment

8. Multiple environments, many of which are highly unstable (but may be highly profitable)

9. Uniform financial climate 9. Variety of financial climates ranging from over-conservative to wildly inflationary

10 Single currency 10. Currencies differing in stability and real value

11 Business "rules of the game" mature and understood

11. Rules diverse, changeable and unclear

12 Management generally accustomed to sharing responsibilities and using financial controls

12. Management frequently unautonomous and unfamiliar with budgets and controls

Planning allows for rapid growth of the international function, changing markets, increasing

competition, and the turbulent challenges of different national markets. The plan must be blend

the changing parameters of external country environments with corporate objectives and

capabilities to develop a sound, workable marketing program.


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Planning relates to the formulation of goals and methods of accomplishing them, so it is both a

process and a philosophy. Structurally, planning may be viewed as corporate, strategic, or

tactical. International Corporate Planning is essentially long term, incorporating generalized

goals for the enterprise as a whole. Strategic planning is conducted at the highest levels of

management and deals with products, capital, and research, and long and short-term goals of the

company. Tactical planning or market planning, pertains to specific and to the allocation of

resources used to implement strategic planning goals in specific markets.

The Key success of planning is evaluating company objectives, including management‘s

commitment and philosophical orientation to international business.

THE PLANNING PROCESS

Guidelines and systematic procedures are necessary for evaluating international opportunities

and risks and for developing strategic plans :

International planning process includes 4 phases:

T

Phase 1: Preliminary Analysis and Screening-Matching Comapany and Country Needs

A critical first step in the international planning process is deciding in which existing country

market to make a market investment. A company‘s strengths and weakness, products,

philosophies, and objectives must be matched with a country‘s constraining factors and market

potential. In the first part of the planning process, countries are analyzed and screened to

eliminate those that do not offer sufficient potential for further considerations. The next step is


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to establish screening criteria against which prospective countries can be evaluated. These

criteria are ascertained by an analysis of company objectives, resources, and other corporate

capabilities and limitations. It is important to determine the reasons for enetering a foreign

market and the returns expected from such an investment. Minimum market potential,

minimum profit, return on investment, accepatable competitive levels.

Phase 2: Adapting the Marketing Mix to Target Makets:

When target markets are slelected, the market mix must be evaluated in light of the data

generated in the phase 1. Incorrect decisions at this point lead to products inappropriate for the

intended market or to costly mistakes in pricing, advertising, and promotion. The primary goal

of phase 2 is to decide on am marketing mix adjusted to the cultural constraints imposed by the

uncontrollable elements of the environment that effectively achieves corporate objectives and

goals. Phase 2 also permits the marketer to determine possibilities for applying marketing

tactics across national markets.//

Phase 3: Developing the Marketing Plan

At this stage of the planning process, a marketing plan is developed for the target market-

whether it is a single country or a global market segment. The marketing plan begins witn a

situation analysis and culminates in the selection of an entry mode and a specific action

program for the market. The specific plan establishes what is to be done, by whom, how it is to

be done, and when. Included are budgets and sales and profit expectations.

Phase 4: Implementation and Control

A ―go‖ decision in phase 3 triggers implementation of specific plans and anticipation of

successful marketing. However, the planning process does not end at this point. All marketing

plans require coordination and control during the period of implementation. An evaluation and

control system requires performance-objective action, that is, bringing the plan back on track

should standards of performances fall short. A global orientation facility the difficult but

extremely important management tasks of coordinating and controlling the complexities of

international marketing.


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ALTERNATIVE FOREIGN MARKET ENTRY STRATEGIES:

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

This decision should reflect an analysis of market characteristics ( such as potential sales,

strategic importance, cultural differences, and country restrictions) and company capabilities

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

and commitment that management is prepared to make.

Alternative Market-Entry Strategies

Import regulations may be imposed to protect health, conserve foreign exchange, serve as

economic reprisals, protect home industry, or provide revenue in the form of tariffs.

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

exporting

contractual agreements

strategic alliances, and

direct foreign investment

EXPORTING

Exporting can be either direct or indirect. In direct exporting the company sells to a customer in

another country. In contrast, indirect exporting usually means that the company sells to a buyer

(importer or distributor) in the home country who in turn exports the product. The internet is

becoming increasingly important as a foreign market entry method. Direct sales, particularly for

high technology and big ticket industrial products a direct sales force may be required in a foreign

country. This may mean establishing an office with location expatriate managers and staff

depending of course on the size of the market and potential sales revenues.


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CONTRACTUAL AGREEMENTS

Contractual agreements are long term, non-eqauity associations between a company and another

in a foreign market. Contractual agreements involve the transfer of technology, processes,

trademarks, or human skills.

•Contractual forms of market entry include:

(1)Licensing: A means of establishing a foothold in foreign markets without large capital

outlays is licensing of patent rights, trademark rights, and the rights to use technological

(2)Franchising: In licensing the franchiser provides a standard package of products, systems,

and management services, and the franchisee provides market knowledge, capital, and personal

involvement in management.

STRATEGIC INTERNATIONAL ALLIANCES

Strategic alliances have grown in importance over the last few decades as a competitive

strategy in global marketing management. A strategic international alliance (SIA) is a business

relationship established by two or more companies to cooperate out of mutual need and to share

risk in achieving a common objective.. SIAs are sought as a way to shore up weaknesses and

increase competitive strengths. SIAs offer opportunities for rapid expansion into new markets,

access to new technology, more efficient production and marketing costs.

An example of SIAs in the airlines industry is that of the Oneworld alliance partners made up of

American Airlines, Cathay Pacific, British Airways, Canadian Airlines, Aer Lingus, and

Qantas.

INTERNATIONAL JOINT VENTURES

International joint ventures (IJVs) have been increasingly used since 1970s.JVs are used as a

means of lessening political and economic risks by the amount of the partner‘s contribution to the

venture. JVs provide a less risky way to enter markets that pose legal and cultural barriers than

would be the case in an acquisition of an existing company. A joint venture is different from

strategic alliances or collaborative relationships in that a joint venture is a partnership of two or

more participating companies that have joined forces to create a separate legal entity. Joint

ventures are different from minority holdings by an MNC in a local firm.


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Four factors are associated with joint ventures:

1. They are established, separate, legal entities

2. They acknowledge intent by the partners to share in the management of the Jv.

3. They are partnerships between legally incorporated entities such as companies, chartered

organizations, or governments, and not between indiciduals

4. Equity positions are held by each of the partners.

CONSORTIA

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

characteristics.

(1)They typically involve a large number of participants.

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

active.

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

DIRECT FOREIGN INVESTMENT

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

Companies may manufacture locally to capitalize on low-cost labor, to avoid high import taxes,

to reduce the high costs of transportation to market, to gain access to raw materials, or as a

means of gaining market entry. Firms may either invest in or buy local companies or establish

new operations facilities.

Comparison of Market Entry Options

The following table provides a summary of the possible modes of foreign market entry:

Comparison of Foreign Market Entry Modes

Mode Conditions Favoring

this Mode Advantages Disadvantages

Exporting Limited sales potential in

target country; little product adaptation

required Distribution channels close to plants

Minimizes risk and

investment. Speed of entry

Maximizes scale; uses existing facilities.

Trade barriers &

tariffs add to costs. Transport costs

Limits access to local information Company viewed as


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High target country

production costs Liberal import policies High political risk

an outsider

Licensing Import and investment

barriers Legal protection possible

in target environment. Low sales potential in target country.

Large cultural distance Licensee lacks ability to

become a competitor.

Minimizes risk and

investment. Speed of entry

Able to circumvent trade barriers High ROI

Lack of control over

use of assets. Licensee may

become competitor. Knowledge spillovers

License period is limited

Joint

Ventures Import barriers Large cultural distance Assets cannot be fairly

priced High sales potential

Some political risk Government restrictions on foreign ownership

Local company can provide skills, resources,

distribution network, brand name, etc.

Overcomes ownership restrictions and

cultural distance Combines

resources of 2 companies. Potential for

learning Viewed as insider

Less investment required

Difficult to manage Dilution of control Greater risk than

exporting a & licensing

Knowledge spillovers Partner may become

a competitor.

Direct

Investment

Import barriers

Small cultural distance Assets cannot be fairly priced

High sales potential Low political risk

Greater knowledge

of local market Can better apply specialized skills

Minimizes knowledge

spillover Can be viewed as an insider

Higher risk than

other modes Requires more resources and

commitment May be difficult to

manage the local resources.

ORGANIZING FOR GLOBAL COMPETITION

An international marketing plan should optimize the resources committed to company

objectives. The organizational plan includes the type of organizational arrangements to be used,

and the scope and location of responsibility. Companies are usually structured around one of

three alternatives:

1. Global product divisions responsible for product sales throughout the world;

2. Geographical divisions responsible for all products and functions within a given geographical

area; or


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3. A matrix organization consisting of either of these arrangements with centralized sales and

marketing run by a centralized functional staff, or a combination of area operations and global

product management.


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Module IV (6 Hours)

Products and services for consumers: Quality – Green marketing and product development,

products and culture – analyzing product components for adaptation– products for consumers in

global markets, product development, product adaptation, product standardization, marketing

consumer services globally – marketing of services, brands in international markets


Demand in global business to business markets – quality and global standards – business services

– trade shows' crucial part of business to business marketing – relationship markets in business to

business context

PRODUCTS AND SERVICES FOR CONSUMERS

QUALITY:

The ability of a product or service to meet customer needs. It can be defined on 2

dimensions,

Market perceived quality

Performance quality

Both are important but consumer perception of a quality product often has to do more with

market perceived quality. It is also measured in many industries by objective third parties.

Maintaining performance quality is critical, but frequently a product that leaves the factory at

performance quality is damaged as it passes through the distribution chain.

A product may have to change in a number of ways to meet the physical or mandatory

requirements of a new market, ranging from simple package changes to total redesign of the

physical core product.

Green marketing is a term used to identify concern with the environmental consequences

of a variety of marketing activities.

Quality is associated with customer satisfaction. It is a means to an end.

Q: QUEST FOR EXCELLENCE.

U: UNDERSTANDING CUSTOMER‘S NEEDS.


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A: ACTION TO ACHIEVE CUSTOMER‘S APPRECIATION.

L: LEADERSHIP.

I: INVOLVING ALL PEOPLE.

T: TEAM SPIRIT TO WORK FOR A COMMON GOAL.

Y: YARDSTICK TO MEASURE PROGRESS.

GREEN MARKETING

At the forefront of the ―green movement,‖ with strong public opinion and specific legislation

favoring environmentally friendly marketing and products.

•Green marketing is a term used to identify concern with the environmental consequences of a

variety of marketing activities. The designation that a product is ―environmentally friendly‖ is

voluntary, and environmental success depends on the consumer selecting the eco-friendly

product. In some countries each level of the distribution chain is responsible for returning all

packaging, packing, and other waste materials up the chain

PRODUCTS AND CULTURE:

A product is the sum of physical and psychological satisfactions it provides the user. A

product is more than a physical item. It is a bundle of satisfaction that the buyer receives. A

product‘s physical attributes generally are required to create its primary function. The meaning

and value imputed to the psychological attributes of a product can vary among cultures and are

perceived as negative or positive.

To maximize the bundle of satisfaction received and to create positive product attributes

rather than negative ones, adaptation of the nonphysical features of a product. The adoption of

some products by consumers can be affected as much by how the product concept conforms to

norms, values, and behavior patterns as by its physical or mechanical attributes.

An important first step in adapting a product to a foreign market is to determine the degree

of newness as perceived by the intended market. Any idea perceived as new by a group of

people is an innovation. Product diffusion is the process by which innovation spreads. A critical

factor in the newness of a product is its effect on established patterns of consumption and

behavior.


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Analyzing the 5 characteristics of an innovation can assist in determining the rate of

acceptance or resistance of the market to a product. A product‘s,

Relative advantage – The perceived marginal value of the new product relative to the old.

Compatibility – With acceptable behavior, norms, values.

Complexity – The degree of complexity associated with product use.

Trial ability – The degree of economic and/or social risk associated with product use.

Observability – The ease with which the product benefits can be communicated.

After the degree of its acceptance or resistance.

ANALYZING PRODUCT COMPONENTS FOR ADAPTATION:

A product is a multidimensional, and the sum of all its features determines the bundle of

satisfactions received by the consumer.

Core Component: It consists of the physical product, the platform that contains the essential

technology and all its design and functional features. It is on the product platform that product

variations can be added or deleted to satisfy local differences. Alterations in design, functional

features, flavors, color can be made to adapt the product to cultural variations. Functional features

can be added or eliminated depending on the market.

Packaging Component:

Includes style features, packaging, labeling, trademarks, brand name, quality, price of a

product‘s package. Packaging component frequently require both discretionary and mandatory


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changes. Care must be taken to ensure that corporate trademarks and other parts of the

packaging component do not have unacceptable symbolic meanings. Labeling law create a

special problem for companies selling products in various markets with different labeling laws

and small initial demand in each.

Support Services Component:

Includes repair and maintenance, instructions, installations, warranties, deliveries and the

availability of spare parts. Repair and maintenance are difficult in developing countries.

The product component model can be a useful guide in examining adaptation

requirements of products destined for foreign markets. A product should be carefully evaluated

on each of the 3 components for mandatory and discretionary changes that may be needed.

MARKETING CONSUMER PRODUCTS & SERVICES GLOBALLY:

Products are often classified as tangible, whereas services are intangible. The intangibility

of services results in characteristics unique to a services. It is inseparable, heterogeneous, and

perishable. A service can be marketed as a B2B or consumer service.

There are various barriers to entering global markets for consumer services:-

Protectionism

Restrictions on Transborder data flows

Protection of Intellectual Property

Cultural Barriers and Adaptation

PRODUCTS AND SERVICES FOR BUSINESS:

B2B marketing requires close attention to the exact needs of customers. Basic differences

across various markets are less than for consumer goods, but the motives behind purchases

differ enough to require a special approach. Global competition has risen to the point that

industrial goods marketers must pay close attention to the level of economic and technological

development of each market to determine the buyer‘s assessment of quality. Companies that


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adapt their products to these needs are the ones that should be the most effective in the market

place.

The demand for products and services in B2B markets is by nature more volatile than in

most common markets. The demand also varies by level of economic development and the

quality of educational systems across countries. Ultimately, product or service quality is defined

by customers, but global quality standards such as ISO 9000 are being developed that provide

information about company‘s attention to matters of quality. After sale services are hugely

important aspect of industrial sales. The demand for other kinds of business services is

burgeoning around the world. Trade shows are an especially important promotional medium in

B2B marketing.

product adaptation

Definition

Marketing strategy whereby new products are based on modification or some improvement on

existing or competing products, and not on pioneering innovations. It is the strategy of a follower.

PRODUCT STANDARDISATION

Even though product adaptation becomes inevitable in the case of certain products, it should

be realized that there is sound economics logic behind a product policy which suggests

uniformity in all markets. Terpstra has identified six factors which may favour international

product standardization.

1. Economies of Scale in Production: When only one standard version is marketed in all the

areas, it will be possible to have larger production runs, which will result in lower

manufacturing costs.

2. Economies in Product Research and development: Similarly, product standardization will

allow recovery of all costs incurred in product research and development from the entire

sales. This will reduce the recovery period as also lower the break-even point. Moreover,

additional expenditure on adapting product to each individual market can be avoided.


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3. Economies in Marketing. When the same product is to be launched in different markets,

economies can be achieved in terms of sales literature, sales force training, inventory

management, advertising and after-sales requirements.

There are 3 marketing factors which may reinforce the standardization level:

1. Consumer Mobility: Consumers are becoming increasingly more mobile and

transcontinental travel in now fairly common. A consumer who is loyal to a particular

brand in his home market is more likely to remain loyal in a foreign country as well when

the product in question is the same.

2. Made-in Image: When the name of a country is associated with a high standard of quality

in the minds of the consumers, a product manufactured in that country may enjoy a

psychological premium in the foreign markets.

3. Impact of Technology: Industrial products generally tend to have standard and

specifications and do not require much adaptation for foreign markets unless climatic and

similar considerations call for it.

Consumer services globally – marketing of services

MARKETING OF SERVICE

Advice regarding adapting products for international consumer markets also applies to adapting

services or intangible products

However, many consumer services are distinguished by four unique characteistics:

1.intangibility,

2.inseparability,

3.heterogeneity, and

4.perishability

Most services are inseparable and require production and consumption to occur almost

simultaneously; thus, exporting is not a viable entry method for them.

Globally, consumer services marketers face the following four barriers:


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•protectionism,

•controls on transborder data flows,

•protection of intellectual property, and

•cultural requirements for adaptation

BRANDS IN INTERNATIONAL MARKETS:

A GLOBAL BRAND is defined as the worldwide use of a name, term, symbol, design or

combination thereof intended to identify goods or services of one seller and to differentiate

them from those of competitors. A successful brand is the most valuable resource a company

has. Brand image is at the very core of business identity and strategy.

The brands are Kodak, Sony, Coca-cola, Toyota, Marlboro, Kellogg, Levi‘s, Caterpillar, Nestle,

Mars, P&G, Gillette, and BMW.

A global brand gives a company a uniform worldwide image that enhances efficiency and

cost savings when introducing other products associated with the brand name, but not all

companies believe a single global approach is the best.

Country – of – origin (COE) can be defined as any influence that the country of

manufacture, assembly or design has on a consumer‘s positive or negative perception of a

product.

TOP 20 GLOBAL BRANDS:

1. COCA-COLA

2. MICROSOFT

3. IBM

4. GE

5. INTEL

6. NOKIA

7. DISNEY

8. MC DONALD‘S

9. MARLBORO

10. MERCEDES

11. FORD

12. TOYOTA


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13. CITIBANK

14. HP


Demand in global business to business markets

Demand in Global Business-to-Business Markets

• Demand in industrial markets is by nature more volatile

• Stages of industrial and economic development affect demand for industrial products

• The level of technology of products and services make their sales more appropriate for

some countries than others

• Cyclical swings in demand

• Professional buyers tend to act in concert

• Derived demand accelerates changes in markets

• Derived demand can be defined as demand dependent on another source

• Minor changes in consumer demand mean major changes in related industrial demand

• Boeing

• Worldwide demand for travel services related to demand for new airplanes

• Commercial aircraft industry one of the most volatile

Quality and global standards:

International standards, which have general applicability for basic medical education, can be

defined. These take account of the variations among countries in medical education due to

differences in teaching tradition, culture, socio-economic conditions, the health and disease

spectrum, and different forms of health care delivery systems. Such differences can also occur

within individual countries. The scientific basis of medicine is universal. The task of medical

education everywhere is the provision of health care. Notwithstanding variations, there is a

high degree of equivalence of structure, process and product of medical schools worldwide.

A global set of standards for medical education is not to be equated with a global core

curriculum. The core of the medical curriculum consists of the fundamental theory and

practice of medicine, specifically basic biomedical, behavioural and social sciences; general

clinical skills, clinical decision skills, communication abilities and medical ethics, and must be

Addressed by all medical schools aiming to produce safe practitioners of quality.


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Business services

• For many industrial products the revenues from associates services exceed the revenues

from the products

– Cellular phones

– Printers

• Leasing capital equipment

• Services not associated with products

– Boeing at-sea-satellite-launch services

– Ukrainian cargo company space rental on giant jets

– Professional services (advertising, banking, healthcare, etc.)

• Client followers

• Mode of entry

– Licensing

– Franchising

– Direct investment

• Protectionism

• Restrictions on cross-border data flows

Stages of Economic Development:

Trade Shows: A Crucial Part of Business-to-Business Marketing

• Secondary methods for marketing:

– Advertising in print media

– Catalogs

The age of mass

consumption

Drive to

maturity

Take off

Preconditions for take off

The traditional

society

Stages of Economic

Development


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– Web sites

– Direct mail

• Trade shows have become the primary and most important vehicle for doing business in

many foreign countries

• Total annual media budget spent on trade events:

– Europeans – 22 percent

– Americans – 5 percent

• Trade shows

– Provide the facilities for a manufacturer to exhibit and demonstrate products to

potential users

– Allow manufacturers to view competitors products

– Are an opportunity to create sales and establish relationships with agents,

distributors, franchisees, and suppliers

• Online trade shows

– Become useful in difficult economic and/or political circumstances

– Are obviously a less than adequate substitute for live trade shows

Relationship Marketing in Business-to-Business Contexts

• Not a matter of selling the right product the

first time

– Instead selling a continuously changed the product to keep it right over time

• The objective of relationship marketing

– To make the relationship an important attribute of the transaction

► Differentiating oneself from competitors

• Using the Internet to facilitate relationship building and maintenance

– Cisco Systems

– Solar Turbines Inc.

• Customer

• Sales engineer

• Application engineer

• Engineering and control systems

• Project manager

• Manufacturing technicians

• Customer services

• Suppliers


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Module V (8 Hours)

Licensing, Strategic Alliances, FDI: Introduction, Licensing, Strategic Alliances,

Manufacturing Subsidiaries, Entry Modes and Marketing Control, Optimal Entry Strategies.

Global Distribution

Introduction, Distribution as Competitive advantage, Rationalizing Local Channels,

Wholesaling, Retailing, Global Logistics, Parallel Distribution, Global Channel Design


International expansion of retailers – international retailing defined – retail format – variations

in different markets – general merchandise: retailing – issues in international retailing

LICENCING:

A means of establishing a foothold in foreign markets without large capital outlays is

licensing patent right, trademarks right, and the rights to use technological processes are granted

in foreign licensing. It is a favorite strategy for small and medium sized companies, although it

is by no means. Common examples of industries that use licensing arrangements in foreign

markets are television programming and pharmaceuticals. Not many confine their foreign

operation to licensing alone it is generally viewed as a supplement to exporting or

manufacturing rather than the only mans of entry into foreign market.

Although licensing may be the least profitable way of entering a market, the risks and

headaches are fewer than for direct investments. It is a legitimate means of capitalizing on

intellectual property in a foreign market, and such agreements can also benefit the economies of

target countries.

• A quick and easy entry tool with little capital investment in the foreign markets.

• Some countries offer licensing as the only means of tapping the market.

• Licensing is also considered to be an effective tool for life extension of products during

their stage of maturity in order of their life cycle.

• Licensing is a good alternative to start foreign production and marketing activity in a

destination country which has economic inflation, shortages of skilled labour, increasing

domestic and foreign governmental regulation and restriction, and severe international

competition.

• In the licensing arrangement periodic royalties are guaranteed, whereas shared income

from investment fluctuates and stays risky.


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• The company which has a strong domestic base can benefit through licensing arrangement

in developing customized products without expensive research.

• Licensing provides an alternative when exports are no longer profitable because of intense

competition.

• Licensing can reduce transportation costs and help promoting exports in non-competitive

markets.

• One of the major advantages of licensing is the immunity over stringent political

intervention as expropriation.

STRATEGIC ALLIANCES

A strategic alliance is a type of cooperative agreements between different firms, such as shared

research, formal joint ventures, or minority equity participation. The modern form of strategic

alliances is becoming increasingly popular and has three distinguishing characteristics

1. They are frequently between firms in industrialized nations.

2. The focus is often on creating new products and/or technologies rather than distributing

existing ones.

3. They are often only created for short term durations.

TYPES OF STRATEGIC ALLIANCES

• Technology-based alliances

• Production-based alliances

• Distribution-based alliances

• Resource-based alliances

Benefits

• The organizational efficiency will be improved with the flexibility and informality in

strategic alliances.

• Alliances developed strategically offer access to new markets and technologies.

• The risk and expenses are shared among the allies reducing the impact of risk on the

participating members.

• The alliance would help the partners build their independent brand and manage retailing of

goods and services.

• Alliances can take various forms–from simple research and development deals to heavy

budget projects.


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Manufacturing Subsidiaries

A subsidiary, subsidiary company, daughter company,or sister company is a company that is

completely or partly owned by another corporation that owns more than half of the

subsidiary's stock, and which normally acting as a holding corporation which at least partly or

(when as) a parent corporation, wholly controls the activities and policies of the daughter

corporation. The subsidiary can be a company, corporation, or limited liability company. In some

cases it is a government or state-owned enterprise. The controlling entity is called its parent

company, parent, or holding company.

An operating subsidiary is a business term constantly used within the United

States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but

operates with its own identity, locomotives and rolling stock. In contrast, a non-operating

subsidiary would exist on paper only (i.e. stocks, bonds, articles of incorporation) and would use

the identity and rolling stock of the parent company.

The entry modes

• Exporting

• Contractual agreement

• Licensing

• Franchising

• Joint venture

• Strategic alliance

• Wholly-owned subsidiaries

Market control

Each international market is different, so strategies and controls will vary

Distance, language differences and cultural variations cause communications problems

Resentment from subsidiaries of HQ control

Local marketing plan will need to controls appropriate for HQ and subsidiaries.

• International context of control

• Obtaining performance information


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• Principles of a control system.

• Simple process of control

• Control techniques

• Effective control systems

• Benchmarking

• Balanced Scorecard

Principles of a control system

• Aim to translate strategic plans into actions (Drummond and Ensor 2001).

• Ensure that behaviour and operations conform to corporate objectives

• Organisations need to measure, compare and analyse variances so that timely corrections can

be made

• Effective control involves the measurement of inputs as well as outputs.

• Control is important because:

1. ‗You can‘t manage what you can‘t measure‘ adage

2. Gaining importance to measure ROI in marketing

3. Moves afoot to include branding in financial accounts.

Global Distribution

Introduction,

A worldwide computerized reservation network used as a single point of access for reserving

airline seats, hotel rooms, rental cars, and other travel related items by travel agents, online

reservation sites, and large corporations.

The premier global distribution systems are Amadeus, Galileo, Sabre, and Worldspan. They are

owned and operated as joint ventures by major airlines, car rental comopanies, and hotel groups.

Also called automated reservation system (ARS) or computerized reservation system (CRS).

Distribution channels

Getting the product to the target market can be a costly process

Forging an aggressive and reliable channel of distribution may be the most critical and

challenging task facing the international firms

Each market contains a distribution network with many channel choices whose structures are


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In some markets the distribution structure is multi-layered, complex, inefficient, even

strange

Competitive advantage will reside with the marketer best able to build the most efficient

channel

Channel of distribution or marketing channels is defined as the whole set of interrelated

marketing agencies which are involved in making the goods available form the producer to

the consumers.

Channel of distribution structures

The distribution process includes the physical handling and distribution of goods, the

passage of ownership (title), and the buying and selling negotiations between producers and

middlemen and between middlemen and customers

Each country market has a distribution structure through which goods pass from producer

to use

Within this structure are a variety of middlemen whose customary functions, activities,

and services reflect existing competition, market characteristics, tradition, and economic

development

Channel structures range from those with little developed marketing infrastructure such as

those found in many emerging markets to the highly complex, multi-layered system found in

Japan

Japanese distribution structure

a structure dominated by many small middlemen dealing with many small retailers—high

density of middlemen,

channel control by manufacturers,

a business philosophy shaped by a unique culture, and

laws that protect the foundation of the system—the small retailer

Distribution in Japan has long been considered the most effective non-tariff barrier to the

Japanese market .The Japanese distribution structure is different enough from its U.S. or

European counterparts

It has four distinguishing features:


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a structure dominated by many small middlemen dealing with many small retailers

channel control by manufacturers

a business philosophy shaped by a unique culture

laws that protect the foundation of the system – the small retailer.

Channel factor:

Manufacturers depend on wholesalers for a multitude of services to other members of

the distribution network. Financing , physical distribution , warehousing , inventory ,

promotion and payment collection are provided to other channel members by wholesalers .

the system works because wholesalers and all other middlemen downstream are tied to

manufacturers by a set of practices and incentives designed to ensure strong marketing

support for their product and to exclude rival competitors from the channel .wholesaler

typically act as agent middlemen and extend the manufacturers control through the channel

the following element

1. Inventory financing :- sales are made on consignment with credit extending for several

months .

2.Cumulative rebates :- rebates are given annually for any number of reasons including

quantity purchases , early payments , achieving sales target , performing services ,

maintaining specific inventory levels , participating in sales promotions , remaining loyal to

suppliers , maintaining manufacturers price policies , cooperating and contributing to overall

success.

3. Merchandise returns :- all unsold merchandise may be returned to the manufacturers.

4. Promotional support :- intermediaries receive a host of displays , advertising layouts ,

management educations programs , in store demonstrations and other dealer aids that

strengthen the relationship between the middlemen and the manufacturer.

Distribution patterns

Even though patterns of distribution are in a state of change and new patterns are

developing , international marketers need a general awareness of the traditional distribution

base . The ―traditional ― system will not change overnight and vestiges of it will remain for


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years to come .Nearly every international firm is forced by the structure of the market to

use at least some middlemen in the distribution arrangement.

The following description should convey a sense of the variety of distribution patterns.

General patterns : generalizing about internal distribution channel patterns of various

countries is almost as difficult as generalizing about behaviors patterns of people. Despite

similarities, marketing channels are not the same throughout the world. Marketing methods

taken for granted in the United States are rare in many countries.

Middlemen Services:- The service attitudes of people in trade vary sharply at both the

retail and whole sale levels from country to country .

Line Breadth:- every nation has a distinct pattern relative to the breadth of line

carried by wholesalers and retailers . The distribution system of some countries is

characterized by middlemen who carry or can get everything in other every middlemen is a

specialist dealing only in extremely narrow lines. Government regulation in some countries

limit the breadth of line that can be carried by middlemen and licensing requirement to

handle certain merchandise are not uncommon.

Costs and Margins :- cost levels and middlemen margins vary widely from country

to country depending on the level of competition , service offered , efficiencies for

inefficiencies of scale and geographic and turnover factors related to market size

,purchasing power , tradition and other basic determinants.

Channel Length:-some correlation may be found between the stage of economic

development and the length of marketing channels . In every country , channels are likely to

be shorter for industrial goods and high priced consumer goods than for low priced

products. In general , there is an inverse relationship between channel length and the size of

the purchase .combinations wholesaler – retailer or semi wholesaler exist in many countries

adding one or two link to the length of the distribution chain.

Nonexistent Channels : one of the things companies discover about international

channel of distribution patterns is that in many countries adequate market coverage through

a simple channel of distribution is nearly impossible. In many instances , appropriate

channels do not exist .

Blocked Channels :- International marketers may be blocked from using the

channel of their choice. Blockage can result from competitors already established lines in

the various channel or from trade associations or cartels having closed certain channels.


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Stocking :- the high cost of credit , the danger of loss through inflation , a lack of

capital and other concerns cause foreign middlemen in many countries to limit inventories

this often results in out of stock conditions and sales lost to competitors.

Power and Competition :-distribution power tends to concentrate in countries where a

few large wholesalers distribute to a mass of small middlemen . large wholesalers generally

finance middlemen downstream . the strong allegiances they command from their

customers enables them to effectively block existing channels and force an outsiders to rely

on less effective and more costly distribution .

Distribution patterns are always evolving and new patterns are developing and marketing

channels are not the same throughout the world

Distribution as Competitive advantage

Which is world‘s largest selling biscuit brand? It‘s that thing in yellow wrapper with that baby pic

on it that has ruled the Indian market for some 75 years now. Yes, it‘s Parle-G. It is a biscuit that

has remained a strong favourite in the market despite not being very differentiated- a simple

glucose biscuit. Significantly, they haven‘t done much wrong over the years, sticking to a simple

yet effective strategy- Be Available. What really differentiates Parle-G in the marketplace is their

strong Sales and Distribution system. They make it a point never to lose out on a customer by

being available in the remotest of locations- including several villages with populations of just

about 500 people. Parle has an extensive network of over 1500 wholesalers who in cater to nearly

450,000 retailers. In a way thus, they have beaten competition not by spending multi millions on

advertising but by using their extensive sales and distribution network as the key differentiating

factor.

There are several other examples of companies who have used this approach to become industry

leaders. Which channel a company uses to reach its consumers and how effectively it utilizes

these channels can go a long way in determining the success of their marketing strategy.

Traditionally, there are 4 levels available between the manufacturer and the consumer.

With changes in the market place, this structure has changed dramatically. Earlier, most

companies used one of the above channels to reach its customers leaving little room for

differentiation on this basis. That however no more holds true with sales and distribution

becoming an integral part of companies‘ business model. Companies now look to beat


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competition by creating value for customers through their sales and distribution structures. Take

Dell for example. Dell redefined the entire PC industry by using a direct selling model, the

shipping companies being the only intermediary. They entered the industry at a difficult but

quickly adapted to the retail chain evolution by adopting a radically different path and taking

orders on the phone. The move paid off as they have gone to become one of the industry leaders.

Rationalizing Local Channels,

Changing Distributors

The distribution channel configuration for entry into a foreign markets is rarely

optimal once the product is established on the market

The traditional reason for termination of a distributor is

The exporting firm finds that the distributor is not doing a good enough job

in the market

Multiple Channels (Parallel Distribution)

Channel changes do not necessarily involve termination of contracts

In some cases multiple channels emerge or are created

Wholesaling

The sale and distribution of goods to users other than end consumers. Wholesaling involves

selling merchandise to retailers, wholesalers and merchants, or to industrial, commercial and

institutional users. A wholesaler can act as a middleman, brokering deals between these

businesses. Wholesaling often occurs when large quantities of merchandise are reassembled,

sorted, then repackage, and distribute in smaller lots.

Wholesaling Functions

Primary functions of wholesaling

Making contact

Negotiating

Buying

Selling

Warehousing

Wholesaling is a major component of a country‘s infrastructure and its structure

reveals important clues as to the country‘s stage of development

Full-service wholesalers can usually be counted on in most countries


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However, because of their size and tie-ins with existing brands and chains

they might not be willing to distribute the firm‘s products

The full-service concept should be carefully assessed for each country

entered, since a full-service wholesaler will retain market knowledge and

control the marketing.

For the experienced entrant, limited services wholesalers might be more beneficial,

because of increased control and more management learning.

Power and Competition

The size distribution of wholesalers in many countries approximates the well-known ―80-20‖ rule

80 percent of the transactions are handled by 20 percent of the firms Efficiency

The trend toward integration is based on the technological developments that have make large-

scale economies and technical coordination feasible

These vertically and horizontally integrated firms become gate-keepers to the local market –

entry barriers.

Retailing

Retail is the sale of goods and services from individuals or businesses to the end-user. Retailers

are part of an integrated system called the supply chain. A retailer purchases goods or products in

large quantities from manufacturers directly or through a wholesale, and then sells smaller

quantities to the consumer for a profit. Retailing can be done in either fixed locations like stores

or markets, door-to-door or by delivery. Retailing includes subordinated services, such as

delivery. The term "retailer" is also applied where a service provider services the needs of a large

number of individuals, such as for the public. Shops may be on residential streets, streets with few

or no houses or in a shopping mall. Shopping streets may be for pedestrians only. Sometimes a

shopping street has a partial or full roof to protect customers from precipitation. Online retailing,

a type of electronic commerce used for business-to-consumer (B2C) transactions and mail order,

are forms of non-shop retailing.

Different economies have different retail structures (e.g. Gillette blades are sold through

drugstores in the US, tobacco shops in Italy, department stores in Germany, on the street in

Moscow, at movie counters in Thailand, & from traveling vans in India)

GLOBAL LOGISTICS – the transportation & storage activities necessary to transfer the

physical product from the manufacturing plants & warehouses in different countries to various

local market countries


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Nowadays, global distribution has been consolidated such that fully integrated transportation from

point to point across the world is possible at low cost.

Air Express

Technical innovations in computerized inventory systems and numerically controlled machines

for good handling made possible the growth of air express systems

Ocean Carriers

For shipments of bulky and low-value-per-unit products

Ocean vessels are still the most economical carrier alternative overseas

There have been a number of global carrier alliances in the shipping industry due to the savings

involved in sharing resources and the advantage in providing integrated one-stop services to the

shipper

Overland Transportation

The increasing volume of international trade has put the inland distribution system under pressure

One North American solution has been the roll-on-roll-off system in which a loaded container is

simply rolled onto a railcar and shipped by rail for part of the way, avoiding congested freeways

Warehousing

The competitive need on the part of global companies to be ―close to the customer‖ and provide

fast and efficient service

This places increased demand on warehousing and inventory management

Parallel Distribution

Parallel distribution on genuine goods by intermediaries other than authorized channel members

Three main factors motivate entrepreneurs to engage in gray trade:

1. Wide price discrepancies between national markets

2. Limited availability of certain models or versions in one market

3. Inexpensive logistics means that transportation can be accomplished with relative ease

Global Channel Design

Two major considerations:

1. What type of channel/middlemen should be used to ensure that the strategic marketing

objectives are met in that country?

2. What are the important functions in the channel network for that country?


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REVISIT YOUR FSA‘S

Key success factors and FSA‘s vary across countries and across channels

WHAT CHANNELS ARE AVAILABLE?

Once you identify the critical features of your channel network, find out if the country market

possesses these channels

CHANNEL TIE-UP

Channel members might be difficult to enlist due to entry barriers, competition, and special trade

allowances

COORDINATION & CONTROL

Once a distribution network is established, coordination & control from a centralized headquarters

should be feasible


International expansion of retailers

As the global economy continues to stumble, retailers are struggling to achieve growth domestically.

While there are pockets of opportunity, many retail sectors in the United States are saturated and not

expected to grow much, if at all. Growth may be heavily dependent on winning share from

competitors, typically a taxing effort. Consequently, many retailers are looking beyond their borders

or potential growth. Foreign markets offer attractive growth rates fueled by burgeoning middle

classes, lower competitive intensity, and greater pricing flexibility. Additionally, a global presence

may help retailers lessen their risk exposure to an economic downturn in any one market. Some of the

biggest historical barriers to entering foreign markets have eroded. Many foreign governments have

opened their countries to outside investment. Technological advances have revolutionized consumers

and companies‘ ability to communicate and share information. Similarly, enhancements in

infrastructure around the world have made producing and transporting goods considerably more

feasible.

However, entering new countries is not as simple as signing a lease and opening the doors. Market

entry requires careful consideration of external risks and internal parameters in order to understand

market dynamics, requisite competencies, and financial implications. There is no ―one size fits all‖

odel. Based on these considerations, retailers should select a method of entry that balances two

critical but often conflicting interests: speed and control.


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Introduction of retailing

Retailing is going through a process of rapid internalization: the retailing environment

worldwide is undergoing dynamic changes; with local retailers defensively countering

competitive moves of mammoth chains or successfully duplicating their strategies.

Major international retailers are no longer competing only for mature markets-and for

consumers in highly industrialized countries. Retailer‘s competitive arena has expanded to all

emerging markets, where they are responding to an increasing affluence of consumers and to

their increasingly sophisticated consumer related demands. Numerous successful global retailers

and consumer-product-companies-cum-retailers such as Wal-Mart (US), Promodes/Carrefour

(France), Louis Vuitton Moet Henessy(France).

International expansion of retailers

Retailers are expanding internationally to gain competitive advantage and to increase

sales, profits, and overall firm performance. As they expand beyond their home country borders,

retailers also take cost advantage of cost savings and learn from experiences in a way that could

further enhance home-country operations

Ex:- Tesco, the British retailer, for example, is using its stores in central and eastern

Europe as a testing ground for ideas hat are intended for application in the home market: the

new Tesco extra in Newcastle., is based on a Tesco hypermarket in Hungary.

Retailers from America are expanding in Latin America, Asia and Europe. For example

Wal-Mart has adopted an aggressive strategy for international penetration; its purchase of the

Asda group (UK) has boosted its international sales to $25 billion, which is only a fraction of its

total sales figure of $165 billion. Its ambition is for its international operations to account for a

third of sales.


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The top ten list of retailers.

Name of retailer Country Sales in million

dollars

Wal-Mart U.S 137,634

Metro AG Germany 52,131

Sears Roebuck U.S 36,704

Rewe Gruppe Germany 36,212

Edeka Rruppe Germany 32,573

Aldi Gruppe Germany 32,403

Dayton Hudson U.S 30,951

Carrefour France 30,489

Tenzelmann

Gruppe

Germany 30,243

International retailing defined:-

International retailing is defined as all the activities involved in selling products and

services to final international consumers for their personal consumption.

International retailing differs from local retailing as defined in marketing management in

that it address operations of international retailers beyond home-country borders, as well as

operations of local retailers in different countries in world wide- in general and/or in response to

the presence or entry of international retailers aiming for their target market, as such an

examination international retail operations must include an evaluation of global and local

retailing formats, retail practices, and overview of local retailing environments.

Retail Formats: Variation in different markets

There are three main retail formats:

1.General merchandise retailing

2.Food retailing

3.Non store retailing.


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1. General Merchandise Retailing

a. Specialty Stores

Specialty Stores offer a narrow product line and wise assortment. In this category are clothing

stores (usually further specialized in to the women`s, men‘s, or children`s clothing stores),

bookstores, toy stores, office supply stores, and consumer electronics, among others.

In many markets, specialty stores---- chains in particular--- are expanding at the expense

of all forms of n nonfood retailing. For example, specialty store chains are taking market share

away from traditional department stores in the United Kingdom and France. U.K especially

retailers have great strides in international expansion: Marks & Spencer is rapidly expanding in

France, and retailers such as Virgin Records have already made substantial inroads in to the U.S

market .In France ,specialty store appear to be particularly well suited to addressing the unique

French lifestyle. Local payers, as well as international firms such as the Gap, are very successful

in the market.

In most developing countries, specialty stores represent the main retail format. Although

western and local specialty chain stores are quite popular and have done well for decades,

developing country markets are dominated by independent specialty stores(usually family-

owned), such as apparel stores, cosmetic stores, and local arts and crafts stores aimed at the

tourist market as well as other traditional retail system as exemplified by specialized markets.

b. Specialized Markets

Specialized markets contain specialty stores specialized in a particular product category.

Example of such markets exist worldwide in both developed and development countries.

Examples of specialized markets are the Cairo Gold Market in the Khan El Khalili bazaar, the

Jade Market in Hong Kong, and the spice Market and Gold Market in the Covered Bazaar in

Istanbul, Turkey. Specialized market may even cover entire cities. For example, the town of

Otavalo Ecuador, house large and small retailers of leather goods.

c. Department Stores

Department stores offer a broad variety of goods and wide assortments. Among the

products they carry are clothing for men, women, and children; household appliances and

electronics; kitchenware; china; home furnishing; and toys and games. Outside the United

States, department stores typically also have large supermarkets sections, and some may even

carry fresh produce.


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In the United States and Canada, and department stores have suffered substantial losses in

the past decade, mostly attributed to the rise in the discount stores, off-price retailers, and

category killers. In an attempt to conquer new markets, however, a number of chains have been

looking overseas for expansion: Sears Roebuck and JCPenney, in particular, have been looking

at the Latin American Market, with JCPenney recently opening a number of stores in Mexico

and Chile.

Although department stores remain a dominant retail outlet in Asia, they are currently

displaying symptoms of decline, such as oversupply, over duplication of merchandise, fierce

competition, and declining profits. Shanghai alone witnessed the demise of five department

stores in 1997. Existing department stores in the city have done well when changing their

format, for example, specializing in European style clothing and furnishings, or emulating the

hypermarket environment by offering lower prices and maintaining a customer-friendly

environment.

d. General Merchandise Discount Stores

General Merchandise Discount Stores sell high volumes of merchandise, offer limited

service, and charge lower prices. Discount stores are divided in to two categories: all purposes

discount stores, which offer a wide variety of merchandise and offer a wide assortment.

The all-purpose category is dominated by stores such as Wal-Mart, Kmart, and target in

the United States. Internationally, this retailer category tends to draw a substantial portion of

profits from its supermarkets section. In all purpose categories, Wal-Mart has more than 600

stores internationally mainly they ate present in Canada, Mexico, Puerto Rico, Argentina,

Brazil, Germany, and the United Kingdom. Wal-Mart also has a presence in china, through joint

ventures, and two franchise locations in Indonesia. Its goal is to derive one-third of its earnings

from international operations.

Category specialists, also known as category killers or stores with category dominance,

are large specialty stores that carry a narrow variety of merchandise and a wide assortment.

Among examples of category specialists successful internationally are office supply stores, such

as Staples, Office Max, and office Depot; home improvement centers, such as Home Depot;

bookstores, such as Borders, which are especially well received in East Asia; children`s stores,

such as Toys ―R‖ Us, which leads sales in this product category from Scandinavia to South

Africa; and furniture stores, such as IKEA, which dominates the modern, basic furniture market.


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e. Off price retailers

Off price retailers sell brand name and designer merchandise below regular retail; the

products they sell may include over runs, irregular products, as well as products from previous

seasons. Among example of off price retailers are factory outlet stores; close-out retailers, with

broad, inconsistent assortments; and single price retailers. Although this type of retailing is

popular in US and Canada, in the rest of the world, there are only limited possibilities, other

than store sales, for purchasing brand names at a discount. For example Hugo boss has an out

let store in Sothern Germany, close its factory, near Stuttgart, and Zurich has a famous designer

out let mail; Italy has few outlet stores for its famous designers. Non of these examples come

close in depth and variety to the north American off price retailer presence, but that is about to

change, as more and more international consumers demands similar deals as the ones offered in

the US.

Often, American companies must build their own outlet stores in environments where this

type of retail format is unknown. In Japan, for instance, in the Tokyo suburb of Sagami-one,

American malls international opened an outlet mall for companies such as Guess! And Laura

Ashely to sell discountinued merchandise at a discount.

f. Catalog showrooms

Catalog showrooms usually offer high turn over, brand name goods at discount price. A

typical format for a catalog showroom is one in which customers order from a Catalog in the

showroom where the product is only displayed, and then pick up the merchandise at a

designated location. Internationally, the goods sold in retail formats are not typically brand

name goods, but, rather, they are goods that have not sold in season through a companies

catalog. For example, Neckrmann and Quelle, the well-known German catalog retailers, have

catalog showrooms in many of Germany‘s largest cities where they sell their catalog store

brands. In addition, Ikea uses this strategy to sell to consumers worldwide: customers receive a

catalog and in the showroom, they order in the store the product they would like to produce and

pick it up from a designated location in its unassembled state.

Retail Patterns

Retail Size Patterns: - the extremes in size in retailing are similar to those that predominate

in wholesaling. The retail structure and the problem it engenders cause real difficulties afro

the international marketing firm selling consumer goods .large dominant retailers can be sold


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direct , but there is no adequate way to directly reach small retailers who in the aggregate

handle a great volume of sales.

Direct Marketing :-selling directly to the consumer through the mail , by telephone or door to

door is often the approach of choice market with insufficient or underdeveloped distribution

systems. The approach of course also works well in the most affluent market.

Resistance to Change :- effort to improve the efficiency of the distribution system new types

of middlemen and other attempts to change traditional ways as typically viewed as

threatening and are thus resisted .

Alternative Middleman Choices :- A marketers options range from assuming the entire

distribution activity to depending on intermediaries for distribution of the product . channel

selection must be given considerable thought because once initiated it is difficult to change

and if proves inappropriate , future growth of market share may be affected

a) Agent middlemen ;- represent the principal rather than themselves

b) merchant middlemen:- take title to the goods and buy and sell on their own account.

International retailing shows even greater diversity in its structure than does wholesaling

Some general retailing patterns include:

Home-Country Middlemen :- located in the producing firms country provide marketing

services from a domestic base. By selecting domestic middlemen as intermediaries in the

distribution process , companies relegate foreign market distribution to others.

Manufacturers‘ Retail Stores :- An important channel of distribution for a large

number of manufacture is the owned or perhaps franchised.

Global Retailers:-as global retailer like Ikea , Costco, Sears Roebuck , Toys ―R‖ Us

and Wall–mart expand their global coverage , they are becoming a major domestic

middlemen for international markets.

Export Management Companies :- is an important middlemen for firms with

relatively small international volume or for those unwilling to involve their own personnel

in the international function.

Trading Companies:- trading companies have a long and honorable history as

important intermediaries in the development of trade between nation. Trading companies

accumulate , transport and distribute goods from many countries .


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U.S. Export Trading Companies :-the ETC act allows producers of similar products to

form export trading companies .A major goal of the ETC Act was to increase U.S exports

by encouraging more efficient export trade services to producers and suppliers in order to

improve the availability of trade finance and to remove antitrust disincentives to export

activities.

Complementary Marketers :-companies with marketing facilities or contacts in different

countries with excess marketing capacity or a desire for a broader product line sometimes

take on additional lines for international distribution although the formal name for such

activities is complementary marketing.

Manufacturer‘s Export Agent :- is an individual agent middlemen or an agent

middlemen firm providing a selling service for manufactures.

Home-country middlemen, or domestic middlemen, provide marketing services from a

domestic base and find foreign markets for products for local manufacturers

Frequently used types of domestic intermediaries include:

Home-Country Brokers:- the term broker is a catchall for a variety of middlemen

performing low cost agent services.

Buying Offices :- a variety of agent middlemen may be classified simply as buyers or buyer

for export. Their common denominator is a primary function of seeking and purchasing

merchandise on request from principals as such they do not provide a selling service

Selling Groups:- several types of arrangement have developed in which various

manufactures or producer cooperate in a joint attempt to sell their merchandise abroad.

This may take the form of complementary exporting or of selling to a combined business such

a Webb –Pomerene export association.

Webb-Pomerene Export Associations:-are another major form of group exporting. WPEAs

Act of 1918 made it possible for American business firms to join forces in export activities

without being subject to the Sherman antitrust . WPEAs cannot participate in cartesl or other

international agreement that would reduce competition in the united states but can offer

four major benefits

1. reduction of export costs

2. demand expansion through promotion


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3. trade barriers reductions

4. improvement of trade terms through bilateral bargaining .

Foreign Sales Corporation :- is a sales corporation set up in a foreign country or U.S

possession that can obtain a corporate tax exemption on a portion of the earnings generated

by the sale or lease of export property.

Export Merchants :- are essentially domestic merchants operating in foreign market . as such

they operate much like the domestic wholesaler . specifically they purchase goods from a large

number of manufacturers , ship them to foreign countries and take full responsibility for their

marketing .

Export Jobbers:- deal mostly in commodities they do not take physically possession of goods

but assume responsibility for arranging transportation.

Foreign-Country Middlemen :- using foreign country middlemen moves the manufacturers

closer to the market and involves the company more closely with problems of language ,

physical distribution , communications and financing . foreign middlemen may be agents or

merchants , they may be associated with the parent company to varying degrees or they may

be temporarily hired for special purposes. Some of the more important foreign country

middlemen are manufacturers representatives and foreign distributors.

Manufacturer’s Representatives:- are agent middlemen who take responsibility for a

producers goods in a city , regional market area entire country or several adjacent countries .

when responsible for an entire country the middlemen is often called a sole agent.

Distributors :- A foreign distributor is a merchant middleman. This intermediary often has

exclusive sales right in a specific country and works in close co-operation with the

manufacturer . the distributor has a relatively high degree of dependence on the supplier

companies and arrangements are likely to be on a long run continuous basis.

Foreign-Country Brokers:- are agents who deal largely in commodities and food products .

the foreign brokers are typically part of small brokerage firms operating in one country or in

a few contiguous countries.


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Managing Agents and Compradors :- A managing agent conducts business within a foreign

nation under an exclusive contract arrangement with the parent company. The managing agent

in some cases invests in the operation and in most instances operates under as contract with

the parent company.

Dealers :- generally speaking anyone who has a continuing relationship with a supplier in

buying and selling goods is considered a dealer . more specifically dealers are middlemen

selling industrial goods or durable consumer goods direct to customers they are the last step

in the channel of distribution.

Import Jobbers, Wholesalers, and Retailers :- import jobbers purchase goods directly from

the manufacturers and sell to wholesalers and retailers and to industrial customers . large and

small wholesalers and retailers engage in direct importing for their own outlets and for

redistribution to smaller middlemen . the combination retailer wholesaler is more important in

foreign countries than in the united states. It is not uncommon to find large retailers

wholesaling goods to local shops and dealers.

Some of the more important foreign-country middlemen, who find markets for foreign

manufacturers include:

Factors Affecting Choice of Channels

The international marketers needs clear understanding of market characteristic and must have

established operating policies before beginning the selection of channel distribution . the

following points should be addressed prior to the selection process

Identify specific target markets within and across countries.

Specify marketing goals in terms of volume, market share, and profit margin requirements.

Specify financial and personnel commitments to the development of international

distribution.

Identify control, length of channels, terms of sale, and channel ownership

Once these points are established , selecting among alternatives middlemen choices to forge

the best channel can begin . marketers must get their goods into the hands of consumers

and must choose between handling all distribution or turning part or all of it over to various


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middlemen . Distribution channels vary depending on target market ,competition and

available distribution intermediaries.

1. Cost :- There are two kinds of channel cost

a. The capital or investment cost of developing the channel and

b. The continuing cost of maintaining it.

The later can be in the form of direct expenditure for the maintenance of the company selling

force or in the form of margins , markup or commissions of various middlemen handling the

goods.

2. Capital requirement :- the financial ramifications of a distribution policy are often

overlooked .critical element are capital requirement and cash flow patterns associated with

using a particular type of middlemen .

3. Control ;- the more involved a company is with the distribution , the more control its

exerts . A company own sales force affords the most control , but often at a cost that is not

practical.

4. Coverage :- another major goal is full market coverage to gain the optimum volume of

sales obtainable in each market , secure a reasonable market share. And attain satisfactory

market penetration .coverage may be assessed by geographic or market segments or both .

5. Character :- the channel of distribution system selected must fit the character of the

company and the markets in which it is doing business. Some obvious product requirement

often the first considered relate to perishability or bulk of the product , complexity of sale ,

sales service required and value of the product.

6.Continuity :- channel of distribution often pose longevity problems . most agent

middlemen firms tend to be small institution when one individual retires or moves out of a

line of business the company may find it has lost its distribution in that area. Wholesaler

and especially retailers are not noted for their continuity in business either. Most middlemen

have little loyalty to their vendors.


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Issues in international retailing

In the run-up to the EU's implementation of International Financial Reporting Standards (IFRS) in

2005, PwC published. IFRS in Action to help board members in retail and consumer goods

companies better understand what the change to IFRS would mean for their respective industries.

Now, some three years later, the implications and effects of the move to IFRS are easier to see.

PwC took the opportunity to update its IFRS framework for financial reporting across a range of

issues in the retail and consumer sector. Issues and Solutions for the Retail and Consumer Goods

Industries: International Financial Reporting Standards is the result, and it offers an extensive set

of accounting solutions to help you understand the key issues and concerns behind this ongoing

shift to IFRS.

The report also provides a US GAAP perspective to help companies (that must report under this

framework) understand the impact that IFRS might have on their operations.


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Module VI (7 Hours)

Pricing decisions: Global Pricing Framework, Pricing Basics, Marginal Cost Pricing and its

importance, Transfer Pricing, Counter trade, Systems Pricing, Pricing and Positioning, price

quotation – INCO terms – preparation of quotations.

Promotion Decisions

Promotions – international advertising – sales promotion in international markets – international

advertising – direct mailing – personal selling – exhibition – generic promotions in international

marketing

Global Pricing Framework

Due to the increased shifting sales focussed towards e.g. China, India and other fast

developing countries, global Industrial companies are facing sooner that anticipated on the

complexity of regional pricing differences.

By using advanced price indexing techniques global price setpoint and differentiation

issues can be resolved by defining the relative and absolute price positioning.

Global Pricing is lot more complex than domestic pricing due to:

International Currency Fluctuations

Price Escalations due to Tariffs

Difficulties to access credit risks

Price controls, Anti-dumping laws

Regulation on transfer pricing

Methods of payment

Pricing Basics

Basic Principle of pricing considers:

Costs or Cost-Plus formula

Experience Curve Pricing I.e costs go down as more units are produced

Competition Pricing: Discount or premium pricing w.r.t competition

Demand factored pricing

For Global Pricing, there are several other factors to be considered in addition to the basics


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Transfer Pricing

MNC‘s have to determine transfer prices, I.e. the prices charged on subsidiaries for products,

components and supplies.

Transfer pricing must be:

Fair for local subsidiary‘s performance measurement

Help repatriate profits

Satisfy local tax laws governing transfer pricing

Global firms are setting up market related transfer prices to satisfy local laws

Counter trade & Systems Pricing

When local currency is not freely convertible, firms resort to counter trade.

Exchange local currency for some other goods that is then sold for US$ or other currency

Systems pricing or Pricing for turnkey projects have several subcomponents that may be

separately priced or priced as a bundle

Issues with Counter Trade

Counter Trade arises when a country does not have sufficient foreign exchange or its currency

is not freely convertible

Counter Trade is like a Barter, and the exchanged goods then has to be sold to realize any

profits

E.g: Pepsi for Stolichnaya Vodka in USSR

Counter trade can arise from counter purchase agreements to buy back a part of local

production for the right to export into that country

Product Buyback e.g : Hundai exporting cars from India

Third goods buy back e.g: Pepsi exporting potato chips from India

Major Problem is accessing the value of the bartered goods

Evaluation of Counter Trade

Counter Trade is done if it‘s the only option for trade

Firms use trading houses to dispose of the goods received in trade

Firms need to be extra cautious in fixing the barter exchange rates as international value of

certain goods is difficult to valuate


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Counter Trade is a reality in Global markets

Points to Consider in Counter Trade

Is this the only way to make a deal?

Can the received goods be sold?

How to maximize cash returns?

Are there any import restrictions in getting the goods back?

Are there other ways of converting the local currency?

Turnkey Pricing

Turnkey Projects are usually of 2 types:

Bundled Pricing : Entire project is priced as one bundle

Unbundled Pricing: Components of the project is priced individually

Profit Sharing or Penalties for nonperformance is usually used in pricing strategy

Component prices are based on competitive positions, market entry decisions and FSA factors

Price and Positioning

Final selling price depends on Positioning

Price-Quality Relationships (high price = High Quality)

Competitive Positioning : Premium or discount w.r.t competitors

Purchasing power : How much customers are able to pay?

Product Life Cycle & Price Skimming : High price during introduction & falling

prices later on

Penetration Pricing : Discount to gain market share

PRICE QUOTATION

Many businesses, such as hairdressers, use a standardized price list that remains the same for

every customer. Other businesses, such as painters and decorators, have to provide tailored prices

for the specific products or services a customer wants to buy. This is usually done with

an estimate or a quotation. Larger, more complicated projects are often priced on the basis of a

detailed tender document drawn up by the customer.


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This guide outlines how to present your prices to your customers. It tells you how to create a price

list, describes the difference between a quotation and an estimate, details how to prepare

quotations and estimates and describes how to price a tender for a contract.

1. Prepare a price list

2. The difference between a quotation and an estimate

3. Prepare a written estimate

4. Prepare a written quotation

5. Prepare a price for a tender

6. Win contracts at the right price

PREPARE A PRICE LIST

Most businesses will need to draw up a price list at some stage. If you sell a fixed range of

products, this may be the only form of pricing you need. This type of standard price list can also

be used as the basis for pricing your non-standard orders.

It's a good idea to date your price lists - particularly if your customer is likely to keep it for a long

time. You should make it clear when any special offers expire. It can also be useful to include a

clause at the end of the price list stating that prices are subject to change.

You should make clear whether any delivery, packing or postage costs are included in your

prices. Additionally, although you don't have to indicate discounts for bulk purchases on your

price list, it might attract more business.

You may be able to use software packages such as Sage Simply Accounting to help you draw up

complex price lists.

THE DIFFERENCE BETWEEN A QUOTATION AND AN ESTIMATE

It's impossible for some businesses to give standard prices for goods and services. This may be

because the skills, time and materials required for each job vary depending on different

customers' needs.

This situation is more common in some trades than others - decorators or builders, for example,

rarely do exactly the same job twice. When it's not possible to work from a standard price list, you

have to give a quotation or an estimate instead.

A quotation is a fixed price offer that can't be changed once accepted by the customer. This holds

true even if you have to carry out much more work than you expected.


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If you think this is likely to happen, it makes more sense to give an estimate. You can also specify

in the quotation precisely what it covers, and that variations outside of this will be subject to

additional charges.

An estimate is an educated guess at what a job may cost - but it isn't binding. To take account of

possible unforeseen developments, you should provide several estimates based on various

circumstances, including the worst-case scenario. This will prevent your customer from being

surprised by the costs.

To work out a quote or estimate you need to know your fixed and variable costs. These include

the cost-per-hour of manual labour and the cost of the materials you'll require. Your quote or

estimate is then calculated according to what you think the job will involve.

You should provide all your quotes and estimates in writing and include a detailed breakdown.

This will help to avoid any disputes about what work is included in your overall price.

You may also wish to set an expiry date. Your quote or estimate will no longer be valid after this

time.

INCO terms

Trade terms used in different countries may appear identical on the surface, but actually have

different meanings as they are used domestically. Incoterms are internationally recognized and thus

help to prevent confusion in terms of foreign trade contracts, by helping sellers and buyers understand

their obligations in any transaction. Examples of Incoterms include "DAT" (Delivered at Terminal),

"DDP" (Delivered Duty Paid) and "CIF" (Cost, Insurance and Freight).

PREPARATION OF QUOTATIONS

Quotation: - Its a financial document send from supplier to customer regarding service to be

provided. Its also called as temporary financial document for negotiations." A statement of price,

terms of sale, and description of goods or services offered by a supplier to a prospective purchaser, a

bid. When given in response to an inquiry, a quotation often is considered an offer to sell."

Preparation of price quotations will be discussed in classroom in detail.


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International Advertising

The basic framework and concepts of international advertising include the following seven steps:

1. Perform marketing research

2. Specify the goals of the communication

3. Develop the most effective message(s) for the market segments selected

4. Select effective media

5. Compose and secure a budget

6. Execute the campaign, and

7. Evaluate the campaign relative to the goals specified

• Decisions involving advertising are those most often affected by cultural differences among

country markets

• Consumers respond in terms of their culture, its style, feelings, value systems, attitudes,

beliefs, and perceptions

• Advertising‘s function is to interpret the qualities of products in terms of consumer needs,

wants, desires, and aspirations, the emotional appeals, symbols, and persuasive approaches

• Reconciling an international advertising campaign with the cultural uniqueness of markets is

the challenge confronting the international or global marketer

Sales Promotions in International Markets

• Sales promotions are marketing activities that stimulate consumer purchases and improve

retailer or middlemen effectiveness and cooperation

• Sales promotions are short-term efforts directed to the consumer or retailer to achieve such

specific objectives as consumer-product trial or immediate purchase

Examples of sales promotion include

1. Cents-off

2. In-Store Demonstrations

3. Samples

4. Coupons

5. Gifts

6. Product Tie-Ins


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7. Contests

8. Sweepstakes

9. Sponsorship of Special Events,

10. Point-Of-Purchase Displays

International Advertising and the Communications

The international communications process consists of the following seven steps:

1. An information source. An international marketing executive with a product message to

communicate

2. Encoding. The message from the source converted into effective symbolism for transmission

to a receiver

3. A message channel. The sales force and/or advertising media that convey the encoded

message to the intended receiver

4. Decoding. The interpretation by the receiver of the symbolism transmitted from the

information source

5. Receiver. Consumer action by those who receive the message and are the target for the

thought transmitted

6. Feedback. Information about the effectiveness of the message that flows from the receiver

(the intended target) back to the information source for evaluation of the effectiveness of the

process

7. Noise. Uncontrollable and unpredictable influences such as competitive activities and

confusion that detract from the process and affect any or all of the other six steps

DIRECT MAIL ADVERTISING

• It is highly selective.

• This form of advertising is elastic as the retailer can add or delete the name of consumers at

his discretion.

• A wide variety of merchandise or service can be advertised to the same consumer.

• Privacy on consumer preference/order can be maintained.

• Market competition can be avoided instantly.

• Direct mail advertising is personal and specific. Home delivery of goods and services can be

assured. Performance of merchandise/service sales can be monitored and evaluated.


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PERSONAL SELLING

1. Happens via Sales Person

2. In the eyes of most of the customer, the sales person is the company

3. The sales Representative is the final link in the culmination of a company‘s marketing &

Sales effort.

4. Growing global competition coupled with the dynamic & complex Nature of international

business increases both the need & the means for closer ties with the both customers &

suppliers. Relationship marketing built on effective communication between the seller & the

buyer, focuses on building long term alliances rather than treating each sales as a one time

event.

5. Advances in IT are changing the nature of personnel selling & sales management

6. Following are the steps to manage the sales force:

a) Designing the Sales Force

b) Recruiting Marketing & Sales Personnel( Sales Personnel include Expatriates, Local

Nationals & Third Country Nationals. Virtual Expatriates are the new breed of Expatriates

developed through Internet)

c) Selecting Sales & Marketing Personnel

d) Training for International Marketing

e) Motivating Sales Personnel.

f) Evaluating & Controlling Sales representatives.

Exhibition

An exhibition, in the most general sense, is an organized presentation and display of a selection

of items. In practice, exhibitions usually occur within museums, galleries and exhibition halls,

and World's Fairs. Exhibitions include (whatever as in major art museums and small art galleries;

interpretive exhibitions, as at natural history museums and history museums), for example; and

commercial exhibitions, or trade fairs

The word "exhibition" is usually, but not always, the word used for a collection of items.

Sometimes "exhibit" is synonymous with "exhibition", but "exhibit" generally refers to a single

item being exhibited within an exhibition.

Exhibitions may be permanent displays or temporary, but in common usage, "exhibitions" are

considered temporary and usually scheduled to open and close on specific dates. While many


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exhibitions are shown in just one venue, some exhibitions are shown in multiple locations and are

called travelling exhibitions, and some are online exhibitions.

Though exhibitions are common events, the concept of an exhibition is quite wide and

encompasses many variables. Exhibitions range from an extraordinarily large event such as

a World's Fair exposition to small one-artist solo shows or a display of just one item. Curators are

sometimes involved as the people who select the items in an exhibition. Writers and editors are

sometimes needed to write text, labels and accompanying printed material such as catalogs and

books. Architects, exhibition designers, graphic designers and other designers may be needed to

shape the exhibition space and give form to the editorial content. Organizing and holding

exhibitions also requires effective event planning, management, and logistics

Generic promotions in international marketing

In the US more than a billion dollars is spent annually on generic commodity promotion, with

spending in some individual product categories exceeding $100 million.

In South Africa R37 million was spent in 2008 on generic commodity promotion by way of statutory

measures. Extensive economic research has been done for many years to evaluate generic promotion

programs.

A number of studies evaluating the impacts of promotional programs on the demand for agricultural

commodities have been undertaken for a variety of generic promotion campaigns.

In the US more than a billion dollars is spent annually on generic commodity promotion, with

pending in some individual product categories exceeding $100 million.

In South Africa R37 million was spent in 2008 on generic commodity promotion by way of statutory

measures. Extensive economic research has been done for many years to evaluate generic promotion

programs.

A number of studies evaluating the impacts of promotional programs on the demand for agricultural

commodities have been undertaken for a variety of generic promotion campaigns. Generic promotion,

by definition, should be brand or market share neutral.


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It may increase total demand but it should not result in one firm or group of firms gaining market

share over another. In theory brands associated commodities are not expected to lose or gain market

share from the generic advertising of the commodity.

Under circumstances where a generic campaign enhances or reduces one brand share or market share

relative to others a significant equity problem occurs. Equally, if a commodity based firm is of

sufficient size to successfully promote its own brand and capture those gains the firm may argue that

their contributions to generic promotion efforts could be more effectively used to promote their own

brands.

In this regard the level of concentration and the competitive structure of the commodity sector

become major factors in determining the usefulness of generic promotional campaigns.

At some point, notwithstanding the economic arguments for or against generic promotional

campaigns, the implementation of these programs may move beyond the economics and into the

political, legislative, and judicial arenas.

The economic evidence is generally in favour of generic promotion via mandated marketing

programs. General evidence confirming the positive effects of generic promotional

campaigns.Results generally vary between very low impacts in some instances to significantly

positives impacts in other instances.

Notwithstanding the varied impacts of these generic programs the evidence suggests that generic

promotion can expand total demand versus individual firm efforts that often compete only for market

are and shelf space with little impact on expanding the total pie.


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Module VII (6 Hours)

Recent trends in India's foreign trade: Institutional infrastructure for exports promotions in India –

India's trade policy – exports assistance – exports documentation and procedures including

different stages of documentation Globalization in India, Opportunities, Constraints and

Initiatives India - A Hub for Globalization, Globalization in India - Post Liberalization, India‘s

Strengths, Strategies for Sustainable Competitive Advantage, Potential for Made in India, Major

Globalization Initiatives from Indian Companies, WTO Regulations and their implications for

India, Undesirable effects of globalization, Government Initiatives needed to foster globalization

Institutional infrastructure for exports promotions in India

The Government of India has set up several institutions whose main functions are to help an

exporter in his work.

It would be advisable for an exporter to acquaint himself with these institutions and nature of

help that they can render to him so that he can initially contact them and have a clear picture of

what help he can expect of the organized sources in his export effort.

Institutions engaged in export effort fall in six distinct tiers.

Department of Commerce of the Ministry of Commerce and Industry

Deliberative and consultative organizations

Commodity specific organizations

Service Institutions

Government trading organizations

Agencies for export promotion at the State Level

Export Promotion Board

There is an export promotion board under the Chairmanship of the cabinet secretary to

provide policy and infrastructural support through greater coordination among ministries

concerned for boosting the growth of exports.

All ministries directly connected with facilitating foreign trade are represented on this board

by their secretaries.

Export Promotion Council

There are 19 Export Promotion Councils covering a number of products.

These councils advice the government regarding current developments in the export sector

and measures necessary to facilitate future growth in exports, assist manufactures and


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exporters to overcome the various constraints and extend to them the full range of services

for the development of market overseas.

India Trade Promotion Organization (ITPO)

It has become into effect from 01-01-1992 with the main objective of promoting exports and

imports and up gradation of technology through the medium of fairs to be held in India and

abroad, to undertake publicity through the print and electronic media to assist Indian companies in

product development, to organize programs, buyer seller meets, contact promotion programs for

specific products in specific market.

National Center for Trade Information (NCTI)

It‘s a joint venture of ITPO and National Informatics Center.

It was established to provide the latest trade, business and economic information to help

Indian and foreign enterprises in the promotion of the trade from and to India.

Export Credit Guarantee Corporation (ECGC)

For minimizing the risk element in export business and to facilitate the flow of finance from the

banks to exporters, Export Credit Guarantee Corporation was established

Marine Products Export Development Authority

The marine products export development authority started functioning in September

1972. the authority serves the seafood industry right from fishing to processing, packaging,

storing, transporting and marketing to the different marketers all over the world. The authority

is entrusted with the task of ensuring a healthy growth of the industry through judicious

regulation, conservations and control. Importers and exporters can obtain any information

relating to the markets and the products from the Marine Export Development Authority.

Agricultural and Processed Food Products Export Development Authority

With a view to increase the exports from agricultural sector, council has been

established. It will coordinate its activities with national bodies like Horticulture Board and

State Governments for generating production for exports and with research institute for

development of value added products.

Export – Import Bank

It was established for the purpose of financing, facilitating and promoting foreign trade

of India. The bank is the principal financial institution in India for coordinating the work of

institutions engaged in financing export and import trade.


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Federation of Indian Export Organisations

An apex body called the Federation of Indian Export Organisations was established in

order to make a common and coordinating platform for the various export organizations.

Department of Commercial Intelligence and Statistics

It is located at Kolkata. Its functions comprise:

1. commercial intelligence

2. collection, compilation and publication of the statistics of trade, tariffs and shipping.

India’s Export Policy

The objectives are:

To earn adequate foreign exchange to finance the required volume of imports

To effect a change in the directional pattern with a view to reduce dependence on a single

country/limited number of countries

To supplement domestic demand for increasing employment opportunities

To raise unit value realization by promoting exports of value added items

To impose minimum price regulation where inter se compensation is serve.

To impose controls when domestic availability is less than adequate.

India’s Trade Policy

Trade policy of a country refers to the set of policies which govern the external sector of

its economy.

The twin objectives of India‘s trade policy have been to promote exports and to restrict the

level of imports to the level of foreign exchange available to the government.

The basic objective of trade policy revolves around the instruments and techniques of

export promotion and import management.

India’s Import Policy

The objectives are:

To use the available foreign exchange according to national priorities

To so allocate foreign exchange that capacity utilization is maximized

To grant protection to domestic industries


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To maintain price stability

Long Term Fiscal Policy

The government of India has formulated long-term fiscal policy which was presented in

December 1985. The principal features of the Long Term Fiscal Policy relating to the foreign

trade sector are as follows:

Reform of duty drawback scheme for exports

Ad Valorem Vs Specific Duties

Restructuring of Customs Duties

Thrust Commodities

Export Assistance

Developing countries have started manufacturing industries only recently. As a result their

cost of production generally tends to be high because of the following reasons:

1. Total market availability within the country is small with the result that the

economies of large scale production cannot be reaped.

2. Productivity of labour is low because the level of mechanization as compared to that

in the developed countries is low.

3. The cost of production is generally a function of experience i.e. ―learning by doing‖.

4. Manufacturing units in developing countries being small and new, have considerably

less expertise in the field of international marketing and because the volume of

exports is low, the per unit cost of the trade promotion expenditure tends to be high.

India has to raise higher resources for development which has to be done through a number

of indirect levies which tend to push up the overall cost of production.

Most developing countries have therefore resorted to a number of export promotion

measures. India has also been providing export assistance to Indian exporters.

From 1992, export incentive system in India has been made simple. There are essentially

three major incentives. These are:

1. market based exchange rate

2. fiscal concessions


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3. facilities under the export – import policy

Export documents

Standardized and Aligned Pre-shipment documents more than two dozen

commercial and regulatory documents are involved in the pre-shipment stage of

export transactions. These include 16 commercial documents and 9 regulatory

documents.

Commercial Documents

The commercial documents are those which, by customs of trade, are required for effecting

physical transfer of goods and their title from the exporter to the exporter to the important and

realization of export sale proceeds.

14 out of 16 commercial documents have been standardized and aligned to one another,

shipping order and Bill of exchange could not be brought within the fold of the aligned

documentation system because of their very different data elements and having very little in

common with other commercial documents.

The commercial documents are classified into principal documents and auxiliary documents.

Principal Export Documents:

1) commercial Invoice

2) packing list

3) bill of lading

4) combined transport document

5) certificate of inspection/quality control(where required)

6) insurance certificate

7) certificate of origin

8) Bill of exchange and shipment advice

Auxiliary Documents:

1) Proforma Invoice

2) Intimation for inspection

3) Shipping Instructions


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4) Insurance declaration

5) Shipping order

6) Mate receipt

7) Application for certificate of origin

8) Letter to the bnk for collection/negotiation of documents

Regulatory documents:

Regulatory pre-shipment export documents are those which have been prescribed by different

government departments/bodies in compliance of the requirements of various rules and

regulations under relevant laws governing export trade such as export inspection, foreign

exchange regulations, export trade control, customs etc.

Documents related to goods:

Invoice :

An invoice is the seller‘s bill for merchandise and contains particulars of goods, such as the

price per unit at particular location, total value, packing specifications, terms of sale,

identification marks of the package, etc

Packing note and list:

A packing note should include the packing note number, the date of packing, the name and

address of the exporter, the name and address of the importer, the order number, date, shipment

per s/s etc. Apart from the details in the packing note, a packing list should also include item-

wise details.

Certificate of origin:

A certificate of origin, as the name indicates, is a certificate which specifies the country of the

production of the goods. This certificate also to be produced before clearance of goods and

assessment of duty, for the customs law of the country may require this procedure.

CERTIFIED RELATED TO SHIPMENT

1) Mate receipt:

A mate receipt is a receipt issued by the commanding office of the ship when the cargo is

loaded on the ship, and contains information about the name of the vessel, berth, date of


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shipment, description of packages, marks and numbers, condition of the cargo at the time of

receipt on board the ship, etc.

2) Shipping Bill:

The shipping bill is the main document on the basis of which the customs permission for

export is given. The shipping bill contains particulars of the goods exported, name of the vessel,

master or agents, flags, the port at which goods are to be discharged, the country of final

destination, etc.

3) Cart Ticket:

A car ticket, also known as a cart chit, vehicle and gate pass, is prepared by the exporter

and includes details of the export cargo in terms of the shippers name, the number of packages,

the shipping bill number, the port of destination and the number of the vehicle carrying the

cargo.

4) Certificate of Measurement:

Freight is charged either on the basis of weight or measurement. When it is charged on the

basis of weight, the weight declared by the shipper may be accepted. The certificate contains the

name of the vessel, port and destination, the description of goods, the quality, length, breadth,

depth, etc. of the packages.

5) Bill of Lading:

The bill of lading is a document wherein the shipping company gives its official receipts for the

goods shipped in its vessel and at the same time contracts to carry them to the port of

destination. It is also a document of title to then goods and, as such, is freely transferable by

endorsement and delivery.

A bill of lading serves 3 main purposes:

As a document of title to the goods;

As a receipt from the shipping company;

As a contract for the transportation of goods

6) Airway Bill:

An Airway bill, also called, an air consignment note, is a receipt issued by an airline

for the carriage of goods. As eah shipping company has its own bill of lading, each airline has

its own airway bill.


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Documents Related To Payment

(a) Letter of Credit:

A letter of credit is a document containing the guarantee of a bank to honor drafts drawn

on it by an exporter, under certain conditions and up to certain amounts, provided that the

beneficiary fulfils the stipulated conditions.

(b) Bill of Exchange:

The Negotiable Instrument Act,1881, defines the bill of exchange as ―an instrument in

writing containing an unconditional order, signed by the maker, directing a certain person to pay

a certain sum of money only to, or to the order of, a certain person or to the bearer of the

instrument‖.

(c) Trust Receipt:

If the importer is unable to take possession of the documents by making the payment on

the D/P bill following the arrival of the goods, the merchandise may be made available to the

importer by his bank under an arrangement whereby the importer signs a trust receipt.

(d) Letter of Hypothecation:

A letter of hypothecation is a document signed by the customer conveying to a banker the

full ownership of goods at the port of destination in respect of which he has made advances

either by loan or by acceptance or negotiation of bills of exchange.

(e) Bank Certificate of payment:

It is a certificate issued by the negotiating bank of the exporter, certifying that the bill covering

particular consignments, has been negotiated and that the proceeds received in accordance with

exchange control regulations in the approved manner.

Documents Relating To Inspection

Certificate of inspection:

It is a certificate issued by the export inspection agency, certifying that the consignment has

been inspected as required export act 1963, and satisfies the condition relating to quality control

and inspection applicable to it, and is certified to it , and is certified export worthy.


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Documents Related To Excisable Goods

I. G.P. Forms:

a. A GP form is a gate pass for the removal of excisable goods from a factory or

warehouse. Form GP1 is used for the removal of excisable goods on payment of duty and form

GP 2 is used for the removal of excisable goods with payment of duty.

II. Form C:

a. Form c is to be used for applying for rebate of duty on the excisable goods ( other

than vegetables, non essential oils and tea) exported by sea.

III. Forms A.R. -4/A.R. -4A:

a. These forms are meant for applying for the removal of excisable goods for export by

sea/post. Form A.R.-4 is used for applying For excise inspection at the factory and form A.R.-

4A is used when the goods are to be exported under the claim for rebate of excise duty or under

bond.

Documents Related To Foreign Exchange Regulation

Foreign exchange regulations in India require to fill several forms. There are four

important types of forms namely, GR/PP, VP/COD and SOFTEX form for exporter of computer

software obtainable from the RBI or a bank authorized deal with the foreign exchange.

Globalization in India

India had the distinction of being the world's largest economy in the beginning of the Christian

era, as it accounted for about 32.9% share of world GDP and about 17% The goods produced in

India had long been exported to far off destinations across the world. Therefore, the concept of

globalisation is hardly new to India.

India currently accounts for 1.2% of World trade as of 2006 according to the World Trade

Organisation (WTO). Until the liberalisation of 1991, India was largely and intentionally isolated

from the world markets, to protect its fledgling economy and to achieve self-reliance. Foreign

trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct

investment was restricted by upper-limit equity participation, restrictions on technology transfer,

export obligations and government approvals; these approvals were needed for nearly 60% of new


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FDI in the industrial sector. The restrictions ensured that FDI averaged only around $200M

annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid,

commercial borrowing and deposits of non-resident Indians.

India's exports were stagnant for the first 15 years after independence, due to the predominance of

tea, jute and cotton manufactures, demand for which was generally inelastic. Imports in the same

period consisted predominantly of machinery, equipment and raw materials, due to nascent

industrialization. Since liberalization, the value of India's international trade has become more

broad-based and has risen to � 63,080,109 crores in 2003–04 from � 1,250 crores in 1950–

51. India's major trading partners are China, the US, the UAE, the UK, Japan and the EU. The

exports during April 2007 were $12.31 billion up by 16% and import were $17.68 billion with an

increase of 18.06% over the previous year.

India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and

its successor, the World Trade Organisation. While participating actively in its general council

meetings, India has been crucial in voicing the concerns of the developing world. For instance,

India has continued its opposition to the inclusion of such matters as labour and environment

issues and other non-tariff barriers into the WTO policies.

Opportunities, Constraints and Initiatives

1. In recent times, Indian exporters face a number of problems. The problems demotivate the

business firms to enter into foreign markets. Some of the problems are as follows:

2. Recession in World Markets: The world markets faced recession in 2008 and in the first

half of 2009. The recession was triggered due to sub-prime crisis of USA in Sept 2007.

Due to recession, the demand for several Indian items such as gems and Jewellery, textiles

and clothing, and other items were badly hit. During recession, exporters get low orders

from overseas markets, and they have to quote lower prices. Therefore, exporters get low

profits or suffer from losses.

3. Protectionist Measures by Developed Countries: The developing countries like India

have to face the problem of protectionist measures by developed countries. For instance,

in 2009, USA Govt. provided a bailout package to General Motors and other firms to

overcome from financial crisis. The bailout package contained ‗Buy American Clause‘

which means the firms getting financial assistance from the Govt. have to use domestic


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content rather than importing from other countries. Since USA is the major importer from

India, some of the exporters such as auto parts suppliers have to face problems.

4. Reduction in Export Incentives: Over the years, the Govt. of India has reduced export

incentives such as reduction in DBK rates, withdrawal of income tax benefits for majority

of exporters, etc. The reduction in export incentives demotivates exporters to export in the

overseas markets:

5. Competition from China:India is facing stiff competition from China in the world

markets, especially in the OECD markets. As a result, India‘s share of exports to OECD

markets has declined from 53% of total exports in 2000-01 to about 38% in 2007/8. Some

of the Indian exporters have lost their overseas contracts due to cheap Chinese goods arid

supplies.

6. Problem of Product Standards: Developed countries insist on high product standards

from developing countries like India. The products from developing countries like India

are subject to product tests in the importing countries. At times, the importing countries do

not allow imports of certain items like fruits, textiles, and other items on the grounds of

excessive toxic content. Therefore, Indian exporters lose markets especially in developed

countries.

7. Problem of Anti-dumping Duties: Developed countries impose anti-dumping duties on

certain goods imported from developing countries like India, Brazil, China and so on. For

instance, USA had imposed anti-dumping duties on Indian steel items in 2008. Quite

often, the anti-dumping duties are not justified. Therefore, India has to approach the

dispute settlement body of WTO to resolve the dispute regarding anti-dumping duties. Till

the dispute is resolved, Indian exporters lose business opportunities.

8. Problem of Sea Pirates Attacks: A major risk faced by international trade is attack by

pirates in the Gulf of Aden. More than half of India‘s merchandise trade (exports and

imports) passes through the piracy infested Gulf of Aden. New exporters and importers

are facing problems because of increased pirate attacks as they find it difficult to get

insurance cover.

9. Problem of Subsidies by Developed Countries: The developed countries like USA

provide huge subsidies to their exporters. For instance, in case of agriculture exporters,

USA, UK and others provide huge subsidies to their exporters. Therefore, the exporters of

developing countries like India find it difficult to face competition in the world markets.

10. Documentation Formalities: There are a number of documents to be prepared in export

trade. In India, there are as many as 25 documents (16 commercial documents and 9


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regulatory documents) to be filled in. However, aligned documentation system (ADS) has

simplified export documentation procedure.

11. Foreign Exchange Regulations: Export marketing is subject to foreign exchange

regulations. For instance, in India, the exporters have to give a declaration in Form GR to

the Reserve Bank of India (RBI) that they will realize the full value of exports within a

period of 180 days.

Major Globalization Initiatives from Indian Companies

Globalization of Markets: It refers to the merging of national markets into one huge global

marketplace. Globalization of Production: It refers to the sourcing of goods and services from

locations around the world to take advantage of national differences in the cost and quality of

factors of production. Falling Barriers to Trade and Investment: The falling of barriers to

international trade enables firms to view the world as their market. Technological Innovation:

Technological changes have achieved advances in communication, information processing, and

transportation technology, including the Internet and the World Wide Web.

FACTORS DETERMINING INBUILDING GLOBAL COMPANIES• POLITICAL

FACTORS - Stability of the government Type of government - Democratic - Theocracy

(religious) - monarchy ( kingdom) Control structure Canada, USA ( decentralized province)

Japan, France( centralized)

POLITICAL FACTORS Government takeover of asset(with or without permission)- Operational

restriction Remittance/ Repatriation restrictions Government policies- Opposition parties,

pressure groups, external linkages Economic factors Economic system ( open / mixed)-

Economic development Standard of living( per capita income) Sectorial share in GDP-

Foreign Exchange reserves Economic indicators( inflation rate, BOP)

Technological factors Differentiation strategy Competitive advantage Legal factors Home

country laws Host country laws International laws UN resolutions, Patents & Trademark

protection & piracy laws, GATT, codes of conduct

ITCSUBSIDIARIES JOINT VENTURES• ITC Infotech Surya Nepal Private Limited • Maharaja

Heritage• Land base Resorts Ltd.• King Maker Marketing Inc., USA • ITC Filtrona• Technico Pty

Limited. Australia• Russell Credit Limited ASSOCIATE COMPANIES• Wimco Limited •


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Gujarat Hotels Limited• Srinivasa Resorts Limited • International Travel• Fortune Park Hotels

Limited House• Bay Islands Hotels Limited• Gold Flake Corporation Limited

ITC INFOTECH• The company services industries including, Banking Financial Services &

Insurance (BFSI), Consumer Packaged Goods (CPG), Retail, Manufacturing, Engineering

Services, Media & Entertainment, Travel, Hospitality, Life Sciences and Transportation &

Logistics.• Ranked amongst Top 10 Specialty Application Development Providers - Global

Services, CMP Media

ITC CIGARETTES Market Value. The Indian tobacco market grew by 8.9% in 2012 to reach

value of $11.6 billion. Market Value Forecast In 2013, the Indian tobacco market is forecast to

have a value of $14.9 billion, an increase of 29.4% since 2008.

MAHINDRAMAHINDRA AND MAHINDRA FORGINGSMAHINDRA• Their global presence

• They are one of the largest and most means that you can find technologically advanced

Mahindra vehicles on the manufacturers of forged roads—both paved and and machined

components in the world. unpaved—of Australia, They create parts like Europe, Latin America,

links, knuckles, spindles, Malaysia, and South shafts, crankshafts, camshafts, pistons, ball Africa.

And they are joints, and stub axles that seeking out new terrain are used in automotive, every day

agriculture, railway, mining, construction and other industries throughout the world.

MAHINDRAMAHINDRA SATYAM TECH MAHINDRA • Since commencing operations in

1986 as a joint• Sathyam is a global player in venture between Mahindra and the global

Information, British Telecom (BT), they have Communication, and Technology (ICT) space.

They become one of India‘s largest provide enterprise business software exporters and ranked

solutions, infrastructure No.1 in the Telecom Software services, industry native Category (Voice

& Data 2010-11). solutions, integrated For over two decades, they have engineering solutions,

been the chosen transformation consulting services, partner for wire-line, wireless and application

development and broadband operators in Europe, management services, and Asia-Pacific and

North America. business process outsourcing to more than 350 clients in We operate in more than

30 35 countries. countries through 17 sales offices and 13 delivery centers, working with major

players like British Telecom, Vodafone, among others

INFOSYS• Infosys is a global leader in consulting, technology and outsourcing with revenues of

US$ 7.231 billion• Infosys provides business consulting, technology, engineering and outsourcing


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services to help clients in over 30 countries build tomorrow‘s enterprise.• Infosys and its

subsidiaries have 155,629 employees as on Dec 31, 2012.

INFOSYS• Infosys takes pride in building strategic long-term client relationships. 97.5% of our

revenues come from existing customers• Infosys has a global footprint with 67 offices and 69

development centers in US, India, China, Australia, Japan, Middle East, UK, Germany, France,

Switzerland, Netherlands, Poland, Canada and many other countries.

DABUR• Dabur has a special herbal health care and personal care range successfully selling in

markets ranging from the Middle East, Far East, North Africa and Europe• Inroads into several

European and American markets that have good potential due to resurgence of the back-to-nature

movement• Export of Active Pharmaceutical Ingredients (APIs), manufactured under strict

international quality benchmarks, to Europe, Latin America, Africa, and other Asian countries•

Export of food and textile grade natural gums, extracted from traditional plant sources• Six

modern manufacturing facilities spread across South Asia, Middle East and Africa to optimize

production by utilizing local resources and the most modern technology available

TATA• Corus Group (U.K.) Tata Steel, one of the leading steel producers in India, acquired

Corus Group for U.S. $12.11 billion (€ 8.5 billion) on January 31, 2007 This acquisition is

considered to be one of the biggest foreign acquisitions by an Indian company, and after this only

TATA Steel came out to be the fifth largest steel producer in the whole world.

TATA• Jaguar Cars and Land Rover (U.K.) Tata Motors has acquired both Jaguar and Land

Rover, which are two iconic British brands with worldwide growth prospects This deal was for

a whooping U.S. $ 2.3 billion with Ford, the previous American owners. The deal was effective

from May 2008. The deal is seen as yet another endeavor of the fast growing Indian industries,

also the latest in a string of foreign acquisitions by Tata.

Bharti Airtel• Zain Africa Bharti Airtel had acquired Zain Africa for a value of U.S. $10.7

billion. The acquisition gives Bharti Airtel a total customer base of 180 million, including 131

million subscribers it had in India at the end of April By expanding its business outside the

country, Bharti Airtel can in the long term benefit from economies of scale, including getting

better deals from suppliers


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Aditya Birla• Novelis (U.S.)• Has acquired the entire stake in the Atlanta based aluminium

company Novelis for U.S. $6 billion• This company had separated from Alcan, a global

aluminium company

ONGC• Imperial Energy (U.K.)• Oil and Natural Gas Corp (ONGC) has acquired Imperial

Energy. This deal was for 1.3 billion pounds (U.S. $1.9 billion).• The company owed the

acquisition to government support, which in the past seven years increase its number of projects

to 39 in 17 countries, from just a single project in Vietnam

Essar Steel Global Algoma Steel (Canada) Ruias owned Essar Steel Global acquires the Canadian

steel company Algoma Steel at a valuation of Canadian $1.85 billion. Essar Steel Holding, Essar

Groups overseas investment arm made the investment possible and easy. Algoma would

definitely provide Essar an excellent platform for the Canadian and North American market

Reliance• Marcellus Shale Reliance, led by Indian billionaire Mukesh Ambani, got the right to

buy 40 percent of all new Marcellus Shale leases that Atlas acquires, after this purchase

acquisition and agreement was completed.

Acquisition Price ($m) Reliance Industries Flag Telecom, Bermuda 212 Trevira, Germany 95Tata

Motors Daewoo, Korea 118Infosys Technologies Expert Information 3.1 Services, Australia

Wockhardt CP Pharmaceuticals, UK 18Cadila Health Alpharma SAS, France 5.7Hindalco Straits

Ply, Australia 56.4Wipro NerveWire Inc, US 18.5Aditya Birla Dashiqiao Chem, China 8.5United

Phosphorus Oryzalin Herbicide, US 21.3Bharat Forge Carl Dan Peddinghaus Gmbh, Germany

28Ranbaxy RPG Aventis, France 80

WTO Regulations and their implications for India

The World Trade Organization (WTO) is an organization that intends to supervise

and liberalize international trade. The organization officially commenced on 1 January 1995

under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT),

which commenced in 1948.The organization deals with regulation of trade between participating

countries; it provides a framework for negotiating and formalizing trade agreements, and a

dispute resolution process aimed at enforcing participant's adherence to WTO agreements, which

are signed by representatives of member governments and ratified by their parliaments. Most of

the issues that the WTO focuses on derive from previous trade negotiations, especially from

the Uruguay Round (1986–1994).


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The organization is attempting to complete negotiations on the Doha Development Round, which

was launched in 2001 with an explicit focus on addressing the needs of developing countries. As

of June 2012, the future of the Doha Round remained uncertain: the work programme lists 21

subjects in which the original deadline of 1 January 2005 was missed, and the round is still

incomplete. The conflict between free trade on industrial goods and services but retention

of protectionism on farm subsidies to domestic agricultural sector (requested by developed

countries) and the substantiation of the international liberalization of fair trade on agricultural

products (requested by developing countries) remain the major obstacles. These points of

contention have hindered any progress to launch new WTO negotiations beyond the Doha

Development Round. As a result of this impasse, there has been an increasing number of bilateral

free trade agreements signed. As of July 2012, there were various negotiation groups in the WTO

system for the current agricultural trade negotiation which is in the condition of stalemate.

Principles of the trading system

The WTO establishes a framework for trade policies; it does not define or specify outcomes. That

is, it is concerned with setting the rules of the trade policy games. Five principles are of particular

importance in understanding both the pre-1994 GATT and the WTO:

1. Non-discrimination. It has two major components: the most favoured nation (MFN) rule,

and the national treatment policy. Both are embedded in the main WTO rules on goods,

services, and intellectual property, but their precise scope and nature differ across these

areas. The MFN rule requires that a WTO member must apply the same conditions on all

trade with other WTO members, i.e. a WTO member has to grant the most favorable

conditions under which it allows trade in a certain product type to all other WTO

members. "Grant someone a special favour and you have to do the same for all other

WTO members." National treatment means that imported goods should be treated no less

favorably than domestically produced goods (at least after the foreign goods have entered

the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical

standards, security standards et al. discriminating against imported goods).

2. Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise

because of the MFN rule, and a desire to obtain better access to foreign markets. A related

point is that for a nation to negotiate, it is necessary that the gain from doing so be greater

than the gain available from unilateral liberalization; reciprocal concessions intend to

ensure that such gains will materialise.


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3. Binding and enforceable commitments. The tariff commitments made by WTO

members in a multilateral trade negotiation and on accession are enumerated in a schedule

(list) of concessions. These schedules establish "ceiling bindings": a country can change

its bindings, but only after negotiating with its trading partners, which could mean

compensating them for loss of trade. If satisfaction is not obtained, the complaining

country may invoke the WTO dispute settlement procedures.

4. Transparency. The WTO members are required to publish their trade regulations, to

maintain institutions allowing for the review of administrative decisions affecting trade, to

respond to requests for information by other members, and to notify changes in trade

policies to the WTO. These internal transparency requirements are supplemented and

facilitated by periodic country-specific reports (trade policy reviews) through the Trade

Policy Review Mechanism (TPRM). The WTO system tries also to improve predictability

and stability, discouraging the use of quotas and other measures used to set limits on

quantities of imports.

5. Safety valves. In specific circumstances, governments are able to restrict trade. The

WTO's agreements permit members to take measures to protect not only the environment

but also public health, animal health and plant health.

There are three types of provision in this direction:

articles allowing for the use of trade measures to attain non-economic objectives;

articles aimed at ensuring "fair competition"; members must not use environmental

protection measures as a means of disguising protectionist policies.

provisions permitting intervention in trade for economic reasons.

Exceptions to the MFN principle also allow for preferential treatment of developing

countries, regional free trade areas and customs unions.

Undesirable effects of globalization

Globalization seems to be looked on as an unmitigated ―good‖ by economists. Unfortunately,

economists seem to be guided by their badly flawed models; they miss real-world problems. In

particular, they miss the point that the world is finite. We don‘t have infinite resources, or

unlimited ability to handle excess pollution. So we are setting up a ―solution‖ that is at best

temporary.


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Economists also tend to look at results too narrowly–from the point of view of a business that can

expand, or a worker who has plenty of money, even though these users are not typical. In real life,

businesses are facing increased competition, and the worker may be laid off because of greater

competition.

Globalization uses up finite resources more quickly.

Globalization makes it virtually impossible for regulators in one country to foresee the

worldwide implications of their actions

Globalization transfers consumption of limited oil supply from developed countries to

developing countries

Globalization transfers jobs from developed countries to less developed countries.

Globalization transfers investment spending from developed countries to less developed

countries.

Globalization tends to move taxation away from corporations, and onto individual

citizens.

Government Initiatives needed to foster globalization

Globalization of Markets: It refers to the merging of national markets into one huge global

marketplace. Globalization of Production: It refers to the sourcing of goods and services from

locations around the world to take advantage of national differences in the cost and quality of

factors of production. Falling Barriers to Trade and Investment: The falling of barriers to

international trade enables firms to view the world as their market. Technological Innovation:

Technological changes have achieved advances in communication, information processing, and

transportation technology.


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Module VIII (2 Hours)

The future of global marketing: Six major changes in global marketing

Global economies are so tightly interconnected that companies, governments and industries will

soon be forced to cooperate in ways we could not have imagined just a few years ago.

In fact, Ernst & Young believes the six trends are themselves connected by three underlying

drivers that have helped establish each trend and perpetuate it.

1. Demographic shifts. Population growth, increased urbanization, a widening divide

between countries with youthful and quickly aging populations and a rapidly growing

middle class are reshaping not only the business world, but also society as a whole.

2. Reshaped global power structure. As the world recovers from the worst recession in

decades, the rise of relationships between the public and private sectors has shifted the

balance of global power faster than most could have imagined just a few years ago.

3. Disruptive innovation. Innovations in technology continue to have massive effects on

business and society. We're now seeing emerging markets become hotbeds of innovation,

especially in efforts to reach the growing middle class and low-income consumers around

the globe.

Six global trends, interconnected by three key drivers of change


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Six global trends, interconnected by three key drivers of change

1. Emerging markets increase their global power

2. Cleantech becomes a competitive advantage

3. Global banking seek recovery through transformation

4. Government enhances ties with private sector

5. Rapid technology created innovative and mobile world

6. Demographic shifts transforms the global work force

1. Emerging markets increase their global power

Emerging markets serve as the world's economic growth engine, and the far-reaching effects of

their spectacular rise continue to play out. But their risks are often downplayed. Therefore, taking

advantage of emerging-market opportunities requires careful planning.

As the greatest hope for growth in the global economy for the past two years, the

emerging markets have become the darlings of the financial press and a favorite talking

point of C-suite executives worldwide.

Once attractive only for their natural resources or as a source of cheap labor and low-cost

manufacturing, emerging markets are now seen as promising markets in their own right.

Rapid population growth, sustained economic development and a growing middle class

are making many companies look at emerging markets in a whole new way.

The emerging markets rise, so do their companies.

Many companies that had previously posed no competitive threat to multinational

corporations now do so.

These emerging market leaders represent a major shift in the global competitive landscape

— a trend that will only strengthen as they grow in size, establish dominance and seek

new opportunities beyond their traditional domestic and near-shore markets.

In particular, we see the following trends ahead:


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Leading emerging markets will continue to drive global growth

Estimates show that 70% of world growth over the next few years will come from emerging

markets, with China and India accounting for 40% of that growth.

Adjusted for variations in purchasing power parity, the ascent of emerging markets is even more

impressive: the International Monetary Fund (IMF) forecasts that the total GDP of emerging

markets could overtake that of the developed economies as early as 2014.

The forecasts suggest that investors will continue to invest in emerging markets for some time to

come. The emerging markets already attract almost 50% of foreign direct investment (FDI) global

inflows and account for 25% of FDI outflows.

The brightest spots for FDI continue to be Africa, the Middle East, and Brazil, Russia, India and

China (the BRICs), with Asian markets of particular interest at the moment.

By 2020, the BRICs are expected to account for nearly 50% of all global GDP growth. Securing a

strong base in these countries will be critical for investors seeking growth beyond them.

Emerging market leaders will become a disruptive force in the global competitive landscape

As emerging market countries gain in stature, new companies are taking center stage. The rise of

these emerging market leaders will constitute one of the fastest-growing global trends of this

decade.

These emerging market companies will continue to be critical competitors in their home markets

while increasingly making outbound investments into other emerging and developed economies.

Working to serve customers of limited means, the emerging market leaders often produce

innovative designs that reduce manufacturing costs and sometimes disrupt entire industries.

A case in point: India's Tata Motors' US$2,900 Nano, priced at less than half the cost of any other

car on the market worldwide. A version is set to go on sale in Europe this year.

Many emerging market leaders have grown up in markets with "institutional voids," where

support systems such as retail distribution channels, reliable transportation and

telecommunications systems and adequate water supply simply don't exist.


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As a result, these companies possess a more innovative, entrepreneurial culture and have

developed greater flexibility to meet the demands of their local and "bottom-of-the-pyramid"

customers.

Emerging markets will become the new battleground

The BRICs are having a major impact on their regional trading partners and more distant,

resource-rich countries, an increasing number of which are being pulled into their economic orbit.

In 2009, emerging-to-emerging (E2E) trade reached US$2.9 trillion. This massive flow of

investment among emerging markets is well on its way to creating a second tier of emerging

market leaders.

As pressure for resources increases, we expect a battle for first-mover advantage among emerging

heroes, global players and emerging market governments in regions such as the Middle East and

Africa.

Global influence grows

Inevitably, the BRICs' growing economic strength is leading to greater power to influence world

economic policy.

In October 2010, for example, emerging economies gained a greater voice under a landmark

agreement that gave 6% of voting shares in the IMF to dynamic emerging countries such as

China. Under the agreement, China will become the IMF's third-biggest member.

2. Cleantech becomes a competitive advantage

The cleantech-enabled transformation to a low-carbon, resource-efficient economy may be the

next industrial revolution.

As this transformation accelerates, global corporations are increasingly realizing that they must

understand the impact of cleantech on their industries and develop strategic plans to adapt to this

change.

Going big: the rising influence of corporations on cleantech growth, EY's 2010 global survey of

corporations with more than US$1b in revenue, showed that cleantech is an organization-wide or


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business-unit-level initiative for 89% of respondents; 33% spend 3% or more of total revenues on

cleantech and 75% expect cleantech spending to increase over the next five years.

national strategic platform for creating jobs, fostering innovation and establishing local industries.

According to Bloomberg New Energy Finance, investment in cleantech surged 30% in 2010 over

the previous year to US$243b, double the amount recorded in 2006 and nearly five times that of

2004.

There is still a large gap between the capital required and the capital available to fuel the

transition to a low-carbon economy. Primary energy demand is expected to grow by 36%

worldwide between 2019 and 2035, with the bulk of that new energy use (93%) coming from

emerging markets.

By 2035, China alone will see its energy needs rise by 75%, according to the International Energy

Agency (IEA) report, World Energy Outlook 2010.

In the coming years, surging demand, energy prices, energy security concerns and scarcity of

natural resources will encourage governments and companies to work harder to diversify their

energy portfolio mix and to continue investments in clean energy innovation, deployment and

adoption.

This inevitable move to a low-carbon, resource-efficient economy presents an opportunity to

stake out and capture a strategic competitive position — not just for governments, but also for

innovators, investors and corporations, too.

The energy mix evolves

Renewable energy is still expensive in most places, which will limit its use in the short run. But as

wind, solar and other renewable projects scale up, their prices will continue to fall.

The IEA predicts that power generation using renewables will triple between 2010 and 2035.

Fossil fuels such as oil and coal will lose market share over time, as natural gas and nuclear power

contribute to the diversified energy mix.

There has been a surge in construction of nuclear power reactors worldwide. Natural gas, a

cleaner-burning fossil fuel, is expected to grow more important, serving as a bridge to a

renewables-based economy.


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Clean energy is a national competitive advantage

Many governments are aggressively implementing clean energy policies, setting emissions targets

and providing incentives for cleantech investing.

China, Germany, India and Brazil are gaining leadership positions in solar, wind and biofuels.

The US remains a cleantech leader because of its entrepreneurial culture and vibrant venture

capital environment. Policy-makers are betting that cleantech investments will yield other benefits

such as job creation and innovation- led economic growth.

Notably, private investment is flowing to countries with comprehensive, clear and long-term

energy policies aimed at incentivizing renewable energy use, promoting efficiency and reducing

carbon emissions.

Companies make cleantech a strategic priority

Sensing commercial opportunity, companies increasingly are building cleantech into their growth

strategies. Many are also "greening" their existing products in response to increasing consumer

demand.

Others are moving into growth areas that fall outside their traditional lines of business, hoping to

achieve first-mover advantage as the landscape evolves. For example, Google and Cisco have

both entered the home energy management space.

In the past year, corporate activity in the cleantech marketplace has significantly increased

through direct investments, partnerships and acquisitions of newly formed cleantech companies.

Raw materials are strategic assets, especially in a time of scarcity. To secure them, some

governments have turned outward. China, for example, is now deeply invested in Africa.

Companies, meanwhile, are reconfiguring supply chains, seeking greater flexibility in an effort to

mitigate the impact of raw materials shortages, higher commodity costs and price volatility. Some

businesses are protecting their supply chains by acquiring their raw material suppliers.

Steelmakers, for example, have recently bought several iron ore and coal mines in different

countries to guard against supply chain disruptions.


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Organizations are more transparent about sustainability

As concerns about resource scarcity, including energy and water, become more pressing,

companies will face increasing pressure from their stakeholders to demonstrate that their

businesses are sustainable.

Companies will also have to disclose the social and environmental impact of their business

activities. Although most sustainability reporting is currently voluntary, the broad trend is toward

greater disclosure.

More than 3,000 companies worldwide issue such reports, following such voluntary guidelines as

the AA1000 AccountAbility Principles Standard and the Global Reporting Initiative Reporting

Framework.

These voluntary guidelines may soon become mandatory.

3. Global banking seeks recovery through transformation

Three years after the financial crisis began, the global financial system remains in flux.

Regulatory clarity is nearing, but many issues remain unresolved.

Initiatives of the G20, the Basel III global banking standards and the Dodd-Frank Wall Street

Reform and Consumer Protection Act (the Dodd-Frank Act) in the US have begun to bring some

aspects of the new rules into focus.

While regulators have focused mostly on the systemic risk posed by some of the largest and most

interconnected institutions, banks are concerned with their ability to compete and the resulting

regulatory impact on returns.

The final shape of the global regulatory framework is still unclear, but it seems clear that

international banking will change in fundamental ways, including:

Limits on executive pay

Heightened corporate governance

Strengthened consumer protection

More regulation and transparency of the over-the-counter (OTC) derivatives


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Restrictions on proprietary trading and investments in hedge funds and private equity (PE)

funds in the US

Emerging market financial institutions are gaining global stature

In the developed world many financial institutions continue to recover from the financial crisis,

and, in many cases, emerging market banks are in better shape. Many rose from the crisis with

hardly a scratch.

While the traditional top two international financial centers — New York and London — remain

secure in their status, capitals of finance in Asia are rising in the rankings.

In The Global Financial Centres Index's September 2010 ranking, Hong Kong rose to third

position, while Singapore was fourth.

It is growing increasingly apparent that the banking sectors and institutions of emerging markets

— particularly those of China, India and Brazil — will make a strong move toward increasing

their presence on the global scene.

As 2011 unfolds, emerging market banks are well positioned to continue to benefit from strong

credit growth in their local economies.

However, while many emerging market banks have the scale to consider expanding into other

emerging or developed markets, there remain a number of barriers to entry, including the lack, in

many cases, of robust investment banking capabilities.

G20 initiatives will require increased regulatory oversight

In the US, the Dodd-Frank Act mandates that OTC derivatives, for example, be regulated by the

SEC and the Commodity Futures Trading Commission (CFTC).

Similar rules are also expected in the EU and the UK.

At the same time, new consumer financial protection agencies have been created and proposals to

strengthen consumer protection authorities have been proposed.

New rules limiting executive compensation are a major regulatory focus affecting the sector. The

goal is to ensure that excessive risk-taking is not rewarded. These measures include an agreement


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to lower 2010's aggregate bank bonuses in the UK from the previous year, increase transparency

and reduce clawbacks and deferred shares subject to vesting periods.

Regulation will drive up the cost of business for many large financial institutions

The substance of the new rules creates challenges. For instance, Basel III requires banks to boost

capital and liquidity levels, implement a leverage ratio, increase risk coverage for certain assets

and activities and raise standards for supervisory review.

In the US, the Dodd-Frank Act is more than 2,300 pages long and will require agencies to write

353 new rules and conduct 68 studies.

Not surprisingly, large financial institutions cite regulatory uncertainty as the biggest challenge

they face.

Their uncertainty is compounded by the fragmentation of regulations, as individual countries set

out to make their own rules.

Governments enhance ties with the private sector

The global recession left many developed countries with falling tax revenues and rising expenses.

Key emerging market countries did not experience the disruptions caused by the financial crisis,

but they face the need to develop infrastructure, educational institutions and social safety nets for

their fast-growing middle classes.

To meet those needs, governments of both mature and developing countries have three priorities:

To strengthen their finances

To deliver their services more efficiently, effectively and economically

And to make sure that the private sector grows in an economically sustainable manner and

ensures better employment

To achieve those goals, many governments are trying to further their national interests

through diverse vehicles and activities, including state-owned corporations, sovereign

wealth funds (SWFs), industrial planning and regulation.

The challenges are serious enough that we see governments taking an extremely active

role in the economy.


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Looking ahead, we believe governments will increasingly take the lead in five key areas:

Developed countries rebalance their finances

After several years of rising debt-to-GDP ratios, most developed countries are now

struggling to put their finances in order.

From 2006 through 2009, the overall developed country market debt-to-GDP ratio rose

from less than 80% to 95%.

In 2011, the debt ratio is expected to break the 100% mark. Deutsche Bank projects that the debt-

to-GDP ratio for developed countries will reach 133% of GDP by 2020.

Alarmed by these numbers, developed economies at the G20 Summit in Toronto in June 2010

committed themselves to reducing their deficits by 2013, and to stabilizing or reducing

government debt-to-GDP ratios by 2016.

Emerging markets countries expand their social benefits

Emerging markets countries with a surplus need to boost social spending on pensions, health care

and infrastructure. In some markets, a stronger safety net is intended to promote economic

growth.

Most Chinese, for example, essentially insure themselves through extraordinarily high household

savings rates. To strengthen its consumer economy, China must first convince consumers that it is

safe for them to spend.

Emerging market countries also need to improve the effectiveness of their tax administration, and

to invest in infrastructure, telecommunications, transportation, education and housing. Public-

private partnerships (PPPs) are likely to become important investment vehicles in these markets.

Aging populations and immigration inflows pose new spending challenges

Meeting the needs of people who are living longer, healthier lives will have a tremendous

financial impact. Standard & Poor's reports that the median age-related public spending for

developed economies (including health care, pensions, long-term care and unemployment) is

expected to rise from 17% of GDP in 2010 to 27% in 2050, versus 11% to 17% for emerging

market countries.


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Median public spending on age-related health care in developed economies is expected to grow

from 6% of GDP in 2010 to 11% in 2050, versus 4% to 11% of GDP for emerging market

economies.

Increased immigration flows are also expected to put upward pressure on future government

spending.

Governments direct their economies

Against the backdrop of uneven economic recovery around the globe, governments continue to be

active in economic life. An enormous amount of wealth remains concentrated under state control

in the form of SWFs.

Although SWF assets fell in value after the recession, they are set to grow again. The total assets

of SWFs are expected to climb from roughly US$3.5 trillion in 2010 to US$8 trillion by 2015,

making SWFs powerful sources of capital for years to come.

State-owned enterprises (SOEs) will remain important to defending strategic industries and

guaranteeing the adequacy of critical infrastructure in some countries. SOEs are becoming larger

and more globally competitive:

Sixty-two percent of Indian companies on the 2010 Fortune Global 500 list are SOEs.

Forty-six Chinese SOEs (excluding Taiwan-based companies) are on the 2010 list, up

from 34 in 2009.

Three of China's state-owned energy giants are now in the top 10.

Governments balance global cooperation with pursuit of their national interests

Greater globalization necessitates a new agenda for international economic cooperation, but at the

same time, diverging domestic needs are creating conflict.

The G20 agree in principle that global rebalancing is desirable to create long-term economic

growth and financial stability. Developed economies have to save more and spend less to get their

financial houses in order.

Key emerging markets need to reduce their reliance on exports and stimulate domestic demand.

Meanwhile, the need for faster economic growth is fueling new rounds of trade protectionism and

stimulus plans.


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Trade and currency issues were high on the agenda at the G20 Summit in Seoul in November

2010.

Debate centered on varying perceptions of China's valuation of its currency to drive exports, as

well as quantitative easing in the US and its potential to increase capital inflows to emerging

countries and fuel asset bubbles.

Despite fragmented views, the G20 Seoul declaration managed to reaffirm the notion of working

together, with a focus on moving toward more market-determined exchange rate systems,

refraining from competitive devaluation of currencies and pursuing a full range of policies

conducive to reducing excessive imbalances.

Rapid technology innovation creates a smart, mobile world

Over the past 25 years, the digital revolution has changed the way we work and play almost

beyond recognition. Yet the smart, interconnected world we live in now is still neither as smart,

nor as connected, as we would like it to be.

Consumers want more powerful devices and applications, while businesses seek more cost-

effective technology to cope with increasingly complex challenges.

Satisfying these demands will lead to explosive growth in data and analytics, to new competition

in almost every field, and to the disruption and realignment of many industries.

Specifically, we expect to see the following changes:

Businesses will compete on analytics to differentiate themselves

The growing number of embedded sensors collecting information about the world, and the rise of

social networks that store the data people share, will generate immense quantities of information.

IDC, a market research firm, suggests that the amount of digital information created each year

will increase to 35 trillion gigabytes by 2020, requiring 44 times more data storage than in 2009.

For example, telematics applications, similar to global positioning systems, will allow

organizations to send, receive and store information via telecommunications devices while

controlling remote objects.


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Although commonly associated with the automotive industry, telematics applications are being

developed for use in medical informatics, health care and other fields. Despite these advances in

technology, simply collecting and managing the massive volumes of data will provide minimal

value.

The real payback comes when business intelligence is applied to enable companies to make better

strategic decisions.

Business intelligence, which enables organizations to gather quantifiable data on each area of the

organization and analyze it in a way that yields information they can act on — helping them

enhance decision making, improve performance, mitigate risk and sometimes even create new

business models —; is growing in importance.

Smart mobility will change the way people interact

Increasingly, smart devices — portable tools that connect to the internet — have become a part of

our lives. In the last quarter of 2010, sales of smartphones outpaced those of PCs for the first time,

according to data from IDC.

By 2014, more smart devices could be used to access the internet than traditional computers. The

move to an increasingly mobile world will create new players and new opportunities for a variety

of industries.

We expect that new emerging market companies will be significant competitors, growing rapidly

in part because a lack of legacy systems will enable them to profit more quickly from new

technology as it becomes available.

Emerging markets will create plenty of opportunities related to smart technology, and they will

not be limited to for-profit enterprises

In Kenya, for example, mobile phones are being used to collect data and report on disease-

specific issues from more than 175 health centers serving over 1 million people. This technology

has reduced the cost of the country‘s health information system by 25% and cut the time needed

to report the information from four weeks to one week.


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Technology blurs boundaries

Many industries will be disrupted by the consequences of technology innovation. The "blur"

created by digital technologies will intertwine geographies, economies, industries, products and

even private and business lives. Technology insiders have long spoken of "true convergence," and

this is it.

As smart devices become increasingly accepted, companies will move into adjacent markets to

exploit new revenue models such as mobile commerce and mobile payment systems. Already, a

number of data and tech giants are jockeying for position.

As these waves of disruption continue, whole new markets will be created even as long-

established businesses are destroyed. In this changing environment, network providers, for

example, will be faced with a choice: either evolve into the role of innovation provider, or be

content simply to serve as a utility.

Over the long term, the ultimate blurring of boundaries might take the form of Web 3.0 — often

called the "semantic web" — a term that refers to functions and activities involving the

integration of machines, the web and human beings. Currently the stuff of science fiction, the

semantic web is nevertheless an area to watch.

Cloud computing takes off — finally

Analysts have been talking about cloud computing for years, but cloud-based services are finally

starting to take off.

By 2016, Gartner, a consultancy, expects all Forbes‘ Global 2000 companies to use public cloud

services, transforming much of the current IT hardware, software and database markets into

infinitely flexible utilities.

When cloud computing becomes widespread, it will transform businesses and business models,

potentially reducing both initial and recurring costs for IT buyers, increasing their flexibility and

lowering their risks. What‘s not to like about an infinitely scalable, pay-as-you-go business

model?

Despite concerns related to data security, privacy and business continuity, its value proposition

makes the success of cloud computing inevitable. Over time, cloud-based services will grow

increasingly sophisticated and evolve into full-scale business processes as a service.


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The power of the individual will spur innovation

Google, Facebook, Twitter, smartphones, tablets and e-readers — technologies that originated in

the consumer space — are now reshaping the way companies communicate and collaborate with

employees, partners and customers.

Through the new possibilities for "social listening," businesses are able to better understand what

their customers and employees need and want.

More change can be expected when the generation that has grown up with new technologies and

instant information gratification joins the workforce.

For example, by 2014, Gartner forecasts that social networks will become the main form of

business communication for 20% of employees worldwide.

Government’s role in innovation grows

Governments will increasingly become involved in technology, investing in a broad range of

applications — from home-grown innovation incubators to local manufacturing sites that create

jobs and manage geopolitical risk.

In cloud computing, for example, governments are taking the lead, much as the US did in the

development of the internet.

In China, the Beijing Academy of Science and Technology has built the country‘s largest

industrial cloud-computing platform, designed to serve small- and medium-sized enterprises in

government-supported industries, including biotech, pharmaceuticals, new energy and

knowledge-intensive manufacturing.

At the same time, governments haven‘t forgotten their regulatory role. As citizens share more

personal data on websites such as Facebook, many governments are considering regulations to

protect citizens‘ privacy and corporations‘ data.

The EU is developing stricter privacy rules, including an "online right to be forgotten," which

would require websites to delete data permanently at an individual‘s request.

However, the public pressure to strengthen privacy protection through legislative means is likely

to vary by region. Consumers in regions such as North America, for example, seem willing to

trade some privacy in return for customized service.


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Demographic shifts transform the global workforce

Despite a growing global population, the availability of skilled workers is actually shrinking, and

no longer just in advanced, aging countries such as Japan and Italy. Now, some emerging

markets, such as China and Russia, are also feeling a demographic pinch.

The data suggests that this is only the beginning. A ―demographic divide‖ will soon arise between

countries with younger skilled workers and those that face an aging, shrinking workforce. The

war for talent will become increasingly acute in certain sectors, especially areas requiring high

skill levels and more education.

More specifically, we expect:

Labor force demographics will shift profoundly

Despite projected growth in the global population from 6.9 billion in 2010 to 7.6 billion in 2020,

the working-age population is expected to decline in many countries. Japan already has more

people exiting the workforce than there are workers prepared to enter it.

In the European labor market, 2010 marked the first time more workers retired than joined the

workforce. While this labor gap is a relatively manageable 200,000, it will surge to 8.3 million by

2030.

By the end of this decade, other large economies such as Russia, Canada, South Korea and China

will also have more people at retirement age than are entering the workforce. Other, younger

countries stand to profit from those trends.

One-third of India‘s population is now under the age of 15.

Other emerging market economies with young labor forces such as Brazil, Mexico and Indonesia

may benefit from a demographic dividend, a surge in productivity and growth as those workers

join the labor pool.

But the dividend pays off only if the country provides its youth with adequate educational and

economic opportunities to develop their skills.


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There is a growing mismatch between the skills employers need and the talent available

An estimated 31% of employers worldwide find it difficult to fill positions because of talent

shortages in their markets, reports the 2010 Talent Shortage Survey from Manpower, an

international employment agency.

When it comes to attracting employees with critical skills, the task becomes even more

challenging. Today, 65% of global companies and more than 80% of companies in fast-growth

economies are having problems finding employees with the skills they need, according to Towers

Watson, an HR consultancy.

Why can‘t companies find the right talent despite the growing ranks of college-educated workers

and the high unemployment in some of the best-educated markets?

Part of the answer has to do with the rising skill level needed in the evolving global economy.

Another element is the failure of educational systems to produce an adequate base of talent to

meet these changing needs. Although educational access is growing worldwide, not enough

students graduate with the skills desired by global employers.

―Generation U‖ and women to fill the skills gaps

Desperate for workers, many companies will become more accepting of diverse employees,

particularly older workers and women.

The leading US advocacy group for retired people, the AARP, believes that 80% of baby boomers

will keep working full- or part-time past their current retirement age.

The Pew Research Center predicts that Generation U (unretired) workers will fuel 93% of the

growth in the US labor market through 2016.

Women, an increasingly well-educated source of talent, have entered the workforce in ever

greater numbers in recent decades. However, their talents are still often underutilized.

This is particularly true in societies with traditional views of gender roles, including many fast-

growing economies.


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The talent market is increasingly global and mobile

Economic development and greater integration across markets in the past few decades have

caused many talented people to explore career opportunities overseas.

Cross-border migration has grown 42% in the last decade, from 150 million to 214 million, with

most of the traffic directed toward OECD countries.

Higher unemployment in developed markets has discouraged many migrants recently. Between a

lack of opportunity and local hostility to migrant workers, more would-be migrants are staying

home.

New legal restrictions also have created a disincentive.

As the economy recovers, however, demand for labor is expected to bounce back — and

migration along with it. Some countries have taken initial steps to soften or reverse restrictive

policy changes that they implemented at the height of the recession.

The dramatic growth of emerging market countries is also beginning to change migration

patterns. Although developed markets are still a top choice for economic migrants, we are

increasingly seeing reverse migration as well.

According to the World Economic Forum, ―The return migration of highly skilled workers to

their home countries is a growing trend for emerging countries.‖

Employees gain more bargaining power

Over the past 20 or 30 years, the bond between company and employee has weakened, even in

corporate cultures where loyalty was once prized.

Fast-changing company needs and a desire to cut costs led first to more frequent layoffs, and then

to nontraditional relationships where the expectation was not decades of service, but only a few

years.

In a period of high unemployment, this new social contract is an advantage for the employer. But

as the market turns, skilled employees should benefit. They will want a better understanding of

their employment options and a greater say in how work is assigned, assessed and rewarded.


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The employer will no longer define the workplace; rather, employees‘ priorities and preferences

will dictate what the future workplace will look like, particularly now that technology makes it

easier than ever to design a variety of flexible arrangements.

Companies operating in aging societies will have to craft methods to engage or re-engage the

experienced base of talent. Companies that fail to respond to this change and do not succeed in

redefining their employee value proposition will fail to attract, retain or develop talent effectively.