mba intl mktg

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INTERNATIONAL MARKETINGMBA-IV SEMESTER

Course Objectives:

The course objectives are to familiarize the students with the Internationalmarket and to understand the working of International Organizations andtheir changing role in the context of globalization of the world economy.

Course Contents:

Unit I Introduction, Meaning & Concepts of InternationalMarketing, Distinctions between Domestic & InternationalMarketing & International Trade, Barriers to International

Marketing.

Unit II International Marketing Environment- Economic, Social,Cultural, Political & Legal Environment, Factors affectingInternational Marketing Environment.

Unit III International Marketing Strategies-, Product Strategy, PricingStrategy, Promotion Strategy & Distribution Strategy.

Unit IV Export Procedure & Documentation, International EconomicInstitutions-IMF, World Bank,

Unit V General Agreement on Tariffs and Trade (GATT), World TradeOrganization (WTO), United Nations Conference on Trade andDevelopment (UNCTAD), European Union (EU).

Suggested Readings:

1. Mishra M. N. -International Marketing Management, Oxford &

IBH Publishing, 19932. Varshney R.L. & Bhattacharya B., International Marketing

Management, Sultan Chand & Sons, 19993. Cherunilam Francis, Global Economy and Business

Environment, Himalaya Publishing, 2001

4. Bennett Roger, "International Marketing", Kogan Page Ltd, 1995


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International Marketing Management

UNIT I

IntroductionInternational marketing consists of certain special features, which make it quitedistinctive to domestic marketing. Marketing denotes the concept of marketingmanagement whereby prices, product, promotion, physical distribution and packaging areto be managed keeping in view the international environment.

Meaning and Concepts

International marketing is the marketing carried on across national boundaries. PhilipKotler has defined marketing as "human activity directed at satisfying needs and wantsthrough exchange process".' It is potential exchange for the purposes of satisfyinghuman needs and. wants. It is a technique used to the conversion of potential exchanges

into realised exchanges. International marketing is the marketing techniques involvedbetween countries. It is beyond the boundaries of the country. Marketing within theboundaries of a national can be termed as domestic marketing and marketing activitiesbeyond the boundaries of the country are termed as international marketing.

Cateora and Hess have defined international marketing as "the performance ofbusiness activities that direct the flow of a company's goods and services to consumersor users in more than one nation".

He pointed out that the difference between domestic marketing and internationalmarketing is that the activities take place in more than one country. It involves complexand diverse problems. The marketing principles are applicable to domestic as well as

international marketing. There is need of marketing as a separate subject for internationalactivities because of the environment within which international marketing has tooperate. The markets and consumers living beyond the frontiers have different needs,wants and behavioral attitude and the international marketers may have to deal with themdifferently.

Business activities are directly and primarily concerned with the recognition of thedemand and potential demand, stimulation of demand through promotion and selling andsatisfaction of the demand by the product. Warren J. Keegan has pointed out" foreignmarketing is marketing in an environment different from that of the home or baseenvironment". The activities performed by business enterprise to promote, support andcontrol the penetrations and development of international market from a production baseeither inside the country or outside the country. Product development, pricing, marketintelligence, distribution and promotion of marketing activities across the national

boundaries are termed as international marketing. International marketing covers thoseactivities, which are performed at international level.

INTERNATIONAL Vs. DOMESTIC MARKETING

The international and domestic marketing are similar in many cases. In both themarkets, success of marketing depends upon satisfying the basic requirements of theconsumers. They have to find out the buyers' needs. It is necessary to win over theconsumers and develop goodwill in both the markets-domestic as well as international


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markets. Research and development is essential in both the markets. Although the sameprinciples of marketing apply to the domestic and international markets, the preparationof marketing strategy abroad is somewhat very different. There is severe competition ininternational marketing. The goods and services have to move across national boundariesin case of international marketing, which have to face a number of restrictions viz., tariffsor customs duties, quantitative restrictions, exchange control, and taxes. The differences

between domestic marketing and international marketing are also due to different legalsystems, monetary systems, and lower mobility of factors, differences in procedures anddocumentation and differences in market characteristics.The differences between domestic and international marketing are entirely because of thedifferences in national environments, differences in the organisation and programme. Theinternational marketing is found in the diversity of problems and the variety of strategies.International trade agreements may cause further distortions. The international marketinginvolves different types of languages, culture and traditions. The domestic marketingworks within a few languages, culture and traditions. Patriotism does not help ininternational marketing but it is, very helpful to domestic marketing. The domesticmarket is much more homogeneous than that of international marketing. Domesticmarketing deals with one currency whereas international marketing deals with severalcurrencies. Domestic marketing has uniform economic climate while international

marketing has varied economic climates. Political factors and government interferencesare least in domestic markets but they count maximum in the international markets.Considerable financial and non-financial risks are present in international markets.Transport cost influences marketing decision to a great extent.

International marketing generally has been divided into foreign marketing andmultinational marketing. Foreign marketing is marketing in environment different fromthat of the home or domestic environment. Multinational marketing is world oriented. Ithas two or more national markets across the national boundaries. It arises because acompany is simultaneously marketing its products in more than one nationalenvironment.

INTERNATIONAL MARKETING VS. INTERNATIONAL TRADE

International marketing and international trade are interchangeable. But they are notthe same in real sense. The international trade is primarily related to exports and imports.It takes place when buyers find foreign markets cheaper and sellers find them moreprofitable to dispose them of. The comparative cost and natural resources have been thebasis of international trade.

The international marketing is a wider connotation. It is confined not only to sale andpurchase and depending on the international trade theories, but it is a new discipline andstrategy to export for survival and widening of the existing markets for growth. Whileinternational trade is primarily concerned with balance of trade and payment problems,The International marketing aims to expand the existing markets in foreign countries and penetrating new markets by applying various strategies of marketing management.International marketing is the means of achieving the profit by selling or persuading a

potential customer to buy the product. The needs, wants and preferences of the customersare the determinants not only of product characteristics but also of pricing, distribution,advertising, promotion and services. The total set of marketing activities known, as themarketing mix is the components of international marketing. On the other hand, inter-national trade is least concerned with these individual activities.

International trade has been developed as a result of government's efforts. The countryas a whole bothers about the international trade whereas individual marketers devote theirefforts to achieve profits in the international market. The international trade views theprofit as a function of sales and the international marketing view the profit as a function


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of providing customer benefits.

Barriers to International Marketing

International marketing as discussed above is not free from difficulties and barriers.

The marketer has to follow time-consuming procedures and meet the trade regulations.The tariffs and taxes increase the prices of goods to be marketed. It creates toughcompetition with the domestic goods. The trade restrictions also influence the volume ofgoods to be exported. It indicates that there are several barriers to internationalmarketing. Generally these barriers are divided into two parts:

(i) Tariff barriers and

(ii) Non-tariff barriers.

(i) TARIFF BARRIERS

The tariff barriers are the barriers of taxes imposed on the export and import of goods.During the period of laissez faire, such barriers were very nominal. Even today, countriesadopting bilateral or multilateral agreements lessen such barriers. Originally the tariffswere imposed to meet the revenue requirements of the country. The government is in acomfortable position to impose taxes to meet the expenses of security, defense andadministration of foreign trade. Gradually the tariffs became a successful instrument toprotect indigenous industries against the competition from the foreign products.The tariff makes the imported product costlier and the product of indigenous industriesbecome cheaper. The import duties collected are used to subsidies the costs of productionof indigenous industries. The tariffs or duties may be levied as a fixed percentage of thevalue of imported goods. Fixed sum of money may be charged upon the commodity. Amodified value added method is being used to buy taxes on import and export. Tariffbarriers may be export duties, import duties, transit duties, subsidies duties and anti-

dumping duties.a) Export Duties: Export duties are levied to acquire revenue as well as to meet therequirements of the consumers. The export of raw material is discouraged by levying ahigher rate of export duties making export of raw material costlier. It helps to provideadequate raw material to domestic industries. However, the export duties are levied atlower rate on the export of manufacture goods to promote a higher amount of export. Theexporting country levies export duties to collect revenue on the export of rarecommodities. The exporter cannot avoid payment of export duties and has to follow thepolicies of government.

b) Import Duties: Import duties are generally levied to protect indigenous industriesagainst foreign industries. It makes imported goods costlier making the domesticproduction cheaper which may invite more market. Import duties may be levied for

collecting revenue. The protection policy of India has levied such duties in the early oftwenties of the twentieth century. Import duties have been levied by the government toprotect domestic industries against the aggressive and unfair competitions of foreignproducts. The third purpose of import duties is to rectify the unbalanced trade payment.The import duties are not uniform to all products but the imported products are dividedinto several categories depending upon their utilities in the national economy for thepurposes of levying import duties.

c) Transit Duties: Transit duties are levied on the goods and products passing through a


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territory, which provides the shortest route. Had the goods and products been shipped bythe normal route, the cost of transportation would have been higher. So they ship theirproducts by the shortest route. The territory, therefore, is in a favourable position to levysome taxes of the goods passing through it. The transit duties were common in the oldage but it is now very nominal to meet the expenses of port-administration. Transit dutieshave been used to restrict trade in some cases.

d) Anti-Dumping Duties: When the exporting countries do not get a proper place inforeign market, they sell their product below the normal price or below marginal cost of production to capture the foreign market. It is known as dumping. The importingcountries levy some duties on such goods to protect the domestic product. Thus, theinternational marketer finds it difficult to export its product. He has to adopt suchpolicies, which may manage the export of goods in case of dumping of goods.

e) Monetary Barriers: Government can effectively regulate international trade byexchange control restrictions. Differential exchange rate is an indigenous method ofcontrolling imports.

(ii) NON-TARIFF BARRIERS

Non-tariff barriers create difficulties in exporting of goods. These non-tariff barriersare generally rules, regulations and restrictions.These are not the duties or levies. They may be quantitative restrictions, foreign exchangeregulations, technical and administrative regulations: health and safety regulations, priorimport duties, legal formalities, state trading and procurements.

a) Quantitative Restrictions: The quantitative restrictions may be normally imposed inthe form of quotas and licenses. The quotas may be universal or bilateral depending onthe situation. The quantitative restrictions are more selective. The licenses may begiven on restrictive basis to slow down the speed of imports. The international marketerhas to manage its sale within the constraints of quotas and licenses. He ha... to followthese restrictions and regulations.

b)Exchange Regulations: The exchange regulations are adopted to regulate Imports andto restrict import to make the trade balance favourable or correct the unfavourablebalance of trade. Unless the regulations' are followed or clearances are made, the" customauthorities and import administrator will not allow import of the goods. The marketer hasto see that the trade regulations are followed.

c) Technical Regulations: The technical regulations are mainly in terms of production-quality. The quality of food and dresses, mechanical standard of electrical goods andmachinery and many other technical standards have to be maintained by the exportingcountries so that the product may be accepted by the importing country. The standard laiddown by the importing country should be strictly adhered to by the exporters. Sometimes,their discretionary powers create more problems of easy flow of goods.

d)Health and Safety Regulations: Health and safety regulations are imposed on the foodproducts by the importing country. The environments are becoming difficult to importsuch goods. The packing, labeling and processing are examined by the importing countryand non-compliance of such regulations makes the international marketing very difficult.Sometimes, the exporting countries are unaware of the regulations and have to sell theproduct at very low rate because returning back of such products may involve more costs.The international marketing, therefore, requires knowledge of such regulations.

e) Import Deposits: The issue of import licenses requires deposit of import-value. Theimporting authorities may require the exporters to deposit hundred percent amount of


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export-value with the importing authorities. This deposit is security money to issuelicense. Generally, this deposit is required from the unfamiliar exporters.

f) Consular Formalities: The importing countries need some formalities to be fulfilled,viz., certified invoices, import certificates, consular's certificates and use of languages ofimporting countries. The importing countries may levy heavy penalties if thedocumentation formalities are not compiled with. The documentation fees are also levied.

g)State Trading: The foreign trade is governed by the government which frames severalimport and export policies. These policies change from time to time according to theireconomic plans.

UNIT II

International Marketing Environment

International marketers are facing a diversity of marketing environment in which theyhave to operate their business. The international marketing decisions are constrained withthe environments. These factors influence the marketing system. The environment hasbeen varying from country to country making it difficult for the marketer to cope withdifferent situations of different nations. Realisation and understanding of differentculture, tradition, political Systems, and other factors of all countries. There are severalfactors influencing marketing decisions. They may be termed as controllable anduncontrollable factors. The controllable factors are product, price, promotion anddistribution. These are also known as internal factors or marketing mix. These are called

controllable factors because the marketer can exercise some sort of control over thesefactors. The factors which are uncontrollable are known as environment or externalfactors which shape the market mix decisions of the international marketer. Theenvironment may be economic, social and cultural, political, regional and legal. These areanalysed in the present chapter.

Economic Environment

The economic differences of various countries influence the market significantly. Theeconomic capacity of a country has direct impact on the pattern of buying and selling bythe people. The differences in the standard of living have relevant bearings on the marketsystems. The per capita income is the basis of a particular standard of living. The percapita income has been used to classify the world economy into developed and

developing economy the developing countries, say countries having per capita incomeless than $2500 are having simple market. These countries have subsistence level and nowide and complex market. As per economic development of the countries, the per capitaincome rises giving more purchasing power to the

IncomeThe income of people is a more valuable economic variable to decide the pattern and

structure of international marketing. Population of the country cannot be ignored becauseit is population after all which has to purchase particular goods or services. The per capita


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income has been therefore used to decide the level of living standard and purchasingbehaviour. One should not be misguided by the gross national income. The disposablepersonal income per population is a deciding factor to determine international marketingmix. The household habits are simultaneously decided by the marketer to assess thepattern and trend of market.

The exchange rate becomes an important decider of standard of living because the per

capita income in dollar term may be low but in local currency, it may be as good as percapita income in the USA. Therefore the prices of goods and services in local currencydecide the purchasing power of the consumers at the given per capita income. Goods andservices, which enter in the international market, are decided at the international pricesbased on the foreign exchange rate. For example, industrial products sold in foreignmarket bear the international price and no local price is of much use. The less developedcountries have low price rate as compared to those of developed countries. Therefore, theUN-International Comparison Project (ICP) has developed a method for measuring totalexpenditure directly comparable to estimates of per capita income. The World Bank hasgiven this figure on the basis of exchange rate. The ICP is considered more sophisticatedmeasure. For example, India's real income comes three times greater than the incomecalculated on the basis of exchange rate.

The standard of living at a particular level of income is decided by the prices of goods

and services and also on the basis of per capita income. On international level,comparison of per capita income on local currency or USA dollar based on exchange ratemay not give the correct figure. Therefore the ICP has taken these two factors intoaccount to decide the level of living in a particular country.

Population

Population is an important factor to determine market potential. It was observed thatabout 60 per cent of the world market was accounted by 10 most populous countries. Theworld trade and population increased simultaneously. During the second half of thecentury world population increased at a higher rate. Consequently, the world market alsoincreased significantly. It is natural because the demand for food, clothing, shelter,education, etc. increase as per number of consumers increases. However, the market does

not increase at par with increase in income. The developing countries with maximumpopulation have different market patterns. The developed countries have low population.The basic necessities are the predominant needs of the developing countries whereas thedeveloped countries require the latest and sophisticated articles.

Age and Education

The number of inhabitants is the guiding factor to decide the market pattern. Thedemographic features are similarly more important to decide the market potential andtrend of the market. Working force may need different types of commodities and serviceswhereas the dependents need basic articles for their growth and survival. Developingcountries have a larger number of dependent populations whereas developed countrieshave less number of dependents. The market is wide and varied for educated populationwhereas the needs of non-educated population are very simple and do not require muchof technical complexities.

Trade Pattern

The trade pattern also influences the marketing structure. The raw materials and otherresources are being exported by the developing countries to the developed countrieswhereas the industrial products are being exported from the industrialised countries to


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the developing countries. It has been observed from the data of International Tradepublished by GATT that the industrialised countries have accounted more than 65 percent of world trade whereas developing countries accounted about 20 per cent of worldtrade of which 15 per cent was shared by oil exporting developing countries. The easterntrading countries took about 10 per cent of the world trade. A major portion of export ofthe industrialised countries was exported to other industrialised countries. Thus the

competitors of industrialised countries are also best customers. Developing countrieswere also exporting a major share of their export to the industrialised countries. Easterntrading countries have exported major share of their export to eastern trading countries.The highest exporting countries have been the USA, Western Europe, Japan and Canadawhich accounted for more than 70 per cent of the world trade. The maximum importingcountries have also been these countries.

Consumption Pattern

Income is the guiding factor to determine consumption pattern and the relationship between income level and consumption pattern is known as per Engel's law. Afterknowing the consumption pattern, the market structure can be decided. Therefore, incomeis used to define market segmentation, Ernst Engel has pointed out that when income

grew above a certain level, expenditure on food as percentage to total income decreasesalthough the absolute amount of expenditure on food-articles may remain the same ormay increase. It is also revealed in term of developing and developed countries. There isinverse correlation between GNP per capita and income elasticity of demand for food.The income and consumption/pattern have important influence on the market. Forexample, the sale of air conditioners will not be popular in less developed countrieswhatsoever may be the level of hot climate. But, people of developed countries in northmost regions may not require air-cooler. The allied products' sale is also decidedaccordingly.

Social Environment

The social environment shapes the international marketing in different manner.

Consumer-behaviour and purchasers' practices are greatly influenced by the system ofsociety, social attitude and behaviour, social institutions and other social environment ofthe customer countries. The international marketing manager should adapt his businesspractices as per social environment of the buying countries. The marketing mix is decidedas per social environment. The primitive social system has progressed into proliferationof organisation. The government tries to serve the interests of society by controllingbusiness system and the marketing manager should understand clearly the marketingsystems of various societies. The education religion and family system are the importantcomponents of social system and these sub-parts should be clearly understood by themanager. He should know how physical goods enter in a particular society and morefrom one society to another society. He must have knowledge how various componentsof social environment influence the marketing process. The marketing implications in thedifferent social components should be properly assessed and evaluated to form propermarketing mix.

Human bahaviour in groups and social settings are guidelines to formulate laws andgeneralisations about human nature, Social interaction and social organisation. Theindividuals who compose each social class are not identical even though they are of equalstatus. People of the same social class generally live in the similar kind of houses, havesimilar food habits, dress the same kind of clothes, have similar tastes, literature andinteractions. The marketing manager having deeper knowledge of these things cansucceed and attain the objectives of sales and profit.


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Cultural Environment

Culture environment is another important external factor, which mould theinternational marketing culture, and is a part of human environment. It is a sub-total ofmankind's knowledge, beliefs, morals, customs and habits of the society. It has become apertinent study of international marketing. The marketing manager when designing themarketing mix e.g. production, promotion, prices and physical distribution must considerthe culture of the customer countries. The marketing mix should be culturally acceptable.The' marketing manager's efforts acceptable as per culture will decide the degree ofsuccess. He should be culturally sensitive so that he can evaluate, appreciate and adjusthis marketing decision as per attune of the nuances of culture. The success of marketingoperations abroad depends on an awareness and understanding of the basic differences inculture of his country and of customer countries.

ELEMENTS OF CULTURE

Culture includes all parts of life. Specifically they may includethe following elements:

a. Material Culturei) Technology;

ii) Economy.

b. Social Institutionsi) Social Organisation and Family system;

ii) Education;iii) Political Structures.

c.Belief of People

d.Aestheticsi) Religion;

ii) Art; iii) Folklore; iv) Music.e.Language.

a) Material Culture

The material culture is related to the economic and commercial attitude of thepopulation; they affect favourably to increase the marketing opportunities. The materialculture has been divided into technological and economic culture.

i) Technological culture: The technological culture is related to the technical know-how possessed by the people of society. It affects the means of productionadopted for the purpose of getting different types of production. Ina poor country,high technology is considered a waste and is undesirable. The national incomecan be used in a better manner for construction of houses, clothing and food. Thesophisticated technology is, much prevalent in developed countries. Thetechnological culture is different in different countries and therefore the markethas different dimensions there. The electrical appliances are more popular indeveloped countries rather than in developing countries.

ii)Economic culture:Economy is compositors of physical and financial behaviour of thepopulation. People employ their capabilities to satisfy their wants. The production is alsoguided by the economic wellbeing of the population. The economic level of the people


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influences the distribution, exchange and consumptions. The economic culture affects thelevel of demand, the type and quality of products and functional features to direct theproduction line. The marketing system and pattern are also influenced as per economicculture. For example, the use of car is common feature in the U.S.A. whereas it hasbecome a status symbol in India. Only bureaucracy is often using the car in India. Peoplein West are materialistic in their approach whereas people in East have self-satisfaction

approach.

b) Social Institutions

The social institutions greatly shape the market. There are some unique characteristics,which are common in all the social set-ups. But many characteristics are diverse indifferent society. Value system is influenced by the value of social prestige attached tothe status symbol. The independent-attitude affects the products they buy and the savinghabits they adopt. The nationalistic and tradition motives influence the buying behaviour.They are very selective in their approaches. The free and open minded people encouragemore markets and also purchases of different products., There is need to determine thenature of social pressures to decide the market-pattern. The social institutions mayinclude social organisation and family system, education and political structure.

i) Social organisation and family system: Social organisation governs the activities ofthe people in order to live in harmony, teaches acceptable behaviour to succeedinggenerations and decides the position of men and women in society, family and socialclasses. The organisations underlie market behaviour through its important componentsand classification of egalitarian or on inheritance, material or non-material attitude,objective or subjective approach, extensiveness or intensiveness and personal or groupgain. The market is influenced by these factors.

Family system is major determinant of the market. It differs from country to countryand caste to caste. Family system decides the positions of men and women in society,family, group behaviour and social classes. They influence the market through behaviour,values and overall pattern of society, there is a close knit family units Le., thepromotional campaign is at the family unit rather than at the individual member of the

family. The French and Japanese are more closely tied with family-knit than the people inCanada and U.S.A. The Moslems consider their wives as subordinate and see with fewrights and title of recognition. However some democratic countries have accepted equalrights to men and women. There are other societies such ac; Hindu, Japanese and LatinAmerican where wives are given more liberty to manage the family affair althoughhusbands have final authority. The most free society does not believe much of family ties.American has egalitarian society where wives have equal understanding and right andthey are free to behave differently to the family heads' attitude. Since the family systemvary widely, the advertising and physical-distribution should be changed accordingly.The Christian wear white colour clothes at auspicious occasion whereas Hindus use whitecolour clothes at the time of death and inauspicious occasions. Hindus are fond ofjewellery whereas Japanese are repugnant to jewels. There may be several examples ofdifferences.

ii)Education:Education is backbone of economic development and marketing structure.The education pattern differs from country to country. Japanese stresses on learning andpractices. Indian emphasises on reasons and logic. English tells discipline and way ofworking. The market, therefore, will vary as per education-pattern. The literacy rate andgeneral level of education affect the market. In Europe, people emphasis on vocationalcourses rather than on higher liberal education. Literate people offer more market thanthe illiterate people. Educated masses have - varied need as compared to non-educatedpeople. Americans give much emphasis on the marketing management whereas Japaneselay stress on personnel management. In less educated society print media of


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advertisement have less impact. The radio and exhibition may be utilised for the effectiveadvertisement.

iii) Political institution: Political institutions form the basis of cultural environment.They influence the culture positively or negatively. In free economy particularly,capitalistic economy, people are more free to adopt their way of living, interacting andforming institutions and organisations. The socialistic and communistic systems do not

emphasise on the way of living. They have compact and controlled economy. The peoplebehave as per production and consumption pattern. Certain political institutions hindermarketing organisation or marketing of politically vulnerable products. Legal structuresdiffer from country to country. The political and legal systems are outcome of the socialinstitutions and behaviour.

c)Belief of People

The belief of people towards formation of universe has an important bearing on theculture. Religion, superstitions, belief and related structure affect the value systems,which influence the marketing.

They affect the people's habit and outlook to life. Media selection can be made on political attitude. Acceptance of certain types of clothing, food etc. is frequentlyinfluenced by religion. Superstition plays an important role in society's belief. Thesuperstition includes belief of ghosts, fortune telling, palmistry, and demons verdict.Superstitions believe that the outdoor of house should not be southward. Similarly, otherbeliefs influence the marketing pattern.

d)Aesthetics

Aesthetics have a major impact on marketing process. They may be divided inreligion, art, folklore and music.

i) Religion: Religion has been major determinant of the moral and ethical standards.

Northern Europe, Anglo-Saxon have been influenced by the Protestant who have beenhard workers and live a simple life. They give lower priority to labour-saving techniques.They have set examples to manage businesses. In Puritanical cultures, it is customary tothink of cleanliness as being next to godliness. Roman Catholic believes in humanbehaviour. They have their different culture. The Islam preaches a different type ofattributes. They prohibit liquor. Buddhism and Hinduism believe in spirituality and not inmaterialistic achievement. Their business and economic well-being have been lagging behind. The basic tenets of all religion are to be honest, sincere and truthful. Themarketing manager should analyse the fundamentals of all religions to adopt suitablemarketing strategies.ii) Art: Love of art is one of several segments of culture. Artistic tastes of people arereflected in the quality of products, advertising pattern and promotion efforts. Themarketing manager should know various methods of artistic expression, standard of

beauty and colour and unless the manager is aware of the artistic-attitude of theconsumers, he cannot correctly interpret the marketing structure and style. Wrongunderstanding of the art-culture may be negative to successful marketing. Properunderstanding of the art will attract the customer to the particular product. For example,the depiction of yellow and godly picture may invite more customers in India whereas redcolour in USA is not acceptable to people.

iii) Folklore:Folklore is very strong communication of culture. The characteristics of theculture can be easily assessed with the uniqueness of the folklore. Indians may like to usetheir local dance and drama


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Political Environment

The political environment includes laws, regulations, government action andreactionary forces of opposite political parties. The role of political parties has greaterinfluence on the marketing system of the country. The government directs and controls

the economy, which shapes the marketing system and culture of the countries. Thephilosophies and principles of various political parties and also of several organisationsand associations have significant bearings on the marketing structure. For example,international marketers have no easy entry in the communist countries whereas they canenter in capitalists countries with competitive spirits. The government's participation andintervention in economic and commercial activities have become common phenomena inmany countries although the degree of intervention may vary from country to country.The international marketer tries to find out whether his product is politically acceptable.He has to adopt such policies, which may encourage marketing in such countries. If thegovernment decides to accept foreign investment and joint venture, the foreign may getadequate market. The developing countries have been accepting foreign collaboration forthe development of basic and key industries as well as for the expansion of infrastructurefacilities. They may also attract foreign capital and skills for rapid industrialisation.

During war and internal trouble, the government may decide very selective attitudes.The government may adopt expropriation, prohibition, nationalisation etc.. The politicalrisks are always doubted in foreign countries. The international marketer must considerthe consistency of government policies, the presence and absence of controls andrelationships with the foreign countries. The foreign government can encourageinternational marketing by providing bounties and subsidies. The host country judgesevery foreign business by standards of the nations, political philosophies and attitudes ofgovernment.

The international marketer should assess the political environments-i) Political PartySystems, ii) Stability of Government, iii) Nationalism, iv) Political Vulnerability, v)Political Risks, vi) Other Risks, (vii Policies of Foreign Investment for achieving successin the foreign business.

POLITICAL PARTY SYSTEMS

The political party or government systems may take the form of democracy, socialistic,communistic, dictatorship or monarchy. These forms of government have differentimpacts on the foreign trade Le., export and imports by them. The international marketermust have knowledge of these governments and their possible impacts on his business.Without having proper understanding of the form of government, the marketer cannot besuccessful in his trade.

Its people generally decide the form of government. Its people can change themonarchy if they decide to overthrow the monarch and replace him by a popular leader.The will and desire of the masses have influenced the formation of government.

STABILITY OF GOVERNMENT

The stable government may form stable policies of trade. The permanency is morelinked with the stability of the policies. Frequent changes of government or political parties may have diverse effect on the trade, as radical changes in policies createuncertainty of market. The long-range policies and philosophies provide an opportunityto predict the stable policies. The investment in foreign countries is determined by theclimate of the countries. Unpredictable and drastic changes are more fatal tointernational market than the opposition and hostility to foreign entry in the countries


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because the marketer becomes clearer in the latter situation and may not take the risk ofsale or investment in those countries. Uncertainties will increase the risk of loss ofcapital, as instability is prone to frequent changes of form of government. Frequentchanges occur when other form often replaces one form of government. Foreign market becomes feeble when there are social discontent and national frustrations, since thereformist government may impose reprisals against foreign marketers. The changes of

head of the government are not so severe as overthrowing of the government by anothergovernment.

NATIONALISM

Nationalism is love of one's nation. The people think in the term of national interestand integrity for the economic and political organisation. The wave of nationalism isspreading throughout the world. If the nationalism will continue in its strict sense ofapplication, the world trade may face strong protectionism. The nationalism tries topreserve the national economic autonomy. The individual residents give more importanceto their national-interest than serving their own interests. The sovereignty of the state alsoknown as patriotism is identification of loyalty nationalism. Nationalism is pervasivealthough it may have different degrees of philosophy, styles and interest as per the

people's attitude. The nationalism is widespread in the sense that. No nation will tolerateunlimited penetration by foreign nationals into its economy.

POLITICAL VULNERABILITY

The political systems may be either favourable or unfavourable. The favourable politicalsystems can protect industry reduce tax rates, exemption from quotas and other types ofconcessions. The unfavourable political climate or political vulnerability can be changedwithin few months if the government is changed.The political vulnerability may take the form of confiscation, expropriation anddomestication.

a) Confiscation: Confiscation means taking over the foreign investment by thegovernment without any reimbursement. It has been practiced in many less developedcountries. It is relatively cheap to practice because it costs nothing. Government bypassing a decree can confiscate the businesses of foreigners in the country. The national

Wealth and property from the hands of foreigners pass to the local people orgovernment. Although the practice of confiscation has been I reduced to minimum, it isstill a political vulnerability. The foreign investors must be aware of such practices,which may be used by the governments.

b) Expropriation: Expropriation means taking over of foreign investment by agovernment with partial reimbursement. It indicates that the owners of the business didnot sell the investment willingly. It is justified on the grounds that the industry is

critical to national defense, national wealth, national sovereignty and economic growth.It is observed that certain industries are more susceptible to expropriation than otherindustries. Defense industries cannot be in the hands of foreigners for the sake ofnational defense. Mining, oil and other natural resources are generally not owned by theforeigners. The government tries to regulate the foreign investment keeping in accountthe national interest and protection of domestic industries.

It is observed that expropriation has not resulted in total loss to the foreign investors.The expropriation is becoming uncommon in developing countries because foreigninvestment helps achievement of desired growth as the local investors lack the will and


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skill of growth. The foreign investors can pressurise for equitable reimbursement at theexpropriation of the foreign business. The foreign investment and expertise becomeindispensable and less vulnerable because they provide adequate opportunities oftraining and management positions. The local people develop necessary skills andentrepreneurship with the collaboration of foreign investors.

c) Domestication: Domestication is the process by which foreign held corporations

have to relinquish their control and ownership. Many countries are trying to take overthe ownerships of foreign business to bring the foreign firms' activities at par with thedomestic firms. The expropriation and confiscation have been considered serious stepsof curbing and controlling the foreign investment whereas domestication is a mild stepto control the foreign investment. Domestication is transfer of ownership to nationals.The domestic nationals get opportunities of higher levels of management. The localpeople make the final decisions.

SUGGESTIONS

The political vulnerability can be reduced with certain precautions. The investors haveto accept the challenges and conditions of the host country. If the country is interested insocio-economic goods, the investors should cope with the requirements. The fear ofmultinationals' interest e.g. exploitation of labour, market and raw materials have to beencountered. The multinationals should cooperate with the policies of host country. Theyshould accept the profit participation. The Singer, the General Electric Company, theSears, the Xerox Corporation and Pflzer Companies are the important multinationals,which have adapted with the requirements of the host country. Joint ventures are lessvulnerable to political restrictions. The multinationals may avoid domestication by sellingequity to nationals at fair prices, prepare nationals for top decision making positions,integrate local companies into worldwide marketing programmes and meet otherrequirements of the host country. These companies should develop cooperative attituderather than conflicting attitude with the government.

POLITICAL RISKS

Political risks are generally related to political attitude and the law and order problemsof the country. War and disturbances have adverse impacts on the business and theforeigner may hesitate to invest in those countries, which are politically disturbed. Thechanges. in government will lead to uncertain business environment. The governmentmay be suspicious about the foreign investment and may adopt unethical practices. Thepeople may loot and destroy the businesses of foreign investors. There may not be anysafety and security to the foreign businesses. Government may stop outflow of profit tothe investors' countries. Illegal atmosphere may dominate the situation as no systematiclaw and order prevails. The military personnel do exercise some immoral pressures on theforeign business in their countries. Foreign businesses and investors are suspected asspies of their countries. This situation becomes out of control and the foreign investorstry to close down their businesses in such country. If no political shelter is available, they

have no other option but runaway from the country - Such examples are not rare; riots,arson, looting fire, troubles etc. are pervasive in such countries. The foreign investorsshould not invest in such countries and should try to relinquish the countries at the timeof political risks. Special precautions are exercised in investing in troubled countries.

OTHER RISKS

There are several other risks to which foreign investment and international marketingare exposed. Some of them may be exchange controls, import restrictions, tax controls,


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price controls and other risks. If a nation faces shortages of foreign exchange, it canlevy some restrictions on movements of capital to conceive the foreign exchanges. Thegoods and services to be imported may be categorised as necessities or luxuries. Thenecessities are put under favourable exchange categories whereas luxuries are heavilycontrolled to preserve foreign exchange balances. Exchanges control is exercised toavert difficult balance of payments problem. The host country can limit profit

remittance to the investors' countries. The country can regulate the currencyconvertibility to avoid sufferings from economic setback or shortage of foreignexchange reserves.

The import restrictions are selectively utilised to conserve several important resourcesfor the development of domestic resources. Raw materials, machines and spare parts arecontrolled to be exported to other countries. The government does not allow outflow ofsuch resources particularly when such resources are scarce in the country. Excessiveprice controls and taxes may be levied on the movements of resources from one countryto another. Drugs, medicines, gasoline and essential food articles are subject to pricecontrol. The inflationary trend becomes more harmful if costlier imports are allowed. Thetaxes or profit may partially limit the outflow of the profit to the investing countriesthough it discourages the foreign investment.

Strong labour unions and nationalism cause difficulties to the foreign investors.

Layoffs may be forbidden. The multinationals may face such unavoidable problems.They have to be very practical to solve the problems by seeking the cooperation of thegovernment rather than using their control mechanisms. Local unions sometimesoppose the management policy and create problems of smooth functioning's of theorganisation. The host government can come to the rescue of such multinationals iftheir contributions to the nation's economic well-beings are established.

International Legal Environment

There are different legal systems in each country of the world. The international marketershould know the relevant laws and regulations of the customer countries. There may be severallegal difficulties pertaining to patents and trade marks, price controls, warranty and after-sale

services, packaging laws, product quality laws and controls, resale price maintenance,cancellation of agreements and so on. The international marketer should know the rules ofcompetition, restrictions, discrimination, promotion and pricing. He should be aware of the legalenvironment and business issues related to the environment.

BUSINESS ISSUES

The business issues related to legal environment may be establishment, resource,patents and trademarks, expropriation and domestication, taxes, antitrust and bribery.

The conditions relating to establishment of trade are governed by the internationallaws. The businessman should ensure that he would be treated nicely in the host country.The right of establishment is reciprocal. There may be nondiscriminatory treatment withthe foreign firms if the member countries are agreed to their mutual help. The hostgovernment may impose the jurisdiction of its own laws on the foreign businesses in thecountry. The local as well as international regulations have to be followed for theestablishment and starting of the business.

INTERNATIONAL LAWS

International laws are those rules and principles of states, which are binding uponthemselves. The laws may belong to one country or to more than one country pertaining


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to property, trade, immigration etc. Laws not mutually agreed upon cannot be binding tothe countries. If one nation refuses to submit to arbitration or does not recognizeunfavourable Judgement, the other nation can do nothing. Thus, there is need of mutuallyagreed international laws. Previously laws were decided on state-by-state basis. Thecommon laws governing the British Domain were applicable to all the colonies and alliesof Great Britain. The Roman laws were also used for the purpose of civil, commercial

and criminal laws. The commercial laws have their own administrative structure,property rights and other formal laws. The common laws were based on previous rulingsand traditions. The property laws were based on ownership. International laws were usedfor preventing war or dealing with problems of war. They have been related with theactions of sovereign states and were not related to individuals.

In absence of any suitable commercial laws governing the international marketing, themarketers face multiple national laws. Laws of several nations, rulings and local customsand other national regulations have to be known by the marketer. When no legislative actor judicial decision is available, customs and usages of forward nations are used fordeciding the international commercial disputes. The considerations of humanity havebeen deciding factors of international laws.

BASIS OF LEGAL SYSTEMS

The legal systems as discussed above have been based on common law of Englandand code laws of other countries. The international marketers face problems when thesetwo laws have differing attitudes. The common laws have been the outcome of pastpractices, legal precedents, interpretations of statutes and past ridings. Interpretationthrough the past decisions has become the basis of deciding the Court cases. Thus thecustomary principles of law or sets of facts have become the basis of common laws. Onthe other hand, code law is written rule. It may be divided into commercial, civil andcriminal.

Code law is considered complete and all-inclusive. The commercial laws includeimportant provisions and rulings of code laws and common laws. Since there is nospecific recognition of commercial problems in any law, the civil laws may be appliedto them. Since the legal problems of merchants areoften unique, there is need of special

status for the business and commercial activities. Uniformity and measure ofcodifications are taken into account to codify commercial law.The international marketers have to consider the differences of code laws and common

laws. For example, ownership of a property is established by use under common lawswhereas ownership is determined by registration under code-laws. Under Code-lawsagreements may not be materialised unless notarised or registered. The common law mayrequire proof of agreement. The international marketer will have to be familiar with thesetwo laws. The nonperformance of a contract is not exercisable unless it is forbidden byunavoidable forces, may be act of God or unforeseeable human acts. The marketer mustbe aware of the two systems: Code law and Common law. In different countries, differentlegal systems are applicable. There may be differences in use of the laws in differentcountries. The international marketer should be aware of these differences andsimilarities.

LEGAL DISPUTES

There is no judicial body to deal with the international commercial problems arisingbetween individuals of two countries. The International Court of Justice and World Courtat Hague have no jurisdiction of dealing with legal disputes of individuals. They dealwith the international disputes between sovereign nations of the world. Therefore, itbecomes essential to the international marketer to know the legal systems of all thecustomer countries. The foreign marketer's operatioI1c; are tailored as per legal system ofthe countries. The dispute should be settled under the laws of one of the countries


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involved. The important question is to what country's jurisdiction does the disputebelong'? It may be settled in one of the three. Ways: (1) on the basis of jurisdiction-clausementioned on the contract; (2) on the basis of the place where contract was entered intoand (3) on the basis of place of performance. The first alternative is more appealing. Thedispute can be settled very easily if jurisdiction clause is mentioned in the contract. Inabsence of such clause, the dispute is generally decided by the place of contract entered

into.

Factors Affecting International Marketing

International marketer has to face different challenges and problems. These challengesare known as environments, which may be controllable as well as uncontrollable factors.They affect the marketing decision.

INTERNAL CONTROLLABLE FACTORS

Controllable factors are those factors, which can be influenced by the marketingmanagers. The internal controllable factors are product, price, promotion and distribution.

The internal factors can be managed by the marketing manager. These factors are alsoknown as marketing mix. It should be noticed that these factors are not perfectlycontrollable because the market situation and behaviour are not within the decision limitof the firm. One individual firm can modify and manage its product, price, promotion anddistribution according to internal and external environments.

INTERNAL UNCONTROLLABLE FACTORS

. The environments of the country wherein the marketing activities are decided andgoverned are not controllable. They may be socioeconomic climate, political forces andcompetitive structure of the market within the country. The culture of the country shapesthe size and structure of the international marketing. Culture is the pattern of learned

behaviour viz., language, habits, religious and moral beliefs, knowledge, attitudes, valuesand other behaviours of the majority of the population. Psychological and sociologicalbehaviours of the population of the country influence the marketing decisions to enter inthe international market.

Fig. 1.1. Factors affecting international marketing


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EXTERNAL UNCONTROLLABLE FACTORS

The marketing manager has to face external uncontrollable factors while taking hismarketing decision. These factors may be government regulations, political forces, socialand cultural forces, economic forces, competition, level of technology, geography, anddistribution patterns. The domestic base of international marketing tries to forecast theenvironmental conditions and adjust the marketing mix accordingly. There may be severedifficulties in adjusting the decisions as per extreme conditions of political environments,socio-economic and cultural climates. These are the main challenges to which theinternational marketing has to cope with in designing the programme. The assessing andforecasting of international business climate are difficult tasks. The alien status makes thetasks of international marketing more difficult. Political ramifications and otherconditions make the problem complex to confront. Change of governments ininternational markets becomes very critical, because it may result in expropriation,expulsion and restrictions on the operations. The uncertainty of consumers' behaviour inforeign market may require close study of operating environment. Strategy of marketingin one country may not be successful in another country.

UNIT III

INTERNATIONAL MARKETING STRATEGIES

PRODUCT STRATEGY

Developing international marketing involves planning and development of markets.The marketing program decides what products are to be sold, how to be sold and whereto be sold? The product planning is adapted as per changing desires and needs ofcustomers. The product planning is adapted based on domestically successful products.The developing international marketing includes: (1) Developing Consumer Products forForeign Markets, (2) Marketing Industrial Products and Services and (3) InternationalPromotion Strategies.

1. Developing Consumer Products

The consumers' desire and needs are constantly changing. The marketing plans andorganisation have to be aware of the changing pattern of consumers. The selling andproducing of consumers' goods basing on domestic pattern are not very desirable strategy

of marketing development. The differences between domestic market and internationalmarket have to be observed to find out a successful way of international marketing. It iswrongly assumed that the patterns of consumers desires and needs at the domestic marketwill also remain the same in the foreign market. The Self-Reference Criterion (SRC) canbe successful only with certain modifications. The national, regional and internationalplans should be developed to meet the requirements of different markets. There is need ofdeciding product standardisation, product line product adaptation, product diffusion,product innovation and consumerism for planning and developing consumer products forinternational markets.


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PRODUCT STANDARDISATION

The uniformity of product or product standardisation offers a number of advantages.Economies of scale or cost savings are significant advantages of standardisation becauseit delimits a number of models and variant products. Henry Ford demonstrated these

advantages by adopting standardized products. The cost saving is achieved in productiontechniques, Packaging, advertising and distribution. There is saving of cost in researchdevelopment. Standardized product provides more mobile consumption worldwide.Consumers can develop standardized programme in their operations. The image makingis possible with standardised production. Image of a product may create psychologicalfavour in the international markets. The technological improvement tends to favourstandardisation. The 'standardisation have been proved very successful in internationalmarketing; but it has certain limitations.

The standardisation may impose several obstacles in international marketing. Theculturally unique markets may require different types of products. Since the worldwidemarkets have different cultural and economic patterns, only different types of productscan meet their respective requirements. Standardisation is less costly and more rigid to penetrate in world-markets. The cost saving in standardisation and benefits of

differentiated products should be compared to decide the product specifications. It iswell-settled policy that slight modifications in the standardised products should be madeto meet the varying requirements of the consumers.

PRODUCT LINE

International marketing planners should consider the product line to meet the differingrequirements of consumers in different countries. The quality, quantity, prices and promotion planning have to be adapted as per needs and desires of the varyingconsumers. The marketer may decide either to sell the same product throughout the worldwithout any distinction or modification or adapt the product as per tastes and needs of theconsumers. When the adaptation in the existing product does not serve the purpose of theconsumers, new product can be developed to meet their requirements.

The same product but differing promotional media can meet the requirements of thepeople having different cultures and tastes. The same product and the same promotionalmedia can be another strategy to meet the requirements of the consumers. For exampleCoco-cola have the same product line and promotion policy worldwide and have provedsuccessful in many countries. The inspecting cars of developed countries may be used astaxi-vehicle in developing countries, which requires different promotion policy for thesame product. The third strategy may be adopting new physical products with the samepromotion policy as used in the domestic markets. Fruit powder may be consumed bymixing with water or milk depending upon the habits of the consumers of differentcountries. The new product with milk is arrived at although the promotion strategy is thesame. The fourth strategy of product line is to change the product as well as thepromotion-policy. It meets the different requirements of the consumers at differentculture. Changing the design and size of clothes with changed promotional-message canmeet the requirements of clothes of different consumers in several countries. The fifthstrategy of product line is to develop product altogether with the changed promotion-policy. The tractor needs of farmers in developed countries are totally different from thetractor-needs of the developing countries. The operation, the utilization and maintenancerequire different advertising messages to educate people of these countries to use thedifferent size, shape and power of tractor. The sixth strategy of product line ismodification of product with the same strategy. Products are adapted for country tocountry with the same promotional measure. The product is adapted as per culture andeconomic levels of the consumers using the same promotion-policy.


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PRODUCT ADAPTATION

A product may be suitable in one market but may not be suitable in another market.The producer has to modify the product to meet the requirements of different markets.Functional requirements vary from market to market. The products are used for different

purposes and the many facets of product have to be exposed to meet the diversified needsof the consumers. It should be noted that the product is not the abstract commodity tosatisfy wants but is the virtue and tenets of the products to satisfy different wants of theconsumers. Since there are different needs and desires of several consumers, the productis modified to meet their respective demands. Culture is woven to shape the demandsbesides the economic characteristics. The product adaptation may take the form ofphysical adaptation and cultural adaptation.

a) Physical Adaptation: Products are modified to meet the different needs of foreignmarkets. The electrical appliance of220 volts may not be suitable to Japanese markets asthey use 110 volts electrical

party can interrupt the agreement. The barter system although full of disadvantages has

been used by many barter houses who help development of world market. .

PRICING STRATEGY

The marketing manager has to fix appropriate price for international marketing so that pricing policy is fixed within the range of prices governed by competition, marketsituations, government regulations and economic factors. The prices formulated areadministered in different manners in different countries. The pricing concepts, objectives,factors, strategies and administration are discussed under international pricing 'policy.

Pricing Concept

Price is defined, as exchange value of goods and services and it is a measure of whatone can exchange in order to obtain a particular commodity. Demand, cost andcompetition are the important factors to determine the price. The marketers are faced withgovernment regulations and taxes. The high transportation costs, middlemen's role,channels of distribution and multinationals' role greatly influence the pricing policy. Thepricing policy is influenced by political, cultural and socio-economic conditions of themanufacturer's country and of the customers' countries. The pricing strategies are decidedon the complex market situations. Some marketers may use the pricing as a tool to beatthe competition. Different marketing situation forces the manufacturer to use flexiblepricing policies. Sometimes, prices are fixed at lower level in one market and at higherlevel in another market. Price escalation, price skimming etc. are used to administer thepricing policies. The international marketers have to review the pricing policies form

time to time to make more effective pricing in the given situation, intracompanycompetition, national and international laws, international 'competitions, type of productetc.

Pricing Objectives

Pricing objectives are established considering various social obligations such as

consumers, employees, shareholders, and public interest apart from the marketing and


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corporate considerations. The pricing objectives may be divided into three categories;

profitability objectives volume objectives and others.The profitability objective is related to maximization of profit and profitability. The profitmaximisation is considered as business Objective. It aims to maximise the sale. Themarketer tries to maximise the market's share in the market abroad. This objective is used

only for those international marketers who have small business and do not believe inmarketing mix as instrument for increasing sale, and in that case price is not very usefulinstrument to maximise sale. The volume objectives or the marketing objectives havebeen the main objectives of the company whereby the prices are considered to be instru-mental to increase volume of sale or market share. The company can try to influence theprices at the final consumption level. The prices are considered along with the importantmarketing mix for expansion of the market. The total prices paid by the consumers minusdistribution prices are considered the mill net pricing which are received by themanufacturer. Marketing has considered pricing a


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buyer or middlemen. It is also known as functional discount. The manufacturer may grantcertain percentage of invoice value to the wholesalers and retailers for performingmarketing functions, particularly distribution functions. Similarly, the manufacturer mayoffer promotion allowances, brokerage allowances and other allowances for enhancingthe market share.

GEOGRAPHICAL PRICING

Geographical pricing is determined on the areas basis and logistics. The Free on Board(EO.B.); Cost, Insurance and Freight (C.LF.), Basing Points and Zone pricing are theseveral forms of geographical pricing. The EO.B. refers to the price whereby the buyerspay the freight charges. The owner's title and responsibilities pass to the importersimmediately after loading the products on the ship or carrier. Cost, insurance and freight(C.LF) refer to the price whereby the cost, insurance and freight charges are paid by theexporters. The basing point pricing designates some place as base for charging the freightcost to the place of consumers. Zone pricing is fixed as per zone. The geographicalpricing is used to impress customers.

PSYCHOLOGICAL PRICING

Psychological pricing is based upon the assumption that certain price-range is moreappealing to consumers. Prices ending with odd number are preferred by manyconsumers. For example, they may prefer Rs. 15.95 to Rs. 16.00. Some consumers mayprefer unit pricing i.e. expressed in terms of some recognized unit of measurement.Pricing based on well formulated policy is known as creative pricing which arerecognised by many managers.

SKIMMING PRICING

Marktt skimming is a deliberate attempt to reach a segment of the market who arewilling to pay higher price because the product has high value to them. Many Westerncompanies put high price for getting the benefits of sophisticated people. The

manufacturer is in a position to recover sunk costs from the surplus of gain based on theskimming pricing. The loss in dumping is recouped by the surplus of skimming pricing.One of the several purposes of skimming pricing is to maximise the revenue receivedfrom the sale of new product before getting any competition. At a later stage, the pricesare reduced to get the benefits of lower prices in competition.

PENETRATION PRICING

Penetration pricing believes in lower prices to enter in the market. Consumer goods aregenerally demonstrated higher sale at penetration pricing. The new competition does notenter in the market because of fear of loss at lower prices. Brand popularity is increasedthrough lower prices. The penetration pricing is used for innovative product hoping towith the desire of a large number of consumers; prices may fall further as the scale ofoperation expands. This strategy is used where the market is highly sensitive to pricesand reduction in cost of production is expected in future. It discourages present andpotential competition.

PRICE FLEXIBILITY

Price flexibility assumes that the market can be attracted at different price-level andvariable pricing is more suitable where individual bargaining is involved and one pricestrategy may suit the requirement of mass selling. The variable pricing has the advantages


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of selling to different consumers. It has significant edge over the competitors' prices.

PRICE LIVING

Price living is the practice of marketing merchandise at a limited number of prices.Few prices are determined and the consumers are free to select any price fix and not

between the two price-lines. The price lines are indicative of quality. Each product linehas separate price.

PROMOTIONAL PRICING

The promotional prices are the ingredient of selling strategies. The manufacturer canoffer many prizes, additional products and other facilities. The prices may vary from place to place, customer to customer. Competitive bidding may be involved for promotional purposes. The seasonal prices and off-season discounts attract morecustomers. Cash rebates may also attract more consumers to the product. Several otherpricing methods have been employed to promote the sale.

TRANSFER PRICING

Transfer pricing is the pricing pattern for sending goods from one branch of acompany to another branch of the company. The manufacturer performs the task ofmarketing on decentralised basis in many cases. Raw materials work in progress andinventory may be transferred from one branch or office of the manufacturer to otherbranches or offices of manufacturer in other countries. The question lies how muchpricing system should be taken into account for transfer of these goods. The manufacturermay transfer the products and raw materials at direct cost or at direct cost plus overheadexpenses or at price prevailing in the market depending upon the situations andrequirements of the transfer or and transferee offices.

PRICE ESCALATION

Price escalation is the remarkable increase of the imported products' price. Theescalation is done to set off the expenses incurred by the importer for transportation, dutytaxes and margins. The manufacturer can search the international manufacturing systemto have low cost based merchandise to avoid price escalation's adverse impact on the saleand the distribution cost has to be mitigated to bring the total price at competitive level.The manufacturer can start production in the customers' countries if the price escalationbecome prohibitive. The manufacturer has to evaluate different alternatives of the priceescalation to adopt the best alternative.

PROMOTION STRATEGY

Planning for international promotion has important effect on the marketing mix.Development of a suitable promotion-strategy depends on the appropriate planning. The potential market can be exploited only at the effective planning and strategies ofdeveloping promotional media. A promotion mix includes advertising, sales promotion,personal selling and personnel of sales force. The development of promotional strategyfor the success in international marketing involves determining the promotional mix,standardisation, developing effective massage, selecting appropriate media anddeveloping worldwide marketing objectives. The development of international promotion policy faces the cultural variations which have direct impact on the markets. Theinternational promotion strategy is discussed under advertising, sales promotion, personal


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selling and managing sales-force.

ADVERTISING

The advertising has been considered an effective tool of sales promotion in national aswell as in international markets. Different media of advertising have been used in

different countries depending upon their acceptability by the potential consumers. Theadvertisement expenditure have been increasing in all the countries. The advertisementeducates people about the uses of new commodities. It changes the existing patterns ofculture and customs. Every country tries to create demand through advertisement forexpansion of market. The advertising brings together the product already made or would be made with the present and potential consumers. With the improvements of thecommunication system, the advertising is getting more popularity amongst the marketers.The advertising can be analysed under organisation challenges and media selection.

i) Organisation: The advertisement can be made by independent agencies or by thecompany itself. The company can avail the services of independent agencies which maybe either domestic agency, foreign agency, multinationals and coordinating agencies. Thedomestic agency provides local expertise. There may be several advertising agencies in a

country. The marketer has to select anyone or many of them. The international agencieshave less cost because of foreign approaches. Multinational agencies will be againcheaper because of their worldwide network. The coordinating agencies have no wide-spread branches of their own but have the facilities of coordinating activities of otheragencies. Kickbacks are prevalent in many developing countries for the agencycommission. The self-advertisement is not very effective system of advertisementbecause of lack of expertise in these areas. High level talents in advertising many have to be employed by the company, which would prove costlier. Concentration onadvertisement will be not relief funds for other purposes. There are several otherproblems of self-advertisement.

The advertisement requires effective communication which may change from time totime, product to product and country to country. The basic strategy of advertising is to

use international communication media, determine use of local marketing and creativetalents, encourage creative people, measure creativity and identify common-factors anddifferences. .

The costs and benefits analysis of the advertisement is done to decide its effectiveness.It can be used only when it can contribute economically and effectively to the company.The advertising budgets and sales thereon are compared to decide the role of advertising.

ii) Challenges: Advertising is a creative strategy. It has to face the creative challenges oflaw, language, culture, media, production and company policy. All the advertisers have toresort basic advertising policies of procedures, media and research. Every advertisercreates different campaigns for each country. The basic purpose is to motivate people to purchase the advertised products. The advertising has legal restrictions almost in allcountries. There are certain limitations on expenditures of advertisement, the media of

advertisement, type of product, price of advertised products and other aspects ofadvertisement. The advertisement may be challenged in a court of law if othercompetitors consider the claims of the advertisers as false or based on wrong notions. Theadvertisement expenditure may be taxed. The Monopoly Restrictive Trade Practices Actimposes certain restrictions on expenditure on advertisement. The legal and taxregulations are not uniform in all the countries and they vary from country to country.

International policy of advertising faces another problem of language. Differentlanguages are used in different countries. The linguistic nuances and vernaculars aredifferent in the different markets of the world. The local dialect may have quite opposite


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meaning of the statement. The illiteracy or low level of education may be another bloc ofprint media. The use of verbal media is desirable there. In Indian conditions, the verbalmode of advertisement will be more effective. The multiple languages in India have madeadvertisement more difficult. The language translation will not be very effective becauseidiomatic and figure of speeches. The advertising language requires some specific wordsand phrases which are selected after a proper understanding of the language-culture. The

communication involves the cultural heritage and social inheritance. The advertiser of thelocal language can use the word and writing very effectively reveal how far theadvertisement be resisted if the government or people are of the view that it has harmedthe consumers' interest. The advertisers have to consider these challenges in properperspective.

iii)Media Selection: Selection of advertising media is another problem of advertising planning. The advertisers are facing numerous problems in selecting media ofadvertisement because of non-availability, higher cost and less-coverage of particularmedia. The advertisers should be aware of the media-restrictions, media-convenienceand specialized media of advertisement. Many countries have very few media ofadvertisement. Some of them are too costly to be availed by an average advertiser.Some media do not commonly approach the people. Magazine, journals and newspaper

media are not very useful in India because of high illiteracy figure. Radio andtelevision may be effective media of advertisement in such countries. On the otherhand, radio and television are very costly. Government has restricted frequent uses ofradio and television for advertisement. Only permitted messages and visual designscan be broadcasted and telecasted by these media.

The coverage of advertisement will reveal how far a particular media ofadvertisement may work in a particular society. The media, massage and cost areimportant factors to decide the acceptability of the advertisement. A large number ofmedia should reach the majority of the world population. The cost factor inbroadening the coverage should be taken into account to reach even to neglectedareas. The lack of data may not substantiate the advertising policy. It requires data onincome, age, education and other market potentials. The advertisers can vary theiradvertising policies and procedures as per needs of advertisements.

SELECTION OF ADVERTISING MEDIA

Selection of advertising media is a difficult problem. There may be differentadvertising media in particular countries having their respective scope and limitations.In Indian conditions, several thousands, magazines and journals in different languagesare available. Innovative media may benefit the advertisers maximum while ignoringthe drawbacks of traditional media. The economy moves up gradually in everycountry and it changes the needs of the people. Therefore, the marketing may requirenew media of advertisement. Not only the media but the specific message andpresentations of the media are undergoing drastic changes as per economicdevelopment. Television has taken lead in this direction. It has much more impact on

the consumers. Other media of advertisement are getting less share of advertising. Theinternational marketers have to consider the changing patterns of media ofadvertisement. The specific attributes of newspaper magazine, radio, television andother media are discussed for the purpose of selection. .

a) Newspapers: Newspapers have been traditional medium of advertisement. Itcontributed significantly in market expansion and had remained a prominent medium ofadvertisement. There are lakhs of newspapers throughout the world. Selection of somespecific newspapers depends on various factors such as market potential, culture,


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language, economic status of the consumers, rules and regulations of advertisement. Thenewspapers charge very high prices sometimes, for advertising. The authentic and morepopular newspapers charge very high rates. The cost may vary from time to time and dayto day. The advertisers have to be very selective in such process. The scarcity of spacemay require pre-booking for advertisement. The lack of newsprint has added to theproblems. If the newspapers are very popular, the cost of advertisement will be very high.

The services of advertising agencies may be availed for booking advertisement in goodnewspapers although there are very few advertising agencies in India and Middle East.There are some advertising policies adopted by the newspapers to delimit the space foradvertisement. T)le international newspapers have been used for advertising international products. All the principles of selecting newspapers for advertisement are taken intoconsideration for international marketing.

b) Magazines: Magazines are selected after proper scrutiny because some magazineshave wide circulations, some have specific readers, some are totally unsuitable for thespecific messages. Technical magazines are used for industrial products whereas housemagazines are suitable for consumers goods. There are space and cost restrictions. Theeffectiveness of advertisement in a particular magazine is studied and evaluated before itsselection for the purpose. International magazines may include advertisement of

international markets. The local magazines are also suitable for the international marketsprovided the messages are carried in local languages. If technical magazines are notavailable for the technical products, the advertisement in common journals may be done.In India, technical magazines are scarce; the advertisers, therefore, adopt commonmagazines for the purpose. The advertisement in magazines must mention the distributionchannel to have effective impacts on marketing.

c) Radio:Radio has become very common medium of advertisement in almost all thecountries because of its popularity and cheaper cost per unit of audience. Even illiteratepeople can get the message of advertisement through radio. In developing countries, theradio has proved a very good media of advertisement. Some countries have speciallyearmarked commercial radio stations for advertisement. There may be some restrictionson the radio broadcasting of commercial nature. Government-owned radio has specificannouncements. The advertisement is not free and frank although advertisement by suchradio stations have much more effects on the population because it has become a rare andselective advertisement. The non-government radio channels may permit free competitionin advertisement. Since the television telecasting is costlier in many countries, the radiobroadcasting has become popular in these countries. The contents and audiences of theradio advertisements are suitably selected to give more fruitful results. The alcohol anddrug industries cannot avail the radio advertisement because of their impact on society ingeneral and children in particular. Some international broadcasting institutes arefunctioning in the international markets although their time and cost are prohibitive to beadopted by advertisers. The commercial radio stations are becoming selective inbroadcasting because of competitive attitudes developed after their broadcasting. .

d) Television: Television has become a major media of advertising. Television indeveloped countries is more popular. It reaches a larger number of populations. In

developing countries, it has not been so popular. Many audiences do not view televisionregularly. The television advertisement has to be very selective to telecast the messagesonly when a larger population view the television. In India, more than 80 per cent of thepopulation viewed television on Sunday to view the telecast of Ramayan and Mahabharatserials. It was considered very appropriate time of advertisement. Therefore 15 minutesadvertisement was permitted by the Doordarshan Department. Sunday evening moveieshave second place of attracting audience for television advertising. Many governmentshave permitted use of television for commercial advertisement whereas other countriessuch as India and China have restricted use of television for commercial advertisement.


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The time of television advertisements is limited in many countries. The audiencemeasurement is essential before restoring television advertisement because viewers oftelevision are limited in' many countries. They view television only at a specific time andthe serials. The costs and benefits of television advertisement should be compared to takea decision for television advertisement.

e) Other Media: There are other media of advertisement which can be used for

international marketing. They may be cinema, direct mail, posters, exhibitions, fairs, etc.for advertising the product, messages to local population. The international marketers canhire local advertising agents or appoint international advertising agencies to convey themessages of new products. Cinema hac; become powerful media of advertisement indeveloping countries because a larger population view the movies in absence of adequatefacilities of television and videos. Direct mails are effectively used in developedcountries. The cost of direct m

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