Transcript International Marketing

International Marketing
Prof. Kiran Sharma
K.J.Somaiya Institute of Management Studies and
Research
Global Perspective: Recent Events
Information technology boom of the late 1990s
The high-tech bust of 2001
Enron scandal
September 11th attacks on the World Trade
Center and Pentagon
Wars in Afghanistan and Iraq
Global Perspective: Recent Events
International conflict among China,
Taiwan, and the United States
2003 SARS outbreak in Asia
Global terrorism, e.g., Indonesia, London,India,
and Pakistan
Transcending these events, international
commerce continued
Global Business Trends
1. The rapid growth of the
World Trade Organization
and regional free trade
areas, e.g., NAFTA and the
European Union
2. General acceptance of the
free market system among
developing countries in Latin
America, Asia, and Eastern
Europe
3. Impact of the Internet and
other global media on the
dissolution of national
borders, and
4. Managing global
environmental resources
International Marketing: A Definition
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
The International Marketing Task
Foreign Environment
(Uncontrollables)
7. Structure of
Distribution
1. Competition
Domestic environment
(Uncontrollables)
Environmental
Uncontrollables
country market A
(Controllables) 1. Competition
2. Technology
Price
Product
Target
3. PoliticalEnvironmental
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Market
uncontrollables
6. Geography and Legal
country
Promotion Place or
Infrastructure
market B
Distribution
2. Economy
5. PoliticalLegal
3. Economy
4. Culture
Environmental
uncontrollables
country
market C
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)
Continuum
Adaptation
(of Marketing Mix)
Standardization
(of Marketing Mix)
INFLUENCED BY 7 ENVIRONMENTAL FACTORS
Developing a Global Awareness
To be globally aware is to have:
1. Tolerance of Cultural Differences, and
2. Knowledgeable of:
(a) Culture, (b) History, (c) World Market Potential,
(d) Global Economic, Social and Political Trends
Stages of International Marketing
Involvement
In general, firms go through five different phases in going
international:
No Direct Foreign Marketing
Infrequent Foreign Marketing
Regular Foreign Marketing
International Marketing
Global Marketing
Strategic Orientation: EPRG Schema
Orientation
EPRG Schema
Domestic Marketing
Extension
(Ethnocentric)
Multi-Domestic
Marketing
(Polycentric)
Global Marketing
(Regio/Geocentric)
Strategic Orientation: EPRG Schema
Generally, four distinctive approaches dominate strategic thinking in
international marketing:
1. Ethnocentric or Domestic Marketing Extension Concept:
Home country is superior to rest of the world.
Assumes that products and practices will succeed anywhere
in the world as they have been in home country.
2. Polycentric or Multi-Domestic Marketing Concept:
Opposite of ethnocentrism
Management believes that each country is unique and
allows each to develop own marketing strategies locally.
Leads to adaptation approach where products must be
adopted in response to different market conditions.
Strategic Orientation: EPRG Schema
Generally, four distinctive approaches dominate strategic thinking in
international marketing:
3. Regiocentric:
A region becomes the relevant geographic unit.
Management’s role is to develop an integrated regional
strategy.
4. Geocentric:
Company views the entire world as a potential market and
strives to develop integrated world market wherein a
uniform, standardized marketing strategy is used for
several countries, countries in a region, or the entire
world.
Foreign Market-Entry Strategies
When a company makes the commitment to go international, it
must choose an entry strategy
The choice of entry strategy depends on:
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market characteristics (such as potential
sales, strategic importance, cultural
differences, and country restrictions)
company capabilities and characteristics,
including the degree of near-market
knowledge, marketing involvement, and
commitment that management is prepared
to make
Alternative Market-Entry Strategies
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Import regulations may be imposed to protect health, conserve
foreign exchange, protect home industry, or provide revenue in
the form of tariffs
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A company has four different modes of foreign market entry
from which to select:
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exporting
contractual agreements
strategic alliances, and
direct foreign investment
Exporting
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Exporting can be either direct or
indirect
In direct exporting the company sells
to a customer in another country
In contrast, indirect exporting usually
means that the company sells to a
buyer (importer or distributor) in the
home country who in turn exports the
product
The Internet is becoming increasingly
important as a foreign market entry
method
Contractual Agreements
Contractual agreements are long-term, non-equity associations
between a company and another in a foreign market
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Contractual agreements generally involve the transfer of
technology, processes, trademarks, or human skills
Contractual forms of market entry include:
(1) Licensing: A means of establishing a foothold in foreign markets
without large capital outlays wherein patent rights, trademark rights and
the rights to use technological processes are granted.
(2) Franchising: A contract in which franchisor provides a standard
package of products, systems and management systems and franchisee
provides market knowledge, capital and personal involvement.
Strategic International Alliances
•
Strategic alliances have grown in importance over the last few
decades as a competitive strategy in global marketing
management
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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
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SIAs are sought as a way to shore up weaknesses and increase
competitive strengths
SIAs offer opportunities for rapid expansion into new markets,
access to new technology, more efficient production and marketing
costs
An example of SIAs in the airlines industry is that of the alliance
partners made up of American Airlines, Cathay Pacific, British
Airways, Canadian Airlines.
International Joint Ventures
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International joint ventures (IJVs) have been increasingly
used since 1970s
a means of lessening political and economic risks by the amount
of the partner’s contribution to the venture
a less risky way to enter markets
A joint venture is different from strategic alliances or
collaborative relationships in that a joint venture is a partnership
of two or more participating companies that have joined forces
to create a separate legal entity
International Joint Ventures (contd.)
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Four factors are associated with joint ventures:
1.
2.
3.
4.
JVs are established, separate, legal
entities;
they acknowledge intent by the partners
to share in the management of the JV;
they are partnerships between legally
incorporated entities such as companies,
chartered organizations, or
governments, and not between
individuals;
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, and
(2) They frequently operate in a
country or market in which
none of the participants is
currently active
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Consortia are developed to pool financial and managerial
resources and to lessen risks.
Direct Foreign Investment
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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
Export Procedures and
Documentation
Export procedures and documetation
• Export procedures and documentation are crucial to
international marketing, as both exporters and
importers are situated in two different countries and
are governed by different legislative frameworks
• Export documentation facilitates international
transactions and protects the interest of the
exporters and importers
Types of export documents
• Commercial documents are used by ‘custom of trade’
in international commerce by exporters and importers
in discharge of their respective legal and other
incidental responsibilities under sales contract.
•Regulatory documents are prescribed by different
government departments / bodies for compliance of
formalities under relevant laws
Eg: Commodities ( Agri) – PHYTO certificate
Pharmaceuticals –
PLANT approval( US FDA, UK MHRA, TG Australia, WHO GMP)
PRODUCT –
•Free sale certificate issued by FDA India, validity 3 years
•EXPORTS Manufacturing License (Domestic) + Certificate of Pharmaceutical
Product(COPP)
•Quality Control Labs Must follow GLP (Good laboratory Procedures)
•Certificate of Analysis mentioning heavy metal content (Pb, Cd, As, Hg)
•Material Safety Data Sheet (MSDS) asked by carrier
•Bioequivalence Studies ( Atorvastatin vs. Lipitor)
•Stability/ Efficacy Studies in different temperature zones
Commercial documents
• Commercial invoice is a document of content that provides:
- identification of shipment
- detailed description of goods
- description of quantity
• Packing list provides details of how the goods are
packed, the contents of different boxes, cartons, or
bales, and details of the weights and measurement of
each package in the consignment
•Transport documents that evidence shipment of goods, such
as bill of lading, combined transport document.
Bill of lading
• Marine bill of lading (B/L)
- a transport document issued by the shipping company to
the shipper for accepting the goods for the carriage of
merchandise
• Airway bill (AWB)
- issued by the carrier as an evidence of contract of
carriage
• Bill of lading serves three purposes:
- it is the receipt of cargo by the shipping company
- a contract of carriage (or transport)
- a document of title
Types of Bill of lading
 On
board or shipped bill of lading
 Received for shipment bill of lading
 Clean bill of lading
 Dirty (clause) bill of lading
 Through bill of lading
 Trans-shipment bill of lading
Certificate of origin
 used as an evidence of the origin of goods in the
importing country
 includes the details of the goods covered and the country
where the goods are grown, produced or manufactured
Other Documents of Importance
• Inspection certificate is related to quality of goods
• Insurance certificate provides protection to the cargo-owner, an
insurance cover is necessary while the cargo is in transit from the
consignor to the consignee
• Mate’s receipt is a cargo receipt issued by the master of the vessel
for every shipment taken on board
• Bill of exchange is an unconditional order in writing prepared and
signed by the exporter addressed to the importer requiring the
importer to pay a certain sum of money to the exporter or his / her
nominee
• Shipment advice is sent to the importer informing of the details of
the shipment
• Shipping bill / bill of export is the principal document
required by customs authority mentioning details of
shipment for exports
• Bill of entry is a document needed for customs
clearance of imported cargo
Procedure for export-import
• compliance with legal framework
• obtaining import-export code number
• registration with export promotion council
• registration with sales tax and central excise authorities
• concluding an export deal
• arranging export finance
• appointing C& F Agent
• manufacturing of goods
• arranging cargo insurance
• port procedures and customs clearance
• presentation of documents at the negotiating bank
• claiming export incentives( Duty Drawback)
• receiving payment and export incentives
Electronic processing of export documents
• use information technology in the field of international
business has facilitated computerized generation and
processing of export documents
• for electronic filing and processing of documents,
Indian customs and central excise electronic commerce
/ electronic data interchange (EC /EDI) gateway has been
created, popularly known as ICEGATE
Terms Of payment in
International transactions
Terms Of Payments
Advance payment
Open account
Consignment (Payment after sale of goods)
Documentary credit
Documentary credit without Letter of Credit
Sight Drafts (Documents against payment)
Usance or time Draft (Documents against
acceptance)
Types of credit according to methods of payments
Documentary credit with letter of credit
•Irrevocable- No change, modification or
cancellation)
•Revocable – Change possible
•Confirmed
•Unconfirmed
Revolving Credit
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