Master of Business Administration- MBA Semester 4 MK0018 International Marketing -4 Credits (Book ID: B1199) Assignment (60 marks

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KUMAR BHASKAR MBA- 4TH SEM 521106645 ZITE 01904

Q.1. Define Multinational Corporation. How is international marketing deferent from domestic marketing? Answer: A multinational corporation (MNC) or multinational enterprise (MNE) is a corporation that is registered in more than one country or that has operations in more than one country. It is a large corporation which both produces and sells goods or services in various countries. It can also be referred to as an international corporation. They play an important role in globalization. The first multinational company was the British East India Company, founded in 1600. The second multinational corporation was the Dutch East India Company, founded March 20, 1602, which would become the largest company in the world for nearly 200 years. The striking difference between international and domestic marketing lies in the environment in which the two take place. The important points of differences between international and domestic marketing are: 1. Sovereign Political Entities: Each country is a sovereign political entity and, therefore, they for importing and exporting the goods and services in order to safeguard their national interest impose several restrictions. The traders in international marketing have to observe such restrictions. These restrictions may fall in any of the following categories. i) Tariffs and customs duties on import and export of goods and services in order to make them costly in the importing country and not to ban their entry into the country completely. In the post war period, through the efforts of General Agreement on Tariffs and Trade (GATT) there has been a significant reduction in tariff globally and on regional basis due to the emergence of regional economic groupings. ii) Quantitative restrictions are also imposed with an intention to restrict trade in some specific commodities. The major objective behind the restriction is the protection of home industries from the competition of the foreign commodities.

iii) Exchange control is another restriction imposed by almost every sovereign state. The Government, in some cases, does not ban the entry of goods in the country but the importer is not allowed the necessary foreign exchange to make the payment for the goods imported. But, in some cases, exchange control and quantitative controls are put together along with the grant of import licence. iv) Imposition of more local taxes on imported goods with an object to make the imported goods costly is one of the restrictions in international marketing. 2. Different Legal Systems: Different countries operate different legal systems and they all differ from each other. In most of the countries follow English Common Law as modified from time to time. Japan and Latin American countries are important exceptions to this rule. The existence of different legal systems makes the task of businessmen more difficult as they are not sure as to which particular system will apply to their transactions. This difficulty does not arise in the domestic trade, as laws are the same for the whole country. 3. Different Monetary Systems: Each country has its own monetary system and the exchange rates for each countrys currency are fixed under the rules framed by the International Monetary Fund and, therefore, they are more or less fixed. However, in recent years the exchange rates are fluctuating and are being determined by demand and supply forces. Some countries operate multiple rates; i.e. different rates are applicable to different transactions. 4. Lower Mobility Factors of Production: Mobility of different factors of production is less as between nations than in the country, itself. However, with the advent of air transport, the mobility of labour has increased manifold. Similarly, the development of international banking has increased the mobility of capital and labour. In spite of these developments, the mobility of labour and capital is not as much as it is within the country itself. 5. Differences in Market Characteristics: Market characteristics in each segment are different, i.e. demand pattern, channels of distribution, methods of promotion etc. are quite different from market to market. If we take each country a separate market, we can assume different market characteristics there. These differences are accentuated due to the existence of government controls and regulations. However, this is a difference of degree only. Even in one single country, for example, India and America, these differences in market patterns may be found from state to state. 6. Differences in Procedure and Documentation: The centuries old laws and customs of trade in each country demand different procedures and documentary requirements for the import and export of the goods and services. The traders residing in the territory have to comply with these regulations and customs if they want import and export of goods and services. Q.2. Differentiate between absolute advantage and comparative advantage theories. Answer: Absolute advantage is used to describe a situation in which a person, corporate entity or country can produce something at a price that is lower than

others. Comparative advantage refers to a situation in which the same type of commodity can be produced with a lower opportunity cost than others. The difference between absolute advantage and comparative advantage lies in the difference between the advantages inherent in the two factors. Absolute advantage is focused on the advantage of cost, while comparative advantage is based on opportunity cost. Also, absolute advantage provides more benefits in trade than comparative advantage. Comparative advantage occurs when a product can be produced more efficiently than other people, companies or countries producing the same the good. The main benefit to comparative advantage in economics is the idea of trading a product one is more efficient at producing for a product he or she is less efficient at producing. This saves time, materials and labor, while also reducing the opportunity cost for producing the good. The reduction in opportunity cost shows a difference between absolute advantage and comparative advantage. An example of this difference is if Country A can produce 10 pairs of shoes per hour and two sets of pencil per hour, while Country B can produce 100 sets of pencil per hour and one pair of shoes per hour, both countries have comparative advantage in different items. While Country A has comparative advantage in the production of shoes, Country B has comparative advantage in the production of pencils. Both countries can mutually benefit from trading in those two items in order to compensate for the items they are less efficient at producing. Another example of the difference between absolute advantage and comparative advantage is the kind of benefits attached to an absolute advantage concerning the production of an item. Such a variance might be that Country A has an abundant resource of fresh oranges supplied by local farmers, while Country B does not have the kind of climate that permits the growth of oranges and must import its oranges from other countries. Country A has an absolute advantage over Country B in the production of orange juice simply because it can obtain oranges at a much cheaper rate and without expending too much labor, including transportation logistics. The absolute advantage Country A has is due to its close proximity to the source of the raw material, unlike Country B, which has to put in extra effort just to get the raw material needed to produce the same end product. This makes it more prudent for Country B to import the finished product from Country A Q.3. Write a short note on International Advertising. How is it important for international marketing? Answer: International advertising entails dissemination of a commercial message to target audiences in more than one country. Target audiences differ from country to country in terms of how they perceive or interpret symbols or stimuli, respond to humor or emotional appeals, as well as in levels of literacy and languages spoken. How the advertising function is organized also varies. In some cases, multinational firms centralize advertising decisions and budgets and use the same or a limited number of agencies worldwide. In other cases, budgets are decentralized and placed in the hands of local subsidiaries, resulting in greater use of local advertising agencies. International advertising can, therefore, be viewed as a communication

process that takes place in multiple cultures that differ in terms of values, communication styles, and consumption patterns. International advertising is also a business activity involving advertisers and the advertising agencies that create ads and buy media in different countries. The sum total of these activities constitutes a worldwide industry that is growing in importance. International advertising is also a major force that both reflects social values, and propagates certain values worldwide. International advertising is important for international marketing as: Communicating to a target audience that differ in term of language, literacy and other cultural factor Business activities through which a firm attempt to inform target audience in multiple country about itself and its product and service offering It provide reassurance to the consumers about there offering. firm and brand and remind

Through the selective reinforcement of certain social role language and values it act as and important for fashioning the cognitions and attitudes that underline behavior not only in the market place, but also in all aspects of life

Q.4. What are SEZs and what benefit they provide to the international trade and marketer? Answer: Special Economic Zones (SEZs) is a specially delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. Goods and Services going into the SEZ area shall be treated as deemed exports and goods and services coming into Domestic Tariff Area (DTA) from the SEZ shall be treated as if the goods are being imported. 1. SEZ units may export goods and services including agro-products, partly processed goods, sub-assemblies and components except prohibited items. It may also export by-products, rejects, waste scrap arising out of the production process. 2. SEZ unit may import/procure from the DTA without payment of duty all types of goods and services, including capital goods, whether new or second hand, required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC (HS). 3. SEZ unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. In such a case the SEZ unit and the domestic/foreign leasing company shall jointly file the documents to enable import/procurement of the capital goods without payment of duty.

4. SEZ unit shall be a positive net foreign exchange earner. 5. The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to achieve positive foreign exchange earning it shall be liable to penalty in terms of the legal undertaking or under any other law for the time being in force. 6. SEZ unit may export goods manufactured or software developed by it, though a merchant-exporter/status holder recognised under the policy or any other EOU/SEZ/EHTP/STP unit. 7. Goods imported/procured by an SEZ unit may be transferred or given on loan to another unit, within the same SEZ which shall be duly accounted for, but not counted towards discharge of export performance. 8. SEZ unit, may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/EHTP/STP with the permission of the Customs authorities. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. Sub-contracting by SEZ gems & jewellery units through units in DTA or through other SEZ/DOU/EHTP/STP units shall be subject to conditions given in the Handbook. 9. SEZ units may sell goods, including by-products and services, in the DTA on payment of applicable duties. Q.5. What are the factors that affect the pricing strategy of an international firm? What different pricing strategies can the firms adopt? Answer: There are three main factors which affect the export price strategy to be adopted by the exporter in the foreign markets viz. the characteristics of the product and the nature of its demand, the philosophy of its management and the market characteristics. The pricing strategy is a short-term tool to make fit the prices in the changing competitive situations in the short run with its pricing policy decisions. Characteristics of the product and the nature of its demand: It is a major factor in fixing the price of the product at a particular time. In other words, improvement in quality of the product and product adaptation according to the changing competitive conditions in the foreign market should be taken as a continuous process. Elasticity of demand is another factor, which influences the price. If the demand of a product is inelastic the price reduction will not help to increase the revenue. The philosophy of the management: As we know that the main objective of management of every concern is to maximize profits, this is an adverse relationship between the price and the demand.

Market characteristics: Market characteristics such as number of competitors and degree of competition, supply position, quality of the product, substitutes available in the market etc. determines the pricing strategy of the firm. These market characteristics vary from country to country. Different Price strategies: The export price quotations may not be the same for all markets. Prices may differ from market to market due to various reasons viz. political influence, buying capacity, financial and import facilities, total market turnover and other pricing and non-pricing factors etc. in order to make the local price of the product competitive. Thus, different strategies may be used in different markets. In some markets prices may be higher in some others they may be cost price or in many others, they may be less than the cost price. Normally, the following pricing strategies are used in the export market: 1. Market Penetration Strategy: Under this strategy, exporters offer a very low introductory price to speed up their sales and, therefore, widening the market base. It aims at capturing the products in the market especially if the quality of the product is proved with its wide acceptance. 2. Probe Pricing Strategy: Fixing low price for its product may have an adverse effect on the image of the firm and of the product. It may raise doubts in the minds of the buyers about the quality of the product if it is lower than the price of competitors or if it is reduced subsequently. When no information is available on the extent of the competition or the likely preferences of the buyers, sufficiently higher prices may be quoted on the first few offers. No business is really expected to grow except feed back information. Hence, the prices may be adjusted accordingly. 3. Follow the Leader Pricing Strategy: In a competitive world market or where adequate market information is not available, it may be useful to follow the leader in the market comparing its product with that of the leader the exporter may then fix the price of its product. In such cases the price of the product is lower than the leaders product. However, this price has no rational or scientific base for fixing the price. 4. Skimming Pricing Strategy: Under this strategy, a very high introductory price is fixed to skim the cream of the demand at the very outset. This policy is generally introduced when there is no competition in the market. Such prices continue to be high till competitors enter the foreign market. As soon as competitors enter the market, the exporter reduces the price. 5. Differential Trade Margins Strategy: Variation in trade margins may be adopted by the exporter as the pricing strategy in foreign market. This strategy allows various types of discounts on the list price. Quantity discounts encourage to procure huge orders. It may be based on the value or on the quantity purchased or on the size of the package purchase. Special discounts may be allowed while introducing the product. These are given on all the purchases. Seasonal discount aims at shifting the storing function in the channels. This approach is buy sooner or more. Cash discount attracts prompt payment. It

ensures quick pay-back. Trade discount is a reduction in list price given to channel members in anticipation of a job they are going to perform. 6. Standard Export Pricing Strategy: In some cases, exporter quotes the standard price or list price that is one price for all. But still there should be some margin for negotiations as in many markets especially in under developed countries, bargaining over prices is a part of life. In such cases, fixed prices may serve as a starting point for negotiation. Hence, it is desirable to keep a certain margin for the negotiations. This strategy is generally adopted in the export of capital goods i.e. plant and machinery. 7. Cheaper Price for Original Equipment and Higher Price for Spare Parts: In certain cases it might be useful to quote lower prices for the original equipment and charging higher prices for spares and replacement parts to be exported later as and when required. This strategy is useful where only the supplier of the original equipment can supply standard spare parts. This strategy could be used for tractors, telephone equipment, defense armaments, railway equipment and so on. Q.6. Write short notes on A. E-MARKETING: E-marketing involves the marketing of products or services on the internet. Successful E-marketing requires good search engine marketing strategies. The primary purpose of marketing an online business is the promotion of a good or service. E-marketing makes extensive use of the available tools for getting web users to purchase a product or service from a website. E-marketing approaches: To accomplish their objectives, Internet marketers use many approaches, some of which include: Banners: A banner ad is a boxed-in promotional message that often appears at the top of the web page. If a visitor clicks on the banner ad, she/he is transported to the advertisers home page. This is the most used form of Internet promotion. Banners can be used to create brand recall or recognition. Other names given to banners include side panels, skyscrapers, or verticals. Sponsorships: This is another common advertising approach on websites. The advertiser is given a permanent place on hosts website and pays a sponsorship fee to the host. Pop-up and Pop-under: When a window appears either in front or viewing. Pop-ups become visible as under becomes visible only when the visitor accesses a web page, sometimes a underneath the web page, the visitor is sooner the web site is accessed and popvisitor closes the browser.

Portal Use: Some portals give a prominent place to a companys offer for a fee. When a visitor follows directed search, the marketers name appears prominently at or near the top of the list. E-mail: Companies send e-mails to Internet users to visit the company web site. It can be effective only when the target customer is appropriate otherwise it becomes junk mail.

 Interstitials: These ads appear on the computer screen while a visitor is waiting for a sites contents to download. Push Technologies: Some companies provide screen savers to its website visitors that allow the firms to directly hook the visitor to their websites. This is an approach to push a message to the consumers rather than wait for consumers to locate it. Sales Promotions: Many companies effectively use sales promotions such as contests and sweepstakes to generate consumer interest.

B. JOINT VENTURE- A joint venture is a strategic alliance where two or more parties, usually businesses, form a partnership to share markets, intellectual property, assets, knowledge, and, of course, profits. A joint venture differs from a merger in the sense that there is no transfer of ownership in the deal. Fuji-Xerox for example, was set up as a joint venture between Xerox and Fuji Photo. Establishing a joint venture with a foreign firm has long been popular mode for entering a new market. The most typical joint venture is a 50/50 venture, in which there are two parties, each of which holds a 50 percent ownership stake and contributes a team of mangers to share operating control. It can also occur between two small businesses that believe partnering will help them successfully fight their bigger competitors. While forming a joint venture, a company should keep in mind the following: Before a company forms a joint venture, they will need to look for partners to join them. When a company has its partner(s) chosen, agree on the terms of partnership such as who takes on what tasks, what they both earn from the business, solutions to conflicts that may arise, including if one, both, or all of them want to exit the business. Every partner will have to agree on the type of structure that the business is to have.