MK0009– International Marketing

Assignment Set- 1

1. International marketing is basically an extension of domestic

marketing. Do you agree or disagree with this statement? Justify your
answer.

Ans: International marketing can be conceptualised in terms of an extension of

domestic marketing as the product of a new international integrative order.

The Domestic Market Extension Concept: The domestic company that seeks
sales extension of its domestic products into foreign markets illustrates this
orientation to international marketing. It views its international operations as
secondary to and an extension of its domestic operations. The primary motive is
to dispose of excess domestic production. Domestic business is its priority and
foreign sales are seen as a profitable extension of domestic operations. While
foreign markets may be vigorously pursued, the orientation remains basically
domestic. Its attitude toward international sales is typified by the belief that if it
sells in Peoria it will sell anywhere else in the world. Minimal, if any, efforts are
made to adapt the marketing mix to foreign markets. The firm’s orientation is to
market to foreign customers in the same manner the company markets to
domestic customers. It seeks markets where demand is similar to the home
market and its domestic product will be acceptable. This Domestic Market
Expansion Strategy can be very profitable. Large and small exporting companies
approach international marketing from this perspective.

2. Discuss the factors which need to be considered in making product

related decisions in international markets.

Ans: It is essential that the production of the product or service is well planned
and coordinated, both within and with other functional area of the firm these
decisions are very critical. The factors which need to be considered in making
product related decisions in international markets are:

Specification: Specification is very important in products. Some markets will

not take produce unless it is within their specification. Specifications are often
set by the customer, but agents, standard authorities (like the EU or ITC Geneva)
and trade associations can be useful sources, found, generally, that there are no
consistent standards for product quality and grading, making it difficult to do
international trade regionally.

Culture: Product packaging, labelling, physical characteristics and marketing

have to adapt to the cultural requirements when necessary. Religion, values,
aesthetics, language and material culture all affect production decisions. Effects
of culture on production decisions have been dealt with already in chapter three.

Physical product: The physical product is made up of a variety of elements.

These elements include the physical product and the subjective image of the
product. Consumers are looking for benefits and these must be conveyed in the
total product package. Physical characteristics include range, shape, size, colour,
quality, quantity and compatibility. Subjective attributes are determined by

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advertising, self image, labelling and packaging. In manufacturing or selling
produce, cognisance has to be taken of cost and country legal requirements.

Again a number of these characteristics is governed by the customer or agent.

For example, in beef products sold to the EU there are very strict quality
requirements to be observed. In fish products, the Japanese demand more
"exotic" types than, say, would be sold in the UK. In sophisticated markets like
seeds, the variety and range is so large that constant watch has to be kept on
the new strains and varieties in order to be competitive.

Packaging: Packaging serves many purposes. It protects the product from

damage which could be incurred in handling and transportation and also has a
promotional aspect. It can be very expensive. Size, unit type, weight and volume
are very important in packaging. Costs of packaging have always to be weighed
against the advantage gained by it.

Increasingly, environmental aspects are coming into play. Packaging which is

non-degradable - plastic, for example - is less in demanded. Bio-degradable,
recyclable, reusable packaging is now the order of the day. This can be both
expensive and demanding for many developing countries.

Labelling: Labelling not only serves to express the contents of the product, but
may be promotional The EU is now putting very stringent regulations in force on
labelling, even to the degree that the pesticides and insecticides used on
horticultural produce have to be listed. This could be very demanding for
producers, especially small scale, ones where production techniques may not be
standardised. Government labelling regulations vary from country to country.
Labels may have to be multilingual, especially if the product is a world brand.
Translation could be a problem with many words being translated with difficulty.
Again labelling is expensive, and in promotion terms non-standard labels are
more expensive than standard ones. Requirements for crate labelling, etc. for
international transportation will be dealt with later under documentation.

Branding and trademarks: It is difficult to protect a trademark or brand,

unless all countries are members of a convention. Brand "piracy" is widespread
in many developing countries. Other aspects of branding include the promotional
aspects. A family brand of products under the Zeneca (ex ICI) label or Sterling
Health are likely to be recognised worldwide, and hence enhance the
“subjective” product characteristics.

Warranty: Many large value agricultural products like machinery require

warranties. Unfortunately not everyone upholds them. It is common practice in
Africa that if the original equipment has not been bought through an authorised
dealer in the country, that dealer refuses to honour the warranty. This is
unfortunate, because not only may the equipment have been legitimately
bought overseas; it also actually builds up consumer resistance to the dealer.
When the consumer is eventually offered a choice, the reticent dealer will suffer.

Product strategies: There are five major product strategies in international

marketing:

i) Product communications extension: This strategy is very low cost and

merely takes the same product and communication strategy into other

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 markets. However it can be risky if misjudgements are made. For
example CPC International believed the US consumer would take to dry
soups, which dominate the European market. It did not work.
ii) Extended product - communications adaptation: If the product basically
fits the different needs or segments of a market it may need an
adjustment in marketing communications only. Again this is a low cost
strategy, but different product functions have to be identified and a
suitable communications mix developed.
iii) Product adaptation - communications extension: The product is adapted to
fit usage conditions but the communication stays the same. The
assumption is that the product will serve the same function in foreign
markets under different usage conditions.
iv) Product adaptation - communications adaptation: Both product and
communication strategies need attention to fit the peculiar need of the
market.
v) Product invention: This needs a totally new idea to fit the exclusive
conditions of the market. This is very much a strategy which could be
ideal in a Third World situation. The development costs may be high,
but the advantages are also very high.

The choice of strategy will depend on the most appropriate product/market

analysis and is a function of the product itself defined in terms of the function or
need it serves, the market defined in terms of the conditions under which the
product is used, the preferences of the potential customers and the ability to buy
the product in question, and the costs of adaptation and manufacture to the
company considering these product - communications approaches.

3. Write short notes on – a) International distribution objectives b) e-

commerce

Ans: a) International distribution objectives

There can be different objectives for different firms. Some of them are as
under:

Interrelated objectives: A firm’s distribution objectives will ultimately be highly

related—some will enhance each other while others will compete. For example,
as we have discussed, more exclusive and higher service distribution will
generally entail less intensity and lesser reach. Cost has to be traded off against
speed of delivery and intensity (it is much more expensive to have a product
available in convenience stores than in supermarkets, for example).

Narrow vs. wide reach: The extent to which a firm should seek narrow (exclusive)
vs. wide (intense) distribution depends on a number of factors. One issue is the
consumer’s likelihood of switching and willingness to search. For example, most
consumers will switch soft drink brands rather than walking from a vending
machine to a convenience store several blocks away, so intensity of distribution
is essential here. However, for sewing machines, consumers will expect to travel
at least to a department or discount store, and premium brands may have more
credibility if they are carried only in full service specialty stores. Retailers
involved in a more exclusive distribution arrangement are likely to be more
“loyal” – i.e., they will tend to recommend the product to the customer and thus
sell large quantities, carry larger inventories and selections and provide more
services.

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 Distribution Opportunities: Distribution provides a number of opportunities for
the marketer that may normally be associated with other elements of the
marketing mix. For example, for a cost, the firm can promote its objective by
such activities as in-store demonstrations/samples and special placement (for
which the retailer is often paid). Placement is also an opportunity for promotion –
e.g., airlines know that they, as “prestige accounts,” can get very good deals
from soft drink makers who are eager to have their products offered on the
airlines. Similarly, it may be useful to give away, or sell at low prices, certain
premiums (e.g., T-shirts or cups with the corporate logo.) It may even be possible
to have advertisements printed on the retailer’s bags (e.g., “Got milk?”)

Other opportunities involve “parallel” distribution (e.g., having products sold

both through conventional channels and through the Internet or factory outlet
stores). Partnerships and joint promotions may involve distribution (e.g., Burger
King Sells clearly branded Hershey pies).

Deciding on a strategy: In view of the need for markets to be balanced, the

same distribution strategy is unlikely to be successful for each firm. The
question, then, is exactly which strategy should one use? It may not be obvious
whether higher margins in a selective distribution setting will compensate for
smaller unit sales. Here, various research tools are useful. In focus groups, it is
possible to assess what consumers are looking for and which attributes are more
important. Scanner data, indicating how frequently various products are
purchased and items whose sales correlate with each other may suggest the
best placement strategies.

It may also, to the extent ethically possible, be useful to observe consumers in

the field using products and making purchase decisions, one can observe factors
such as (1) how much time is devoted to selecting a product in a given category,
(2) how many products are compared, (3) what different kinds of products are
compared or are substitutes (e.g., frozen yogurt vs. cookies in a mall), (4) what
are “complementing” products that may cue the purchase of others if placed
nearby. Channel members – both wholesalers and retailers – may have valuable
information, but their comments should be viewed with suspicion, as they have
their own agendas and may distort information.

b) E-commerce
E Commerce is one of the most important facets of the Internet to have
emerged in the recent times. Ecommerce or electronic commerce involves
carrying out business over the Internet with the assistance of computers, which
are linked to each other forming a network. To be specific ecommerce would be
buying and selling of goods and services and transfer of funds through digital
communications.

The benefits of E-commerce:

• Ecommerce allows people to carry out businesses without the barriers of

time or distance. One can log on to the Internet at any point of time, be it day or
night and purchase or sell anything one desires at a single click of the mouse.
• The direct cost-of-sale for an order taken from a web site is lower than
through traditional means (retail, paper based), as there is no human interaction
during the on-line electronic purchase order process. Also, electronic selling
virtually eliminates processing errors, as well as being faster and more
convenient for the visitor.

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• Ecommerce is ideal for niche products. Customers for such products are
usually few. But in the vast market place i.e. the Internet, even niche products
could generate viable volumes.
• Another important benefit of Ecommerce is that it is the cheapest means
of doing business.
• The day-to-day pressures of the marketplace have played their part in
reducing the opportunities for companies to invest in improving their competitive
position. A mature market, increased competitions have all reduced the amount
of money available to invest. If the selling price cannot be increased and the
manufactured cost cannot be decreased then the difference can be in the way
the business is carried out. Ecommerce has provided the solution by decimating
the costs, which are incurred.
• From the buyer’s perspective also ecommerce offers a lot of tangible
advantages.
1. Reduction in buyer’s sorting out time.
2. Better buyer decisions
3. Less time is spent in resolving invoice and order discrepancies.
4. Increased opportunities for buying alternative products.
• The strategic benefit of making a business ‘ecommerce enabled’, is that it
helps reduce the delivery time, labour cost and the cost incurred in the following
areas:
1. Document preparation
2. Error detection and correction
3. Reconciliation
4. Mail preparation
5. Telephone calling
6. Data entry
7. Overtime
8. Supervision expenses
• Operational benefits of e commerce include reducing both the time and
personnel required to complete business processes, and reducing strain on other
resources. It’s because of all these advantages that one can harness the power
of ecommerce and convert a business to e-business by using powerful
turnkey ecommerce solutions made available by e-business solution providers.

The Internet has created a new economic ecosystem, the e-commerce

marketplace, and it has become the virtual main street of the world. Providing a
quick and convenient way of exchanging goods and services both regionally and
globally, e-commerce has boomed. Today, e-commerce has grown into a huge
industry with consumer-driven (B2C) online transactions impacting industries
from travel services to consumer electronics, from books and media distribution
to sports & fitness. With more than 70% of Americans using the Internet on a
daily basis for private and/or business use and the rest of the world also
beginning to catch on, e-commerce's global growth curve is not likely to taper off
anytime soon.

MK0009– International Marketing

Assignment Set- 2

1. Discuss the relative advantages and disadvantages of

standardization vs. localization of advertising, with suitable examples.

Ans: Advantages of standardization are:

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 i. Economies of scale in production and marketing
ii. Consumer mobility – the more consumers travel, the more is the demand
iii. Technology
iv. Image, for example "Japanese", "made in".
The latter can be a factor both to aid or to hinder global marketing development.
Nagashima1 (1977) found the "made in USA" image has lost ground to the
"made in Japan" image.

The advantages of standardization in manufacturing are cost effectiveness and

integration. Standardization of lathe cutting tool stock sizes and tool post mounts
for instance allow tool post manufacturers to cover a huge range of lathe designs
and uses with a single product, whereas otherwise a potentially huge range of
tool post products might be required to furnish the functionality of a given tool
post design to diverse lathes and cutting tool dimensions.

The basic potential disadvantage of standardization in manufacturing is that it

may lock in obsolescence. Tool stock developments may for instance render tool
posts designs obsolete for the advantages of new tools, or a given tool post
mount design may for instance preclude using the advantages offered by new
tool post designs, which thus makes the lathes obsolete. Because good system
designs can exercise foresight to ensure long term non-obsolescence, there are
usually general advantages to be realized from standardization wherever a
fitting, universal vision for standardization can be conceived.

2. What are some of the obstacles that come in the way of charging a
uniform price across different markets?

Ans: Foreign exchange is currency bought or sold in the foreign exchange

market. The "market" is the total of persons who buy and sell and involves
various financial and other institutions. The "spot" market is for the immediate
delivery or in the interbank market within two business days, of foreign
exchange. The forward market is for future delivery. The principal players are the
banks (inter-bank market) and others including the London International Futures
Exchange (LIFE).

The foreign exchange market is very dynamic. The price of one currency in any
other currency is the result of forces of supply and demand in the foreign
exchange market. The demand for one currency may be due to consumers
wishing to buy from overseas, or a belief that one country’s currency is stronger
than another’s. In Africa, where exchange controls occur in some countries, this
can lead to an official or unofficial black market. Also, currency allocation is a
feature which tends to slow down business or hinder its development.

If a country sells more than it buys, its currency value will rise and vice versa. If
foreign exchange rates were set simply by money exchanged for goods and
services, then forecasting exchange rates would be easy. However, short and
long term capital flows, speculative purchases and sales distort the picture.

Governments intervene to dampen fluctuation in exchange rates. Often they get

involved in extensive trading to stem the rise in currency value, so exports are
not harmed.

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Exchange rates are very difficult to forecast due to a multitude of factors.
Forecasts are, therefore, a continuation of economic analysis and judgment.

In forecasting foreign exchange rates, it is important to take account of

purchasing power parity (PPP), that is, one unit of currency should buy the same
amount of goods and services as it bought in an equilibrium period, despite
differential rates of inflation. The lower the level of inflation, the greater will be
the PPP effect. If prices in local currency rise faster or more slowly than prices in
the rest of the world, an equal adjustment of the exchange value of the currency
in the opposite direction will restore equilibrium to relative price levels.

Unfortunately as levels of inflation are difficult to predict and foreign exchange

transactions are other than solely for purchasing goods and services, the PPP is
not a very reliable forecasting technique. Other factors affect the foreign rate of
exchange other than just PPP. These are:

· Economic factors – balance of payments, monetary and fiscal policy, inflation,

real and nominal interest rates, government controls and incentives, etc.

· Political factors – philosophy of leaders, elections

· Psychological factors – expectations, forward market prices, traders’

attitudes.

One of the issues in analyzing a country’s competitive position is the critical

adjustment of the exchange value of a country’s currency. The index is a trade
weighted index (based on world trade share). Indices are issued by various
bodies like the IMF.

Three basic factors determine the boundaries of the pricing decision – the price
floor, or minimum price, bounded by product cost, the price ceiling or maximum
price, bounded by competition and the market and the optimum price, a function
of demand and the cost of supplying the product. In addition, in price setting
cognisance must be taken of government tax policies, resale prices, dumping
problems, transportation costs, and middlemen and so on.

In setting prices, it must be made clear what the objectives and policy are. Few
organizations can now be pure profit maximizers – there is hardly a sector of
industry where competition or potential competition is not prevalent. Three
frequently encountered price polices are as follows:

Skimming: The market skimming pricing strategy is a deliberate attempt to

reach a market segment that is willing to pay a premium price for a product. In
such instances, the product must create high value for buyers. This pricing
strategy is often used in the introductory phase of the product life cycle, when
both production capacity and competition are limited. By setting a deliberately
high price, demand is limited to early adopters who are willing and able to pay
the price. One goal of this pricing strategy is to maximize revenue on limited
volume and to match demand to available supply. Another goal of market
skimming pricing is to reinforce customers’ perceptions of high product value.
When this is done, the price is part of the total product positioning strategy.

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Penetration Pricing: Penetration pricing uses price as a competitive weapon
to gain market position. The majority of companies using this type of pricing in
international marketing are located in the Pacific Rim. Scale-efficient plants and
low-cost labor allow these companies to blitz the market. It should be noted that
a first-time exporter is unlikely to use penetration pricing. The reason is simple:
Penetration pricing often means that the product may be sold at a loss for a
certain length of time. Companies that are new to exporting cannot absorb such
losses. They are not likely to have the marketing system in place (including
transportation, distribution, and sales organizations) that allows global
companies such as Sony to make effective use of a penetration strategy.
However, a company whose product is not penetrable may wish to use
penetration pricing to achieve market saturation before the product is copied by
competitors.

In the U.S. process, cost is typically determined after design, engineering, and
marketing decisions have been made in sequential fashion; if the cost is too
high, the process cycles back to square one-the design stage.

Market Holding: The market holding strategy is frequently adopted by

companies that want to maintain their share of the market. In single-country
marketing, this strategy often involves reacting to price adjustments by
competitors. For example, when one airline announces special bargain fares,
most competing carriers must match the offer or risk losing passengers. In global
marketing, currency fluctuations often trigger price adjustments.

Market holding strategies dictate that source country currency appreciation will
not be automatically passed on in the form of higher prices. If the competitive
situation in market countries is price sensitive, manufacturers must absorb the
cost of currency appreciation by accepting lower margins in order to maintain
competitive prices in country markets.

A strong home currency and rising costs in the home country may also force a
company to shift its sourcing to in-country or third-country manufacturing or
licensing agreements, rather than exporting from the home country, to maintain
market share. IKEA, the Swedish home furnishing company, sourced 50 percent
of its products in the United States in 1992, compared with only 10 percent in
1989.

3. You have just taken over as General Manager of a Company that is

planning to launch a chain of Indian fast food restaurants in the US
market. Which aspects of the marketing strategy are impacted by
cultural differences and how would you deal with them?

Ans: Consumption patterns, living styles, and the priority of needs are all
dictated by culture. Culture prescribes the manner in which people satisfy their
desires. Not surprisingly, consumption habits vary greatly. The consumption of
beef provides a good illustration. Some Thai and Chinese do not consume beef at
all, believing that it is improper to eat cattle that work on farms, thus helping to
provide foods such as rice and vegetables. In Japan, the per capita annual
consumption of beef has increased to eleven pounds, still a very small amount
when compared to the more than 100 pounds consumed per capita in the United
States and Argentina.

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The eating habits of many people seem exotic to Americans. The Chinese eat
such things as fish stomachs and bird’s nest soup (made from bird’s saliva). The
Japanese eat uncooked seafood, and the Iraqis eat dried, salted locusts as
snacks while drinking. Although such eating habits may seem repulsive to
Americans and Europeans, consumption habits in the West are just as strange to
foreigners. The French eat snails. Americans and Europeans use honey (bee
expectorate, or bee spit) and blue cheese or Roquefort salad dressing, which is
made with a strong cheese with bluish mold. No society has a monopoly on
unusual eating habits when comparisons are made among various societies.

Food preparation methods are also dictated by culture preferences. Asian

consumers prefer their chicken broiled or boiled rather than fried. Consequently,
the Chinese in Hong Kong found American-style fried chicken foreign and
distasteful.

Not only does culture influence what is to be consumed, but it also affects what
should not be purchased. Muslims do not purchase chicken unless they have
been halalled, and like Jews, no consumption of pork is allowed. They also do not
smoke or use alcoholic beverages, a habit shared by some strict Protestants.
Although these restrictions exist in Islamic countries, the situation is not entirely
without market possibilities. The marketing challenge is to create a product that
fits the needs of a particular culture.

Unless marketers remain flexible in their own attitudes by accepting differences

in basic patterns of thinking, local business tempo, religious practices, political
structure, and family loyalty, they are hampered, if not prevented, from reaching
satisfactory conclusions to business transactions. In such situations, obstacles
take many forms, but it is not unusual to have one negotiator’s business
proposition accepted over another’s, simply because "that one understands us."
Adaptation is a key concept in international marketing and willingness to adapt is
a crucial attitude. Adaptation is required on small matters as well as large ones.
In fact, the small, seemingly insignificant situations are often the most crucial.
More than tolerance, affirmative acceptance of an alien culture is required.
Through such affirmative acceptance, adaptation becomes easier because
empathy for another’s point of view naturally leads to ideas for meeting cultural
differences.

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