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IBO-2

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Attempt all the questions

1) A) Distinguish between the following:

i) Multinational Marketing and Global Marketing

SOLUTION

MULTINATIONAL MARKETING

Multinational marketing, also known as international marketing, is when a business directs products and services
toward potential consumers in other countries. Seeking new markets helps to offset domestic saturation and increase
revenue.

Businesses use one or more core methods of multinational marketing: entering joint ventures with foreign companies,
exporting goods or services from another country, licensing trademark and patent rights to foreign companies and
creating manufacturing plants in companies abroad. There is no single best practice.

There are both advantages and disadvantages to this type of marketing. Advantages include establishing a global
presence, increasing revenue and minimizing the effect of negative domestic financial situations such as recessions.

Disadvantages include foreign trade policy changes, cultural challenges and the host country's laws, infrastructure and
technology level. Much research and planning must be done before a company enters a foreign market.

MULTINATIONAL MARKETING STRATEGIES

Lowering of trade barriers, increased communication and the ease of international shipping have given rise to
multinational corporations. These companies sell, manage and distribute products across geographic boundaries.
Marketing approaches can vary drastically based on the company’s preferences, products and targeted regions.
Marketing internationally requires reviewing differences in legal requirements, modifying languages on products and in
advertising, and determining how to approach variations in culture, buying patterns and customer preferences.

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Standardize

In this approach, products, marketing and distribution channels are as similar as possible. While adjusting for language
and legal variations as needed, the business strategy remains the same. This standardization works best when there is a
strong brand in high demand around the globe. Standardizing multinational marketing minimizes costs, management
requirements and the need for on-location personnel.

Localization

Local customs, laws and practices guide a customization multinational marketing strategy. This course relies heavily on
local employees to help translate the product needs and marketing mix necessary for success in their local market.
Products are customized based on the buying patterns and cultural differences between countries.

Regionalization

Regionalization balances localization and standardization strategies. Standard products and promotion approaches are
developed on a regional basis. Regions may be defined by continent or by smaller blocks as appropriate. Some local
employees are needed, especially to manage logistical tactics.

Centralization

A centralization strategy uses a single headquarters for all marketing and distribution requirements. When needed,
companies dispatch employees across the globe to support their marketing efforts. This type of marketing strategy helps
unify the company and may minimize expenses. The drawback of centralization is the lack of local connections and the
potential to misunderstand cultural trends and shopping habits.

Subsidiary Approach

Multinational firms can establish subsidiaries by region or nation that serve as partially independent entities for
producing, distributing and marketing products to their geographic area. A subsidiary approach allows more local control
and responsiveness to consumer changes and needs. This type of arrangement may be a necessity in countries where
joint ventures are required for foreign entry of goods and services.

GLOBAL MARKETING

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Global marketing is defined as the process of adjusting the marketing strategies of your company to adapt to the
conditions of other countries. Of course, global marketing is more than selling your product or service globally. It is the
full process of planning, creating, positioning, and promoting your products in a global market.

Big businesses usually have offices abroad for countries they market to. Currently, with the proliferation of the internet,
even small businesses can reach consumers anywhere in the world. If a business chooses not to extend internationally, it
can face domestic competition from international companies that are extending their international presence. The
presence of this competition almost makes it a requirement for many businesses to have an international presence.

There are many benefits of global marketing, when it is done right.

 First, it can improve the effectiveness of your product or service. This is because the more you grow, the more you
learn, and the faster you learn, you become more effective at producing new product or service offerings.

 Second, you are able to have a strong competitive advantage. It is easy enough for companies to be competing in the
local market. But there are very few companies who can do so on the worldwide arena. Hence, if you can compete in
the worldwide market and your competitors cannot, you have become a strong force in your industry!

 Third, you increase consumer awareness of your brand and product or service. Through the internet, consumers can
keep track of your progress in the world.

 Finally, global marketing can reduce your costs and increase your savings. In focusing on other markets, you can attain
economies of scale and range by standardizing your processes – not to mention the savings that you get when you
leverage the internet!

GLOBAL MARKETING STRATEGIES

Global marketing strategies are actually important parts of a global strategy. In order to create a good global marketing
strategy, you must be able to answer: “What I am trying to achieve in an international market?” “What are my
company’s strengths and weaknesses for that market?” “How can I counter challenges in the market?” “What potential
will I have in this market?”

Moreover, a good global marketing strategy incorporates all the countries from all regions of the world and coordinates
their marketing efforts accordingly. Of course, this strategy does not always cover all the countries but should be applied
for particular regions. For example, you can break down regions like North America, Latin America, Europe and the
Middle East, Asia and the Pacific, and Africa.

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Beyond its breakdown per country or region, a global marketing strategy almost always consists of several things: (1)
uniform brand names; (2) identical packaging; (3) similar products; (4) standardized advertising messages; (5)
synchronized pricing; (6) coordinated product launches; and (7) harmonious sales campaigns.

As a whole, these two are the most well known global marketing strategies used by companies expanding
internationally:

 Create a consistent and strong brand culture. Creating a strong and consistent brand that always seems familiar to
customers is a priority for companies growing internationally. With the ever-more rising and expanding internet, brand
structure has become more of a brand culture. To be more specific, it has become more prevalent nowadays that the
brand you support reflects your culture. It can be damaging if you compromise your brand culture. For example, Google
found out the hard way when it launched a self-censored search engine in China, even though China subjects its new
media to government blocks. Google’s brand has been known to make the world access information at anytime. How
can Google set up something in China against its own culture? As a result, customer backlash versus Google was
substantial.

 Market as if there were no borders. Due to the proliferation of digital platforms, brands cannot always adopt different
strategies per country. In a way, due to the internet, companies have to adopt a marketing approach that is more or less
unified.
ii) International Marketing Information System and International Marketing Research

SOLUTION

INTERNAT ONAL MARKETING INFORMATION SYSTEM

An international marketing information system is a continuing interacting structure Of people, equipment, and
procedures designed to gather, sort, analyze, evaluate, and distribute pertinent, timely, and accurate information for
use by international marketing decision makers to improve their marketing planning, execution and control, . moderate
Yes The data and information necessary for effective international marketing may, in most cases, not readily available at
least in the form in which it can be immediately utilized by the company. Therefore, a system for regular collectible of
relevant data and information, analysis and presentation of findings is required for effective international marketing.
Given the nature of international markets, international marketing information system should work on a continuous
basis, unlike market research efforts which nlay4be occasional in nature.. For sound international marketing decisions, a
continuous and timely flow of relevant and updated information is a prerequisite. Most of the enterprises operating in
international markets try to collect general and specific information required by them, basically two sources: (1) internal

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sources; and (2) external sources. Internal sources of the company imply the officials of the company posted the specific
purpose of information gathering and the records, registers and balance-sheet of the firm. Information collected
through internal sources is known to be qualitatively different from that collected through external sources, as the
former collect the information on a continuous basis with specific objectives in view. But collection through internal
sources, particularly when officers and staff have to be appointed and trained exclusively for information gathering,
involves substantial cost, which small enterprises may find difficult to bear. This is particularly true in regard to
international marketing operations since a good amount of informati011 will pertain to overseas markets.

External sources include the following: (i) Banks and financial institutions (both national and international), (ii) Chambers
of Commerce and Trade Associations, (iii) Government agencies in the exporter's and importer's countries, (iv)
Embassies and High Commissions, (v) commercial intelligence services (both international and national), (vi) universities
and research organisations, (vii) international organisations such as' World Bank, WTO, ITC and UN organisations, (viii)
Regional UN organisations such as ESCAe ECLA, etc. and (ix) other regional bodies like OCED. The nature and scope of
international marketing information system depends upon the specific requirements of a particular enterprise. Thus,
different organisations may have different levels of information systems, but essentially all of them are designed for
collection of such information and data, which are vital for the growth and survival of the firm in a rapidly globalizing
business world.

INTERNATIONAL MARKET REAEARCH

International marketing research is a systematic collection and analysis ~f data and information relevant to international
marketing operations. The required data and information may, in most cases, be not always readily available. If it is
available, it may not be in the form in which you require. Therefore, considerable efforts need to be put in by the
company in the collection of relevant information before analysis of the same is undertaken. Thus, international
marketing research may be defined as "the systematic and objective process of collecting, recording and analyzing data
for aid in making international marketing decisions"

International marketing research will cover the following aspects:

 Present and future size of the market for the relevant product(s)/service(s)
 Nature, extent and source of competition
 Consumer likes and dislikes and the reasons for the same

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 Marketing variables such as product, price, promotion, logistics, brand, packaging, etc. o Marketing environment factors
such as social, political, economic, technological, infrastructural, etc.
 Relevant policies and procedures of the importing country and service
 Entry techniques

International marketing research involves use of quantitative techniques, objective analysis and subjective
interpretation of data and information. Depending upon the circumstances and requirements, the volume and depth of
international marketing research may vary. Enterprises may themselves conduct international marketing research or
they may avail of I the services of specialised marketing research agencies.

B) Write short notes on the following:

i) Impact of developments in Information Technology on International Marketing

SOLUTION

As a human being, we all think about our development. As we plan for our development we also have to
decide our working area, or the most possible / approachable area. Every one likes to cover bigger area as
much as he can cover. Initially we had a small area of operation in each segment of life. But as the
technology developed, we become part of global market and now we are able to cope with the market
development at large.

Information technology has made a tremendous development in respect of our approach at a mass level.
It opens the door of several avenues as well as has brought in several threats, which should be analyzed
carefully. Due to development in technology, the information can be transferred from one place to another
in very short span of time, earlier which required lot of time. Transfer of large information and storing
capacity for a long period also has some draw backs, inherent in the process itself. For example
manipulation of message is very easy and it requires small level of technical literacy. It is also observed
that master in a subject may not be many times able to express his views effectively as compared to a
person having less knowledge of subject but more computer literacy, who can make better presentations.
Here the knowledge part of the core subject has been compromised with proficiency with technology. .

Now, to teach one subject several teaching methodologies are available. One has to apply one or two out
of them, which suits him most. If one institute has less number of such teaching technologies it cannot
make its place in the market even if it is very sincere and dedicated for providing a quality education to
the students. Here it leads to pomp and show than the development of value-based teaching.

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It is true that the development of information technology made available number of resources but it also
lead duplicacy as well as piracy. In spite of reading articles or gathering information from different sources
for qualitative research useful for the society, one would like to cut and paste information and other
relevant matter for his advantage, which discourage the habit of reading, being creative and utilizing brain
storming exercises.

Whole economy of the world is vary much dependent upon the technological advancement. This increased
competition in each segment of the market. One very important aspect is that now people are buying
consumer durables not once only but majority of them are replacing the existing product within very short
span of time. Such type of changes in consumer taste can be seen in the Television, Air conditioner,
washing machines, automobiles, mobile industries etc. It leads to the product out of market with in very
short period of time, and it also increases consumerism. Which ultimately decrease the saving and
investment habit of an individual.

This drastic change in the technology has negative impact on society also. Now the theft, piracy, robbery
and other type of hi-tech crimes have grown up very fast. These crimes are committed by young
professional generation because they need handsome money through the application of such technical
advanced skills. This shows negative picture of current education system and also of educated class. It
demoralizes the young generation.

Today's generation is very much choosy than earlier and the reason is that they have more alternatives in
their hands. Certainly, it creates more avenues and dynamism but it also hampers the mental stability.
Today's young generation wants to earn money by hook or crook. It is immaterial for them, how they earn
money. The most important thing for them is only how much money they have. It reduces the quality of
life, which generates the stress, social unrest and mental tension and ultimately no peace in the life. They
are trying to stretch the period of twenty-four hours of a day in more and more productive hour at the
cost of their health. Which has disturbed their natural system of digestion and standard level of health? To
improve the health and physical fitness they need a sophisticated & hygienic environment and medical
physician and surgeon.

Lack of required number of people of desired qualification and skill is also a big problem. Due to fast
change in the information technology, several technical qualifications have also become out of date with in
very short period of time.

The technological development especially in information sector requires a large amount of capital
investment, sophisticated environment and increase in dynamic risk. Dynamic risk means possibility of
loss due to change in environmental factors. First it requires investment in its installation, maintenance

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and then in its replacement. It involves cost of equipment, which is of capital nature as well as
remuneration paid to personnel involved at each stage i.e. revenue expenditure. Capital expenditure
requires its absorption during fixed period of time through depreciation. Like wise the revenue expenditure
also involves some of cost of capital, which is made available through own or borrowed sources of owner.
The depreciation and all the revenue expenditure form part of the annual income statements. Above cost
factors play a very crucial role in the adoption of new technology.

Last but not least the tendency to adopt new technology is a very typical psychological tension of mind.
With a great pressure one become ready to adopt new technology if he has no choice, otherwise the
general tendency is to cope with the old technology or work with old technology for which people are
habitual. So, the adoption of new technology is also difficult.

All in all, the development of new information technology should be welcomed because it is the need of
the hour. And all of us should prepare ourselves to make it easier for us and should use it in ethical ways
then only we would be able to survive in the global market

ii) Standardization of International Advertising

SOLUTION

Most people must be motivated to want a product before they buy it. Products or services will not sell unless people are
told about them. Advertising is an important motivator in marketing and may be defined as any form of communication
in the paid media. The primary role of advertising is to inform, educate, motivate and persuade people to buy a product,
a brand or a service. Advertising must also be able to overcome people's resistance and inertia to change and counter
competitive claims to draw consumer's attention to the advertiser's products. Once consumers are won, they must be
held and made loyal to the advertiser's products. Advertising thus plays two basic roles in marketing: (a) attract
potential customers towards the product and (b) help hold them as loyal customers to the product.

Advertising thus plays two basic roles in marketing: (a) attract potential customers towards the product and (b) help
hold them as loyal customers to the product. In addition to the two top objectives of advertising-to draw in new
customers and to help hold old ones as repeat purchasers of advertiser's product-advertising also plays other important
roles in marketing such as

• Advertising identifies a business with goods or service if offers.

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• Advertising can build up confidence in a business.

• Advertising can create image and goodwill.

• Advertising can increase sales and increase turnover.

However, advertising is not the only answer to all marketing problems. There are several things which advertising
cannot do.

STANDARDIZATION

As discussed above, a major issue facing global marketers is whether a specific message and media strategy must be
changed from region to region or country to country because of varying environment; especially for matching with local
culture. However, little research has been done globally to find out when standardization of international adver tising
pays off and when it does not. No magic solution to when standardization of marketing communication should be
implemented seems to have been found. The argument over which approach - standardization or adaptation-is better
started long back in 1960s and continues till date. The debate picked up great momentum after the publication of article
titled "The Globalization of Markets" by Prof Levitt in Harvard Business Review in 1983, in which he stated that the
world's needs and tastes have been irrevocably homogenized. Advocates of standardization point to a number of
advantages offered by such strategy. These include

i) Economies of scale in production and distribution

ii) Lower advertising production costs
iii) A consistent international band and /or company image
iv) Transfer and sharing of good ideas
v) Brings greater sophistication for less developed countries

However, opponents of standardized campaigns point a number of drawbacks like

 Problems of language, culture and-lifestyle

 Difference in market characteristics, including conditions, consumer needs, media availability etc.
 Local resistance
 Consumer usage patterns and perceptions of a product may vary from one country to another

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2) Explain the steps involved in the international market process.

SOLUTION

This may be hard for you to come to grips with but “ international marketing is a process, not an event.” It can be
compared to breathing. You can’t live very long from a single breath. It takes many breathes, one right after another.
Marketing is the same. You will not attract, obtain , and keep customers with one marketing action. You keep breathing
to stay alive. You keep marketing to generate leads, make the phone ring, cause people to ask for your product, visit
with you, request for more information or try a test run.

To understand how to think and approach marketing for your business, it may be helpful to understand my definition of
marketing: Marketing is everything you DO or SAY that your ideal customer SEES and HEARS.

Below you will find the seven essential steps that address today’s international marketing and sales challenges for
organizations and small businesses. I’ve developed these 7 steps for creating marketing success from working and
having discussions with businesses owners and CEOs over the years.

1. Develop vision before strategy.

Vision and strategy are both important to your marketing success. But there is a priority to them. Vision always comes
first. If you develop a clear vision, you will attract the right strategy. If you don’t have a clear vision, no strategy will save
you.

Once you get clear on what you want, the how will take care of itself.
Most leadership and business owners don’t take the time to ask, “What are my marketing goals and what is my
marketing vision?” Devoting time and energy during your planning process is the most important aspect of any
successful marketing implementation.

2. Focus on the customer experience.

Nothing matters more to a business than how they make customers feel. How the customer feels determines whether
your business survives or sinks. The secret to every businesses growth is word-of-mouth marketing, not the marketing
done in the pages of a magazine, newspaper, trade publication, on TV, or other media outlets.

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Word-of-mouth is generated because you made the customer experience referable. If someone chooses to refer your
product or service, I then call that a “referable experience” because that’s what we share, our experiences with a
product or service. (Products includes your blog, podcast, newsletter, online radio show, and more.)

3. Become the new media company.

Today you must commit to creating content much like a publisher might. Not just any content though, you need to
create content that works as marketing.

The Internet has disrupted the traditional sales process, allowing the prospective
customer or client to begin on their own terms via search and social media. This means
savvy business owners or marketing departments must adapt to the information-empowered prospect in a fashion
that more resembles courting than it does selling.

The best way to produce content that works as marketing is to have it focus on the problems and desires of prospects
and customers. It’s all about delivering independent value with content before you attempt to make the sale.

4. Adapt the engagement model.

I often say that, “your website is for you—one-way conversation, while your blog is for prospects—two-way
conversation.” (Note: My point is not that you need a blog but that you need a way to communicate with prospects.)

The majority of today’s purchase decisions involved some amount of research online. Your business must be easily
found online, easily engaged online, and easily communicated with online. This requires a focus on:

 Content Marketing,
 SEO and
 Social Media participation.

The smart way to approach this is to treat content marketing, social media and search engine results as aspects of a
holistic strategy necessarily centered around content.

Of course, this also means integrating your online presence and activity into every offline business function.

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5. Educate to generate and close.

Don’t think of yourself as a salesperson but as a educator and partner to your prospect. This healthy mindset improves
both your perspective and your chances of closing.

Realize that you have an opportunity to educate your prospects to succeed at whatever they wish to succeed at. As soon
as possible, learn what it is that your prospect wishes to succeed at, and then show how what you are selling can make
that success achievable.

You can educate them through:

 workshops
 seminars
 webinars
 teleseminar
 classes
 blogs
 newsletters
 infogrpahics
 slide shares

6. Develop a selling process.

In the same way that your marketing generates leads, you need to also take that same approach when a prospect wants
to learn more. Have a well thought out road map that every new lead walks, a way to develop trust and rapport, and a
proven process for orienting new clients can positively influence the bottom line conversion results you experience.

7. Create a marketing calendar.

The one thing that is finite for any business is time. There is always more month than time.

So you must identify how and when you would like to launch your program to market your products and services. By
creating monthly projects and themes, weekly action steps, and daily marketing appointments, you keep the focus,
enthusiasm, and creativity on marketing

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(References. https://www.business2community.com/marketing/7-steps-involved-successful-marketing-process-
01199767)

3) An Indian auto-ancillary company decided to enter into international markets with full pledged investment in
production and marketing. Discuss various modes of entry available for the company, and critically evaluate in which
situation each of them is suitable.

SOLUTION

Companies intending to undertake international business must determine the type of presence they desire to
maintain in every market where they would like to operate. One major choice concerns the technique of
market entry. A company may want to produce in its home country and export to the overseas market or
alternatively it may prefer to produce overseas and sell it there. A second major choice involves the extent of
direct ownership desired; should the company strive for full ownership of it local operations or should it
associate a local firm with its operations? These initial decisions on market entry have short term, medium
term and long term implications, leaving little room for change once a commitment has been made.
Therefore, it is important that these decisions ate taken with utmost care. In this unit we shall discuss the
major entry strategy alternatives by exploring each one in detail and citing relevant company experiences.

VARIOUS MODE OF ENTRY

The long-term advantages of doing international business in a particular country depend upon the following factors −

 Size of the market demographically

 The purchasing power of the consumers in that market

 Nature of competition

By considering the above-mentioned factors, firms can rank countries in terms of their attractiveness and profitability.
The timing of entry into a nation is a very important factor. If a firm enters the market ahead of other firms, it may
quickly develop a strong customer base for its products.

There are seven major modes of entering an international market. In this chapter, we will take up each mode and
discuss their advantages and disadvantages.

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Exporting

An item produced in a domestic market can be sold abroad. Storing and processing is mainly done in the supplying firm’s
home country. Export can increase the sales volume. When a firm receives canvassed items and exports them, it is
called Passive Export.

Alternately, if a strategic decision is taken to establish proper processes for organizing the export functions and for
obtaining foreign sales, it is known as Active Export.

 Advantages − Low investment; Less risks

 Disadvantages − Unknown market; No control over foreign market; Lack of information about external environment

Licensing

In this mode of entry, the manufacturer of the home country leases the right of intellectual properties, i.e., technology,
copyrights, brand name, etc., to a manufacturer of a foreign country for a predetermined fee. The manufacturer that
leases is known as the licensor and the manufacturer of the country that gets the license id known as the licensee.

 Advantages − Low investment of licensor; Low financial risk of licensor; Licensor can investigate the foreign market;
Licensee’s investment in R&D is low; Licensee does not bear the risk of product failure; Any international location can be
chosen to enjoy the advantages; No obligations of ownership, managerial decisions, investment etc.

 Disadvantages − Limited opportunities for both parties involved; Both parties have to manage product quality and
promotion; One party’s dishonesty can affect the other; Chances of misunderstanding; Chances of trade secrets leakage
of the licensor.

Franchising

In this mode, an independent firm called the franchisee does the business using the name of another company called
the franchisor. In franchising, the franchisee has to pay a fee or a fraction of profit to the franchisor. The franchisor
provides the trademarks, operating process, product reputation and marketing, HR and operational support to the
franchisee.

Note − The Entrepreneur magazine’s top ranker in "The 2015 Franchise 500" is Hampton Hotels. It has 2,000 hotels in 16
countries.

 Advantages − Low investment; Low risk; Franchisor understands market culture, customs and environment of the host
country; Franchisor learns more from the experience of the franchisees; Franchisee gets the R&D and brand name with
low cost; Franchisee has no risk of product failure.

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 Disadvantages − Franchising can be complicated at times; Difficult to control; Reduced market opportunities for both
franchisee and franchisor; Responsibilities of managing product quality and product promotion for both; Leakage of
trade secrets

Turnkey Project

It is a special mode of carrying out international business. It is a contract under which a firm agrees – for a remuneration
– to fully carry out the design, create, and equip the production facility and shift the project over to the purchaser when
the facility is operational.

Mergers & Acquisitions

In Mergers & Acquisitions, a home company may merge itself with a foreign company to enter an international business.
Alternatively, the home company may buy a foreign company and acquire the foreign company’s ownership and control.
M&A offers quick access to international manufacturing facilities and marketing networks.

 Advantages − Immediate ownership and control over the acquired firm’s assets; Probability of earning more revenues;
The host country may benefit by escaping optimum capacity level or overcapacity level

 Disadvantages − Complex process and requires experts from both countries; No addition of capacity to the industry;
Government restrictions on acquisition of local companies may disrupt business; Transfer of problems of the host
country’s to the acquired company.

Joint Venture

When two or more firms join together to create a new business entity, it is called a joint venture. The uniqueness in a
joint venture is its shared ownership. Environmental factors like social, technological, economic and political
environments may encourage joint ventures.

 Advantages − Joint ventures provide significant funds for major projects; Sharing of risks between or among partners;
Provides skills, technology, expertise, marketing to both parties.

 Disadvantages − Conflicts may develop; Delay in decision-making of one affects the other party and it may be costly; The
venture may collapse due to the entry of competitors and the changes in the partner’s strength; Slow decision-making
due to the involvement of two or more decision-makers.

Wholly Owned Subsidiary

Wholly Owned Subsidiary is a company whose common stock is fully owned by another company, known as the parent
company. A wholly owned subsidiary may arise through acquisition or by a spin-off from the parent company

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4) Explain the various stages in the international product life cycle. Discuss life cycle stretching strategies

SOLUTION INTERNATIONAL PRODUCT LIFE CYCLE

International product life cycle discusses the consumption pattern of the product in many countries. This concept
explains that the products pass through several stages of the product life cycle. The product is innovated in country
usually a developed country to satisfy the needs of the consumers. The innovator country wants to exploit the 1
technological break through and starts marketing the products in foreign country. \ Gradually foreign country also starts
production and becomes efficient in producing those I commodities. As a'result, the innovator country starts losing its
export market and finds 1 the import of that product advantageous. In this way, the innovator country becomes the
importer of the products. Terpstra and Sarathy have identified four phases in the I international product life cycle. Let us
learn them

1) Export strength is &dent by innovator country: Products are normally innovated in the developed countries because
they possess the resources to do so. The firms have the technological know how and sufficient capital to invest on the
research and development activities. The need of adaptation and modification also forces the production activities to be
located near the market to respond quickly towards the changes. The customers are affluent in the developed countries
who may prefer to buy the new products. Thus, the manufacturers are attracted to produce the goods in the developed
country. The goods are marketed in the home country. After ,meeting the demand of the home country, the
manufacturers start exploring foreign market and exporting goods to them. This phase exhibits the introduction and
growth stage of the product life cycle.

2) Foreign production starts: The importing firms in the middle income country reduce \ the demand potential of the
product on the home market. The manufacturers also become familiar in producing the goods. The growing demand of
the products . attracts the attention of many firms. They are tempted to start production in his country and gradually.
start exporting to the low income country. The large production in the middle income country reduces the export from
the innovating country. This shows the maturity stage of product life cycle where the production activities start shifting
from innovating country to other -countries.

3) Foreign production becomes competitive in export market: The firms in low income country also realise the demand
potential in the domestic market. They start producing the products in their home country by exploiting cheap labour.
They gain expertise in manufacturing the commodity. They become more efficient in producing the goods due to low
cost of production. Gradually they start exporting the goods to other countries. The export from this country replaces
the export base of innovating country, whose export has been already declining. This exhibits the declining stage of

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product life cycle for the innovator country. In this stage, the product gets widely disseminated and other countries start
imitating the product. This is the third phase of product life cycle where the products start becoming standardised.

4) Import Competition begins: The producers in the low income importing country gain sufficient experience in
producing and marketing the products. They attain the economies of scale and gradually become more efficient than the
innovator country. At this stage, the innovator country finds the import from this country advantageous. Hence, the
innovator country finally becomes the importer of that product. In this fourth stage of product life cycle the product
becomes completely standardised. Look at Figure x which shows international product life style

LIFE CYCLE STRETCHING STRATEGIES

Depending on the nature of the product and the market, a number of alternate strategies - may be considered each by
itself or in combination with one or more of others, for stretching the life cycle of a product. One of the most
commonly employed strategies is to "reposition" the product, in case it is felt that the strategy would create a better
image for the item. For example, consequent to increasing health concerns among people, most companies in cooking
oil business have repositioned their brands in recent years, emphasizing the cholesterol free attribute of their product
while, in the past, it was not the case. Similarly, condoms have been repositioned in India, the emphasis shifting from
family planning to safe sex. The second possibility is to try to bring about quality, improvement in the product .through
better engineering and use of better quality raw materials and promoting the new product as a more reliable and
durable one than the earlier version of the same, This is possible if the product's such that technical quality is the main
attribute looked for by the customer in the product, significant quality variations are possible to be. brought about in the
product and the segment comprises sufficient number of quality conscious buyers. Another strategy could be to bring
about , feature changes i.e. raising the number of real or fancied benefits of the product to the customer, for example,
refrigerators being brought out with two or three doors instead of one door, etc. The fourth possibility is to increase the
aesthetic appeal of the product, particularly in the case of fashion items such as garments, hand bags, etc. Nowadays

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even in products like automobiles, substantial style improvements are brought about - frequently. @e above strategies
are adopted without the existing version of the product undergoing I substantial change, but is subject to minor
changes. However, there are instances where the firm's existing product is either replaced by another item meeting the
same requirements or in most cases, the firm's' existing product and the new product are both made available in the
market simultaneously so that the combined sales of the two go to ensure reasonable revenue and profit to the
company. For instance, firms normally sell tooth and tooth powder or detergent cake and detergent powder together
and similarly, a firm in leaf tea business also introduces tea bags. Then, there are instances where a company itself
introduces a substitute product for its own brand of a product; for example,, there are companies selling ball pens and
fountain pens with the 'same brand . name and firms promoting the same brand of cotton and blended textiles. Yet
another strategy would be to resort to "line extension" i.e. introducing closely related products or loosely related
products; instances here relate to firms in the business of items such as shaving brush, shaving cream and shaving blade
under the same brand name, food items such as salt and wheat flour and toiletries such as toilet $oap and shampoo. In
all the cases, the attempt of the firm is to stretch the life cycle of a product at a higher level of sales if possible, or,
maintain the same sales level as obtained in the saturation period or even at a lower level which guarantees reasonable
return.

5) Compare and contrast the different approaches to budgeting for international advertising

SOLUTION

Percentage of Sales or Gross Margin

One rule of thumb used in setting advertising budgets is relating it as a percentage to sales, revenue, past sales or
forecasted future sales. For example, a company had allocated 5% of the sales revenue or a brand for advertising the
brand in the previous year. In the current year, if the brand is expected to generate Rs. 40 crore turnovers, a Rs. 2 crore
advertising budget may be proposed. A similar decision could be based upon market share, or units of products sold. For
example, a brand could allocate $1 million for every percent of market share it holds, or $2 for every unit of the product
it expects to sell. The advertising budget as a percentage of sales is the most common approach.'^ 1981 survey of 55
leading consumer advertisers found that over 70% of the companies allocated for advertising as a percentage of sales, as
did a similar survey of 92 British companies. This approach Gas certain advantages. If a firm or brand has been successful
over several years using the percentage of sides approach, there is little reason to change to another approach in setting
budgets. This approach tend to make explicit the marketing mix decision and the allocation of the budget to the various
elements of the marketing program. Furthermore, it provides comfort lo a prudent financial executive who likes to be

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assured that his or her firm can afford the advertising. Finally, if competitors also use such a rule, it leads to a certain
stability of advertising within the industry. The major flaw in this method is that it totally ignores the premise that
advertising influence sales. In fact, when sales or a sales estimate determine advertising expenditures, sometimes it
may lead to excessive and avoidable expenditures on brands that are basically servicing old loyal customers who will
very likely continue to buy even if advertising support is withdrawn. It can, conversely, lead to inadequate budgets for
promising healthy brands that could potentially become money spinners with more advertising muscle. The second flaw
in this method is that it ignores brand profitability, by looking only at brand sales. A more logical rule would be to use a
percentage, not of sales, but of a brand's gross margin or contribution-to-overhead. This would imply that more
profitable brands get more advertising support compared too less profitable brands irrespective of their sales revenues.

All You can Afford

Firms with limited resources may decide to spend all they can reasonably allocate Lo advertising alter other unavoidable
expenditures have been allocated. This rule usually ensures that the advertising expenditure is not too heavy and that
advertising monies are not being wasted. If the benefits of more advertising could he demonstrated, extra money could
usually be raised. So the limitations is somewhat artificial. Some large firms also use this rule. They start with the sales
forecast, and budget for all essential expenditures other than advertising. Then allocation for advertising budget is made
from the remaining resources. Main advantage of this approach is that it generates a financial plan that usually looks
neat and attractive in an accounting sense. As this approach is based on the assumption that sales are independent of
advertising expenditures, there is no realization of the fact that advertising influences sales and its absence would be
difficult to justify.

Competitive Parity and Share-of-Voice

Another common guide is to adjust he advertising budget in comparison with the competitors' budget. The logic is that
the collective minds of the firms in the industry will probably generate advertising budgets that are somewhat close to
the optimal. Furthermore, any departure from the industry norms could precipitate a spending war. The main limitation
here is that there is no guarantee that what the group or firms spending is the optimum. In this approach spending
habits of various companies in the industry remains are constant over time. In case market conditions change over time,
advertising budget under this approach may not reflect optional level. As the situation faced by each one of ' the firms
is unique to itself, the practice of competitive parity may not be the best practice. In particular, a new firm in the field
might not receive the proportionate amount of impact for it's advertising that a large established firm receives. The
success of the larger firm may be more due to other factors than to advertising. Furthermore, the method does not
consider such questions as differences in effectiveness of various campaigns or the efficiency of media placement.

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Following the competition night offer the satisfaction that you are not taking a big competitive risk, but it might turn out
to be a case of the blind following the blind.

Objective and Task

Objective and task is more an optimal approach to budgeting than any other decision rule discussed above. This practice
is followed by two-thirds of the largest advertisers. An advertising objective is first established in specific terms. For
example, a firm may decide to attempt to increase the awareness of its brand in a certain population segment to 50
percent. The tasks that are required to accomplish this objective are then detailed. This might involve development of a
specific advertising campaign exposing the relevant audience to an average of five times. The cost of obtaining these
exposures then becomes the advertising budget. This approach is logical in that it assumes that there is a casual flow
from advertising to sales. In effect, it represents an effort to introduce intervening variables such as awareness and
attitude, which will presumably be indicators of future sales as well as of intermediate sales. The major problem with
this approach is that the link between the objective and immediate future sales is often not spelt out. Many new
product researchers have, however, manage to develop proprietary estimates of how different levels of advertising
response objectives (particularly brand awareness) correspond lo typical levels of trials of new products and from there
to sales volumes, using their knowledge of historical experience. Another difficulty is that it is hard to estimate the
precise relationship between advertising media exposure and the objective (e.g, creating brand awareness) itself. Here
again, many advertising agencies have built up databases of tracking results showing how advertising spending relates to
different measures of effectiveness (such as ad recall, brand awareness, brand persuasion, etc.).

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