Assignment - Winter 2013

MBA MARKETING SEM 4 International Marketing - MK0018

Submitted By / Roll No. Mayank Sharma / 521133491

Q.NO.1 Discuss the different management orientations of a company. How does it affect international

marketing?

Answer :- Management orientations

The form and substance of a companys response to global business opportunities depend greatly on managements assumptions or beliefs both conscious and unconscious about the nature of the world. The worldview of a companys personnel can be described as ethnocentric, polycentric, regiocentric, and geocentric. Management at a company with a prevailing ethnocentric orientation may consciously make a decision to move in the direction of

geocentricism.

Figure: Orientations of Management and Companies

Ethnocentric- The ethnocentric orientation mans company personnel see only similarities in markets and assume the

products and practices that succeed in the home country will, due to their demonstrated superiority, be successful

anywhere. At some companies, the ethnocentric orientation means the opportunities outside the home country are

ignored. Such companies are sometimes called domestic companies. Ethnocentric companies that do conduct business

outside the home country can be described as international companies; they adhere to the notion that the products that

succeed in the home country are superior and, therefore, can be sold everywhere without adaptation.

Polycentric-The polycentric orientation is the opposite of ethnocentrism. The term polycentric describes

managements often-unconscious belief or assumption that each country in which a company does business is unique. This assumption lays the groundwork for each subsidiary to develop its own unique business and marketing strategies

in order to succeed; the term multinational company is often used to describe such a structure.

Regiocentric and geocentric orientations-In a company with a regiocentric orientation, management views regions

as unique and seeks to develop an integrated regional strategy. For example, a U.S. company that focuses on the

countries included in the North American Free Trade Agreement (NAFTA) the United States, Canada, and Mexico has a regiocentric orientation.

Effect on international marketing

In a firms internationalization process, one key strategic decision is international market selection. Entering new markets, in particular foreign markets, involves a major commitment of recourses (strategic, technical, managerial,

and financial). Due to the limitation of resources, a firm has to make a strategic decision on which markets to enter

and allocate resources accordingly. This decision is especially important in the case of companies that decide to be

international from the inception, as INVs. Nevertheless few efforts have been done in explaining why and how INVs

decide to enter in one or more countries. firms can use their international market orientation to overcome cultural

distance problems, especially information asymmetry, opportunistic behavior, and uncertainty. Market-oriented

behaviors facilitate acquisition and dissemination of knowledge and responsiveness to this intelligence about foreign

markets what is especially important when the firm has no international experience

Q.NO.2. It is very important to analyze the politico-legal environment of a country in international business.

Comment.

Answer:-

Importance to analyze the politico-legal environment of a country in international business

The legal/political aspect is very important in global marketing. Getting acquainted with how politics and law affect

business activities around the world is a critical concern of todays successful global organizations. Especially in the

past ten years, there have been substantial political changes around the world that have shaped business operations.

New markets have opened, old ones have closed, and the level of uncertainty that exists presents many marketing

challenges. A countrys political system integrates the various parts of its society into a viable, functioning whole. It

also influences the extent to which government intervenes in business, and thus the way in which business is

conducted both domestically and internationally.

There are 5 main political causes of instability that affect the international markets:

Some forms of government seem to be inherently unstable

Changes in ruling political parties

Extreme nationalism

Animosity targeted toward specific countries

Trade disputes

In order to understand how the political environment impacts your business, you must analyze how politically

vulnerable your company is. Unfortunately, there are no universal guidelines to do so, but understanding how much

your business is effected by the political environment can identify threats to your firm. It also important to note that

high priority products and industries in a country may have more favorable government restrictions.

To decrease how vulnerable your business is to political conditions, it is especially important for the marketer to

forecast risk and engage in business ventures that may benefit them. Some examples of these practices include

forming joint-ventures, expanding your investment base, licensing your products/services, or political bargaining

through lobbying.

Government policies and laws vary from country to country, and doing business abroad means that government may

have a greater level of involvement than what you are used to in domestic business. Overall, the primary marketing

objective is to develop a plan that will be enhanced or at least not negatively affected by the political and legal

environments.

Q.NO.3 Compare GATT and WTO and discuss the implications of WTO on international marketing.

Answer:-

Comparison between GATT and WTO:

General Agreement on Tariffs and Trade (GATT): GATT is a multilateral treaty among the member countries that

lays down certain agreed rules for conducting international trade. The member countries contribute together to four-

fifth of the total world trade. It is interesting to note that underdeveloped countries form a sizable majority in GATT.

The basic aim of GATT is to liberalise world trade negotiations among members countries and, for the last forty seven

years, it has been concerned with negotiations on the reduction, even the elimination of trade barriers tariff and non-tariff between countries and improving trade relations so that the international trade flows freely and swiftly. It also provides a forum to member countries to discuss their trade problems and negotiate to enlarge their trading

opportunities.

WTO: The World Trade Organisation (WTO) was established on 1st January 1995. The functions and objectives of

WTO are given in following subsections. The agreement establishing WTO provides that it should perform the

following four functions:

First, it shall facilitate the implementation, administration and operation of the Uruguay Round legal instruments and of any new agreements that may be negotiated in the future.

Second, it shall provide a forum for further negotiations among member countries on matters covered by the agreements as well as on new issues falling within its mandate.

Implications of WTO:

The implications are as follows:

1. The System Helps to Keep the Peace: helping trade to flow smoothly and providing countries with a constructive

and fair outlet for dealing with disputes over trade issues. It is also an outcome of the international confidence and

cooperation that the system creates and reinforces. The WTO system helps resolve these disputes peacefully and

constructively.

2. Freer Trade Cuts the Cost of Living: The WTOs global system lowers trade barriers through negotiation and applies the principle of non-discrimination. The result is reduced costs of production (because imports used in

production are cheaper) and reduced prices of finished goods and services and ultimately a lower cost of living.

3. Trade Raises Incomes: Lowering trade barriers allows trade to increase, which adds to incomes national incomes and personal incomes. But some adjustment is necessary. The fact that there is additional income means that

resources are available for governments

to redistribute.

4. Trade Stimulates Economic Growth and that can be Good News for Employment: Trade clearly has the potential

to create jobs. In practice there is often factual evidence that lower trade barriers have been good for employment. But

the picture is complicated by a number of factors. Nevertheless, alternative protectionism is not the way to tackle

employment problems.

5. The Basic Principles make the System Economically more Efficient and they Cut Costs: Many of the benefits of

the trading system are more difficult to summarise in numbers but they are still important. They are the result of

essential principles at the heart of the system and they make life simpler for the enterprises directly involved in trade

and for the producers of goods and services.

Q.NO.4 Nestle is marketing bottled water to Pakistan. Which segmentation it adopts there and what are the

other international market segmentations? (Nestls segmentation, Bases of segmentation) 3, 7

Answer:-

Nestls segmentation Consumers can be categorized in terms of usage rates for example, heavy, medium, light, and nonuser. Consumers can also be segmented according to user status: potential users, nonusers, ex-users, regulars, first-timers, and users of

competitors products. Although bottled water may be considered a luxury product in some high-income markets, Nestle is marketing bottled water in Pakistan where there is a huge market of nonusers who, despite their low income,

are willing to pay 18 rupees a bottle for clean water because of the widespread presence of arsenic poisoning in well

water and the pollution of surface water. Tobacco companies are targeting China because the Chinese are heavy

smokers.

Benefit segmentation

International benefit segmentation focuses on the numerator of the value equation the B in V=B/P. This approach can achieve excellent results by virtue of marketers superior understanding of the problem a product solves or the benefit it offers, regardless of geography. For example, Nestle discovered that cat owners attitudes toward feeding their pets are the same everywhere. In response, a pan-European campaign was created for Friskies dry cat food. The

appeal was that dry cat food better suits a cats universally recognized independent nature.

Bases of segmentation

Market segmentation is the process of subdividing a market into distinct subsets of customers that behave in the same

way or have similar needs. Some widely used bases of segmentation are discussed below in sub sections.

Geographic segmentation

Geographic segmentation has major limitations: The mere fact that markets are in the same world geographic region

does not meant that they are similar. Japan and Vietnam are both in East Asia, but one is a high-income, post-

industrial society and the other is an emerging, less developed, pre-industrial society. Geographic segmentation is

dividing the world into geographic subsets. The advantage of geography is proximity: Markets in geographic

segments are closer to each other and easier to visit on the same trip or to call on during the same time window.

Demographic segmentation

A number of demographic trends aging population, fewer children, more women working outside the home, and higher incomes and living standards suggest the emergence of international segments. For most consumer and industrial products, national income is the single most important segmentation variable and

indicator of market potential. Annual per capita income varies widely in world markets, from a low of $81 in the

Congo to a high of $38.587 in Luxemburg. The World Bank segments countries into high income, upper middle

income, lower middle income, and low income.

Psychographic segmentation

Psychographic segmentation involves grouping people in terms of their attitudes, values, and lifestyles. Data are

obtained from questionnaires that require respondents to indicate the extent to which they agree or disagree with a

series of statements. In the United States, psychographics is primarily associated with SRI International, a market

research organization whose original VALS and updated VALS 2 analyses of U.S. consumers are widely known.

Behavioral segmentation

Behavioral segmentation focuses on whether people buy and use a product, as well as how often and how much they

use it. Consumers can be categorized in terms of usage rates for example, heavy, medium, light, and nonuser. Benefit segmentation

Segmentation focuses on the numerator of the value equation the B in V=B/P. This approach can achieve excellent results by virtue of marketers superior understanding of the problem a product solves or the benefit it offers, regardless of geography.

Q.NO.5 Write short notes on:

a) International packaging

b) International logistics planning

Answer:-

a) International packaging: Packaging has assumed an important function for the preservation of the goods as well

as for the reduction of cost of the products. It may be viewed as consisting of two distinct types: (i) industrial

(exterior) and (ii) consumer (inferior). Consumer packaging is designed for the purpose of affecting sales acceptance.

The aim of industrial packaging is to prepare and protect merchandise for shipment and storage Packing is even more

critical for overseas shipment than for domestic shipment because of the longer transit time and a greater number of

hazards. The subsequent subsections, we will discuss the problems that businesses face with packaging and a possible

way to overcome those problems containerisation.

Problems with packaging: There are four common packing problems some of which are in direct conflict with one

another: (i) weight, (ii) breakage, (iii) moisture and temperature, (iv) pilferage.

Weight: Over packaging not only directly increases packing cost but increases the weight and size of the cargo. An

undue increase in weight or size only serves to raise freight charges. Moreover, import fees or customs duties may

also rise when import duties are based on gross weight. Thus, over protection of cargo can cost more than its worth.

Breakage: Although over packaging is undesirable, so is under packaging because the latter allows a product to be

susceptible to breakage or damage. The breakage problem is prevalent in every step of sea transport. The cargo may

be dropped, dragged, pushed, and rolled during loading and unloading, moving in and outside the customs or in transit

to the final destination. Therefore, packing must be prepared to accommodate rough manual handling and guard

against breakages and pilferage.

Moisture and Temperature: A good packing helps in the seepage of moisture and also prevents destruction of goods

during extreme temperatures especially when the cargo is to be shipped by sea. The sea saline water corrodes the

metal parts of the cargo if it is not properly packed. Similarly, extreme climate also destroys the very shape, colour

and qualities of a product.

Pilferage: Pilferage of goods is very common especially in the Third World Countries. If the proper packaging of the

goods that are being shipped is not done, the pilferage incidents will be more and there will be a loss to the shippers.

The packaging has got to be strong and sturdy so that it cannot be easily opened by ordinary means.

b) International logistics planning: Having sketched in the broad picture of international marketing, we are ready to

analyze the approaches of management to international logistic planning. In supplying world markets, companies try

to work out systems that will be competitively practical and permit lowest cost operation so that profit is maximized.

This is one of the key components of the global unification strategy upon which the overall effectiveness of a

multinational firm depends. Looking at the operations of U.S. companies, we find that logistic systems are commonly

composed of four main components:

Components of logistics:-

I. Export of finished products from the United States. Virtually all companies start their logistic planning with a

strong preference for exporting from the United States. Manufacture abroad always involves some risks, along with

the complications of managing operations from a distance. Furthermore, exports from the United States add to the

volume of output of domestic plants, making them more efficient.

II. Manufacture in a foreign country for sale in that country. Under this heading fall two types of situations. First

are the plants in less developed countries. Companies selling goods in these countries are repeatedly confronted with

the choice of manufacturing on a protected basis within the country or being excluded by restrictions designed to

protect those who are willing to manufacture. Sometimes companies have decided to take the second choice rather

than make sizable investments of money and manpower in small markets. But because of the long run potential in the

developing countries, most companies are reluctant to be frozen out of them.

III. Foreign plants producing for local and export markets. This type of operation may be expected to increase

with the reduction of trade restrictions under international agreements and especially with the development of

common markets. A major disadvantage of foreign manufacture has been the high cost of producing on a small scale

for one-country markets. As barriers to trade are lowered, therefore, companies have shifted toward logistic systems

based on small number of fairly large plants located at strategic spots around the world.

IV. Export of components from the United States and third countries. Although many finished products cannot be

exported from the United States, it is generally possible to export some parts or supplies for use in foreign plants,

especially those manufacturing complex products like drugs, automobiles, and electronic equipment.

Q.NO.6 Select a product of your choice for export and explain how you will do the pricing and costing of that

product.

Answer:-

Choosing the product: Before breaking into the foreign market, marketers must consider factors that influence

product adoption. As explained by Diffusion Theory at least six factors have a bearing on the adoption process:

relative advantage, compatibility, trialability/divisibility, observability, complexity and price. These factors are all

perceptual and thus subjective in nature. For a product to gain acceptance it must demonstrate its relative advantage

over existing alternatives. A product must also be compatible with local customs and habits. A freezer would not find

a ready market in Asia where people prefer fresh food. A new product should also be compatible with consumers other belongings. If a new product requires replacement of those other items that are still usable, product adoption

becomes a costly preposition.

Export pricing and costing: Export pricing should be differentiated from export costing. Price is what we offer to

the customer. Cost is the price that we pay/incur for the product. Price includes our profit margin; cost includes only

expenses we have incurred. Export pricing is the most important tool for promoting sales and facing international

competition. The price has to be realistically worked out taking into consideration all export benefits and expenses.

However, there is no fixed formula for successful export pricing. It will differ from exporter to exporter depending

upon whether the exporter is a merchant exporter or a manufacturer exporter or exporting through a canalising

agency. You should also assess the strength of your competitor and anticipate the move of the competitor in the

market. Pricing strategies will depend on various circumstantial situations. You can still be competitive with higher

prices but with better delivery package or other advantages. Your prices will be determined by the following factors:

1. Range of products offered.

2. Prompt deliveries and continuity in supply.

3. After-sales service in products like machine tools, consumer durables.

4. Product differentiation and brand image.

5. Frequency of purchase.

6. Presumed relationship between quality and price.

7. Speciality value goods and gift items.

8. Credit offered.

9. Preference or prejudice for products originating from a particular source.

10. Aggressive marketing and sales promotion.

11. Prompt acceptance and settlement of claims.

12. Unique value goods and gift items.

Export Costing is basically a cost accountants job. It consists of fixed cost and variable cost comprising various elements. It is advisable to prepare an export-costing sheet for every export product.