international marketing lecture 04

8/9/2019 International Marketing Lecture 04

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LECTURE 5


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INTERNATIONAL MARKET RESEARCH

Market Research is the gathering, recording and analyzing data to

provide information useful in making Marketing Decisions

Domestic Market Research and International Market Research arebasically the same, i. e. the same rules apply whether the research

is done for markets in Salem - Tamilnadu or Cairo Egypt or

Winston Salem North Carolina.


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SCOPE OF INTERNATIONAL MARKET RESEARCH

General information about the country, area and/or market

Specific information needed to make price, promotion, distribution

and product decisions

Information needed to forecast future marketing requirements by

anticipating social, economic and consumer trends within specific

target markets


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MARKET RESEARCH PLANNING STEPS

Unysis Corporation has successfully incorporated a three stage market researchplanning process:

Environmental: including economic/socio-political climate/overview of market conditions technological environs competitors market shares

Divisional assessment of the above conditions

Review of strategies developed from the above assessment, and choosing the optimalassessment


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THE RESEARCH PROCESS

The Market Research Process is always a compromise dictated by limits of time,cost and the present state of the art. The research process should, however, followthe steps given below to have a good probability of success:

Define the research problem and establish the research objectives

Determine the sources of information to fulfill the research objectives

Analyze, interpret and present the results


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PROBLEMS IN AVAILABILITY AND RELIABILITY OF DATA

The breadth of foreign marketing studies and the marketers lack of

familiarity with the host countrys basic socio-economic and culturaldata result in considerable demand for information available fromsecondary sources in the home country. However, the followingproblems present themselves:

Availability of data

Reliability of data Comparability of data

Therefore, it is imperative that the data should be validated byempirical or statistical means prior to putting a strategy into full force


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MULTINATIONAL MARKETING INFORMATION SYSTEMS

A company shift from decisions involving market entry to those involved in

managing and controlling a number of growing foreign markets requires

greater emphasis on a continuous system designed to generate, store,catalog, and analyse information from sources within the firm and external

to the firm for use as the basis of worldwide and country-oriented decision

making. In short, companies have a need for a Multinational Marketing

Information System (MMIS) (see next slide)


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Corporate MMIS

Country (A)

CMIS

Country (B)

CMIS

Country (C)

(etc) CMIS

InformationInstruction


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As global competition becomes more fierce, industrial marketers

should place a top priority on centrally managing the orderly

gathering and analysis of market intelligence


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SOURCES OF SECONDARY DATA

US Government sources freely available to all:

Foreign Trade Report (FT 410)

International Economic Indicators

Market Share Reports

International Marketing Information Series

Global market surveys

Country market sectoral surveys Overseas Business Reports

Business America (formerly Commerce America)

Trade Opportunities Program

Commercial Information Management System


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International Organizations:

A number of International Organizations provide information and

statistics on international markets. The Statistical Yearbook, an

annual publication of the United Nations, provides comprehensive

social and economic data for more than 250 countries around the

world. Many regional organizations, like the Organization of

Economic Cooperation and Development (OECD), Pan AmericanUnion, and the European Community publish information statistics

and market studies relating to their respective regions.


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Chambers of Commerce

Trade, Business and service Organizations

National Trade Data Bank (NTDB), which resulted from the

mandate, Omnibus Trade and Competitiveness Act of 1988, is

designed to bring over 1,00,000 different documents the

equivalent of three complete sets of the Encyclopedia Britannica to the user. Updated monthly, it is available in CD read only

memory, which contains information from several Government

agencies


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PRICING FOR INTERNATIONAL MARKETS

When selling to a variety of markets, the InternationalMarketer is faced with new sets of variables to

consider, like differences in tariff, costs, attitudes,

competition, currency fluctuations, methods of price

quotations, and marketing strategy of the firm.


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Pricing Objective

Price decisions can be an active instrumentation of achievingmarket objectives, or a strategic element in a business decision.Companies involved in international business consider, among

others, the following four factors as important to their pricingdecisions:

Total Profits

Return on investments

Achieving a certain market share

Total Sales Volume

The broader the product line and larger the market base, the morecomplex is the price control and management exercise.


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Parallel Imports

This is a form of Cannibalizing, occurring when importers buy products fromdistributors from one country and sell them to another. A case in point is the saleof finished pharmaceutical formulations to third countries from India with bulkdrugs imported from the West.

Administered Pricing

Administered pricing relates to attempts to establish prices for an entire market.Such prices may be arranged through the cooperation of competitors, throughnational, state, or local Governments, or by international agreement. The legality

of administered pricing arrangements of various kinds differs from country tocountry and from time to time. A country may condone price fixing for foreignmarkets but condemn it for the local market.


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Price Setting by Industry Groups

Licensing Agreements

Cartels

Trade Associations


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Countertrade as a Pricing Tool

The challenges of Countertrade must be viewed from the same position asall other variations in International Trade. Marketers must be aware whichmarkets will likely require countertrade just as they must be aware of socialcustoms and legal requirements. Assessing this factor along with all othermarket factors will enhance a marketers competitive position.

Types of Countertrade

Barter Compensation deals

Counterpurchase or Offset Deals

Product Buy Back arrangements


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Full Cost versus Variable Cost Pricing

Firms employing cost oriented pricing structures resort to variable cost pricing toachieve full utilization of product capacity, where local market only covers a

portion of the production and the balance would otherwise remain unutilized.

An international firm that utilizes variable cost pricing in some markets mustultimately decide whether it is a marketer exporting from one country to another,or if it is a global player. If it regards itself as a global marketer, it is more likely to

think in terms of full cost pricing to ALL markets.


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Skimming versus Penetration Pricing

Firms must decide on which policy to follow, depending on the level ofcompetition, the innovativeness of product, and the market characteristics.

Escalation of International Pricing

A pricing exercise is done here showing HOW price escalates because ofexportation components in costs!

Case: A shipment of 1,900 cases of assorted industrial goods manufactured inPatna, Bihar, is transported by truck to Kolkata Port, then by Sea Freight to Dares Salaam, Tanzania. The total weight of the shipment is 18,000 Kg. and itsvolume is 40 Cubic Feet.


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Escalation of International Pricing (contd.)

Transit time is 14 weeks {1 week from Patna to Kolkata, 1 week at the Kolkata Port, 7weeks at High Seas between Kolkata and Dar es Salaam (including trans-shipment atColombo), 3 weeks at the Dar Port, and 2 weeks in transit from the port to store inTanzania}

FOB Patna price: Rs. 4,40,000 $10,000

Freight to Kolkata: (Rs. 4500) $ 100Sea Freight to Dar: $ 1,897

Special Invoices: $ 21

Port and Fwd Fees: $ 19

Inse. (valued at $20,000): $ 395

Port Charges: $ 587

Total Shipping Charges: $ 3,019 $ 3,019

CIF Value: $13,019

Duty (20% of CIF Value): $ 2,604

Mark Ups (10% Dist, 20% Dealer) $ 4,687

Retail Price in Tanzania: $20310


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Escalation of International Pricing (Contd.)

While this is a fictitious exercise, it demonstrates how a price balloons from thesource to the final destination. The escalations are even more magnified where

Import Duties are higher, as In India!

Summarizing, the various International Pricing Strategies are:

Full Cost versus Variable Cost Pricing Strategies Skimming versus Penetration Pricing Strategies

Prices to tackle Parallel Imports

Transfer Pricing (especially applicable to MNCs)


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EXPORT PROCEDURES/DOCUMENTATION

The Terms of Delivery

Pricing decisions of exports depend on the Terms of Delivery. These are theterms on which the goods are delivered to overseas buyers. There are several

such terms and the International Chamber of Commerce (ICC) has attempted toestablish a set of Terms. These are known as the INCO Terms, variousparameters of which are given below:

EXW (Ex Works) FCA (Free Carrier) FAS (Free Alongside Ship)

FOB (Free on Board) CNF (Cost & Freight paid to Destination Port)

CIF (Cost, Inse., Freight paid to Destination Port) CPT (Carriage pd. to dest.)CIP (Carriage/Inse. Pd. To Dest.) DAF (Delivered to Frontier)

DES (Delivered ex. Ship) DEQ (Delivered ex Quay)

DDU (Delivered Duty Unpaid) DDP (Delivered Duty Paid)


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Documents needed for Exports

The following Documents are generally necessary for exporting

goods from India

Commercial Invoice

Packing List

Consular Certification of Commercial Invoice

Bill of Lading

Certificate of Origin

Insurance Policy/Certificate


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Documents needed for Exports

The following Documents are generally necessary for exporting

goods from India

Commercial Invoice

Packing List

Consular Certification of Commercial Invoice

Bill of Lading

Certificate of Origin

Insurance Policy/Certificate


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