tata research report

8/6/2019 Tata Research Report

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OBJECTIVE OF THE PROJECT

Companies undertake International Marketing for a variety of

reasons. Some are pushed by poor opportunities in the home

market, and some are pulled by superior opportunities abroad.

Given the risks of International Marketing, companies need asystematic way to make their International Marketing decisions.

This Project concentrates on major dimensions of global marketing,

the global marketing mix, and managing and leading the global

marketing effort.

A company that fails to go global is in danger of losing its domestic

business to competitors with lower costs, greater experience, better

products, and, in a nutshell, more value for the customer.


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1.1. INTRODUCTION TO GLOBAL MARKETING

We live in a global marketplace. As you read this project, you may be

sitting in a chair imported from Brazil at a desk imported from Denmark

under a lamp from Italy. On your desk you might have a PC clone from

Taiwan, software programmes from India or perhaps a Macantosh

designed in the United States and made in Ireland. Your shoes might

have come from Bulgaria, and the coffee you are sipping could be from

Latin America or from Africa, or tea made in India. In the background you

have on your favorite soft-rock radio station playing a Grateful Dead

record pressed on a Philips of the Netherlands compact disc. You are

planning to go to a Hollywood movie made in LosAngeles and then you

plan to meet friends for dinner at the new McDonald's in town. Welcome

to the new millennium. Yesterday's marketing fantasy has become

today's reality: A global marketplace has emerged.

The world has undergone a complete revolution economically from the

time only 50 years ago when students sitting at their desks would,

perhaps with the exception of the books they were reading, not have anyarticle in their possession that was manufactured more than 75 miles from

where they lived. This project is about global marketing, which is defined

as:

It is the process of focusing the resources (people, money and

physical assets) and objectives of an organisation on global

market opportunities and threats.

The post-World War II decades have been a period of unparalleled

expansion of enterprises into global markets. Two decades ago, the term

global marketing did not even exist. Today, global marketing is essential

not only for the realization of the full success potential of a business, but

even more critically, for the survival of a busines s.


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Following are the steps the company has to keep in its mind while taking

major decisions:

Considering a particular foreign market, its economic,

political-legal and cultural characteristics.

Whether to do business in few or many countries

To decide in which particular market to enter

How to enter the market that is through direct exports,

joint venture or direct investment

The extent to which their product, price, promotion,

distribution should be adapted to individual foreign

markets.

The main aim of doing this project is to get familiar with the strategies a

company adopts to make important international business decisions.

Appraising theinternationalmarketing

environment

Decidingwhether to go

abroad

Deciding onthe marketingprogramme

Deciding on themarketing

organization

Deciding howto enter the

markets

Deciding whichmarkets to

enter


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1.2. ORIENTATIONS OF THE MANAGEMENT IN GLOBAL

COMPANIES

Behavior is based on the thinking of the top management can be

classified in four ways i.e. whether the organization is Ethnocentric,

Polycentric, Geocentric and Region centric.

Ethnocentric:

These companies have strong orientation towards the home country.

They use the home base forstandardized production for export in order to

gain some marginal business. Decision-making is centralized. Ex.

Siemens and GM are ethnocentric.

Polycentric:

These companies have strong orientation towards the host country. They

consider each market to be unique and influenced by income, culture,

laws and politics. Decision-making is decentralized.

Geocentric:

These companies consider the whole rather than any particular country as

the target market. They usually do not identify themselves with a

particular country. They combine centralization and decentralization in the

syntheses that allowssome degree of flexibility. Ex. Colgate -Palmolive.

Region centric:

These companies are powerful only in certain regions. Ex. Frooti is

present in India, Sri Lanka and Nepal .


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1.3. THE STAGES OF DEVELOPMENT OF THE

TRANSNATIONAL CORPORATION

There are five stages in the evolution of the transnational corporation.

These stages describe significant differences in the strategy, worldview,

orientation, and practice of companies operating in more than one

country. One of the key differences in companies at these different stages

is in orientation.

Stage OneDomestic

The stage-one company is domestic in its focus, vision, and operations.

Its orientation is ethnocentric. This company focuses upon domestic

markets, domestic suppliers, and domestic competitors. The

environmental scanning of the stage-one company is limited to the

domestic, familiar, home-country environment. The unconscious motto of

a stage-one company is: "If it's not happening in the home country, it's not

happening." The world's graveyard of defunct companies is littered with

stage-one companies that were sunk by the Titanic syndrome: the belief,

often unconscious but frequently a conscious conviction, that they were

unsinkable and invincible on their own home turf.

The pure stage-one company is not conscious of its domestic orientation.

The company operates domestically because it never considers the

alternative of going international. The growing stage -one company will,

when it reaches growth limits in its primary market, diversify into new

markets, products, and technologies instead of focusing on penetrating

international markets.


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Stage TwoInternational

The stage-two company extends marketing, manufacturing, and other

activity outside the home country. When a company decides to pursue

opportunities outside the home country, it has evolved into the stage-two

category. In spite of its pursuit of foreign business opportunities, the

stage-two company remains ethnocentric, or home country oriented, in its

basic orientation. The hallmark of the stage-two company is the belief that

the home-country ways of doing business, people, practices, values, and

products are superior to those found elsewhere in the world. T he focus of

the stage-two company is on the home-country market.

Because there are few, if any, people in the stage -two company with

international experience, it typically relies on an international division

structure where people with international inter est and experience can be

grouped to focus on international opportunities. The marketing strategy of

the stage-two company is extension; that is, products, advertising,

promotion, pricing, and business practices developed for the home -

country market are "extended" into markets around the world.

Almost every company begins its global development as a stage-two

international company. Stage two is a natural progression. Given limited

resources and experience, companies must focus on what they do best.

When a company decides to go international, it makes sense at the

beginning to extend as much of the business and marketing mix (product,

price, promotion, and place or channels of distribution) as possible so that

learning can focus on how to do business in fore ign countries.

A fundamental strategic maxim is that it is a mistake to attempt to

simultaneously diversify into new customer and new-product/technology

markets.


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The international strategist observes this maxim by holding the marketing

mix constant while adding new geographic or country markets. The focus

of the international company is on extending the home-country marketing

mix and business model.

Stage ThreeMultinational

In time, the stage-two company discovers that differences in markets

around the world demand an adaptation of its marketing mix in order to

succeed. Toyota, for example, discovered the former when it entered the

U.S. market in 1957 with its Toyopet. The Toyopet was not a big hit:

Critics said they were "overpriced, underpowered, and built like tanks."The car was so unsuited for the U.S. market that unsold models were

shipped back to Japan. The market rejection of the Toyopet was chalked

up by Toyota as a learning experience and a source of invaluable

intelligence about market preferences. Note that Toyota did not define the

experience as a failure. There is, for the emerging global company, no

such thing as failure: only learning experiences and successes i n the

constantly evolving strategy and experience of the company.

When a company decides to respond to market differences, it evolves into

a stage-three multinational that pursues a multi-domestic strategy. The

focus of the stage-three company is multinational or in strategic terms,

multi- domestic. (That is, this company formulates a unique strategy

for each country in which it conducts business.) The orientation of

this company shifts from ethnocentric to polycentric.

A polycentric orientation is the as sumption that markets and ways of

doing business around the world are so unique that the only way to

succeed internationally is to adapt to the different aspects of each national

market. Like the stage-two international, the stage-three multinational,

polycentric company is also predictable. In stage-three companies, each


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foreign subsidiary is managed as if it were an independent city -state. The

subsidiaries are part of an area structure in which each country is part of a

regional organization that reports to world headquarters. The stage-three

marketing strategy is an adaptation of the domestic marketing mix to meet

foreign preferences and practices.

Philips and its Japanese competition was dramatic. Matsushita, for

example, adopted a global strategy that focused its resources on serving

a world market for home entertainment products.

Stage FourGlobal

The stage-four company makes a major strategic departure from thestage-three multinational. The global company will have either a global

marketing strategy or a global sourcing strategy, but not both. It will either

focus on global markets and source from the home or a single country to

supply these markets, or it will focus on the domestic market and source

from the world to supply its domestic channels. Examples of the stage-

four global company are Harley Davidson and the Gap. Harley is an

example of a global marketing company. Harley designs and

manufactures super heavyweight motorcycles in the United States and

targets world markets. The key engineering and manufacturing assets are

all located in the home country (the United States). The only Harley

investment outside the home country is in marketing. The Gap is an

example of a global sourcing company. The Gap sources worldwide for

product to supply its U.S. retail organization. Each of these companies is

operating globally, but neither of them isseeking to globalize all of the key

organization functions.

The stage-four global company strategy is a winning strategy if a

company can create competitive advantage by limiting its globalization of

the value chain. Harley Davidson gains competitive advantage because it

isAmerican designed and made, just asBMW and Mercedes have traded


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on theirGerman design and manufacture. The Gap understands the U.S.

consumer and is creating competitive advantage by focusing on market

expansion in the United States while at the same time taking advantage of

its ability to source globally for product suppliers.

Stage FiveTransnational

The stage-five company is geocentric in its orientation: It recognizes

similarities and differences and adopts a worldview. This is the

company that thinks globally and acts locally. It adopts a global

strategy allowing it to minimize adaptation in countries to that which will

actually add value to the country customer. This company does not adapt

for the sake of adaptation. It only adapts to add value to its offer.

The key assets of the transnational are dispersed, interdependent, and

specialized. Take R&D, for example. R&D in the transnational is

dispersed to more than one country. The R&D activities in each country

are specialized and integrated in a global R&D plan. The same is true of

manufacturing. Key assets are dispersed, interdependent, and

specialized. Caterpillar is a good example. Cat manufactures in many

countries and assembles in many countries. Components from

specialized production facilities in different countries are shipped to

assembly locations for assembly and then shipped to customers in world

markets.


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1.4. MARKETING STRATEGIES ADOPTED BY GLOBAL

COMPANIES

Marketing Strategies Adopted by Global Company can be broadly

classified as follows:

1. AGlobal Strategy

It treats the world as a single market. Thisstrategy is warranted when

the forces for global integration are strong and the forces for national

responsiveness are weak. This is true of the consumer electronics

market, for example, where most buyers will accept a fairly

standardized pocket radio, CD player, or TV. Matsush ita has

performed better than GE and Philips in the consumer electronics

market because Matsushita operates in a more globally coordinated

and standardized way.

2. A Multinational Strategy

It treats the world as a portfolio of national opportuni ties. Thisstrategy

is warranted when the forces favoring national responsiveness are

strong and the forces favoring global integration are weak. This is the

situation in the branded packaged -goods business (food products,

cleaning products). Unilever can be cited as a better performer than

Procter & Gamble (P&G) because Unilever grants more decision-

making autonomy to its local branches.


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3. A "Glocal" Strategy

It standardizes certain core elements and localizes other ele ments.

This strategy makes sense for an industry (such as telecommunica-

tions) where each nation requires some adaptation of its equipment

but the providing company can also standardize some of the core

components. Ericsson can be cited as balancing these considerations

better than NEC (too globally oriented) and ITT (too locally oriented).

One of the most successful "Glocal" companies isABB, formed by a

merger between the Swedish company ASEA and the Swiss company

Brown Boveri.


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1.5. MARKETING MIX UNDER GLOBAL MARKETING

A global marketing manger has to take 4 Ps of international

marketing into consideration i.e. the Product, Price, Place and

Promotion.

1.5.1. 1ST P: THE PRODUCT

Product is probably the most crucial element of a marketing program. To

a very important degree a company's products define its business.

Pricing, communication, and distribution policies must fit the product. Its

research and development requirements will depend upon the

technologies of its products. Indeed, every aspect of the ente rprise is

heavily influenced by the firm's product offering.

In the past, managers have been prone to committing (often

simultaneously) two types of errors regarding product decisions in global

marketing. One error has been to fall victim to the " Not Invented

Here" (NIH)syndrome, ignoring product decisions made by subsidiary or

affiliate managers. Managers who behave in this way are essentially

abandoning any effort to influence or control product policy outside the

home-country market. The other error has been to impose product

decisions policy upon all affiliate companies on the assumption that

what is right for customers in the home market must also be right for

customers everywhere.

The challenge facing a company with global horizons is to develop

product policies and strategies that are sensitive to market needs,competition, and company resources on a global scale.


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P ESI

P t si is f t t i i s ss i l l ti .

Shoul ompanyadapt product desi n for arious national markets or

offera singledesign to theglobal market? In some instances, makinga

design change may increase sales. owever, the benefits of such

potential sales increases must beweighedagainst thecost ofchanginga

product s design and testing it in the market. Global marketers need to

considerfourfactors whenmakingproduct designdecisions: preferences,

cost, laws andregulations, andcompatibility.

Preferences

There are marked and important differences in preferences around the

world for factors such as colour and taste. arketers who ignore

preferences do soat theirownperil.

ost

In approaching the issue of product design, company managers must

considercost factors broadly. Ofcourse, theactual cost ofproducing the

product will create a cost floor. Other design-related costs whether

incurredby themanufacturerortheenduserm ust alsobeconsidered.

ompatibility

The last product design issue that must be addressed by company

managers is product compatibilitywith theenvironment inwhich it is used.

A simple thing like failing to translate the user's manual into v arious

languages can hurt sales of home appliances built in America. Also,electrical systems range from to volts and from to cycles.

This means that thedesignofanyproduct poweredbyelectricitymust be

compatiblewith thepowersystem in thecountryofuse.


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Climate

Climate is another environmental characteristic that often demands

compatibility. Many products require tropicalization to withstand humidity,

whereas other products must withstand extreme cold. Many European

automobiles are not suited to the extreme cold winter conditions found in

parts of North America. This is particularly true of cars coming from Britain

and Italy, two countries that do not have extreme winters.

Measuring systems do not demand compatibility, but the absenc e of

compatibility in measuring systems can create product resistance. The

lack of compatibility is a particular danger for the United States, which is

the only non-metric country in the world. Products calibrated in inches and

pounds are at a competitive disadvantage in metric markets. When

companies integrate their worldwide manufacturing and design activity,

the metric-English measuring system conflict requires expensive

conversion and harmonization efforts.

Strategy 1: Product-Communications Extension (Dual Extension)

Many companies employ product-communications extension as a strategy

for pursuing opportunities outside the home market. Under the right

conditions, this is the easiest product marketing strategy and, in many

instances, the most profitable one as well. American companies pursuing

thisstrategy sell exactly the same product, with the same advertising and

promotional appeals used in the United States, in some or all world

market countries orsegments.

Note that this strategy is utilized by companies in stages two, four, and

five. The critical difference is one of execution and mindset. In the stage -

two company, the dual extension strategy grows out of an ethnocentric

orientation; the stage-two company is making the assumption that all


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markets are alike. The company in the fourth or fifth stage does not fall

victim to such assumptions; geocentric orientation allows the company in

stage four or five to thoroughly understand its markets and consciously

take advantage ofsimilarities in world markets.

One of the leading practitioners of this approach is PepsiCo, whose

outstanding robust global performance is a persuasive justification of this

practice. Gillette also recently used this strategy in the worldwide launch

of itsSensor razor, using the advertising theme "The best a man can get."

The product-communications extension strategy has an enormous appeal

to global companies because of the cost savings that are associated with

this approach. The two most obvious sources of savings are

manufacturing economies of scale and elimination of duplicate product

R&D costs. Less well known but still important are the substantial

economies associated with standardization of marketing communications.

For a company with worldwide operations, the cost of preparing separate

print and television ads for each market is a significant marketing

expense. Although these cost savings are important, they should not

distract executives from the more important objective of maximum profit

performance, which may require the use of an adaptation or invention

strategy. As we have seen, in spite of its immediate cost savings, product

extension may in fact result in market failure.

Strategy 2: Product Extension-Communications Adaptation

When a product fills a different need, appeals to a different segment, or

serves a different function under use conditions that are the same or

similar to those in the domestic market, the only adju stment that may be

required is in marketing communications. Bicyclesand motor scooters

are examples of products that have been marketed with this approach.

They satisfy recreation needs in the United States but serve as basic

transportation in many other countries. Similarly, outboard marine


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motors are usually sold to a recreation market in the United States,

whereas the same motors in many foreign countries are often sold to

fishing and transportation fleets. As these examples show, the product

extension-communications adaptation strategy whether by design or by

accident results in product transformation. The same physical product

ends up serving a different function or use than that for which it was

originally designed or created. The appeal of the product extension-

communications adaptation strategy is its relatively low cost of

implementation. Since the product in this strategy is unchanged, R&D,

tooling, manufacturing setup, and inventory costs associated with

additions to the product line are avoided. The only costs of this approach

are in identifying different product functions and revising marketing

communications (including advertising, sales promotion, and point -of-sale

material) around the newly identified function.

Strategy 3: Product Adaptation-Communications Extension

A third approach to global product planning is to extend, without change,

the basic home-market communications strategy while adapting the

product to local use or preference conditions. Note that thisstr ategy (and

the one that follows) may be utilized by companies in stages three, four,

and five. The critical difference, as noted earlier, is one of execution and

mindset. In the stage-three company, the product adaptation strategy

grows out of a polycentric orientation; the stage-three company assumes

that all markets are different. By contrast, the geocentric orientation of

managers and executives in a company in stage four or five has

sensitized them to actual rather than assumed differences between

markets.

Strategy 4: Dual Adaptation

When comparing a new geographic market to the home marker marketers

sometimes discover that environmental conditions of use or consumer


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preferences differ; the same may be true of the function a product serves

or consumer receptivity to advertising appeals. In essence, this is a

combination of the market conditions of strategies 2 and 3. In such a

situation, a company in stage four or five will utilize the strategy of product

and communications adaptation. As was true about strategy 3, stage-

three companies will also use dual adaptation regardless of whether the

strategy is warranted by market conditions, preferences, function, or

receptivity.

Unilever's experience with fabric softener in Europe exemplifies the

classic multinational road to adaptation. For years, the product wassold in

ten countries underseven different brand names with different bottles and

marketing strategies. Unilever's decentralized structure meant that

product and marketing decisions were left to cou ntry managers. They

chose names that had local-language appeal and selected package

designs to fit local tastes. Today, rival Procter & Gamble is introducing

competitive products with a pan-European strategy of standardized

products with single names, suggesting the European market is more

similar than Unilever assumed. In response, Unilever's European brand

managers are attempting to move gradually toward standardization.

Strategy 5: Product Invention

Adaptation and adjustment strategies are effective approaches to

international (stage-two) and multinational (stage-three) marketing, but

they may not respond to global market opportunitie s. Nor do they respond

to the situation in markets where customers do not have the purchasing

power to buy either the existing or adapted product. This latter situation

applies to the less developed part of the world, which includes roughly

three-quarters of the world's population.

Rather than extend or adapt an existing product, it is often necessary to

plan and design for the global market. An example is the rechargeable


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battery market, whose voltage and cycles vary around the world.

Anton/Bauer, a small Connecticut company, offers a portable power

system (batteries and chargers) that will operate anywhere in the world

without adjustments by the user. The charger "knows" or reads the type of

power that it is plugged into and adjusts accordingly. The produ cts

portability creates added value for customers. The Anton/Bauer approach

is to design for the global market: The company manufactures one

product instead of many and thereby keeps costs down. This design

feature enables Anton/Bauer to manufacture one chassis instead of

several, which in turn enables the company to achieve greater economies

ofscale and greater experience. Scale and experience mean lower costs,

and lower costs and higher quality are essential in serving global markets

in the 1990s. The winners in global competition are the companies

that can develop product designs offering the most benefits , which

in turn create the greatest value for buyers. The product invention

strategy frequently means higher levels of product performance and lower

prices, which translate into greater customer value.

In some instances, value is not defined in terms of performance, but

rather in terms of customer perception. Customer perception is as

important for an expensive perfume or champagne as it is for an

inexpensive soft drink. Product quality is essentialindeed, it is frequently

a givenbut it is also necessary to support the product quality with

imaginative, value-creating advertising and marketing communications.

This can be done with a global advertis ing campaign. Most industry

experts believe that a global appeal and a global campaign are more

effective in creating the perception of value than is a series of separate

national campaigns.

When potential customers cannot afford a product, the strategy Indicated

is invention. In other words, a company may need to develop an entirely

new product designed to satisfy the need or want at a price that is within


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the reach of the potential customer. This is demanding, but if product

development costs are not excessive, it is potentially a rewarding product

strategy for the mass markets in the less developed countries of the

world.

Although there are ample opportunities for the application of the invention

strategy in global marketing, it is a strategy that is unfortunately under

appreciated and under utilized. For example, an estimated 600 million

women in the world still scrub their clothes by hand. Soap and detergent

companies have served these women for decades, yet until recently not

one of these companies had attempted to develop an inexpensive

manual-washing device.


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1.5.2. 2ndP: PRICE

In any country, three basic factors determine the boundaries within which

market pricesshould be set. The first is product cost, which establishes a

price floor, or minimum price. While it is certainly possible to price a

product below the cost boundary, few firms can afford to do this for

extended periods of time. Second, competitive prices for comparable

products create a price ceiling or upper boundary. International

competition almost always puts pressure on the prices of domestic

companies. A widespread effect of international trade is to lower prices.

Indeed, one of the major arguments favoring international business is the

favorable impact of international competition upon national price levels

and, in turn, upon a country's rate of inflation. Between the lower and

upper boundaries for every product there is an optimum price, which is a

function of the demand for the product as determined by the willingness

and ability of customers to buy. The interplay of these factors is reflected

in the pricing policies adopted by many Global companies in the mid-

1990s.

A global manager must develop pricing systems and pricing policies that

address these fundamental factors in each of the national markets in

which his or her company operates. The following is a list of eight basic

pricing considerations for marketing outside the home country.

Does the price reflect the product's quality

Is the price competitive

Should the firm pursue market penetration, market skimming, or

some other pricing objective


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hat type of discount trade, cash, uantity) and allowance

advertising, trade-off) should the firm offer its international

customers?

Shouldprices differwithmarket segment?

hat pricing options are available if the firm's costs increase or

decrease? Is demand in the international market elastic or

inelastic?

Are the firm's prices likely to be viewed by the host-country

government as reasonableorexploitative?

Do the foreigncountry's dumping laws poseaproblem?

A firm's pricing system and policies must also be consistent with other

uni uelyglobal constraints. Thoseresponsible forglobal pricingdecisions

must take into account international transportation costs, middlemen in

elongated international channels of distribution, and the demands of

global accounts for equal price treatment regardless of location. In

addition to thediversityof national markets inall threebasicdimensions

of cost, competition, and demand, the international executive is also

confrontedbyconflictinggovernmental taxpolicies andclaims as well as

various types ofpricecontrols. These includedumping legislation, resale

pricemaintenance legislation, priceceilings, andgener al reviews ofprice

levels.


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GLOBAL PRICING STRATEGIES

An effective pricing strategy for international markets is one in which

competition and costs have influenced the pricing decision. Only

examining the price levels of competitive and substitute products in targetmarkets can determine competitive prices. An excellent way to get this

information is to visit the market personally. Once these price levels have

been established, the base price can be determined. The four steps

involved in determining a base price are:

1. Determine the price elasticity of demand. Inflexible demand will

allow for a higher price.

2. Estimate fixed and variable manufacturing costs on projected sales

volumes. Product adaptation costs must be calculated.

3. Identify all costs associated with the marketing program.

4. Select the price that offers the highest contribution margin.

The final determination of a base price can be made only after the other

elements of the marketing mix have been established. These include the

distribution strategy and communication strategy. The nature and length

of channels utilized in the marketing program will affect margins, as will

the cost of advertising and communications. Clearly, the marketing

program has a dramatic effect on the final price of the product.


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GLOBAL PRICING: THREE POLICY ALTERNATIVES

What pricing policy should a global company pursue Viewed broadly,

there are three alternative positions a company can take toward

worldwide pricing.

Extension/Ethnocentric

The first can be called an extension/ethnocentric pricing policy. This policy

requires that the price of an item be the same around the world and that

the importer absorbs freight and import duties. This approach has the

advantage of extreme simplicity because no information on competitive or

market conditions is required for implementation. The disadvantage of this

approach is directly tied to its simplicity. Extension pricing does not

respond to the competitive and market conditions of each national marke t

and, therefore, does not maximize the company's profits in each national

market.

Adaptation/Polycentric

The second pricing policy can be termed adaptation/polycentric. This

policy permitssubsidiary or affiliate managers to establish whatever price

they feel is most desirable in their circumstances. Under such an

approach, there is no control or fixed requirement that prices be

coordinated from one country to the next. The only constraint on this

approach is in setting transfer prices within the corpora te system. Such an

approach issensitive to local conditions, but it does present problems ofproduct arbitrage opportunities in cases where disparities in local market

prices exceed the transportation and duty cost separating markets. When

such a condition exists, there is an opportunity for the enterprising

business manager to take advantage of these price disparities by buying


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in the lower-price market and selling in the more expensive market. There

is also the problem that under such a policy, valuable knowledge and

experience within the corporate system concerning effective pricing

strategies is not applied to each local pricing problem. The strategies are

not applied because the local managers are free to price in the way they

feel is most desirable, and they may not be fully informed about company

experience when they make their decision.

Invention/Geocentric

The third approach to international pricing can be termed

invention/geocentric, Using this approach, a company neither fixes asingle price worldwide nor remains aloof from subsidiary pricing decisions,

but instead strikes an intermediate position. A company pursuing this

approach works on the assumption that there are unique local market

factors that should be recognized in arriving at a pric ing decision. These

factors include local costs, income levels, competition, and the local

marketing strategy. Local costs plus a return on invested capital and

personnel fix the price floor for the long term. However, for the short term,

a company might decide to pursue a market penetration objective and

price at less than the cost-plus return figure using export sourcing to

establish a market. Anothershort-term objective might be to estimate the

size of a market at a price that would be profitable given local sourcing

and a certain scale of output. Instead of building facilities, the target

market might first be supplied from existing higher-cost external supply

sources. If the market accepts the price and product, the company can

then build a local manufacturing facility to further develop the identified

market opportunity in a profitable way. If the market opportunity does not

materialize, the company can experiment with the product at other prices

because it is not committed by existing local manufacturing facilities to a

fixed sales volume.


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For consumer products, local income levels are critical in the pricing

decision. If the product is normally priced well above full manufacturing

costs, the international marketer has the latitude to price below prevailing

levels in higher-income markets and, as a result, reduces the gross

margin on the product. While no business manager enjoys reducing

margins, marginsshould be regarded as a guide to the ultimate objective,

which is profitability. In some markets, income conditions may dictate that

the maximum profitability will be obtained by sacrificing "normal" margins.

The important point here is that in global marketing there is no such

thing as a normal margin

The final factor bearing on the price decision is the local marketing

strategy and mix. Price must fit the other elements of the marketing

program. For example, when it is decided to pursue a "pull" strategy that

uses mass-media advertising and intensive distribution, the price selected

must be consistent not only with income levels and competition but also

with the costs and extensive advertising programs.

In addition to these local factors, the geocentric approach recognizes that

headquarters price coordination is necessary in dealing with international

accounts and product arbitrage. Fina lly, the geocentric approach

consciously and systematically seeks to ensure that accumulated national

pricing experience is leveraged and applied wherever relevant.

Of the three methods, only the geocentric approach lends itself to global

competitive strategy. A global competitor will take into account global

markets and global competitors in establishing prices. Prices will support

global strategy objectives rather than the objective of maximizing

performance in a single country.


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For this reason, channel strategy is one of the most challenging and

difficult components of an international marketing program. Smaller

companies are often blocked by their inability to establish effective

channel arrangements. In larger multinational companies operating via

country subsidiaries, channel strategy is the element of the marketing mix

that headquarters understands the least. To a large extent channels are

an aspect of the marketing program that is locally led through the

discretion of the in-country marketing management group. Nevertheless, it

is important for managers responsible for world marketing programs to

understand the nature of international distribution channels. Distribution is

an integral part of the total marketing program and must be appropriate to

the product design, price, and communications aspects of the total

marketing program. Another important reason for placing channel

decisions on the agenda of international marketing managers is the

number and nature of relationships that must be managed. Channel

decisions typically involve long-term legal commitments and obligations to

other firms and individuals. Such commitments are often extremely

expensive to terminate or change. Even in cases where there is no legal

obligation, commitments may be backed by good faith and feelings of

obligation, which are equally difficult to manage and painful to adjust.


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TARGET ARKETS

The startingpoint in selecting themost effectivechannel arrangement is a

cleardeterminationof the target market forthecompany's marketingeffort

andadeterminationof theneeds andpreferences of the target market.

hereare thepotential customers located?

hat are their informationrequirements?

hat are theirpreferences forservice?

ow sensitiveare they toprice?

These are some of the questions that the channel manager shouldanswer. ustomer preference must be carefully determined because

there is as much danger to the success of a marketing program in

creating too muchutilityas there is increating too little. oreover, each

market must be analysed to determine the cost of providing channel

services. hat is appropriate in one country may not be effective in

another.

hannel strategy in a global marketing program must fit the company'scompetitive position and overall marketing objectives in each national

market. Ifacompanywants toenteracompetitivemarket, it has twobasic

choices.

Oneoption is providing incentives to independent channel agents

that will induce them topromote thecompany's product.

Alternatively, the company must establish company-owned or

franchisedoutlets.


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The process of shaping international channels to fit overall company

objectives are constrained by four factors: customers, products,

intermediaries, and the environment. Important characteristics of each of

these factors are discussed briefly.

Customer Characteristics

The characteristics of customers are an important influence on channel

design. Their number, geographical distribution, income, shopping

habits, and reaction to different selling methods all vary from

country to country and therefore require different channel approaches.

Remember, channels create utility for customers.

In general, regardless of the stage of market development, the need for

multiple channel intermediaries increases as the number of customers

increases. The converse is also true: The need for channel intermediaries

decreases as the number of customers decreases. For example, if there

are only ten customers for an industrial product in each national market,

these ten customers must be directly contacted by either the

manufacturer or an agent. For mass-market products bought by millionsof customers, retail distribution outlets or mail-order distribution is

required. In a country with a large number of low-volume retailers, it is

usually cheaper to reach them via wholesalers. Direct selling that

bypasses wholesale intermediaries may be the most cost -effective means

ofserving large-volume retailers. While these generalizations apply to all

countries, regardless ofstage of development, individual country customs

will vary.


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Product Characteristics

Certain product attributes such as degree of standardizati on,

perishability, bulk, service requirements, and unit price have an

important influence on channel design and strategy . Products withhigh unit price, for example, are often sold through a direct company sales

force because the selling cost of this "expensive" distribution method is a

small part of the total sale price. Moreover, the high cost ofsuch products

is usually associated with complexity or with product features that must be

explained in some detail, and a controlled sales force can do this most

effectively. For example, computers are expensive, complicated products

that require both explanation and applications analysis focused on the

customer's needs. A company-trained salesperson or "sales engineer" iswell suited for the task of creating information utility for computer buyers.

Computers, photocopiers, and other industrial products may require

margins to cover the costs of expensive sales engineering. Other

products require margins to provide a large monetary incentive to a direct

sales force. In many parts of the world, cosmetics are sold door to door;

company representatives call on potential customers. The representatives

must create in the customer an awareness of the value of cosmetics and

evoke a feeling of need for this value that leads to a sale. The sales

activity must be paid for. Companies using direct distribution for consumer

products rely upon wide gross selling margins to generate the revenue

necessary to compensate salespeople. Amway and Avon are two

companies that have succeeded in extending their direct-sales systems

outside the United States.

Perishable products impose special form utility demands on channel

members. Such products usually need relatively direct channels to ensure

satisfactory condition at the time of customer purchase. In less developed

countries, producers of vegetables, bread, and other food products


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typically sell their goods in public marketplaces. In developed countries,

controlled sales forces distribute perishable food products, and stock is

checkedby these sales distributororgani ations toensure that it is fresh

andready forpurchase.

Bulky products usually require channel arrangements that minimi e the

shipping distances and the number of times products change hands

betweenchannel intermediaries before theyreach theultimatecustome r.

Soft drinks and beer are examples of bulky products whose widespread

availability is an important aspect ofaneffectivemarketing strategy.

S l i i i Agents

The selecti n istri tors nd gents in target market is a

criticall im ortant task. A good commission agent or stocking

distributor can make the difference between reali ing ero performance

andperformance that exceeds % ofwhat is expected. At anypoint in

time, some of any company's agents and distributors will be excellent,

others will be satisfactory, and still others will be unsatisfactory and in

needofreplacement.

To find a good distributor, a firm can begin with a list provided by the

Department of ommerceor its equivalent indifferent countries. The local

chamber of commerce in a country can also provide lists, as can local

tradeassociations. It is awasteof time to try to screen the list bymail. Go

to the countryand talk toendusers of theproducts you are selling and

find out which distributors they prefer and why they prefer them. If the

product is aconsumerproduct, go to theretail outlets and findout where

consumers arebuyingproducts similartoyourownandwhy. Twoorthree

names will keep comingup. Go to these twoor three and see whichof

themwouldbeavailable to sign. Before signing, make sure there is


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someone in the organization who will be the key person for your product

who will make it a personal objective to achieve success with your

product.

This is the critical difference between the successful distributor and the

worthless distributor. There must be a personal, individual commitment to

the product. The second and related requirement for successful

distributors or agents is that they must be successful with the product.

Success means that they can sell the product and make money on it. In

any case, the product must be designed and priced to be competitive in

the target market. The distributor can assist in this process by providing

information about customer wants and the competition and by promoting

the product he orshe represents.

The only way to keep a good distributor is to work closely with him or her

to ensure that he orshe is making money on the product. Any distributor

who does not make money on a line will drop it. It is really quite simple. In

general if a distributor is not working out, it is wise to terminate the

agreement and find another one. Few companies are large enough to

convert a mediocre distributor or agent into an effective business

representative. Therefore, the most important clause in the distributor

contract is the cancellation clause. Make sure it is written in a way that will

make it easy to terminate the agreement. There is a myth that it is

expensive or even impossible to terminate di stributor and agent

agreements. Some of the most successful global marketers have

terminated hundreds of agreements and know success is based on their

willingness to terminate if a distributor or agent does not perform.


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The key factor is performance: If a distributor does not perform, he

or she must either shape up or be replaced.

Environmental Characteristics

The general characteristics of the total environment are a major

consideration in channel design. Because of the enormous variety of

economic, social, and political environments internationally, there is a

need to delegate a large degree of independence to local operating

managements or agents.


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1. . . th P PROMOTION

arketing communications the promotion P of the marketing mix

refers toall forms of communications that organi ations use toestablish

meaning and influence buying behavior among existing and potential

customers. arketing communications should be designed to tell

customers about thebenefits andvalues that aproduct or serviceoffers.

Theprincipal forms ofmarketingcommunications that is/ theelements of

thepromotionmix, are

Advertising,

Personal selling,

Publicityand

Sales Promotion.

All of these elements can be utili ed in global marketing; however, the

environment in which marketing communications programs are

implementedcanvary fromcountry tocountry.

Advertising may edefinedasanysponsored, paidcomm nication

placed ina mass-medi m vehicle.

Advertisingplays amore important communicationrole in themarketing

of consumer products than industrial products. Frequently purchased,

low-cost products generally require heavy advertising support. ot

surprisingly, consumerproducts companies top the list ofbigadvertising

spenders.


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GLOBAL PROMOTION STRATEGIES

Companies can run the same advertising and promotion campaigns used

in the home market or change them for each local market, a proce ss

called communication adaptation. If it adapts both the product and thecommunication, the company engages in dual adaptation. There are 3

approaches that a global company can use in advertisements:

First Approach

The first approach is to consider the message. The company can

change its message at four different levels. The company can use onemessage everywhere, varying only the language, name, and colors.

Exxon used Put a tiger in your tank with minor variations and gained

international recognition. Colours might be changed to avoid taboos in

some countries. Purple is associated with death in Burma and some Latin

American nations; white is a mourning color in India; and green is

associated with disease in Malaysia. Even names and headlines may

have to be modified. When Clairol introduced the Mist Stick, a curling

iron, into Germany, it found that mist isslang for manure. Few Germanswanted to purchase a manure stick. The Dairy Association brought its

got Milk advertising campaign to Mexico only to find that the Spanish

translation read, Are you lactating When Coors put its slogan turn it

loose, into Spanish, it was read by some as suffer from diarrhoea. In

Spain, Chevrolet's Nova translated, as it doesn't go." A laundry soap ad

claiming to wash really dirty parts was translated in French -speaking

Quebec to read a soap for washing private parts.


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Second Approach

The second Approach is to use the same theme globally but adapt the

copy to each local market. For example, Camay soap commercial showed

a beautiful woman bathing. In Venezuela, a man was seen in the

bathroom; in Italy and France, only a man's hand wasseen; and in Japan,

the man waited outside. Danish beer company, Carlsberg, goesso far as

to adapt copy not to countries but to individual cities and even neighbour

hoods within those cities. The 151-year-old Danish beer is available in

more than 140 countries around the world, but because of the

competitiveness and maturity of the U.S. market, it has to take a local tack

in its approach to win new customers who aren't familiar with the brand.All advertisements feature the same single image of the Carlsberg bottle,

along with a humorous message about the specific city.

Third Approach

The third approach consists of developing a global pool of ads, from

which each country selects the most appropriate one . Coca-Cola and

Goodyear use this approach. Finally, some companies allow their country

managers to create country-specific ads within guidelines, of course.

Kraft uses different ads for Cheez Whiz in different countries, given that

household penetration is 95 percent in Puerto Rico, where the cheese is

put on everything; 65 percent in Canada, where it is spread on morning

breakfast toast; and 35 percent in the United States, where it is

considered a junk food.

The use of media also requires international adaptation because media

availability varies from country to country. Norway, Belgium, and France

do not allow cigarettes and alcohol to be advertised on TV. Austria and

Italy regulate TV advertising to children. Saudi Arabia does not want


37/92


advertisers to use women in ads. India taxes advertising. Magazines vary

in availability and effectiveness; they play a major role in Italy and a minor

one in Austria. Newspapers have a national reach in the United Kingdom,

but the advertiser can buy only local newspaper coverage in Spain.

Marketers must also adapt sales-promotion techniques to different

markets. Greece prohibits coupons, and France prohibits games of

chance and limits premiums and gifts to 5 percent of product value.

People in Europe and Japan tend to make inquiries via mail rather than

phonewhich may have ramifications for direct mail and other sales -

promotion campaigns. The result of these varying preferences and

restrictions is that global companies generally assign sales promotion as

a responsibility of local management.


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2.1. OMPANY PROFI E -TATA

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39/92


TATA GROUP

For over 130 years Tata name had been synonymous with leadership in

industry, ethical business practices and an ongoing commitment to

quality. The Tata Group had fueled the nations growth and prosperity bycontributing significantly to Indias core sectors and has emerged as a

leading force in the new economy.

2.2. VISION OF TATA INTERNATIONAL

As the international business gateway of the Tata Group, we are the

driving force behind the emergence of the Tata name as a global brand.

Augmenting the existing product portfolio of the group, we leverage our

reach to offer quality products and services around the globe, sourced

from the most competitive regions worldwide.

It is our commitment to our vision of creating and exciting, empowered

and know ledged Rich Corporation, which propels our continuous

exploration of new horizons.

2.3. ACHIEVEMENTS IN THE LAST 5 YRS

1995-96

1996 First engine produced by Tata Cummins in January 1996.

LPT 2516 vehicle fitted with Tata Cummins engine launched on March

4, 1996.

Tata Sumo Deluxe launched.

Tata Holset's turbo charger plant inaugurated on November 25, 1996.

688 acres of land at Dharwad (Karnataka) were allotted forAu to and

CEBU Units, in Dec 1996.

Concorde Motors Ltd., a Joint Venture was established between Tata

Engineering and Jardine International Motors (Mauritius) Ltd.


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1997-98

1997 Industrial Entrepreneurs Memorandum was filed for taking up

manufacture ofspecial purpose vehicles and construction equipment at

Dharwad in Jan 1997.

Management Services Division of the Company was transferred to the

wholly owned subsidiary of Tata Engineering - Tata Technologies (I) Ltd,

inApr 1997.

Tata Sierra Turbo launched.

100,000th Tata Sumo rolled out.

The commercial vehicle, LPT 909 introduced.

1998 Tata Safari - India's first Sports Utility vehicle launched in Jan 1998.

Concorde MotorsLtd., a Joint Venture between Tata Engineering and

Jardine International Motors (Mauritius) Ltd. was appointed as dealer

for the Company's passenger cars in several cities across the country,

in Feb 1998.

Two millionth vehicle rolled out.

Collaboration with Hitachi, Japan, for manufacture of Series V

excavators to replace Series I & III machines, in Mar 1998.

Indica, India's first fully indigenous car, launched in Dec 1998.

Telco Construction Equipment Company Ltd. (TELCON) came into

being as a subsidiary of Tata Engineering, in Dec 1998.

1999

1999 An overwhelming 115,000 bookings for Indica were made against full

payment within a week, in Jan 1999.

New TATA Logo unveiled. The company would hereafter be called "

Tata Engineering".


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Commercial production of Indica begins and first car issold.

Construction Equipment Business Unit is transferred to TELCON.

In Oct 1999, the Company won the National award for R&D Efforts in

Development of Indigenous Technology in the Mechanical Engineering

Industries Sector instituted by Department of Scientific a nd Industrial

Research, Ministry ofScience and Technology for the year 1999.

2000

2000 Order for 500 Nos. of Tata Indica received for Malta. First batch of 160

Nos. exported in Jan 2000.

Indica with Bharat Stage II (Euro II) compliant diesel engine launched in

Feb 2000.

Machine Tools and Growth Divisions, Axle Division and Transmission

Division of Tata Engineering transferred to newly formed subsidiaries

Telco Automation Ltd., HV Axles Ltd. and HV Transmission Ltd.

respectively on March 31 2000.

The Automobile Business Unit was restructured into Commercial

VehiclesBusiness Unit and Passenger CarBusiness Unit, in Mar 2000.

Tata Engineering bagged the National Award for successful

commercialization of indigenous technology by an industrial concern for

the year 2000, for the indigenous development and commercialization of

Tata Indica, in Mar 2000.

Utility vehicles with Bharat Stage II (Euro II) compliant engine launched,

in Mar 2000.

Indica 2000, Bharat Stage II (Euro II) compliant with Multi Point Fuel

Injection petrol engine launched, in Apr 2000.

Tata Engineering selected for the "Good Corporate Citizen Award" by

Bombay Chamber of Commerce and Industry for the year 1999-2000.

The award was received later in April 2001.

Tata Engineering received the "All India Trophy for Highest Exports" for

the year 1998-99 in the Capital Goods Exports- Non- SSI category, from

Engineering Export Promotion Council (EEPC) on May 31, 2000.


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Tata Engineering was awarded the EEPC Regional Top Exporter's

Trophy in the category of 'Units registered with DGTD/ SIA/ Textile

Commissioner etc.' for engineering exports in the year 1998 -99 on

November 10, 2000.

Second prize- "Central Pollution Control Board Award for Environment

Protection" was bagged by Tata Engineering at ENVIRO

INTERNATIONAL, 2000 which was jointly organized by TAFCON

Projects (India) Ltd. and Royal Dutch Jaarbeurs, Netherlands, in Pragati

Maidan, Delhi from September 27 to 29, 2000.

Launch of CNGBuses in December, 2000.

Launch of 1109 vehicle(11 Ton GVW).

Hitachi inducted as an equity partner for TELCON undershareholder's

agreement with Tata Engineering.

2001

2001 The next generation of Indica, Indica V2 launched in January, along with

2 new models- DLS in Diesel and LSI in the Indica 2000 range.

100,000th Indica rolled out in March.

Launch of CNG Indica in June.


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2. . SINESS SECTORS

[Rs. illion]

TataGroupfigures

The TataGroup operates business in seven key industry sectors. The

chart below illustrates how, inpercentage terms, Tatacompanies ineach

of these sectors contribute to theoverall makeupof thegroup. The table

that follows shows thegroup's sector-wise financial performance.

Year Total

turnover

Sales

turnover

Valueof

assets

Gross

block

PAT Exports

-01 ,12, 06 ,00,623 , ,341 3, 2, 38 10, 82 65,120

1999-00 3,86,071 3,71,535 4,17,381 3,29,014 19,873 50,170


44/92


Materials

Engineering

Energy

Chemicals

Year Total

turnover

Sales

turnover

Value of

assets

Gross

block

PAT Exports

2000-01 93,150 92,016 1,05,088 1,24,338 5,631 8,735

1999-00 83,542 8,25,79 1,04,245 1,18,275 4,213 8388

Year Total

turnover

Sales

turnover

Value of

assets

Gross

block

PAT Exports

2000-01 1,14,280 1,12,869 72,753 73,988 -5,236 7,879

1999-00 1,14,851 1,12,542 76,952 69,722 953 6,981

Year Total

turnover

Sales

turnover

Value of

assets

Gross

block

PAT Exports

2000-01 38,138 35,221 64,519 50,854 3,967 914

1999-00 32,389 28,490 62,114 42,926 4,712 501

Year Total

turnover

Sales

turnover

Value of

assets

Gross

block

PAT Exports

2000-01 28,627 25,774 35,668 30,757 1,409 1,477

1999-00 31,345 29,630 34,386 31,048 1,434 1197


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Consumer products

Services

It can be inferred from the above chart that the major inflow to the

company comes from the Tata Engineering sector, which is the most

important, and profit-making sector of the Tata Empire.

Year Total

turnover

Sales

turnover

Value of

assets

Gross

block

PAT Exports

2000-01 45,437 44,020 50,153 18,593 248 4696

1999-00 50,538 48,194 34,188 18,898 2,231 4,810

Year Total

turnover

Sales

turnover

Value of

assets

Gross

block

PAT Exports

2000-01 44,988 43,552 86,382 33,818 -2,267 8,686

1999-00 38,495 36,239 79,542 31,278 2,212 7,450


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2.5. TATA ENGINEERING

Established in 1945, Tata engineering manufactured steam locomotives

at Jamshedpur in eastern India. By 1954, the company had diversifiedinto manufacturing of commercial vehicles through collaboration with

Daimler Benz. By the time the collaboration ended 1969, Tata

Engineering had become an independent producer of medium

commercial vehicles (mcv) with negligible export content. It had also

developed the capability of fully designing, testing and manufacturing

such vehicles

Currently the largest automobile company in India, Tata Engineeringranks among the top ten commercial vehicle producers in the world.

The transition of Tata Engineering from being a pre -dominantly

commercial vehicle manufacturer to a complete automobile company

began in the early 1990s with the launch of the sports utility vehicle, Tata

Sierra and the estate car, Tata estate. The insights gained into the

customers needs in these markets led to the development of the world

classsports utility vehicle the TATASAFARI LAUNCHED IN 1998.

Soon after they launched Tata Safari, Tata Engineering made an

aggressive foray into the main line passenger car market with its small

car, the Tata Indica. The Indica fulfils the Tata Group Chairman Ratan N

Tatas vision of developing and manufacturing a truly Indian car that

would use modern technology and contemporary styling of the small car

genre. It went out to set a benchmark in terms of internal spaciousness

and pricing.

Automobiles accelerating globalization

Globalization is a two-way process and to benefit from this Indian firms

have to exploit global opportunities. The automobile sector can make a


47/92


difference if Indian firms act with foresight. In 2000, global trade in

automobile products totaled $549 billion, 10 per cent of all the global

trade.Also the automobile industry creates enormous employment and it

has substantial spillover benefits on industrialization and regional

development.

Currently, the global automobile industry is undergoing a major

reorientation. Four clear trends, which are inter-related and intertwined,

are discernible. Global automobile firms are segmenting into two distinct

product markets low priced cars and premium segment cars with intense

competition in both segments. The strategy is to make many variants

using the same platform

A far-reaching network facilitates exports of automobiles to countries in ,

Europe

South east Asia

West Asia

Australia

Africa

South America

Strengths of TATA Engineering

Worldwide marketing and distribution network

Sourcing and supplying production services

Vendor identification, development and partnering

Shipping, logistics and warehousing management

Expertise in trade laws and regulations of various countries


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Expertise in import and export documentation

Risk management

Ability to raise finance from banks and financial institutions

both in India and overseas

Expertise in international financial transactions

Facilitating technology transfers, joint ventures and strategic

alliances

In Tatas ongoing quest to improve customer satis faction and to meet

market demand they constantly seek out opportunities for growth, change

and renewal of existing businesses.

Tata launched itself into the markets with the commercial vehicles i.e.

trucks and busses in 1960 with the markets mainly; Afri ca, Europe,

Malaysia, Dubai etc. It re-launched itself with the passenger cars in the

year 1998, with Indica and Safari having the main markets as Europe

Italy the diesel and the petrol versions.


49/92


3.1. HY DOES A COMPANY GO GLOBAL?

There are a number of objectives of international business but the primary

and the basic of them being;

1. Learning and Product Development:

Today every organization is a learning organization. Also it has to

continuously be in touch with the competition in the market. Hence it has

to do the up gradation of the existing products eventually whenever

required.

When one enters international markets, one comes across other

competitors from other countries. One is therefore exposed to competition

from other countries. Domestic goods have to match international

standards to remain in competition, not only with respect to product, cost

and quality but services as well. Therefore, one gets an opportunity to

learn and develop or improvise new products.

2. Brand building for other products

In international markets, if the company is competent enough to beat the

rivals in the field, it not only creates a goodwill and image of the product it

is promoting but it also opens avenue for promotion of other line of

products manufactured by the company. It not only helps in brand building

of the company but also assists in promotion of its product mix.


50/92


3. Capacity utilization and providing cushion for domestic

recessions/ slow downs

International markets also help in full capacity utilization. it therefore helps

in meeting domestic recession and slow down , thus avoiding retrenchment

ofstaff and reduction in theirsalaries and wages.

4. Foreign exchange earnings

Products launched in international markets also assist in earning precious

foreign exchange for the country, thus the company can import advanced

accessories or gadgets and technology.

5. Quality improvement and cost reduction

The precious foreign exchange earned can be thus be utilized for quality

improvement of the existing products to stay in international business and

subsequently import know-how technology to develop new products.


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3.2. MARKET SELECTION STRATEGY

Following is the model that Tata adopts to decide upon which country has

the potential car market and the perspective customers.

MARKET ATTRACTIVENESS MATRIX

Attributes Grading Rating ScaleProduct

0 1 2 3 4 5

Country stability 3 - - - - 4 - 3*4=12

Market 5 - - 2 - - - 5*2=10

Ease of entry 10 - - - 3 - - 10*3=30

Competitors 2 - - - - 4 - 2*4= 8

TOTAL 60

The above given is a hypothetical example of the selection criteria Tata

adopts in order to explore the new markets. Tata has developed its own

criterion, which is known as Market Attractiveness Matrix. This Matrix

depends on four basic factors i.e. Country stability, Market conditions,

Ease of entry, Competitors.

The above matrix is the way of deciding whether the markets are feasibleor not and whether the Company should explore the markets.


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There are 4 major aspects to this matrix, Country Stability, Markets, and

Ease of entry, our competitors. An already weighed scale or a standard is

given to these attributes to which the actual studied ratings are multiplied.

Example:

Consider any market not explored by the Tatas. An already established

criterion is looked at, which has 4 constraints. Say the standard country

stability of the company as feasible to them is 3, but the Country stability

of the place that is to be analyzed is coming up to 4. So this 4 is multiplied

to the standard figure of 3 and hence 12 is what the company arrives at.

Similarly, the other constraints as, the market ease of entry and the

competitors are dealt with. This is totaled up and if the total of t he

potential market lies anywhere between 50 and 81 these are considered

to be favorable and are explored. The figures of 50 and 81 are already

the set standards established by the company

The criteria taken into consideration are broadly classified as:

Country stability: Economic parameter

GDP Growth rate

Infrastructure

Unemployment

Fiscal deficit

Current account

Market:

Market size

Growth Rate

Number of players (competitors)


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Ease of entry: Government Regulations

Imports

Training requirements

Technical requirements or competence

Local manufacturing base/support

Legal manufacturers.

Our competitors: Benchmarking

Products

Brands

After locating the market a strategy is devised to find the entry. A network

of importer distributor and dealer is selected after studying their credit

worthiness, financial capability, their experience and standing in theindustry.

The importers and distributors of the potential country, Indicating the

market size, pricing, other costs and taxes and profitability including

competition and expected market share, work out a detailed market plan.

A dealer in the Tatas is chosen on the basis of the marketing plan

submitted by the dealers to the company.

Following is the method by which volumes to be exported are calculated


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MARKETING PLAN:

Marketsize

Total car market (90000 cars)

Retail price ($10,000)

Cost Insurance Freight (CIF) ($5000)

Profitability ($100)

E.g. Market share = 5% of the total market size

I.e. 5% of 90,000 = 4,500 cars.

Hence volumes mount to a sale of approximately 4,500 cars annually.

Importer distributor dealer afterselection carry out necessary advertising

and sales promotion through audio, video and pint media. The distributors

also carry out the required market research by the principals as to what is

the market share, the retail pricing of a unit, competitors, trends of the

market, fashion, customer profile, product profile etc.


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4.1. TATA VENTURING IN ITALY

Italy Italia) is a republic in the south of Europe,

consisting of a boot-shaped peninsula together with

two large islands in the editerraneanSea: Sicilyand

Sardinia.

Thecapital is Rome, but theeconomiccapital is ilan in thenorth. Other

important cities include indecreasingorderofpopulation) aples, Turin,

Palermo, Genoa, Bologna, Florence and Venice. The peninsula is

extended among Tyrrhenian Sea, Ionian Sea, andAdriatic Sea. Italy is

oneof thecountries that use the Eurocurrency; its national bank is Banca

d'Italia, betterknownas Bankitalia.

Italy is well-known for its art, culture, and several monuments, among

them the leaning towerof Pisaand theRoman olosseum, as well as for

its food pi a, pasta, etc.), wine, and lifestyle elegance, design and

friendliness.

Its history is perhaps the most important one for the cultural and social

development of the editerraneanareaas awhole. This countryhas had

an important prehistoricactivity, andarcheological sites canbe found im

many regions: LazioandToscana Etruscanpeople), Umbria, Basilicata.

After agnaGraecia, Etruscan civilization and Roman Empire, and the

medieval umanism, the Renaissance indeed shaped the whole of

western art history and Rome contains some of the most important

examples of the Baroque. Today Italy is considered a leading reference

point forelegance, food, wine, cultur e, cinema, theatre, literature, poetry,visual arts, music notablyOpera), holidays, andgenerally speaking, for

taste.


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Italy became a nation-state belatedly - in 1861 when the states of the

peninsula and Sicily were united under king Victor Emmanuel II of the

Savoy dynasty, hitherto ruler of Piedmont and kings of Sardinia. Rome

itself remained for a decade under the Papacy, and became part of the

Kingdom of Italy only in 1870, final date of the Italian unification. Vatican

is now an enclave, like San Marino.

The Fascist dictatorship ofBenito Mussolini that took over in 1922 led to a

disastrous alliance with Nazi Germany and Japan, and Italian defeat in

World War II. In 1946 a referendum on the monarchy resulted in the

establishment of a republic.

Italy was a charter member of NATO and the European Economic

Community (EEC) and joined the growing political and economic

unification of Western Europe, including the introduction of the Euro in

1999. Persistent problems include illegal immigration, the r avages of

organized crime (mafia), corruption, high unemployment, and the low

incomes and technical standards of southern Italy compared with the

more prosperous north.

Italy has a diversified industrial economy with approximately the same

total and per capita output as France or the United Kingdom. This

capitalistic economy (still mitigated by a wide presence of state and

governmental influences) remains divided into a developed industrial

north, dominated by private companies, and a less developed agric ultural

south, with substantial unemployment.

Most raw materials needed by industry and more than 75% of energy

requirements are imported. Forseveral years Italy has adopted budgets

compliant with the requirements of the European Monetary Union (EMU);

representatives of government, labor, and employers also agreed to an

update of the 1993 "social pact," which has been widely credited with

having brought Italy's inflation into conformity with EMU requirements.


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Italy has been urged to work to stimulate employment, promote wage

flexibility, hold down the growth in pensions, and tackle the informal

economy. Economicgrowthwas 1.3% in1999andwas expected toedge

up to2.6% in2000, ledby investment andexports.

Football is themainnational sport. Italyhas won theFootball orld up

three times: 1934, 1938and1982. Someofworld's best football players

and teams come from Italy. The latter includeA. . ilan, In ter ilanoFC,

A.S. Roma, S.S. Lazio also from Rome), uventus from Turin), and

Fiorentina fromFlorence).

GEOGRAPHY OF ITALY


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Area:

Total: 301,230 sq km

Land: 294,020 sq km

Water: 7,210 sq km

Languages:

Italian (official);

German (parts of Trentino-Alto Adige region are predominantly

German speaking; official in the province ofBolzano);

French (small French speaking minority in Valle d'Aosta region;standard French is official only in the Valle d'Aosta).

Slovene (Slovene-speaking minority in the Trieste-Gorizia area).

Sardinian (in the island ofSardinia), now partly official;

Ladin (in the Dolomite mountains, between Trentino -AltoAdige and

Veneto), connected with Swiss Romansh; official only in the part

enclosed in the province ofBolzano, together with German;

Friulian (in the Friuli region), presentssimilarities with Ladin.

Other local minorities:

Catalan (in the town ofAlghero, Sardinia).

Albanian (villages in Calabria and Sicily);

Greek (ancient dialects in villages of Calabria).

ECONOMY OF ITALY:

The Italian economy has changed dramatically since the end of World

War II. From an agriculturally based economy, it ha

tata research report

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