MK0018 International

Marketing

Q1. Define multinational corporations. How is international marketing different from domestic marketing? Answer: Various definitions of multinational corporations: By Size: The term MNC implies bigness but bigness also has a number of dimensions such as market value, sales, profits, and return on equity whenused to identify the largest MNCs will yield varying results. For example, Daimler Chrysler AG is number 1 in terms of sales but it is number 7 in terms of assets. General Motors is no. 2 in terms of assets and no. 4 in terms of sales. TNI is the abbreviation for transnationality index. The transnationality index is calculated as the average of three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment to total employment. Industry classification for companies follows the United States Standard Industrial Classification as used by the United States Securities and Exchange Commission (SEC). assets, sales and employment are outside Australia and Asia America By Structure: According to Ahroni, an MNC has three signi ficant dimensions: structural, performance, and behavioural. Structural requirements include the number of countries in which the firm does business and the citizenship of corporate owners and top managers. For instance, Singer Corporation sells its sewing machines in 181 countries, thus, satisfying the requirements with regard to the number of countries. Citi Corporation satisfies the requirement for multinationalism through the citizenship of members of top management. The company has done as much as other major American MNCs to diversify its management. In Asia, a Pakistani is in-charge of the firms $ 800 million finance business for all Asia except Japan. His colleague, an Indian national heads the consumer business. They are the two of the eight non-American in the elite group of 15 Executive Vice Presidents. International Marketing vs. Domestic Marketing The striking difference between international and domestic marketing lies in the environment in which the two take place. The important points of differences between international and domestic marketing are: 1. Sovereign Political Entities: Each country is a sovereign political entity and, therefore, they for importing and exporting the goods and services in order to safeguard their national interest impose several restrictions. The traders in international marketing have to observe such restrictions. These restrictions may fall in any of the following categories. i) Tariffs and customs duties on import and export of goods and services in order to make them costly in the importing country and not to ban their entry into the country completely. In the post war period, through the efforts of General Agreement on Tariffs and Trade (GATT) there has been a significant reduction in tariff globally and on regional basis due to the emergence of regional economic groupings. ii) Quantitative restrictions are also imposed with an intention to restrict trade in some specific commodities. The major objective behind the restriction is the protection of home industries from the competition of the foreign commodities. iii) Exchange control is another restriction imposed by almost every sovereign state. The Government, in some cases, does not ban the entry of goods in the country but the importer is not allowed the

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necessary foreign exchange to make the payment for the goods imported. But, in some cases, exchange control and quantitative controls are put together along with the grant of import licence. iv) Imposition of more local taxes on imported goods with an object to make the imported goods costly is one of the restrictions in international marketing. 2. Different Legal Systems: Different countries operate different legal systems and they all differ from each other. In most of the countries follow English Common Law as modified from time to time. Japan and Latin American countries are important exceptions to this rule. The existence of different legal systems makes the task of businessmen more difficult as they are not sure as to which particular system will apply to their transactions. This difficulty does not arise in the domestic trade, as laws are the same for the whole country. 3. Different Monetary Systems: Each country has its own monetary system and the exchange rates for each countrys currency are fixed under the rules framed by the International Monetary Fund and, therefore, they are more or less fixed. However, in recent years the exchange rates are fluctuating and are being determined by demand and supply forces. Some countries operate multiple rates; i.e. different rates are applicable to different transactions. 4. Lower Mobility Factors of Production: Mobility of different factors of production is less as between nations than in the country, itself. However, with the advent of air transport, the mobility of labour has increased manifold. Similarly, the development of international banking has increased the mobility of capital and labour. In spite of these developments, the mobility of labour and capital is not as much as it is within the country itself. 5. Differences in Market Characteristics: Market characteristics in each segment are different, i.e. demand pattern, channels of distribution, methods of promotion etc. are quite different from market to market. If we take each country a separate market, we can assume different market characteristics there. These differences are accentuated due to the existence of government controls and regulations. However, this is a difference of degree only. Even in one single country, for example, India and America, these differences in market patterns may be found from state to state. 6. Differences in Procedure and Documentation: The centuries old laws and customs of trade in each country demand different procedures and documentary requirements for the import and export of the goods and services. The traders residing in the territory have to comply with these regulations and customs if they want import and export of goods and services. Q2. Though society and culture do not appear to be a part of business situations, yet they are actually key elements in showing how business activities will be conducted. Discuss. Answer: Though society and culture do not appear to be a part of business situations, yet they are actually key elements in showing how business activities will be conducted, what goods will be produced, and through what means they will be sold to establishing industrial and management patterns and determining the success or failure of a local subsidiary or affiliate. Let us learn various aspects of international cultural environment, discussed in the subsequent subsections. Elements of culture There are too many human variables and different types of international business functions for an exhaustive discussion about culture. The main elements of culture are: 1. Attitudes and Beliefs: The set of attitudes and beliefs of a culture will influence nearly all aspects of human behaviour, providing guidelines and organisation to a society and its individuals.

MK0018 International

Marketing

2. Attitudes towards Time: Everywhere in the world people use time to communicate with each other. In international business, attitudes towards time are displayed in behaviour regarding punctuality, responses to business communication, responses to deadlines, and the amount of time that is spent waiting in an outer office for an appointment. 3. Attitude towards Work and Leisure: Peoples attitudes towards work and leisure are indicative of their views towards wealth and material gains. These attitudes affect the types, qualities and numbers of individuals who pursue entrepreneurial and management careers as well. 4. Attitude towards Achievement: In some cultures, particularly those with high stratified and hierarchical societies, there is a tendency to avoid personal responsibility and to work according to precise instructions received from supervisors that are followed by the latter. In many industrial societies, personal responsibility and the ability to take risks for potential gain are considered valuable instruments in achieving higher goals 5. Attitudes towards Change: The international manager must understand what aspects of a culture will resist change and how the areas of resistance differ among cultures, how the process of change takes place in different cultures and how long it will take to implement change. 6. Attitude towards Job: The type of job that is considered most desirable or prestigious varies greatly according to different cultures. Thus, while medical and legal professions are considered extremely prestigious in the United States, civil service is considered the most prestigious occupation in several developing countries including India. Cultural dimension The influences of the religious, family, educational and social systems of a society on the business system comprise the cultural dimension of our picture. Because cultural attitudes vary so much among countries, it is harder to find general patterns here than for the economic dimension. The French and the Germans, for example, though their economic levels are similar, are culturally quite different. Thus, to determine the cultural aspects of markets, we must, in large measure, analyse each society by itself without the benefit of guiding generalizations. Religions are a major determinant of the moral and ethical standards that play a large part in the business process. It is difficult, however, to develop any generalisations about their nature in each region. The basic codes of religions the entire Bible, the Kuran, etc. exhort their followers to be honest, truthful and otherwise to act in a good manner. In practice, however, all business systems are characterised to varying degrees by false claims, dishonesty and other moral shortcomings. So the specific character of each society must be analysed as a distinct entity in this regard. Family systems fall into three general categories. One, especially prevalent in Moslem areas, traditionally places the wife in a subordinate and secluded role, with few rights and little control over the affairs of the family. This general pattern still prevails over much of the Middle-east, though in many Moslem countries, like Turkey and Pakistan, women have achieved a high degree of emancipation. A second pattern is particularly common in Latin America. The wife is still definitely a junior member of the partnership, the husband having the final authority in all but minor matters. The third type of relationship is found in varying forms throughout most of Europe and the Anglo-Saxon countries. The basic code in this pattern is equality, though there are many variations in actual practice. In other respects, cultural attitudes related to the family system differ widely among countries. Such matters as the way in which the sexes attract each other bear both on products sold and advertising methods, and they are subject to a host of local codes. So far as educational systems are concerned, the obvious marketing factors are the literacy rate and the general level of education, both of which generally run parallel to the pattern of economic development. There are also differences in educational methods common to large areas.

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Q3. Discuss the entry model adopted by McDonalds to build a presence in foreign markets. What are its limitations? Answer: When a firm is thinking about entering to new markets around the world, the most important decisions to make are: which foreign markets? And which entry mode? When talking about which foreign markets, ultimately, the choice must be based on an assessment of nations long-run profit potential. McDonalds has presence today in 119 countries, but under which criteria were this nations chosen? The attractiveness of a country as a potential market for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country. The long-run economic benefits of doing business in a country are a function of factors such as the sixe of the market, the present wealth of consumers in that market, and the likely future wealth of consumers, which depends upon economic growth rates. While some markets are very large when measured by number of consumers, it is also important to look at the living standards and economic growth. On the other hand, when a business is choosing an entry mode, it has to look to various options, such as turnkey projects, exporting, licensing, joint ventures, wholly owned subsidiaries and franchising. Each of these entry modes has its advantages and disadvantages, factors that are extremely important when making this decision. The entry mode chosen by McDonalds to have presence in other countries is Franchising. This entry mode is similar to licensing, although franchising tends to involve longer-term commitments than licensing. Franchising is basically a specialized form of licensing in which the franchiser not only sells intangible property o the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business. The franchiser receives a royalty payment, which amounts to some percentage of the franchisees revenues. Franchising is employed primarily by service firms, like McDonalds, this firm is the perfect example of franchising. McDonalds strict rules as to how franchisees should operate a restaurant extend to control over the menu, cooking methods, staffing policies, and design and location. This factor is a huge part of the successful strateg y of McDonalds. One advantage of franchising is that the firm is relieved of many of the costs and risks of opening a foreign market on its own. Instead, the franchisee assumes those costs and risks. This creates a good incentive for the franchisee to build a profitable operation as quick as possible. A service firm can build a global presence quickly and at a relatively low cost and risk, as McDonalds has. Limitations The disadvantages of franchises are: Loss/lack of control Independent franchises often have to follow the guidelines set forth by the franchise including what kinds of tables to use, wallpapers and more. If you don't want to give up that control, this won't be the business for you. Less long-term profits Franchises are a big business but making it rich isn't always there. You'll earn a decent income but nothing like Microsoft or any other Fortune 500 company. Hard to sell When you have a franchise, it's harder to get out from underneath it especially if it seems the parent company is having problems. Possibility of parent company going out of business

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It doesn't matter if your business is doing well or not; if the parent company goes under, so will you. Make sure you choose a company that's been doing well, both in good times and in bad. Possibility of getting a bad name When a franchise fails to do well, you could be indirectly affected by it. Your reputation will be tarnished just because of the name. Q4. Market segmentation divides market into distinct subsets. Explain the purpose and bases of international market segmentation. Answer: pupose of International Market Segmentation : International market segmentation has become an important issue in developing, positioning, and selling products across national borders. It helps companies to target potential customers at the international-segment level and to obtain an appropriate positioning across borders. A key challenge for companies is to effectively deal with the structure of heterogeneity in in the same country. In such an approach no coordination is required between countries, products are produced locally and are tailored to satisfy local needs. Distinct advertising, distribution, and pricing strategies are developed for targeting consumers in each country, and ompetition is managed at a national level. Competitive moves are conducted on a countryto-country basis and do not take the developments in other countries into account. Thus, in segmenting their markets, firms operating according to a multi-domestic approach can suffice with the standard segmentation techniques that are developed for domestic markets. Market segmentation is the process of subdividing a market into distinct subsets of customers that behave in the same way or have similar needs. Each subset may conceivably be chosen as a market target to be reached with a distinctive marketing strategy. Some widely used bases of segmentation are discussed below in sub sections. 1. Geographic segmentation 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. Geographic segmentation also 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. The differences in the markets in these two countries overwhelm their similarities. 2. Demographic segmentation Demographic segmentation is based on measurable characteristics of population such as age, gender, income, education, and occupation. 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. 3. 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. 4. Behavioural segmentation Behavioural 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. Consumers can also be segmented

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Marketing

according to user status: potential users, nonusers, ex-users, regulars, first-timers, and users of competitors products. 5. 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. 6. Vertical versus horizontal segmentation Vertical segmentation is based on product category or modality and price points. For example, in medical imaging there is X-ray, Computed Axial Tomography (CAT) scan, Magnetic Resonance Imaging (MRI), and so on. Each modality has its own price points. These price points were the traditional way of segmenting the medical imaging market. Q5. Explain the meaning and benefits of e-marketing. Discuss the various emarketing approaches. Answer: E-marketing : E-marketing involves the marketing of products or services on the internet. Successful E-marketing requires good search engine marketing strategies. The primary purpose of marketing an online business is the promotion of a good or service. Emarketing makes extensive use of the available tools for getting web users to purchase a product or service from a website. Benefits: It is no exaggeration to describe e-marketing as a revolution for the marketing industry. For the first time, it gives businesses of any size access to the mass market at an affordable price and, unlike TV or print advertising, it allows truly personalized marketing. Specific benefits of e-marketing include: GLOBAL REACH If you build a website you can reach anyone, anywhere in the world, provided they have internet access. This allows you to tap new markets and compete globally with only a small investment. This can be particularly useful for niche providers, companies whose products can be posted easily, or businesses who are looking to expand geographically but cannot afford to invest in new offices or businesses. LOWER COST A properly planned and effectively targeted e-marketing campaign can reach the right customers at a much lower cost than traditional marketing methods. You can build a website for as little as a few hundred pounds or send e-mail for a fraction of a penny. TRACKABLE, MEASURABLE RESULTS Marketing by e-mail or banner advertising makes it easier to establish how effective your campaign has been. If someone clicks on a banner advert, or a link in an e-mail or on a website, you can see how they arrived at your website. This detailed information about customers responses to your advertising allows you to assess the effectiveness of different campaigns. 24-HOUR MARKETING With a website your customers can find out about your products even if your office is closed. SHORTER LEAD TIMES If you have a website or an e-mail template, you can react to events much more quickly giving your marketing a much more contemporary feel. If one of your products is in the news or something important happens in your industry, you can capitalise on it without having to print or post anything.

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E-marketing approaches To accomplish their objectives, Internet marketers use many approaches, some of which include: Banners: A banner ad is a boxed-in promotional message that often appears at the top of the web page. If a visitor clicks on the banner ad, she/he is transported to the advertisers home page. This is the most used form of Internet promotion. Banners can be used to create brand recall or recognition. Other names given to banners include side panels, skyscrapers, or verticals. Sponsorships: This is another common advertising approach on websites. The advertiser is given a permanent place on hosts website and pays a sponsorship fee to the host. Pop-up and Pop-under: When a visitor accesses a web page, sometimes a window appears either in front or underneath the web page, the visitor is viewing. Pop-ups become visible as sooner the web site is accessed and pop-under becomes visible only when the visitor closes the browser. Portal Use: Some portals give a prominent place to a companys offer for a fee. When a visitor follows directed search, the marketers name appears prominently at or near the top of the list. E-mail: Companies send e-mails to Internet users to visit the company web site. It can be effective only when the target customer is appropriate otherwise it becomes junk mail. Interstitials: These ads appear on the computer screen while a visitor is waiting for a sites contents to download. Push Technologies: Some companies provide screen savers to its website visitors that allow the firms to directly hook the visitor to their websites. This is an approach to push a message to the consumers rather than wait for consumers to locate it. Sales Promotions: Many companies effectively use sales promotions such as contests and sweepstakes to generate consumer interest. Q6. List any 6 export promotion schemes. What are SEZs and how are they beneficial to international trades and marketers? Answer: To achieve the objectives laid down under the Foreign Trade Policy 2004-09 and double Indias percentage share of global merchandise trade by the year 2009, the government is committed to providing a stimulus to exports through various export promotion schemes from time to time. Details of the existing Export Promotion Schemes are as follows: Advance licensing scheme Duty Free Replenishment Certificate (DFRC) scheme Duty drawback scheme Export Promotion Capital Goods (EPCG) scheme Export Oriented Units (EOUs), Electronics Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) scheme Served from India scheme Target Plus scheme Duty Entitlement Pass Book (DEPB) Scheme Vishesh Krishi Upaj Yojana Sezs : Special Economic Zones (SEZs) are defined as geographical areas, governed by one oversight management body, that offer special trade incentives to firms who choose to physically locate within them. Many countries employ their own variations of these special

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enclaves, and in doing so use their own terminology to describe them. For example, Mexico refers to its zones as maquiladoras, Ghana, Cameroon, and Jordan have industrial free zones, the Philippines calls its economic zones special export processing zones, and Russia has free economic zones. Despite the differences in nomenclature, each SEZ operates to increase trade throughout its respective region by offering special trade incentives to stimulate local and foreign investment within the region. The first modern special economic zone was created in Puerto Rico in 1942. Since then, 135 countries, many of them emerging markets, have developed over 3,000 zones. Their development has helped to improve global trade relations and has created over 70 million jobs and hundreds of billions of dollars in trade revenue. SEZ Benefits Even though SEZ developments bring challenges to host countries, they also bring valuable benefits. As already noted, an SEZs tax benefits help expand a countrys indust rial base by luring foreign industries that might not otherwise choose to locate in the host country. Foreign direct investors doing business in a host country also improve host country facilities because one of the ways they compete for global business is through sophisticated, hightech developments and world-class facilities. These highly developed enclaves help offset country risks that many foreign investors consider when they consider investments in foreign markets. The new Songdo City in Seoul, South Korea, part of the new Incheon Free Economic Zone, is the epitome of a world-class SEZ. When completed in 2015, it will be a digital city that highlights all of the newest global technologies. SEZs also improve industries focusing on enhanced technologies by providing research and development resources that allow countries to export more sophisticated manufactured goods. Within these technologically sophisticated developments, large foreign firms often partner with smaller local firms, providing brand-name recognition and large firm expertise that gives the local firm greater global marketing visibility. Other economic benefits of the zones include increased government income from trade revenues once government subsidies expire, export growth and foreign exchange earnings, and lease revenues from firms renting space within the zone. Centralization of local and foreign trade facilities also helps stabilize employment levels and promotes ingenuity and experimentation of new trade regimes under a common infrastructure. A country can experiment with using different oversight methodologies and then calculate which regulations best meet its trade needs. Foreign direct investment promotes organic growth from within the country as locals develop new skill bases and improve their infrastructure, allowing them to compete at a higher level for subsequent foreign investments. SEZs help expand a host countrys employment base by creating additional jobs and training opportunities for more local citizens, and sometimes by actually improving a countrys labor standards. For example, employment in the Dominican Republics SEZs rose from 500 in 1970 to over 200,000 today, and almost 1 million workers are employed in the Philippines SEZs. And unlike Namibia, Mozambique has mandated that national labor laws apply to its SEZs and has guaranteed acceptable working conditions with mandatory vacation, minimum wage laws, and maternity leave. SEZs also generate economic activity outside the zone due to increased infrastructure requirements and a need for support services to transfer goods to and from a zones geographic area. Once SEZs generate additional employment and services, there is an increased demand for social infrastructure like housing, education, health and transport communication, shopping, tourism, hospitality, packaging, banking, and insurance, all of which combine to grow employment and improve the quality of life in and around an SEZ development.