International marketing has also been defined as ' the performance of business activities that direct the flow

of goods and services to consumers or users in more than in one nation'. It is different from domestic marketing in as much as the exchange takes place beyond the frontiers, thereby involving different markets and consumers who might have different needs, wants and behavioral attributes. SPECIAL D I FFICULTIESIN INTERNATIONAL M ARKETING There are a number of difficulties in undertaking international business. Some of them the special difficulties are as follows: Quantitative restrictions to protect local industries. Government regulations restricting imports by way of import licenses, etc Exchange controls. Local taxes like sales taxes on imported goods. Different monetary systems like Dollars in USA, Sterling in UK, YEN in Japan. Different legal system regarding import and export of goods. Differences in procedures and documentation. Differences in market characteristics. Lower mobility of factors of production. Cultural dimensions of international marketing. Economic Unions. Trade barriers - Tariff and non tariff barriers. Lack of export incentives to exporters. Lack of adequate export financing especially for small scale industries. Complications of Exporting. Paper work is more in export business. Competition from local exporters, competition from exporters from other countries and competition from producers of goods in the importing countries. Shipping and freight problems. INTERNATIONAL M ARKETING ENVIRONM ENT

It is necessary to know the concepts of "controllable" and "uncontrollable factors" in international marketing. There are some factors which can be controlled by the management may not be able to haves any control over them. Now let us discuss these factors as follows: Controllable Factors: Control will have to be defined with reference to a company's management. The company is in a position to control and design marketing mix elements i.e. product, price, export to any place by choosing any distribution channels and follow any promotional methods.

Uncontrollable Factors: There are some factors on which the company can not have any control. Such uncontrollable factors in international marketing are described here. SOCIAL FACTORS: The social/cultural environment of a nation/market may profoundly influence business in different ways and dimensions. The attitude of workers, lab our-management relations, government-business relations, entrepreneurial nature and attitude, political philosophies and systems, legal environment, business ethics, governance, government policies etc. could have a social influence of them Management may undergo a social transformation, for example , a number of family owned business groups in India have ushered in professional management. The need for good corporate governance is getting more and more recognition. In short, the type of products to be manufactured and marketed, the marketing strategies to be employed, the way the business should be organized and governed, the values and norms it should adhere to, are all influenced by social structure and the culture of a society. The tastes and preferences, purpose of consumption, method of consumption, occasion of consumption, quantity of consumption, values associated with consumption, etc of a product may show wide variations between cultures. Because of cultural differences, a promotion strategy that is very effective in one market may utterly fail in another, or may even result in social or legal reprisals. Etiquettes differ from culture to culture. The ways of meeting and greeting people, expression of appreciation or disapproval, methods of showing respect, ways of conducting meetings and functions, table manners etc. vary quite widely between cultures. So familiarity with cultural is necessary for success. The other social factors which influences the international marketing inclusive of

National legal regime

Political and Financial system

Marketing infrastructure

Language, Religion and Climate POLITICAL and GOVERNMENT FACTORS: The following political and government factors must be taken into consideration by an international marketer while planning to entry any market abroad: Consistency of government policies. The nature of political relationship between the target country and exporter's country. The presence or absence of controls on foreign exchange, imports, prices,etc., in the target country. Legal restrictions on foreign investments and the patent ability of the product in the target market. The company has no control over all the above factors mentioned and hence the exporter has to adjust him to these factors. ECONOMIC FACTORS: I. Commercial policy variables e.g. tariffs, quotas, licensing or any other non-tariff barriers. II. Currency restrictions - depending on the policy of the central bank of the country. III. Internal demand management policies and instruments followed by the

country. The exporters have to be thorough with the above policies and adjust them accordingly. DEMOGRAPHIC FACTORS: Demographic factors such as size of the population, population growth rates, age composition, ethic composition, family size, family life cycle, income levels, have very significant implications for business. The demographic environment differs from country to country and from place to place within the same country or region. Further, it may change significantly over time. Because of the diversity of the demographic environment companies are sometimes compelled to adopt different strategies within the same market COMPETITON: Competition will also influence the international marketing. As like domestic marketing the trader always aware of his competitors. But the quantum of competitors is more in implications for business. The demographic environment differs from country to country and from place to place within the same country or region. Further, it may change significantly over time. Because of the diversity of the demographic environment companies are sometimes compelled to adopt different strategies within the same market COMPETITON: Competition will also influence the international marketing. As like domestic marketing the trader always aware of his competitors. But the quantum of competitors is more in

Exim Policy or Foreign Trade Policy is a set of guidelines and instructions established by the DGFT in matters related to the import and export of goods in India. The Foreign Trade Policy of India is guided by the Export Import in known as in short EXIM Policy of the Indian Government and is regulated by the Foreign Trade Development and Regulation Act, 1992. DGFT (Directorate General of Foreign Trade) is the main governing body in matters related

to Exim Policy. The main objective of the Foreign Trade (Development and Regulation) Act is to provide the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India. Foreign Trade Act has replaced the earlier law known as the imports and Exports (Control) Act 1947. EXIM Policy Indian EXIM Policy contains various policy related decisions taken by the government in the sphere of Foreign Trade, i.e., with respect to imports and exports from the country and more especially export promotion measures, policies and procedures related thereto. Trade Policy is prepared and announced by the Central Government (Ministry of Commerce). India's Export Import Policy also know as Foreign Trade Policy, in general, aims at developing export potential, improving export performance, encouraging foreign trade and creating favorable balance of payments position. History of Exim Policy of India In the year 1962, the Government of India appointed a special Exim Policy Committee to review the government previous export import policies. The committee was later on approved by the Government of India. Mr. V. P. Singh, the then Commerce Minister and announced the Exim Policy on the 12th of April, 1985. Initially the EXIM Policy was introduced for the period of three years with main objective to boost the export business in India Exim Policy Documents The Exim Policy of India has been described in the following documents: Interim New Exim Policy 2009 - 2010 Exim Policy: 2004- 2009 Handbook of Procedures Volume I Handbook of Procedures Volume II ITC(HS) Classification of Export- Import Items The major information in matters related to export and import is given in the document named "Exim Policy 2002-2007". An exporter uses the Handbook of Procedures Volume-I to know the procedures, the agencies and the documentation required to take advantage of a certain provisions of the Indian EXIM

Policy. For example, if an exporter or importer finds out that paragraph 6.6 of the Exim Policy is important for his export business then the exporter must also check out the same paragraph in the Handbook of Procedures Volume- I for further details.

The Handbook of Procedures Volume-II provides very crucial information in matters related to the Standard Input-Output Norms (SION). Such Input output norms are applicable for the products such as electronics, engineering, chemical, food products including fish and marine products, handicraft, plastic and leather products etc. Based on SION, exporters are provided the facility to make duty-free import of inputs required for manufacture of export products under the Duty Exemption Scheme or Duty Remission Scheme. The Export Import Policy regarding import or export of a specific item is given in the ITC- HS Codes or better known as Indian Trade Clarification Code based on Harmonized System of Coding was adopted in India for import-export operations. Indian Custom uses an eight digit ITC-HS Codes to suit the national trade requirements. ITC-HS Codes are divided into two schedules. Schedule I describe the rules and exim guidelines related to import policies where as Export Policy Schedule II describe the rules and regulation related to export policies. Schedule I of the ITC-HS code is divided into 21 sections and each section is further divided into chapters. The total number of chapters in the schedule I is 98. The chapters are further divided into subheading under which different HS codes are mentioned. ITC(Hs) Schedule II of the code contain 97 chapters giving all the details about the Export Import Guidelines related to the export policies. Objectives Of The Exim Policy : Government control import of non-essential items through the EXIM Policy. At the same time, all-out efforts are made to promote exports. Thus, there are two aspects of Exim Policy; the import policy which is concerned with regulation and management of imports and the export policy which is concerned with exports not only promotion but also regulation. The main objective of the Government's EXIM Policy is to promote exports to the maximum extent. Exports should be promoted in such a manner that the economy of the country is not affected by unregulated exportable items specially needed within the country. Export

control is, therefore, exercised in respect of a limited number of items whose supply position demands that their exports should be regulated in the larger interests of the country. In other words, the main objective of the Exim Policy is: To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities. To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components,' consumables and capital goods required for augmenting production. To enhance the techno local strength and efficiency of Indian agriculture, industry and services, thereby, improving their competitiveness. To generate new employment. Opportunities and encourage the attainment of internationally accepted standards of quality. To provide quality consumer products at reasonable prices. Governing Body of Exim Policy The Government of India notifies the Exim Policy for a period of five years (1997-2002) under Section 5 of the Foreign Trade (Development and Regulation Act), 1992. The current Export Import Policy covers the period 2002-2007. The Exim Policy is updated every year on the 31st of March and the modifications, improvements and new schemes became effective from 1st April of every year. All types of changes or modifications related to the EXIM Policy is normally announced by the Union Minister of Commerce and Industry who co-ordinates with the Ministry of Finance, the Directorate General of Foreign Trade and network of Dgft Regional Offices. Exim Policy 1992 -1997 In order to liberalize imports and boost exports, the Government of India for the first time introduced the Indian Exim Policy on April I, 1992. In order to bring stability and continuity, the Export Import Policy was made for the duration of 5 years. However, the Central Government reserves the right in public interest to make any amendments to the trade Policy in exercise of the powers conferred by Section-5 of the Act. Such amendment shall be made by means of a Notification

published in the Gazette of India. Export Import Policy is believed to be an important step towards the economic reforms of India. Exim Policy 1997 -2002 With time the Exim Policy 1992-1997 became old, and a New Export Import Policy was need for the smooth functioning of the Indian export import trade. Hence, the Government of India introduced a new Exim Policy for the year 1997-2002. This policy has further simplified the procedures and educed the interface between exporters and the Director General of Foreign Trade (DGFT) by reducing the number of documents required for export by half. Import has been further liberalized and better efforts have been made to promote Indian exports in international trade. Objectives of the Exim Policy 1997 -2002 The principal objectives of the Export Import Policy 1997 -2002 are as under: To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities. To motivate sustained economic growth by providing access to essential raw materials, intermediates, components,' consumables and capital goods required for augmenting production. To improve the technological strength and efficiency of Indian agriculture, industry and services, thereby, improving their competitiveness. To create new employment. Opportunities and encourage the attainment of internationally accepted standards of quality. To give quality consumer products at practical prices. Highlights of the Exim Policy 1997-2002 1. Period of the Exim Policy This policy is valid for five years instead of three years as in the case of earlier policies. It is effective from 1st April 1997 to 31st March 2002. 2. Liberalization A very important feature of the policy is liberalization. It has substantially eliminated licensing, quantitative restrictions and other regulatory and discretionary controls. All goods, except those coming under negative list, may be freely imported or exported.

3. Imports Liberalization Of 542 items from the restricted list 150 items have been transferred to Special Import Licence (SIL) list and remaining 392 items have been transferred to Open General Licence (OGL) List. 4. Export Promotion Capital Goods (EPCG) Scheme The duty on imported capital goods under EPCG Scheme has been reduced from 15% to 10%. Under the zero duty EPCG Scheme, the threshold limit has been reduced from Rs. 20 crore to Rs. 5 crore for agricultural and allied Sectors 5. Advance Licence Scheme Under Advance License Scheme, the period for export obligation has been extended from 12 months to 18 months. A further extension for six months can be given on payment of 1 % of the value of unfulfilled exports. 6. Duty Entitlement Pass Book (DEPB) Scheme Under the DEPB Scheme an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency. Such credit can be can be utilized for import of raw materials, intermediates, components, parts, packaging materials, etc. for export purpose. Impact of Exim Policy 1997 2002 (a) Globalization of Indian Economy: The Exim Policy 1997-02 proposed with an aim to prepare a framework for globalizations of Indian economy. This is evident from the very first objective of the policy, which states. "To accelerate the economy from low level of economic activities to- high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities."

(b) Impact on the Indian Industry: In the EXIM policy 1997-02, a series of reform measures have been introduced in order to give boost to India's industrial growth and generate employment opportunities in non-agricultural sector. These include the reduction of duty from 15% to 10% under EPCG scheme that enables Indian firms to import capital goods and is an important step in improving the quality and

productivity of the Indian industry. (c) Impact on Agriculture: Many encouraging steps have been taken in the Exim Policy 1997-2002 in order to give a boost to Indian agricultural sector. These steps includes provision of additional SIL of 1 % for export of agro products, allowing EOUs and other units in EPZs in agriculture sectors to 50% of their output in the domestic tariff area (DTA) on payment of duty. (d) Impact on Foreign Investment. In order to encourage foreign investment in India, the Exim Policy 1997-02 has permitted 100% foreign equity participation in the case of 100% EOUs, and units set up in EPZs. (e) Impact on Quality up gradation: The SIL entitlement of exporters holding ISO 9000 certification has been increased from 2% to 5% of the FOB value of exports, which has encouraged Indian industries to undertake research and development programmers and upgrade the quality of their products. (f) Impact on Self-Reliance:The Exim Policy 1997-2002 successfully fulfills one of the Indias long terms objective of Selfreliance. The Exim Policy has achieved this by encouraging domestic sourcing of raw materials, in order to build up a strong domestic production base. New incentives added in the Exim Policy have also added benefits to the exporters. Exim Policy 2002 2007 The Exim Policy 2002 - 2007 deals with both the export and import of merchandise and services. It is worth mentioning here that the Exim Policy: 1997 - 2002 had accorded a status of exporter to the business firm exporting services with effect from1.4.1999. Such business firms are known as Service Providers. Objectives of the Exim Policy: 2002 - 2007 The main objectives of the Export Import Policy 2002-2007 are as follows: To encourage economic growth of India by providing supply of essential raw materials, intermediates, components, consumables and capital goods required for augmenting production and providing services. To improve the technological strength and efficiency of Indian agriculture, industry and services, thereby improving their competitive strength while generating new employment opportunities and encourage the attainment of internationally accepted standards of quality; and To provide consumers with good quality products and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers.

Main Elements of Exim Policy 2004-2009 The new Exim Policy 2004-2009 has the following main elements: Preamble Legal Framework Special Focus Initiatives Board Of Trade General Provisions Regarding Imports And Exports Promotional Measures Duty Exemption / Remission Schemes Export Promotion Capital Goods Scheme Export Oriented Units (EOUs),Electronics Hardware Technology Parks (EHTPS), Software Technology Parks (STPs) and Bio-Technology Parks (BTPs) Special Economic Zones Free Trade & Warehousing Zones Deemed Exports Permeable of Exim Policy 2004-2009: It is a speech given by the Ministry of Commerce and Industries. The speech for the Exim Policy 2004-2009 was given by Kamal Nath, on 31ST AUGUST, 2004. Legal Framework of Exim Policy 2004-2009 1.1 Preamble The Preamble spells out the broad framework and is an integral part of the Foreign Trade Policy. 1.2 Duration In exercise of the powers conferred under Section 5 of The Foreign Trade (Development and Regulation Act), 1992 (No. 22 of 1992), the Central Government hereby notifies the Exim Policy for the period 2004-2009 incorporating the Export Import Policy for the period 2002-2007, as modified. This Policy shall come into force with effect from 1st September, 2004 and shall remain in force up to 31st March, 2009, unless as otherwise specified. 1.3 Amendments

The Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by Section-5 of the Act. Such amendment shall be made by means of a Notification published in the Gazette of India. 1.4 Transitional Arrangements Notifications made or Public Notices issued or anything done under the previous Export / Import policies and in force immediately before the commencement of this Policy shall, in so far as they are not inconsistent with the provisions of this Policy, continue to be in force and shall be deemed to have been made, issued or done under this Policy. Licenses, certificates and permissions issued before the commencement of this Policy shall continue to be valid for the purpose and duration for which such licence; certificate or permission was issued unless otherwise stipulated. 1.5 Free Export Import In case an export or import that is permitted freely under Export Import Policy is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated, provided that the shipment of the export or import is made within the original validity of an irrevocable letter of credit established before the date of imposition of such restriction. Special Focus Initiative of Exim Policy 2004-2009 With a view to doubling our percentage share of global trade within 5 years and expanding employment opportunities, especially in semi urban and rural areas, certain special focus initiatives have been identified for agriculture, handlooms, handicraft, gems & jewellery, leather and Marine sectors. Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from time to time. Board of Trade of Exim Policy 2004-2009 BOT has a clear and dynamic role in advising government on relevant issues connected with foreign trade. To advise Government on Policy measures for preparation and implementation of both short and long term plans for increasing exports in the light of emerging national and international economic scenarios; To review export performance of various sectors, identify constraints and suggest industry specific measures to optimize export earnings;

To examine existing institutional framework for imports and exports and suggest practical measures for further streamlining to achieve desired objectives; To review policy instruments and procedures for imports and exports and suggest steps to rationalize and channelize such schemes for optimum use; To examine issues which are considered relevant for promotion of Indias foreign trade, and to strengthen international competitiveness of Indian goods and services; and To commission studies for furtherance of above objectives. General Provisions Regarding Exports and Imports of Exim Policy 2004-2009 The Export Import Policy relating to the general provisions regarding exports and Imports is given in Chapter-2 of the Exim Policy. Countries of Imports/Exports - Unless otherwise specifically provided, import/ export will be valid from/to any country. However, import/exports of arms and related material from/to Iraq shall be prohibited. The above provisions shall, however, be subject to all conditionality, or requirement of licence, or permission, as may be required under Schedule II of ITC (HS). Promotional Measures of Exim Policy 2004-2009 The Government of India has set up several institutions whose main functions are to help an exporter in his work. It would be advisable for an exporter to acquaint him with these institutions and the nature of help that they can provide so that he can initially contact them and have a clear picture of what help he can expect of the organized sources in his export effort. Some of these institution are as follows. Export Promotion Councils Commodity Boards Marine Products Export Development Authority Agricultural & Processed Food Products Export Development Authority Indian Institute of Foreign Trade India Trade Promotion Organization (ITPO) National Centre for Trade Information (NCTI) Export Credit Guarantee Corporation (ECGC) Export-Import Bank Export Inspection Council Indian Council of Arbitration Federation of Indian Export

Organizations Department of Commercial Intelligence and Statistics Directorate General of Shipping Freight Investigation Bureau Duty Exemption / Remission Schemes of Exim Policy 2004-2009 The Duty Exemption Scheme enables import of inputs required for export production. It includes the following exemptionsDuty Drawback: - The Duty Drawback Scheme is administered by the Directorate of Drawback, Ministry of Finance. Under Duty Drawback scheme, an exporter is entitled to claim Indian Customs Duty paid on the imported goods and Central Excise Duty paid on indigenous raw materials or components. Excise Duty Refund: - Excise Duty is a tax imposed by the Central Government on goods manufactured in India. Excise duty is collected at source, i.e., before removal of goods from the factory premises. Export goods are totally exempted from central excise duty. Octroi Exemption: - Octroi is a duty paid on manufactured goods, when they enter the municipal limits of a city or a town. However, export goods are exempted from Octroi.

The Duty Remission Scheme enables post export replenishment/ remission of duty on inputs used in the export product. DEPB: Duty Entitlement Pass Book in short DEPB Rate is basically an export incentive scheme. The objective of DEPB Scheme is to neutralize the incidence of basic custom duty on the import content of the exported products. DFRC Under the Duty Free Replenishment Certificate (DFRC) schemes, import incentives are given to the exporter for the import of inputs used in the manufacture of goods without payment of basic customs duty. Duty Free Replenishment Certificate (DFRC) shall be available for exports only up to 30.04.2006 and from 01.05.2006 this scheme is being replaced by the Duty Free Import Authorisation (DFIA). DFIA: Effective from 1st May, 2006, Duty Free Import Authorisation or DFIA in short is issued to allow duty free import of inputs which are used in the manufacture of the export product (making normal allowance for wastage), and fuel, energy, catalyst etc. which are consumed or utilised in the course of their use to obtain the export product. Duty Free Import

Authorisation is issued on the basis of inputs and export items given under Standard Input and Output Norms(SION). Export Oriented Units (EOUs), Electronics Hardware Technology Parks (EHTPs), Software Technology Parks(STPs) And Bio-Technology Parks (BTPs) of Exim Policy 20042009 The Export Import Policies relating to Export Oriented Units (EOUs) Electronics Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio-technology parks (BTPs) Scheme is given in Chapter 6 of the Foreign Trade Policy. Software Technology Park(STP)/Electronics Hardware Technology Park (EHTP) complexes can be set up by the Central Government, State Government, Public or Private Sector Undertakings. Export Promotion Capital Goods Scheme (EPCG) of Exim Policy 2004-2009 Introduced in the EXIM policy of 1992-97, Export Promotion Capital Goods Scheme (EPCG) enable exporters to import machinery and other capital goods for export production at concessional or no customs duties at all. This facility is subject to export obligation, i.e., the exporter is required to guarantee exports of certain minimum value, which is in multiple of total value of capital goods imported. Capital goods imported under EPCG Scheme are subject to actual user condition and the same cannot be transferred /sold till the fulfillment of export obligation specified in the licence. In order to ensure that the capital goods imported under EPCG Scheme, the licence holder is required to produce certificate from the jurisdictional Central Excise Authority (CEA) or Chartered Engineer (CE) confirming installation of such capital goods in the declared premises. Special Economic Zone (SEZ) under the Exim Policy 2004-2009 A Special Economic Zone in short SEZ is a geographically distributed area or zones where the economic laws are more liberal as compared to other parts of the country. SEZs are proposed to be specially delineated duty free enclaves for the purpose of trade, operations, duty and tariffs. SEZs are self-contained and integrated having their own infrastructure and support services. The area under 'SEZ' covers a broad range of zone types, including Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Trade Zones (FTZ), Free Ports, Urban Enterprise Zones and others. In Indian, at present there are eight functional Special Economic Zones located at Santa Cruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Noida (Uttar Pradesh) in India. Further a Special Economic Zone at Indore ( Madhya Pradesh ) is also ready for operation.

Free Trade & Warehousing Zones of Exim Policy 2004-2009 Free Trade & Warehousing Zones (FTWZ) shall be a special category of Special Economic Zones with a focus on trading and warehousing. The concept of FTWZ is new and has been recently introduced in the five-year foreign trade policy 2004-09. Its main objective is to provide infrastructure for growth of the economy and foreign trade. Free Trade & Warehousing Zones (FTWZ) plays an important role in achieving global standard warehousing facilities as free trade zones. Free Trade & Warehousing Zones is a widely accepted model with a history of providing Substantial encouragement to foreign trade and warehousing activity. Deemed Exports under the Exim Policy 2004-2009 Deemed Export is a special type of transaction in the Indian Exim policy in which the payment is received before the goods are delivered. The payment can be done in Indian Rupees or in Foreign Exchange. As the deemed export is also a source of foreign exchange, so the Government of India has given the benefit duty free import of inputs.

Direct export.

For practical purposes, the manufacturer cannot be called an exporter, and he cannot claim or avail of export incentives given on a fairly liberal scale; Indirect exporting provides little control over the operations of middlemen. Export merchants may concentrate on the products, which offer them the greatest profit. The small manufacturer's products may be ignored. The middleman, particularly the agent on commission basis, may not be aggressive, with the result that sales may suffer; Export merchants middlemen may not be available for all the markets. DIRECT EXPORTING: In case the firm decides not to operate through any of the intermediaries described in the earlier paragraphs, and opts for direct exporting, it will have to choose most carefully between one and or the other kind of export sales organization to be created. If its export plans are ambitious and the prospects of selling in a number of markets are promising, it may make a modest start- appoint an export manager plus a clerk. Depending upon the firm's export sales

turnover, existing and potential, it may create/set up a separate export department or even a separate export company. Direct Exporting may also be undertaken by: Setting up a sales branch or a subsidiary sales organization in a foreign country, which may be a substitute for, or a supplement to the home organization; Appointing home-based sales representatives, who would travel abroad and book orders; Selecting suitable distributors in a foreign country who would buy his product and sell it there, or suitable agents in that country who would sell it on commission basis without taking any title to it. Advantages of Direct Exporting: The manufacturer will have better knowledge of customers' requirements and market conditions. He will have direct control over the marketing operations. He can enjoy the full returns on exports. His profits will be more than selling the goods through middlemen

irect exporting is the only choice for certain products and not alternative to get success, especially in the following cases: - If the product is technically unique - If middlemen decline - If importers wants only direct export - If costs increase because of tariffs - If after sales service is a must Disadvantages of Direct Exporting: Large financial resources needed Managerial ability is essential and more staff is required Increased distribution cost More risk

Greater initial outlay before profit begins to flow in. LICENSING: Under this method, the manufacturer enters into an agreement with a licensee in the foreign country and this gives him the right to use the manufacturing process, a patent design or a trademark, technical information or some facility in return for some fee or royalty. It is often the quickest way of entering overseas markets - sometimes the only possible way as in centrally planned economies. It is clearly a method that involves little expense, and avoids all distribution costs. Advantages and Disadvantages of Licensing Advantages Licensing mode carries low investment on the part of the licensor. Licensing mode carries low financial risk to the licensor. Licensor can investigate the foreign market Disadvantage Licensing agreements reduce the market opportunities for both licensor and licensee. Both the parties have the responsibilities to maintain the product quality and promoting the product. Therefore one party can affect the other through their improper acts. Licensor can investigate the foreign market Costly and tedious litigation may crop up

Franchising is also a form of licensing. The franchisor can exercise more control over the franchise compared to that in licensing. Under franchising, an independent organization called the franchise operates the business under the name of another company called franchisor. The franchisor provides the following services to the franchisee:

Trade marks Operating system Product reputations Continuous support systems like advertising, employee training, reservation service, and quality assurance programme etc

Advantages Franchisor can enter global markets with low investment and low risks. Franchisor can get the information regarding the markets, culture, customers and environment of the host country. Franchisor learns more lessons from the experiences of the franchisees, which he could not experience from the home countrys market.

Disadvantages International franchising may be more complicated than domestic marketing. It is difficult to control the international franchisee. Franchising agents reduce the market opportunities for both the franchisor and franchisee.

JOINT VENTURE: A joint venture involves a capital partnership and may be arranged for manufacturing activities, marketing activities, or both. This takes place when: The domestic investor buys an interest in a manufacturing unit situated in a foreign country; Any investor of a foreign country buys an interest in a manufacturing unit of the domestic investor already existing in that country; or

A domestic investor and an investor in a foreign country together start a new venture in that foreign country. FOREIGN SUBSIDIARIES: The marketer establishes a subsidiary manufacturing unit in a foreign country. He is its exclusive owner and controller, the monarch of all that it contains. This is the culmination of international marketing. It is international production-cum marketing. When a company engages in such production in a number of countries, it is called multinational company. SPECIAL MODES OF ENTRY: A. Contract Manufacturing: Some companies outsource their part of or entire production and concentrate on marketing operations. This practice is called the contract of manufacturing or outsourcing. MANAGEMENT CONTARCT

The companies with low level technology and managerial expertise may seek the assistance of a foreign company. Then the foreign company may agree to provide technical assistance and managerial expertise. This agreement between these two companies is called the management contract. C. Turnkey projects: A turnkey project is a contract under which firms agrees to fully design, construct and equity a manufacturing/business/service facility and turn the project over to the purchaser when it is ready for operations for a remuneration. International turnkey projects include nuclear power plants, air ports, oil refinery, national highways, railway lines etc. WORLD TRADE ORGANISATION Established on January 1, 1995 WTO is the embodiment of the Uruguary Round results and the successor to GATT. T is not a simple extension of GATT; it completely replaces its predecessor

and has a very different character. As on 6th November 2000, the membership of the WTO stood at 139. 76 Governments became members of the WTO on its first day. The present membership accounts for more than 90 per cent of world trade. Many more countries have requested to WTO. The WTO is based in Geneva, Switzerland. Its essential functions are as follows. 1. To administer the trade policy mechanism. 2. To achieve greater coherence in global economic-policy making in cooperation with World Bank and IMF. 3. To provide a forum for negotiations among its members concerning their multilateral trade relations in matters dealt with in the agreements. 4. To administer the understandings on Rules on Procedures governing the settlement of disputes. 5. To introduce the idea of 'sustainable development' in relation to the optimal use of the world resources and the need to protect and preserve the environment in a manner consistent with the various levels of national economic development. WTO is a watchdog of international trade, regularly examine the trade regimes of individual members. Trade disputes that cannot be solved through bilateral talks are adjudicated under the WTO dispute settlement 'court'. The WTO is also a management consultant for world trade. It economists keep a close watch on the pulse of the global economy and provide studies on the main trade issues of the day. The mandate of the WTO includes trade in goods, trade in services, trade related in investment measures and trade related intellectual property rights. A number of simple and fundamental principles run throughout all of the instruments which, together, make up the multilateral trading system . They are: - Trade without discrimination - Predictable and growing access to market

Export-Import Bank: The EXIM Bank was established on January 1, 1982 for the purpose of financing, facilitating and promoting foreign trade of India. It extends finance to exporters of capital and manufactured goods, exporters of soft wares and consultancy services and overseas joint

ventures and construction projects abroad. The bank is the principal financial institution in India for coordinating the work of institutions engaged in financing export and import trade. The EXIM bank concentrates mainly on medium and long term credit for export of goods and services on deferred payment terms. ROLE OF EXIM BANK OF INDIA Objectives: The Export-Import Bank of India was set up[ the Government of India in 1982 as a public sector financial institution under an Act passed in the parliament for the purpose of financing, facilititating and promoting foreign trade of India. The board of directors manages the EXIM BANK with representation from government financial institutions, banks and business community. FUNCTIONS: Lending Programmes to Indian Exporters: Suppliers credit: This enables the exporters to extend credit to overseas importers of eligible Indian goods. Finance for consultancy and technology services; This enables Indian exporters of consultancy and technology services to extend term credit to overseas importers. Pre-shipment credit: This enables Indian exporters to buy raw materials and other inputs for fulfilling export contracts involving cycle time exceeding six months.

Finance for deemed exports. Finance for EOU and EPZ Units Software Training Institutes Export marketing finance Export-Product Development Finance: This Indian firms to undertake product development, R & D for exports. Services Offered to Indian Exporters: Underwriting: This enables the Indian exporters to raise finance from capital markets with the backing of EXIM Bank's underwriting commitment. Forfeiting: This Indian exporters to convert sale to cash on without recourse basis.

Guarantee Facility: To execute export contracts and import transactions. Business Advisory and Technical assistance Cooperation arrangement with African Management Services. For Commercial Banks:

Refinance of Export credit Bulk import finance Guarantee cum Refinance supplier's credit Other activities: The bank helps Indian companies go global by setting up subsidiaries and joint ventures abroad. It provides information to potential exporters about projects abroad specially about multilaterally agencies. It also helps companies in preparing bids according to strict condition prescribed by the multilateral agencies. It also entertains proposals for various facilities under he European Community Investment Partners like feasibility studies for setting up export units. The bank introduced the "cluster of Excellence" programme for up gradation of quality standards and obtaining ISO certification.

PRE-SHIPMENT CREDIT OR PACKING CREDIT Export packing credit is a loan or any other credit given by a bank to an exporter for financing (a) procuring raw materials and components to manufacture the product or (b) processing or assembling or packing the goods for export. The banks on the basis of the following give the packing credit. A letter of Credit (L/C) opened in favour of the exporter by the importer's bank: A confirmed or irrevocable order for the export of goods from India having been placed on the exporter, or Any other evidence of an order for exports of goods from India having been placed on the exporter or Relevant policy issued by the ECGC; or Personal bond in the case of party's already known to the exporter. COSTS COVERED BY PRE-SHIPMENT FINANCE

Pre-shipment finance would normally cover the following costs; Cost of purchase or production Packing including any special packing for export Costs of special inspection or tests required by the importer Internal transport costs Port, customs and shipping agent's charges Freight and insurance charges if the contract is either CIF contract or C&F contract and Export duty or tax, if any. 2.POST SHIPMENT CREDIT Post-shipment finance is required by the exporters to bridge the gap between the time of shipment of goods and the actual payment for the goods exported. Post - shipment credits are given by commercial banks Against the security of approved shipping documents tendered against-letters of credit or otherwise. It is also provided at concessional rate of Interest. The banks normally finance the post-shipment credit in one the following ways: (i) Negotiating export bills under letter of credit Discounting of bills drawn against shipment of goods-discounting of usance bills (D/A Bills ) drawn against shipment of goods- discounting of bills is usually done under limits sanctioned to different customers, and (iii) An advance against bills under collection. Banks usually charge a commission according to the rates prescribed by the Foreign Exchange Dealer's Association of India. The rate of interest on post-shipment credit is also charged at concessional rate. TYPES OF POST -SHIPMENT CREDIT Post shipment credit may be of three types: (i)

Short term: The short term credit is usually for 6 months and provided by banks. (ii) Medium term: Medium term loans are offered for a period beyond 6 months and up to 5 years. These loans are also provided by commercial banks in collaboration with EXIM Bank of India. Medium term loans are provided for in the case of durable consumer goods and light capital goods. (iii) Long term: Long term loans are provided in the case of sale of capital goods complete plants and turnkey jobs. The period of credit is usually more than 5 years. Banks enjoy certain benefits for advancing loans to exporters, They are as follows. Refinance by EXIM Bank of India. (ii) Guarantees provided by ECGC where a substantial part of the risk is covered by the ECGC. 3. FORFAITING Forfaiting enable an exporter to convert an overseas credit sale into a cash sale through the process of discounting of export receivables. The bill of exchange accepted by the importer is surrendered to the forfeiting agency which pays him in cash after deducting a fee. The understanding is that the agency will collect the dues from the importer on expiry of the said period. FINANCE FOR EXPORTS ON DEFERRED PAYMENT TERMS Our exchange control regulations stipulate that exporter should realize the foreign exchange for their exports within 180 days from the date of shipment. Contracts for export of goods against payment to be received fully or partly after the expiry of the stipulated period for the realization of export proceeds are treated as deferred payment export contract. Extension of long term export credit has become an accepted export market strategy and therefore, provision

has been made for the extension of medium and long term credit to finance the sale of Indian capital goods and related services. EXPORT TERMS OF PAYMENT AND LETTERS OF CREDIT The exporter has to receive payment for the goods he supplied to the importer. How it is to be paid can be decided by the exporter and importer before the shipment is made. Generally there are five methods of export payment and they are explained below: PAYMENT IN ADVANCE: This type of payment is most uncommon. However, if thee is heavy demand for the goods and the goods are tailor-made for the customer, the exporter may get payment in advance. Under this method, the exporter receives a bank or a bank advice either on confirmation of the order or at any time before shipment. This is the most advantageous form of payment as the exporter does not have any risk but, as we have already observed, it is not very common. OPEN ACCOUNT: Under this method, the exporter sends the documents directly to the importer with a covering letter asking for the invoice value to be remitted to him. In this case the exporter does not draw any bill of exchange. Hence, there is no evidence of the obligation to pay. Though this method is simple and less expensive the exporter carries the burden of finance and it also involves real risk for the exporter. The exporter may accept this method of payment if there is keen competition and there is a long and established relationship between and the importer. DOCUMENTARY BILLS: This method of payment finances a large proportion of overseas trade. These bills act as a bridge between the exporter's willingness to part with his money unless he is paid for and importer's unwillingness to part with his money unless he is sure of receiving the goods. The commercial banks that deal in foreign exchange provide a via media by giving the necessary assurances to both the parties. Under this method of payment the exporter agrees to submit

documents to his bank along with the bill of exchange. The documents include bill of lading, involve and a marine insurance policy. Under this method there are two types of payments viz: Documents against payment (D/P) and documents against Acceptance (D/A). Under D/P bills, the exporter's bank will send the documents to its correspondent bank in the importer's country, which will present the documents to the importer and ask him to pay the money for the goods exported. On payment of the bill of exchange the bank will deliver the documents to the importer so that he can take possession of the goods. In case of D/A bills, the correspondent bank will submit the bill of exchange to be signed by the importer t indicate his acceptance of the payment obligation. After the importer accepts the bill he will get possession of the documents for taking delivery of the goods. On the due date of payment, the bank will again present the bill to the importer who then makes the payment. The money received is remitted through usual banking channels to be credited to the exporter's account.

LETTER OF CREDIT A letter of credit is a document containing the guarantee of a bank to honour drafts drawn on it by an exporter, under certain conditions and up to certain amounts, provided that the beneficiary fulfils the stipulated conditions. The letter of credit offers advantages to both the seller and buyer. As far as the seller is concerned, a letter of credit ensures him payment for the goods he sells, provided, of course, that he follows the instructions. Though the buyer has to have the botheration of arranging for the letter of credit, it may enable him to obtain more liberal discounts and a lower price from the seller. Further, the buyer is assured that the shipment will be made by the date specified in the letter of credit, or else the credit will expire. PARTIES TO THE LETTER OF CREDIT: The Opener: The opener is the buyer(importer). The letter of credit is opened at the initiative and request of the buyer. 2. The Issuer: The issuer, also called the opening or issuing bank, is the bank in the importer's country issuing the letter of credit at the request of the importer. 3. The Beneficiary: The beneficiary is the party in whose favour the credit is issued; that is the beneficiary is the seller or exporter.

4. The confirming Bank: The confirming bank is a bank in the exporter's country, which guarantees the credit at the request of the issuing bank. The confirming bank undertakes all the obligations of the issuing bank as a primary party to the credit, and even if the issuing bank fails during the currency of the credit, the confirming bank is obliged to honour its commitment. 5. The Notifying Bank: The notifying bank is the bank, which, at the request of the issuing bank, notifies the beneficiary that the credit has been opened in his favour. If the letter of credit is confirmed, the confirming the bank advises the beneficiary accordingly. 6. The Paying Bank: The paying bank is the bank on which the draft or bill of the exchange is to be drawn under the commercial credit. The paying bank may be the issuing bank, the confirming bank or the notifying bank. 7. The Negotiating Bank: The negotiating bank is the bank, which pays or accepts the drafts of the exporter. If no paying bank is specified in the credit, the beneficiary may go the any bank and present the draft and related documents under the credit; and if the bank agrees to negotiate the documents, it becomes the negotiating bank. KINDS OF LETTER OF CREDIT 1. Clean Letter of Credit: This kind of letter of credit may be negotiated against a clean draft. A clean draft is a draft without any documents attached to it. 2. Documentary Letter of Credit: Under this, the draft must be accompanied by the documents specified in the letter of credit. 3. Assignable Credit; Under this kind of L/C, the beneficiary may assign his rights to another beneficiary, either within a stated period or before the expiry date of the credit. 4. Non-Assignable Credit: As opposed to the assignable credit, the named beneficiary of a non-assignable L/C cannot transfer his rights to another party. 5. Cash credit; under the cash credit, the exporter may draw a sight draft on the bank. The great advantage of this type of credit, therefore, is that the beneficiary will receive cash for his draft as soon as the goods are ready for shipment and the relevant documents in proper order are represented to the bank.

6. Acceptance Credit: Under this arrangement, the bank merely 'accepts' the drafts drawn by the exporter. After the bank has accepted it, the draft becomes a bank acceptance, which may be readily discounted or sold by the exporter to the accepting bank, to other banks or to exchange dealers. 7. Revocable credit: The revocable letter of credit may be revoked or cancelled at any time without the consent of, and without notice to, the beneficiary. As the revocable L/C does not adequately protect the beneficiary on the basis of this type of L/C are not common. 8. Irrevocable Credit: An irrevocable L/C is one, which cannot be revoked, amended or modified by the issuing bank without the express consent of all the parties concerned. 9. Confirmed Credit: If a bank in the beneficiary country confirms the L/C, it becomes a confirmed credit. In this case, the bank issuing the L/C sends it through its branch or correspondent bank located in the beneficiary's country with the request to add its confirmation to the credit. 10. Back-to-Back Credit: A back-to back credit is essentially a secondary credit, opened by a bank on behalf of the beneficiary of an original credit, in favour of a domestic supplier. The original credit backs another credit and facilitates the purchase of the goods from a local supplier by the beneficiary of the original L/C. 11. Revolving Credit: A revolving credit is designed to obviate the need for establishing new credit for each shipment when the transactions are more or less continuous. Under the revolving credit, provision may be made for making available the credit again as soon as the importer reimburses the issuing bank with the drafts already negotiated by the paying bank. 12. Red Clause Credit: The red clause L/C enables the beneficiary to draw a predetermined value of the L/C as its established. The red clause is an authority to the negotiating bank to make advances to the beneficiary for the purpose of purchasing the relevant merchandise. The conditions on which such advances may be made are incorporated in the L/C. STEPS IN THE OPERATION OF LETTER OF CREDIT:

In Letter of credit, normally four parties are involved, viz, the applicant for the credit (importer), the beneficiary of the credit (exporter), the issuing bank and the advising bank incase of unconfirmed credit or the confirming bank in case of confirmed credit. The step-by-step procedure involved can be discussed by taking an example. M/S Rainbow limited. Chennai has secured a contract for the supply of 200 ceiling fans to a Nigerian importer. It has been decided that the terms of payment will be a confirmed irrevocable letter of credit. The total value of the contract is Rs.2, 00,000. Once the contract is duly signed the Nigerian bank then sends instructions to its correspondent bank to the credit and the advice the Rainbow limited accordingly. On receipt of this advice from the local correspondent bank in India, the Rainbow limited., makes the shipment of he cling fns and gets the shipping documents and other related documents. He presents these to the correspondent bank, which scrutinizes the

DIAGRAM

documents. If these are in full conformity with the terms of the credit, it will accept the documents and make the payment to the exporter. The documents are then forwarded to the issuing bank, which reimburses the amount to the correspondent bank. The issuing bank in turn presents the documents to the importer and debits his account for the corresponding amount.

The steps involved, therefore, relate to three distinct activities, viz., opening of credit, presentation of documents and the process of payment. The entire scheme of operation can be easily visualized with reference to the Flow chart given below. he straight lines show the flow of the credit. The dashed lines shows the flow of the documents and the dotted lines show the process of payment. ADVANTAGES OF LETTER OF CREDIT: 1. Purchase without cash: The importer can purchase goods on credit from foreign merchants, who do not know him and may rely upon his standing, on the banker's credit issuing the letter of credit. 2. Payment after satisfying conditions: The importer is assured in case of documentary letter of credit that the exporter cannot obtain any benefit under the letter of credit without actually shipping the merchandise and handing over the documents to the bank 3. Better terms of trade: The issuing banker lends the advantage of his own credit to the importer, who is able to secure terms of trade from the foreign supplier, which is otherwise not possible. 4. Release against trust receipt: When banks are willing to assume credit risk of the importer, shipping documents are surrendered to him in return for his trust receipt, and the goods released. 5. Certainty of Payment: Though the importer and the exporter are not known each other, the letter of credit provides an absolute assurance that the bills of exchange drawn under the letter of credit will be honoured. 6.Credit facilities: The exporter can secure loans from his bank to buy or manufacture the goods to be supplied on the strength of the letter of credit. 7. Discount facilities: The bills of exchange drawn under the letter of credit are readily discounted with the advising/confirming banker or any other banker, because of the firm undertaking given by the opening banker.