IM/U1 Topic 1 Nature, Importance and

Scope of International Marketing

According to Kotler, “Global marketing is concerned with integrating and standardizing
marketing actions across a number of geographic markets.”

According to Cateora, “International marketing is the performance of business activities that

direct the flow of goods and services to consumers and users in more than one nation.”

According to Cateora and Graham, “International marketing is the performance of business

activities designed to plan, price, promote, and direct the flow of a company’s goods and
services to consumers or users in more than one nation for a profit.”

According to Terpstra and Sorathy, “international marketing consists of finding and

satisfying global customer needs better than the competition, both domestic and international
and of coordinating marketing activities within the constraints of the global environment.”

International marketing is different from domestic marketing not only in scope but also in
nature. Following are the nature and scope of international marketing.

Nature of International Marketing

1. Broader market is available

Unlike domestic marketing the market is not restricted to national population. Population of
other countries can also be targeted in international marketing.

2. Involves at least two set of uncontrollable variables

In domestic marketing the marketers have to interact with only one set of uncontrollable
variables. In international marketing at least two set of uncontrollable variables are involved
or more if the marketing organization deals in more countries.

3. Requires broader competence

Special management skills and broader competence is required in international

marketing/business.

4. Competition is intense

An international marketing organization has to compete with both the domestic competitors
and the international competitors. Hence, the competition is intense in international
marketing.

5. Involve high risk and challenges

International marketing is prove to various kinds of risk and challenge like – political risk,
cultural differences, changes in fashion and style of foreign customers, sudden war, changes
in government rules and regulations, communication challenges due to language and cultural
barriers, etc.
 Importance of International Marketing

1. Important to expand target market

Target market of a marketing organization will be limited if it just concentrate on domestic

market. When an organization thinks globally, it looks for overseas opportunities to increase
its market share and customer base.

2. Important to boost brand reputation

International marketing may give boost to a brand’s reputation. Brand that sold
internationally is perceived to be better than the brand that sold locally. People like to
purchase products that are widely available. Hence, international marketing is important to
boost brand reputation.

3. Important to connect business with the world

Expanding business into an international market gives a business an advantage to connect

with new customers and new business partners. Apple – the tech giant designs its iPhone in
California; outsources its manufacturing jobs to different countries like – Mongolia, China,
Korea, and Taiwan; and markets them across the world. Apple have not restricted its business
to a nation, rather expanded it to throughout the world. The opportunities for networking
internationally are limitless. The more “places” a business is, the more connections it can
make with the world.

4. Important to open door for future opportunities

International marketing can also open door for future business opportunities. International
marketing not only increases market share and customer base, it also helps the business to
connect to new vendors, a larger workforce and new technologies and ways of doing
business. For example – American organisations investing in Japan have found programs like
– Six Sigma and Theory Z which are helpful in shaping their business strategies.

Scope of International Marketing

1. Export

It is a function of international business whereby goods produced in one country are shipped
to another country for further sale or trade.

2. Import

Goods or services brought into one country from another for use or sale.

3. Re-export

Import of semi-finished goods, further processing, and export of finished goods.

4. Management of international operations

 Operating marketing and sales facilities abroad,

 Establishing production or assembly facilities in foreign countries, and
 Monitoring the operations and practices of other MNCs and agencies.
IM/U1 Topic 2 Domestic Marketing
vs. International Marketing
Domestic Vs. International business Marketing is defined as the set of activities which are
undertaken by the companies to provide satisfaction to the customers through value addition
and making good relations with them, to increase their brand value. It identifies and converts
needs into products and services, so as to satisfy their wants. There are two types of
marketing namely, domestic and international marketing. Domestic marketing is when
commercialization of goods and services are limited to the home country only.

On the other hand, International marketing, as the name suggests, is the type of marketing
which is stretched across several countries in the world, i.e. the marketing of products and
services is done globally.

Comparison Chart

BASIS FOR DOMESTIC

INTERNATIONAL MARKETING
COMPARISON MARKETING

Domestic marketing refers International marketing means the activities of

to marketing within the production, promotion, distribution,
Meaning
geographical boundaries of advertisement and selling are extend over the
the nation. geographical limits of the country.

Area served Small Large

Government
Less Comparatively high
interference

Business
In a single country More than one country
operation

Use of
Limited Sharing and use of latest technology.
technology

Risk factor Low Very high

Capital requirement Less Huge

Nature of
Almost same Variation in customer tastes and preferences.
customers

Deep research of the market is required

Required but not to a very
Research because of less knowledge about the foreign
high level.
markets.

Domestic Marketing
 Domestic marketing is the selling of a company’s products within a local financial market. It
deals with only one set of competition and economic issues which make it more convenient
to do.

There are no language barriers in domestic marketing and obtaining and interpreting data on
local marketing trends and consumer demands is easier and faster to do. It helps the company
make decisions and develop marketing strategies that are more effective and efficient. The
risks are also lesser with domestic marketing and it needs lesser financial resources.

Local markets are not as broad as the international market though and most companies are
aiming at doing business globally.

International Marketing
International marketing is the promotion and sale of a company’s products to consumers in
different countries. It is very complex and requires a huge amount of financial resources.

Every country has its own laws on business and a company that aims at entering into business
in another country must first know about them. Consumer tastes and preferences may also
differ so marketing strategies must be formulated to cater to the needs of different consumers.

International marketing requires more time and effort, not to mention its being very risky too.
The international market is very uncertain and a company must always be ready for changes
that may suddenly occur. It requires a higher level of commitment to succeed in an
international market.

Summary

1. Domestic marketing is the production, promotion, distribution, and sale of goods and services in a
local market while international market is the production, promotion, distribution, and sale of goods
and services in a global market.
2. Domestic marketing is less risky and easier to conduct while international marketing is more risky and
more complex.
3. Domestic marketing requires lesser financial resources while international marketing requires huge
financial resources.
4. Domestic marketing deals with only a single market while international marketing deals with several
different countries and markets.
5. Although both use all the basic marketing principles, international marketing is more challenging and
requires more commitment from the company because of the uncertainty and differences in laws and
regulations in the global market while domestic marketing deals only with the laws and regulations of
one country.
6. Domestic marketing deals only with one set of consumers while international marketing deals with
different types of consumers with different tastes.
7. In domestic marketing, the company can have the same policies and strategies while international
marketing requires different strategies in the promotion of their products.

Conclusion
After digging the differences in the two subjects, we came to the conclusion that the world
itself is a market, and that is why the guiding principles are versatile. It does not make any
change that where the principles are applied i.e. in a local or a global market. The basic cause
of the difference between domestic and international marketing is the area of its implication
and the market conditions.
 IM/U1 Topic 3 International
Marketing Management Process
Steps of International Marketing Management Process:

1. Using Domestic Market to your Advantage

Promoting your brand at global level takes a lot of effort and budget. Those who become
successful in making their brand reputed in local markets find it a lot easier to promote their
brand outside that localization since they know the full potential of their brand. Furthermore,
you can use your local market to build up sales and boost up your resources which will prove
to be a lot helpful for your international campaigns promotions and to go further deep down
to the end of that international marketing process.

2. Getting Familiar to Target Market

Knowing your target audience is as important as getting a know-how of your potential since
it is the targeted audience that determines your overall planning for the promotion of your
brand. Furthermore, as an exporter, it is important to understand that an active strategy is a lot
better than chasing for orders around the world. That’s why before setting up their steps in an
unfamiliar market, companies analyze the whole global market and by keeping the strengths
and weaknesses of their brand, they narrow down their targets to just three to four markets.

It is a common observation that whenever a new company starts a global level business, it
often tries to target a country with an almost similar working environment, legal structures
and most importantly, economic factors like Canadian companies preferring US markets.

3. Testing the Market

According to the third step of the international marketing process, it is always a wise strategy
to start out small if you don’t know how to make a big thing work. Instead of jumping right
into the market and spending all of your resources at once, it is better to proceed step by step,
starting out from smaller investments and a lesser number of exports. This will help you in
getting a better view of that market. If successful, then you can increase the exports promptly.
By the time, chances of failure are diminished, and it is easier to make changes to strategy on
the go to improve it. Furthermore, favorable results from these timed exports also increase the
exporters confidence in dealing with exporting mechanics and as well as costumer’s
familiarity with the brand.

4. Expanding the Exports

Successful initial sales lead to a lot of expansion chances. And that’s the actual result of that
intense market research planning that you did while staying awake at nights and missing your
meals. At this point and even earlier, your major focus should be on integrating your
networks in stronger forms and spreading them. Participate aggressively in major
international trade shows to gain more experience and create good relationships with other
marketers while increasing the exports you make. Well! It’s just like every other reputed
brand. You make negotiations with other potential partners to create a strong win-win
relationship to strengthen your brand. As time passes, your experience also grows and at the
present stage, you will be confident enough to take tougher decisions for the advantage of the
brand in accordance with international marketing process.

5. Increasing the Investments in Foreign Markets

Once the brand grows its roots deep down in overseas markets, the profits become
encouraging which lead to even more compelling opportunities. And that’s where a company
has to choose whether to expand its effect in the target market or not?

The final step of international marketing process deals with the clarification of that foggy
image; the customer has in his mind about your brand. So, for the purpose at hand, companies
buy an existing company in that locality, open a local office to deal with their customers and
to help them and tighten their relations to the partners. Well! You can say that the target
market now serves the purpose of stepping stones for venturing further into other target
markets.

IM/U1 Topic 4 International

Marketing Orientation:
EPRG Approach
Different attitudes towards company’s involvement in international marketing process are called
international marketing orientations. EPRG framework was introduced by Wind, Douglas and
Perlmutter. This framework addresses the way strategic decisions are made and how the
relationship between headquarters and its subsidiaries is shaped.

Perlmutter’s EPRG framework consists of four stages in the international operations evolution.
These stages are discussed below.

Ethnocentric Orientation
The practices and policies of headquarters and of the operating company in the home country
become the default standard to which all subsidiaries need to comply. Such companies do not
adapt their products to the needs and wants of other countries where they have operations. There
are no changes in product specification, price and promotion measures between native market and
overseas markets.

The general attitude of a company’s senior management team is that nationals from the
company’s native country are more capable to drive international activities forward as compared
to non-native employees working at its subsidiaries. The exercises, activities and policies of the
functioning company in the native country becomes the default standard to which all subsidiaries
need to abide by.

The benefit of this mind set is that it overcomes the shortage of qualified managers in the
anchoring nations by migrating them from home countries. This develops an affiliated corporate
culture and aids transfer core competences more easily. The major drawback of this mind set is
that it results in cultural short-sightedness and does not promote the best and brightest in a firm.
Regiocentric Orientation
In this approach a company finds economic, cultural or political similarities among regions in
order to satisfy the similar needs of potential consumers. For example, countries like Pakistan,
India and Bangladesh are very similar. They poss
possess a strong regional identity.

Geocentric Orientation
Geocentric approach encourages global marketing. This does not equate superiority with
nationality. Irrespective of the nationality, the company tries to seek the best men and the
problems are solved globally
lobally within the legal and political limits. Thus, ensuring efficient use of
human resources by building strong culture and informal management channels. The main
disadvantages are that national immigration policies may put limits to its implementation and a it
ends up expensive compared to polycentrism. Finally, it tries to balance both global integration
and local responsiveness.

Polycentric Orientation
In this approach, a company gives equal importance to every country’s domestic market. Every
participating
ing country is treated solely and individual strategies are carried out. This approach is
especially suitable for countries with certain financial, political and cultural constraints.

This perception mitigates the chance of cultural myopia and is often less
less expensive to execute
when compared to ethnocentricity. This is because it does not need to send skilled managers out
to maintain centralized policies. The major disadvantage of this nature is it can restrict career
mobility for both local as well as fore
foreign
ign nationals, neglect headquarters of foreign subsidiaries
and it can also bring down the chances of achieving ynergy.
 IM/U1 Topic 5 Influence of
Physical, economic, Socio-Cultural
on International Marketing
Influence of physical environment on International Marketing
Although the physical environment is not considered one of the core components of the
SLEPT factors, it is an environment that can impact upon your success in exports and
consequently needs to be considered.

A country’s territorial size, geographical location, natural resources, climate, rivers, lakes and
forests constitute its physical environment. The physical environment influences political and
economic activities, shapes cultural characteristics such as language and religion, and
determines land usage, transportation, and commercial flows.

When planning international marketing activities, the possible impact of the physical
environment should take into account. For example:

 Population distribution will be affected by topography (i.e. a country’s rivers, mountains, deserts, etc.)
and climate – people tend to settle where the climate is temperate, and there is an adequate supply of
water.
 Certain climatic conditions may dictate adaptations to the product – some glues and oils, for example,
will not function in very cold climates.
 Climate should also influence the arrangements made in respect of packaging (in the marketing
context) and protective packing for the purposes of safeguarding the product while it is in transit or in
storage. Products which are particularly vulnerable to climatic conditions, are those that are adversely
affected by extremes in temperature or excessive humidity changes (fruits being transported to hot
climates or across the equator, for example).
 Abnormal weather conditions (e.g. typhoon season in Asia) can disrupt the transportation of export
products while unforeseen changes in the weather can threaten companies which produce seasonal
goods.
 Topography will influence the routing of goods and the choice of transport mode, which in turn will
affect cost and thus impact on the price offered to the buyer.

The Impact of Economics on International Marketing

The economic situation of your market impacts what you offer and how you present it to your
target customers. For international marketing, the economics of the target market as well as
the international economy affect your marketing strategy. The local economy influences how
you approach consumers, while the international economic framework limits your ability to
produce, ship and distribute your products through cost and regulatory constraints. An
effective international marketing strategy takes both local and international economic
conditions into account.

(i) Product

Your international marketing of goods may be successful in western economies that have a
similar economic structure to the United States, but it will fail in developing markets unless
you make adjustments. You have to adapt your products to the local economies. A product
you market as environmentally-friendly may not be relevant in a subsistence economy. A
product that saves energy will not sell if energy is subsidized and inexpensive in the foreign
market. You may offer the same products internationally as you do in the United States, but
your global marketing has to change for your products to make economic sense in foreign
economies.

(ii) Price

Whether an international market is accessible to your company depends on whether you can
offer your products at a competitive local price. International economic factors such as
currency exchange rates, tariffs and shipping impact your costs and the prices of your goods.
If the cost of offering your products in international markets is higher than that of locally-
produced products, you may have to target luxury goods market segments. Sometimes mass-
produced goods cost less than locally-made custom products, and your marketing strategy
can price your products to achieve wide acceptance.

(iii) Production

Carrying out production locally is one way to reduce costs and limit the influence of
international economic factors on your operations. Instead of incurring costs through duties
and transportation, you may be able to take advantage of lower production costs in the local
economy with lower labor and facility expenses. Local production can impact your marketing
by affecting both price and local acceptance. Marketing your products as locally-produced
competitively-priced options can be an effective marketing strategy.

(iv) Channel

The international and local economic environments influence your channel marketing. If
establishing a local presence is costly, you may opt for partnering with a local or international
distributor who already has experience in the target market. For some markets, it makes
economic sense to market your products via direct sales, either through local representatives
or via online sales. Alternatively, a low-cost, open local economy may make it feasible to
create your own local distribution network. The channel you choose for your marketing
initiatives depends on the economics of delivering the goods to market and the local
economic situation.

Socio-cultural influences on international marketing

According to Doole and Lowe (2004), the socio-cultural influences on international
marketing are great. Social-cultural factors concern about demographics changes which
organizations should be aware of. It involves age structure of the population, changing nature
of occupations, improvement in education, and family size, and so on, which can have a great
impact on demand of the products and services. Differences in social conditions, religion and
culture can all affect consumers’ perceptions and patterns of buying behavior. In some
countries, environment of the religion might be a source of opportunities or threats to
companies doing the business in that particular location. Development and movement in
populations around the world are crucial factors heralding social changes. It will affect the
supply and demand of products and services within an economy. Cultural differences,
especially language differences can have a significant impact on the way a product may be
used in a market, its brand name and the advertising campaign. For example, there are culture
gaps between Western and Asian countries where some companies simply do not find their
way into a market or where their performance is less than successful.
IM/U1 Topic 6 Political and Legal
Environments on International
Marketing Information
The political and legal environment of the company’s home country, its host country and
the general international environment also has important effects on the marketing activities of
international companies.

The politics and regulations of the company’s home country can determine its opportunities
outside national borders. One of the main types of regulation that international marketers
need to be aware of are embargoes and sanctions which are used to distort the free flow of
trade. They need to know where they are applicable and take them into account when
planning marketing activities so that they do not breach them and face subsequent sanctions.
Governments also employ export and import control systems. Export controls prevent or
delay companies from selling their products in certain countries whilst import controls are
used to protect and stimulate the domestic market. Marketers need to take them into account
so they know where the company can do business and where it can obtain its supply from.
Finally, governments may induct special measures to ensure that their companies behave in a
correct manner in the international business environment. One of the major areas concerned
is boycott, which is when companies reject to conduct business with someone. The
government’s control in this area can force companies to decide whether to stop transactions
and lose profit or to continue trading and pay charges. The Arab nations, for example, have
blacklisted a number of companies who conduct business with Israel. In response, the United
States imposed several laws to prevent U.S. companies from complying with the Arab
boycott as it has political ties with Israel. Companies may lose out to firms whose home
country does not employ such measures. Nonetheless, according to Czinkota and Ronkainen
(2007), it is best to avoid adopting inappropriate behaviour as it may lead to damages to the
company’s reputation, boycotts by consumers and cancellation of transactions. This might
cost the company more money than it gained through adopting such behavior.

Companies are also affected by the legal and political environment of the host country.
Marketers firstly need to determine the level of political risk, i.e. the likelihood of political
changes that could adversely affect the company, by looking at the host country’s
government, its political actions and its stability. U.S. companies, for example, who are a
major target for terrorist attacks because of their home country’s actions and capitalistic
image, need to particularly take into account the stability of the host country. Marketers also
need to be aware of the actions of the host country’s government. Price controls, for example,
which are used by the government to respond to inflation, can put international companies
into a difficult situation where it has to decide whether to stop their operations or to carry on
in the hope that the controls will be changed and they can regain the sacrificed profits.
Companies also need to be familiar with the laws of the host country and the restraints they
place on their operations. In France, Canada, Brazil, and Indonesia, for example, there are
laws that restrict imports of U.S. entertainment to protect and preserve their cultural
industries. However there are also laws that are aimed at assisting companies with their
international operations, e.g. subsidies. Shortages of regulations can also create problems for
companies, e.g. the lack of intellectual property rights in China. Therefore, companies need to
attain a good understanding of how the country’s legal and political systems work to reduce
the impact of the problems they cause. By undertaking in-depth research on the country’s
history, culture and political setting before entering it allows companies to avoid making
investments that could have disastrous outcomes. An in-depth knowledge of the country
would also allow the company to anticipate, plan and adapt into the local community. Hiring
locally, undertaking local charity work and joint ventures with local businesses show the
government that the company cares about the local community and does not just see it as an
object it can exploit. This reduces the amount of interference by the government giving the
company more freedom in its operations.

Marketers must also consider the overall international business environment. Relations
between countries and governments have important effects on the operations of international
companies. The U.S. government’s differences with South Africa, for example, forced U.S.
companies to leave their operations in the country. Relations between home and host
countries are governed by bilateral agreements, as well as by multilateral ones between sets
of countries. Marketers need to continuously monitor the international political environment
keeping up to date with political affairs so that they can anticipate changes and plan and
modify their marketing strategy accordingly. In terms of the legal environment, managers
need to be aware of certain laws and treaties which because of the respect they receive from
many countries have a strong influence on the way companies operate. The World Trade
Organization, for example, gives an outline on the behaviour that it finds acceptable from its
member states (WTO, 2010).

Conclusion
International marketers are faced with quite many and quite a range of factors in the
international business environment that can have profound effects on their marketing
activities. They need to be aware of the main sources of culture, such as religion, language,
education, values and attitudes, aesthetics, and customs and manners. Given that they are
embedded into societies and individuals it is necessary for companies to adapt their
marketing activities to the market and not force a different standpoint on the consumer.
International marketers also need to consider economical factors, such as population, income,
inflation, economic integrations and infrastructure. They allow them to assess the
attractiveness of the market and identify the segments and the geographical areas they should
target. This reduces the risk of investing money in marketing activities in markets that are
unprofitable. Finally, companies need to take into account the legal and political factors
affecting the home country, the host country, as well as the overall international business
environment. They need to be aware of the different governments, their political actions, their
stability, and their relation with other countries, and constantly monitor them by keeping up
to date with economic affairs around the world. This allows them to determine the level of
political risk so that they can anticipate and plan for threats and take advantage of
opportunities political changes offer them.

IM/U1 Topic 7 Scanning and

Monitoring Global
Marketing Environment
Environmental Scanning

The purpose of the scan is the identification of opportunities and threats affecting the global
business for making strategic business decisions. As a part of the environmental scanning
process, the organization collects information regarding its environment and analyzes it to
forecast the impact of changes in the environment. This eventually helps the management
team to make informed decision globally.
As seen from the figure above, environmental scanning should primarily identify
opportunities and threats in the organization’s environment. Once these are identified, the
organization can create a strategy which helps in maximizing the opportunities and
minimizing the threats.

Important Factors for Environmental Scanning

Before scanning the environment, an International organization must take the following
actors into consideration:

(i) Events

These are specific occurrences which take place in different environmental sectors of a
business. These are important for the functioning and/or success of the business. Events can
occur either in the internal or the external environment. Organizations can observe and track
them.

(ii) Trends

As the name suggests, trends are general courses of action or tendencies along which the
events occur. They are groups of similar or related events which tend to move in a specific
direction. Further, trends can be positive or negative. By observing trends, an organization
can identify any change in the strength or frequency of the events suggesting a change in the
respective area.

(iii) Issues

In wake of the events and trends, some concerns can arise. These are Issues. Organizations
try to identify emerging issues so that they can take corrective measures to nip them in the
bud. However, identifying emerging issues is a difficult task. Usually, emerging issues start
with a shift in values or change in which the concern is viewed.

(iv) Expectations

Some interested groups have demands based on their concern for issues. These demands are
Expectations.
Monitoring Global Marketing Environment
The Global market environment is dynamic it is always changing. Whether the forces of the
Global market environment fluctuate slowly or rapidly, they create uncertainty, obstacles, and
opportunities. International Marketers must constantly monitor the marketing environment to
be prepared to capitalize on opportunities and minimize adverse conditions. To monitor
changes in the marketing environment effectively, marketing managers must engage in
environmental scanning and analysis.

Environmental Analysis
Environmental analysis is the process of assessing and interpreting the information gathered
through environmental scanning. A manager reviews the information for accuracy, ties to
reconcile inconsistencies in the data, and interprets the findings. Analysis allows a marketing
manager to discern changes in the environment and, if possible, or predict future changes. By
evaluating these changes, a marketing manager should be able to determine possible threats
and opportunities associated with environmental fluctuations. Knowledge of current and
predicted environmental changes aids a marketing manager in assessing the performance of
current marketing efforts and in developing marketing strategies for the future.

Approaches for Responding to Environmental Forces

In responding to environmental forces, International marketers use one of two general
approaches. In the first approach, International marketing managers view the forces of the
marketing environment as uncontrollable. According to this traditional approach, an
organization can do little to alter the influence of the taking this reactive approach tries to
prepare itself to respond quickly to changes in the environment. For example, although an
organization has little power to alter economic conditions new regulations, or the actions of
competitors, it can monitor the environment closely and adjust its marketing strategy to
counter the effects of inflation, a new product safety law, or product improvements by
competitors.

A second response to the International marketing environment is to take a proactive, or

aggressive, stance toward environmental forces. A growing number of marketing
professionals argue that the forces of the marketing environment can be controlled, at least to
some extent. They believe that marketing itself represents a significant force that can be used
to create change and extend its influence over the environment. Through lobbying, legal
action, advertising of key issues, and public relations, organizations can alter some
environmental forces. For instance, a firm can control its competitive environment by using
aggressive pricing or competitive advertising strategies to influence the decisions of rival
firms. It can lobby political officials to repeal legislation that it believes will restrict its
business. Likewise, a firm can use political skills and public relations activities to open
foreign marketer to domestic business. Neither response to environmental forces is superior.
For some organizations, the reactive approach is more appropriate; for other firms, the
proactive approach leads to better performance. The selection of a particular approach is
determined by an International organizations managerial philosophies, objectives, financial
resources, markets and human skills, and by the composition of the set of environmental
forces within which the International organization operates.

IM/U2 Topic 1 International

Marketing Research
One of the most striking developments of recent decades has been the globalization of
business. The growth of world trade requires more information about foreign markets and
companies which expand into new and unknown markets must possess the information about
the demand and conditions of these markets. Companies invade not only into such developed
markets as Europe, US and Japan, but also into the unstable but growing markets of Latin
America, the politically uncertain markets of the Middle East and Russia, and the rapidly
changing markets of South East Asia and the emerging African market.

The development of new communication and information technologies change the lifestyle,
consumption behavior and purchasing patterns of different nations. All this indicates that the
marketing research in global environment has become essential.

The purpose of this paper is to give definition of the international marketing research and
describe the factors which influence the marketing research in different countries. The paper
also deals with the steps of international marketing research process and its main categories.
The advantages and disadvantages of collecting secondary and primary data and survey
methods of international marketing research are presented in the paper. Finally, the problems
which may occur in the international marketing research are summed up.

Definition of International Marketing Research

International marketing research is the systematic design, collection, recording, analysis,
interpretation, and reporting of information pertinent to a particular marketing decision facing
a company operating internationally.

International Market Research is a particular discipline of Market Research, focusing on

certain geographical areas.

International Market Research is concerned with consumer goods, but also with any resource
or service within a value chain which will be commercially utilized or further processed –
which is the area of industrial goods and B2B-Marketing.

Marketing Research in a Global Environment

Marketing research practices and techniques have become truly global. For example, the
world’s largest research firm, Nielsen, is headquartered in the U.S. but derives almost two-
thirds of its revenue from outside the U.S. It is standardizing much of the data it routinely
collects in 27 different countries.
 International marketing managers make the same basic types of decisions as do those who
operate in only one country. Of course, they make these decisions in a more complicated
environment. As with marketing decisions, the basic function of marketing research and the
research process does not differ between domestic and multinational research. However, the
process is complicated almost exponentially as more and more countries are involved in the
same decision.

The main factors which influence the marketing research in different countries are:

1. Cultural differences

Culture refers to widely shared norms or patterns of behaviour of a large group of people. It is
the values, attitudes, beliefs, artefacts and other meaningful symbols represented in the
pattern of life adopted by people that help them interpret, evaluate and communicate as
members of society. A company which works on the international market is in need of cross
cultural awareness. Cross cultural differences (language, non-verbal communication,
different norms and values) may cause cross cultural blunders. There are examples of cultural
blunders in the marketing mix.

(i) Product: When a soft drink was launched in Arab countries, it has a label with six-pointed
stars. The sales were very low as the stars were associated with Israel.

(ii) Price: An American firm was willing to set a reasonable price for the product they
intended to sell to the Japanese. A detailed presentation was made to the Japanese
businessmen, but it was followed by a deep silence. The Americans thought that the Japanese
were going to reject the price and offered a lower price. The Japanese kept silence again.
After that the Americans lowered the price again saying that it was the lowest they could sell
at. After a brief silence the offer was accepted. Later the Japanese confessed that the first
offered price was quite acceptable, but they had a tradition to think over the offer silently. An
American company suffered great losses in this case.

(iii) Place: A company wanted to enter the Spanish market with two-litter drinks bottles and
failed. Soon they found out that Spaniards prefer small door fridges and they could not put
large bottles into them.

(iv) Promotion: PepsiCo came to Taiwan with the ad ‘Come Alive with Pepsi’. They could
not imagine that is it translated ‘Pepsi will bring your relatives back from the dead’ into
Chinese.

2. Racial Differences

This refers to the differences in physical features of people in different countries. For
example, types of haircut and cosmetic products differ greatly in various countries.

3. Climatic Differences

These are the meteorological conditions such as temperature range or degree of rain. For
example, Bosch-Siemens adapted their washing machines to the markets they sell. In
Scandinavia, where there are very few sunny days, they sell washing machines with a
minimum spin cycle of 1,000 rpm and a maximum of 1,600 rpm, whereas in Italy and Spain a
spin cycle of 500 rpm is enough.

4. Economic Differences
 Economic development of various countries is different and when a company introduces a
new product it adapts it to that new market. There are factors which show the level of
economic development

(i) Buying power and revenue of the market: In developed countries with higher income of
revenue people prefer complicated product with advanced functions, while in poor countries
simple product are preferable.

(ii) The infrastructure of the market: Such elements of the infrastructure of the country as
transport, communication system and others influence the product. When Suzuki entering the
Indian market the suspension was reinforced as the state of roads in India is very poor.

5. Religious Differences

Religion affects the product greatly and makes companies adapt their product to religious
norms. If a company exports grocery products to Islamic countries it must have a special
certificate indicating that the animal was slaughtered according to ‘Halal’ methods.

6. Historical Differences

Historical differences affect the consumer behaviour. For instance, Scotch whiskey is
considered fashionable in Italy and not very trendy in Scotland.

7. Language Differences

The correct translation and language adaptation is very important. For example, when Proctor
& Gamble entered the Polish markets it translated properly its labels but failed. Later they
found out that imperfect language must have been used in order to show that the company fits
in.

IM/U2 Topic 2 Concept of

Marketing Research
The marketing concept states that the character of the marketing orientated organization,
whether product or service based, profit or non-profit based, is the identification and true
delivery of consumers’ needs and wants, more effectively and efficiently than the
competition.

Hence, in a broad sense, marketing management needs to understand the minds of their target
markets, their attitudes, feelings, beliefs and value systems. They require a formalised,
managerial approach to this most important job. And this entire job is the basic role and
purpose of formal marketing research. Marketing research is the systematic, objective and
exhaustive search for study of the facts relating to any problem in the field of marketing. It is
systematic problem analysis, model building and fact-finding for the purpose of decision-
making and control in the marketing of goods and services.

According to American Marketing Association “marketing research is the systematic

gathering, recording and analysing of data about problems relating to the marketing of goods
and services.” According to Green and Tull, “marketing research is the systematic and
objective search for and analysis of information relevant to the identification and solution of
any problem in the field of marketing”. Professor Philip Kotler defines marketing research as
 “Systematic problem analysis, model-building and fact-finding for the purpose of improved
decision making and control in the marketing of goods and services.”

Features of marketing research

1. Search for data

It is a search for data which are relevant to marketing problems – problems in different
functional areas of marketing consumer behaviour, product, sales, distribution channel,
pricing, ad and physical distribution.

2. It is systematic

It has to be carried out in a systematic manner rather than haphazard way. The whole process
should be planned with a clear objective.

3. It should be objective

Objectivity is more important in any result. It means that the research is neither carried on to
establish an opinion nor is intentionally slanted towards pre-determined results.

4. It is a process

It involves various steps for gathering, recording and analysing of data.

Objectives of Marketing Research

Marketing research may be conducted for different purposes. The main objectives or
purposes of marketing research are:

(i) To estimate the potential market for a new product to be introduced in the market.

(ii) To know the reactions of the consumers to a product already existing in the market.

(iii) To find out the general market conditions and tendencies.

(iv) To know the reasons for failure of a product already in the market.

(v) To find out the better methods of distributing the products to consumers.

(vi) To know the types of consumers buying a product and their buying motives to know their
opinions about the product and to get their suggestion improvement of a product.

(vii) To assess the strength and weakness of the competitors.

(viii) To know the dimensions of the marketing problems.

(ix) To ascertain the distribution methods suited to the product.

(x) To estimate the market share of a firm.

(xi) To assess the probable sales volume of a firm.

(xii) To assess the reaction of the consumers to the packaging of the firm and to make
packaging as attractive as possible.

Advantages of Marketing Research

(i) Marketing research helps the management of a firm in planning by providing accurate and
up- to-date information about the demands, their changing tastes, attitudes, preferences,
buying.

(ii) It helps the manufacturer to adjust his production according to the conditions of demand.

(iii) It helps to establish correlative relationship between the product brand and consumers’
needs and preferences.

(iv) It helps the manufacturer to secure economies in the distribution о his products.

(v) It makes the marketing of goods efficient and economical by eliminating all type of
wastage.

(vi) It helps the manufacturer and dealers to find out the best way of approaching the
potential.

(vii) It helps the manufacturer to find out the defects in the existing product and take the
required corrective steps to improve the product.

(viii) It helps the manufacturer in finding out the effectiveness of the existing channels of
distribution and in finding out the best way of distributing the goods to the ultimate
consumers.

(ix) It guides the manufacturer in planning his advertising and sales promotion efforts.

(x) It is helpful in assessing the effectiveness of advertising programmes.

(xi) It is helpful in evaluating the relative efficiency of the different advertising media.

(xii) It is helpful in evaluating selling methods.

(xiii) It reveals the causes of consumer resistance.

(xiv) It minimizes the risks of uncertainties and helps in taking sound decisions.

(xv) It reveals the nature of demand for the firm’s product. That is, it indicates whether the
demand for the product is constant or seasonal.

(xvi) It is helpful in ascertaining the reputation of the firm and its products.

(xvii) It helps the firm in determining the range within which its products are to be offered to
the consumers. That is, it is helpful in determining the sizes, colours, designs, prices, etc., of
the products of the firm.

(xviii) It would help the management to know how patents, licensing agreements and other
legal restrictions affect the manufacture and sale of the firm’s products.
 (xix) It is helpful to the management in determining the actual prices and the price ranges.

(xx) It is helpful to the management in determining the discount rates.

Limitations of Marketing Research

1. It is not a Panacea

Marketing Research is not the ultimate solution to all marketing problems. Rather it offers
accurate information, which can arrive at suitable decisions to solve problem.

2. Not an exact science

It deals with human behaviour and as such cannot be examined in a controlled environment.
There are various and uncontrollable factors which influence marketing forces. This gives
scope for wrong conclusions. Hence this leads to marketing research as not being an exact
science.

3. Limitation of time

Its process is lengthy and needs long time to complete it. During the period between starting
the research and implementation of decisions, the situation and assumptions may have
changed drastically which reduces the utility of research report. Decisions based on such
report prove to be obsolete and result in false conclusions.

4. Erroneous findings

The complicated problems may not be comprehensively studied and their impact properly
analysed by the researcher on account of insufficient fund, time and technique. This leads to
erroneous findings, which disappoint the management.

5. Not an exact tool of forecasting

It cannot be used as a foolproof tool of forecasting because there are number of intervening
factors between the findings of the research and marketing complex. The forces act and react
and interact to give a complex state, which is difficult to be studied.

6. In experienced research staff

It needs great expertise and well-trained and experienced researcher, interviewer and
investigator.

7. Narrow Conception

Marketing research is a fact-finding exercise. It is not problem oriented. It is of low and

questionable validity.

8. Involves high cost

It is considered as a luxury for the management as it involves high cost.

9. Limitations of tools and techniques

The validity of marketing research is also limited by the limitation of tools and techniques
involved.
10. It is passive

Its use and effectiveness largely depends upon the ability of executives to get the most value
of it.

IM/U2 Topic 3 Need for

Marketing Research
The most important task of a marketer is to get the right product at the right place with the
right price to the right person. Besides, it was also necessary to go back and find whether
consumer is getting optimum satisfaction, so that consumer remains loyal. These aspects
made it imperative for the marketers to conduct marketing research.

The following points explain the need of marketing research:

1. Identifying problem and opportunities in the market

It helps in identifying new market opportunities for existing and new products. It provides
information on market share, nature of competition, customer satisfaction levels, sales
performances and channel of distribution. This helps the firms is solving problems.

2. Formulating market strategies

Today, markets are no more local. They have become global. Manufactures find it difficult to
contact customers and control distribution channels. Competition is equally severe. The
consumer needs are difficult to predict. Market segmentation is a complicated task in such
wide markets. The marketing intelligence provided through marketing research not only helps
in framing but also in implementing the market strategies.

3. Determining consumer needs and wants

Marketing has become customer-centric. However, large-scale production needs

intermediaries for mass distribution. Due to prevalence of multi channels of distribution,
there is an information gap. Marketing research helps in collecting information on consumers
from structured distribution research and helps in making marketing customer oriented.

4. For effective communication mix

 In an era of micro- rather than mass-marketing, communication plays a vital role. Marketing
research uses promotional research to study media mix, advertising effectiveness and
integrated communication tools. Research on such aspects will help in promoting effectively
a company’s product in the market.

5. Improving selling activities

Marketing research is used to analyse and evaluate performances of a company within a

market. It also studies effectiveness of a sales force. It helps in identifying sales territories.
Such information helps the companies in identifying areas of shortcoming in sales. It also
examines alternative methods for distribution of goods.

6. For sales forecasting

The most challenging task for any production manager is to keep optimum levels of
inventory. However, production is undertaken in anticipation of demand. Therefore, scientific
forecast of sales is required. Marketing research helps in sales forecasting by using market
share method, sales force estimate method and jury method. This can also help in fixing sales
quotas and marketing plans.

7. To revitalize brands

Marketing research is used to study and find out the existing brand position. It finds out the
recall value of brands. It explores the possibilities of brand extension or prospects of
changing existing brand names. The main purpose of marketing is to create brand loyalty.
Marketing research helps in developing techniques to popularize and retain brand loyalty.

8. To facilitate smooth introduction of new products

Marketing research helps in testing the new products in one or two markets on a small scale.
This helps in finding out consumer response to new product and develop a suitable marketing
mix. It reveals the problems of the customers regarding new products. Thus, it controls the
risk involved in introducing a new product.

9. Determine export potentials

The development in transport and communication has helped in globalization and

digitalization of world trade. This has helped in boosting the growth of international markets.
Marketing research helps in conducting market survey for export. It. collects information on
marketing environment prevailing in a country. By collecting data on consumers from
different countries, it indicates export potentials.

10. Managerial decision-making

Marketing research plays a vital role in the decision-making processes by supplying relevant,
up-to-date and accurate data to the decision-makers. Managers need up-to-date information to
access customer needs and wants, market situation, technological change and extent of
competition.

IM/U2 Topic 4 Approach to

Marketing Research
 The study of marketing has been approached in more than one way. To some it has meant to
sell something at a shop or market place; to some it has meant the study of individual product
and its movement in the market; to some it has meant the study of persons-wholesalers,
retailers, agents etc., who move the products and to some it has meant the study of behaviour
of commodity movement and the way the persons involved to move them. The approach to
the study of marketing has passed through several stages before reaching the present stage.
There is a process of evolution in the development of these approaches.

1. Product or Commodity Approach

Under the commodity approach the focus is placed on the product or it is an approach on the
marketing on commodity wise basis. In other words, the study relates to the flow of a certain
commodity and its movement from the original producer right up to the ultimate customer.
The subject-matter, under this study, is commodity.

When one studies the marketing on this basis—commodity approach, one must begin to study
and analyses the problems relating to a commodity i.e., sources and conditions of supply,
nature and extent of demand, mode of transporting, storage, standardization, packing etc.
Again, take an example of a commodity, say rice.

One has to study the sources of rice, location, people involved in buying and selling, means
of transport, problems of selling the product, financing, storage, packing etc. Thus, we get a
full picture of the marketing from the original producer to the ultimate consumer. The method
of study is repeated for each item.

2. Institutional Approach

In the institutional approach, the focus is on the study of institutions- middlemen,

wholesalers, retailers, importers, exporters, agencies, warehousing etc., engaged in the
marketing during the movement of goods. The approach is also known as middlemen
approach. Here, emphasis is given to understand and analyses the functions of institutions,
who are discharging their marketing functions.

3. Functional Approach

The functional approach gives importance on the various functions of marketing. In other
words, one concentrates attention on the specialized services or functions performed by
marketers. In this approach, marketing splits into many functions-buying, selling, pricing,
standardization, storage, transportation, advertising, packing etc. This may be studied one
after another. Here each function is studied in detail in order to understand it and analyses the
nature, need and importance of each function.

In this approach, marketing is regarded as “business of buying and selling and as including
those business activities involved in the flow of goods and services between producers and
customers.” This system gives too much importance to various marketing functions and fails
to explain how such functions are applied to the specific business operations.

4. Management Approach

This approach is the latest and scientific. It concentrates upon the activities or marketing
functions and focuses on the role of decision-making at the level of firm. This approach is
mainly concerned with how managers handle specific problems and situations. It aims
through evaluation of current market practices to achieve specific marketing objectives.

5. System Approach
 The system approach can be defined as “a set of objects together with the relationships
among them and their attributes.” Systems focus on interrelations and interconnections
among the functions of marketing. The system examines marketing connections (linkage)
inside as well as outside the firm. Inside the firm there is a co-ordination of business
activities-engineering, production, marketing, price etc.

6. Societal Approach

This approach has been originated recently. The marketing process is regarded as a means by
which society meets its own consumption needs. This system gives no importance as to how
the business meets the consumer’s needs. Therefore, attention is paid to ecological factors
(sociological, cultural, legal etc.) and marketing decisions and their impact on the society’s
well-being.

7. Legal Approach

This approach emphasizes only one aspect i.e., transfer of ownership to buyer: It explains the
regulatory aspect of marketing. In India, the marketing activities are largely controlled by
Sales of Goods Act, Carrier Act etc. The study is concentrated only on legal aspects, leaving
other important aspects. This does not give an idea of marketing.

8. Economic Approach

This approach deals with only the problems of supply, demand and price. These are important
from the economic point of view, but fail to give a clear idea of marketing.

IM/U2 Topic 5 Scope of

International Marketing Research
Global marketing research is meant to provide adequate data and cogent analysis for
effective decision making on a global scale. The analytic research techniques practiced by
domestic businesses can be applied to international marketing projects. The key difference is
in the complexity of assignments because of the additional variables that international
researchers must take into account. Global marketers have to judge the comparability of their
data across a number of markets and are frequently faced with making decisions based on the
basis of limited data. Because of this, the researcher must approach the research task with
flexibility, resourcefulness, and ingenuity.

In today’s changing society, companies need to be competitive under many challenging

environments. There are many reasons to adopt International marketing. One of them is off
course, profit. Although profit is the most common, government policies (as in Germany, due
to the new legislation, solar panels manufacturing companies were restricted from increasing
their profits in the local market, thereby finding themselves in the need to consider
international marketing in order to remain competitive), monopoly power (as TANESCO in
Tanzania), domestic market constraints, spin of benefits and competition or market
saturation.

Therefore, these companies need to look into new possibilities of maintaining and increasing
their market share as well as their profits. In order to do that, most of the companies take an
international marketing approach.
The concept of international marketing represents the performance of business activities
designed to plan, price and promote as well as to direct the flow of a company’s goods or
services to consumers or users in more than one nation, for profit. – Philip R cateora

In international marketing, marketers generally have to deal with at least two

uncontrollable elements as domestic and international environments. The major forces from
the international markets are represented by political, legal, economic, social/cultural,
technological and environmental factors. All these factors can be analyzed through the
PESTLE analysis.

Besides these main factors we can also include infrastructure, competition structure of
distribution and geography. The major restraining forces in international marketing are
represented by management myopia, organizational culture, national controls, international
world order as well as fight against international terrorism.

If we were to look at some relevant examples, let’s start with the current situation of Russia,
which based on their latest decisions the country got an interdiction of imports of European
products. This measure not only affected Russia but also a lot of European companies which
were exporting into Russia, therefore minimizing their profits. We can take this reference to
understand the importance of political situations in a country and stability in international
marketing.

Firms must adapt to an uncontrollable environment while doing business in international

markets by adjusting the marketing mix represented by price, promotion, product and
placement or distribution.

One very important factor which can be considered a challenge while operating in
international environment is known as the Self-Reference Criterion as well as ethnocentrism.
The Self-Reference Criterion happens when unconsciously you take decisions as if it was
your company and your culture you were operating in, instead of a culture based in a
completely different environment.

Ethnocentrism on the other hand, happens when you know the culture of the other country,
but still think that your way of doing things is right and that you will like to carry on with the
way things are at home. These two factors have the potential of impeding the ability to assess
a foreign market in its true meaning and purpose. Not taking into consideration these factors,
can lead to unsuccessful international marketing campaign and what it is more important:
international marketing strategies.

By having defined the business problem or goal in home-country cultural habits together with
the business problem or goal in foreign country cultural ones, without any value judgements,
managers are given the chance to isolate the Self Reference Criterion in the problem and
examine to see how it complicates the problem. Through these steps, by redefining the
problem without the Self-Reference criterion, managers can identify the optimum business
goal situation.

The general driving forces in international marketing include: regional economic

agreements, markets supplies and demands, technology, transportation and communication,
product development costs, product quality as well as world economic trend in general.
 IM/U2 Topic 6 International
Marketing Research Process
Conduct Preliminary Research

Carry out some preliminary research by going online and searching for existing survey
reports on your topic of interest. There might not be much especially if you are looking for
very specific information, but you might find something close either for a different country or
a report that gives you some ideas on how to go about your primary research.

2. Develop Research in Brief

To get the most out of your marketing research project, put together a brief with the
objectives of your data collection. What exactly do you want to understand better? Be as
specific as possible, for example: “What percentage of adult working females aged between
25 and above living in urban areas use my product brand?”

Which aspects of the 4 Ps of marketing (Product, Price, Place, and Promotion) do you want to
best understand? The more detail you can provide the better. This helps later when designing
the project.

A brief document should contain the following information: Company background, the
business objectives, the research objectives, your target market, your competition, the
geographical focus and your research project budget.

3. Identify the Right Marketing Research Agency

Research agencies come in all shapes and sizes. It often helps to understand an agency’s main
data collection method which, more often than not, tells you what their strengths are. What
you will note is that many of the international marketing research agencies have wide-ranging
capabilities in data collection and use multiple data collection modes. However, often the cost
for these agencies is higher than for agencies that only specialize in one data collection
method. For you as the consumer, the scope of your project will determine which agency you
will work with.

When talking to various research agencies, counter check their website and social media
pages to look for any published reports online, which will give you an idea of the quality of
their research and topic areas they focus in. Another crucial due diligence aspect of deciding
on what agency to work with is their capabilities and country coverage – too many companies
claim to be in markets that they are not in, and they end up sub-contracting. This practice
means you are further removed from the data collection process and can also result in a
higher cost.

4. Determine Your Data Collection Mode

Once you have listed your objectives, deciding on which of the following research
methodologies to utilize becomes easier. Deciding on which type of research to run also helps
further narrow down the agency best suited based on their capabilities. The data collection
mode you use will impact both the type of data you collect and how it is collected.

Data is generally grouped into two categories, qualitative and quantitative. Simply put,
qualitative data is unstructured and is often exploratory by nature. When analyzed, responses
 may be grouped into similar categories but they cannot be ranked in the same way
quantitative data can.

Quantitative research is the mathematical approach to collecting data, which can more clearly
be measured and structured. Quantitative data includes survey data where respondents have a
clear choice of answers, and quantitative questions often appear with radio buttons, check
boxes and Likert scales which are easy to measure and compare. The two data collection
methods are often referred to as simply quant and qual. It is important to note that qualitative
research tends to be more expensive than quantitative research, as it requires more manual
data analysis.

Different research modes will often lend themselves more easily to quantitative or qualitative
data collection. Focus groups, unstructured interviews, and open-ended questions are
typically collecting qualitative data, while surveys with answer choices collect quantitative
data. Understanding the different modes and what type of data they can collect is important:
Text message surveys can collect some qualitative data, but perform better with quantitative
questions that are easily answered from a list of choices.

You also need to consider how robust and agile the different modes of data collection are.
Can your selected mode work across multiple countries and languages? How much data are
you looking to collect and in what time-frame? The level of scalability of the mode is
important, especially if your project will entail a multi-country survey. In addition, some
modes will collect data more slowly than others.

Some examples of different modes of data collection include:

 Face-to-face
 Text message (SMS) survey
 Online survey
 Mobile web survey
 Mobile application survey or passive data collection
 CATI (Computer Assisted Telephone Interviews)
 CAPI (Computer Assisted Personal Interview)
 Focus groups

5. Conduct Data Analysis

The most important aspect of market research is being able to analyze the data once it has
been collected. A thorough analysis should guide you on how to act on the insights you have
gathered. It is therefore crucial that the research agency, through their insights report, address
the questions you had set out at the start of your survey. For example: What is my product’s
current position in the market, who are my actual customers, and which aspects of my 4 Ps do
I need to work on? Analysis capabilities of the agency and the tools being used by the
analysts and if they meet your needs

6. Complete a Post Project Review

Having a session with the research team after completion of your project to share feedback
and discuss the project execution is sometimes overlooked. Such an undertaking involves
various departments but is important to understand why a project did or did not go as
smoothly as planned. A post-project review session helps in both parties knowing what areas
worked and which ones the agency or the client will need to improve for their next project.

In Summary
 Conducting international marketing research is often a large undertaking and there are
various details you need to consider before embarking on your project. Language,
infrastructure, internet penetration, and the type of data you are looking to collect all have an
impact on your project and how easily data will be collected from your target population. To
be successful, you must engage the right company: One that has a wide range of experience
in the area you are researching can utilize multiple modes with ease and can give you advice
on questionnaire design, regional nuances, and more.

IM/U2 Topic 7 Market Surveys

Market survey is the survey research and analysis of the market for a particular product/service
which includes the investigation into customer inclinations. A study of various customer capabilities
such as investment attributes and buying potential. Market surveys are tools to directly collect
feedback from the target audience to understand their characteristics, expectations, and requirements.

Marketers develop new and exciting strategies for upcoming products/services but there can
be no assurance about the success of these strategies. For these to be successful, marketers
should determine the category and features of products/services that the target audiences will
readily accept. By doing so, the success of a new avenue can be assured. Most marketing
managers depend on market surveys to collect information that would catalyze the market
research process. Also, the feedback received from these surveys can be contributory in
product marketing and feature enhancement.

Market surveys collect data about a target market such as pricing trends, customer
requirements, competitor analysis, and other such details.

Purpose of Market Survey

1. Gain critical customer feedback

The main purpose of the market survey is to offer marketing and business managers a
platform to obtain critical information about their consumers so that existing customers can
be retained and new ones can be got onboard.

2. Understand customer inclination towards purchasing products

Details such as whether the customers will spend a certain amount of money for their
products/services, inclination levels among customers about upcoming features or products,
what are their thoughts about the competitor products etc.

3. Enhance existing products and services

A market survey can also be implemented with the purpose of improving existing products,
analyze customer satisfaction levels along with getting data about their perception of the
market and build a buyer persona using information from existing clientele database.

4. Make well-informed business decisions

Data gathered using market surveys is instrumental in making major changes in the business
which reduces the degree of risks involved in taking important business decisions.

Importance of Market Survey

1. Understanding the demand and supply chain of the target market
 A product is most likely to be successful if it is developed by keeping in mind the demand
and supply of the target market. This way, marketers can obtain insights about market
capabilities to absorb new products and concepts to develop customer-centric products and
features.

2. Developing well-thought marketing plans

The World is a target market for an organization, especially a well-established one. Getting
data from the target market through thorough market research using market surveys and
segmentation can be a source of creating concrete and long-term marketing plans.

3. Figure out customer expectations and needs

All marketing activities revolve around customer acquisition. All small and large
organizations require market surveys to gather feedback from their target audience regularly,
using customer satisfaction tools such as Net Promoter Score, Customer Effort Score,
Customer Satisfaction Score (CSAT) etc. Organizations can analyze customer feedback to
measure customer experience, satisfaction, expectations etc.

4. Accurate launch of new products

Market surveys are influential in understanding where to test new products or services.
Market surveys provide marketers a platform to analyze the scope of success of upcoming
products and make changes in strategizing the product according to the feedback they
receive.

5. Obtain information about customer demographics

Customer demographics form the core of any business and market surveys can be used to
obtain intricate and sensitive details about customer demographics such as race, ethnicity or
family income.

Types of Market Survey with Examples

Multiple types of market surveys are used by enterprises to collect data depending on the
objective of their market research. The information collected can be used to study various
aspects of the market to address topics such as the right time to launch the product/service, to
understand the trends in the market, to measure customer loyalty, to study their competitors
and many more.

There are various types of market surveys out of which we will talk to get information from
customers about their demands, expectations and what they opine about the competitors.
Each one of these market surveys has a different approach and has a marking impact on the
various aspects of a business.

In order to conduct various types of market surveys, successful enterprises in today’s world,
use powerful market research survey software to get actionable market insights through real-
time data collection and robust analytics. Following are the top 10 types of market surveys
that are conducted by successful enterprises.

1. Market Surveys for segmentation

An organization can spot existing and prospective customers and understand why the
customers have chosen their products/services and the prospects have not yet made a
purchase. This can lead to a structured market segmentation and analysis.
2. Market Surveys for exploring various aspects of the target market

Get information about factors such as market size, demographic information such as age,
gender, family income etc. to lay out a roadmap by considering growth rate of the market,
positioning, and average market share.

3. Market Surveys to probe into purchase procedure

How does a customer deciding on making a purchase? What are the factors that convert
product awareness into sales? This type of market survey will unveil awareness, information,
free trial, purchase, and repeat.

4. Market Surveys to establish buyer persona

These surveys are to build a buyer persona by knowing about customer preferences,
inclination, and capabilities of purchasing a product.

5. Market Surveys to measure customer loyalty

What is the degree of loyalty that the customers have towards and organization? The answer
to this question can be obtained by conducting a market survey.

6. Market Surveys to analyze a new feature or concept

It is essential for an organization to include market-compliant features and concepts. By

carrying out a market survey to understand which features to launch, will help all the teams
involved in the feature development process to do that with proper research.

7. Market Surveys for competitor analysis

Healthy competition is always good for an organization’s progress. Market surveys done with
the motive of competitor analysis will produce results about how does the target market
weigh the organization’s products/services in comparison to the others in the market.

8. Market Surveys to understand the impact of sales activities

Sales activities are the backbone of an organization and it becomes crucial to keep track of
these activities. Market surveys for sales activities will produce a report of the impact of sales
activities, whether their frequency needs to increase or any changes the audiences think
should be inculcated in the sales process.

9. Market Surveys to assess prices for new products/services

Affordability of products also is an aspect that drives the market for organizations. Price
ranges, product variants to cater multiple price ranges, target customers for each of the
products etc.

10. Market Surveys for evaluation of customer service

Good customer service can lead to enhanced satisfaction levels among customers. Factors
such as time taken to resolve issues, the scope of improvement, best practices of customer
service etc.
 IM/U2 Topic 8 Marketing
Information System
The Marketing Information System refers to the systematic collection, analysis,
interpretation, storage and dissemination of the market information, from both the internal
and external sources, to the marketers on a regular, continuous basis.

The marketing information system distributes the relevant information to the marketers who
can make the efficient decisions related to the marketing operations viz. Pricing, packaging,
new product development, distribution, media, promotion, etc.

Every marketing operation works in unison with the conditions prevailing both inside and
outside the organization, and, therefore, there are several sources ( viz. Internal, Marketing
Intelligence, Marketing Research) through which the relevant information about the market
can be obtained.

Components of Marketing Information System

1. Internal Records

The Company can collect information through its internal records comprising of sales data,
customer database, product database, financial data, operations data, etc. The detailed
explanation of the internal sources of data is given below:

 The information can be collected from the documents such as invoices, transmit copies, billing
documents prepared by the firms once they receive the order for the goods and services from the
customers, dealers or the sales representatives.
 The current sales data should be maintained on a regular basis that serves as an aide to a the
Marketing Information System. The reports on current sales and the inventory levels help the
management to decide on its objectives, and the marketers can make use of this information to design
their future sales strategy.
 The Companies maintain several databases such as*Customer Database- wherein the complete
information about the customer’s name, address, phone number, the frequency of purchase, financial
position, etc. is saved.
 The companies store their data in the data warehouse from where the data can be retrieved anytime
the need arises. Once the data is stored, the statistical experts mine it by applying several computer
software and techniques to convert it into meaningful information that gives facts and figures.

2. Marketing Intelligence System

The marketing intelligence system provides the data about the happenings in the market, i.e.
data related to the marketing environment which is external to the organization. It includes
the information about the changing market trends, competitor’s pricing strategy, change in
the customer’s tastes and preferences, new products launched in the market, promotion
strategy of the competitor, etc.

In order to have an efficient marketing Information System, the companies should work
aggressively to improve the marketing intelligence system by taking the following steps:

 Providing the proper training and motivating the sales force to keep a check on the market trends, i.e.
the change in the tastes and preferences of customers and give suggestions on the improvements, if
any.
 Motivating the channel partners viz. Dealer, distributors, retailers who are in the actual market to
provide the relevant and necessary information about the customers and the competitors.
 The companies can also improve their marketing intelligence system by getting more and more
information about the competitors. This can be done either by purchasing the competitor’s product,
attending the trade shows, reading the competitor’s published articles in magazines, journals, financial
reports.
 The companies can have an efficient marketing information system by involving the loyal customers
in the customer advisory panel who can share their experiences and give advice to the new potential
customers.
 The companies can make use of the government data to improve its marketing Information system.
The data can be related to the population trends, demographic characteristics, agricultural production,
etc. that help an organization to plan its marketing operations accordingly.
 Also, the companies can purchase the information about the marketing environment from the research
companies who carry out the researches on all the players in the market.
 The Marketing Intelligence system can be further improved by asking the customers directly about
their experience with the product or service via feedback forms that can be filled online.

3. Marketing Research

The Marketing Research is the systematic collection, organization, analysis and interpretation
of the primary or the secondary data to find out the solutions to the marketing problems.
Several Companies conduct marketing research to analyze the marketing environment
comprising of changes in the customer’s tastes and preferences, competitor’s strategies, the
scope of new product launch, etc. by applying several statistical tools. In order to conduct the
market research, the data is to be collected that can be either primary data (the first-hand
data) or the secondary data (second-hand data, available in books, magazines, research
reports, journals, etc.)

The secondary data are publicly available, but the primary data is to be collected by the
researcher through certain methods such as questionnaires, personal interviews, surveys,
seminars, etc.

A marketing research contributes a lot in the marketing information system as it provides the
factual data that has been tested several times by the researchers.

4. Marketing Decision Support System

 It includes several software programs that can be used by the marketers to analyze the data,
collected so far, to take better marketing decisions. With the use of computers, the marking
managers can save the huge data in a tabular form and can apply statistical programs to
analyze the data and make the decisions in line with the findings.

Thus, the marketers need to keep a check on the marketing environment, i.e. both the internal
(within the organization) and the external (outside the organization, so that marketing
policies, procedures, strategies can be designed accordingly.

IM/U2 Topic 9 International

Market Segmentation
International Market segmentation is a marketing strategy which involves separating a
wide target market into subsets of customers, enterprises, or nations who have, or are
perceived to have, common requirements, choices, and priorities, and then designing and
executing approaches to target them.

International Market segmentation approaches are basically used to identify the target clients,
and provide assisting data for marketing plan components like positioning to get certain
marketing plan objectives.

Businesses may discover product differentiation approaches, or an undifferentiated approach,

including specific goods or product lines relying on the precise demand and attributes of the
target segment.

The most common forms of market segmentation practices are as follows:

1. Geographic Segmentation

Dealers can segment market according to geographic criterion that is nations, states, regions,
countries, cities, neighbourhoods, or postal codes. The geo-cluster strategy blends
demographic information with geographic data to discover a more precise or specific profile.
For example, in rainy areas dealers can easily sell raincoats, umbrellas and gumboots. In
winter regions, one can sell warm clothing.

A small business product store focuses on customers from the local neighborhood, while a
larger departmental store focuses its marketing towards different localities in a larger city or
region. They neglect customers in other continents. This segmentation is very essential and is
marked as the initial step to international marketing, followed by demographic and
psychographic segmentation.

2. Demographic Segmentation

Segmentation on the basis of demography relies on variables like age, gender, occupation and
education level or according to perceived advantages which an item or service may provide.

An alternative of this strategy is called firmographic or character based segmentation. This

segmentation is widely used in business to business market. It’s estimated that 81% of
business to business dealers use this segmentation.
 According to firmographic or character based segmentation, the target market is segmented
based on characteristics like size of the firm in terms of revenue or number of employees,
sector of business or location like place, country and region.

3. Behavioural Segmentation

This divides the market into groups based on their knowledge, attitudes, uses and responses
to the product.

Many merchants assume that behaviour variables are the best beginning point for building
market segments.

4. Psychographic Segmentation

Psychographic segmentation calls for the division of market into segments based upon
different personality traits, values, attitudes, interests, and lifestyles of consumers.

Psychographics uses people’s lifestyle, their activities, interests as well as opinions to define
a market segment.

Mass media has a dominating impact and effect on psychographic segmentation. To the
products promoted through mass media can be high engagement items or an item of high-end
luxury and thus, influences purchase decisions.

5. Occasional Segmentation

Occasion segmentation is dividing the market into segments on the basis of the different
occasions when the buyers plan to buy the product or actually buy the product or use the
product. Some products are specifically meant for a particular time or day or event. Thus,
occasion segmentation helps identify the customers’ various reasons to buy a particular
product for a particular and thus boosts the sale of the product.

IM/U2 Topic 10 International

Positioning Strategies
After the global market has been segmented and one or more segments have been targeted, it
is essential to plan a way to reach the target(s). To achieve this task, marketers use
positioning, a process whereby a company establishes an image for its product in the minds
of consumers relative to the image of competitors’ product offerings. In today’s global
market environment, many companies find it increasingly important to have a unified global
positioning strategy.

Can global positioning work for all products? One study suggests that global positioning is
most effective for product categories that approach either end of a “high-touch/high-tech”
continuum. Both ends of the continuum are characterized by high levels of customer
involvement and by a shared “language” among consumers.

1) High Tech Positioning:

Personal computers, video and stereo equipment, and automobiles are examples of product
categories where high-tech positioning has proven effective. Such products are frequently
purchased on the basis of concrete product features, although image may also be important.
Buyers typically already possess or wish to acquire considerable technical information. High-
tech products may be divided into three categories: technical products, special-interest
products, and demonstrable products.

i) Technical Products:

Computers, chemicals, tires, and financial services are just a sample of the product categories
whose buyers have specialized needs; require a great deal of product information and who
share a common “language.”

ii) Special-Interest Products:

While less technical and more leisure or recreation oriented, special-interest products also are
characterized by a shared experience and high involvement among users. Again, the common
language and symbols associated with such products can transcend language and cultural
barriers. Fuji bicycles, Adidas sports equipment, and Canon cameras are examples of
successful global special- interest products.

iii) Products that Demonstrate Well:

Products that “speak for themselves” in advertising of features and benefits can also travel
well.

2) High-Touch Positioning:
Marketing of high-touch products requires less emphasis on specialized information and
more emphasis on image. Like high-tech products, however, high touch categories are highly
involving for consumers. Buyers high-touch products also share a common language and set
of symbols relating to themes of wealth, materialism, and romance.

The three categories of high-touch products are:

i) Products that solve a Common Problem:

At the other end of the price spectrum from high-tech, products in this category provide
benefits linked to “life’s little moments.” Ads that show friends talking over a cup of coffee
in a cafe or quenching thirst with a soft drink during a day at the beach put the product at the
centre of everyday life and communicate the benefit offered in a way that is understood
worldwide.

ii) Global Village Products:

Channel fragrances, designer fashions, mineral water, and pizza are all examples of products
whose positioning is strongly cosmopolitan in nature. Fragrances and fashions have travelled
as a result of growing worldwide interest in high-quality, highly visible, high-price products
that often enhance social status. However, the lower- priced food products just mentioned
show that the global village category encompasses a broad price spectrum.

iii) Products that use Universal Themes:

Some advertising themes and product appeals are thought to be basic enough that they are
truly transnational. Additional themes are materialism (keyed to images of well-being or
status), heroism (themes include rugged individuals or self-sacrifice), play
(leisure/recreation), and procreation (image of courtship and romance).
 IM/U2 Topic 11 International
Marketing Strategies
The International market is entirely different from the local market where you just have to
take care of a few things like price and quality. But the moment when you get your product
out in front of the whole world, it does not only need to be quality perfect, but it also has got
to look great, too. Although, the number of factors affecting the business are very high in the
international business, but the basic concepts of marketing your brand internationally are
same as that of domestic ones.

Types of International Marketing Strategies

1. Individualized Marketing Strategy

Individualized marketing, as its name suggests, focuses each and every targeted market in
detail which requires the company to gather an extensive amount of research data. Therefore,
to maintain the balance between the profit and the costs involved in that research, the focus is
kept to, just, two or three countries. Furthermore, a revised version of the product is created
to match the needs of all the individual markets by keeping economic, political and social
factors in the notice.

2. Global Marketing Strategy

Promoting a brand globally enables it to create a unified version of the product by ignoring
most or nearly all of the differences between different countries is known as global
marketing. Application of such international marketing strategies takes place just because of
the reason that the world is now acting like a global village where customers are having a
standardized taste and their ideas of assessing a product are getting more and more similar.
This strategy cuts the costs of research significantly, but promotion needs enormous efforts to
get the word for your product deep down in the markets.

These international marketing strategies are also known as Global Marketing Strategies and
almost used in all over the world as marketing product or brand globally.

Tools for International Marketing Strategies

Even though the market gets bigger and bigger as the number of targeted countries increases,
but the tools used for promotion are same.

One of the most powerful marketing tools that can help you achieve your dream of
converting your product to sales is advertising it through different means. Put the word for
your product in international newspapers, radio channels, anything that can get a poster on it
and most importantly, the Internet because it houses hundreds of other means of marketing
your brands like emails, websites, and many others. Furthermore, you can also run a contest
for which entrants will have to share the news about your brand to their friends and family.

1. Price Promotions

The best way to get a buzz of the product is by putting up some promotions. Either you can
give your product sales a huge boost through discounts or by giving your customers some
timed trial or you can couple up your product with a freebie for every purchase.
2. Make use of tradeshows

There are many types of products that customers do not buy until they have tested by
themselves especially cars. Actually, they are looking for the experience of the product to be
purchased and that’s where tradeshows come into play. The company invites its customers to
the trade show and let them experience the full potential of the brand.

3. B2B Marketing

B2B is an unusual tactic often used by bigger enterprises is to spread the word among
individuals and organizations alike which allow them to sell their product to other
commercial businesses, institutions, and other agencies, which can then either use this
product or resell it.

4. Inbound Marketing

Making use of the requests, for the new products, often made by the customers can
undoubtedly lead to additional sales of services that you currently have. For example, when a
customer contacts the bank to check the account balance, the bank’s contact center takes
advantage of the chance and offers its customers to apply for any other service.

5. Outbound Marketing

Reaching out to individual target groups is a lot more fruitful than addressing the whole
world, since it lets the potential customers know that a particular business exists and can be a
lot more advantageous to our cause. For this purpose, a list of prospects is developed that can
provide a starting point for the brand and this list is, then, further refined to concentrate the
search for new customers. The same was the case of Microsoft when it spread the word of its
accounting software.

Limitations of International Marketing Strategies

Although, marketing your product internationally exposes your brand to a wider audience,
but there are many constraints that can quickly neutralize your market efforts.

1. Language and cultural differences

The difference of the language is what keeps most of the business from entering a market
with an alien language. That’s why, most of the advertisements, product guides, and even
products themselves (if possible) are converted to the language according to the market. Let’s
say you want to release your product in Portugal; then you will have to convert everything
from that product’s parent language to the target market’s language (e.g. Portuguese) and not
just generic ones, but the refined ones too (like Brazilian Portuguese).

Keeping an eye on the cultural differences is also important and in some cases, it becomes the
strongest constraint to the business success. Since, advertising symbolism may mean similar,
but due to differences in culture and values, the same thing may appear to be aggressive.

2. Media Structure

A newspaper in Latin America, usually, has a deeper and wider reach than television and
radio or any other mean of communications. Similarly, cable TV are either not well
developed or are entirely absent in some countries. Furthermore, some cable operators also
refuse to put advertisements in their connections. That’s how international marketing
strategies differ from country to country and so, do the costs involved.
3. Rules and Regulations

Each target market has some rules to follow implied by the respective country. The same
applies to advertisements and their means. For example, some countries have rules that any
advertisement that is to advertise needs to be created in the country, while it is also a fact that
comparative marketing is banned almost in every country except USA.

IM/U2 Topic 12 International

Market Entry Strategies: Different
Entry Modes and Market
Entry Strategies
There are a number of ways businesses can sell their products in international markets. The
most appropriate method will depend on the business, its products, the outcome of its
Marketing Environment analysis and its Marketing Plan.

1. Direct Export

The organization produces their product in their home market and then sells them to
customers overseas.

2. Indirect Export

The organizations sells their product to a third party who then sells it on within the foreign
market.

3. Licensing
 Another less risky market entry method is licensing. Here the Licensor will grant an
organization in the foreign market a license to produce the product, use the brand name etc. in
return that they will receive a royalty payment.

4. Franchising

Franchising is another form of licensing. Here the organisation puts together a package of the
‘successful’ ingredients that made them a success in their home market and then franchise
this package to overseas investors. The Franchise holder may help out by providing training
and marketing the services or product. McDonalds is a popular example of a Franchising
option for expanding in international markets.

5. Contracting

Another of form on market entry in an overseas market which involves the exchange of ideas
is contracting. The manufacturer of the product will contract out the production of the
product to another organisation to produce the product on their behalf. Clearly contracting out
saves the organisation exporting to the foreign market.

6. Direct Investment

Multinational organizations may choose to engage in full-scale production and marketing

abroad by directly investing in wholly-owned subsidiaries. As opposed to the previously
mentioned methods of entry, this type of entry results in a company directly owning
manufacturing or marketing subsidiaries overseas. This enables firms to compete more
aggressively abroad, because they are literally “in” the marketplace. However, because the
subsidiary is responsible for all the marketing activities in a foreign country, this method
requires a much larger investment. It’s also a risky strategy because it requires a complete
understanding of business conditions and customs in a foreign country.

7. Joint Venture

A joint venture is a partnership between a domestic and foreign firm. Both partners invest
money, share ownership, and share control of the venture. Typically, the foreign partner
provides expertise about the new market, business connections and networks, and access to
other in-country elements of business like real-estate and regulatory compliance. Joint
ventures require a greater commitment from firms than other methods, because they are
riskier and less flexible. Joint ventures may afford tax advantages in many countries,
particularly where foreign-owned businesses are taxed at higher rates than locally owned
businesses. Some countries require all business ventures to be at least partially owned by
domestic business partners. Joint ventures may also span multiple countries. This is most
common when business partners team up to conduct business in a world region.

Example: Toyota’s Progression into Global Business

Toyota Motors started out as a domestic marketer in Japan. Eventually it began exporting its
cars to a few regional markets. As it saw greater success, Toyota became adept as a
multinational marketer, and today is a true global marketer. Today Toyota operates
manufacturing plants in foreign countries with local labour, using local ad agencies, and
pursing marketing strategies that appeal to each country’s market segments and consumer
needs. As Toyota progressed through each stage of global expansion, it revised its attitudes
and approach to marketing and its underlying philosophy of business.
 IFM/U4 Topic 13 International
Joint Ventures
Joint Venture can be described as a business arrangement, wherein two or more independent
firms come together to form a legally independent undertaking, for a stipulated period, to
fulfil a specific purpose such as accomplishing a task, activity or project. In other words, it is
a temporary partnership, established for a definite purpose, which may or may not uses a
specific firm name.

For example, Maruti Ltd. of India and Suzuki Ltd. of Japan come together to set up Maruti
Suzuki India Ltd.

The firms joining hands in a joint venture are called Co-venturers, which can be a private
company, government company or foreign company. The co-venturers come to a contractual
agreement for carrying out an economic activity, which has shared ownership and
control. They contribute capital, pooling the financial, physical, intellectual and managerial
resources, participating in the operations and sharing the risks and returns in the
predetermined ratio.

Salient Features of Joint Venture

1. Agreement: Two or more firms come to an agreement, to undertake a business, for a definite purpose
and are bound by it.
2. Joint Control: There exist a joint control of the co-venturers over business assets, operations,
administration and even the venture.
3. Pooling of resources and expertise: Firms pool their resources like capital, manpower, technical
know-how, and expertise, which helps in large-scale production.
4. Sharing of profit and loss: The co-venturers agree to share the profits and losses of the business in
an agreed ratio. The computation of the profit and loss is usually done at the end of the venture,
however, when it continues for the long duration, the profit and loss is calculated annually.
5. Access to advanced technology: By entering into joint venture firms get access to various techniques
of production, marketing and doing business, which decreases the overall cost and also improves
quality.
6. Dissolution: Once the term or purpose of the joint venture is complete, the agreement comes to an
end, and the accounts of the coventurers, are settled, as and when it is dissolved.

The co-venturers are free to carry on their own business, unless otherwise provided in the
joint venture agreement, during the life of the venture.

Objectives of Joint Venture

 To enter foreign market and even new or emerging market.
 To reduce the risk factor for heavy investment.
 To make optimum utilisation of resources.
 To gain economies of scale.
 To achieve synergy.

Joint ventures are primarily formed for construction of dams and roads, film production,
buying and selling of goods etc.

The type of joint venture is based on the various factors like, the purpose for which it is
formed, number of firms involved and the term for which it is formed.
 IM/U2 Topic 14 Strategic Alliances
Strategic alliance, two companies will decide to share resources to accomplish a specific,
mutually beneficial project. This type of agreement is less involved and less binding than a
joint venture, where the two businesses pool resources in the creation of a separate business
entity. Each of the two companies will maintain their autonomy in a strategic alliance while
gaining a new opportunity.

A strategic alliance can help a firm offer a more effective process, grow into a new market, or
develop an edge over a competitor. The arrangement allows the two businesses to work
toward a common goal that will be of benefit to both. The gained advantage may provide a
short- or long-term benefit and may be formal or informal between the two partners.

 A strategic alliance is an arrangement between two companies that have decided to share resources to
undertake a specific, mutually beneficial project.
 A strategic alliance agreement could help a company develop a more effective process.
 Strategic alliances allow two organizations, individuals or other entities to work toward common or
correlating goals.

The Purpose of Strategic Alliances

While the strategic alliance can be an informal alliance, the responsibilities of each member
are clearly defined. The needs and benefits gained by the partnered businesses will dictate
how long the coalition is in effect.

The results of forming a strategic alliance can include allowing each of the businesses to
achieve organic growth at a quicker pace than would happen if they acted alone. The
partnership could provide access to resources and knowledge that one company owns but the
other does not. As an example, if a small printing company allied with another that could
provide access to high-speed presses, the small business could reduce their cost of production
and capture more of the local printing business.

Strategic alliances are flexible because they avoid some of the hindrances that a joint venture
would include. The two firms do not need to merge capital and can remain independent of
one another. The alliance should not replace the goal of the mission of either business.

The results of forming a strategic alliance can include allowing each of the businesses to
grow at a quicker pace than would happen if they acted alone. The partnership could provide
access to resources and knowledge that one company owns but the other does not. As an
example, if a small printing company allied with another company that could provide access
to high-speed presses, the small business could reduce their cost of production and capture
more of the local printing business. The best functioning of the deal happens when the two
business practices are quite varied.

The Risks of Strategic Alliances

A strategic alliance can bring risks. While the agreement is usually clear for both companies,
there may be variations in how each firm goes about business. This difference can create
conflict. Further, if the alliance requires one party to give proprietary information to the
partnered business, there must be trust between the two allies.

With a long-term strategic alliance, both parties may also become dependent on one another.
If one firm is more dependent than the other, it could cause additional friction as one side
gains an advantage over the other.
Real World Example
An oil and natural gas company might form a strategic alliance with a research laboratory to
develop more commercially viable recovery processes. A clothing retailer might form a
strategic alliance with a single clothing manufacturer to ensure consistent quality and sizing.
A major website could form a strategic alliance with an analytics company to improve its
marketing efforts.

IM/U2 Topic 15 Direct Investment

Direct investment, more commonly referred to as foreign direct investment (FDI), refers to
an investment in a foreign business enterprise designed to acquire a controlling interest in this
enterprise. Direct investment provides capital funding in exchange for an equity interest
without the purchase of regular shares of a company’s stock.

The purpose of foreign direct investment (FDI) is to gain an equity interest sufficient to
provide control of a company. In some instances, it involves a company in one country
opening its own business operations in another country, while in other cases it involves
acquiring control of existing assets of a business already operating in the foreign country. A
direct investment can involve gaining a majority interest in a company or a minority interest
large enough to provide the investor with effective control of the company.

Direct investment is primarily distinguished from portfolio investment, the purchase of

common or preferred stock shares of a foreign company, and by the element of control, that is
sought.

Control can come from sources other than an investment of capital, though the control of
such things as technology is merely critical inputs. In fact, foreign direct investment is
frequently not a simple monetary transfer of ownership or controlling interest but also
involves complementary factors, such as organizational and management systems or
technology.

Foreign direct investments can be made by individuals but are more commonly made by
companies wishing to establish a business presence in a foreign country.

Examples of Foreign Direct Investment

Foreign direct investment takes many forms in actual practice but is generally classified as
either a vertical, horizontal, or conglomerate investment.

A vertical direct investment is one where the investor adds foreign activities to an existing
business, such as in the case of an American auto manufacturer establishing dealerships or
acquiring a parts supply business in a foreign country.

Horizontal direct investment is perhaps the most common form. In horizontal investments, a
business already existing in one country merely establishes the same business operations in a
foreign country, such as in the case of a fast food franchise based in the United States
opening restaurant locations in China. Horizontal direct investment is also referred to as
greenfield entry into a foreign market.

The conglomerate type of direct investment, the least common form, is where an existing
company in one country adds an unrelated business operation in a foreign country. This is a
particularly challenging form of direct investment since it requires simultaneously
establishing a new business and establishing it in a foreign country. An example of
conglomerate direct investment might be an insurance firm opening a resort park in a foreign
country.

IM/U2 Topic 16 Manufacturing

& Franchising
Manufacturing
Manufacturing is the processing of raw materials into finished goods through the use of tools
and processes. Manufacturing is a value-adding process allowing businesses to sell finished
products at a premium over the value of the raw materials used.

Humans have historically sought ways to turn raw materials, such as ore, wood, and
foodstuffs, into finished products, such as metal goods furniture and processed foods. By
refining and processing this raw material into something more useful, individuals and
businesses have added value. This added value increased the price of finished products,
rendering manufacturing a profitable endeavor. People began to specialize in the skills
required to manufacture goods while others provided funds to businesses to purchase tools
and materials.

How products are manufactured has changed over time. The amount and type of labor
required in manufacturing vary according to the type of product being produced. On one end
of the spectrum, products are manufactured by hand or through the use of basic tools using
more traditional processes. This type of manufacturing is associated with decorative art,
textile or leather work, carpentry, and some metal work. At the other end of the spectrum,
mechanization is used to produce items on a more industrial scale. This type of
manufacturing does not require as much manual manipulation of materials and is often
associated with mass production.

The industrial process used to turn raw materials into products in high volumes emerged
during the Industrial Revolution of the 19th century. Before this period, handmade products
dominated the market. The development of steam engines and related technologies allowed
companies to use machines in the manufacturing process reducing the number of personnel
required to produce goods while also increasing the volume of goods that could be produced.

Mass production and assembly line manufacturing allowed companies to create parts that
could be used interchangeably and allowing finished products to be made more readily by
reducing the need for part customization. The use of mass production techniques in
manufacturing was popularized by the Ford Motor Company in the early 20th century.
Computers and precision electronic equipment have since allowed companies to pioneer
high-tech manufacturing methods. Products made using these methods typically carry a
higher price but also require more specialized labor and more expensive capital inputs.

The skills required to operate machines and develop the processes used in manufacturing
have changed drastically over time. Many low skill manufacturing jobs have shifted from
developed countries to developing countries because labor in developing countries tends to be
less expensive. More skilled manufacturing, particularly of precision and high-end products,
tend to be undertaken in developed economies. Technology has made manufacturing more
efficient and employees more productive; therefore, although the volume and number of
goods manufactured have increased, the number of workers required has declined.
 Economists and government statisticians use various ratios when evaluating the role
manufacturing plays in the economy. Manufacturing value added (MVA), for example, is an
indicator that compares manufacturing output to the size of the overall economy. It is
expressed as a percentage of GDP – gross domestic product. The ISM Manufacturing Index
uses surveys of manufacturing firms to estimate employment, inventories and new orders and
is an indicator of the health of the manufacturing sector.

Franchising
The term ‘franchise‘ is understood as an exclusive right conferred by the parent organization
to an individual or enterprise to use the former’s successful business model, in stipulated
areas. Franchising is a business relationship; wherein the owner authorises another party to
use their brand, product, business system and process in return for adequate consideration.

In finer terms, franchising is an arrangement, in which the manufacturer, permits another

firm, the right to use its diverse intellectual property rights such as trademark, brand name,
technical know-how, designs, etc., in addition to the proven name, goodwill and marketing
strategies, for a certain sum. E.g. Mc Donald’s, Subway, & Eleven, Domino’s, Dunkin’
Donuts, etc.

In franchising, the firm that grants a license is called franchiser, and the individual or entity to
whom the right is conferred is franchisee. The franchisee acquires franchise by paying initial
startup and annual licensing fees to the franchiser, who in return provides training and
assistance to the franchisee at regular intervals.

Franchising Agreement is a special agreement between both the parties, under which rights
are given, and also the terms and conditions relating to franchising are stated clearly.

Characteristics of Franchising

1. License

The franchisee gets the right to use, franchiser’s trademark under a license.
2. Policies

The franchisee must follow the policies concerning the mode of conducting business, as
stated in the agreement.

3. Marketing support and technology

Franchisee is supplied with continuous market support and technology, by the franchiser, to
undertake business, in the manner stated in the franchising agreement.

4. Training

Complete training and assistance are provided to the personnel working in the franchisee’s
enterprise.

5. Royalty

For making use of a well-known business model, the franchisee pays the royalty to the
franchiser.

6. Limited period

Franchisee is allowed to use the business know-how and brand name for a specified period,
as mentioned in the franchise agreement. Although, the agreement can be renewed further.

Franchising is a most common practice of expanding the business, through a licensing

relationship, wherein the owner provides training, equipment, ingredients, and marketing
support to the other entity.

Importance of Franchising
(i) It allows franchiser to augment his distribution chain in minimum time.

(ii) It provides feedback to the franchiser regarding the product popularity, needs and choices
of customers, etc.

(iii) It expands the network of franchiser which helps in increasing goodwill.

(iv) As the business is already established, the franchisee need not make efforts in promoting
the product.

(v) Franchisee get sole rights in providing the product or service

Franchising is a great alternative to developing chain stores, to provide goods and services to
the customers and avoid investment. But there are certain demerits attached to it such as there
is always a fear that franchisee may open the same business with a different name, after the
expiry of the said term. The franchiser’s brand name and reputation will suffer if the
franchisee does not provide quality service to the target audience.

IM/U3 Topic 1 International

Product Policy
International Product Policy: The Basic Product
Many German companies are actively selling their products into global markets, and they are
successful in the globalization business. For many years, Germany has the largest trade
volume of all countries worldwide.

Although the current climate in 2009 is not very favourable for the world markets (the World
Trade Organization WTO is → estimating a decline of 9% in the world trade of 2009), the
success of this country on the world markets is important for the country, the companies, and
the inhabitants.

As international trade, and exports are important for participating countries, the question is
what their companies need to do in order to be successful abroad.

Which products to export?

One of the most relevant questions for a firm (newly) approaching international markets, is,
which products to sell abroad, and how these products should look like. The one side of the
coin is thereby the market view („how successful can we be “), and the other view is the cost-
oriented view („economies of scale “).

In particular each company with international ambitions needs to define, if these products
should be standardized („one size fits it all “) or if they are to be adapted to local markets.
Often the product management drives this very important question, or is at least part of the
decision process.

Adaptation versus Product Standardization

The easiest way of a small firm that is just beginning to approach international markets, is to
sell the same products as they are designed for the home market, without any or few changes
abroad (standardized product).

On the other hand of the spectrum would be a company, which designs products for each
individual target market (adaptation to local needs). Both approaches have advantages and
disadvantages over the other, which I will discuss here.

Factors in Favour of Standardization

Normally holds, the larger the quantities produced, the lower the costs per unit. Simply due to
the quantity and the learning-curve-effect, standardized products can result in lower costs and
larger economies of scale in the different activities from production to sales.

Further, the more equal the markets are, the easier the management of the internationalization
process is, and the easier it is to use identical marketing in different countries. On the other
hand, sales often depend on local tastes and needs (and sometimes there are legal
requirements), and therefore the on-size-fits-it-all approach is not universally possible.

In practice the company needs to find the right point in the middle. A different option is a
platform strategy that makes sure that as few parts of the product as possible are adapted to
local needs.

Terpstra/ Sarathy (2002) name the following additional factors, which favour standardization:
 High costs of adaptation: High costs of production can make it difficult to sell the product at a
reasonable price in low volume markets. In these cases, standardization allows larger economies of
scales, resulting in less costs per unit.
 Industrial products: Industrial goods tend to be more standardized than the more people centric
consumer goods, as they normally adhere to technical principles, which are valid internationally.
 Convergence and similar tastes: Consumer patterns among countries with identical income levels
tend to converge, and thus products for markets with differing income levels will more likely be
different. The choice of target markets partially predefines which standardization level is possible.
 Predominant use in urban environments: Urban environments tend to be similar across countries,
and it is possible to standardize if the usage of the product can be limited to urban users.
 Marketing to similar countries: Depending on characteristics of the products, it is possible to
identify markets with similar characteristics in terms of sales. It is possible to standardize, when it is
possible to identify clusters of similar markets.
 Centralized management and operating with exports: If a firm operates internationally as an
exporter is more likely that this firm favour to work with standardized products.
 Country-of-origin effects: Products might actively retain their home market focus. The firm might
use these attributes strategically and it might use these characteristics actively as a buying argument.
 Economies of scale in production: The firm can gain economies of scale in production when
standardizing the products.
 Economies of scale in research and development: It the firm uses the same product design globally,
it is possible to achieve economies of scale in R&D.
 Economies in marketing: Economies of scale are possible, if it is possible to use an identical
marketing approach globally.

The Factors in Favour of Adaptation

If the adapted product meets the needs local market demands better, the customers abroad are
often willing to pay a higher price. Thus, adapted products might in general yield a higher
profit per unit sold.

As mentioned before, sometimes adaptations are not just marketing-driven, but simply they
are legally needed, and are therefore the prerequisite to market entry. Terpstra/ Sarathy
(2002) name the following additional factors, which favour adaptation:

 Differences in technical standards might make it necessary to adapt the product to local needs.
 Needs of local customers: Consumer and personal use products will more exactly meet the needs of
the local market, when adapted.
 Variation in consumer needs and differing use conditions: Use conditions in the different markets
may differ, so that it might be required to adapt the product to local needs.
 Differing income levels: The per capita income level varies greatly among the different countries
worldwide. It might be required to adapt certain product specifics to local needs, and to allow
customer segments to buy it, which are different to those at home.
 Fragmented independent national subsidiaries: Depending on the globalization strategy,
companies might have largely independent national subsidiaries, which are active in their respective
markets for a long time. These subsidiaries might produce adapted products, and can, or will
sometimes not follow new efforts to standardize the products globally. It is also possible that national
subsidiaries demand from their headquarters local products that allow them to reach given profit
targets.
 Cultural differences: Cultural differences might affect different buying criteria. It is thus often
necessary to adapt a product to local tastes and habits.
 Environmentally induced adaptation: Governments might forbid or favour product characteristics,
which are allowed in the home country. It is possible also, that they impose local content requirements
(in these cases a certain portion of the product needs to be produced locally) to foreign companies.
 Corporate strategy and competition: The firms need to consider examples of successful companies,
and they need to understand, what these firms did, and how their success was related to the different
strategic choices.

Principles for Product Adaptation

Assuming that you studied your target markets in sufficient depth and is clarified how
standardized or adapted the product can and should be. Also, assuming that you evaluated if a
platform strategy could help you, keep a least part of the product standardized. Then the next
question is, how and where you adapt the product.

Terpstra/ Sarathy (2002) summarize the variables that foster product adaptation as follows (in
declining importance in the industry):

(i) The criteria variations in customer needs, conditions of use and ability to buy are among
the most important reasons to choose an adaption strategy. These factors guide the adaptation
of attributes and features of the basic product, or of areas, such as packaging.

(ii) In most cases different technical standards, and different user languages require that
particular product characteristics are altered.

(iii) It is then often required to follow competitors, which already offer adapted products.

(iv) If adaptation costs are low, it is likely that adaptation takes place. Products with high
R&D effort will thus often not be adapted to local needs.

(v) Local production parameters, and available material requires local production with
changes in design or process.

(vi) In many cases government regulations force companies to make a localized product
available.

(vii) Cultural preferences require certain adaptations.

IM/U3 Topic 2 Product Planning in

International Markets
INTERNATIONAL PRODUCT PLANNING
A proper plan should be framed in respect of products to be exported. New products should
be produced on a larger scale to answer foreign demand. Supply of export goods must be
uninterrupted. Goods having large domestic demand should be exported only if their supply
is in excess of internal demand. Quality of export goods should be high and their prices
competitive.

In exports, ‘product planning’ is a term which is used to describe the complete process of
bringing a new product or service to a new market. There two parallel paths involved in the
export product planning process – one involves the idea generation, product design, and
detailed engineering and the other involves market research and marketing analysis.

Companies typically see new product development as the first stage in generating and
commercializing new products within the overall strategic process of product life cycle
management, used to maintain or grow the market share.

Export product planning involves determining which products to introduce into which
countries; what modifications to make in the products; what new products to add; what brand
names to use; what package designs to use: what guarantees and warranties to give, what
after-sales services to offer, and finally, when to enter the market. All these are crucial
decisions requiring a variety of informational inputs.

Although the basic functions of exporting and domestic selling are the same, international
markets differ widely because of great variations in certain uncontrollable environmental
forces. These include currency exchange controls/risks, taxation, tariffs, and inflation, which
happen to originate outside the business enterprise. Such variations require managers who are
aware of international threats and opportunities.

If a company already manufactures a product or service, it is reasonable to assume that its

product or service is what will be exported. However, companies must first determine the
export potential of a product or service before they invest their resources into the business of
foreign trade.

IM/U3 Topic 3 Packaging

and Labelling
Packaging
Packaging is the other side of the product identification. Traditionally, the function of
packaging was to protect goods. However, it is a promotional tool and the major image
builder contributing to the product success. It is a point of sale display that develops a
favourable consumer appeal.

‘Packing’ is a process that speaks of company’s ability to contain economically man made or
natural products for shipment, storage, sale or final use. It comprises the activities of
wrapping or creating the product for performing the marketing functions more easily and
economically.

In simple words, packing is the act of housing the product in the packages or containers like
tins, cans, bags, jars, bottles, boxes, kegs, casks, and the like. A ‘package’ is a wrapper or a
container in which a product is enclosed, encased, housed or sealed.

‘Packaging’ on the other hand, deals with activities of planning and designing of different
means of packing the products. What are clothes to human-beings, so are the packages for the
products.

Definitions:

“Packaging is the general group of activities in designing the containers or wrappers for the
products”. Professor William Stanton

“Package design is the unique combination of colours, graphics and symbols to

distinguishing the products.” John Bull

“Packaging is an activity which is concerned with the protection, economy, convenience and
promotional considerations”. Professor Philip

Thus, it embraces the functions of package selection, manufacture, filling and handling. It is
worth noting, here, that the word ‘packing’ is more comprehensive and, hence, covers
‘packaging’. Packing is concerned with product protection while packaging with product
promotion.

Objectives of Packaging
Packaging is a market and marketing necessity, at-least five objectives can be identified so
far as product packaging is concerned. These are product protection, product identification,
product convenience, product profit generation and product promotion.

These points can be outlined as given below:

(i) Product protection

The primary objective of packaging is protection of products or contents. It is the package

that keeps the contents fresh, clean and un-spoilt by using moisture proof, vermin-proof and
damage resistant materials.

It is powerful weapon to avoid shop-lifting, stealing in shops. This protection is given to the
products from their birth till their death. Thus, product is protected against the possible theft,
pilferage, leakage, spilling, breakage, contamination, deterioration, evaporation and so on.

(ii) Product identification

The products available in a shop on shelves must be distinguishable for easy identification.
One brand is to be compared and distinguished from another. Next to brand names,
packaging is another easy and convenient method to identify the products of different
producers or marketers.
It is obvious that the packaging of one product is very much different from another. Thus, it
becomes a means of easy identification. The size, the colour combinations, the graphics used
in each package are unique that can be easily remembered and recalled.

(iii) Product convenience

A packaging aims at providing maximum convenience to the purchasers, producers and

distributors alike. A nicely designed product package facilitates product shipping, storage,
stocking, handling and display on the part of producers and distributors. It is caused by
product density.

Good packaging facilitates the ease of product use by consumers. The best examples of this
kind are: tear-tape, poring spouts, squeeze bottles, aerosol cans, flip-tops pull- tubes,
wrappers and the like. They increase consumer convenience to a great extent.

(iv) Product promotion

Product package is a powerful promotional tool. Packaging performs good many advertising
functions.

At-least four are emphasized:

(a) Self advertising package design has supreme significance as it attracts consumers.

(b) Point of purchase display when we talk of display the two possibilities are ‘window’ and
‘counter’ where the first does the work of attracting the consumers or prospects to ‘get in’
and the second one gives the comparison of ‘competitive products’ for consumer choice.

(c) Media of advertising the general appearance and the selling features created by the
packaging techniques decide the product success and

(d) Product publicity free advertising is done through package-insert or flap advertising.

(v) Product profit generation

Adequate and proper packaging can be the cause for generating increased profits to the
producers and distributors. Because of product density created by good packaging, it reduces
costs in storage, transportation and handling.

Further, the wastes that are common in marketing process can be minimized, if not
eradicated. Further, sound packaging is an effective tool of sale-promotion. All these factors
are bound to contribute towards profit maximization with reduced costs and improved
efficiency.

Role/Functions of Packaging
In modern dynamic and competitive marketing conditions, the role of packaging cannot be
underestimated. It has become a highly specialized activity building the fortunes of
producers, extending the stay of middlemen and expanding the convenience to the
consumers. The role of packaging is self evident from the specific functions it performs.

The functions of good packaging are summed up as under:

(i) It protects the contents

The basic function of packaging from the time is to protect the contents of it from damage,
dust, dirt, leakage, pilferage, evaporation, watering, and contamination and so on. The
intrinsic values or the properties or the quality standards are maintained intact. Thus, the
contents are kept fresh, clean, un-spoilt and unaffected.

Seasonal fluctuations in demand may be smoothened out through packaging. The canning
and deep freezing of some perishable products like straw berries, orange juice, and mango
pulp enable all the year round consumption on the part of consumers.

(ii) It provides product density

It is packaging that increases the product density. Product density implies selecting such
package materials, design and shape that it helps to use the limited space in the best way.
Product density improves relations with common carriers, permits better use of space in
storage and usage and increases the grace and poise of arrangement.

(iii) It acts as promotional tool

Good packaging can sell more easily and quickly as it works as a promotional tool. It is a
‘silent’ salesman. As a promotional tool, it does self-advertising, displaying, publishing and
acts as an advertising medium.

Attractive package enhances the opportunity of impulse buying. It is the package, size,
design, colour combinations and graphics that decide its ability to attract the valuable
attention of customers or the prospects.

(iv) It provides user convenience

Convenience in storage, transportation, handling and usage the product is another

requirement. Good packaging does this in greater degree. As a result, the marketing functions
of the transportation, storage and handling are performed with ease and without wastage.

Consumers are greatly assisted so long as the product is in usage. In fact, neat packaging has
brought home reduction in inventory costs, packing costs, space and time costs.

(v) It facilitates product identification

Product differentiation is the hallmark of these days of keen competition. This process of
product differentiation is furthered by effective product identifiers; one is branding, and
another is packaging.

The product package identifies the product no matter where you see it, under what
circumstances you see it, or when you see it.

A package is product’s personality, its reality. Product identification goes easy with
distinguished packaging as it adds to its personality or image. Consumers’ confusion over the
large variety need not confound them and mislead them in consumer decision making
because, they go by distinctive product packaging.

(vi) It allows easy product-mix

 Product-mix relates to the product-lines and assortment of sizes, colours, measures, grades,
and package types etc., offered by the selling house. Changes in product-mix can be possible
as packaging is to influence weight, size and dimensions of the products.

Such a selected sales or product-mix will facilitate product pricing, shipping, storage,
stocking, handling, display and so on, in diversified market segments.

(vii) It extends product life-cycle

The package of a product may be used to extend the product life- cycle. Updating design may
help to give the pack a more contemporary image.

It is increasingly difficult to come up with totally new products, but any variety of packaging
innovation can be introduced which offers features of a consumer wants and willingness to
pay for a form of product innovation. This can be achieved through improved convenience to
not only consumers but also to wholesalers and retailers by which packages are easy to stock,
price, mark, display and identify.

Essentials of Good Packaging

The objectives and functions of packaging have clearly demonstrated the importance of
packaging in modern marketing setting. To get all these benefits, the packaging must be
certainly attractive, protective, economical, convenient and adjustable. Experts opine that the
following points to be fulfilled by a packaging to be called as ‘good’ packaging.

Therefore, the requisites of good packaging are:

 It should protect the contents

 It should be attractive
 It should bestow convenience
 It should guarantee economy
 It should assure adjustability
 It should be pollution free
 It should be informative

Types of Packages
When one speaks of types of packaging, there can be three types namely primary, secondary
and shipping. Let us know about each type.

1. Primary Packaging

Primary packaging is basically done for protecting the quality of the product and protection
against possible effects caused by exposure. Much depends on the type of product its form
namely, Solid or liquid, solids are packed in polyethylene paper bags, hard boards, bottles
both glass and plastic.

The basic idea is to protect or preserve the basic ingredients. Say, a shampoo can be packed
in sachets, pouches, plastic bottles, so in the case with other liquids. Tetra-packing is done in
case of soft-drinks, juice, and oil and so on.

2. Secondary Packaging

Secondary packaging serves for providing quantitative convenience of the buyers and sellers.
Thus, Shampoo Sachets may be in straps of 10, 20, 30, 40, and 50 and so on. The bottles may
 be 10, or 12, or 144 units put to together. This is done for additional protection plus meeting
the consumer’s dealers, convenient for exchange purpose. It also helps in storage.

3. Shipping Packaging

Shipping packaging is the final packaging mainly for transportation and stocking purposes on
wholesale basis. Thus, fruit juice boxes (tetra pack) may be put in cartons of 50, 100, and 200
and so on.

The care is taken to see that it helps in convenient handling of cartons in transportation and
warehousing while loading and unloading to cause least damages. Here, the materials used
are rugged and providing cushion in handling, storing and transportation.

The materials used for primary, secondary and shipment packages differ very much. A
continuous research is going on to do away with conventional materials.

PRODUCT LABELLING

Labelling is another significant means of product identification like branding and packaging.
Labelling the act of attaching or tagging labels. A label is anything may be a piece of paper,
printed statement, imprinted metal, leather which is either a part of a package or attached to
it, indicating value of contents of price of product name and place of producers.

It carries verbal information about the product, producer or such useful information to be
beneficial to the user. Thus, a label is an informative tag, wrapper or seal attached to a
product or product’s package.

The Purposes of Labelling

1. To bring home the product features

A label goes on describing the product specialties which makes the product a quick mover. It
gives its correct use. Thus, bottle containing poison, if not labelled, it fails to tell about its
contents. Wrong labelling does more harm than no labelling at all.

2. To facilitate the exchange process

As good many competitive products are available in a given product range, label helps in
avoiding the unwanted confusion. This is of special importance in case of drugs and
chemicals where even spelling mistakes prove fatal to the users. That is why; druggists and
chemists are having qualified pharmacists in the pharmacies.

3. To encourage self-service

A label is a strong sales tool that encourages self-service operations. If the customers are
supplied with necessary information of the contents of the package or the container, as its
contents, weight, use, price, taxes, and instructions and so on, consumers can pick the
package of their choice from shop shelves. Thus, labelling has a special role to play in self-
selling units.

A label may be descriptive, informative or grade designating or a combination of these. A

‘descriptive’ label describes the contents of the package or the ingredients of the product.
Thus, a descriptive label on a cane of pineapple describes the contents by size, weight,
number of slices, syrup cups and the number of servings.
 An ‘informative’ label includes detailed description with emphasis on how the product is
made? How to use it? How to care for it? In order to drive maximum satisfaction. A ‘grade’
label designates customary or regulated standards. Thus, a pack of ghee or honey might have
‘Ag-mark’ grading, certificates as A, B, or C.

4. Product related services

Generally, a product is surrounded by various services that make it easier for the consumer to
use, pay for and maintain the product, in addition to its branding, packing and labelling.
These include the product support services, credit granted guarantees and warrantees given
and after-sale services extended.

IM/U3 Topic 4 International Product

Life Cycle
The International Product Life Cycle Theory was authored by Raymond Vernon in the
1960s to explain the cycle that products go through when exposed to an international market.
The cycle describes how a product matures and declines as a result of internationalization.
There are three stages contained within the theory.

1. New Product Introduction

The cycle always begins with the introduction of a new product. In this stage a corporation in
a developed country will innovate a new product. The market for this product will be small
and sales will be relatively low as a result. Vernon deduced that innovative products are more
likely to be created in a developed nation because the buoyant economy means that people
have more disposable income to use on new products.

To offset the impact of low sales, corporations will keep the manufacture of the product local,
so that as process issues arise or a need to modify the product in its infancy stage presents
itself, changes can be implemented without too much risk and without wasting time.

As sales increase, corporations may start to export the product out to other developed nations
to increase sales and revenue. It’s a straightforward step towards the internationalization of a
product because the appetites of people within developed nations tends to be quite similar.

2. The Maturity Stage

At this point, when the product has firmly established demand in developed countries, the
manufacturer of the product will need to consider opening up production plants locally in
each developed country to meet the demand. As the product is being produced locally, labor
costs and export and costs will decrease thereby reducing the unit cost and increasing
revenue. Product development can still occur at this point as there is still room to adapt and
modify the product if needed. Appetites for the product in developed nations will continue to
increase in this stage.

Although the unit costs have decreased due to the decision to produce the product locally, the
manufacture of the product will still require a highly skilled labor force. Local competition to
offer alternatives start to form. The increased product exposure begins to reach the countries
that have a less developed economy, and demand from these nations start to grow.

3. Product Standardization and Streamlining of Manufacturing

Exports to nations with a less developed economy begin in earnest. Competitive product
offers saturate the market which means that the original purveyor of the product loses their
competitive edge on the basis of innovation. In response to this, rather than continuing to add
new features to the product, the corporation focuses on driving down the cost of the process
to manufacture the product. They do this by moving production to nations where the average
income is much lower and standardizing and streamlining the manufacturing methods needed
to make the product.

The local workforce in lower income nations are then exposed to the technology and methods
to make the product and competitors begin to rise as they did in developed nations
previously. Meanwhile, demand in the original nation where the product came from begins to
decline and eventually dwindles as a new product grabs the attention of the people. The
market for the product is now completely saturated and the multinational corporation leaves
the manufacture of the product in low income countries and instead, focuses its attention on
new product development as it bows gracefully out of the market.

What is left of the market share is divvied up between predominantly foreign competitors and
people in the original country who want the product at this point, will most likely buy an
imported version of the product from a nation where the incomes are lower. Then the cycle
begins again.

IM/U3 Topic 5 Branding decisions

in International Markets:
Standardization vs. Adaptation
 Branding consists of a set of complex branding decisions. Major brand strategy decisions
involve brand positioning, brand name selection, brand sponsorship and brand development.

Before going into the four branding decisions, also called brand strategy decisions, we should
clarify what a brand actually is. A brand is a company’s promise to deliver a specific set of
features, benefits, services and experiences consistently to buyers. However, a brand should
rather be understood as a set of perceptions a consumer has about the products of a particular
firm. Therefore, all branding decisions focus on the consumer.

1. Brand Positioning
A brand must be positioned clearly in target customers’ minds. Brand positioning can be
done at any of three levels:

 On product attributes
 On benefits
 On beliefs and values.

At the lowest level, marketers can position a brand on product attributes. Marketing for a car
brand may focus on attributes such as large engines, fancy colours and sportive design.
However, attributes are generally the least desirable level for brand positioning. The reason is
that competitors can easily copy these attributes, taking away the uniqueness of the brand.
Also, customers are not interested in attributes as such. Rather, they are interested in what
these attributes will do for them. That leads us to the next level: Benefits.

A brand can be better positioned on basis of a desirable benefit. The car brand could go
beyond the technical product attributes and promote the resulting benefits for the customer:
quick transportation, lifestyle and so further.

Yet, the strongest brands go beyond product attributes and benefits. They are positioned on
beliefs and values. Successful brands engage customers on a deep, emotional level. Examples
include brands such as Mini and Aston Martin. These brands rely less on products’ tangible
 attributes, but more on creating passion, surprise and excitement surrounding the brand. They
have become “cool” brands.

Brand positioning lays the foundation for the three other branding decisions. Therefore, brand
positioning should also involve establishing a mission for the brand and a vision of what the
brand should be and do. The brand’s promise must be simple and honest.

2. Brand Name Selection

When talking about branding decisions, the brand name decision may be the most obvious
one. The name of the brand is maybe what you think of first when imagining a brand – it is
the base of the brand. Therefore, the brand name selection belongs to the most important
branding decisions. However, it is also quite a difficult task.

We have to start with a careful review of the product and its benefits, the target market and
proposed marketing strategies. Having that in mind, we have to find a brand name matching
these things. Naming a brand is part science, part art, and certainly a measure of instinct.

Although finding the right name for a brand can be a challenging task, there are some
guidelines to make it easier. Desirable qualities for a brand name include:

It should suggest something about a product’s benefits and qualities. Think of the wadding
polish “Nevr Dull”. The brand name indicates the benefit of using this product: the treated
metal will never be dull.

It should be easy to pronounce, recognise, and remember. iPod and Nike are certainly better
than “Troglodyte Homonculus” – a clothing brand.

The brand name should be distinctive, so that consumers don’t confuse it with other brands.
Rolex and Bugatti are good examples.

It should also be extendable. Think of [Link], which began as an online bookseller but
chose a name that would allow expansion into other categories. If [Link] had chosen a
different name, such as [Link], it could not have extended its business that easily.

The brand name should translate easily into foreign languages. The Ford Pinto line had some
struggles in Brazil, seeing as it translated into “tiny male genitals”. Or the Mitsubishi Pajero,
which means in Spanish “man who plays with himself and enjoys it a bit too much”. More
famous: Coca-Cola reads in Chinese as “female horse stuffed with wax”.

It should be capable of registration and legal protection. In other words, it must not infringe
on existing brand names.

Worthy of note is the fact that brand name preferences are changing continuously. After a
decade of choosing quirky names (such as Yahoo!, Google) or fictional names, today’s style
is to build brands around names that carry real meaning. For instance, names such as
Blackboard, a school software, make sense. However, with more and more brand names and
trademark applications, available new names can be hard to find.

Choosing a brand name is not enough. It also needs to be protected. Many firms attempt to
build a brand name that will eventually become identified with a product category. Examples
for these names include Kleenex, Tip-ex and Jeep. However, their success can also quickly
threaten the company’s rights to the name. Once a trademark becomes part of the normal
language (called “genericization”), it is not protected anymore. For that reason, many
 originally protected brands name, such as aspirin, Walkman (by Sony) and many other names
are not protected anymore.

3. Brand Sponsorship
Branding decisions go beyond deciding upon brand positioning and brand name. The third of
our four branding decisions is the brand sponsorship. A manufacturer has four brand
sponsorship options.

A product may be launched as a manufacturer’s brand. This is also called national brand.
Examples include Kellogg selling its output under the own brand name (Kellog’s Frosties, for
instance) or Sony (Sony Bravia HDTV).

The manufacturer could also sell to resellers who give the product a private brand. This is
also called a store brand, a distributor brand or an own label. Recent tougher economic times
have created a real store-brand boom. As consumers become more price-conscious, they also
become less brand-conscious, and are willing to choose private brands instead of established
and often more expensive manufacturer’s brands.

Also, manufacturers can choose licensed brands. Instead of spending millions to create own
brand names, some companies license names or symbols previously created by other
manufacturers. This can also involve names of well-known celebrities or characters from
popular movies and books. For a fee, they can provide an instant and proven brand name. For
example, sellers of children’s products often attach character names to clothing, toys and so
on. These licensed character names include Disney, Star Wars, Hello Kitty and many more.

Finally, two companies can join forces and co-brand a product. Co-branding is the practice of
using the established brand names of two different companies on the same product. This can
offer many advantages, such as the fact that the combined brands create broader consumer
appeal and larger brand equity. For instance, Nestlé uses co-branding for its Nespresso coffee
machines, which carry the brand names of well-known kitchen equipment manufacturers
such as Krups, DeLonghi and Siemens.

4. Brand Development
Branding decisions finally include brand development. For developing brands, a company
has four choices: line extensions, brand extensions, multiband or new brands.

Line extension refers to extending an existing brand name to new forms, sizes, colours,
ingredients or flavours of an existing product category. This is a low-cost, low-risk way to
introduce new products. However, there are the risks that the brand name becomes
overextended and loses its specific meaning. This may confuse consumers. An example for
line extension is when Coca-Cola introduces a new flavour, such as diet cola with vanilla,
under the existing brand name.

Brand extension also assumes an existing brand name but combines it with a new product
category. Thus, an existing brand name is extended to a new product category. This gives the
new product instant recognition and faster acceptance and can save substantial advertising
costs for establishing a new brand. However, the risk that the extension may confuse the
image of the main brand should be kept in mind. Also, if the extension fails, it may harm
consumer attitudes toward other products carrying the same brand name. For this reason, a
brand extension such as Heinz pet food cannot survive. But other brand extensions work well.
For instance, Kellogg’s has extended its Special K healthy breakfast cereal brand into a
complete line of cereals plus a line of biscuits, snacks and nutrition bars.
 Multiband means marketing many different brands in a given product category. P&G (Procter
& Gamble) and Unilever are the best examples for this. In the USA, P&G sells six brands of
laundry detergent, five brands of shampoo and four brands of dishwashing detergent. Why?
Multigrading offers a way to establish distinct features that appeal to different customer
segments. Thereby, the company can capture a larger market share. However, each brand
might obtain only a very small market share, and none may be very profitable.

New brands are needed when the power of existing brand names is waning. Also, a new
brand name is appropriate when the company enters a new product category for which none
of its current brand names are appropriate.

As you might have recognised, these four branding decisions are all interrelated. In order to
build strong brands, brand positioning, brand name, brand sponsorship and brand
development have to be in line with each other.

Standardization vs. Adaptation

You can’t mention adaptation without mentioning standardization; they are two sides of the
same coin. They both represent a way of selling products overseas. As pointed out, adaptation
involves modifying a product so as to meet the local requirements and customs. An example
is McDonald’s vegetarian burgers in India. Adaptions also demand the use of different
marketing and selling strategies in the foreign market.

With standardization, however, the products are neither modified nor are the marketing
approach changed. A company assumes “one size fits all” strategy and tries to infiltrate
foreign markets. Standardization is very cheap and efficient although it doesn’t have as good
a chance of penetrating the new market as adaptation does. It is vital to note that a certain
degree of adaptation is inescapable due to local regulations.

Establishing Product Adaptation

In order to drive a successful product adaptation, there are steps to be followed. The first and
obvious one is for companies to research the new market and determine how different it is
from the current market. This involves learning the needs, attitudes, cultural believes, and
desires of the consumers in the new market. It is also of great need that a company
determines the marketing strategies that would work on the new crowd as strategies don’t
work the same for all markets.

A company is then faced with the task of determining the required type of product
modification. There are a few that are available for such companies, and they include:

 Tangible Adaptation: This involves changing a product’s physical aspects such as size and
packaging
 Intangible Adaptation: Here, a company will modify intangible elements such as positioning and
brand name
 Promotional Adaptation: This involves changing methods and types of advertising as well as the
media of choice.
 Price Adaptation: A company adopting this type of adaptation must change size or quantity of their
product to account for the changed this is because a new market may not be willing or able to spend
as much money on a certain product as others.

IM/U3 Topic 6 Protecting

Brand Names
 A well-defined, recognized and respected business brand is a substantial asset for any
company. Business leaders should spare no expense or energy in aggressively defending their
brand from infringement. This protection includes setting clear standards for how the brand is
used and communicated from within, as well as from encroachment by others.

It also means that business leaders should actively watch for negative stories and comments
about the company and find a way to make it right. For example, NASCAR has started fining
drivers who speak negatively about the sport to protect the NASCAR image.

Several companies offer Internet monitoring of brand identity. There is scant evidence that
these companies are truly effective at assessing and protecting a brand against all aspects of
online infringement.

Trademarks are often some of the most valuable assets of a business – legend has it that Coke
is the second most well-known word in the world after “hello.” The Google brand is
estimated to be worth more than $20 billion. A trademark is a brand name, logo, or slogan
that distinguishes your business’ products or services from those of competitors. Regardless
of how big or small the business, the value and protection of brands is critical, particularly in
the online word of today where domain names and usernames (such as Facebook and Twitter)
can be key to connecting with customers.

To help protect your brand(s), here are five basic steps to strengthening your trademark
protection:

1. Choose Wisely

The more creative your brand name is, the greater the odds that it is unique. A more
distinctive and create name or slogan is generally more capable of standing out among the
competition and becoming a brand with real value. Which sounds like a more exciting brand,
a more valuable brand: “Jim’s Gym” or “Vantage Fitness?

2. Use it

The more you use your trademarks – brand names, logos and slogans – the stronger and more
distinctive they become and the more your likely customers are to remember your brand and
to use it to tell others about it.

3. Distinguish It

Use ALL CAPS, bold or italics to emphasize your brand as often as you can. Then the
customer knows exactly what your brand is.

4. Apply to register it

Registration with the U.S. Patent and Trademark Office, a federal agency and part of the
Department of Commerce, enhances the protection and the value of your trademark assets.
Registration allows use of the ® symbol, provides substantial benefits and savings if you ever
must go to court to stop an infringement, and may help stop cybercasters from registering
new domain names.

5. Create Google Alerts

An easy and free way to monitor for others copying your brand or commenting on it. If you
find a possible infringement, contact the offender and if unresolved, contact an attorney.
 IM/U4 Topic 2 Price and Non-
Price Factors
Very often, importers in developed countries do not have adequate confidence in the quality
of goods produced in India and developing countries. For example, Indians had to sell their
storage batteries 10 per cent cheaper in Saudi Arabia than US and European batteries even
though the quality was comparable. Lower price may become inevitable to make our products
acceptable in foreign markets. However, in some cases Indians have established themselves
well e.g. transmission line towers, sugar mill machinery, textile mill machinery etc.

If products are well differentiated and they have built up a brand image for themselves,
manufacturers are in a position to charge comparatively higher process. Brand names like
Dunlop, HMT, Bata, GKW, Lucas, L&T, Kirloskar etc., have already built up a good image
and these products are able to realize much higher price. It may be pointed out here that 75
per cent of German imports and 75 per cent of US exports are attributable to some degree of
product differentiation.

The price a purchaser is willing to pay often depends upon the frequency of purchase. In the
case of durable consumer goods, products having a snob value and gift items is not the
material factor. People may be willing to pay a very high price if the particular goods catch
their fancy. This applies particularly to handicrafts manufactured by developing countries.

There appears to be close association in the consumer minds between price and quality; the
higher priced goods carry a much greater conviction about quality than the low priced goods.
In this respect, it may be useful to note that it may be easier to sell in developed countries
with a higher price tag but in developing countries, lower price may help increase sales. In
general, price constitutes a barrier to demand when it is too low just as much as when it is too
high. Above a particular price, the article s regarded as too expensive, and below another
price as constituting a risk of not giving adequate value. What is stressed here is that lower
prices do not necessarily lead to higher sales. And in periods of inflationary price rise, a
reduction in price may have an adverse reaction on the consumers and may, in fact, lead to
reduction in demand rather than in increase in demand.

In the case of industrial goods, price is not likely to be an indicator of quality. A buyer of
industrial goods in more keen to check what he gets for the price he pays than an average
consumer. His knowledge of products and their quality is more exact, if not perfect. A
technically sound product, steady availability at a reasonable price and comprehensive after
sale service, are the more important factors in the case of industrial goods.

In the case of engineering products and equipment, both before and after sales service are
very significant factors, and assurance of after sales service particularly is much more
important than a lower price. Before sales service in the case of engineering goods include

1. Advising the purchaser about the relative suitability of competing products for his requirements and
2. Demonstrating the use of his products. For example, TELCO sent their mechanics to Zambia for
maintenance of buses and training of the Zambian personnel. After sales service includes

(i) Rectification of genuine technical failures in the product.

(ii) Educating the users on the use of the product and providing training for its maintenance,

(iii) Free service during the warranty period, and

(iv) Ensuring supply of spare parts and components after the warranty period.

On the other hand, in the case of consumer goods, service before sales, as for example
exampl
attractive packaging and good finish tend to be more important. MIGROS, a department store
of Switzerland, requires the suppliers to pack the products in such a manner that they can be
put immediately on the shelf without further packaging.

IM/U4 Topic 3 Pricing Methods

The different pricing methods are discussed below;

1. Cost-based Pricing
 Cost-based pricing refers to a pricing method in which some percentage of desired profit
margins is added to the cost of the product to obtain the final price. In other words, cost-
based pricing can be defined as a pricing method in which a certain percentage of the total
cost of production is added to the cost of the product to determine its selling price. Cost-
based pricing can be of two types, namely, cost-plus pricing and markup pricing.

These two types of cost-based pricing are as follows:

(i) Cost-plus Pricing

Refers to the simplest method of determining the price of a product. In cost-plus pricing
method, a fixed percentage, also called mark-up percentage, of the total cost (as a profit) is
added to the total cost to set the price. For example, XYZ organization bears the total cost of
Rs. 100 per unit for producing a product. It adds Rs. 50 per unit to the price of product as’
profit. In such a case, the final price of a product of the organization would be Rs. 150.

Cost-plus pricing is also known as average cost pricing. This is the most commonly used
method in manufacturing organizations.

In economics, the general formula given for setting price in case of cost-plus pricing is as
follows:

P = AVC + AVC (M)

AVC= Average Variable Cost

M = Mark-up percentage

AVC (m) = Gross profit margin

Mark-up percentage (M) is fixed in which AFC and net profit margin (NPM) are covered.

AVC (m) = AFC+ NPM

For determining average variable cost, the first step is to fix prices. This is done by estimating
the volume of the output for a given period of time. The planned output or normal level of
production is taken into account to estimate the output.

The second step is to calculate Total Variable Cost (TVC) of the output. TVC includes direct
costs, such as cost incurred in labor, electricity, and transportation. Once TVC is calculated,
AVC is obtained by dividing TVC by output, Q. [AVC= TVC/Q]. The price is then fixed by
adding the mark-up of some percentage of AVC to the profit [P = AVC + AVC (m)].

The advantages of cost-plus pricing method are as follows:

 Requires minimum information

 Involves simplicity of calculation
 Insures sellers against the unexpected changes in costs

The disadvantages of cost-plus pricing method are as follows:

 Ignores price strategies of competitors

 Ignores the role of customers

(ii) Markup Pricing

 Refers to a pricing method in which the fixed amount or the percentage of cost of the product
is added to product’s price to get the selling price of the product. Markup pricing is more
common in retailing in which a retailer sells the product to earn profit. For example, if a
retailer has taken a product from the wholesaler for Rs. 100, then he/she might add up a
markup of Rs. 20 to gain profit.

It is mostly expressed by the following formula:

 Markup as the percentage of cost= (Markup/Cost) *100

 Markup as the percentage of selling price= (Markup/ Selling Price)*100
 For example, the product is sold for Rs. 500 whose cost was Rs. 400. The mark up as a percentage to
cost is equal to (100/400)*100 =25. The mark up as a percentage of the selling price equals
(100/500)*100= 20.

2. Demand-based Pricing
Demand-based pricing refers to a pricing method in which the price of a product is finalized
according to its demand. If the demand of a product is more, an organization prefers to set
high prices for products to gain profit; whereas, if the demand of a product is less, the low
prices are charged to attract the customers.

The success of demand-based pricing depends on the ability of marketers to analyze the
demand. This type of pricing can be seen in the hospitality and travel industries. For instance,
airlines during the period of low demand charge less rates as compared to the period of high
demand. Demand-based pricing helps the organization to earn more profit if the customers
accept the product at the price more than its cost.

3. Competition-based Pricing
Competition-based pricing refers to a method in which an organization considers the prices of
competitors’ products to set the prices of its own products. The organization may charge
higher, lower, or equal prices as compared to the prices of its competitors.

The aviation industry is the best example of competition-based pricing where airlines charge
the same or fewer prices for same routes as charged by their competitors. In addition, the
introductory prices charged by publishing organizations for textbooks are determined
according to the competitors’ prices.

4. Other Pricing Methods

In addition to the pricing methods, there are other methods that are discussed as follows:

(i) Value Pricing

Implies a method in which an organization tries to win loyal customers by charging low
prices for their high- quality products. The organization aims to become a low cost producer
without sacrificing the quality. It can deliver high- quality products at low prices by
improving its research and development process. Value pricing is also called value-optimized
pricing.

(ii) Target Return Pricing

Helps in achieving the required rate of return on investment done for a product. In other
words, the price of a product is fixed on the basis of expected profit.

(iii) Going Rate Pricing

 Implies a method in which an organization sets the price of a product according to the
prevailing price trends in the market. Thus, the pricing strategy adopted by the organization
can be same or similar to other organizations. However, in this type of pricing, the prices set
by the market leaders are followed by all the organizations in the industry.

(iv) Transfer Pricing

Involves selling of goods and services within the departments of the organization. It is done
to manage the profit and loss ratios of different departments within the organization. One
department of an organization can sell its products to other departments at low prices.
Sometimes, transfer pricing is used to show higher profits in the organization by showing
fake sales of products within departments.

IM/U4 Topic 4 International

Pricing Strategies
International Pricing is often considered the most critical and complex issue in international
marketing. When talking about the price of a product, it is important to notice that it is a sum
of all monetary and non-monetary assets the customer has to spend in order to obtain the
benefits it provides. The main pricing decisions in international marketing comprise the
following:-

The overall international pricing strategy determines general rules for setting (basic) prices
and using price reductions, the selection of terms of payment, and the potential use of
countertrade.

 The price setting strategy determines the basic price of a product, the price structure of the product
line, and the system of rebates, discounts or refunds the firm offers.
 The terms of payment are contractual statements fixing, for example, the point in time and the
circumstances of payment for the products to be delivered.

There are several options in terms of general price determination. They represent different
levels of adaptation to local requirements.

A standard pricing strategy is based on setting a uniform price for a product, irrespective of
the country where it is sold. This strategy is very simple and guarantees a fixed return.
However, no response is made to local conditions.

With standard formula pricing, the company standardises by using the same formula to
calculate prices for the product in all country markets. There are different ways to establish
such a formula. For example, full-cost pricing consists of taking all cost elements (e.g.
production plus marketing, etc.) in the domestic market and adding additional costs from
international transportation, taxes, tariffs, etc. A direct cost plus contribution margin formula
implies that additional costs due to the non-domestic marketing process and a desired profit
margin are added to the basic production cost. The most useful approach in standard formula
pricing is the differential formula. It includes all incremental costs resulting from a non-
domestic business opportunity that would not be incurred otherwise and adds these costs to
the production cost.

While these strategies accentuate elements of international standardization in pricing, in price

adaptation strategies prices are typically set in a decentralized way (e.g. by the local
subsidiary or local partner). Prices can be established to match local conditions. While this
ability to comply with local requirements constitutes a clear advantage, there can be
difficulties in developing a global strategic position.

Additionally, the potential for price adaptation is limited by interconnections between the
diverse international markets. Therefore it is necessary to coordinate the pricing strategy
across different countries because otherwise reimports, parallel market or grey market
situations can emerge. In these situations, products are sold outside of their authorized
channels of distribution. As a specific form of arbitrage, grey markets develop when there are
price differences between the different markets in which products are sold. If these
differences emerge, products are shipped from low-price to high-price markets with the price
differences between these markets allowing the goods to be resold in the high-price market
with a profit. Parallel markets, while legal, are unofficial and unauthorized and can result in
the cannibalization of sales in countries with relatively high prices, damaging relationships
with authorized distributors.

To avoid these drawbacks in totally standardized or differentiated approaches, geocentric

pricing approaches can be chosen. There is no single fixed price, but local subsidiaries are not
given total freedom over setting prices. For example, firms can set price lines that set the
company’s prices relative to competitors’ prices (i.e. standardised price positioning).

It is important to notice that international pricing decisions also depend on the degree of
industry globalization. Global industries are dominated by a few, large competitors that
dominate the world markets. Which international pricing strategy is appropriate depends on
the firm’s ability to respond to the diverse external, market-related complexities of
international markets.

IM/U4 Topic 5 Dumping and

Price Distortion
 DUMPING
Dumping is an international price discrimination in which an exporter firm sells a portion of
its output in a foreign market at a very low price and the remaining output at a high price in
the home market Haberler defines dumping as: “The sale of goods abroad at a price which is
lower than the selling price of the same goods at the same time and in the same circumstances
at home, taking account of differences in transport costs” Viner’s definition is simple.

According to him, “Dumping is price discrimination between two markets in which the
monopolist sells a portion of his produced product at a low price and the remaining part at a
high price in the domestic market.” Besides, Viner explains two other types of dumping. One,
reverse dumping in which the foreign price is higher than the domestic price.

This is done to turn out foreign competitors from the domestic market. When the product is
sold at a price lower than the cost of production in the domestic market, it is called reverse
dumping Two when there is no consumption of the commodity in the domestic market and it
is sold in two different foreign market, out of which one market is charged a high price and
the other market a low price. But in practice, dumping means selling of the product at a high
price in the domestic market and a low price in the foreign market. We shall explain price
determination under dumping in this sense.

Types of Dumping
1. Sporadic or Intermittent Dumping

It is adopted under exceptional or unforeseen circumstances when the domestic production of

the commodity is more than the target or there are unsold stocks of the commodity even after
sales. In such a situation, the producer sells the unsold stocks at a low price in the foreign
market without reducing the domestic price.

This is possible only if the foreign demand for his commodity is elastic and the producer is a
monopolist in the domestic market. His aim may be to identify his commodity in a new
market or to establish himself in a foreign market to drive out a competitor from a foreign
market. In this type of dumping, the producer sells his commodity in a foreign country at a
price which covers his variable costs and some current fixed costs m order to reduce his loss.

2. Persistent Dumping

When a monopolist continuously sells a portion of his commodity at a high price in the
domestic market and the remaining output at a low price in the foreign market, it is called
persistent dumping. This is possible only if the domestic demand for that commodity is less
elastic and the foreign demand is highly elastic. When costs fall continuously along with
increasing production, the producer does not lower the price of the product more in the
domestic market because the home demand is less elastic.

However, he keeps a low price in the foreign market because the demand is highly elastic
there. Thus, he earns more profit by selling more quantity of the commodity in the foreign
market. As a result, the domestic consumers also benefit from it because the price they are
required to pay is less than in the absence of dumping.

3. Predatory Dumping

The predatory dumping is one in which a monopolist firm sells its commodity at a very low
price or at a loss in the foreign market in order to drive out some competitors. But when the
 competition ends, it raises the price of the commodity m the foreign market. Thus, the firm
covers loss and if the demand in the foreign market is less elastic, its profit may be more.

Objectives of Dumping
The main objectives of dumping are as follows:

(i) To Find a Place in the Foreign Market

A monopolist resorts to dumping in order to find a place or to continue himself in the foreign
market. Due to perfect competition in the foreign market he lowers the price of his
commodity in comparison to the other competitors so that the demand for his commonly may
increase. For this, he often sells his commodity by incurring loss in the foreign market.

(ii) To Sell Surplus Commodity

When there is excessive production of a monopolist’s commodity and he is not able to sell in
the domestic market, he wants to sell the surplus at a very low price in the foreign market.
But it happens occasionally.

(iii) Expansion of Industry

A monopolist also resorts to dumping for the expansion of his industry. When he expands it,
he receives both internal and external economies which lead to the application of the law of
increasing returns. Consequently, the cost of production of his commodity is reduced and by
selling more quantity of his commodity at a lower price in the foreign market, he earns larger
profit.

(iv) New Trade Relations

The monopolist practices dumping in order to develop new trade relations abroad. For this, he
sells his commodity at a low price in the foreign market, thereby establishing new market
relations with those countries. As a result, the monopolist increases his production, lowers his
costs and earns more profit.

PRICE DISTORTION
Price distortions are defined as deviations of quoted prices from a level that would clear the
market if all participants were trading for conventional risk-return optimization. In short, they
measure gaps between mark-to-market prices and a plausible range of economic values of a
contract. The occurrence of distortions implies that market prices can deviate from
fundamental value and evidently so.

Like information inefficiency, price distortions lead to a mispricing of financial contracts

relative to their fundamental value. Unlike information inefficiency, this mispricing is not
based on ignorance, but on ”inefficient flows”. These are transactions in financial markets
that are motivated by objectives other than return optimization. In practice, one can observe
many market flows and transactions that obstruct the alignment of price and value. Common
causes or triggers for such “inefficient flows” include:

 Formal and rigid risk management rules across that apply to many institutions,
 Liquidity shocks, i.e. a sudden deterioration of the tradability of assets or the risk thereof,
 Mechanical allocation rules, for example of exchange-traded funds, indexed fund and related
structured products, and
 Government intervention and regulation.

Detecting price distortions

Unlike information-based trading, price distortion-based strategies do not require information
advantage in respect to the traded contract. They do not focus on in-depth research of its
expected value. Instead, these strategies ascertain some apparent price-value gap and market
inefficiency. They subsequently use advantages in market access or in pricing know-how to
extract value. Sometimes, trading speed and financial leverage can be of the essence.

Detecting inefficient flows and related distortions is not trivial. Most of what is commonly
called “market noise” is actually rational trading disguised by complexity. This makes it easy
to underestimate markets. However, price distortions frequently do arise pursuant to major
information or price shocks that create a state of confusion or even panic. Moreover, trading
in times of turmoil often bears high transaction cost, which deters market participants from
immediately taking advantage of price-value gaps. In order to detect price distortions
systematically one can take three different angles:

 The first is to understand and identify the causes of distortions, such as institutional risk management
constraints, market liquidity problems and so forth, which are explained in the sections below. If a
market is being heavily influenced by any of these causes it is more probable that prices will be
regularly distorted and that there will be payback subsequently.
 The second angle are metrics of misalignment between prices and fundamental value, such as in
financial bubbles. Diagnosing price distortions this way is not the same as estimating price-value
gaps, as the latter would require superior information efficiency. Price distortions can be detected by
conventional valuation metrics but with a focus on extreme price value gaps that associated with
obstacles to arbitrage or trading.
 The third approach is to investigate the time series pattern of asset prices. For example, higher-than-
exponential asset price growth with apparent feedback loops is often an indication of an unsustainable
asset price bubbles. Also, temporary mild explosiveness in asset prices or exchange rates in
conjunction with relative stability in underlying fundamentals is usually indicative of short-term
distortions. Generally, a self-reinforcing price dynamics that is not a reflection or cause of underlying
value changes is prone to producing price distortions.

IM/U4 Topic 6 Counter Trade Legal

and Ethical Issues in
International Marketing
Countertrade is a reciprocal form of international trade in which goods or services are
exchanged for other goods or services rather than for hard currency. This type of international
trade is more common in lesser-developed countries with limited foreign exchange or credit
facilities. Countertrade can be classified into three broad categories: barter, counter
purchase, and offset.

In any form, countertrade provides a mechanism for countries with limited access to liquid
funds to exchange goods and services with other nations. Countertrade is part of an overall
import and export strategy that ensures a country with limited domestic resources has access
to needed items and raw materials. Additionally, it provides the exporting nation with an
opportunity to offer goods and services in a larger international market, promoting growth
within its industries.

Barter
 Bartering is the oldest countertrade arrangement. It is the direct exchange of goods and
services with an equivalent value but with no cash settlement. The bartering transaction is
referred to as a trade. For example, a bag of nuts might be exchanged for coffee beans or
meat.

Counterpurchase

Under a counter purchase arrangement, the exporter sells goods or services to an importer
and agrees to also purchase other goods from the importer within a specified period. Unlike
bartering, exporters entering into a counterpurchase arrangement must use a trading firm to
sell the goods they purchase and will not use the goods themselves.

Offset

In an offset arrangement, the seller assists in marketing products manufactured by the buying
country or allows part of the exported product’s assembly to be carried out by manufacturers
in the buying country. This practice is common in aerospace, defense and certain
infrastructure industries. Offsetting is also more common for larger, more expensive items.
An offset arrangement may also be referred to as industrial participation or industrial
cooperation.

Other Examples of Countertrades

 A counter purchase refers to the sale of goods and services to a company in a foreign country by a
company that promises to make a future purchase of a specific product from the same company in
that country.
 A buyback is a countertrade occurs when a firm builds a manufacturing facility in a country—or
supplies technology, equipment, training, or other services to the country and agrees to take a
certain percentage of the plant’s output as partial payment for the contract.
 An offset is a countertrade agreement in which a company offsets a hard currency purchase of an
unspecified product from that nation in the future.
 Compensation trade is a form of barter in which one of the flows is partly in goods and partly in hard
currency.

Benefits and Drawbacks of Countertrades

A major benefit of countertrade is that it facilitates the conservation of foreign currency,

which is a prime consideration for cash-strapped nations and provides an alternative to
traditional financing that may not be available in developing nations. Other benefits include
lower unemployment, higher sales, better capacity utilization, and ease of entry into
challenging markets.

A major drawback of countertrade is that the value proposition may be uncertain, particularly
in cases where the goods being exchanged have significant price volatility. Other
disadvantages of countertrade include complex negotiations, potentially higher costs and
logistical issues.

Additionally, how the activities interact with various trade policies can also be a point of
concern for open-market operations. Opportunities for trade advancement, shifting terms, and
conditions instituted by developing nations could lead to discrimination in the marketplace.

Ethical Issues in International Marketing

 Companies are always looking for new ways to become more competitive by providing better
quality products at lower prices to its customers. Outsourcing production jobs to countries
with cheaper labor costs is one way to do that. However, doing business in other countries
presents US companies with ethical issues to face before opening a foreign operation.

1. Outsourcing Production Jobs

Wages in the US are extremely high compared to labor rates in countries such as China,
India, Phillippines and Mexico and major corporations are taking advantage of these wage
differentials and moving jobs overseas. Rexnord, a Milwaukee-based manufacturer of
machine parts, is an example of this trend.

According to Time Inc., Rexnord announced that it was closing its Indianapolis plant and
moving the operations to Mexico, where labor rates average $3 an hour compared to
$25/hour for top union employees in Indiana. Three hundred workers will lose their jobs.

This trend to move jobs to low-wage countries has been followed by other major U.S
corporations such as IBM, General Electric, Carrier, AT&T, Verizon and Microsoft.

2. Working Conditions and Standards

While outsourcing production work may result in lower labor costs, it brings social and
ethical issue for management to face.

Generally, working conditions in foreign countries are worse than in the United States.
Laborers often work longer hours in uncomfortable and hazardous environments with
inadequate protection.

The United States created the Occupational Safety and Health Administration in 1970 to set
standards for safe and healthy working conditions. Since its inception, OSHA has reduced
workplace injuries and fatalities and improved safety on job sites. The downside to OSHA is
that it cost money to meet and comply with these government rules and regulations.

Does an international company try to implement its home country OSHA standards or apply
and accept the inferior work conditions of the host country? Compromises must often be
made to have successful foreign operations.

3. Bribery and Corruption

Not all companies in the international marketplace play by the same rules. Take bribing
public officials and foreign corporate managers. In several Latin American countries, for
example, bribery and kickbacks are normal and expected as a normal part of doing business.

In the United States, the Foreign Corrupt Practices Act prohibits US companies from paying
bribes to foreign government officials to gain business favors and advantages. Other
developed countries don’t have similar restrictive laws, and their companies are perfectly free
to pay such bribes, putting US companies at a disadvantage. Germany, for example,
recognizes bribes paid to foreign government officials and allows these payments as tax
deductions.

As a result, managers of US corporations, who are under pressure to produce profits,

sometimes resort to other means, maybe unethical, to influence foreign government officials.
They may not directly violate the Corrupt Practices Act, but they might come close to it. If
they do pay bribes, they have to find ways to hide the payments in the financial statements.
 The pressure to produce profits strains the ethics codes of these managers to get results and
keep their jobs.

4. Gifts and Favors

Most US corporations have standard written policies regarding the acceptance and amount
allowable of gifts. Managers of foreign operations would like to have clear guidelines, but,
unfortunately, no such standard can be created that crosses the culture and accepted practices
of all foreign countries. Each nation is different.

Gift-giving is acceptable in most cultures, but in others, it may be considered unethical. In

most European countries and Canada, giving a gift gets attention because it isn’t expected. A
German colleague will be particularly appreciative of a small, well-selected gift.

On the other hand, Asian counterparts do expect to receive a gift and will examine it closely
for appropriateness. Certain colors of wrapping should be avoided, and, if a reciprocal gift is
presented, it should never be opened in front of everyone. That’s considered as greedy. A
Japanese businessman expects to be impressed with a gift that reflects the level of his
position. A $25,000 watch would not be unusual for a Japanese executive, whereas, in the
US, a gift of this amount would likely be considered a bribe.

Understanding the local customs of gift-giving is important to doing the right thing instead of
being embarrassed with an inappropriate offer.

5. Using Child Labor

According to data from UNICEF, over 150 million underage children in the world are
working long hours in hazardous conditions. Because they live in highly impoverished
countries, these children are forced to work to provide income for their families. The worst
offenders are Somalia, Pakistan, India, Nigeria and Bangladesh.

Large garment manufacturers are some of the largest users of child labor because many of the
tasks in the supply chain are better done by children rather than adults. Therefore, the large
corporations have an economic incentive to use child labor, and they pretend they are
unaware that the foreign suppliers and subcontractors are employing underage children.

Garment retailers put pressure on suppliers to keep costs down and improve shipping dates.
Suppliers respond by paying low wages to the children and making them work excessive
overtime hours.

6. Human Rights Issues

Children are not the only ones working in deplorable conditions; adults are also affected.

Unlike the United States, many foreign countries deny their citizens the right to assembly,
collective bargaining, strike and even to negotiate for better wages and working conditions.
Many of these countries have weak or no laws for enforcing employee rights, and workers
have few avenues in which to address their grievances for unsafe work conditions.

International businesses face the dilemma of complying with work standards of their home
country versus the lack of such rights in the host countries. Does a corporation try to impose
its own human rights policies on the host country or accept the deplorable conditions?
 In an attempt to establish global standards for human rights related to business activities, the
United Nations created the Guiding Principles on Business and Human Rights.

7. Work Standards and Conditions

An absence of human rights policies can lead to difficulty in imposing work standards and
creating acceptable work conditions.

Performance and quality standards that are well-defined and expected in the US can be
difficult to apply in foreign countries. Incentives for better performance may not exist in
places where employees have little or no hope for receiving higher wages or achieving better
living conditions.

8. Workplace Diversity and Equal Opportunity

Even though much progress has been made in the US in creating a more diverse workforce
and equal opportunity, the same is not true in foreign countries.

Attention has been paid in the United States to create workforces made up of different races,
genders and backgrounds. Corporations work with local schools and colleges to educate and
develop students with the skills needed to fill the jobs demanded in the workplace. Equal
opportunity is a policy offered to anyone who wants to earn a raise or a promotion.

Foreign countries are not as concerned with employee diversity and equal opportunity.
Policies brought by US companies to overseas operations will not always be well-received.

9. Social and Cultural Considerations

Understanding the cultural differences can make the difference between success and failure in
a global market. Each nation has its own distinct customs, history, traditions and code of
ethics.

One barrier is language. Businesses must often rely on translators when communicating with
foreign contacts. Unfortunately, words don’t always carry the same meanings through a
translation, leading to a misunderstanding or misinterpretation of ideas, expressions and
feelings.

Gender is another issue. While the US has more women now in higher business positions, the
same is not true in other countries. Women don’t always receive the same degree of attention
and respect. International companies need to pay attention to the gender hierarchy in other
nations when arranging meetings or designating managers for foreign subsidiaries.

IM/U4 Topic 7 Nature of

International Business Disputes and
Proposed Action
A lot of good came out of globalization in business and trade, giving rise to what is now known as
the “global marketplace”. The globalization of markets and competition was brought about, in large
part, by the high speed of technological advancements.
 As transportation and communication vastly and quickly improved, so did the access of
consumers to products and services, even if they happen to come from different parts of the
globe. International divides and barriers that used to be seen as obstacles to trade have
become manageable, so that even small businesses are now able to sell their products and
services to consumers in other countries.

IMPACTS OF GLOBALIZATION OF TRADE AND BUSINESS

Many positive benefits gained from the globalization of business and trade. Right off the bat,
we can say that the emergence of the global marketplace has resulted in economic growth all
across the globe. Floundering economies have been injected with new life, and already
flourishing economies find themselves prospering even more.

 Easier and faster access of end users and consumers to quality products and services from around
the world. It is no longer impossible or difficult for someone from the United States, for example, to
acquire goods manufactured and sold in Asia, and vice versa.
 Broader selection of products and services enjoyed by consumers. End users are no longer limited
when it comes to choices, since they can look to other countries for the products and services that
they are looking for.
 Increased awareness of business opportunities in different parts of the globe. International
investments definitely get a big boost over this, aside from the fact that aspiring entrepreneurs who
may find their own markets to be lacking in opportunities can look beyond their borders and shores
to find better business opportunities.
 Increase in the quality of products and services. Competition in the global market place spurred
businesses and industries to improve the quality of the products and services that they offer to the
global consumer. They know that, if they do not focus on quality, they will be left behind by their
competitors from other countries.
 Increase in job and income-generating opportunities. Jobs are created as businesses the world over
increasingly become competitive. Earning power of workers are likewise increased while raising their
income levels.

INTERNATIONAL BUSINESS DISPUTES

International disputes are, by definition, major disagreements between two or more countries
on matters such as territory, maritime rights, and human rights, to name just a few. These
disagreements may also be over business, considering how trade and business has joined the
globalization bandwagon.

International disputes, however, are not limited to two or multiple parties disagreeing
actively, because they may also arise from declarations made unilaterally by one country that
are not acknowledged or accepted by other countries.

If these international disputes are not addressed and resolved, they could lead to bigger
problems of global proportions, such as animosity and hostility between and among
countries, tense international relations, or, worse, armed conflicts and wars.

RESOLVING INTERNATIONAL BUSINESS DISPUTES

International trade and business, just like your regular domestic business, faces a lot of risks.
This is why local businesses establish their own sets of risk management strategies. It is no
different in the case of businesses that are engaged in international trade. They are also at risk
of being embroiled in disputes and so they should also come up with ways to manage this
risk. One way to do that is to pay attention to their dispute resolution measures.
 Before you can start resolving an international business dispute, however, it is important to
first have a full understanding of what the dispute is all about. Several types of international
business disputes have been identified.

Types of International Business Disputes

Dispute on the sale of goods or commodities

The dispute could arise from the issues on:

1. Product quality and quantity;

2. Pricing or costing issues;
3. Payment issues, such as the conditions and modes of payment, as well as the timing of these
payments;
4. Transportation or logistics, including the conditions on delivery of commodities or products;
5. Other contractual provisions or stipulations, including how they were presented in a contract. Often,
disputes arise due to vague stipulations and references on written contracts.

Clearly, this type of business dispute can be easily avoided if the contract was prepared
properly and accurately, eliminating any vagueness or ambiguity. Everything should be set
out clearly in order to avoid confusion.

IM/U4 Topic 8 Legal Concepts

Relating to International Business
International Business is terms used to describe all commercial transactions (investments,
sales, private and governmental transactions, transportation and logistics) that take place
between two or more nations or two or more business that operate in different countries.

Typically in International Business, corporations or private companies will undertake deals or

conduct transactions for profit, while governments undertake such business objectives for
political purposes.

International Business is a broad term, which refers to all business activities that involve
cross border transactions of services, goods, and resources between two or more nations.

The transaction of economic resources in International Business include the transfer of

capital, skills, assets, people etc. for the international production of tangible goods and
services. Typically these transactions are conducted for construction, finance, banking, or
insurance purposes.

Companies that engage in International business are referred to international corporations or

multinational enterprises. These companies engage in a worldwide approach to market and
produce goods in multiple nations. Examples of such companies include McDonalds, Yum
Foods, Toyota, the Ford Motor Company, and Samsung.

The International Legal Environment

 Public international law is the system of rules and principles governing the conduct of and
relationships between states and international organizations as well some of their persons.
 Private international law governs relationships between persons and organizations engaged in
international transactions and addresses which laws will apply when the parties are in a legal dispute.
 Foreign law is a law enacted by a foreign country.

International Business law is the scope and practice of law in the global business market.
International Business law includes a direct focus on economics and the law in relation to
international commercial transactions, licensing procedures, tariffs and taxes, and other
intricacies which are used to regulate international transactions between government entities
or multinational enterprises.

International law varies between jurisdictions; the premise elaborates basic business law
concepts by expanding them to an international field.

International law is typically related to trade or commerce that takes place between two
nations or two companies that operate in separate countries. The laws of different
jurisdictions will come into play in each transaction; an analysis of such laws for each
jurisdiction must be observed and understood by the engaging parties prior to the affirmation
of the business deal.

The foundation of international business law is rooted in trade agreements and the laws which
regulate such transactions. Two or more countries, who join together for a specific trade
agreement, must meet the specific regulations instituted by each practicing nation’s
interpretation of international business law.

In addition to trade agreements, international business law will administer, regulate and
subsequently deliver licenses. These licenses are needed to either conduct business in a
foreign nation or are required to partake in a transaction for a specific good or service.
Additionally, licensing requirements will also encompass various intellectual property or
tangible property that is being exchanged between two parties.

For instance, a company operating in one country may develop a specific form of intellectual
property; this company may then produce their product in another country, or may license
other companies the right to produce the product. As each transaction or agreement is
negotiated, the licensing rights and the exchange of property are the fundamental aspects of
international business law and the primary focus of the commercial transaction.

Tariffs, taxes, and other mechanisms which surround a business transaction will vary by
jurisdiction. Typically, there are basic provisions for a country that may be modified by trade
agreements among different nations; these issues must be considered when a party negotiates
each transaction.

IM/U5 Topic 1 International

Promotional Strategies
Companies develop marketing strategies to build a loyal customer base, to build relationships with
those customers and to create value for the customer. Effective product and promotion strategies are
essential in making sure your product is readily accessible in the global marketplace. Special
considerations are necessary when marketing to global customers such as international issues of
technology, transportation and regulation.

The globalization of business has caused multinational companies to spend considerable time
assessing their global product and promotion strategies. A dilemma with both is whether to
present a universal product offering or to customize the product or promotional efforts to
each country of operations.
Extension

A straight product extension is presenting your product to a global marketplace without any
changes. Some products are globally known and need no additional product or promotion
changes. People want the product on a global basis, and once it is made available to them, it
is purchased without having to create any additional marketing or promotion strategies.

Adaptation

Production and promotion adaptation strategies are used in a global market for a product that
may be popular but needs to be adapted to meet local customs and demand. For example,
customers of less affluent countries may need a product of similar quality that has been
downscaled to be more affordable to purchase. Technology products must be altered to meet
the specific language of the country being marketed to.

Invention

Another product and promotion strategy is inventing a new product to meet the needs of a
particular country. For example, consumers in crowded commuting conditions might need a
laptop product that better fits their travel situation, a more compact version of the typical
laptop. This strategy also could take on the form of reinventing a popular product to meet the
needs of a particular country or world region.

Pricing Considerations

Global product and promotion strategies must take into consideration the economic
conditions of the country where products are introduced. For example, a price that might be
discounted in the United States would be considered too high for poorer countries or perhaps
not high enough in rich countries. To combat prices being too high in less affluent countries,
a company could make a smaller or less complex version at a lower price.

Product Standardization

A standardized product strategy is when your business decides to produce and market the
same basic product in all markets. This approach has economies of scale benefits, as it is
much less expensive to design one product and mass produce it to meet global demand.
Standardization works best when your product has the same uses and benefits in each country
or culture. Inability to differentiate to meet different uses or preferences is a challenge with
standardization, especially if your product has variable uses in each market.

Product Customization

Customization as a global product strategy means that you offer product variations or
customized versions of your product in each country or market. A simple example of this is
when movies are presented with subtitles or dubbed voice-overs in markets with different
languages. In other cases, certain features or traits of a product are altered to match the needs
or desires of customers in a given market.

Global Promotion

A global promotion strategy is when your company presents the same basic message of brand
or product value around the globe. This approach ties closely with the standardized product
strategy. The general idea is to present a universal product with benefits that apply to
customers in each targeted marketplace. An advantage of a globalized approach is
consistency, in that customers in each market can identify with your brands as they travel the
world. While the company tailors menus and messages in some instances, McDonald’s has
benefited from a consistent commitment to its global message of efficient, family-friendly
fast food.

International Promotion

An international promotion strategy is when promotional messages vary from one country to
the next or where campaigns are tailored to different regions. This strategy is used with either
the standardized or customized product. With a standardized product that has different uses,
variations in marketing project different benefits or value propositions based on the uses in
each market. With the customized product strategy, promotions are tailored to emphasize the
value of the customized offering in each market. This can generate stronger loyalty in
markets where brands are perceived differently, though the costs are usually greater with
customized promotion.

IM/U5 Topic 2
Communications Process
Marketing communications process consists of integrated activities in which the targeted
audience is identified and a well coordinated promotional program is prepared to generate the
desired response from the audience. Most problems of preferences, image and immediate
awareness in the target customers is focused by the marketing communication. But there are
certain limitations associated with the concept of communication. These limitations include
high cost and short term duration that cannot generate the desired results from the targeted
customers.

In recent years Marketing Communication is used by most of marketers as building customer

relationship at the stages of pre-selling, selling, utilization, and post utilization. Due to
differences in customers, different programs of communications are developed for specific
segments & niches.

Element of Marketing Communication Process

For Effective Communication, the marketer should know how communication works?
Following are the nine elements that are involved in the marketing communication process.
1. Sender

The party or person who is sending the message to the other party or person is the sender.

2. Encoding

The conversion of thought into the meaningful symbols is called encoding.

3. Message

The group of symbols transmitted by the sender is called a message.

4. Media

The channel of communication through which transfers the message from sender to receiver
is called media.

5. Decoding

The conversion of symbols into meaning by the receiver is called decoding.

6. Receiver

The sent message received by another person or party is called the receiver.

7. Response

The reaction shown by the receiver before the message is called response.

8. Feed Back
 The portion of the response of the receiver that is sent back to the sender is called feedback.

9. Noise

The unplanned distortion during the process of communication due to which the receiver
understands the wrong meaning of the original message is called noise.

The effective message is that where the process of encoding is matched with the decoding of
messages. The message sent should be consisted of words and symbols that are known to the
receiver.

MARKETING COMMUNICATION PROCESS STEPS

There are certain steps that should be involved in the effective marketing communication
process. The marketing and promotional activities should focus on these steps in order to
attract a huge portion of long run customers. Following are the steps that make
communication process effective.

1. Identification of the Target Audience

The first step in the effective marketing communication process is to identify the target
audience. These audiences may be potential customers or other people that can influence the
decisions of these customers. The audience may include the individuals, groups, general
public or special public. The audience has a direct effect on the decisions of the
communication, like what to say? How to say? And when to say? Etc.

2. Determination of the Communication Objectives

In this step the marketing communicator should clear the objectives of the communication
process. In most of the situations, the purchase is required by the marketing communicator,
but purchase is made after a prominent customer decision making process. The
communicators should also understand the standing position of the customer. Generally there
are six Stages of Customer Readiness through which a customer pass to make a purchase
which are as follow.

 Awareness
 Knowledge
 Liking
 Preference
 Conviction
 Purchase

The target group of the marketing communicator is not much familiar with the new product
or its silent features. So the marketing communicator should create the awareness and
knowledge of its new product and features. But this is not the surety to the success; the new
product should also provide superior customer value too.

3. Designing of the Message

In this step the marketing communication, communicator focuses upon the design of the
message. Any message that can attract the attention, develop the interest, arousal of desire
and stimulate the action is the effectively designed message. This procedure is best known as
AIDA model that can make any message effective and potential. Besides this the marketing
communicator also decides about the content and structure of the message.
4. Message Content

In this step of the marketing communication process the content of the message is decided.
The theme or an appeal is suggested that can bring the desired response from the audience or
receiver. Following are the three appeals that should be used in this regard.

 Rational appeal: The self interest of the audience is focused on the rational appeal in which the
benefits availed by the usage of the products or services.
 Emotional Appeal: In this case positive or negative emotions are stimulated to encourage the
purchase of the product.
 Moral Appeal: In this situation the morality is included in the message to influence the targeted
customers.

5. Message Structure & Format

In this step the important issues of the message structure together with the message format is
analyzed. In marketing communication of a product, it must be decided that the message must
include the conclusion or may keep to the audience to get a conclusion from them. Or the
massage presents either only the strengths of the product or both the strengths and
weaknesses. Moreover the format of the message is also focused on which the size and shape
use, eye-catching colors, and headlines etc are decided in the most effective manner.

6. Choosing Media

The channels of communication are decided in this step of a marketing communication

process, which may take the following two forms.

 Personal: In this channel of communication two or more persons directly communicate with each
other like face to face, through the mail, on the telephone, or through a chat on the internet.
Personal Addressing and feedback is allowed in the personal communication.
 Non Personal: Non personal messages are spread through these channels which also excludes the
option of feedback. Such channels include print media, display media, broadcast media, online
media etc.

7. Collecting Feedback

This is the last step of the marketing communication process in which the feedback from the
target customers. This can help the marker to alter the promotion program or other marketing
activities. For this purpose the buying behaviour of targeted customers is analyzed in the light
of the new product. Questions may also be asked to the customers to collect their views about
the positive and negative aspects of the new product.

IM/U5 Topic 3 Principles

of Communication
7 Principles of Communication
Following principles of communication make it more effective:

1. Principle of Clarity

The idea or message to be communicated should be clearly spelt out. It should be worded in
such a way that the receiver understands the same thing which the sender wants to convey.
 There should be no ambiguity in the message. It should be kept in mind that the words do not
speak themselves but the speaker gives them the meaning. A clear message will evoke the
same response from the other party. It is also essential that the receiver is conversant with the
language, inherent assumptions, and the mechanics of communication.

2. Principle of Attention

In order to make communication effective, the receiver’s attention should be drawn towards
message. People are different in behaviour, attention, emotions etc. so they may respond
differently to the message. Subordinates should act similarly as per the contents of the
message. The acts of a superior also draw the attention of subordinates and they may follow
what they observe. For example, if a superior is very punctual in coming to the office then
subordinates will also develop such habits. It is said that ‘actions speak louder than words.

3. Principle of Feedback

The principle of feedback is very important to make the communication effective. There
should be a feedback information from the recipient to know whether he has understood the
message in the same sense in which the sender has meant it.

4. Principle of Informality

Formal communication is generally used for transmitting messages and other information.
Sometimes formal communication may not achieve the desired results, informal
communication may prove effective in such situations. Management should use informal
communication for assessing the reaction of employees towards various policies. Senior
management may informally convey certain decisions to the employees for getting their
feedback. So this principle states that informal communication is as important as formal
communication.

5. Principle of Consistency

This principle states that communication should always be consistent with the policies, plans,
programmes and objectives of the organization and not in conflict with them. If the messages
and communications are in conflict with the policies and programmes then there will be
confusion in the minds of subordinates and they may not implement them properly. Such a
situation will be detrimental to the interests of the organization.

6. Principle of Timeliness

This principle states that communication should be done at proper time so that it helps in
implementing plans. Any delay in communication may not serve any purpose rather decisions
become of historical importance only.

7. Principle of Adequacy

The information communicated should be adequate and complete in all respects. Inadequate
information may delay action and create confusion. Inadequate information also affects
efficiency of the receiver. So adequate information is essential for taking proper decisions
and making action plans.

IM/U5 Topic 4 Status of Promotion

 Before a company decides to become global, it must consider a multitude of factors unique to
the international marketing environment. These factors are social, cultural, political, legal,
competitive, economic, and even technological in nature. Ultimately, at the global marketing
level, a company trying to speak with one voice is faced with many challenges when creating
a worldwide marketing plan. Unless a company holds the same position against its
competition in all markets (market leader, low cost, etc.), it is impossible to launch identical
marketing plans worldwide. Thus, global companies must be nimble enough to adapt to
changing local market trends, tastes, and needs.

For global advertisers, there are four potentially competing business objectives that must be
balanced when developing worldwide advertising: building a brand while speaking with one
voice, developing economies of scale in the creative process, maximizing local effectiveness
of advertisements, and increasing the company’s speed of implementation. Global marketers
can use the following approaches when executing global promotional programs: exporting
executions, producing local executions, and importing ideas that travel.

Factors in Global Promotion

To successfully implement these approaches, brands must ensure their promotional
campaigns take into how consumer behavior is shaped by internal conditions (e.g.,
demographics, knowledge, attitude, beliefs) and external influences (e.g., culture, ethnicity,
family, lifestyle) in local markets.

1. Language

The importance of language differences is extremely crucial in global marketing, as there are
almost 3,000 languages in the world. Language differences have caused many problems for
marketers in designing advertising campaigns and product labels. Language becomes even
more significant if a country’s population speaks several languages.

2. Colors

Colors also have different meanings in different cultures. For example, in Egypt, the
country’s national color of green is considered unacceptable for packaging because religious
leaders once wore it. In Japan, black and white are colors of mourning and should not be used
on a product’s package. Similarly, purple is unacceptable in Hispanic nations because it is
associated with death.

3. Values

An individual’s values arise from his or her moral or religious beliefs and are learned through
experiences. For example, Americans place a very high value on material well-being and are
much more likely to purchase status symbols than people in India. In India, the Hindu
religion forbids the consumption of beef.

4. Business norms

The norms of conducting business also vary from one country to the next. For example, in
France, wholesalers do not like to promote products. They are mainly interested in supplying
retailers with the products they need.

5. Religious beliefs

A person’s religious beliefs can affect shopping patterns and products purchased in addition
to his or her values. In the United States and other Christian nations, Christmas time tends to
be a major sales period. In other religions, significant religious holidays may or may not
serve as popular times for purchasing products.

There are many other factors, including a country’s political or legal environment, monetary
circumstances, and technological environment that can impact a brand’s promotional mix.
Companies have to be ready to quickly respond and adapt to these challenges as they evolve
and fluctuate in the market of each country.

Changing the Global Promotional Mix

When launching global advertising, public relations or sales campaigns, global companies
test promotional ideas using marketing research systems that provide results comparable
across countries. The ability to identify the elements or moments of an advertisement that
contribute to the success of a product launch or expansion is how economies of scale are
maximized in marketing communications. Market research measures such as flow of
attention, flow of emotion, and branding moments provide insight into what is working in an
advertisement in one or many countries. These measures can be particularly helpful for
marketers since they are based on visual, not verbal, elements of the promotion.

Considering these measures along with conducting extensive market research is essential to
determining the success of promotional tactics in any country or region. Once brands
discover what works (and what does not) in their promotional mix, those ideas can be
imported by any other market. Likewise, companies can use this intelligence to modify
various elements in their promotional mix that are receiving minimal or unfavourable
response from global audiences.

IM/U5 Topic 5 Promotion Appeals

Top Five Appeals That Advertisers Use to Sell a Product

Commercial, print and online ads use some form of appeal to reach potential customers.
Advertisers use appeal to influence a customer to purchase a product or support a cause.
Appeals speak to an individual’s need, wants or interest and entice him to take the desired
action.

Tip

The most common advertising appeals include use of fear, humor, rational, sex or bandwagon
propaganda.

Fear as a Motivator

Fear appeals focus on the negative outcomes that can happen because of an action or inaction.
Advertisers use fear appeals to promote an immediate behavior change such as eating
healthier or not smoking. Another fear tactic involves isolation. People will purchase a
product to avoid isolation from others because of bad hygiene. Deodorant and toothpaste ads
often employ this tactic.

Government agencies appeal to an individual’s fear of death or incarceration to prevent

drinking and driving. Fear appeals work when the recommended action is specific, effective
and plausible. For example, ads geared toward smokers can be ineffective if the person does
not believe quitting is within reach.

Humour Creates Emotional Connections

Humour appeals make consumers laugh and create an emotional link with the product. A
well-executed humour appeal enhances recollection, evaluation and the intent to purchase the
product. Advertisers link the product with the humour. For example, a humorous insurance ad
hits the mark when the humour shows the consumer why having insurance is beneficial.

Using humour at the expense of one group may lead to resentment. Senior citizens may resent
a product that portrays them as grumpy, while women may refuse to purchase a product that
portrays them as overbearing. Humorous ads work best with established and commonly
purchased products such as cell phones, fast food and alcoholic beverages.

Rational Appeals to the Practical Side

Rational or logical appeals focus on the consumer’s need for practicality and functionality in
a product. Advertisers relay this message by focusing on product features and cost. These ads
tell consumers the benefits associated with the purchase of a product. The advertiser then
provides proof to back up the claims.

An automobile advertisement focuses on gas efficiency, mileage and prices to reach

consumers who want a cost-efficient, reliable vehicle. Household appliance manufacturers
may place emphasis on features that lower home utility costs and protect the environment.
Printed and business-to-business advertisements are better suited for rational appeals.

Sex and Sensuality Sell

Sex appeals capture attention, but seldom promote product consumption. Effective sex appeal
ads convey a specific message to the target demographic group. Beer advertisers often use
sex appeal to promote their product to men. The typical scene involves several young,
average-looking men in a bar. The men purchase the beer and gain the attention of an
attractive young woman.

Fragrance products use sex appeal to convey romance to women by indicating the use of the
product will help her find the man of her dreams. Generally done by showing the woman
spraying the fragrance and then capturing the attention of an attractive male who passes her
on the street. Overly overt images subtract from the overall message the advertiser wants to
convey.

Fear of Missing Out

A bandwagon appeal makes consumers believe they are missing out by addressing the
consumer’s need to belong. Food and drink ads show hip young adults enjoying a product
and ignoring the individual who chooses the less popular product. Medical products show
consensus by indicating the number of medical professionals who support the product. For
example, a cold medicine ad may say, “Eight out of 10 doctors recommend this product” to
show product effectiveness.

Automobile dealers and cell phone providers give sales and user statistics to indicate why
their product is the more preferred. This type of message says buy this product because
everyone does. If done correctly, the consumer will purchase the product. Bandwagon
appeals can backfire in that the consumer’s desire to fit in can conflict with the ability to
make a rational decision.

IM/U5 Topic 6 Media Selection

When deciding which media to select for promotional purposes, firms must consider a
number of factors in order to maximize the effectiveness of their marketing campaigns.

Budget

What is your overall budget for advertising? Will your budget give you the coverage you
want? A firm that has a limited budget for advertising will limit the amount of coverage
certain media can provide. You will need to strike a balance between budget and coverage.

Campaign Objectives

One factor that will influence the budget and coverage question is the objective of the
campaign. If the objective is to raise the brand awareness of the firm amongst the teenage
market then this will influence any decisions you make above. You may need to spend a little
more on certain publications in order to meet your objectives.

Target Audience

The media you selected is obviously influenced by the target audience. A firm must select
media that the target audience is associated with e.g. the magazines or paper that they read, or
the social networking site they use.

Focus

What is the message focus going to be? Will the message be emotional and work on guilt or
will the message be clear cut and say why the firm is better than the leading player?

Readership of Media

What is the readership of the media you wish to select? Readership is the number times a
publication has been read, so if I pick up newspaper on the train, read it and leave it on the
train and that same newspaper has been read by 10 other commuters, the readership in total is
11.

Circulation of Media
A firm will need to find out what the overall circulation of the media chosen is. So how many
publications are sold, and exactly who reads them.

Timing

When do you want the advertising campaign to start? Is it specific to a particular time of the
year e.g. Easter or Christmas?

So when selecting your media for advertising you need to take into account all of the above
factors into account to maximise the success of your advertising campaign. The importance
of a particular factor will depend on the campaign in question so it will be important to
prioritise the list in a manner that suits you and your campaign.

IM/U5 Topic 7 Personal Selling –

Purpose, Types, Limitations
Personal selling happens when companies and business firms send out their salesmen to use
the sale force and sell the products and services by meeting the consumer face – to – face.
Here, the producers promote their products, the attitude of the product, appearance and
specialist product knowledge with the help of their agents. They aim to inform and encourage
the customer to buy, or at least trial the product.

For example, salesmen go to different societies to sell the products. Another example is found
in department stores on the perfume and cosmetic counters. A customer can get advice on
how to apply the product and can try different products. Products with relatively high prices,
or with complex features, are often sold using personal selling. Great examples include cars,
office equipment (e.g. photocopiers) and many products that are sold by businesses to other
industrial customers.

Types of Personal Selling

Retail Selling: Retail selling the product the consumers through retail store or door to door
visit .in door sales persons work at the store and they deal with the customers visiting the
sorters and outdoor sales personal visit the potential costomers in their homes or offices and
persuade them to buy the product.

Trade Selling: It involves selling the product to the retailers and wholesellers trade saales
personal made regular contact to the wholeseller and retailers and receved bulk order from
them, trade sales personal work either for wholeseller or manufactures.

Missionary Selling: In missionary selling missionary sales personal create demand for the
product they do not directly sales the product .they visit retial staores and incourage them to
place orders from the deailers and wholesellers they work for manufactures.

Industrial Selling: It involves selling the capital item like equipment ,machineres to the
industrial users ,industrial sales personal are useually very well educated experience and train
people they provides technical information and assitances.

Advantages of Personal Selling

 It is a two-way communication. So the selling agent can get instant feedback from the prospective
buyer. If it is not according to plan he can even adjust his approach accordingly.
 Since it is an interactive form of selling, it helps build trust with the customer. When you are selling
high-value products like cars, it is important that the customer trusts not only the product but the
seller also. This is possible in personal selling.
 It also is a more persuasive form of marketing. Since the customer is face to face with the
salesperson it is not easy to dismiss them. The customer at least makes an effort to listen.
 Finally, direct selling helps reach the audience that we cannot reach in any other form. There are
sometimes customers that cannot be reached by any other method.

Disadvantages of Personal Selling

 It is a relatively expensive method of selling. High capital costs are required.

 Also, it is an extremely labour intensive method. A large sales force is required to carry out personal
selling successfully.
 The training of the salesperson is also a very time consuming and costly.
 And the method can only reach a limited number of people. Unlike TV or Radio ads it does not cover
s huge demographic.

Merits:
The strength of personal selling is measured in terms of the merits to its credit as a distinct
form of promotion. These are:

1. Flexibility and adaptability:

Personal selling by its very nature is capable of providing more flexibility, being adaptable. A
salesman can adjust’ himself to the varying needs, moods, motives, impulses, attitudes and
other behavioural variables of the prospects with a view to communicate effectively and
effect the sales for the unit.

2. Minimum waste:
The efforts put in by the salesman are highly focused on a single customer or a small group of
customers. The message is likely to reach them without distortion and diffusion. This is
perhaps the greatest merit in contrast to advertising where the ad message is released en-
masse resulting in message diffusion and distortion causing more wastage or promotional
efforts.

3. Acts as a feed-back:
The salesman is, in effect, a researcher. Being in direct contact with the consumers, he has the
advantage of collecting and transmitting the relevant market information affecting his
company.

Such timely, authentic and verifiable data is the basis of vital decisions, strategies, and
tactical adjustments. Thus, he feels the pulse of the market that is ever changing.

4. Creates lasting impression:

The personal selling process is so direct and penetrating that lasting business relation can be
developed between the selling house and the clientele. In case of advertising, it acts like a
flash of a thunder-bolt from the blue. The light though very powerful, lasts only for a few
seconds. The light of salesmanship is like an electric current that lasts longer.

5. Pulls through logical sequence:

The personal selling follows a logical selling process which matches to the reasoning of one
and all. A salesman pulls through the customer in the step-by-step selling process starting
 with attention and ending with satisfaction with interest, desire, conviction and action
juxtaposed between.

Further, he detects loss of consumer attention and interest and brings the consumer back to
the track by repetitions and reinforcements.

Limitations:
However, all is not well with process of personal selling. There are certain limitations which
one should take into account before giving the conclusion as to its real worth.

1. It is expensive:

Personal selling as a method of promotion is quite expensive. Getting salesman is one thing
and retaining him for long is another. Further, there are no definite correlations between his
stay and cost of retaining and the contributions of his, in return, to the firm, for such costs.

2. Difficulty of getting right kind of salesmen:

Though, theoretically certain guidelines are prescribed for getting right kind of salesmen
from the potential candidates, it is really very difficult to get suitable salesmen from
company’s point of view. The potential salesmen so selected, trained and placed, do not
guarantee loyal service to the company.

3. Stake in consumer loyalty:

Personal selling is such a process-direct and close between the customer and salesman that
the consumer loyalty depends on the presence of such a salesman. The firm’s fortunes are
tied to the loyalty of consumers which, in turn, depends on the very presence of salesman.
The moment the salesman moves out, the clientele drops down to the detriment of the firm.

4. More administrative problems:

Personal selling involves more of administrative problems than impersonal selling. Since, the
firm is to deal with manpower a driving force behind sales the company has to meet the
challenges in the areas of manpower-planning, organizing, directing, coordinating,
motivating and controlling. The solutions to these problems, even if found out, are not
everlasting because, human content in management is unique.

IM/U5 Topic 8 Publicity and

Public Relations
Publicity
Publicity is defined as the way of disseminating information to the public at large, through
media. It can be in the form of news, stories, event information or write-ups, that creates
awareness and credibility in the people regarding a brand, product or the company offering
them.

Publicity aims at spreading the information or news, to the maximum number of people, in
minimum time. It is a non-paid form of communication, which is not under the control of the
company. It can be a positive review regarding a product, i.e. mobile, television, refrigerator,
etc. given by a satisfied customer, or information published in the newspaper regarding the
quality-rich services provided by a company, or it can be a simple word of mouth, etc.
 In a nutshell, publicity has nothing to do with the company’s sales; it is all about creating
awareness in general public through editorial or unbiased comments concerning a product.

Public Relations
Public Relations can be understood as the strategic management tool, which helps an
organization to communicate with the public. Here, ‘public’ means the group of people that
have an interest in or impact on a company’s ability to achieve business objectives. It is not
only concerned with getting public attention, but it also aims at reaching the goals of the
organization, by communicating the message to the target audience. It includes press releases,
crisis management, social media engagement, etc.

Public Relations is all about maintaining the positive image of the company in the eyes of the
public and developing strong relationships with them. It encompasses a range of programs
organised by the company to promote its product and services. There are many companies,
which have public relations department, which looks after the attitude of the appropriate
public and also spread information to them, to increase the goodwill.

The functions performed by the public relations department include press relations, corporate
communications, counselling, product publicity, etc.

Key Differences between Publicity and Public Relations

The difference between publicity and public relations can be drawn clearly on the following
grounds:

1. Publicity can be described as public visibility, wherein news or information is communicated to the
general public so as to build credibility or awareness in them, with the help of a channel, i.e. mass
media. On the other extreme, the term public relations, as the name suggest, is a strategic
management tool, that aims to create a company’s positive image in the eyes of the public.

2. While publicity is not under the control of the company, public relations is fully under the company’s
control.

3. Publicity can be positive or negative, in the sense that it can be positive or negative feedback
regarding the product or service concerning a product given by the customer or controversial news
about the company. Conversely, public relations is always positive, because it is strategised and
managed by the public relations department of the company.

4. Publicity is free of cost; as it is made by the third party. As against, in case of public relations, the
company incurs money to organize events, sponsor programs, third-party endorsement, etc.

5. Publicity involves, gaining the attention of the media, that communicates any information or news,
regarding a product, service, person, organization, etc. so as to create awareness in people. In contrast,
public relations seek to attract the target audience, for the purpose of boosting the company’s sales.
CONCLUSION

By and large, publicity and public relations are different from one another, as in publicity is
when someone or something is being noticed by the media, and people are informed about it.
Unlike, public relations, is all about taking such steps, to maintain a good relationship with
the interested public, which includes customers, government, shareholders, creditors,
suppliers, government, etc.

IM/U5 Topic 9 Sales Promotion

Sales Promotion is one of the elements of the promotional mix. (The primary elements in the
promotional mix are advertising, personal selling, direct marketing and publicity/public
relations). Sales promotion uses both media and non-media marketing communications for a
pre-determined, limited time to increase consumer demand, stimulate market demand or
improve product availability. Examples include contests, coupons, freebies, and loss leaders,
point of purchase displays, premiums, prizes, product samples, and rebates.

Sales promotions can be directed at either the customer, sales staff, or distribution channel
members (such as retailers). Sales promotions targeted at the consumer are called consumer
sales promotions. Sales promotions targeted at retailers and wholesale are called trade sales
promotions.

Sales promotion includes several communications activities that attempt to provide added
value or incentives to consumers, wholesalers, retailers, or other organizational customers to
stimulate immediate sales. These efforts can attempt to stimulate product interest, trial, or
purchase. Examples of devices used in sales promotion include coupons, samples, premiums,
point-of-purchase (POP) displays, contests, rebates, and sweepstakes.

Sales promotion is implemented to attract new customers, to hold present customers, to

counteract competition, and to take advantage of opportunities that are revealed by market
research. It is made up of activities, both outside and inside activities, to enhance company
 sales. Outside sales promotion activities include advertising, ppublicity,
ublicity, public relations
activities, and special sales events. Inside sales promotion activities include window displays,
product and promotional material display and promotional programs such as premium awards
and contests.

Advantages of Sales Promotions

The main advantages in using sales promotional activity, either alone or to support
mainstream marketing activity and communications, are:

(i) Very flexible and adaptable in terms of tackling specific problems or supporting
mainstream marketing communications Bata national or local level

(ii) Capable of specific action through specific focus and structure

(iii) Relatively short lead times to design and implement (compared with media
communications)

(iv) Often more easy to monitor the effect or ta

tangible results

(v) Economical and cost saving, possibly with economies of scale

(vi) Can be adapted to large and small markets, major or minor products or brands.

11 Important Techniques of Sales Promotion

1. Rebate

Under it in order to clear the excess sto

stock,
ck, products are offered at some reduced price. For
example, giving a rebate by a car manufacturer to the tune of 12,000/
12,000/- for a limited period of
time.

2. Discount

Under this method, the customers are offered products on less than the listed price. For
example,
le, giving a discount of 30% on the sale of Liberty Shoes. Similarly giving a discount
3. Refunds

Under this method, some part of the price of an article is refunded to the customer on
showing proof of purchase. For example, refunding an amount of 5/- on showing the empty
packet of the product priced 100/-.

4. Product Combination

Under this method, along with the main product some other product is offered to the
customer as a gift. The following are some of the examples:

5. Quantity Gift

Under this method, some extra quantity of the main product is passed on as a gift to the
customers. For example, 25% extra toothpaste in a packet of 200 gm tooth paste. Similarly, a
free gift of one RICH LOOK shirt on the purchase of two shirts.

6. Instant Draw and Assigned Gift

Under this method, a customer is asked to scratch a card on the purchase of a product and the
name of the product is inscribed thereupon which is immediately offered to the customer as a
gift. For example, on buying a car when the card is scratched such gifts are offered – TV,
Refrigerator, Computer, Mixer, Dinner Set, Wristwatch, T-shirt, Iron Press, etc.

7. Lucky Draw

Under this method, the customers of a particular product are offered gifts on a fixed date and
the winners are decided by the draw of lots. While purchasing the product, the customers are
given a coupon with a specific number printed on it.

On the basis of this number alone the buyer claims to have won the gift. For example, ‘Buy a
bathing soap and get a gold coin’ offer can be used under this method.

8. Usable Benefits

Under this method, coupons are distributed among the consumers on behalf of the producer.
Coupon is a kind of certificate telling that the product mentioned therein can be obtained at
special discount.

It means that if a customer has a coupon of some product he will get the discount mentioned
therein whenever he buys it. Possession of a coupon motivates the consumer to buy the
product, even when he has no need of it.

Such coupons are published in newspapers and magazines. Some companies distribute
coupons among its shareholders. Sellers collect the coupons from the customers and get the
payment from the company that issues the same.

9. Full Finance @ 0%

Under this method, the product is sold and money received in installment at 0% rate of
interest. The seller determines the number of installments in which the price of the product
will be recovered from the customer. No interest is charged on these installments.

10. Samples or Sampling

 Under this method, the producer distributes free samples of his product among the
consumers. Sales representatives distribute these samples from door-to-door.

This method is used mostly in case of products of daily-use, e.g., Washing Powder, Tea,
Toothpaste, etc. Thus, the consumers willy-nilly make use of free sample. If it satisfies them,
they buy it and in this way sales are increased.

11. Contests

Some producers organize contests with a view to popularizing their products. Consumers
taking part in the contest are asked to answer some very simple questions on a form and
forward the same to the company. The blank form is made available to that consumer who
buys the product first.

IM/U5 Topic 10 Advertising-

Definition and Importance
Advertising is the best way to communicate to the customers. Advertising helps informs the
customers about the brands available in the market and the variety of products useful to them.
Advertising is for everybody including kids, young and old. It is done using various media
types, with different techniques and methods most suited.

Objectives of Advertising

1. Trial
2. Continuity
3. Brand switch
4. Switching back

Let’s take a look on these various types of objectives.

1. Trial: The companies which are in their introduction stage generally work for this objective. The trial
objective is the one which involves convincing the customers to buy the new product introduced in
the market. Here, the advertisers use flashy and attractive ads to make customers take a look on the
products and purchase for trials.
2. Continuity: This objective is concerned about keeping the existing customers to stick on to the
product. The advertisers here generally keep on bringing something new in the product and the
advertisement so that the existing customers keep buying their products.
3. Brand switch: This objective is basically for those companies who want to attract the customers of
the competitors. Here, the advertisers try to convince the customers to switch from the existing
brand they are using to their product.
4. Switching back: This objective is for the companies who want their previous customers back, who
have switched to their competitors. The advertisers use different ways to attract the customers back
like discount sale, new advertise, some reworking done on packaging, etc.

Basically, advertising is a very artistic way of communicating with the customers. The main
characteristics one should have to get on their objectives are great communication skills and
very good convincing power.

Importance of Advertising
Advertising plays a very important role in today’s age of competition. Advertising is one
thing which has become a necessity for everybody in today’s day to day life, be it the
producer, the traders, or the customer. Advertising is an important part. Lets have a look on
how and where is advertising important:

1. Advertising is important for the customers

Just imagine television or a newspaper or a radio channel without an advertisement! No, no

one can any day imagine this. Advertising plays a very important role in customer’s life.
Customers are the people who buy the product only after they are made aware of the products
available in the market. If the product is not advertised, no customer will come to know what
products are available and will not buy the product even if the product was for their benefit.
One more thing is that advertising helps people find the best products for themselves, their
kids, and their family. When they come to know about the range of products, they are able to
compare the products and buy so that they get what they desire after spending their valuable
money. Thus, advertising is important for the customers.

2. Advertising is important for the seller and companies producing the products

Yes, advertising plays very important role for the producers and the sellers of the products,
because

 Advertising helps increasing sales

 Advertising helps producers or the companies to know their competitors and plan accordingly to
meet up the level of competition.
 If any company wants to introduce or launch a new product in the market, advertising will make a
ground for the product. Advertising helps making people aware of the new product so that the
consumers come and try the product.
 Advertising helps creating goodwill for the company and gains customer loyalty after reaching a
mature age.
 The demand for the product keeps on coming with the help of advertising and demand and supply
become a never ending process.

3. Advertising is important for the society

Advertising helps educating people. There are some social issues also which advertising deals
with like child labor, liquor consumption, girl child killing, smoking, family planning
education, etc. thus, advertising plays a very important role in society.

IM/U5 Topic 11 E- Marketing

Online marketing can be a powerful and cost effective means of promoting your products
and services to an international target market.

There are several facets to setting up a successful international online presence and
performing ongoing targeted campaigns. We can provide a full solution tailored to your
needs, incorporating some or all of the following services, and can provide support on an
ongoing basis.

International Web Landing Pages

The first step in marketing to an international audience is to create a landing page, and a
different page will be created for each target country.

Creating an international landing page has many benefits:

 It will become the focus for the target country’s marketing communications.
 Increased visibility in a country’s search engine results.
 Cost effective method in starting the international marketing process.
 Providing a link back to your main website ensuring this too reaches a wider audience
 May form the precursor event before future investment is made in a specific market entry

There are many different options in developing a landing page, and we treat every case
individually.

 Create a simple landing page based on a pre-designed template with the addition of a company logo
 Copy existing online design from a current UK website
 Design and develop a full bespoke website designed to appeal to the local market

We can also provide an option to translate the landing page text to the local language using
experienced translators.

A top-level domain name for the target country is required for international Search Engine
Optimisation (SEO) – such as .pl (Poland) and .in (India.) Ideally the website should be
hosted in the target country too, partly for download speed and for a small SEO benefit.

SEO is the method of improving a website’s visibility within search engines’ natural
listings. It is a proven method for driving visitors to a website, and will result in more
conversions and completed calls to action.

Inbound International Marketing

 Inbound marketing is the process of making a company easy to be found online, partly by
creating interesting content and promoting it through social media channels. It combines SEO
and Social Media Marketing to create a powerful marketing toolset.

Social Media Marketing is the method of promoting a brand through social media channels
such as Facebook, Twitter, LinkedIn and many others. The benefits of Social Media
Marketing are far reaching, as not only can the user learn about a business without visiting a
website, it increases visitors to the site and boosts natural search engine rankings.

Video Production
A video can be very effective at quickly describing your brand and products / service, both on
a website and for inbound marketing benefits through YouTube and other video channels.
Google looks favourably at videos for its organic search results, and videos placed within a
website holds attention and increases conversions.

A video can become an even more powerful tool in an international context as it can be more
compelling than words alone.

We can produce videos from simple productions using still images and text, to full
productions using local camera crews.

International Email Marketing

Sending branded emails to an opted-in list is an Outbound Marketing process, as it is a direct

communication to an audience. It can be a very effective communication method if the
recipients are expecting an email and the content is engaging.

Paid Advertising

Google and Facebook both provide targeted paid advertising, and are an instant way to reach
an intended audience.

IM/U5 Topic 12 International E-

tailing: Concept, Types & Benefits
The Electronic Retailing also called as e-tailing or internet retailing, is the process of selling
the goods and services through electronic media, particularly the internet. Simply, the sale of
retail goods and services online is called as electronic retailing.

It follows the B2C business model wherein the business interacts directly with the customers
without the involvement of any intermediaries.

The e-retailers can be of two types:

 Pure Play e-retailers such as Amazon, that emerged as the online bookseller. It is present only online
and do not have any physical outlet for the customers.
 Brick and click e-retailers such as Dell, that sells computers through the internet as well as has the
physical store front for the customers.

Advantages of Electronic Retailing

1. Through electronic retailing, customers can save both the efforts and time.
2. The wide range of products is available online, so the comparison can be made easily before the
purchase.
3. The customer can shop anytime and from anywhere, the facility is available 24*7
4. The huge discounts can be availed while shopping online.
5. The detailed information about the product is available online; that helps the customer to make the
purchase decision.
6. The electronic retailing offers the easy payment terms such as payment on delivery that instigate the
customer to shop online.

Disadvantages of Electronic Retailing

1. The customers may not be sure of the quality of the products offered online.
2. It is the tendency of every individual to bargain before making the final purchase, but this quotient is
missing in electronic retailing.
3. Also, the customers may not trust on the payment gateways and fear the misuse of credit cards or
any other mode of payment.
4. Every customer wants to see and feel the product that he purchases, but it is not possible in case of
electronic retailing where the customer makes the decision just by looking at the image.
5. The product is not readily available; the customer has to wait for some time to get the product in his
hands.
6. The customer misses the emotional attachment with the seller that leads to less faith on the
offerings.

The electronic retailing is the subset of E-Commerce that means, E-commerce is

the principle domain that includes the e-tailing operations.

IM/U5 Topic 13 International

Market Segmentation
AKTUTHEINTACTONE3 MONTHS AGO 1 COMMENT

International Market segmentation is a marketing strategy which involves separating a

wide target market into subsets of customers, enterprises, or nations who have, or are
perceived to have, common requirements, choices, and priorities, and then designing and
executing approaches to target them.

International Market segmentation approaches are basically used to identify the target clients,
and provide assisting data for marketing plan components like positioning to get certain
marketing plan objectives.

Businesses may discover product differentiation approaches, or an undifferentiated approach,

including specific goods or product lines relying on the precise demand and attributes of the
target segment.

The most common forms of market segmentation practices are as follows:

1. Geographic Segmentation

Dealers can segment market according to geographic criterion that is nations, states, regions,
countries, cities, neighborhoods, or postal codes. The geo-cluster strategy blends
demographic information with geographic data to discover a more precise or specific profile.
 For example, in rainy areas dealers can easily sell raincoats, umbrellas and gumboots. In
winter regions, one can sell warm clothing.

A small business product store focuses on customers from the local neighborhood, while a
larger departmental store focuses its marketing towards different localities in a larger city or
region. They neglect customers in other continents. This segmentation is very essential and is
marked as the initial step to international marketing, followed by demographic and
psychographic segmentation.

2. Demographic Segmentation

Segmentation on the basis of demography relies on variables like age, gender, occupation and
education level or according to perceived advantages which an item or service may provide.

An alternative of this strategy is called firmographic or character based segmentation. This

segmentation is widely used in business to business market. It’s estimated that 81% of
business to business dealers use this segmentation.

According to firmographic or character based segmentation, the target market is segmented

based on characteristics like size of the firm in terms of revenue or number of employees,
sector of business or location like place, country and region.

3. Behavioral Segmentation

This divides the market into groups based on their knowledge, attitudes, uses and responses
to the product.

Many merchants assume that behavior variables are the best beginning point for building
market segments.

4. Psychographic Segmentation

Psychographic segmentation calls for the division of market into segments based upon
different personality traits, values, attitudes, interests, and lifestyles of consumers.

Psychographics uses people’s lifestyle, their activities, interests as well as opinions to define
a market segment.

Mass media has a dominating impact and effect on psychographic segmentation. To the
products promoted through mass media can be high engagement items or an item of high-end
luxury and thus, influences purchase decisions.

5. Occasional Segmentation

Occasion segmentation is dividing the market into segments on the basis of the different
occasions when the buyers plan to buy the product or actually buy the product or use the
product. Some products are specifically meant for a particular time or day or event. Thus,
occasion segmentation helps identify the customers’ various reasons to buy a particular
product for a particular and thus boosts the sale of the product.
 IM/U5 Topic 14 Pricing and
Promotional Strategies in E-tailing
5 eCommerce Pricing Strategies
Cost-Plus Pricing
This strategy entails the retailer placing a mark-up on top of the wholesale cost of the product
that they paid for. This is also known as Keystone Pricing. If you are experiencing slow
inventory turnover online, have substantial shipping and handling costs, and own products
that are scarce, you may be able to provide a higher markup in price. Cost-Plus Pricing
ensures that you are implementing an ample profit margin at all times. For
example, McMaster-Carr is a supplier of industrial and commercial facilities worldwide,
specializing in next day delivery of Maintenance, Repair and Operations materials and
supplies.

Target Return Pricing

This price strategy includes a goal for a return on cost. You can determine a price that yields
its target rate of return on investment. The product of desired rate of return and the capital
invested provides the required total return, and hence the desired return on investment. A
disadvantage of this strategy is that it does not take into account price elasticity and
competitor pricing. The manufacturer would need to consider different pricing scenarios and
estimate the probable impact on sales volume and profits. Grainger is a leading B2B E-
Commerce site and the largest retailer of maintenance, repair and operations supply on the
web. In addition to monitoring competitors on their pricing patterns, Grainger has a specific
expectation on target return that they look to obtain from their products, particularly on
products in which they can drive larger profit margins.

Value-Based Pricing
The pricing strategy entails pricing a product or service to appeal to customers over
alternative products or competing prices. It takes into account a very deep understanding of
customer value. Value-Based Pricing establishes prices for products and services largely on
perceived value. This strategy works best for products that have a highly emotional
component or that exist in a controlled environment. The cost of production of products,
shipping, tariffs and other expenditures dictate how you price your product and how your
competitors price their product. At a very basic level, this strategy depicts the intersection
between supply and demand in the marketplace. The pricing should reflect the value that
customers feel the whole product and service package is worth, and hence takes into
consideration all products in the marketing mix. This model may be best suited for your
brand if you:

 Have an existing cult-like follower base

 Are an established brand known for quality in the marketplace
 Sell your product in a controlled environment

For example, Under Armour is a consumer products use case in which the company leverages
value-based pricing for their product lines. Under Armour is confident that its customers will
pay for the value they perceive they are obtaining through the integrity of the product and
brand, and not based on competitive influence or target return. Hence, they are able to price
according to this value perceived by the customer:
Competitive Pricing
This pricing strategy is the practice of setting a price based on what your competition charges
for similar goods or services. It results in a narrow gap between cost and profit. When a good
or service is offered by many vendors at a relatively similar price, you can charge
competitively. For instance, a computer retailer can decide to sell hardware at a loss if they
can sell their software or services for a higher margin order to capture the sale and result in a
projected positive lifetime customer value. For example, CDW Corporation is a B2B use case
in which the company sells technology products with solutions and services for the business,
government and education markets. They utilize competitive based pricing very well. Users
can select from a variety of large screen monitors for example, which are also offered my
competitors in the marketplace including some Apple, Dell and Insight Enterprises. Hence,
CDW has to monitor competitor’s pricing strategies very closely in order to win business
from it’s clientele.

Lead Generation Model

This strategy is the practice of engaging users to actively request additional information
online. As pricing is contingent upon terms and conditions stipulated in pre-determined
contracts, this strategy ensures that the visitor does take action and click to request
information expecting to hear back from a sales representative in regards to product details
and pricing terms. Users can adopt this strategy online if they require a portal login for their
customized pricing needs.

For example, Neopost USA is a B2B use case powered by the Apttus E-Commerce solution
in which the a leading provider of mailing, business communications management and
shipping hardware and software solutions worldwide, engages visitors to request information
and learn about their solutions further online. Neopost USA deploys lead generation as each
of their clients has unique pricing depending on terms and conditions stipulated upfront in
their contract. Hence, Neopost requires their users to login to their portal to view their
negotiated pricing terms prior to purchasing: