Presentation on theme: "786 A Brief Overview Of International Marketing By:M.Iqbal Mehdi"— Presentation transcript:
1 786 A Brief Overview Of International Marketing By:M.Iqbal Mehdi (Freelance Manager Marketing and Sourcing Consultant)
2 What is a MarketMarket is a place where buyers and sellers gather for transactions which involves the exchange of goods and services.
3 What is Marketing? A Philosophy An Attitude A Perspective A Management OrientationPlusA Set of Activities, including:-Products-Pricing-Promotion-Place (Distribution)
4 Marketing Objectives Increase sales volume Increase growth rate Increase market shareIncrease market penetrationMaximize Return on InvestmentPromote positive company imagePromote social responsibility
5 Definition of International Marketing At its simplest level, international marketing involves the firm in making one or more marketing mix decisions across national boundaries.At its most complex level, it involves the firm in establishing manufacturing facilities overseas and coordinating marketing strategies across the globe.
6 International vs Domestic Marketing Difference from domestic marketing is as much as exchange takes place beyond the frontiers.Involves different marketing and consumers who might have different needs, wants & behavioural attributes.Existence of more than one market necessarily complicates the marketing process.Since the countries are sovereign and dependent, the respective Governments enact legislations for the control of foreign trade.International marketing, is essentially similar to domestic marketing.
7 International vs Domestic Marketing – cont’d Marketing can be conceived as an integral part of two processes:- Technical- SocialTechnically both international and domestic markets are identical. (Technical includes non-human factors such as Product, Price, Cost, Brands etc.)Social aspect is unique in any given stratum (level), because it involves human element namely the behaviour pattern of consumers and the given characteristics of a society, such as customs, attitudes, values etc. Hence it is obvious that marketing to the extent it is visualized as a social process, will be different from domestic marketing.
8 International vs Domestic Marketing – cont’d The barriers imposed by Govt are both visible and invisible. So it is important to make trade, free from those barriers.Even if there is complete free trade, logistic may create problems totally different from those experienced in domestic operations.Foreign Exchange Regulation which does not effect domestic sales, have considerable impact on financing of overseas Sales and Operations.As human needs and wants have different attributes in foreign markets, perception of those needs will require an overall appreciation of the environment, and the social & individual value systems.
9 Scope of International Marketing Different Legal Systems:Different Legal systems in different countries make the businessman task more difficult as they are not sure as to which particular system will apply to their transactions:Uniformity is being saught forIncoterms Uniform Customs and Practice of documentary credit developed by the international chamber of commerce is one such example.Different Monetary Systems:Each country has it’s own monetary system and their exchange value differExchange rates keep fluctuating and are determined by forces of supply & demandSome also operate on multiple exchange rates and each exchange rate is applicable on certain set of transactions.
10 Scope of International Marketing - contd Lower Mobility of Factors of Productions:- Factors of productions are less mobile between nations than in the country itself.However due to advent of Air transport, mobility of labour is nowincreasing.Due to development of international banking and removal of restrictionson capital movements, capital has also become more mobile.Difference in market characteristics:Each country is a separate market having its own- Demand patternChannels of distributionsMethods of promotionsThese difference are accentuated due to the existence of Governmentcontrol and regulations.Difference in Procedures and Documentation
11 Scope of International Marketing - contd Greater degree of risks involved in Int’l marketing due to:- Larger volumes of transactions and the highervalues of these transactions.- Longer period involved in these transaction dueto longer time in transit and long credit periodinvolved.- Comparatively less knowledge about the parties’reputation and credibility, and- Exchange fluctuation risks.Cultural Dimensions of International Marketing:- Cross cultural environment - Makes marketing task morecomplex.- Culture though very commonly used term, is not, however, easyto define.
12 Impact of Global Issues on International Marketing The economic, political and social changes that have occurred over thelast decade have dramatically altered the landscape of global business.Consider the present and future impact of the following:The ever present threat of global terrorism after 9/11 attack.Major armed conflicts in sub-Sahara Africa and the Middle East.The emerging markets in Eastern Europe, Asia and Latin America, where more than 75 % of the growth in world trade over the next 20 years is expected to occur.The reunification of Hong Kong, Macau and China which finally puts all of Asia under the control of Asians for the first time in over a century.The European Monetary Union and the successful switch from local country currencies to one monetary unit for Europe, the Euro.The growth of middle income households the world over.
13 Impact of Global Issues on International Marketing – cont’d The continued strengthening and creation of regional market groups such as the European Eunion (EU), the North American Free Trade Area (NAFTA), ASEAN Free Trade Area (AFTA), the Asian Pacific Economic Cooperation (APEC).General Agreement on Tariff and Trade (GATT) and creation of the World Trade Organization (WTO) with China and Taiwan as new members.The restructuring, reorganizing and refocusing of companies in telecom, entertainment and biotechnology.The continuing integration of the internet into all aaspects of the companies’ operations and consumers’ lives.These are not simply news. These changes affect the businesses world-wide, and they mean that companies will have to constantly examine theway they do business and remain flexible enough to react rapidly tochanging global trends to be competitive.
14 International Marketing Environment Economic – stage of developmentSocio-Cultural – customs, tastes, preferencesDemographic – size, age, households, incomePolitical – parties, platforms, controlGovernment – nature, policiesTechnological – breakthroughs, diffusion. Stage of development classification also consists of – low income, middle, high income economies14
15 Reasons for Going International ProfitGrowth OpportunitiesDomestic Market ConstraintsCompetitionGovernment Policies and RegulationsMonopoly PowerSpin-Off BenefitsStrategic VisionGlobalizationCapacity Surplus15
16 Reasons for Going International cont’d Profit:- Increase Sales- Reduce Costs – cheap labor, free trade agreements- Increase Profit MarginsGrowth Opportunities:- Short-Term Growth – Developed market base in ForeignMarket – US, Singapore, EU, UK.- Future Growth Potential – emerging marketsDomestic Market Constraints:- Insufficient Economies of Scale – stable market share indomestic market.- Recession in Domestic Market – reduce economic risk,16
17 Reasons for Going International cont’d Competition:- Economic Liberalization – reduction in domestic protectionand trade barriers.- Counter International Competition – change in businessstrategy.Government Policies and Regulations:- Export Promotion Policies - incentives- Foreign Direct Investment Policies – restrictions eliminated- Environmental Regulations – may be less stringent- Trade Agreements – EU, NAFTA, SAARC17
18 Reasons for Going International cont’d Monopoly Power:- Patents- Technology Advantage- High Market Share – few competitors- Product Differentiation- Raw Material ResourcesSpin-Off Benefits:-Branding – build identity and image-Foreign Exchange – easier imports-Government Incentives – export incentives-Product Development – product improvements-New Products/Technologies – foreign R&D18
19 Reasons for Going International cont’d Strategic Vision:- Future Growth – long-range plan- Retain Competitive Edge – survival- To Diversify – acquire new businesses- Reduce Economic Risk – build a business portfolioGlobalization:- Global Corporation – become one Resource Globally – materials,components, manufacturing, advertising, financing, management- Changing Business Environment – stay aheadCapacity Surplus:- When the local market is saturated, exploring the internationalmarket is the next choice.19
20 Reasons for Going International cont’d Export Incentives:Export incentives are a widely employed strategy of export promotion.The objective is to increase the profitability of export business by encouraging exports.Types of Incentives:-Duty Exemption/Drawback-Income Tax Concession-Cash Compensatory Support-International Price Reimbursement Scheme-Interest Subsidies-Freight Subsidies, etc.20
21 Financial Transactions The international market is generally very competitive and sensitive, and the credit facilities made available to the buyers are one of the important determinants of export business.The extent to which credit must be extended to the importer depends on the sale terms.If the exporter gets cash in advance, there is no issue of financing; but this is not common.It, therefore, becomes necessary to make institutional credit available to the export sector to meet pre-shipment and post-shipment financial requirementsSuch credit facilities will enable the exporter to extend reasonable credit facilities to foreign buyers21
22 Pre-Shipment Finance Exporter’s Pre-Shipment Financing Requirements: 1. Purchase of Raw Materials and Components2. Processing3. Packaging4. Packing5. Marking6. Transactions, Others7. WarehousingPurpose:Pre-shipment finance, also known as packing credit, refers to the credit extended to the exporter prior to the shipment of goods to meet working-capital requirementsIs short-term financeAlso advanced against export incentivesProviders:Local and foreign commercial banks which are members of the Foreign Exchange Dealers’ Association. Export incentives – cash assistance, refund of excise and customs duty, and reimbursement of pricedifferentials between domestic and international prices of certain raw materials22
23 Pre-Shipment Finance – cont’d Advances by Commercial Banks are governed by the Credit Scheme of the State Bank.The Features are:- The loan is advanced only on receipt of an export order.- The exporter should deliver either a L/C or a confirmedexport order.- Advances must be repaid from the proceeds of the relativeexport bill.- Packing credits are eligible for interest subsidy.- Available against incentives.- Concessional rates of interest.- Sub-supplier must submit documents from Export House orMerchant Exporter.23
24 Post-Shipment Finance Exporter’s Post-shipment Financing Requirements:-To cover period between the shipment of the goods and thereceipt of payment.Supplier’s Credit:- Credit extended to Overseas Buyer to pay for goods importedfrom Exporter. Generally, advanced for capital goods.Providers:- Local and foreign commercial banks which are members of theForeign Exchange Dealers’ Association24
25 Other Finances Short-term Finance: - Provided by commercial banks under L/C, by purchasing D/Pand D/A bills, against export bills, export incentives, etc.Medium and Long-Term Finance:- By commercial banks.- Industrial Development BanksNote:- Some of these institutions also provide suppliers’ credit,including line of credit to promote exports.- Export credits generally carry concessional interest rates.25
26 Foreign Exchange - Participation in trade fairs and exhibitions. Foreign exchange is released for undertaking approved market development activities such as:- Participation in trade fairs and exhibitions.- Foreign travel for export promotion.- Advertising abroad.- Market research.- Procurement of samples and technical information26
27 Payment Terms 1. Cash in Advance Payment Terms Involves export financing methods and process1. Cash in Advance2. Open Account3. Consignment Sale4. Document Against Payment – D/P5. Document on Acceptance – D/A6. Letter of Credit27
28 Payment Terms – cont’dCash in Advance:- Most Advantages for Seller. Required with Order or BeforeShipment in the form of Draft, Check, Electronic Transfer.- Seldom Acceptable to Buyer.- Generally used for Customized Manufacture, on specificationsof the buyers i.e. made to order.- Necessary when Buyer is Unknown to Seller.- Buyer’s Creditworthiness is Doubtful.- Seller’s Monopoly Exists.- Sellers Market Condition Exists.Fortunately, the International Market is Inherently veryCompetitive.28
29 Payment Terms – cont’d Open Account: -Exporter Ships Goods with no Financial Documents, OnlyCommercial Invoice.-Seller Carries Financial Risk.-Restricted to Intra-Company Transactions.-Seller and Buyer have Established Relationship.-Local exporters are allowed to sell on the Open Accountbasis only with special permission from the State Bank.-This permission is given only to foreign companies operatingin our country.29
30 Payment Terms – cont’d Consignment Sale: -Exporter consigns to Agent or Rep in the foreign market.-Agent or Rep arranges Sale and Pays to the Exporter.-Exporter retains the Title until the Sale.-No Bill of Exchange is Involved.-Seller is Exposed to Default Risk.-Exchange Risk exists if Consignee is Inefficient or Dishonest.-An exporter selling goods on consignment basis must furnish adeclaration regarding the full export value of the goods.30
31 Payment Terms – cont’d Document Against Payment – D/P: -Same as C.A.D. -Exporter Ships Goods to Foreign Buyer.-Documents giving Title is handed over through Bank only onPayment.-Until Payment ownership of Goods remains with Seller.-Exporter can obtain Finance from the Bank against the D/P Bill.-If the bank is satisfied, it may finance the exporter bypurchasing the D/P Bill, usually on a ‘with recourse’ basis.-In the event of non-payment by the buyer, the bank hasrecourse to the drawer.31
32 Payment Terms – cont’d Documents on Acceptance: - Buyer Accepts the Bill of Exchange by Signing it.- Documents and Title to the Goods are handed over by theBank.- Exporter extends 30, 60, 90 days credit to the Importer.- Bank may extend finance to Exporter by purchasing theD/A Bill ‘with recourse’.- The exporter relies on the honesty and creditworthinessof the buyer, and the D/A is extended only to partieswith integrity, financial stability, and reputation.32
33 Payment Terms – cont’d - Letter of Credit is used most often Globally. - Importer arranges L/C with a Bank.- Document gives Bank Guarantee.- Draft is Drawn on Importer’s Bank.- Bank will Honor the Draft when submitted by Exporter.- L/C Eliminates Risk for Exporter.- Exporter must fulfill obligation of Shipment.- Immediately after shipment of the goods the exporter canpresent the Bill of Exchange and other documents specified inthe L/C to obtain payment through exporters own Bank.33
34 Payment Terms – cont’d There are different terms of Letters of Credit: 1. Documentary L/c.2. Transferable L/c.3. Non-transferable L/c.4. Cash L/c – payment in cash.5. Acceptance L/c – bank merely ‘accepts’, exporter thensells draft to bank.6. Revocable L/c – can be cancelled.7. Irrevocable L/c – cannot be revoked8. Confirmed L/c – a bank in exporter’s country confirms the L/c.9. Back-to-Back L/c – original L/C is used for secondary credit.10. Revolving L/c – for similar transactions.34
35 Payment Terms – cont’d Irrevocable Letter of Credit It is generally used in international transactions.It cannot be revoked, amended, or modified by the issuing bank without express consent of all the parties.Is a definite undertaking provided shipment terms and conditions are complied with.35
36 Payment Terms – cont’d Example Of Irrevocable Letter of Credit US Buyer, Overseas Seller.Overseas Exporter requests US Importer to arrange for an Irrevocable Letter of Credit.US Importer applies to it’s own bank in the US to issue an L/C.In the application the US Importer will indicate the terms of the sale and the documents to accompany.If the US Bank is prepared to issue the L/C, the US Importer will sign the L/C Contract agreeing to reimburse the bank.The US Bank will now notify the Overseas Exporter’s bank in his Country, mentioned in the L/C, and to confirm the L/C to the Overseas Exporter.The notifying Sellers Bank will now confirm to the Exporter that an irrecoverable L/C has been arranged, and will describe the terms under which the shipment must be made before the Exporter’s payment draft will be honored.36
37 Payment Terms – cont’dExample Of Irrevocable Letter of Credit – cont’dThis makes the contract binding on both the issuing US Bank and the confirming Sellers Bank.The Exporter will now ship the goods to the US Buyer, and draw a time draft on the issuing US Bank with documents, and present it to the confirming sellers Bank.The Seller may sell the draft and documents to the confirming Seller’s Bank.The confirming Sellers Bank will send the draft and documents to its own corresponding bank in the US, which will present it to the issuing or drawer US Bank, of the US Buyer, for acceptance.The accepting/issuing US Bank will deliver the draft and documents to the US Importer/Buyer, with a Trust Receipt, an instrument under which the bank retains title to the merchandize.The US Importer/Buyer is expected to make full payment when the draft matures.37
38 Exchange Control Regulations The Export-Import Policy (Exim Policy) reflects the foreign trade policy of home country.It is implemented under the framework of the Foreign Trade and Foreign Exchange Regulation Act.38
39 Problems in International Marketing Special Problems due to Differences:1. Political and Legal – complex, regional within2. Cultural – significant compared to domestic3. Economic – free or freer market economy4. Currency – exchange rate fluctuations, monetary policy5. Language – can be managed easily.6. Infrastructure – developed, developing7. Marketing – advertising media8. Trade Policies – restrictions, import controls9. Logistics – transportation, insurance10. Trade Practices – customs clearance, duty39
40 Export PromotionThe Government should promote exports as Export development is important to the Firm and the Economy.Benefits of Export:-Economies-of-Scale-Surplus Supply of Commodities-Export-Led Growth-Counter Domestic Recession-Earn Foreign Exchange-Reduce Trade Deficits-Compete in the Global Market40
41 Export Promotion – cont’d Government’s Role & Responsibility:- Establish and Sponsor Organizations.- Ministry of Commerce.- Establish Autonomous Bodies:1. Commodity Boards.2. Export Inspection Council.3. Institute of Foreign Trade.4. Institute of Packaging.5. Export Promotion Councils.6. Federation of Export Organizations.7. Council of Arbitration.8. Marine Products Export Development Authority.9. Agricultural and Processed Food Products ExportDevelopment Authority.10. Trade Promotion Organization.41
42 Export Promotion Bureau Functions:- Develop and promote exports, imports, and upgrade technologythrough fairs locally and abroad.- Compile and disseminate trade related information.- Publicity.- Organize visits of foreign buyers and traders.- Send and receive Foreign delegations.- Assist local companies in trade development.- Assist with Marketing Surveys and Research.- Provide Marketing Information.- Organise International Trade Fairs and Exhibitions.- Help in arranging Credit and Insurance Facilities.42
43 Export Documents Form ‘E’ Commercial Invoice Packing List Visa Country of OriginBill of Lading / Airway BillBill of Exchange
44 Balance of Payments.As economists we need an overall view of our money transactions with the rest of the world.The government system for analysing this is the Balance of Payments.It is made up of three separate accounts. Together it measures all of the economic transactions that one country has with the rest of the world in one year.1. Current Account2. Capital Account3. Financial Account