1 FRAMEWORK OF INTERNATIONAL MARKETING

2 Core Concept of Marketing Need Want Demand Product Exchange Transaction Market

3 The Concept of International Marketing Philip Koler defines marketing as ‘the human activity directed at satisfying needs and wants through exchange process The American Marketing Association defines marketing as the process of planning and executing the concept, pricing, promotion and distribution of goods and services to create exchanges that satisfy individual and organizational goals.

4 Anticipative marketer looks ahead at customer’s needs and wants in the near future. Creative Marketer discover and produces solutions that a customer did not ask for but would enthusiastically respond to (eg. Walkman, VCR, CD, ATMs, Cellular Phones. International Marketing is defined as marketing activity carried out across national boundaries. Every firm has to operate in a given set up environmental factors over which it has little control. These are social, economic, political, legal and technological environment – uncontrollable elements

5 Controllable elements – product, price, distribution and promotion. Consequent to economic liberalization, a firm operating in domestic market can no longer rely upon its home market because the firm’s home market is now and export market for everybody else

6 Domestic and International Environmental Challenges Domestic Environmental challenges Economic Environment :  Domestic Tariff Structure  Import Duty Exemption Schemes offered by home government – determine cost of imported inputs – affects final cost of production – affects competitiveness  Exchange rate and foreign exchange regulations

7 Options available for making and receiving payments from International Markets National Policies of FDI – determine kind and magnitude of foreign investment and entry mode Political and Legal Environment Political priorities of government  Trade Policy  Fiscal Policy  Matters relating to bilateral and multilateral trade  Banning Trade with countires

8 Infrastructure Development of physical, financial, human and institutional infrastructure Physical Infrastructure – roads, telecommunications, port handling – cost of logistics Trading hubs – Singapore, Hong Kong, Dubai Overseas Environmental Challenges  Political  Stability of Government  Pakistan – no MFN status to India

9  CIS countries – transition phase – unpredictable environment Economic  Economic uncertainty and hyper inflation – CIS Brazil, Argentina  Soundness of financial institutional system  Foreign Exchange Risk Legal  Well defined, sound, legal systems in target market help to reduce marketing risk

10  Country's at higher stage of a economic development and democratic form of government, provide, relatively independently and more just legal system  CIS and China – transition phase from planned economy to market economy Cultural and social  Countries with cultural similarity – easily approachable  Affects product modifications especially in consumer products

11 Social environment  Buying decision  Communications strategies to be adjusted according to social traits  Social beliefs and aspiration vary significantly among countries. Marketing mix to be tailor made to suit social norms  Socio – cultural factors affects buyer – seller relationship eg. Americans – result oriented Japanese – building long term relationship

12 Competition:  Product Imported  Produced locally  Exporter’s own country  Products imported from competing countries if have different business environment – affects competitiveness  Marketing barriers (Tarrifs and Non Tarrifs) make marketing mix decision complex

13 Marketing Channels  High Income Countries – organized and large scale retail outlets – have higher stake in business negotiations  Packaging – customer’s attention  Developing and Least Developed Countries – size of retail outlets are small

14 Technology  Variation in availability of technology between developed and emerging markets of India (Mainly developing countries)  Transfer of technology  Opportunities for developing countries like India and China to market products at competitive price in other developing countries and LDC Eg. Indian Bajaj Three Wheelar to Bangladesh and Indonesia Indian turn key projects to Africa and Middle East

15 Why Should a Firm Enter International Markets? Growth Profitability Economies of scale Spreading Risk Access to Imported inputs Uniqueness of Product or services Marketing Opportunities Due to life Cycle Spreading R & D Cost Competition in Domestic market Govt. Policies & Regulations Spin - off benefits Strategic Vision Reasons for Entering International Markets

16 WHY COMPANIES GO INTERNATIONAL? Two Factors: Pull factors : Push Factors Pull factors: Proactive reasons – forces of attraction – pulls the business to foreign markets – profit, growth etc. Push factors: Reactive reasons – compulsion of domestic market prompts companies to internationalize – saturation etc. Profit Motive: International business – profitable than domestic market – investment in low cost locations.

17 Growth Opportunities Economic growth in many foreign countries strong attraction. Domestic Market Constraints Market for product tends to saturate or decline (happens frequently in advanced countries) – Transfer of technology to developing countries. Scale economies – Need to enter foreign market in addition to domestic market – Korea – economic size plants Competition Competition – driving force behind internationalization – A protected market motivates domestic sales Economic liberalization in 1991 increased competition from foreign firms as well as domestic firms – many Indian companies going international.

18 Government Policies and Regulations Incentives: Incentives offered by government to export and invest in foreign countries. Governments of many countries offer incentives to foreign investors. Obligations: Foreign exchange needed to finance imports, payment of royalty etc. Companies are subject to specific export obligations – export house, EOUs,

19 International Marketing vs Domestic Marketing Similarities Both in domestic marketing as well as in international marketing success depends upon satisfying the basic requirements of the consumer It is necessary build goodwill both in domestic and international market Research & Development for product improvement is necessary in both the market

20 Differences Sovereign political entities  Tariffs or custom duties  Quantitative restrictions  Exchange control  Local taxes Different Legal Systems Different Monitoring Systems  Each country has its own monitory system and the exchange value of each countries currencies is different from that of the other

21 Lower Mobility of Factors of Production Differences in market characteristics Differences in procedures and documentation Grater degree of risk Cultural dimensions of international marketing

22 International Marketing vs Domestic Marketing Similarities Both in domestic marketing as well as in international marketing success depends upon satisfying the basic requirements of the consumer It is necessary build goodwill both in domestic and international market Research & Development for product improvement is necessary in both the market