1. INTERNATIONAL MARKETING How is it Different from Domestic Marketing? How is it Different from Domestic Marketing?

2. MARKETING ACROSS NATIONAL BOUNDARIES SHIFT IN FOCUS IN INTERNATIONAL MARKETING MARKETING ACROSS NATIONAL BOUNDARIES ENVIRONMENTAL FACTORS FOREIGN MARKET 2 EGYPT FOREIGN MARKET 3 CANADA HOME MARKET COMPANY /FIRM In INDIA All Environmental Factors of the Foreign Country Market become Very Important. ECONOMIC FACTOR CULTURAL FACTOR LEGAL FACTOR POLITICAL FACTOR It Involves Marketing across National Boundaries FOREIGN MARKET 1 AUSTRALIA

3. `The World is my Market’ ( The Concept of a Global Village) International Marketing involves a SHIFT IN FOCUS FROM DOMESTIC TO INTERNATIONAL MARKET Global World Market Size = 7.449 Billion (World Population size, 2016) Of which India = 1.301 Billion (2016) China = 1.411 Billion (2016) (UN Figures for Global World Population 2016 Figures)

4. US COMPANIES 75% of the potential market lies outside the U.S. JAPANESE COMPANIES 85% of the potential market lies outside Japan GERMAN COMPANIES 94% of the potential market lies outside Germany. EUROPEAN COMMUNITY (EC Markets) 75% of the potential market is outside the European Community Market. Several Marketing Opportunities for a Company lie Outside a Company’s domestic market: GLOBAL MARKETING OPPORTUNITIES See Keegan

5. `Indian Companies are globalizing, and their CEOs should have a global mindset, keeping marketing realties in view. We should gradually move towards a market led global system for our CEOs.’ Sanjiv Goenka, Nov. 2002… At the start of India’s Liberatization. There has been a SHIFTING GLOBALIZATION TREND IN INDIAN COMPANIES since the 2000 decade….

6. 1.Emergence of a GLOBAL MARKET SEGMENT. These Draw on CULTURAL UNIVERSALS Ex. Soft Drinks Market, Ex. Diamonds market:`Diamonds are forever’. 2. Better Quality at least Cost for the consumer. A Global Company can scan the world to SEARCH for L east cost sources. 4.Companies are also under pressure for need to drive down R&D costs for new product development through Economies of Scale (Greater Volumes) 4. Standardized Technology There are no cultural boundaries limiting the application of technology through R&D. 5. Communications Evolution (exposure to Satellite Communications). Markets in neighboring countries may be exposed to overseas communication. Example: France; Belgium, Germany reception of Satellite TV Signals 6.Companies also derive leverage through Experience Transfers of Skilled Management. Leverage of the Factors of prod uction. (Men; Money; Materials) DRIVING FORCES THAT HAVE STIMULATED GLOBALIZATION

7. Other FACILITATING CHANGES OCCURING AT THE GLOBAL LEVEL Faster Transportation of Goods and People Increasing Capital Movements Electronic transfer of funds across Countries. The Convergence among Nations towards Capitalism and Market Economies. Rapid Diffusion of Technologies and Evolving Consumer Markets Faster Telecommunications due to Speed.

8. ….THERE IS A SHIFT TOWARDS THE STRATEGIC MARKETING CONCEPT THE EXPANDED CONCEPT OF BOUNDARYLESS MARKETING The firm is positioned between vendors (in one country market) and customers (in another, foreign country market. A VALUE CHAIN DEVELOPS

9. CUSTOMER NEEDS & WANTS R & D ENGINEERING & DESIGN MANUFACTURING CUSTOMER VALUE THE VALUE CHAIN in BOUNDARYLESS MARKETING THERE IS A SHIFT TOWARDS THE STRATEGIC MARKETING CONCEPT What is this Value Chain….? See Keegan p.4

10. MAJOR MARKETING DEVELOPMENTS LEADING TO THE GLOBAL PHENOMENON 1.THE MARKETING CONCEPT 2.THE STRATEGIC MARKETING CONCEPT 3.THE GLOBAL MARKETING PHENOMENON The most significant development of the twentieth century: PRE 1960’s 1960’S-1990’s 1990’s -2000’s The Strategic Marketing Concept: Customer Satisfaction in the Context of The External Environment PRODUCT CONCEPT CUSTOMER IS KING STRATEGIC MARKETING CONCEPT

11. What is meant by the Strategic Marketing Concept?... THE STRATEGIC MARKETING CONCEPT A Company should aim to identify and satisfy Customer needs and wants in the Context of the Global External Environment….

12. WHAT DISTINGUISHES INTERNATIONAL /GLOBAL MARKETING? HIGH RISK HIGH UNCERTAINTY

13. UNCERTAINTIES IN INTERNATIONAL MARKETING - UNCERTAINTY IN DELIVERY OF CONSIGNMENT UNCERTAINTY OF PAYMENTS UNCERTAINTY OF PROJECT EXECUTION UNCERTAINTY OF MARKET ACCEPTANCE RISKS & UNCERTAINTIES IN INTERNATIONAL MARKETING RISKS IN INTERNATIONAL MARKETING RISK OF CURRENCY FLUCTUATIONS P rofitability or Losses.

14. R e s c u e r s a t t h e s c e n e a f t e r a C a m b o d i a n C a r g o s h i p s p l i t i n t w o w h i l e l a n d i n g a t t h e p o r t i n A t h e n s. A U k r a n i a n s a i l o r d i e d a n d f o u r o t h e r c r e w m e m b e r s w e r e i n j u r e d. EXAMPLE OF UNCERTAINTY IN DELIVERY OF CONSIGNMENT

15. In 1995, NFL negotiated a deal with M/S Karsan Ticaret (A Turkish Firm) to purchase 2,00,000 metric tonnes of urea fertilizer. 31 Oct. 1995 NFL made advance remittance to the Turkish Firm, Karsan, for 2 lakh metric tonnes of Urea. No Bank Guarantee was taken from Karsan Tijaret. 1 Feb. 1996A new Fertilizer Secretary took over. The Fertilizer Ministry sent a letter to NFL. Why Hasn’t the Urea Arrived to India? AFTER 6 MONTHS: 24th April, 1996 a CBI Inquiry was initiated for Financial Irregularity. The Karsan Tijaret officials fled to Geneva. They were taken into custody by Interpol in Geneva (Switzerland). CBI asked for extradition of Karsan officials for trial in Indian courts. Swiss Laws protected Karsan Tijaret. India does not have a treaty for extradition with Switzerland. 17th Sep. 1996 A Fertilizer Consignment finally landed in Bhavnagar port (India). The Urea Sample was sent to the Central Quality Control Lab (Faridabad). It was found not up to the prescribed standards in the contract and not fit to be sold to the farmers. UNCERTAINTY DUE TO LOSS OF CONSIGNMENT EXAMPLE OF NATIONAL FERTILIZERS LTD (NFL), INDIA A Public Sector Enterprise under the Fertilizer Ministry

16. EXAMPLE OF PPCL (PYRITES, PHOSPHATES & CHEMICALS LTD) INDIA PPCL, India, placed orders in 1997 under the Indian Government Import Quota with Saudi Arabian and Kuwaiti Companies for Urea Fertilizer, 70,000 metric tonnes. It frantically negotiated with 5 Nationalized Banks in the country for obtaining credit facilities. Banks were reluctant to issue LCs in the wake of the NFL(National Fertilizers Ltd.) Urea Scam UNCERTAINTY IN MAKING PAYMENTS to the Overseas Buyer PPCL Ltd. COULD NOT OBTAIN THE LETTER OF CREDIT. (An LC is a Letter of conditional guarantee issued by Indian Banks guaranteeing payment by PPCL) The Fertilizer Ministry diverted the shipments to STC and MMTC and asked them to take delivery of the consignments instead. PPCL had to surrender its import quota of this consignment to STC and MMTC.

17. WHAT IS A LETTER OF CREDIT? A letter of credit is a letter of Conditional Guarantee issued by a Bank on Behalf of the Buyer (Importing Company) assuring payment to the Exporter in the Foreign Country Market. The Exporter receives payment from the Bank once the shipping documents are presented to the bank by the exporter. PPCL Ltd. (India) was not able to obtain this LC in the environment of uncertainty of problems in the Fertiliser industry.

18. 1991An Agreement was signed for payment of 24.6 billion yen. (OECF) (Overseas Economic Cooperation Fund) was to Fund the Project. 1992An Environmental Agitation in India and also in Japan (strong environmental powerful lobby in Japan). OECF WITHDREW ITS FUNDING ASSISTANCE. SSNNL could not take delivery, had no funds. 1996 Sumitomo Corporation imposed Rs1000 crore. demurrage charges on SSNNL. For four years the turbines had been lying in Sumitomo warehouses. 1996 SSNNL began trying to obtain alternative funding sources. Finally the Power Finance Corporation of India funded the purchase for SSNNL. UNCERTAINTY OVER RECEIVING PAYMENTS (Overseas Supplier) EXAMPLE OF SUMITOMO CORPORATION (JAPAN) The Company Received an order from Sardar Sarovar Narmada Nigam Ltd. ( SSNNL ) India, for 6 Turbine Generating Sets Custom Made to Supply to Sardar Sarovar Narmada (SSNNL) Dam Project.

19. On the reverse side, 14 Public Interest Litigations were ALSO filed against ENRON UNCERTAINTY OVER PAYMENTS & PROJECT EXECUTION & PAYMENT A PPA Agreement was Negotiated by Enron Corp. with Congress State Government and Maharashtra State Electricity Board (MSEB). The PROJECT COMMENCED State Government Elections Occurred after commencement of the Project. A New State Government (BJB-ShivSena) declared the Agreement Void due to Nationalist sentiments and high Price per unit of power. ENRON’S RESPONSE: `How Can you scrap an Agreement that has been signed?’ EXAMPLE OF ENRON CORPORATION (U.S.A) : THE COMPANY SIGNED A POWER PURCHASE AGREEMENT (PPA), WITH INDIA, FOR Rs. 6000 Crores.

20. OTHER RESTRAINING FORCES (See Keegan chap 1, p. 18) INTERNAL MANAGERIAL ORGANIZATIONAL CULTURE AND Attitudinal ORIENTATION FOREIGN COUNTRY BARRIERS TO ENTRY Tariff barriers (Duties imposed on Export/Import) Non tariff barriers (Inspection Checks) PRODUCT ADAPTATION MAY BE COSTLY,NOT FEASIBLE MAKET REQUIREMENTS: SOME PRODUCTS MAY NOT BE SUITED TO GLOBAL TASTES. THE PROBLEMS FACED BY EXPORTERS FACTORS RESTRAINING A FIRM FROM GOING INTERNATIONAL INEFFICIENT BUREAUCRACY Duty drawbacks difficult to obtain The pass book scheme for logging in, is not streamlined. HIGH CREDIT INTEREST RATES (RBI CREDIT POLICY) CONGESTION AT PORTS CAUSING DELAYS

21. MOTIVATIONS TO INTERNATIONALIZE THE MOTIVATION TO INTERNATIONALIZE MAY VARY FROM REACTIVE TO PROACTIVE NO MOTIVATION TO INTERNATIONALIZE REACTIVE MOTIVATIONS to EXPORT PROACTIVE MOTIVATIONS to EXPORT

22. NO MOTIVATION TO EXPORT: EXAMPLE OF RAJDOOT PAINTS ` Where do Exports Figure in your Scheme of things? (1996) `We don’t cater to the Export market at all. It is a question of Spare Capacity (VP Rajdoot Ltd, Sales & Marketing) PAINT INDUSTRY GROWTH RATE 15% RAJDOOT PAINTS GROWTH RATE30% Per Capita Consumption in India is 3.23 kg (2015 figures) in comparison to Per Capita Consumption in Developed countries 25 kg (2015 figures)

23. COMPETITORS’ SALES ASIAN PAINTS Rs. 361.4 Crores GOODLASS NEROLACRs. 106.0 Crores BERGER PAINTSRs 122.4 Crores JENSON & NICHOLSON Rs. 77.8 Crores SHALIMAR PAINTSRs. 56.4 Crores RAJDOOT PAINTRs 75 Crores EXAMPLE OF RAJDOOT PAINTS RAJDOOT GROSS TURNOVER 1993-94 Rs. 40 crores 1994-95Rs. 52 crores 1995-96Rs. 75 crores PAINT INDUSTRY GROWTH RATE 15% RAJDOOT PAINTS GROWTH RATE30%

24. Rajdoot Paints Ltd: ` It was a small company compared to the Giants but with double the industry growth rate. Pre- eminent in Quality. It went Public in 1995. Manufacturing a wide array of Decorative and Industrial paints. Rajdoot Paints merged with Berger Paints India Ltd in 1999. "In 1999, Rajdoot Paints Ltd. was merged with Berger Paints Company. The merger resulted in addition of two new factories at Goa and Sikandrabad, U.P., a joint venture company by the name of Berger Becker Coatings Private Limited, a network of new depots and several new brands.“ (Berger Paints Website) Since then, Rajdoot operates as a division of Berger Paints India Limited but with its own independent infrastructure of manufacturing units and sales offices. Distinctive portfolio of brands marketed through an all India network of over 3000 channel partners.

25. BERGER PAINTS GLOBAL PRESENCE: Nepal; Bangladesh; Russia; Poland Source: Company Website

26. THE RESTRAINING FACTORS TO INTERNATIONALIZATION NO MOTIVATION TO EXPORT OTHER RESTRAINING FORCES (See Keegan chap 1, p. 18) INTERNAL MANAGERIAL ORGANIZATIONAL CULTURE AND Attitudinal ORIENTATION (Ex Rajdoot Paints Ltd). FOREIGN COUNTRY BARRIERS TO ENTRY: Tariff barriers (Customs Duties on Export/Import) /Non-tariff barriers (Inspections & Quality Checks) PRODUCT ADAPTATION MAY BE COSTLY AND NOT FEASIBLE MAKET REQUIREMENTS: SOME PRODUCTS MAY NOT BE SUITED TO GLOBAL TASTES. THE PROBLEMS FACED BY EXPORTERS FACTORS RESTRAINING A FIRM FROM GOING INTERNATIONAL INEFFICIENT BUREAUCRACY Duty drawbacks difficult to obtain The pass book scheme for logging in, is not streamlined. HIGH CREDIT INTEREST RATES (RBI CREDIT POLICY) CONGESTION AT PORTS CAUSING DELAYS

27. PROBLEM SOLVING 1.EXCESS PRODUCTION CAPACITY Example Tyre Industry 2. SURPLUS PRODUCTION 3. SEASONALITY OF DEMAND Ex Skiing Equipment Northern Hemisphere Markets US/Europe vs Southern Hemisphere Markets Australia New Zealnd OPPORTUNISTIC UNSOLICITED ORDERS Company receives orders from buyers without looking for them. GOVERNMENT INCENTIVES To EOUs (Export Oriented Units) Exporters Proactive to Incentives SATURATED DOMESTIC MARKET Nestle Market Expansion into Developing Countries RESPONSE TO COMPETITION Ex Goodyear Tyres (U.S) PERCEIVED PROFIT ADVANTAGE OPERATIONAL SHORT TERM Objectives STRATEGIC LONG TERM Objectives OBJECTIVES THE MOTIVATION TO INTERNATIONALIZE MAY VARY FROM REACTIVE TO PROACTIVE NOTE: REACTIVE MOTIVATION MAY NOT REPRESENT FULL COMMITMENT TO INTERNATIONALIZATION. STRATEGIC REACTIVEPROACTIVE OPERATIONAL SHORT TERM Objectives STRATEGIC LONG TERM Objectives

28. EXCESS PRODUCTION CAPACITY (Spare Capacity) SURPLUS PRODUCTION / OVER-PRODUCTION SEASONALITY OF SALES SATURATED DOMESTIC MARKET REACTIVE MOTIVATIONs May occur due to:

29. 1.A TEMPORARY RECESSION IN ECONOMY Slowdown on sales of Consumer Durables: Autos/Appliances Ex. Tyre Industry India in1989: Installed capacity 24 million tyres, production 19 million tyres A cartel was formed by MRF, CEAT, DUNLOP to search for overseas opportunities. 2.SEASONALITY OF SALES Ex. Manufacturers of Skiing equipment winter sports (Olin, Saloman, Whitestag, Head) sell in: Northern Hemisphere Country Markets: USA and Europe from October to March, (Winter Sports) and …. shift to Southern Hemisphere Markets Australia, New Zealand in April to September (Winter Sports ). World Markets are seldom depressed at the same time 3.A SATURATED DOMESTIC MARKET EXCESS PRODUCTION MAY REPRESENT EXAMPLES

30. EXAMPLE: VXL INSTRUMENTS LTD, Started as a partnership Firm 1976 Manufacture of Terminals/ Monitors Converted to Pvt. Ltd Company 1986 Became a Public Ltd Company: 1993 Installed Capacity in 1992-93: 40,000 Terminals But Capacity Utilization 32% (Only) VXL Doubled Capacity 1994-95 80,000 Terminals But Actual Production 24.6% of Capacity Utilization Further increased its capacity 1995-96 120,000 Terminals Profit Margins ROI 1993-94 11.6% 29% 1995-96 10.9% 19% Finally: The Company signed an MOU with a US company to supply to the US market (2000) WHEN ARE COMPANIES PUSHED INTO EXPLORING FOREIGN COUNTRY MARKETS? REACTIVE MOTIVATION TO EXPORT: EXCESS PRODUCTION CAPACITY EXAMPLE: VXL INTRUMENTS Ltd Bangalore ` PINNING HOPE ON EXPORTS’

31. VXL is one of the world’s largest suppliers of thin clients. Established in 1976, VXL has grown steadily and now has over three hundred people Worldwide. – with offices in India, Germany, France, United States and the United Kingdom. The company’s headquarters is in Bangalore, India. About VXL Instruments (India) Shares of VXL Instruments went up 8% after the company signed an agreement with Lenovo Group Ltd in October 2010 (See Website Newsroom Section). The stock traded at Rs38, up Rs 2.95. The stock has hit a high of Rs 39 and a low of Rs 37. Total traded quantity on the counter stood at over 15,870 shares. 0000000000

32. REACTIVE MOTIVATION DUE TO COMPETITION is typically Strategic Long term INCREASING COMPETITION IN INDIA `How do you counter the threat of other multinationals unless you become one yourself?’ Dabur Group MD, 1995 `Rather than stagnate, decay and die amidst the stiff competition in the Indian Market, we decided to set up outside’ Raymonds V.P, 1996

33. PROACTIVE MOTIVATIONS TO INTERNATIONALIZE PERCEIVED PROFIT ADVANTAGE: Potentiallyhigher ROI Ex. Xerox PERCEIVED TECHNOLOGY ADVANTAGE: Due to Technology Advances Ex. Sony (Japan) (Success in Music Systems) PRODUCT ADVANTAGE: The firm may have a unique product Ex. Herbal products from India (Dabur). MANAGERIAL URGE: Proactive desire and Enthusiasm of Management Ex. IBM

34. EXAMPLE: OPPORTUNITIES IN FLORICULTURE EXPORTS WORLD TRADE IN CUT FLOWERS AND POTTED PLANTS = $11 BILLION (2014) INDIA’S Share 1990-91 $1.6 billion 1994-95 0.6% = $ 10 billion. 2004-05: 1.5% 2008-09 2.0% 2013-14 0.65% Indian government announced a target of Rs 1,000 crore for India's floriculture exports by 2010. as a Sunrise Industry. In the fiscal year 2006-07, exports reached Rs 649.6 crore. But since then, they have been slipping. Currently, India accounts for 0.65% of the $11 billion global flower trade. PROACTIVE MOTIVATIONS TO EXPORT EXIM REPORT: `Despite India’s tradition of growing flowers, it has remained a back garden enterprise …. …to pluck flowers anywhere in any stage of their growth.’ Inconsistent Quality.

35. Indian Flower Trade: Major Export Destinations (2014-15): United States, United Kingdom, Germany, Netherlands United Arab Emirates were major importing countries of Indian floriculture during the same period.

36. THE INTERNATIONALIZATION PROCESS

37. INTERNATIONAL MARKETING ORIENTATIONS BY LEVEL OF INVOLVEMENT INFREQUENT EXPORT MARKETING REGULAR FOREIGN MARKETING MULTINATIONAL MARKETING GLOBAL/ TRANSNATIONAL MARKETING INTERNATIONAL MARKETING 1 2 3 4 There are FOUR DEFINING CHARACTERISTICS at Each Stage Motivation Involvement Commitment Attitude POLYCENTRIC ORIENTATION ETHNOCENTRIC ORIENTATION REGIOCENTRIC ORIENTATION GEOCENTRIC/ REGIOCENTRIC ORIENTATION International marketing orientations of companies may vary at different stages of internationalization and are not directly connected with the stage of Internationalization END

38. Polycopy Readings and Group Write-ups Expected for Next Week: Saturday: Group presentation: Group 1 Reading No. 1: Global Grid. Reading No. 2: A Cautionary tale for Emerging Markets