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International Marketing

INTERNATIONAL MARKETING

 

 

Assignment set 1

Q: 1 Explain the several economic indicators which give us the thought of the economical condition of the country in brief.

The financial condition can be measured by using some economic indicators. They are the variables made to predict changes available cycle.

The size of population

He larger the populace, larger will be the market. The population of your country changes due to three factors the following:

1) Birth rate.

2) Death count.

3) Migration in and from the country

The distribution of population can be an important aspect of forecasting the demand of the product and is effective in market segmentation decisions. Different age groups will have different demands and population density is an excellent pointer of market attractiveness.

Level of income and its distribution:

The income level is usually represented by Gross national product (GNP) or Gross Domestic product (GDP). GDP: it is the aggregate of the full total output of goods and services by a country throughout a financial year.

GNP: GDP plus the income from abroad. World Bank has classified countries by their per capita income in the following categories:

Low income countries US $ 875 or less.

Middle income countries US $ 876-10725.

High income countries US $ 10, 726 or above.

Another way of classifying countries according tots financial activity can be: Less developed countries, Pre-industrial countries, Developing countries, industrialized countries, advanced countries.

the study of population helps in making market segments and accordingly the business can focus on the demands of both high and low price versions of the same product in the same country.

Market structure:

To evaluate the monetary condition of a country, we should know the structure of the marketplace.

The main classifications are:

1. Perfect competition

The main characteristics of this market are:

Lots of producers and consumers.

Identical products.

Price is set by the market forces (demand and offer).

Willingness to pay.

Monopolistic competition

Monopolistic competition is more realistic condition than perfect competition.

Main characteristics of the market are:

Large quantity of organizations producing slightly differentiated products.

Sole producer of a specific product so is a monopolist of this product/brand.

The differentiation is only from the idea of view of buyers.

Each firm has some extent of control over prices.

Buyers become loyal to the product/brand.

New companies are absolve to enter the marketplace.

Oligopoly

Main characteristics of this market are:

  • Few firms having similar or different products.
  • Each firm has some degree of control over price.
  • Reaction of rivals is very important.
  • Interdependence of behavior in case of oligopoly.
  • New entry is difficult.

Stages of business cycle

Prosperity boom decline depression recovery

Consumption pattern: Consumption means final purchase of the goods and services by the individuals

Inflation

Inflation is thought as a general increase in the level of prices. When the level of prices are high in a country companies may not find it good for sell its products as the purchasing power of individuals reduces as the true income reduces.

Accessibility to human resources: The abundance of human resource makes the manufacturing process easy and lowers the price of production. To comprehend the nuances of the business in the host country, the company prefers to recruit the local skilled or semi-skilled labor. That's the reason the company looks at this factor while analyzing the economic environment of the host country.

Infrastructure: The importance of infrastructure needs no emphasis. For the functioning of the company, road and rail connection, telecommunication facilities, power and so forth is required. A support infrastructure is a precondition for the development of any industry. The firms must examine the option of infrastructure of the host country.

Q: 2 Write short notes on:

  1. Arbitration b) FDI

Arbitration Arbitration is a technique of dispute resolution in international commercial transactions, or outside the court. it is that techniquie in which the third party reviews the evidences and impose decision. It is most commonly used in matters such as consumers and empolyments. it is faster and affordable process. A number of the benefits of arbitration may be as follow:

  • It limits the dispute and associated libilities because most legal systems there are extremely limited avenues for for appeal of an arbitral award.
  • In judicial proceedings the official language of the country is automatically applied while in arbitral priceedings any language may be used.
  • Arbitration awards are generallu easier than judicial awards.
  • Arbitration is often faster than litigation in court
  • It is more flexible and cheaper for businesses.
  • Arbitral awards and proceedings are generally made confidential and non-public.
  • Arbitrators with appropriate degrees are appointed when the subject, atter of the dispute is highly technical.
  • Exclusionary rules of evidence don't apply; everything can come into evidence so long as relevant and non-cumulative.
  • There is less exposure to punitive damages and run away juries from defense point of view
  • The fact of finality of arbitration awards that normally there is no right of appeal to the courts to improve the award.

FDI (Foreign Direct Investment) foreign direct investment, a corporation directly invests in another country to make or market an entity in a foreign country. The investing company may make investment in a number of ways in overseas by establishing associated or subsidiary company in foreign country by jv, mergers or shares of an foreign company. Foreign direct investment is passive investment such as stock and bonds as opposed to portfolio investment.

Brown field strategy is one form in which the company aspiring to look international decides to invest in an existing company in a suitable location/country. That existing company has almost all of the infrastructure, however the technology involved may be obsolete, present operating capacity may far less than the installed capacity and also may be in need of funds for modernization and increase production.

The second form of market entry strategy is through green field investment, where a new unit is established after creating all the mandatory infrastructure and permission from the neighborhood government.

Q:3 What exactly are the problems related channel decisions in international marketing?

Most producers rarely sell their goods right to the final consumers. Most often producers rely on the marketing channel which comprise of a host of marketing intermediaries performing a number of functions and bearing a variety of names. One of the most crucial decisions facing management is marketing-channel decisions. The rest of the marketing decisions are very closely influenced by the company's selected channels.

1-Relatively long-term commitments to other companies are involved with a company's channel decisions.

2-There is also a robust inertial tendency in channel arrangements

3-The scope of distribution channels extends beyond simple convenience to include impacting the product's meaning.

Effectiveness of international distribution channels:

The Five C's Framework can be utilized by international marketers to look for the effectiveness with their international distribution channels:

Coverage Ability of channel to hook up with targeted customers to accomplish market share and growth objectives.

Character Congruence of channel with the company's popular product positioning.

Continuity The channel loyalty to the business.

Control The power of the business to control the complete marketing program for the product or service.

Cost The investment needed to set up and maintain the channel- variable associated with sales level.

Fixed costs had a need to manage the channel: training of sales force, facilities and inventories.

Control over distribution:

1-There is a global trend toward shorter distribution channels and closer links, if not direct relationships, with those active participants in the channel.

2-It is the view of some that the only real way to internationalise is to navigate closer and closer to complete control through totally owned subsidiary. This however is a fairly incorrect one.

3-First, we must consider Industry characteristics, the value-addition of the business enterprise and the particular consumers really desire should be first considered. Secondly, close control through the commission agent or joint venture is often possible. Control and ownership shouldn't be directly equated.

Q:4 What are the different strategies adopted by the marketer while fixing the purchase price for the product?

Different strategies are adopted by the marketers while fixing the price for the product and these strategies need to be monitored and reviewed at regular intervals.

Cost based pricing or Cost plus pricing: This is the most frequent approach to pricing followed by the marketers.

Price = [Fixed costs + Variable costs + Overheads + Marketing costs] + specified percentage of the total costs (representing the profit portion)

Market Oriented Pricing

method is highly flexible and provides for prices to be changed in tune with changes on the market conditions. This technique is generally known as ˜what the traffic will bear method',

Following competitors

Following the leaders is a common trend observed in every field of activity inside our daily lives. Similarly, even in the case of fixing prices, many organizations simply follow the dominant competitors. These dominant rivals are also called as ˜price leaders'

Three alternative means of following competitor:

Fixing the price at the same level as that of the competitor

Fixing less price than the main one fixed by the competitor

Fixing a price which is greater than that of the competitor's

Negotiated prices

This method is commonly adopted when dealing with powerful buyers who buy in variety, for example, Governments and institutions.

Customer determined price

In case of international marketing, often, the foreign buyer indicates the purchase price at which he's prepared to choose the product. By virtue of the, owner is pre-empted from quoting his price.

Break-even pricing

For any marketer, there is a particular point in his business game where he is able to cover all the expenses incurred by him but he is unable to earn any profit from the activity he's pursuing.

Break-even price the price for a given level of output at which there is certainly neither any loss nor profit.

Break-even point popularly called BEP, this is actually the point or the amount of sales at which the total income will exactly equal the full total cost.

Margin of safety the difference between the BEP and the expected capacity utilization is recognized as the margin of safety.

Margin of safety = expected capacity utilization break-even point

From the aforementioned we can interpret:

a) Lower the BEP, higher the opportunity of the project making profit

b) Lower the BEP, higher the margin of safety

c) When the BEP is high, the risk may also be high.

Marginal Cost Pricing

This approach is more suitable in evaluating and analyzing the profitability of the new orders in case there is firms with idle capacity i. e. , the firm is not utilizing its installed optimally.

Creative Pricing

Creative pricing is a concept derived from the marginal costing approach. Creative pricing approach advocates tapping the good thing about the flexibility between your lower limit of break-even price and top of the limit of the competitor's price for a similar product. In the event the marginal cost is very less in comparison with the price tag on the competitor, there is certainly leverage to the exporter to look at aggressive pricing policies in case there is export order.

Q: 5 what's personal selling? Explain with reasons why local nationals are preferred as sales personnel in international marketing?

Delivery of an specially designed message to a prospect with a seller, usually by means of face-to-face communication, personal correspondence, or an individual telephone conversation.

According to Stanton, "personal selling is the non-public communication of information to persuade possible customer to buy something something, service, idea or something else. This is in contrast to the mass, impersonal communication of advertising, sales promotion and or other promotional tools

Advantages

Personal selling is one of the very most effective way of marketing communication. It also helps to overcome the marketing barriers in few cases.

1) A side benefit for your business is the chance to gain general market trends out of this personal contact. You can gain understanding of what your clients really think, what your competitors are up to and what's currently missing from the marketplace offerings

2) On account of the non-public touch, the marketer is in a position to get meaningful feedback, ideas for improvement and redress the complaints and grievances promptly.

3) Personal selling is highly flexible as the marketer can develop specific plans to take care of every customer.

4) It really is highly cost-effective especially for the small marketers with limited resources at their disposal.

5) Personal selling is a highly effective and fast track approach to convert inquiry into sales.

6) Opportunity to build a more powerful long-term relationship. Personal contact will encourage loyalty

7) Try before you get depending on your product/service, potential clients may be able to trial the product/services before actually purchasing.

Advantages of using local nationals

International business firms need to engage the services of expert sales team as a first part of managing personal selling. While recruiting marketing and sales personnel going to take care of a specific foreign market,

Local market have to be appointed. However, if in a foreign market, third country nationals are likely to flourish in personal selling, third country personnel may also be engaged. While using growth in international marketing, it is anyway ideal to use local nationals for the intended purpose of personal selling. English being the internationally accepted language, sales rep so selected need to have good spoken English to enable those to translate the objectives of the business enterprise firm into a profitable venture.

For example the sale of certain consumer goods like vacuum cleaner (Eureka Forbes) and water purifiers (Aqua guard) through personal selling is very effective. The sales personnel are achieving the ultimate users and persuading them to purchase the products explaining the technology and long- term advantages to the households. In addition they convey the disadvantages to the households if this consumer goods are not used in conditions of inability to provide pure normal water and maintaining the houses clean.

Q: 6 discuss the advantages of direct and indirect exporting.

Advantages of direct exporting

In direct export eliminating intermediaries escalates the potential profit

  • In direct marketing you have greater overall flexibility to improve or redirect your marketing efforts as your business develops in foreign, market
  • Marketplace is way better understood
  • You can present yourself fully committed and engaged in t he export process
  • Fast and direct feedback by customers are given to you for your product and performance
  • You know whom to get hold of if something isn't working
  • Better protection for trademarks, patents and copyrights are provided.
  • Better communication with the customers is designed for more effective and efficient performance and product.
  • Awareness of customers is increased.
  • Transactions take place over greater control.

Advantages if indirect exporting

  • It will not require any market expertise
  • Concentration of resources towards production
  • It offers a path to enter foreign markets with no complexities
  • Little or no financial commitment as the clients' exports usually covers most expenses associated with international sales.
  • Low risk exists for companies who consider their domestic market to be more important and then for companies that remain developing their R&D, marketing, and sales strategies.
  • Export management is outsourced, alleviating pressure from management team
  • In indirect exporting company can start exporting without incremental investment in fixed capital, low start-up costs and few market risks but with prospects for incremental sales.
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