MK0018 International

Marketing Assignment 1416FE40917C

Q1. Define multinational corporations. How is international marketing different from domestic marketing? Ans: MNC is not a one-dimensional concept. Similarly, globalization does not have a single definition. There is no single criterion that proves satisfactory at all times in identifying an MNC. Whether a company is identified as MNC or not depends on a number of criteria used. Various definitions of multinational corporations: By Size: The term MNC implies bigness but bigness also has a number of dimensions such as market value, sales, profits, and return on equity when used to identify the largest MNCs will yield varying results. By Structure: According to Ahroni, an MNC has three significant dimensions: structural, performance, and behavioural. The difference between international and domestic marketing lies in the environment in which the two take place. The important points of differences between international and domestic marketing are: 1. Sovereign Political Entities: Each country is a sovereign political entity and, therefore, they for importing and exporting the goods and services in order to safeguard their national interest impose several restrictions. The traders in international marketing have to observe such restrictions. These restrictions may fall in any of the following categories. i) Tariffs and customs duties on import and export of goods and services ii) Quantitative restrictions are also imposed iii) Exchange control is another restriction iv). Imposition of more local taxes on imported goods 2. Different Legal Systems: Different countries operate different legal systems and they all differ from each other. In most of the countries follow English Common Law as modified from time to time. This difficulty does not arise in the domestic trade, as laws are the same for the whole country. 3. Different Monetary Systems: Each country has its own monetary system and the exchange rates for each countrys currency are fixed under the rules framed by the International Monetary Fund and, therefore, they are more or less fixed. 4. Lower Mobility Factors of Production : Mobility of different factors of production is less as between nations than in the country, itself. In spite of these developments, the mobility of labour and capital is not as much as it is within the country itself.

5. Differences in Market Characteristics : Market characteristics in each segment are different, i.e. demand pattern, channels of distribution, methods of promotion etc. are quite different from market to market 6. Differences in Procedure and Documentation: The centuries old laws and customs of trade in each country demand different procedures and documentary requirements for the import and export of the goods and services.

Q2. Differentiate between absolute advantage and comparative advantage theories . Ans: Absolute vs Comparative Advantage Absolute advantage and comparative advantage are two terms that are widely used in international trade. Both terms deal with production, goods and services. Absolute advantage is a condition in which a country can produce particular goods at a lower cost in comparison to another country. On the other hand, comparative advantage is a condition in which a country produces particular goods at a lower opportunity cost in comparison to other countries. While absolute advantage is a condition where the trade is not mutually beneficial, comparative advantage is a condition in which the trade is mutually beneficial. Comparative advantage can be described as the ability of a particular country to produce a certain product better than another country. Comparative advantage generally compares the output of production of the same type of goods or services between two countries A country will have an absolute advantage over another country when it produces the highest number of goods after the same resources are supplied to both of them. Absolute advantage also means more goods and services in an efficient way. Unlike absolute advantage, comparative advantage also looks into the overall production of the services or goods within a time frame. When compared to comparative advantage, absolute advantage is concerned with multiple goods. While cost is a factor involved in absolute advantage, opportunity cost is the factor that is involved in comparative advantage. Unlike absolute advantage, comparative advantage is always reciprocal and mutual. It was Adam Smith who first described absolute advantage in the context of International trade. Robert Torrens described comparative advantage for the first time in 1815 in an essay about Corn Laws. But the concept of absolute advantage is attributed to David

Ricardo, who explained the concept in his book On the Principles of Political Economy and Taxation. Comparative advantage can be described as the ability of a particular country to produce a certain product better than another country. A country will have an absolute advantage over another country when it produces the highest number of goods after the same resources are supplied to both of them. While absolute advantage is a condition where the trade is not mutually beneficial, comparative advantage is a condition in which the trade is mutually beneficial. While cost is a factor involved in absolute advantage, opportunity cost is the factor that is involved in comparative advantage. Unlike absolute advantage, comparative advantage is always reciprocal and mutual. Q3. Write a short note on International Advertising. How is it important for international marketing? Ans: Advertisement plays a very important role in the international marketing. Advertisement is a paid form of non-personal presentation of ideas, goods or services by the sponsor. It is a non-personal method of selling the product or in other words it is a salesmans imprint. Every manufacturer wants to sell his products at a reasonable price to the target buyers. Role of advertising The role of advertising in international promotions includes: Communicating, to a target audience that differs in terms of language, literacy, and other cultural factors Business activity through which a firm attempts to inform target audiences in multiple countries about itself and its product or service offerings It provides reassurance to the firms and brands and reminds consumers about their offerings Through the selective reinforcement of certain social roles, language and values, it acts as an important force fashioning the cognitions and attitudes that underlie behavior not only in the market place, but also in all aspects of life. The pattern standardization approach is a strategy designed from the outset to the susceptible to extensible modifications to suit local conditions, while maintaining sufficient common elements to minimize the drain on resources and management time. For the purpose of implementation of this strategy, the international firms use several alternative methods. One common method used is to appoint a common international advertising agency handling internal and international tasks for the company. This approach has the merit of getting the views of local nationals working in the agency in different countries on the advertising campaign designed in the home market of the international firm. These local employees of the international advertisement agency can point out the drawbacks in designing the advertisement copy with respect to their own

country. Thus, any deficiency in advertisement copy can be nipped in the bud from the very beginning. It is sometimes argued that within certain geographical areas the customs, cultures, traditions and demand structure are increasingly becoming standardized or uniform due to extensive information flow and increased international travel. In such cases, it is very logical and economic too to follow a unified advertising policy

Q4. What are SEZs and what benefit they provide to the international trade and marketer? Ans: Special Economic Zones (SEZs) is a specially delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. Goods and Services going into the SEZ area shall be treated as deemed exports and goods and services coming into Domestic Tariff Area (DTA) from the SEZ shall be treated as if the goods are being imported. 1. SEZ units may export goods and services including agro-products, partly processed goods, sub-assemblies and components except prohibited items. It may also export byproducts, rejects, waste scrap arising out of the production process. 2. SEZ unit may import/procure from the DTA without payment of duty all types of goods and services, including capital goods, whether new or second hand, required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC (HS). 3. SEZ unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. In such a case the SEZ unit and the domestic/foreign leasing company shall jointly file the documents to enable import/procurement of the capital goods without payment of duty. 4. SEZ unit shall be a positive net foreign exchange earner. 5. The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to achieve positive foreign exchange earning it shall be liable to penalty in terms of the legal undertaking or under any other law for the time being in force. 6. SEZ unit may export goods manufactured or software developed by it, though a merchant-exporter/status holder recognised under the policy or any other EOU/SEZ/EHTP/STP unit. 7. Goods imported/procured by an SEZ unit may be transferred or given on loan to another unit, within the same SEZ which shall be duly accounted for, but not counted towards discharge of export performance.

8. SEZ unit, may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/EHTP/STP with the permission of the Customs authorities. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. Sub-contracting by SEZ gems & jewellery units through units in DTA or through other SEZ/DOU/EHTP/STP units shall be subject to conditions given in the Handbook. 9. SEZ units may sell goods, including by-products and services, in the DTA on payment of applicable duties. Q5. What are the factors that affect the pricing strategy of an international firm? What different pricing strategies can the firms adopt? Ans: Pricing is a very critical decision in international marketing management because it is a major factor influencing a firms total revenue from exports and its profitability. Besides, several other factors: economic, social, political, marketing conditions and product attributes influence the decision making in the international marketing. There are three main factors which affect the export price strategy to be adopted by the exporter in the foreign markets: Characteristics of the product and the nature of its demand : It is a major factor in fixing the price of the product at a particular time. In other words, improvement in quality of the product and product adaptation according to the changing competitive conditions in the foreign market should be taken as a continuous process. Elasticity of demand is another factor, which influences the price. The philosophy of the management: As we know that the main objective of management of every concern is to maximize profits, this is an adverse relationship between the price and the demand. The management can earn more profit at increased revenue by reducing the price if the demand is more elastic. Market characteristics: Market characteristics such as number of competitors and degree of competition, supply position, quality of the product, substitutes available in the market etc. determines the pricing strategy of the firm. These market characteristics vary from country to country. Price strategies Different strategies may be used in different markets. In some markets prices may be higher in some others they may be cost price or in many others; they may be less than the cost price. Normally, the following pricing strategies are used in the export market:

1. Market Penetration Strategy: Under this strategy, exporters offer a very low introductory price to speed up their sales and, therefore, widening the market base. It aims at capturing the products in the market especially if the quality of the product is proved with its wide acceptance. 2. Probe Pricing Strategy: Fixing low price for its product may have an adverse effect on the image of the firm and of the product. 3. Follow the Leader Pricing Strategy: In a competitive world market or where adequate market information is not available, it may be useful to follow the leader in the market comparing its product with that of the leader the exporter may then fix the price of its product. 4. Skimming Pricing Strategy: Under this strategy, a very high introductory price is fixed to skim the cream of the demand at the very outset. 5. Differential Trade Margins Strategy: Variation in trade margins may be adopted by the exporter as the pricing strategy in foreign market. This strategy allows various types of discounts on the list price. 6. Standard Export Pricing Strategy: In some cases, exporter quotes the standard price or list price that is one price for all. 7. Cheaper Price for Original Equipment and Higher Price for Spare Parts : In certain cases it might be useful to quote lower prices for the original equipment and charging higher prices for spares and replacement parts to be exported later as and when required. Q6. Write short notes on (a) e marketing (b) Joint venture Ans: (a) e marketing: E-marketing involves the marketing of products or services on the internet. Successful E-marketing requires good search engine marketing strategies. The primary purpose of marketing an online business is the promotion of a good or service. Emarketing makes extensive use of the available tools for getting web users to purchase a product or service from a website. E-marketing approaches Banners: A banner ad is a boxed-in promotional message that often appears at the top of the web page. If a visitor clicks on the banner ad, she/he is transported to the advertisers home page. This is the most used form of Internet promotion.

 Sponsorships: This is another common advertising approach on websites. The advertiser is given a permanent place on hosts website and pays a sponsorship fee to the host. Pop-up and Pop-under: When a visitor accesses a web page, sometimes a window appears either in front or underneath the web page, the visitor is viewing. Pop-ups become visible as sooner the web site is accessed and pop-under becomes visible only when the visitor closes the browser. Portal Use: Some portals give a prominent place to a companys offer for a fee. When a visitor follows directed search, the marketers name appears prominently at or near the top of the list. E-mail: Companies send e-mails to Internet users to visit the company web site. It can be effective only when the target customer is appropriate otherwise it becomes junk mail. Interstitials: These ads appear on the computer screen while a visitor is waiting for a sites contents to download. Push Technologies: Some companies provide screen savers to its website visitors that allow the firms to directly hook the visitor to their websites. This is an approach to push a message to the consumers rather than wait for consumers to locate it. Sales Promotions: Many companies effectively use sales promotions such as contests and sweepstakes to generate consumer interest. (b) Joint Venture: A joint venture is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares. A joint venture takes place when two parties come together to take on one project. In a joint venture, both parties are equally invested in the project in terms of money, time, and effort to build on the original concept. While joint ventures are generally small projects, major corporations also use this method in order to diversify. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project, as well as the resulting profits. Since money is involved in a joint venture, it is necessary to have a strategic plan in place. In short, both parties must be committed to focusing on the future of the partnership, rather than just the immediate returns. Ultimately, short term and long term successes are both important. In order to achieve this success, honesty, integrity, and communication within the joint venture are necessary.