Evolution of Business-From Local To Global State: The Framework For Globalisation of India's Foreign Trade

International Marketing
Evolution Of Business- From local to global

state
Evolution directly linked with progress of human life and

civilisation
From Barter to Global Trade
Business witnessed industrial and transport revolution in the

process
First objective of Export-Import policy (1992-97): To establish

the framework for globalisation of India’s foreign trade.
Stages in Evolution
1. Local Business:
Area- Village/Town
Business conducted at shop/retail level
Local advertising
Flexibility to carry out business acc to individual tastes/likes
2. Regional Business:
Area- State or a group of states
Enabled due to transport revolution
Bulky/perishable goods transportation
Rural markets gained importance
More credit sales than cash transactions
3. National business:
Area- Whole country
Business grows in volume
Restricted to large sized companies due to problem of finance
Economies of scale
Mass media used
Aids to trade fully explored
4. International Business:
Area- More than a single country
Barrier in time and space removed
Revolution in information technology and communication enabled this scale of
business
No country is self sufficient
Countries produce goods where they enjoy comparative advantage wrt
resources, skills, cost.
Cordial international relations
5. Global Business:
World= one common integrated market

Money in overseas market used for R & D
Product tested in domestic market first
If acceptable, it is tested in foreign markets
increase in foreign demand justifies further foreign
investment
Global business takes time; goes through stages of
internationalization
Top mgmt involved in planning world wide
manufacturing facilities, marketing policies and financial
flows.
Common pool of resources
Why Globalisation???
Broadly divided into push and pull factors- proactive and reactive
1. Profit Advantage:
Cheap labour, low cost of production, better technology in
international markets, make international business more motivating
than domestic one.
2. Growth Opportunities:
Tremendous potential, population and income rising. Even though no
present demand for the product, a future potential demand is
predicted. Companies eager to establish a strong foothold in such
countries.
3. Domestic market constraints:

Saturation of local demand, e.g. US of A has more stock of consumer
durables than number of households.
Economies of scale, e.g., feasible no of units that can be produced, is
less than the domestic demand.
A small domestic market- Nestle and Philips get only 2% and 8%
sales from home mkts-Switzerland and Holland
4. Competition:
Post liberalization (July 1991), a protected domestic market
disappeared. This made domestic players to plan internationalization
strategies. (Counter-competition also practiced)
5. Govt. policies and regulations:

Incentives by local govt. to export or make foreign investment
Policies of other governments may be more favourable in an
international market
6. Spin off benefits:

International business may aid in improving domestic business
Image building exercise
Foreign exchange earnings aid in importing technology etc.
Economic incentives are attached to exports
Internationalisation Strategies
Exporting
 Preferred when capacity is under-utilised

 When cost of production in home country is lesser than foreign
markets
Licensing and Franchising
 A firm in one country (licensor) permits a firm in another country

(licensee) to use its intellectual property like patents, trademarks,
copy rights, technology, technical know how etc.
 Franchising is a form of licensing. The franchiser grants

franchisee, the rights to do business in a prescribed manner
 One way of franchising includes supply of a part/material to the

franchisee (Coca Cola)
Contract manufacturing
 A company gives contract to another firm in foreign market to

manufacture/assemble the product
 The rights of marketing the products is retained by the company
 Lesser risk, as no/less investment in foreign country; good way of
entry in new markets
 Cost of production may be low
 E.g.- Godrej soaps manufactured Dettol for Reckitt & Coleman
Management Contacting
 An international firm provides management know how to the

company, who is entering a foreign country
 This firm may not have stakes in the firm; it will only provide
expertise
 Risk of over dependence and loss of control
Fully owned manufacturing facilities
 If the company has long tern and substantial interest in the

foreign market, it is important have physical presence as a
producer
 Full control over production and quality
 Disadvantage in case of high cost of production, unavailability of a
type of technology, skilled labour etc.
Joint Ventures
 Sharing ownership and management

 Licensing
 Contract manufacturing
 Management contracts
Mergers and Acquisitions
 Entry as well as expansion strategy

 Reduces competition
Strategic Alliance
 Alliance with competitors (existing and potential) in foreign markets,

instead of competing with each other
 Eg, USA Pharma company will use mktg/distribution facilities of
Japanese Pharma company, to sell products in Japan and vice versa
 P & G-Godrej Soaps
Counter Trade
 An unconventional way of doing international business which links

exchange of goods and services to do away with currency
transactions
 Imports of goods is paid by export of equal amount of goods,
instead of money payment
Impact of Globalization on Indian Economy
Exports
Flow of Foreign Investments in India
Imports
Growth rate of GDP
Poverty Reduction
Challenges in Globalization
Modernisation of industry
Promotion of exports
Training of personnel; according to global standards
Reorganisation of Industrial Sector
Entry to MNCs in Indian market
Encourage inflow of foreign investment
Continuous dialogue between the government and business

sector

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International Marketing

Evolution Of Business- From local to global

Evolution directly linked with progress of human life and

From Barter to Global Trade

Business witnessed industrial and transport revolution in the

First objective of Export-Import policy (1992-97): To establish

World= one common integrated market

3. Domestic market constraints:

5. Govt. policies and regulations:

6. Spin off benefits:

 Preferred when capacity is under-utilised

Licensing and Franchising

 A firm in one country (licensor) permits a firm in another country

 Franchising is a form of licensing. The franchiser grants

 One way of franchising includes supply of a part/material to the

 A company gives contract to another firm in foreign market to

 An international firm provides management know how to the

Fully owned manufacturing facilities

 If the company has long tern and substantial interest in the

 Sharing ownership and management

Mergers and Acquisitions

 Entry as well as expansion strategy

 Alliance with competitors (existing and potential) in foreign markets,

 An unconventional way of doing international business which links

Impact of Globalization on Indian Economy

Flow of Foreign Investments in India

Growth rate of GDP

Training of personnel; according to global standards

Reorganisation of Industrial Sector

Entry to MNCs in Indian market

Encourage inflow of foreign investment

Continuous dialogue between the government and business

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