Download MBA – IV Semester INTERNATIONAL MARKETING

MBA – IV Semester
INTERNATIONAL MARKETING
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Module I
INTERNATIONAL MARKETING ENVIRONMENT
1.0
Learning Outcomes
1.1
Introduction
Planning for International Marketing Environment
Coping with environmental change
Global environmental factors
Economic Environment
Political environment
Legal and Technical Environment
Regional integration
Global Trade Production
Intermediate and Macro Environment
Introduction
All marketing activities occur within legal, economic, cultural political and other
environments to which strategies and policies must relate. Marketers need to operate within
the constrains of this environment, and in the case of international marketing there will be
more than one environment constraining the company at any one time.
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The Marketing Environment
The term "marketing environment" relates to all of the factors (whether internal, external,
direct or indirect) that affects a firm's marketing decision-making/planning. A firm's
marketing environment consists of three main areas, which are:
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The macro-environment, over which a firm holds little control
The micro-environment, over which a firm holds a greater amount (though not
necessarily total) control
The internal environment
The Macro-Environment
A firm's marketing macro-environment consists of a variety of external factors that manifest
on a large (or macro) scale. These are typically economic, social, political or technological
phenomena. A common method of assessing a firm's macro-environment is via a PESTLE
(Political, Economic, Social, Technological, Legal, Ecological) analysis. Within a PESTLE
analysis, a firm would analyze national political issues, culture and climate, key
macroeconomic conditions, health and indicators (such as economic growth, inflation,
unemployment, etc.), social trends/attitudes, and the nature of technology's impact on its
society and the business processes within the society.
The Micro-Environment
A firm's micro-environment comprises factors pertinent to the firm itself, or stakeholders
closely connected with the firm.
Marketing orientation
The marketing orientation is perhaps the most common orientation used in contemporary
marketing. It involves a firm essentially basing its marketing plans around the marketing
concept, and thus forging products to suit new consumer tastes.
As an example, a firm would employ market research to gauge consumer desires, use R&D to
develop a good attuned to the revealed information, and then utilise promotion techniques to
ensure persons know the good exists. The marketing orientation often has three prime facets,
which are:
Customer Orientation
A firm in the market economy survives by producing goods that persons are willing and able
to buy. Consequently, ascertaining consumer demand is vital for a firm's future viability and
even existence as a going concern.
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Organizational Orientation
All departments of a firm should be geared to satisfying consumer wants/needs. In this sense,
a firm's marketing department is often seen as of prime importance within the functional level
of an organization.
Information from an organization's marketing department would be used to guide the actions
of other departments within the firm. As an example, a marketing department could ascertain
(via marketing research) that consumers desired a new type of product, or a new usage for an
existing product. With this in mind, the marketing department would inform the R&D
department to create a prototype of a good/service based on consumers' new desires.
The production department would then start to manufacture the good, while the marketing
department would focus on the promotion, distribution, pricing, etc. of the product.
Additionally, a firm's finance department would be consulted, with respect to securing
appropriate funding for the development, production and promotion of the product.
Inter-departmental conflicts are possible to occur, should a firm adhere to the marketing
orientation. Production may oppose the installation, support and servicing of new capital
stock, which may be needed to manufacture a new product. Finance may oppose the required
capital expenditure, since it could undermine a healthy cash flow for the organization.
Marketing Communications
Marketing communications breaks down the strategies involved with marketing messages
into categories based on the goals of each message. There are distinct stages in converting
strangers to customers that govern the communication medium that should be used.
Personal sales
Oral presentation given by a salesperson who approaches individuals or a group of potential
customers:
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Live, interactive relationship
Personal interest
Attention and response
Interesting presentation
Clear and thorough.
Sales promotion
Short-term incentives to encourage buying of products:
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Instant appeal
Anxiety to sell
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An example is coupons or a sale. People are given an incentive to buy, but this does not build
customer loyalty or encourage future repeat buys. A major drawback of sales promotion is
that it is easily copied by competition. It cannot be used as a sustainable source of
differentiation.
Customer Focus
Many companies today have a customer focus (or market orientation). This implies that the
company focuses its activities and products on consumer demands. Generally there are three
ways of doing this: the customer-driven approach, the sense of identifying market changes
and the product innovation approach.
In the consumer-driven approach, consumer wants are the drivers of all strategic marketing
decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of
a market offering, including the nature of the product itself, is driven by the needs of potential
consumers. The starting point is always the consumer. The rationale for this approach is that
there is no point spending R&D funds developing products that people will not buy. History
attests to many products that were commercial failures in spite of being technological
breakthroughs.
A formal approach to this customer-focused marketing is known as SIVA (Solution,
Information, Value, Access). This system is basically the four Ps renamed and reworded to
provide a customer focus.
The SIVA Model provides a demand/customer centric version alternative to the well-known
4Ps supply side model (product, price, place, promotion) of marketing management.
Product Focus
In a product innovation approach, the company pursues product innovation, then tries to
develop a market for the product. Product innovation drives the process and marketing
research is conducted primarily to ensure that profitable market segment(s) exist for the
innovation. The rationale is that customers may not know what options will be available to
them in the future so we should not expect them to tell us what they will buy in the future.
However, marketers can aggressively over-pursue product innovation and try to
overcapitalize on a niche. When pursuing a product innovation approach, marketers must
ensure that they have a varied and multi-tiered approach to product innovation. It is claimed
that if Thomas Edison depended on marketing research he would have produced larger
candles rather than inventing light bulbs. Many firms, such as research and development
focused companies, successfully focus on product innovation. Many purists doubt whether
this is really a form of marketing orientation at all, because of the ex post status of consumer
research. Some even question whether it is marketing.
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An emerging area of study and practice concerns internal marketing, or how
employees are trained and managed to deliver the brand in a way that positively
impacts the acquisition and retention of customers (employer branding).
Diffusion of innovations research explores how and why people adopt new products,
services and ideas.
A relatively new form of marketing uses the Internet and is called Internet marketing
or more generally e-marketing, affiliate marketing, desktop advertising or online
marketing. It tries to perfect the segmentation strategy used in traditional marketing. It
targets its audience more precisely, and is sometimes called personalized marketing or
one-to-one marketing.
With consumers' eroding attention span and willingness to give time to advertising
messages, marketers are turning to forms of permission marketing such as branded
content, custom media and reality marketing.
The use of herd behavior in marketing.
The Economist reported a recent conference in Rome on the subject of the simulation of
adaptive human behavior. It shared mechanisms to increase impulse buying and get people
"to buy more by playing on the herd instinct." The basic idea is that people will buy more of
products that are seen to be popular, and several feedback mechanisms to get product
popularity information to consumers are mentioned, including smart-card technology and the
use of Radio Frequency Identification Tag technology. A "swarm-moves" model was
introduced by a Florida Institute of Technology researcher, which is appealing to
supermarkets because it can "increase sales without the need to give people discounts."
Marketing is also used to promote business' products and is a great way to promote the
business.
Other recent studies on the "power of social influence" include an "artificial music market in
which some 14,000 people downloaded previously unknown songs" (Columbia University,
New York); a Japanese chain of convenience stores which orders its products based on "sales
data from department stores and research companies;" a Massachusetts company exploiting
knowledge of social networking to improve sales; and online retailers who are increasingly
informing consumers about "which products are popular with like-minded consumers" (e.g.,
Amazon, eBay).
1.2
Planning for International Marketing Environment
Expanding your business in international markets involves risks that should be meticulously
calculated. It requires additional steps to your planning process, but the results can be very
rewarding!
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Having solid operations at home is usually a first step to a successful international expansion.
Mastering the production, and the overall business experience, will give you the initial
confidence to attract strategic partners.
Begin with a thorough marketing plan, which will serve as a reference to all individuals
involved with the business. The document should include all aspects of the product or service
life, from complete research to launch, implementation and execution. This will be key for
your business plan.
Starting with a comprehensive research plan A detailed research plan will help you make
informative decisions on the objectives and strategies. It will also help you decide how to
enter that market, whether by finding a local partner to distribute your goods, or by opening
sales offices and importing your products, or by building facilities to produce your goods in
the new market.
The analysis of the macro environment is one of the most important steps of international
planning. This involves a clear understanding of the political, social and economic climate of
the target market. Search for trends and forecasts of variables like the exchange rate,
inflation, unemployment rate, purchasing power, import barriers and tariffs, and important
socio-political events. You need to understand what affects your audience and the industry in
general. These issues will hugely impact your operations, and your business model should
make provisions for them.
Next, compile information about the audience you want to reach: gender, average age and
income, geography, preferences, decision and purchasing process, etc. Based on cultural
background, consumers in other markets have a different perception of products, brands and
related services. This will dictate the level of adjustment required to your line of products and
how you will promote it to that audience. The importance of understanding diversity cannot
be overemphasized. A common mistake that many companies make is to lump many
countries together into regions. Each country on every continent has very individualized
habits and traditions that you should take into consideration.
Another important element of your research should be the accessibility of local expertise to
support your operations. Search for partners that can complement your business model in
areas such as sales, operations, supply chain, legal, accounting and distribution. Also
investigate the availability of local talent to manage and run your operations. Allowing for a
fast and dynamic local decision-making process is vital for a successful expansion.
Then you should examine the competitive environment using the "SWOT" analysis
technique. At this time, investigate all public information available about your top
competitors, and get a clear knowledge of their Strengths and Weaknesses. Find out the
barriers for entrants, be aware of your limitations as a new player, and know potential cultural
pre-concepts that may affect you as a foreign brand. With this information in hand you will
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be able to compare and elaborate on your Opportunities and Threats. You want this section to
be very objective, with clear bullet point lists.
Setting the basis
The next step is to quantify your targets. This should include your transaction volume and
revenue targets; most multinational companies use the US dollar as the official currency for
revenue reports. Due to exchange rate fluctuations, it is recommended to track results in both
local currency and the US dollar. Create multiple columns with targets for the year, and also
broken down by quarter. On a separate chart, break it down further by distribution channel
such as intermediaries, in store, online, etc. Detailed reports will help you understand market
seasonality and channels.
After conducting thorough research and setting your targets, you are ready to develop your
key marketing objectives. Use this opportunity to figure out the macro course of actions that
will enable your company to reach its numeric targets. Be realistic; think through objectives
that are both aggressive and achievable. Some important objectives at this stage usually
involve branding, product development and distribution channel mix. List a minimum of
three but no more than six or seven key marketing objectives for the year. Consider hiring
your local manager before or during this stage; the involvement of this professional in the
planning process can be very valuable for the success of your international expansion.
Next, work on the strategies and activities in support, which are the means to realize your
objectives. Start with the 'communications message', the sentiment you want associated with
your brand. Use in-country assistance to consolidate a single powerful message that should be
reflected in all points of contact with customers such as brochures, advertising, website,
stores, press releases, etc. Sometimes a message that is successfully communicated at home is
translatable, but in most cases it will require adjustments to the native culture, which is why
the use of local assistance is vital.
Then, develop the key marketing strategies, supported by tactics and programs to execute
them. In essence, strategy is how resources are distributed and utilized to achieve your key
objectives. Tactics and programs are important to make the strategies action-oriented.
As you work through your six or seven strategies, focus on delivering distinctive value to
your customers through your programs. You don't have to limit the number of programs and
tactics under each strategy. Keep them focused, with clear implementation facts and time
schedules. All should be visually organized, so your team can envision how the tactics and
programs relate to each strategy, and how all strategies will contribute to the overall
objectives. Bear in mind the resources and marketing funds available for the year.
Finish your plan with a detailed budget chart, breaking it down by activities and costs, in both
currencies. In the future, a year-over-year comparison will be helpful to evaluate the results
and calculate return on investment.
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A marketing plan is not a static document. Revisions should be made at least quarterly, as
your team becomes more knowledgeable about the new market. In addition to the numeric
targets, it is useful to establish parameters to measure the effectiveness of your strategies,
tactics and programs. Determine what to evaluate, and establish standards of performance,
but be careful with misleading comparisons between different markets. This exercise will
allow you to take corrective action, adjusting your marketing strategies to be more
competitive during the year.
These are the basics of effective international marketing planning. Once implementation is in
place, have your mind set for future expansions, developing a business model that can be
recreated in other countries, with proper adjustments. And finally, be sure to involve your
team throughout the process, and make allowances for cultural distinction in management
style!
Factors involved in it
Marketing environment is made up of all the factors and forces that influence marketing.
These forces can be internal like departments (other than marketing such as finance
department and human resource department) or external like competitors, suppliers,
economic or political situation. To understand them better, marketing personals divide them
in two categories namely macro environment and micro-environment. Let's have a look at
some of the important factors involved in marketing environment.
(i) Internal factors:
All the departments involved in business management affects the process of marketing as
well, for example the finance or research department in large enterprises. Marketing
department is bound to keep their expenses under the budget set by the finance managers or
to consider recommendations from the research department. Similarly the supplies and
collections can have an impact on marketing as well.
a. Customer markets:
Different types of customers markets include consumer markets (B2C), business markets
(B2B), government markets (B2G), also a new type of customer market has emerged as a
result of globalization i.e. international market. Where most other departments will treat these
markets similarly, marketing team has to treat them all in different manner. Though most
advertising campaigns are targeted to consumer market, the type of customer market does
affect marketing decisions on the whole.
b. Competition:
Competition is becoming more and more influential in a company's approach towards
marketing. Competition stems from the business that is offering the same product as yours. A
business has to counter this competition through marketing; sometimes businesses do try to
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have a hit at their competitors in advertisements (though not candidly). The level of
competition is also a decisive factor when planning on how much to spend on marketing.
c. Different types of publics:
Another important microenvironment factor is the public’s (government, consumer
associations, financial or media publics). All of them can have an affect (positive or negative)
on company's reputation and marketing.
d. Demography:
Good marketing managers tend to spend plenty of time in conducting demographic research
for their targeted consumers. Demography is the research of gender, age, race or anything
else related to consumers. International businesses are concerned about various races (Asians,
Hispanics, etc) and their different set of demands. While the terms like "baby boomers" or
"generation X" were invented to reflect the specific age groups of consumers.
(ii) Economic Factors:
All the variables of economic markets like inflation, rate of exchange, fiscal policies and
monetary policies fall under macro environment factors. They affect all businesses, and
needless to say their marketing efforts as well
1.3
Coping with Environmental Change:
Most of the firm’s environments have to be taken as they are and cannot be controlled, yet
they have profound consequences for marketing management. Thus procedures are needed
for the speedy identification of fresh market opportunities resulting from environmental
change is necessary.
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First, the firm should predict the external changes that might occur and then detail:
how the organization would be affected by them and how it should respond.
Second, it should list the business’s major functions, followed by an outline of all
environmental factors likely to affect these functions.
Unfortunately there is a huge number of external variables that might affect a firm’s
operations, creating the danger that some important variables be overlooked. Very large
companies might attempt to influence the governments and institutions that help determine
environments in the first place.
Lobbying of governments, the media, international organizations, etc, can occur via trade
associations, chambers of commerce, industry trade missions to foreign countries and similar
organizations.
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Global Environmental Factors
1.4
Global “environmental” factors are those so called “uncontrollable”, unlike the “controllable”
factors of price, promotion, place and product. They include market tastes, economic, socio
cultural, legal, technological, competitive and political factors to name but a few. Failure to
account for these factors can lead to dire consequences.
In the past fifty years the global economy has changed rapidly. Particularly marked has been
the development of world economic integration and standardized products. Coca Cola,
Nissan and Marlboro cigarettes are examples of products which serve nearly every market.
Generally there have been four major changes:
capital movements rather than trade have become the driving force of the global
economy,
production has become “uncoupled” from employment,
primary products have become “uncoupled” from the industrial economy.
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Pest Analysis
PEST is a well-known and widely applied tool when considering the external nature of the
domestic market. However, it is equally as useful when applied to the nature of the
international marketing environment.
International PEST Analysis would consider:
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What is the level of new industrial growth? E.g. China is experiencing terrific
industrial growth.
What is the impact of currency fluctuations on exchange rates, and do your home
market and your new international market - share a common currency? E.g. Polish
companies trading in Eire will use Euros.
There are of course the usual economic indicators that one needs to be aware of such
as inflation, Gross Domestic Product (GDP), levels of employment, national income,
the predisposition of consumers to spend savings or to use credit, as well as many
others.
When exchange rates are allowed to fluctuate, the currency of a country that tends to run a
trade deficit will tend to decline over time, since there will be less demand for that currency.
This reduced exchange rate will then tend to make exports more attractive in other countries,
and imports less attractive at home.
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1.5
The Economic Environment
Key factors in the economic environment of a country in which a firm is doing business are
the nature and extent of competition, growth rates and living standards, tax regimes, import
controls and market opportunities as a whole. International marketing managers need to take
an interest in both the economic structures of the country in which they wish to do business
and the international economy as a whole in order to establish the sizes and characteristics of
various markets, identify high-growth sectors, assess the degree of risk attached to operating
in specific countries, and deploy the resources effectively.
If the company is operating a centralized system of control, the foreign subsidiaries will
collect information on national economies. Head quarters staff may then interpret the
information (possibly in liaison with local subsidiary managers) and make cross-national
comparisons using standard criteria. Important variables to be examined include Gross
Domestic Product (GDP) in total and per head of population, the regional distribution of
GDP, levels of capital investment, consumer expenditures, labour costs, inflation rates and
level of unemployment.
Comparisons of the economic conditions prevailing in many disparate countries are a
formidable task. There are problems of data comparability, unreliability of information on
certain economies, differences in data collection periods, and so on. Each firm will of course
be interested in a particular set of economic variables specifically relevant to its operations.
If a firm has a decentralized system of control, information will be collected and acted on
locally, with the home-country management kept in the picture in order for them to retain an
overall view of the company’s progress. In many cases, global corporations allow their
overseas subsidiaries considerable leeway – even allowing them to compete with each other.
For example, Volkswagen ceased the production of beetle in Germany, but the firm’s
Mexican and Brazilian subsidiaries continued to make the car and even exported them back
to Germany. Companies need to look beyond the obvious, and use economic indicators to
predict what governments might do. For example, the balance of payments indicates the
following:
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The overall economic health of the Country;
The likelihood of the country’s government imposing foreign exchange controls,
import restrictions and deflationary economic policies such as tax increases and
interest rises; and
Whether a devaluation of the national currency against other currencies might occur.
Restrictions on entry to the market (tariff levels and controls over the foreign ownership of
enterprises for example), the prices a firm can charge its customers and the ability to
repatriate profits. Economic and legal environment interrelate: political factors influence the
economy, while economic hardship may trigger political upheaval. Political instability can
arise from internal revolution and insurgency, involvement in foreign wars, frequent changes
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of government (peacefully or through violence), bad international relations, falling national
income and living standards, high inflation and rising foreign debt. Further indices are:
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How much capital is leaving the country and the attitudes towards the country of
international organizations such as the world bank and the IMF;
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Widespread bribery and corruption among government officials;
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Industrial relations, including the legality of strike and trade unions.
Macro Risk and Micro Risk
Economic theory can be broadly divided into micro economics and macro economics. The
term micro means small and macro means large.
Macro risks affect all foreign firms operating in the country to an equal extent. Examples
include the impositions of exchange controls, special taxes on foreign firms, “LOCAL
CONTENT” rules, etc. micro risk, conversely, applies to a particular company, industry or
project, e.g. import restrictions on a specific category of product, the compulsory breaking up
of a very large firm into smaller units, cancellation of contracts, etc. there exist consultancies
that specialize in political risk assessment, usually by focusing on analysis of the following
issues:
Economic factors:
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Distribution of wealth and income:
In an economy the distribution of wealth and income must be equal. It should evenly
distributed.
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Labour relations and the incidence of strikes:
The relationship maintained with the labour must be good. The incidence on the
happening of the strikes must also be of a cordial one.
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The rates of economic growth and inflation:
The rate of economic growth such as the growth rate is also one of the factors which
determine the economic environment of a country, which is helped by a positive
inflation rate which does not affect the economy.
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The effectiveness of public administration:
The effectiveness of the public administration is also a factor of the economic
environment. The more the effectiveness, the more the growth.
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The level of unemployment:
The level of unemployment also determines the level of growth of a economy in a
country.
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Balance of payments situation:
Balance of payments is the difference between the imports and the exports of a
country. Balance of payments situation also like other factors determines the
economic growth in a economy.
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Ratio of foreign debt to national income:
The ratio of foreign debt to national income is also a factor which helps in economic
growth. The national income must be greater than the foreign debt.
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A major problem with political risk assessment is that the information on which it is based is
likely to be biased, to rely on hearsay, and to be incomplete, quantitatively immeasurable,
contradictory and difficult to verify. Choice of the factors upon which an analysis should be
based is necessarily subjective, and a huge range of variables may be relevant to the country
concerned. The interpretation of the information is also subjective.
It is of course much easier to evaluate political risk in a democratic country wherein the
views of the government and the opposition may be monitored via the press, parliamentary
debates, party manifestos and it can be similar documents. Much censorship occurs in
undemocratic countries, and can be extremely difficult (perhaps impossible) to establish the
true situation.
MARKET
DEMAND
CULTURAL
FACTORS
SOCIODEMOGRAP
HIC
FACTORS
PRICE
LEGAL
ENVIRONMENT
PLACE
PROMOTION
POLITICAL
ENVIRONMENT
TECHNOLOGY
OF THE
SYSTEM
PRODUCT
COMPETITIVE
ENVIRONMENT
STATE OF
THE
ECONOMY
NATURE AND
EXTENT OF
LOCAL
MARKETING
Figure 1: Economic Factors
What is Cultural:
Terpstran (1987) has defined cultural as follows:
"The integrated sum total of learned behavioral traits that are manifest and shared by
members of society".
Culture, therefore, according to this definition, is not transmitted genealogically. It is not, also
innate, but learned. Facets of culture are interrelated and it is shared by members of a group
who define the boundaries. It is not uncommon to have a European culture, alongside an
indigenous culture, say, for example, Shona, in Zimbabwe. Culture also reveals itself in many
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ways and in preferences for colours, styles, religion, family ties and so on. The colour red is
very popular in the west, but not popular in Islamic countries, where sober colours like black
are preferred.
Objectives
To describe what is meant by "culture" and the numerous ways which have been
devised to study it.
To give an understanding of how "culture" effects global marketing planning.
To show why the study of "culture" is important to marketers.
Approaches to the study of cultural
Keegan (1989) suggested a number of approaches to the study of culture including the
anthropological approach, Maslow's approach, the Self- Reference Criterion (SRC), diffusion
theory, high and low context cultures and perception.
Maslow approach
In searching for culture universals, Maslow's (1964) hierarchy of needs gives a useful
analytical framework. Maslow hypothesised that people's desires can be arranged into a
hierarchy of needs of relative potency. As soon as the "lower" needs are filled, other and
higher needs emerge immediately to dominate the individual. When these higher needs are
fulfilled, other new and still higher needs emerge.
Self Reference Criterion (SRC)
Lee (1965) suggested a way, whereby one could systematically reduce this perception. He
suggested a four point approach.
a)
b)
c)
d)
Define the problem or goal in terms of home country traits, habits and norms.
Define the problem or goal in terms of the foreign culture traits, habits and norms.
Isolate the SRC influence in the problem and examine it carefully to see how it
complicates the pattern.
Redefine the problem without the SRC influence and solve for the foreign market
situation.
The problem with this approach is that, as stated earlier, culture may be hidden or non
apparent. Uneartherning the factors in b) may, therefore, be difficult.
Diffusion Theory
Many studies have been made since the 1930's to assess how new innovations are diffused in
a society. One of the most prolific writers was Everett Rogers. In his book, "Diffusion of
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Innovations" (1962) he suggested that adoption was a social phenomenon, characterized by a
normal distribution. See figure 2.
Figure 2: Adopter categories
In this case the innovators are a small percentage who like to be seen to lead, then the others,
increasingly more conservative, take the innovation on. The adoption process itself is done in
a series of stages from awareness of the product, through to interest, evaluation, trial and
either adoption or rejection (in the case of non adopters). The speed of the adoption process
depends on the relative advantage provided by the product, how compatible or not it is with
current values or experiences, its complexity, divisibility and how quickly it can be
communicated to the potential market. In international marketing an assessment of the
product or service in terms of these latter factors is very useful to the speed of its adoption.
Most horticultural products, for example, have no problem in transfer from one culture to
another, however specific types may have. It is unlikely that produce like "squash" would sell
well in Europe, but it does in Zimbabwe.
High and low context cultures
The concept of high and low context cultures as a way of understanding different cultural
orientations. In low context cultures messages have to be explicit, in high context cultures
less information is required in the verbal message. In low context cultures, for example like
Northern Europe, a person's word is not to be relied on, things must be written. On the other
hand, in high context cultures, like Japan and the Middle East, a person's word is their bond.
It is primarily a question of trust.
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The elements of cultural
1. Material culture
2. Language
3. Education
4. Religion
5. Attitudes and values
Material culture
Material culture refers to tools, artifacts and technology. Before marketing in a foreign
culture it is important to assess the material culture like transportation, power,
communications and so on. Input-output tables may be useful in assessing this.
Language
Language reflects the nature and values of society. There may be many sub-cultural
languages like dialects which may have to be accounted for. Some countries have two or
three languages. In Zimbabwe there are three languages - English, Shona and Ndebele with
numerous dialects. In Nigeria, some linguistic groups have engaged in hostile activities
Education
Education refers to the transmission of skills, ideas and attitudes as well as training in
particular disciplines. Education can transmit cultural ideas or be used for change, for
example the local university can build up an economy's performance.
Education levels, or lack of it, affect marketers in a number of ways:
advertising programmes and labelling girls and women excluded from formal education
(literacy rates) conducting market research complex products with instructions relations with
distributors and, support sources - finance, advancing agencies etc.
1.6
Political Environment
Several studies of civil war have concluded that economic inequality between individuals
does not increase the risk of internal armed conflict. This is perhaps not so surprising. Even
though an individual may feel frustrated if he is poor compared with other individuals in
society, he will not start a rebellion on his own.
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Hence, we should not neglect the group aspect of human well-being and conflict. Systematic
inequalities that coincide with ethnic, religious, or geographical cleavages in a country are
often referred to as horizontal inequalities (or inter-group inequalities). Case studies of
particular countries as well as some statistical studies have found that such inequalities
between identity groups tend to be associated with a higher risk of internal conflict. But the
emergence of violent group mobilization in a country with sharp horizontal inequalities may
depend on the characteristics of the political regime.
For example, in an autocracy, grievances that stem from group inequalities are likely to be
large and frequent, but state repression may prevent them from being openly expressed. This
paper investigates the relationship between horizontal inequalities, political environment, and
civil war in developing countries. Based on national survey data from 55 countries it
calculates welfare inequalities between ethnic, religious, and regional groups for each country
using indicators such as household assets and educational levels. All the inequality measures,
particularly regional inequality, are positively associated with higher risks of conflict
outbreak. And it seems that the conflict potential of regional inequality is stronger for pure
democratic and intermediate regimes than for pure autocratic regimes. Institutional
arrangements also seem to matter. In fact it seems that the conflict potential of horizontal
inequalities increases with more inclusive electoral systems. Finally, the presence of both
regional inequalities and political exclusion of minority groups seems to make countries
particularly at risk for conflict. The main policy implication of these findings is that the
combination of politically and economically inclusive government is required to secure peace
in developing countries.
There are many philosophical and political forces of change in America today which are
molding the environmental agenda of the 104th Congress. What is the proper role of the
federal government? What is the proper balance of public good vs individual rights? and
What are the implications to private property rights? All of these differences seem to come
together over the debate on the protection of wetlands. These principles can be seen in much
of the legislation that is being considered in Congress and will have a significant impact on
the programs and policies in place today.
The Political / Legal / Regulatory environment IS often a direct consequence of the political
parties in power, which represents the popular opinion of the citizens of the region. If the
citizens are, for example, pro-Big Business then probably taxation will be modest and there
will not be a lot of stringent rules about environmental considerations. If the citizens are very
concerned about safety issues, for example, then there will be a lot of rules and regulations
governing things such as transportation safety, which will make it more expensive for some
companies that have big shipping costs.
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1.7
Legal and Technical Environment
This addresses the issue of effective working relationships between legal and technical staff
involved in enforcement. The nature of the enforcement process is described including the
types of formal and informal enforcement actions available to the United States
Environmental Protection Agency. The nature of the legal and technical disciplines are
discussed, along with the types of people in and the training of the legal and technical
professions. The barriers to effective cooperation are discussed. The detailed responsibilities
of the engineer and attorney in specific enforcement actions are explored.
The critical elements in the day-to-day cooperation between the engineer and attorney on an
enforcement action are discussed including case communication, case management and
several other important items that affect the outcome and the management of an enforcement
action. The engineer and attorney is the key to successful enforcement. While there are many
barriers that exist between the two professions, those barriers must and can be overcome in
order to achieve desired results-environmental protection.
Environmental agencies are facing problems of ever increasing complexity. IN order to deal
with those problems, these agencies must assemble the most highly skilled people available
from a number of professions. This is especially the case in the area of environmental
enforcement. Extensive work over a number of years goes into developing environmental
laws, publishing regulations, and issuing permits. For that process to be worthwhile there
must be a strong enforcement program to insure that the regulated community complies with
the laws, regulations, and permits. Because so much is at stake, both for the environment and
economically, enforcement can be exceedingly controversial. In addition, complex issues
relating to environmental damage, the nature and extent of violations, the type of compliance
program to be implemented, and the legal issues must be handled very effectively. There
must be the best possible group of engineers, attorneys, and managers working in full
cooperation with one another to have.
The views expressed in this article are solely those of the authors; they do not necessarily
reflect the views or policies of the U.S. Environmental Protection Agency.
A fully effective enforcement program. This paper addresses the issue of effective working
relationships between legal and technical staff involved in enforcement. There are many
barriers to achieving the full degree of cooperation managers would like to see, but there are
ways to overcome those barriers. Perhaps most importantly, managers must bring to the
program an enforcement mentality, where violations of the environmental laws are taken very
seriously because of their threat both to our legal system and to the environment we are trying
to protect. By attracting and developing engineers and attorneys with this enforcement
attitude and with a clear sense of what they want from their cases, managers of environmental
enforcement programs are much more likely to achieve success.
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1.8
Regional Integration
Regional integration is a process in which states enter into a regional agreement in order to
enhance regional cooperation through regional institutions and rules. Its objectives could
range from economic to political although it has become a political economy initiative where
commercial purposes are the means to achieve broader socio-political and security objectives.
Past efforts at regional integration have often focused on removing barriers to free trade in
the region, increasing the free movement of people, labour, goods, and capital across national
borders, reducing the possibility of regional armed conflict (for example, through Confidence
and Security-Building Measures), and adopting cohesive regional stances on policy issues,
such as the environment, climate change and migration. Such an organization can be
organized either on supranational or intergovernmental decision-making institutional order,
or a combination of both.
There have been several efforts at regional integration, including the Association of Southeast
Asian Nations, the North American Free Trade Agreement and Mercosur. Perhaps the most
well known and developed attempt at regional integration has been the European Union,
which in some policy areas has moved beyond an intergovernmental approach to decision
making at a federalist or supra-state level.
Regional integration has been defined as an association of states based upon location in a
given geographical area, for the safeguarding or promotion of the participants, an association
whose terms are fixed by a treaty or other arrangements. Philippe De Lombaerde and Luk
Van Langenhove define regional integration as a worldwide phenomenon of territorial
systems that increase the interactions between their components and create new forms of
organization, co-existing with traditional forms of state-led organization at the national level.
According to Hans van Ginkel, regional integration refers to the process by which states
within a particular region increase their level of interaction with regard to economic, security,
political, and also social and cultural issues. In short, regional integration is the joining of
individual states within a region into a larger whole. The degree of integration depends upon
the willingness and commitment of independent sovereign states to share their sovereignty.
Regional integration initiatives, according to Van Langenhove, should fulfill at least eight
important functions:
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the strengthening of trade integration in the region
the creation of an appropriate enabling environment for private sector development
the development of infrastructure programmes in support of economic growth and
regional integration
the development of strong public sector institutions and good governance;
the reduction of social exclusion and the development of an inclusive civil society
contribution to peace and security in the region
the building of environment programmes at the regional level
the strengthening of the region’s interaction with other regions of the world.
20
The crisis of the post-war order led to the emergence of a new global political structure. This
new global political structure made obsolete the classical Westphalian concept of a system of
sovereign states to conceptualize world politics. The concept of sovereignty becomes loser
and the old legal definitions of an ultimate and fully autonomous power of a nation-state are
no longer meaningful. Sovereignty, which gained meaning as an affirmation of cultural
identity, has lost meaning as power over the economy. All regional integration projects
during the cold war period were built on the Westphalian state system and were to serve
economic growth as well as security motives in their assistance to state building goals.
Regional integration and globalization are the two phenomenons challenging the existing
global order based upon sovereign states at the beginning of the twenty-first century. The two
processes deeply affect the stability of the Westphalian state system, thus contributing to both
disorder and a new global order.
Closer integration of neighbouring economies is seen as a first step in creating a larger
regional market for trade and investment. This works as a spur to greater efficiency,
productivity gain and competitiveness, not just by lowering border barriers, but by reducing
other costs and risks of trade and investment. Bilateral and sub-regional trading arrangements
are advocated as development tools as they encourage a shift towards greater market
openness. Such agreements can also reduce the risk of reversion towards protectionism,
locking in reforms already made and encouraging further structural adjustment.
In broad terms, the desire for closer integration is usually related to a larger desire for
opening to the outside world. Regional economic cooperation is being pursued as a means of
promoting development through greater efficiency, rather than as a means of disadvantaging
others. Most of the members of these arrangements are genuinely hoping that they will
succeed as building blocks for progress with a growing range of partners and towards a
generally freer and open global environment for trade and investment. Integration is not an
end in itself, but a process to support economic growth strategies, greater social equality and
democratization.
Regional integration arrangements are a part and parcel of the present global economic order
and this trend is now an acknowledged future of the international scene. It has achieved a
new meaning and new significance. Regional integration arrangements are mainly the
outcome of necessity felt by nation-states to integrate their economies in order to achieve
rapid economic development, decrease conflict, and build mutual trusts between the
integrated units. The nation-state system, which has been the predominant pattern of
international relations since the Peace of Westphalia in 1648 is evolving towards a system in
which regional groupings of states is becoming more important than sovereign states. There
is a powerful perception that the idea of the state and its sovereignty has been made irrelevant
by processes that are taking place at both the global and local level. Walter Lippmann
believes that, "the true constituent members of the international order of the future are
communities of states." E.H. Carr shares Lippmann view about the rise of regionalism and
regional arrangements and commented that, "the concept of sovereignty is likely to become
in the future even more blurred and indistinct than it is at present."
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1.9
Global Trade Production
Global Trade Production is exchange of capital, goods, and services across international
borders or territories. In most countries, it represents a significant share of gross domestic
product (GDP). While international trade has been present throughout much of history (see
Silk Road, Amber Road), its economic, social, and political importance has been on the rise
in recent centuries. Industrialization, advanced transportation, globalization, multinational
corporations, and outsourcing are all having a major impact on the international trade system.
Increasing international trade is crucial to the continuance of globalization. International trade
is a major source of economic revenue for any nation that is considered a world power.
Without international trade, nations would be limited to the goods and services produced
within their own borders.
International trade is in principle not different from domestic trade as the motivation and the
behavior of parties involved in a trade does not change fundamentally depending on whether
trade is across a border or not. The main difference is that international trade is typically
more costly than domestic trade. The reason is that a border typically imposes additional
costs such as tariffs, time costs due to border delays and costs associated with country
differences such as language, the legal system or a different culture.
Another difference between domestic and international trade is that factors of production
such as capital and labor are typically more mobile within a country than across countries.
Thus international trade is mostly restricted to trade in goods and services, and only to a
lesser extent to trade in capital, labor or other factors of production. Then trade in good and
services can serve as a substitute for trade in factors of production. Instead of importing the
factor of production a country can import goods that make intensive use of the factor of
production and are thus embodying the respective factor. An example is the import of laborintensive goods by the United States from China. Instead of importing Chinese labor the
United States is importing goods from China that were produced with Chinese labor.
International trade is also a branch of economics, which, together with international finance,
forms the larger branch of international economics.
1. The global trade system
The conclusion of the Uruguay Round (UR) in 1994 saw the establishment of a new trading
system and related agreement under the auspices of the World Trade Organization (WTO).
The WTO oversees implementation of the agreements by which member countries, especially
those that are developed, reduce tariff rates over a wide range of products. They have made
trade weighted tariff cuts that average 40 per cent on industrial products. The WTO also
tightens rules on non-tariff barriers (NTBs) by expecting members to replace NTBs with
bound tariff rates. The UR has converted all NTBs for agricultural products into bound
tariffs, which have to be cut by an average of 35 percent. These developments have helped to
open potential new markets for emerging agriculture- and resource-based Central Asian
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countries. However, as the international trading system becomes more rule-based, it will also
be highly competitive.
2. Developing trade capacity
World economies are well endowed with abundant natural resources such as oil, gas and
metals, as well as commodities like cotton, grain, and cereals. These natural resources create
the potential to develop horizontal and vertical industrial linkages, which can help to broaden
the export base. The republics of the former Soviet Union were traditional markets for the
exports of Central Asian economies. However, when the Russian economy opened, the result
was more foreign competition for Central Asian countries. Therefore, Central Asian countries
have had to adopt two new approaches: upgrade the quality of their exports in order to
compete in the Russian market diversify into other export markets.
The Central Asian governments need to increase their efforts to develop institutions designed
to have more efficient trade activities. Trade efficiency can be defined as the effective
facilitation and promotion of both exports and imports without friction and at the appropriate
cost. Without trade efficiency, export sectors and the supporting physical infrastructure
would be unable to help improve economic development of the country.
3. Private sector and public sector cooperation
World economies already have existing state trading entities that focus on export and trading.
However, changes in the international trade environment make it important for the
government to consult with the private sector about the assistance they will need in order to
adapt. Governments should have feedback mechanisms and dialogues with the private sector
to ensure that rules and regulations facilitate business development. An example would be the
establishment of industry advisory groups that include people from the public and private
sector. Similarly, economic agencies should develop channels for feedback as well as
information for disseminating to the business community. The regulatory framework should
be friendly and relevant to business and should not block business development. The process
of two-way communication will also help in providing appropriate assistance for exports and
product development and will enable companies in Central Asian countries to compete. The
right institutions to implement policies need to be set up and nurtured. Private and public
sector interactions will influence the bureaucracy to have pro-business attitudes. State trading
enterprises (STEs) could be restructured to do trading for production companies in the private
sector. This form of collaboration between the private and public sector will help the small
and medium-sized enterprises to export their products to new markets with minimum
transaction costs.
All of the focus there has been on the crisis in financial markets, the economic downturn has
been led by the industrial sector. However, a substantial part of the reason for the decline in
industrial output is a tightening of credit conditions – a direct result of the financial market
crisis. But the key point is the downturn now underway is impacting countries which did not
23
increase debt (leverage) excessively nor were involved directly in the credit markets that have
now gone bad. Rather, they are being affected by the widespread collapse in global trade that
is now underway. This means that the higher the share of foreign trade in a country’s
economy, the worst the impact on it from the current slowdown in world growth. The credit
crisis is acting to worsen the global economic downturn as trade credit and invoicing dry up.
Not surprisingly, companies are reducing inventories rapidly, business confidence has fallen
sharply and unemployment is now rising quickly.
Figure 3: Industrial Production
The fall in industrial production is fed by a severe fall in business and consumer confidence.
Chart d and e show that the falls in confidence have been dramatic since the third quarter of
2008. One of the key features of this is that it is happening almost simultaneously in a range
of key economies around the world. With such a big synchronized, fall in global production
and business confidence, it is not surprising that unemployment is beginning to show the kind
of increase not seen in decades, see chart f. With these negative economic trends in place, it is
only a matter of time before retail sales fall more sharply than seen so far in most countries,
see chart g. It may seem obvious, but the pace of the eventual economic recovery will be
limited by the extent of the rise in unemployment now underway. Unfortunately, this analysis
also suggests that the global economic recovery may take some time, despite the massive
fiscal and monetary loosening now underway and that it could get worse before it gets better.
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Figure 4: World trae growth
This is the context for the general fall in global trade that is now underway, with chart a
showing that this is likely to be easily the biggest decline in global trade since the 1950s.
Since world trade growth and world gap growth seem to be closely linked, a recovery in
global trade will be necessary to sustain any recovery in economic growth and vice versa.
Export volumes are falling very sharply, see chart b, with the decline in Japanese export
volumes in January, for instance, running at nearly 50% lower than in the year before. Hence,
trade linkages seem to lie at the heart of the collapse taking place in global industrial
production. Chart c shows industrial production tracking the fall in export volumes
downward almost in step. In practical terms, the response reflects a calculation being made
by companies that are facing falling demand and a reduced access to external and internal
finance. They are scaling back in order to survive the economic downturn now underway and
so sharply reducing stocks, output and employment.
4. Regulation of Global Trade Production
Traditionally trade was regulated through bilateral treaties between two nations. For centuries
under the belief in Mercantilism most nations had high tariffs and many restrictions on
international trade. In the 19th century, especially in the United Kingdom, a belief in free
trade became paramount. This belief became the dominant thinking among western nations
since then. In the years since the Second World War, controversial multilateral treaties like
the General Agreement on Tariffs and Trade (GATT) and World Trade Organization have
attempted to create a globally regulated trade structure. These trade agreements have often
resulted in protest and discontent with claims of unfair trade that is not mutually beneficial.
Free trade is usually most strongly supported by the most economically powerful nations,
though they often engage in selective protectionism for those industries which are
25
strategically important such as the protective tariffs applied to agriculture by the United
States and Europe The Netherlands and the United Kingdom were both strong advocates of
free trade when they were economically dominant, today the United States, the United
Kingdom, Australia and Japan are its greatest proponents. However, many other countries
(such as India, China and Russia) are increasingly becoming advocates of free trade as they
become more economically powerful themselves. As tariff levels fall there is also an
increasing willingness to negotiate non tariff measures, including foreign direct investment,
procurement and trade facilitation The latter looks at the transaction cost associated with
meeting trade and customs procedures.
5. The need for a trade promotion organization
Government institutions should be designed and created in order to provide support for the
business community, which will build productive capacity, upgrade industrial and agrotechnology, and expand exports and markets. There is therefore an urgent need to create a
trade promotion organization (TPO). If a TPO is given the right direction and managed
effectively, it can play an important, catalytic role in developing and promoting the country's
exports. The TPO can also act as an advisor and facilitator for the government's trade
development strategies. The role of the TPO is explained in this book. TPOs are generally
created to be the government's instrument for export promotion and development. However, a
TPO could have an expanded role if the government thinks that it would be a suitable
complement to help implement the national trade policy. TPOs could help to restructure
selected STEs to become export development arms for non-exporting companies.
Today's Marketing
The changing behavior of customers and proliferation of new marketing channels setups the
new issues in the business world. In international market competition it's becoming harder
and harder to maintain the life time relation with customers. Selling quality product and
service in affordable price is not enough to gain the customer loyalty there are also many
other dimensions of care. These all changes make profit secondary and modify organizations
to customer-focused organizations and born the new theories and approaches.
Today's marketing has come out with the circle of 4P's (Product, Price, Place and Promotion)
and in the broader sense it is taking as an organizational function. The modified form of
marketing is to provide greater value to customer and develop and maintain a healthy
relationship.
According to the American Marketing Association today's Marketing is:
"Marketing is an organizational function and a set of processes for creating, communicating
and delivering value to customers and for managing customer relationships in way that
benefit the organization and its stakeholders."(Keefe, 2004)
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1.10 Intermediate and Macro Environment
The global marketing environment comprises the intermediate and the macro environment.
The intermediate environment contains those factors which are semi-controllable through
contracts and they will be categorized as suppliers, Distributors, facilitators and shareholders.
For example in software industries the different vendors, application sellers, temporary
specialist staffs and subcontractors etc are part of intermediate environment. The macro
environment is made up of those factors and forces which are generally uncontrollable. (Lee,
2005)
For the Global strategic marketing planning to evaluate and investigate the threats,
opportunities and for risk assessment usually organizations used the PESTLE analysis here
PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental
Factors. (These macro environmental forces are also shown in above figure). Mostly external
auditor is used to audit the impact of these forces.
Some countries have more relaxed and easy polices for import and export.
Countries history of friendly relation and healthy business deals have also a positive impact
in the future trades. Similarly if countries have better infrastructure for trading polices and
legislations it also goes in the favor of the international traders. It helps to minimize the time
and provide the secure dealings and especially newcomers feel comfortable to trade in such
environment. With all these reasons the fresh literature tells us about the twelve factors
involvement in the international trading.
In 2005 according to the Geri Clarke the HELPS FREDICT is a more complete framework
for the international marketing environmental analysis.
H History
F Financial
E Economic
R Rules- International Trade
L Language
E Environment
P Politics
D Demographic
S Social
I Infrastructure
C Culture
T Technology
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Changes and Challenges
In 1998 article in the Economist Magazine Sums it up nicely:
"Marketing has become a complex art. Technology and trade have increased the potential for
global brands. The fragmentation of audiences and rising costs of television and print
advertising are making other media attractive. And direct marketing and the internet are
rewriting all the marketing rules."
55 years back, the television invention opens the new ways of the mass marketing and with
the visual demonstration many local brand and now take the status of the world class brand.
This technology changes the language of the advertising. In old age mostly people preferred
to buy things from market search and mainly radio transmitted about the market affairs and
new coming products. Then TV gave the new confidence to its viewers and globally
advertised the real market position. The visual demonstration also teach the people and guide
them correctly and it also answered the question that why they need and want this specific
product. Now World Wide Web is taking the position of the TV and Similarly the Digital TV
and the Smart mobile are writing the new rules of the marketing.
Today mobile and pager is the basic need of people and everyone is in range just because of a
small piece of technology. Here telecommunication was playing an important role. Now in
the end of 20th century, the emergence of internet and telecommunication introduce mcommerce. First mobile companies simply provide an updates information like weather
reports, games online information, latest movies and songs information etc just to provide
better services and to satisfy customer. From that time the m-commerce became the part of
our life and no one feel this addition of the new business technique, today banks and other
financial services are also providing mobile commerce services and this tiny device has
become the source of market transactions. This was the small overview of emergence of the
technology.
On the other hand the destructive incidents like 9/11 and 7/7 etc. and other country wars (War
against terrorism) are destroying the developed markets and the investors are feeling fear to
invest money in these risky areas.
The customer buying behavior and its quality perception is also changing and now he is
demanding the rich added value products and services. The multinational companies and
chain store also create a strong competition globally and it's becoming more difficult to retain
a long term relation with existing customer.
However the last decade of the twentieth century bought major changes that redefine the role
and concept of marketing. The rapid change of market made customer more sophisticated and
value added demanding. Products/service development and management has changed
radically, the internet and third party securities made more easy transactions and virtualized
payment and distribution channels introduce new way to approach market.
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International Marketing: A Global Perspective examines the main issues facing companies
that want to compete successfully in the global marketplace. It combines extensive coverage
of the relevant theories with a practical approach to the issues and broadens the way business
students view international markets and marketing. Using real-world case studies and
vignettes centred on contemporary problems and issues, International Marketing: A Global
Perspective will be ideal for undergraduates, MBA students and students following executive
courses in international marketing or strategy.
Unlike many US and European texts International Marketing: A Global Perspective does not
look out at the international scene from just one standpoint; rather it examines the way
businesses go international from a variety of different countries and continents, for instance,
from Asia to Europe, Europe to North American and Latin America to the US.
The new edition has been brought completely up-to-date and has a full range of ancillary
material for lecturers and students.
Features
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A managerial, decision- and process-oriented perspective
A truly global perspective
Takes a systemic approach, treating complex businesses as networks of interrelated
social units
Uses real-world case studies and vignettes centered on contemporary problems and
issues
Encourages the student to be sensitive to how each element in the international
marketing mix affects the others
1.11 Review Questions
1. Explain the necessary planning for International Marketing Environment?
2. How Economics Environment factors will affect the firm. Explain?
3. Explain about Diffusion theory.
4. Explain Political Environment, Legal and Technical Environment in detail?
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Module II
INTERNATIONAL MARKETING OPPORTUNITIES
2.0
Learning Outcomes
Introduction
SWOT Analysis - POWER SWOT
The threat of entry
Entering global markets
Market entry methods
Role of Emerging Markets in International Marketing
The global economic environment
Economics of International Trade
External environment influences on opportunities marketing
2.1
Introduction
One of the fundamental steps that needs to be taken prior to beginning international
marketing is the environmental analysis. Of course there are many tools on Marketing
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Teacher that would prove useful at this stage such as lessons on the marketing environment,
PEST Analysis, SWOT Analysis, POWER SWOT and Five Forces Analysis. However, the
very specific and unique nature of each individual nation needs to be looked into. Below we
consider the nature of an international PEST Analysis, and the influence of tariff and nontariff barriers.
Political
1. Is there any historical relationship between countries that would benefit or hinder
international marketing?
2. What is the influence of communities or unions for trading?
3. E.g. The European Union and its authority over European laws and regulation.
4. What kind of international and domestic laws will your business encounter?
5. What is the nature of politics in the country that you are targeting, and what is their view
on encouraging foreign competition from overseas?
Economic
1. What is the level of new industrial growth? E.g. China is experiencing terrific industrial
growth.
2. What is the impact of currency fluctuations on exchange rates, and do your home market
and your new international market - share a common currency? E.g. Polish companies
trading in Eire will use Euros.
3. There are of course the usual economic indicators that one needs to be aware of such as
inflation, Gross Domestic Product (GDP), levels of employment, national income, the
predisposition of consumers to spend savings or to use credit, as well as many others.
Socio-Cultural
1. Culture, religion and society are of huge importance.
2. What are the cultural norms for doing business? E.g. is there a form of barter?
3. Will cultural norms impact upon your ability to trade overseas? E.g. Putonghua is very
difficult for many Western people to learn.
Technology
Do copyright, intellectual property laws or patents protect technology in other countries? E.g.
China and Jordan do not always respect international patents. Does your technology conform
to local laws? E.g. electrical items that run on non-domestic currents could be dangerous. Are
technologies at different stages in the Product Life Cycle (PLC) in various countries?
E.g. Versions/releases of software. Tariff and Non-Tariff Barriers.
There are a number of fences that companies need to plan for when initializing international
marketing. Tariff and non-tariff barriers are still very common, even today.
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Tariff barriers are charges imposed upon imports - so they are a form of import taxation. This
could mean that your margins are reduced so much that trading overseas becomes too
unprofitable. However they are normally transparent and you can plan to take them into
account.
Non-tariff barriers are trickier to spot. Governments sometimes act in favour of their own
domestic industries rather than allow competition from overseas. Bureaucracy is a hurdle
often encountered by exporting companies - it takes many forms and includes unnecessary
hold-ups and red tape. Quotas are another form of non-tariff barrier i.e. restricting the
quantity of a product that can be imported into a particular country.
SWOT Analysis
Strengths, Weaknesses, Opportunities and Threats (SWOT). SWOT analysis is a tool for
auditing an organization and its environment. It is the first stage of planning and helps
marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and
threats. Strengths and weaknesses are internal factors. Opportunities and threats are external
factors. In SWOT, strengths and weaknesses are internal factors. For example: A strength
could be: Your specialist marketing expertise. A new, innovative product or service. Location
of your business. Quality processes and procedures. Any other aspect of your business that
adds value to your product or service. A weakness could be:
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Lack of marketing expertise.
Undifferentiated products or services (i.e. in relation to your competitors).
Location of your business.
Poor quality goods or services.
Damaged reputation.
In SWOT, opportunities and threats are external factors. For example: An opportunity could
be:
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A developing market such as the Internet.
Mergers, joint ventures or strategic alliances.
Moving into new market segments that offer improved profits.
A new international market.
A market vacated by an ineffective competitor.
A threat could be:
A new competitor in your home market.
Price wars with competitors.
A competitor has a new, innovative product or service.
Competitors have superior access to channels of distribution.
Taxation is introduced on your product or service.
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A word of caution, SWOT analysis can be very subjective. Do not rely on SWOT too much.
Two people rarely come-up with the same final version of SWOT. TOWS analysis is
extremely similar. It simply looks at the negative factors first in order to turn them into
positive factors. So use SWOT as guide and not a prescription.
Simple rules for successful SWOT analysis
Be realistic about the strengths and weaknesses of your organization when conducting SWOT
analysis.
SWOT analysis should distinguish between where your organization is today, and where it
could be in the future. SWOT should always be specific. Avoid grey areas. Always apply
SWOT in relation to your competition i.e. better than or worse than your competition.
Keep your SWOT short and simple. Avoid complexity and over analysis SWOT is
subjective.
Once key issues have been identified with your SWOT analysis, they feed into marketing
objectives. SWOT can be used in conjunction with other tools for audit and analysis, such as
PEST analysis and Porter's Five-Forces analysis. So SWOT is a very popular tool with
marketing students because it is quick and easy to learn. During the SWOT exercise, list
factors in the relevant boxes. It's that simple. Below are some FREE examples of SWOT
analysis - click to go straight to them.
Do you need a more advanced SWOT Analysis?
Some of the problems that you may encounter with SWOT are as a result of one of its key
benefits i.e. its flexibility. Since SWOT analysis can be used in a variety of scenarios, it has
to be flexible. However this can lead to a number of anomalies. Problems with basic SWOT
analysis can be addressed using a more critical POWER SWOT.
SWOT Analysis Examples
A summary of FREE SWOT analyses case studies are outlined as follows (those in the table
above are far more detailed and FREE!):
Example 1 - Wal-Mart SWOT Analysis. Strengths - Wal-Mart is a powerful retail brand. It
has a reputation for value for money, convenience and a wide range of products all in one
store. Weaknesses - Wal-Mart is the World's largest grocery retailer and control of its empire,
despite its IT advantages, could leave it weak in some areas due to the huge span of control.
Opportunities - To take over, merge with, or form strategic alliances with other global
retailers, focusing on specific markets such as Europe or the Greater China Region. Threats Being number one means that you are the target of competition, locally and globally.
33
Example 2 - Starbucks SWOT Analysis. Strengths - Starbucks Corporation is a very
profitable organization, earning in excess of $600 million in 2004.Weaknesses - Starbucks
has a reputation for new product development and creativity. Opportunities - New products
and services that can be retailed in their cafes, such as Fair Trade products. Threats Starbucks are exposed to rises in the cost of coffee and dairy products.
Example 3 - Nike SWOT Analysis. Strengths - Nike is a very competitive organization. Phil
Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.
'Weaknesses - The organization does have a diversified range of sports products.
Opportunities - Product development offers Nike many opportunities. Threats - Nike is
exposed to the international nature of trade.
Example 4 - Indian Premier League (IPL) SWOT Analysis. Where will you find the Mumbai
Indians, the Royal Challengers, the Deccan Chargers, the Channai Super Kings, the Delhi
Daredevils, the Kings XI Punjab, the Kolkata Knight Riders and the Rajesthan Royals? In the
Indian Premier League (IPL) - the most exciting sports franchise that the World has seen in
recent years, with seemingly endless marketing opportunities (and strengths, weaknesses and
threats of course!).
Example 5 - Bharti Airtel SWOT Analysis. Weaknesses - An often cited original weakness is
that when the business was started by Sunil Bharti Mittal over 15 years ago, the business has
little knowledge and experience of how a cellular telephone system actually worked. So the
start-up business had to outsource to industry experts in the field.
2.2
SWOT Analysis - POWER SWOT:
Marketing Teacher's Approach to SWOT Analysis
Why is there a need for an advanced approach to SWOT Analysis?
SWOT analysis is a marketing audit that considers an organization's strengths, weaknesses,
opportunities and threats. Our introductory lesson gives you the basics of how to complete
your SWOT as you begin to learn about marketing tools. As you learn more about SWOT
analysis, you will become aware of a number of potential limitations with this popular tool.
This lesson aims to help you overcome potential pitfalls.
Some of the problems that you may encounter with SWOT are as a result of one of its key
benefits i.e. its flexibility. Since SWOT analysis can be used in a variety of scenarios, it has
to be flexible. However this can lead to a number of anomalies. Problems with basic SWOT
analysis can be addressed using a more critical POWER SWOT. POWER is an acronym for
Personal experience, Order, Weighting, Emphasize detail, and Rank and prioritize. This is
how it works.
34
P = Personal experience.
How do you the marketing manger fit in relation with the SWOT analysis? You bring your
experiences, skills, knowledge, attitudes and beliefs to the audit. Your perception or simple
gut feeling will impact the SWOT.
O = Order - strengths or weaknesses, opportunities or threats.
Often marketing managers will inadvertently reverse opportunities and strengths, and threats
and weaknesses. This is because the line between internal strengths and weaknesses, and
external opportunities and threats is sometimes difficult to spot. For example, in relation to
global warming and climate change, one could mistake environmentalism as a threat rather
than a potential opportunity.
W = Weighting.
Too often elements of a SWOT analysis are not weighted. Naturally some points will be more
controversial than others. So weight the factors. One way would be to use percentages e.g.
Threat A = 10%, Threat B = 70%, and Threat C = 20% (they total 100%).
E = Emphasize detail.
Detail, reasoning and justification are often omitted from the SWOT analysis. What one tends
to find is that the analysis contains lists of single words. For example, under opportunities
one might find the term 'Technology.' This single word does not tell a reader very much.
What is really meant is:
'Technology enables marketers to communicate via mobile devices close to the point of
purchase. This provides the opportunity of a distinct competitive advantage for our company.'
This will greatly assist you when deciding upon how best to score and weight each element.
R = Rank and prioritize.
Once detail has been added, and factors have been reviewed for weighting, you can then
progress to give the SWOT analysis some strategic meaning i.e. you can begin to select those
factors that will most greatly influence your marketing strategy albeit a mix of strengths,
weaknesses, opportunities and threats. Essentially you rank them highest to lowest, and then
prioritize those with the highest rank e.g. Where Opportunity C = 60%, Opportunity A =
25%, and Opportunity B = 10% - your marketing plan would address Opportunity C first, and
Opportunity B last. It is important to address opportunities primarily since your business
should be market oriented. Then match strengths to opportunities and look for a fit. Address
any gaps between current strengths and future opportunities. Finally attempt to rephrase
threats as opportunities (as with global warming and climate change above), and address
weaknesses so that they become strengths. Gap analysis would be useful at this point i.e.
35
where we are now, and where do we want to be? Strategies would bridge the gap between
them.
36
Five Forces Analysis
Figure 1: Five Forces Analysis
Five Forces Analysis helps the marketer to contrast a competitive environment. It has
similarities with other tools for environmental audit, such as PEST analysis, but tends to
focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a
single product or range of products. For example, Dell would analyze the market for Business
Computers i.e. one of its SBUs.
Five forces analysis looks at five key areas namely the threat of entry, the power of buyers,
the power of suppliers, the threat of substitutes, and competitive rivalry.
2.3
The Threat of Entry
Economies of scale e.g. the benefits associated with bulk purchasing. The high or low costs
of entry e.g. how much will it cost for the latest technology? Ease of access to distribution
channels e.g. Do our competitors have the distribution channels sewn up? Cost advantages
not related to the size of the company e.g. personal contacts or knowledge that larger
companies do not own or learning curve effects. Will competitors retaliate?
Government action e.g. will new laws be introduced that will weaken our competitive
position?
37
How important is differentiation? e.g. The Champagne brand cannot be copied. This
desensitizes the influence of the environment.
1. The power of buyers
This is high where there a few, large players in a market e.g. the large grocery chains. If there
are a large number of undifferentiated, small suppliers e.g. small farming businesses
supplying the large grocery chains. The cost of switching between suppliers is low e.g. from
one fleet supplier of trucks to another.
2. The power of suppliers
The power of suppliers tends to be a reversal of the power of buyers. Where the switching
costs are high e.g. Switching from one software supplier to another. Power is high where the
brand is powerful e.g. Cadillac, Pizza Hut, Microsoft. There is a possibility of the supplier
integrating forward e.g. Brewers buying bars. Customers are fragmented (not in clusters) so
that they have little bargaining power e.g. Gas/Petrol stations in remote places. The threat of
substitutes where there is product-for-product substitution e.g. email for fax where there is
substitution of need e.g. better toothpaste reduces the need for dentists.
Where there is generic substitution (competing for the currency in your pocket) e.g. Video
suppliers compete with travel companies.
We could always do without e.g. cigarettes.
Competitive Rivalry
This is most likely to be high where entry is likely; there is the threat of substitute products,
and suppliers and buyers in the market attempt to control. This is why it is always seen in the
center of the diagram.
2.4
Entering Global Markets
There are a number of steps that need to be taken before you decide to enter international
markets.
Analyze the international marketing environment. A PEST/STEP analysis needs to be
conducted on the market you enter, to assess whether it is worthwhile or not. Lets briefly look
at some factors that may influence an international decision.
38
a. Political factors
Consider
•
•
The political stability of the nation. Is it a democracy, communist, or dictatorial
regime?
Monetary regulations. Will the seller be paid in a currency that they value or will
payments only be accepted in the host nation currency?
b. Economical Factors
Consider
•
•
•
•
•
Consumer wealth and expenditure within the country.
National interests and inflation rate.
Are quotas imposed on your product.
Are there import tariffs imposed.
Does the government offer subsidies to national players that make it difficult for you
to compete?
c. Social Factors
Consider
•
•
Language. Will language be a barrier to communication for you? Does your host
nation speak your national language? What is the meaning of your brand name in
your host country’s language?
Customs: what customs do you have to be aware of within the country? This is
important.
You need to make sure you do not offend while communicating your message.
•
•
•
Social factors: What are the role of women and family within society?
Religion: How does religion affect behaviour?
Values: what are the values and attitudes of individuals within the market?
d. Technological
Consider
1. The technological infrastructure of the market.
2. Do all homes have access to energy (electricity)
3. Is there an Internet infrastructure. Does this infrastructure support broadband or dial
up?
4. Will your systems easily integrate with your host country?
39
2.5
Market Entry Methods
After assessing the environment in your selected country, how do you decide which are the
best countries to enter? Paliwood (1993) suggests that before you enter an overseas market
there are six factors that need to be considered:
Speed – How quickly do you wish to enter your selected market? Costs- What is the cost of
entering that market? Flexibility – How easy is it to enter/leave your chosen market? Risk
Factor – What is the political risk of entering the market? What are the competitive risk?
How competitive is the market? Payback period – When do you wish to obtain a return from
entering the market? Are there pressures to break even and return a profit within a certain
period? Long- term objectives- What does the organization wish to achieve in the long term
by operating in the foreign market? Will they establish a presence in that market and then
move onto others?
Trading overseas
There are a number ways an organization can start to sell their products in international
markets.
1. Direct export.
The organization produces their product in their home market and then sells them to
customers overseas.
2. Indirect export
The organizations sells their product to a third party who then sells it on within the foreign
market.
3. Licensing
Another less risky market entry method is licensing. Here the Licensor will grant an
organization in the foreign market a license to produce the product, use the brand name etc in
return that they will receive a royalty payment.
4. Franchising
Franchising is another form of licensing. Here the organization puts together a package of the
‘successful’ ingredients that made them a success in their home market and then franchise
this package to oversee investors. The Franchise holder may help out by providing training
and marketing the services or product. McDonalds is a popular example of a Franchising
option for expanding in international markets.
40
5. Contracting
Another of form on market entry in an overseas market which involves the exchange of ideas
is contracting. The manufacturer of the product will contract out the production of the
product to another organization to produce the product on their behalf. Clearly contracting
out saves the organization exporting to the foreign market.
6. Manufacturing abroad
The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the
host country. The government of the host country may give the organization some form of tax
advantage because they wish to attract inward investment to help create employment for their
economy.
7. Joint Venture
To share the risk of market entry into a foreign market, two organizations may come together
to form a company to operate in the host country. The two companies may share knowledge
and expertise to assist them in the development of company; of course profits will have to be
shared out also.
2.6
Role of Emerging Markets in International Marketing
Emerging markets is a term which refers to those economies which are only now beginning
to realize their potential. Unlike established (developed) economies, such as those of the
United States, Japan and Western Europe, emerging markets are just completing
infrastructure improvements necessary for true international marketing. Companies around
the world are eyeing these emerging markets as providing opportunity for future growth, and
there has been considerable interest in these markets as locations for capital investment and
exporting opportunities. This research considers recent analysis of emerging markets and
their role in international marketing.
According to Paul Klebnikov, sales of personal computers in emerging markets grew more
than 80 percent from 1992 to 1994 as capitalism and an emerging middle class in these
nations drives demand. Emerging countries have banks, securities exchanges and other
infrastructure components that need more sophisticated technologies, and manufacturers of
personal computers are taking advantage of the opportunity. In 1995, South Korea and China
both bought more than one million personal computers, a total that Brazil may well be in a
position to match. India, Indonesia, Thailand and Malaysia are seen as nations which will
shortly boast strong demand for personal computers, as well.
Klebnikov also notes that most personal computer sales in emerging markets are from local
companies located in these markets. Such investment, if it indeed yields higher returns, offers
41
investors attractive returns which can be used for other purposes. In the case of corporate
investors, this can offer an attractive way for companies to enter the emerging markets while
realizing a strong return in the process. By purchasing stock in companies in emerging
markets, companies can gain an equity interest without necessarily taking on all of the risk
associated with actually starting a venture without a partner. Such investment may be
regulated by the country in question, however, and some companies may choose instead to
invest in mutual funds without becoming direct investors in companies. In this case, the
investment helps boost the capital resources available to the investing company for other
purposes. In either instance, the investing company is able to take advantage of the emerging
market without necessarily taking on the risk of actually entering the market. However,
international investing is never without risk, and emerging markets can be particularly risky.
While there can be a healthy amount of return in these markets, the risk is present because
they are emerging, not developed, markets, and because the economies which support.
2.7
Global Economic Environment
Robust output growth but mounting global imbalances
World output continued to expand in 2005 and global GDP growth is projected at 3.6 per cent
in 2006. Developing countries have contributed to the fast pace of global growth. Their
overall growth rate averaged about 6 per cent. Many developing countries are benefiting from
strong demand for their exports and rising prices for their primary commodities.
Current global imbalances pose challenges for the global economy, particularly in developing
countries.
1. The United States has a high current-account deficit. The US has acted as a consumer of
last resort and locomotive of global growth but may well become overburdened in
playing this role for much longer. Just as strong demand for imports from the US has had
a positive effect on global growth, a slowdown in US demand could have a negative
impact on the rest of the world.
2. Other industrialized countries, particularly Germany and Japan, run huge current-account
surpluses. They should share the burden of adjustment with the United States by
significantly expanding domestic demand.
3. China's growing domestic demand and rising imports have sustained growth in the
developing world. Revaluation of the Renmimbi should continue gradually, considering
regional implications.
4. Oil producing countries should use terms-of-trade improvements for investment and
diversification.
Some structural improvements in the external environment for development
42
A number of structural improvements in the external environment for developing countries
have supported development and poverty reduction since the mid-1980s, these include:
1.
2.
3.
4.
5.
Some improvements in market access for developing country exports
Progress in alleviating the debt burden of the poorest countries
Commitments by donors to substantial increases in Official Development Assistance
(ODA)
New opportunities from Foreign Direct Investment (FDI)
Increasing remittances from migrants
a. The Global Market Place
Globalization of Markets and Competition: Trade is increasingly global in scope today. There
are several reasons for this. One significant reason is technological—because of improved
transportation and communication opportunities today, trade is now more practical. Thus,
consumers and businesses now have access to the very best products from many different
countries. Increasingly rapid technology lifecycles also increases the competition among
countries as to who can produce the newest in technology. In part to accommodate these
realities, countries in the last several decades have taken increasing steps to promote global
trade through agreements such as the General Treaty on Trade and Tariffs, and trade
organizations such as the World Trade Organization (WTO), North American Free Trade
Agreement (NAFTA), and the European Union (EU).
Stages in the International Involvement of a Firm. We discussed several stages through which
a firm may go as it becomes increasingly involved across borders. A purely domestic firm
focuses only on its home market, has no current ambitions of expanding abroad, and does not
perceive any significant competitive threat from abroad. Such a firm may eventually get some
orders from abroad, which are seen either as an irritation (for small orders, there may be a
great deal of effort and cost involved in obtaining relatively modest revenue) or as "icing on
the cake." As the firm begins to export more, it enters the export stage, where little effort is
made to market the product abroad, although an increasing number of foreign orders are
filled.
In the international stage, as certain country markets begin to appear especially attractive with
more foreign orders originating there, the firm may go into countries on an ad hoc basis—that
is, each country may be entered sequentially, but with relatively little learning and marketing
efforts being shared across countries. In the multi-national stage, some efficiencies are
pursued by standardizing across a region (e.g., Central America, West Africa, or Northern
Europe). Finally, in the global stage, the focus centers on the entire World market, with
decisions made optimize the product’s position across markets—the home country is no
longer the center of the product. An example of a truly global company is Coca Cola.
Note that these stages represent points on a continuum from a purely domestic orientation to
a truly global one; companies may fall in between these discrete stages, and different parts of
43
the firm may have characteristics of various stages—for example, the pickup truck division of
an auto-manufacturer may be largely domestically focused, while the passenger car division
is globally focused. Although a global focus is generally appropriate for most large firms,
note that it may not be ideal for all companies to pursue the global stage. For example,
manufacturers of ice cubes may do well as domestic, or even locally centered, firms.
Some forces in international trade. The text contains a rather long-winded appendix
discussing some relatively simple ideas. Comparative advantage, discussed in more detail in
the economics notes, suggests trade between countries is beneficial because these countries
differ in their relative economic strengths—some have more advanced technology and some
have lower costs. The International Product Life Cycle suggests that countries will differ in
their timing of the demand for various products. Products tend to be adopted more quickly in
the United States and Japan, for example, so once the demand for a product (say, VCRs) is in
the decline in these markets, an increasing market potential might exist in other countries
(e.g., Europe and the rest of Asia). Internalization/transaction costs refers to the fact that
developing certain very large scale projects, such as an automobile intended for the World
market, may entail such large costs that these must be spread over several countries.
2.8
Economics of International Trade
Exchange rates come in two forms:
1.
“Floating”—here, currencies are set on the open market based on the supply of and
demand for each currency. For example, all other things being equal, if the U.S. imports more
from Japan than it exports there, there will be less demand for U.S. dollars (they are not
desired for purchasing goods) and more demand for Japanese yen—thus, the price of the yen,
in dollars, will increase, so you will get fewer yen for a dollar.
Trade balances and exchange rates. When exchange rates are allowed to fluctuate, the
currency of a country that tends to run a trade deficit will tend to decline over time, since
there will be less demand for that currency. This reduced exchange rate will then tend to
make exports more attractive in other countries, and imports less attractive at home.
Measuring country wealth. There are two ways to measure the wealth of a country. The
nominal per capita gross domestic product (GDP) refers to the value of goods and services
produced per person in a country if this value in local currency were to be exchanged into
dollars. Suppose, for example, that the per capita GDP of Japan is 3,500,000 yen and the
dollar exchanges for 100 yen, so that the per capita GDP is (3,500,000/100)=$35,000.
However, that $35,000 will not buy as much in Japan—food and housing are much more
expensive there. Therefore, we introduce the idea of purchase parity adjusted per capita GDP,
which reflects what this money can buy in the country. This is typically based on the relative
costs of a weighted “basket” of goods in a country (e.g., 35% of the cost of housing, 40% the
cost of food, 10% the cost of clothing, and 15% cost of other items). If it turns out that this
44
measure of cost of living is 30% higher in Japan, the purchase parity adjusted GPD in Japan
would then be ($35,000/(130%) = $26,923. (The Gross Domestic Product (GPD) and Gross
National Product (GNP) are almost identical figures. The GNP, for example, includes income
made by citizens working abroad, and does not include the income of foreigners working in
the country. Traditionally, the GNP was more prevalent; today the GPD is more commonly
used—in practice, the two measures fall within a few percent of each other.)
In general, the nominal per capita GPD is more useful for determining local consumers’
ability to buy imported goods, the cost of which are determined in large measure by the costs
in the home market, while the purchase parity adjusted measure is more useful when products
are produced, at local costs, in the country of purchase. For example, the ability of
Argentinians to purchase micro computer chips, which are produced mostly in the U.S. and
Japan, is better predicted by nominal income, while the ability to purchase toothpaste made
by a U.S. firm in a factory in Argentina is better predicted by purchase parity adjusted
income.
It should be noted that, in some countries, income is quite unevenly distributed so that these
average measures may not be very meaningful. In Brazil, for example, there is a very large
underclass making significantly less than the national average, and thus, the national figure is
not a good indicator of the purchase power of the mass market. Similarly, great regional
differences exist within some countries—income is much higher in northern Germany than it
is in the former East Germany, and income in southern Italy is much lower than in northern
Italy.
2.9
External Environment influences on opportunities marketing
External environmental factors such as political conditions, the legal system, and cultural
attitudes influence marketing decisions at every level, including not only global marketing
but domestic marketing. The effects of these factors on international marketing is perhaps
more clear-cut, but their impact is felt in domestic marketing as well.
45
The United States is a large and diverse country. The legal system varies by state, while the
political environment and cultural attitudes vary by region, which may not always correspond
directly to state boundaries. The overall importance of the domestic market for most firms
and industries accentuates the significance of these regional differences, and as in
international marketing they can spell the difference between success and failure.
Political factors can have a dramatic effect on international marketing. China has successfully
pressured Yahoo! and other internet services into acquiescing in censorship of Internet
access. Explicit criticism of the Chinese government might only figure in marketing
campaigns for films with a political message, but marketing slogans that seem innocuous to
us ("freedom," for example, evoked by many campaigns) may spark Chinese official
sensitivities. In more democratic countries, firms may have access to the political process to
make their case; on the other hand, the authorities may respond to popular concerns by
restricting marketing Analysis of marketing Operating in diverse environments places a
premium on the development of the necessary marketing skills to analyze the needs of new
foreign customers and preparation of marketing programs that will reach them effectively.
International marketing involves dealing with many nations that are different from the United
States, nations that may be developing or that may be somewhat developed but that have
different traditions as well as different lifestyles that affect what is marketed and to whom.
Environmental factors that affect marketing decisions
Political/Legal Environment Marketing decisions are strongly affected by developments in
the political and legal environment. This environment is composed of laws, government
agencies and pressure groups that influence and limit various organizations and individuals.
Sometimes these laws also create opportunities for business. "There are a number of reasons
why the legal environment is important to managers, particularly those involved with the
marketing function. First and most obvious, managers themselves may be convicted for
certain legal violations such as price fixing and mail or wire fraud. Second, product design
considerations, often in conjunction with promotional and warranty materials, may lead to
expensive product liability exposure, leading to high insurance rates and even bankruptcy.
Similarly, private antitrust lawsuits by rivals or dealers may lead to treble damage awards that
may be equally staggering (Petty, 1993)."
Marketing decisions are strongly affected by developments in the political and legal
environment. This environment is composed of laws, government agencies and pressure
groups that influence and limit various organizations and individuals. However, sometimes
these laws also create opportunities for business.
The followings are some ways interpreting how the marketing functions of businesses are
impinged: At the most general level, the stability of the political system affects the
attractiveness of a particular national market. While radical change rarely results from
political upheaval in most Western countries, the instability of many Eastern European
46
governments leads to uncertainty about the economic and legislative framework in which
goods and services will be provided. At a national level, government passes legislation that
directly affects the relationship between the firm and its customers and between itself and
other firms. Sometimes legislation has a direct effect on marketers, for example a law giving
consumers rights against the seller of faulty goods.
At other times, the effect is less direct, as where legislation requiring local authorities to put
out to tender some of their duties has the effect of creating more competitive relationships
between firms in a market The government is additionally responsible for protecting the
public interest at large, imposing further constraints on the activities of firms, for example
where the government lays down design standards for cars to protect the public against
pollution or road safety risks The government is additionally responsible for protecting the
public interest at large, imposing further constraints on the activities of firms, for example
where the government lays down design standards for cars to protect the public against
pollution or road safety risks.
Even the most liberal advocates of free market economies agree that the system works best
with at least some regulation. Well-conceived regulation can encourage competition and
ensure fair markets for goods and services. Thus, governments develop public policy to guide
commerce--sets of laws and regulations that limit business for the good of society as a whole.
Almost every marketing activity is subject to a wide range of laws and regulations.
Understanding the public policy implications of a particular marketing activity is not a simple
matter. First, there are many laws created at the federal, state, and local levels, and these
regulations often overlap. Second, the regulations are constantly changing--what was allowed
last year may now be prohibited. Marketers must work hard to keep up with these changes in
the regulations and their interpretations.
Legislation affecting business has increased steadily over the years. This legislation has been
enacted for a number of reasons. The first is to protect companies from each other (e.g.
Sherman Antitrust Act, 1890). Although business executives may praise competition, they
sometimes try to neutralize it when it threatens them. So laws are passed to define and
prevent unfair competition.
The second purpose of government regulation is to protect consumers from unfair business
practices (e.g. Consumer Product Safety Act, 1972). Some firms, if left alone, would make
poor products, tell lies in their advertising, and deceive consumers through their packaging
and pricing. Unfair business practices have been defined and are enforced by various
agencies. The third purpose of government regulations is to protect the interests of society
against unrestrained business behaviour (e.g. National Environmental Policy Act, 1969).
Profitable business activity does not always create a better quality of life.
Growth of Special-Interest Groups The number and power of special-interest group have
increased over the past few decades. Political-action committees lobby government officials
47
and pressure business executives to pay more attention to consumer rights, women’s rights,
senior citizen rights, minority rights, gay rights, and so on. Many companies have established
public-affairs departments to deal with these groups and issues.
An important force affecting business is the consumerist movement-an organized movement
of citizens and government to strengthen the rights and powers of buyers in relation to sellers.
Consumerists have advocated and won the right to know the true interest cost of a loan, and
the true benefits of a product. In response to consumerism, several companies have
established consumer-affairs departments to help formulate policies and respond to
consumers’ complaints.
Clearly, new laws and growing numbers of pressure groups have put more restraints on
marketers. Marketers have to clear their plans with the company’s legal, public relations,
public affairs, and consumer-affairs departments.
2.10 Review Questions
1.
2.
3.
4.
5.
Explain SWOT analysis in detail.
Draw a neat diagram on Five Forces analysis and explain.
Discuss about the market entry methods.
What is the role of Emerging markets in International Marketing?
Describe about Economics of International Trade.
48
Module III
CONCEPTS OF MARKETING
3.0
Learning Outcomes
Introduction
Strategies of International Marketing
Marketing in Practice
Global marketing Advantages and Disadvantages
3.1
Introduction
In order to appraise the new ideas in marketing and particularly in the areas of consumer
behaviour and marketing communications, one should initially outline some challenges faced
by a number of fundamental marketing concepts as well as by the marketing as a discipline.
Micro-marketing, maxi-marketing, database marketing, new marketing, wrap-around
marketing, value-added marketing, relationship marketing and neo-marketing are but a few
variations of today's marketing. The very fact that there are so many offshoots is explanative
of the eventual disintegration of the science marketing as we know it from the Kotler's books.
49
The major marketing concept of customer orientation still seems to be a valid reference point.
In the contemporary over-informed, over-stressed and hedonistic consumer society the
customer is the one who decides to purchase a product, to be loyal to a brand or to switch to a
competitor. We may agree, therefore, that "the need for such a [customer] focus has not
changed" (Holland and Baker, 2001:44). The exchange value concept, however, might have
been rendered obsolete by the "postmodern manoeuvre in marketing and consumer research"
(Brown, in Baker, 2003:25). Let us assume that value may be created "during consumption,
in sign-value" and not in "exchange-value, as modern economists claimed" (Baudrillard, in
Firat and Venkatesh, 1993:235). In such a way the emphasis is on the customer's personal
experience and on the view, that "the value of consumption comes from the consumer
experience" (Addis and Podesta, 2005:404).
According to the traditional theory, consumers are identified, targeted and acquired through a
set of strategic tools such as segmentation, targeting and positioning. Different techniques
and approaches based on statistical, "psychological, sociological, and economic principles
and models" (Addis and Podesta, 2005:389) have been employed in service of these concepts.
While these techniques are still in use, a number of processes and mainly the fragmentation
of markets will gradually render the traditional bases of segmentation (demographics and
psychographics) questionable and "even the more recent typologies" like VALS will be "less
and less useful" (First and Shultz II, 1997:196).
Additional challenges faced by marketing research specialists poses the fact that "within the
field of qualitative research it is widely recognized that there is no single uniform manner for
representing consumer experiences" in postmodern, consumer society (Goulding, 2003:152).
The typical roles of researcher and respondent have also changed and the research process is
characterized by increased collaboration. Furthermore, the Internet demands that researchers
adjust to the new forms of communication by adopting new methods such as "lurking",
"online community", "netnography" and others (Cova and Pace, 2006:1092).
As a result, in today's fragmented markets reality where "segments are breaking up into
individual customers" (Firat and Shultz II, 1997:196), "the modern tools of sociological
analysis" become outdated (Cova 1996:19). While quantitative research is still widely in use,
an array of qualitative techniques are been preferred to "fill the gap" in the knowledge about
the postmodern consumer. Among the most frequently mentioned are ethnography, fiction,
discourse analysis, personal introspection, and in-depth interviewing (Addis and Podesta,
2005:406).
Since purchases, branding and communications are all moving online, scholars have begun
defining the Internet Marketing Segmentation (IMS). One such definition follows: "IMS is
the use of current information technology to classify potential or actual online customers into
groups in which the consumers have similar requirements and characteristics" (Lin et al.,
2004:602).
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Definitions of that sort, alluring as they may look, are simply old concepts in new clothes and
some make-up. More important is that new approaches like online ethnography, or
netnography are being increasingly used as appropriate research methods (Cova and Pace,
2006; Maclaran and Catterall, 2002). Companies would need to resort to guerrilla tactics and
employ people proficient in areas such as online community engineering. Phenomena like
brand hijack (Cova and Pace, 2006:1094) and decisions on how much power should be given
to consumers will eventually speed up the trends that shape contemporary research.
The marketing communication concepts of mass marketing and mass advertising have also
been a subject to considerable revision. The so-called mass customization has been boosted
by the use of email marketing, database marketing, RSS and others. The processes of
fragmentation and post-consolidation have given birth to new concepts like tribal marketing
(Cova, 1996:21). Mass advertising and the one-to-many, one-way linear communications
have given way to one-to-one, many-to-many, two-way, non-linear communication flow
(Holt, 2002; Maclaran and Catterall, 2002). The Internet has brought also the idea of suck as
opposed to the traditional push and pull (Travis, 2001:16). The levels of interactivity have
changed "the nature of advertising from persuasion to relationships" (Philport and Arbittier,
1997:75) and the efficacy of advertising itself has been questioned. The title of the article
"Stop Advertising - Start Staging Marketing Experiences" by Pine II and Gilmore (Strategic
Horizons LLP, accessed 10th January 2009) is self-explanatory.
Schmitt (1999:53) argues that three trends in the broad commercial environment have caused
a paradigm shift from traditional "features-and-benefits" marketing toward "experiential
marketing":
•
The omnipresence of information technology;
•
The supremacy of the brand;
•
The ubiquity of communications and entertainment.
While agreeing with Schmitt's ideas I would also add to the frame the influence of
postmodern consumer behaviour. Therefore, reference points for future research are:
•
Postmodern condition;- Experiential marketing;
•
Internet as a new branding tool;
•
Customer-based brand equity
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3.2
Strategies of International Marketing
Opportunities
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Marketing strategy and its applications.
•
Strategy models
•
Business model and its overview
•
Customer engagement model
•
Need phenonmenon, and marketing practices
Marketing Strategy
Marketing strategy is a process that can allow an organization to concentrate its limited
resources on the greatest opportunities to increase sales and achieve a sustainable competitive
advantage. A marketing strategy should be centered around the key concept that customer
satisfaction is the main goal.
Key part of the general corporate strategy
Marketing strategy is a method of focusing an organization's energies and resources on a
course of action which can lead to increased sales and dominance of a targeted market niche.
A marketing strategy combines product development, promotion, distribution, pricing,
relationship management and other elements; identifies the firm's marketing goals, and
explains how they will be achieved, ideally within a stated timeframe. Marketing strategy
determines the choice of target market segments, positioning, marketing mix, and allocation
of resources. It is most effective when it is an integral component of overall firm strategy,
defining how the organization will successfully engage customers, prospects, and competitors
in the market arena. Corporate strategies, corporate missions, and corporate goals. As the
customer constitutes the source of a company's revenue, marketing strategy is closely linked
with sales. A key component of marketing strategy is often to keep marketing in line with a
company's overarching mission statement.
Basic theory
1. Target Audience
2. Proposition/Key Element
3. Implementation
Tactics and actions
A marketing strategy can serve as the foundation of a marketing plan. A marketing plan
contains a set of specific actions required to successfully implement a marketing strategy. For
example: "Use a low cost product to attract consumers. Once our organization, via our low
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cost product, has established a relationship with consumers, our organization will sell
additional, higher-margin products and services that enhance the consumer's interaction with
the low-cost product or service."
A strategy consists of a well thought out series of tactics to make a marketing plan more
effective. Marketing strategies serve as the fundamental underpinning of marketing plans
designed to fill market needs and reach marketing objectives. Plans and objectives are
generally tested for measurable results.
A marketing strategy often integrates an organization's marketing goals, policies, and action
sequences (tactics) into a cohesive whole. Similarly, the various strands of the strategy, which
might include advertising, channel marketing, internet marketing, promotion and public
relations can be orchestrated. Many companies cascade a strategy throughout an organization,
by creating strategy tactics that then become strategy goals for the next level or group. Each
one group is expected to take that strategy goal and develop a set of tactics to achieve that
goal. This is why it is important to make each strategy goal measurable.
Marketing strategies are dynamic and interactive. They are partially planned and partially
unplanned. See strategy dynamics.
Types of strategies
Marketing strategies may differ depending on the unique situation of the individual business.
However there are a number of ways of categorizing some generic strategies. A brief
description of the most common categorizing schemes is presented below:
Strategies based on market dominance - In this scheme, firms are classified based on their
market share or dominance of an industry. Typically there are three types of market
dominance strategies:
Leader
•
Challenger
•
Follower
Porter generic strategies - strategy on the dimensions of strategic scope and strategic strength.
Strategic scope refers to the market penetration while strategic strength refers to the firm’s
sustainable competitive advantage. The generic strategy framework (porter 1984) comprises
two alternatives each with two alternative scopes. These are Differentiation and low-cost
leadership each with a dimension of Focus-broad or narrow.
•
Product differentiation
•
Market segmentation
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Innovation strategies - This deals with the firm's rate of the new product development and
business model innovation. It asks whether the company is on the cutting edge of technology
and business innovation. There are three types:
•
Pioneers
•
Close followers
•
Late followers
Growth strategies - In this scheme we ask the question, “How should the firm grow? There
are a number of different ways of answering that question, but the most common gives four
answers:
•
Horizontal integration
•
Vertical integration
•
Diversification
•
Intensification
A more detailed scheme uses the categories
•
Prospector
•
Analyzer
•
Defender
•
Reactor
•
Marketing warfare strategies - This scheme draws parallels between marketing
strategies and military strategies.
Strategic Models
Marketing participants often employ strategic models and tools to analyze marketing
decisions. When beginning a strategic analysis, the 3Cs can be employed to get a broad
understanding of the strategic environment. An Ansoff Matrix is also often used to convey an
organization's strategic positioning of their marketing mix. The 4Ps can then be utilized to
form a marketing plan to pursue a defined strategy.
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3.3
Marketing in Practice
The Consumer-Centric Business
There are a many companies especially those in the Consumer Package Goods (CPG) market
that adopt the theory of running their business centered around Consumer, Shopper &
Retailer needs. Their Marketing departments spend quality time looking for "Growth
Opportunities" in their categories by identifying relevant insights (both mindsets and
behaviors) on their target Consumers, Shoppers and retail partners. These Growth
Opportunities emerge from changes in market trends, segment dynamics changing and also
internal brand or operational business challenges. The Marketing team can then prioritize
these Growth Opportunities and begin to develop strategies to exploit the opportunities that
could include new or adapted products, services as well as changes to the 7Ps.
Real-life marketing primarily revolves around the application of a great deal of commonsense; dealing with a limited number of factors, in an environment of imperfect information
and limited resources complicated by uncertainty and tight timescales. Use of classical
marketing techniques, in these circumstances, is inevitably partial and uneven.
Thus, for example, many new products will emerge from irrational processes and the rational
development process may be used (if at all) to screen out the worst non-runners. The design
of the advertising, and the packaging, will be the output of the creative minds employed;
which management will then screen, often by 'gut-reaction', to ensure that it is reasonable.
For most of their time, marketing managers use intuition and experience to analyze and
handle the complex, and unique, situations being faced; without easy reference to theory.
This will often be 'flying by the seat of the pants', or 'gut-reaction'; where the overall strategy,
coupled with the knowledge of the customer which has been absorbed almost by a process of
osmosis, will determine the quality of the marketing employed. This, almost instinctive
management, is what is sometimes called 'coarse marketing'; to distinguish it from the
refined, aesthetically pleasing, form favored by the theorists.
Business Model
A business model is a framework for creating economic, social, and/or other forms of value.
The term business model is thus used for a broad range of informal and formal descriptions to
represent core aspects of a business, including purpose, offerings, strategies, infrastructure,
organizational structures, trading practices, and operational processes and policies.
Conceptualization of business models try to formalize informal descriptions into building
blocks and their relationships. While many different conceptualizations exist, Osterwalder
propose a synthesis of different conceptualizations into a single reference model based on the
similarities of a large range of models, and constitutes a business model design template
which allows enterprises to describe their business model.
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Figure 1: Business Model
Infrastructure
•
•
•
Core capabilities: The capabilities and competencies necessary to execute a
company's business model.
Partner network: The business alliances which complement other aspects of the
business model.
Value configuration: The rationale which makes a business mutually beneficial for a
business and its customers.
Customers
•
•
•
•
•
•
•
•
•
Target customer: The target audience for a business' products and services.
Distribution channel: The means by which a company delivers products and services
to customers. This includes the company's marketing and distribution strategy.
Customer relationship: The links a company establishes between itself and its
different customer segments. The process of managing customer relationships is
referred to as customer relationship management.
Finances
Cost structure: The monetary consequences of the means employed in the business
model. A company's DOC.
Revenue: The way a company makes money through a variety of revenue flows. A
company's income.
History
A brief history of the development of business models might run as follows. The most
known and most basic business model is the shopkeeper model. This involves setting
up a store in a location where potential customers are likely to be and displaying a
product or service.
Over the years, business models have become much more sophisticated. The bait and
hook business model (also referred to as the "razor and blades business model" or the
"tied products business model") was introduced in the early 20th century. This
involves offering a basic product at a very low cost, often at a loss (the "bait") then
charging compensatory recurring amounts for refills or associated products or services
(the "hook"). Examples include: razor (bait) and blades (hook); cell phones (bait) and
air time (hook); computer printers (bait) and ink cartridge refills (hook); and cameras
(bait) and prints (hook). An interesting variant of this model is a software developer
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•
•
that gives away its word processor reader free of charge but charges several hundred
dollars for its word processor writer.
In the 1950s, new business models came from McDonald's Restaurants and Toyota. In
the 1960s, the innovators were Wal-Mart and Hypermarkets. The 1970s saw new
business models from FedEx and Toys R Us; the 1980s from Blockbuster, Home
Depot, Intel, and Dell Computer; the 1990s from Southwest Airlines, Netflix, eBay,
Amazon.com, and Starbucks. Poorly thought out business models were a problem
with many dot-coms.
Today, the type of business models might depend on how technology is used. For
example, entrepreneurs on the internet have also created entirely new models that
depend entirely on existing or emergent technology. Using technology, businesses can
reach a large number of customers with minimal costs.
Examples
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Auction business model
Bricks and clicks business model
Collective business models
Cutting out the middleman model
Direct sales model
Distribution business models, various
Franchise
Freemium business model
Industrialization of services business model
Low-cost carrier business model
Loyalty business models
Monopolistic business model
Multi-level marketing business model
Network effects business model
Online auction business model
Online content business model
Premium business model
Professional open-source model
Pyramid scheme business model
Razor and blades business model (bait and hook)
Servitization of products business model
Subscription business model
Value Added Reseller model
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Applications
Malone et al. at MIT find that some business models, as defined by them, indeed performed
better than others in a dataset consisting of the largest U.S. firms, in the period 1998 through
2002, while they did not prove whether the existence of a business model mattered.
Perhaps the most overlooked dimension in developing a business model especially for a new
product/service/business is the dimension of time, more specifically the timing of
investments/expenses or cash flow out versus the receipt of revenues/accounts receivables or
cash flow in. The principle issues are: 1) Essentially how much of the product or service has
to be built before customers can make some level of either actual purchase decision and/or
purchase commitment? 2) How much investment/expense is required to secure these
revenues/commitments from customers? and 3). How much risk is there in achieving net
positive cash flow, given the required upfront investment and the future time to capture
revenues/receivables cash inflow, within an acceptable timeframe, if ever?
These business model issues often make or break new ventures. Business models that are
optimized to reduce the upfront investment, that accelerate the revenue/receivables cash
inflow, that obtain cogent and reliable customer feedback often and earlier, and that take
other measures to reduce the investment risk all have a higher probability of business success.
For example, in the entertainment industry, does one have to produce a movie for $100
million plus before any box office revenues can be derived, or can the business model be
evolved by licensing certain established characters/signing leading movie stars for secondary
licensing rights for fast-food chain promotional-tie-ins, movie merchandise licenses, etc. can
generate pre-release cash inflow through licensing fees? Or a different entertainment business
model might be to create and promote a "Weirdest Video" website platform for users to
contribute the content and then based on site traffic, sell advertising for revenues. Here, the
upfront investment for creating and promoting the site could be a fraction of the investment
to produce a movie and the chances that it would be more popular than a movie may be much
higher, as it can be tweaked as it is developed while a movie is an all-or-nothing production.
It comes down to a nitty gritty question: Can we make to order or do we have to create a new
mousetrap and then wait to see if the world will come to it, or somewhere in-between?
Customer engagement
Customer engagement (CE) refers to the engagement of customers with one another, with a
company or a brand. The initiative for engagement can be either consumer or company-led
and the medium of engagement can be on or offline.
Unlike marketing terms such as positioning, customer engagement has not been traced to a
single source. Customer engagement has been discussed widely online; hundreds of pages
have been written, published, read and commented upon. Numerous high-profile conferences,
58
seminars and roundtables have either had CE as a primary theme or included papers on the
topic.
Customer engagement marketing places conversions into a longer term, more strategic
context and is premised on the understanding that a simple focus on maximizing conversions
can, in some circumstances, decrease the likelihood of repeat conversions (Customer
engagement interview with Richard Sedley). CE aims at long-term engagement, encouraging
customer loyalty and advocacy through word- of-mouth.
Online customer engagement is qualitatively different from offline engagement as the nature
of the customer’s interactions with a brand, company and other customers differ on the
internet. Discussion forums or blogs, for example, are spaces where people can communicate
and socialize in ways that cannot be replicated by any offline interactive medium. Customer
Engagement marketing efforts that aim to create, stimulate or influence customer behaviour
differ from the offline, one-way, marketing communications that marketers are familiar with.
Although customer advocacy, for example, has always been a goal for marketers, the rise of
online user generated content can take advocacy to another level.
The concept and practice of online Customer Engagement enables organizations to respond to
the fundamental changes in customer behaviour that the internet has brought about, as well as
to the increasing ineffectiveness of the traditional ‘interrupt and repeat’, broadcast model of
advertising. Due to the fragmentation and specialization of media and audiences, as well as
the proliferation of community- and user generated content, businesses are increasingly
losing the power to dictate the communications agenda. Simultaneously, lower switching
costs, the geographical widening of the market and the vast choice of content, services and
products available online have weakened customer loyalty.
So today, leveraging customer contributions is an important source of competitive advantage
– whether through advertising, user generated product reviews, customer service FAQs,
forums where consumers can socialise with one another or contribute to product
development.
Amazon recently re-branded into ‘serving the world’s largest engaged online community’,
the World Federation of Advertisers (WFA) has created a ‘Blueprint for Consumer-Centric
Holistic Measurement’ and the Association of National Advertisers (ANA), American
Association of Advertising Agencies (AAAA) and the Advertising Research Foundation
(ARF), have put together the ‘Engagement Steering Committee’ to work on the customer
engagement metric. Nielsen Media Research, IAG Research and Simmons Research are also
all in the process of developing a CE definition and metric.
Online customer engagement refers to:
1. A social phenomenon enabled by the wide adoption of the internet in the late 1990s
and taking off with the technical developments in connection speed (broadband) in the
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decade that followed. Online CE is qualitatively different from the engagement of
consumers offline.
2. The behaviour of customers that engage in online communities revolving, directly or
indirectly, around product categories (cycling, sailing) and other consumption topics.
It details the process that leads to a customer’s positive engagement with the company
or offering, as well as the behaviours associated with different degrees of customer
engagement.
3. Marketing practices that aim to create, stimulate or influence CE behaviour. Although
CE-marketing efforts must be consistent both online and offline, the internet is the
basis of CE-marketing.(Eisenberg & Eisenberg 2006:72,81)
4. Metrics that measure the effectiveness of the marketing practices which seek to
create, stimulate or influence CE behaviour.
Definition
In March 2006, the Advertising Research Foundation announced the first definition of
customer engagement the first definition of CE at the rethink! 52nd Annual ARF Convention
and Expo:
“Engagement is turning on a prospect to a brand idea enhanced by the surrounding context.”
However, the ARF definition was criticized by some for being too broad.
Customer engagement can also refer to the stages consumers travel through as they interact
with a particular brand. This Customer Engagement Cycle, or Customer Journey, has been
described using a myriad of terms but most often consists of 5 different stages: Awareness,
Consideration, Inquiry, Purchase and Retention. Marketers employ Connection Strategy to
speak to would-be customers at each stage, with media that addresses their particular needs
and interests. When conducting Search Engine Marketing & Search Engine Optimization, or
placing advertisements, marketers must devise media and/or keywords and phrases that
encourage customer flow through the Customer Engagement Cycle, towards Purchase.
Because the various definitions often focus on entirely different aspects of CE, they are not in
every case competing definitions but, rather, illuminate CE from different perspectives. Eric
Peterson’s definition for example frames CE as a metric: “Engagement is an estimate of the
degree and depth of visitor interaction against a clearly defined set of goals.”
At the moment the ARF, World Federation of Advertisers, Nielsen Media Research, IAG
Research and Simmons Research are in the process of developing a definition and a metric
for CE.
The need for customer engagement
CE-marketing is necessitated by a combination of social, technological and market
developments:
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1. Businesses are losing the power to dictate the communications agenda: The effectiveness
of the traditional ‘interrupt and repeat’ model of advertising is decreasing. In August 2006
McKinsey & Co published a report which said that by 2010 traditional TV advertising will
only be one-third as effective as it was in 1990. This is due to:
• Customer audiences are smaller and specialist: The fragmentation of media and
audiences and the accompanying reduction of audience size have reduced the
effectiveness of the traditional top-down, mass, ‘interrupt and repeat’ advertising
model. The adoption of new media. Forrester Research’s North American Consumer
Technology Adoption Study shows people in the 18-26 age group spending more time
online than watching TV.
• Customer audiences are also broadcasters: A company’s position is no longer just
inside consumers’ minds. As they increasingly speak their minds with the power for
circulation and permanence of CGM, businesses lose the power of shouting over
everyone else. Instead of trying to position a product using a couple of static messages
that will themselves become the subject of conversation amongst a target market that
has already discussed, positioned and rated the product, companies must join in. This
also means that consumers can now choose not only when and how but, also, if they
will engage with marketing communications; they can rely on CGM. In addition new
media themselves provide consumers with more control over their advertising
consumption.
2. Decreasing brand loyalty: The lowering of entry barriers (such as the need for a sales force,
access to channels and physical assets) and the geographical widening of the market due to
the internet have brought about increasing competition. In combination with lower switching
costs, easier access to information about products and suppliers and increased choice
customer loyalty is hard to achieve.
The increasing ineffectiveness of TV advertising due to the shift of consumer attention to the
internet, the ability, within new media, to control advertising consumption and the decrease in
audience size is bringing about a progressive shift of advertising spending online.
The proliferation of media that provide consumers with more control over their advertising
consumption (subscription-based digital radio and TV for example) and the simultaneous
decrease of faith in advertising and increase of faith in peers point to the need for
communications that the customer will desire to engage with. Stimulating a consumer’s
engagement with a brand is the only way to increase brand loyalty and, therefore, “the best
measure of current and future performance”.
CE is the solution that marketers have devised in order to come to terms with the social,
technological and market developments outlined above. In a nutshell, it is the attempt to
create an engaging dialogue with target consumers and stimulate their engagement with the
brand. Although this must take place consistently both on and off-line, the internet is the
primary vehicle for doing so.
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CE marketing begins with understanding the internal dynamics of these developments and,
especially, the behaviour and engagement of consumers online. That way, business
opportunities can be identified. As Max Kalehoff suggests, consumer-generated media should
play a massive role in our understanding and modeling of engagement. The control Web 2.0
consumers have gained must, and will be, quantified through ‘old school’ marketing
performance metrics.
Customer Engagement as a social phenomenon
Online inter-customer engagement is a recent social phenomenon that came about through the
wide diffusion and adoption of the internet in western societies during the late 1990s.
Although offline CE predates online CE, the latter is a qualitatively different social
phenomenon unlike any offline CE that social theorists or marketers are familiar with.
It manifests itself in the proliferation of online communities that centre around the
consumption of:
• a particular product category (cycling, sailing, dogs),
• a particular brand (Volks Wagen Beetle enthusiasts or the DellHell anti-funclub), or
• a pure dot-com company’s or bricks and clicks vast array of offerings (Amazon
reader’s comments, Netflix viewers’ recommendations).
People also engage online in communities that do not necessarily revolve around a particular
product, but serve as meeting or networking places, for instance on MySpace. The people in
one’s MySpace friend’s list do not necessarily all share a single consumption habit, although
they often do.
People’s online engagement with one another has brought about both the empowerment of
consumers and the opportunity for businesses to engage with their target customers online.
Customer Engagement as consumer behaviour
CE behaviour became prominent with the advent of the social phenomenon of online CE.
Creating and stimulating customer engagement behaviour has recently become an explicit
aim of both profit and non-profit organizations in the belief that engaging target customers to
a high degree is conducive to furthering business objectives.
Shevlin’s definition of CE is well suited to understanding the process that leads to an engaged
customer. In its adaptation by Richard Sedley the key word is ‘investment’.
“Repeated interactions that strengthen the emotional, psychological or physical investment a
customer has in a brand.”
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A customer’s degree of engagement with a company lies in a continuum that represents the
strength of his investment in that company. Positive experiences with the company strengthen
that investment and move the customer down the line of engagement.
What is important in measuring degrees of involvement is the ability of defining and
quantifying the stages on the continuum. One popular suggestion is a four-level model
adapted from Kirkpatrick’s Levels:
1. Click - A reader arrived (current metric)
2. Consume - A reader read the content
3. Understood - A reader understood the content and remembers it
4. Applied - A reader applies the content in another venue
Concerns have, however, been expressed as regards the measurability of stages three and
four. Another popular suggestion is Ghuneim’s typology of engagement.
Engagement is a holistic characterization of a consumer’s behaviour, encompassing a host of
sub-aspects of behaviour such as loyalty, satisfaction, involvement, Word of Mouth
advertising, complaining and more.
• Satisfaction: Satisfaction is simply the foundation, and the minimum requirement, for
a continuing relationship with customers. Engagement extends beyond mere
satisfaction.
• Loyalty - Retention: Highly engaged consumers are more loyal. Increasing the
engagement of target customers increases the rate of customer retention.
• Word of Mouth advertising - advocacy: Highly engaged customers are more likely to
engage in free (for the company), credible (for their audience) Word of Mouth
advertising. This can drive new customer acquisition and can have viral effects.
• Awareness - Effectiveness of communications: When customers are exposed to
communication from a company that they are highly engaged with, they tend to
actively elaborate on its central idea. This brings about high degrees of central
processing and recall.
• Filtering: Consumers filter, categorize and rate the market from head to tail, creating
multiple, overlapping folksonomies through tagging, reviewing, rating and
recommending.
• Complaint-behaviour: Highly engaged customers are less likely to complain to other
current or potential customers, but will address the company directly instead.
• Marketing intelligence: Highly engaged customers can give valuable
recommendations for improving quality of offering.
• The behavioural outcomes of an engaged consumer is what links CE to profits. From
this point of view, “CE is the best measure of current and future performance; an
engaged relationship is probably the only guarantee for a return on your
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organization’s or your clients’ objectives.” Simply attaining a high level of customer
satisfaction does not seem to guarantee the customer’s business. 60% to 80% of
customers who defect to a competitor said they were satisfied or very satisfied on the
survey just prior to their defection.
Marketing practices
Marketing practices that seek to include the customer aim to:
•
•
Persuade target customers that the company or offering is worth their time, effort,
money and commitment.
Create, stimulate or influence customer engagement behaviour.
The main difference between traditional and customer engagement marketing is marked by
these shifts:
•
•
•
From ‘reach or awareness focused’ marketing communications and their metrics
(GRP or page view) towards more targeted and customized interactions that prompt
the consumer to engage with and act on the content from the outset.
From absolute distinctions and barriers between an organization and its target
customers towards the participation of consumers in product development, customer
service and other aspects of the brand experience.
From one-way, top-down, formal B2C and B2E interaction to continuing, dialogic,
Specific marketing practices involve:
Encouraging collaborative filtering:
•
•
Google, Amazon, iTunes, Yahoo LAUNCHcast, Netflix, and Rhapsody encourage
their consumers to filter, categorise and rate; that is, to market their products. They
realise consumers are not only much more adept at creating highly-targeted
taxonomies (folksonomies) given that they are more adept at delineating the segment
they themselves constitute, but, also, that they are willing to do so for free. And to the
extent they cannot, they do it for them. If enough people like the band Groove
Armada as well as the band The Crystal Method, there may well be a stylistic
connection between them, despite the fact that one’s categorised as ‘downtempo’ and
the other ‘beats and breaks’. Such strong associations tell Yahoo! to put the two on
the same playlist more often, and if the positive ratings continue to come in, that
connection is reinforced. (Anderson 2006:101) Amazon does the same with their
‘customers who bought this item also bought…’ recommendations.
Community development: Helping target customers develop their own communities
or create new ones.
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Evolution to global marketing
Global marketing is not a revolutionary shift, it is an evolutionary process. While the
following does not apply to all companies, it does apply to most companies that begin as
domestic-only companies.
1. Domestic Marketing
A marketing restricted to the political boundaries of a country, is called "Domestic
Marketing". A company marketing only within its national boundaries only has to consider
domestic competition. Even if that competition includes companies from foreign markets, it
still only has to focus on the competition that exists in its home market. Products and services
are developed for customers in the home market without thought of how the product or
service could be used in other markets. All marketing decisions are made at headquarters.
The biggest obstacle these marketers face is being blindsided by emerging global marketers.
Because domestic marketers do not generally focus on the changes in the global marketplace,
they may not be aware of a potential competitor who is a market leader on three continents
until they simultaneously open 20 stores in the Northeastern U.S. These marketers can be
considered ethnocentric as they are most concerned with how they are perceived in their
home country.
2. Export Marketing
Generally, companies began exporting, reluctantly, to the occasional foreign customer who
sought them out. At the beginning of this stage, filling these orders was considered a burden,
not an opportunity.
3. International Marketing
If the exporting departments are becoming successful but the costs of doing business from
headquarters plus time differences, language barriers, and cultural ignorance are hindering
the company’s competitiveness in the foreign market, then offices could be built in the
foreign countries. Sometimes companies buy firms in the foreign countries to take advantage
of relationships, storefronts, factories, and personnel already in place. These offices still
report to headquarters in the home market but most of the marketing mix decisions are made
in the individual countries since that staff is the most knowledgeable about the target markets.
Local product development is based on the needs of local customers. These marketers are
considered polycentric because they acknowledge that each market/country has different
needs.
4. Multinational Marketing
At the multi-national stage, the company is marketing its products and services in many
countries around the world and wants to benefit from economies of scale. Consolidation of
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research, development, production, and marketing on a regional level is the next step. An
example of a region is Western Europe with the US. But, at the multi-national stage,
consolidation, and thus product planning, does not take place across regions; a regiocentric
approach.
5. Global Marketing
When a company becomes a global marketer, it views the world as one market and creates
products that will only require weeks to fit into any regional marketplace. Marketing
decisions are made by consulting with marketers in all the countries that will be affected. The
goal is to sell the same thing the same way everywhere.
6. Elements of the global marketing mix
The “Four P’s” of marketing: product, price, placement, and promotion are all affected as a
company moves through the five evolutionary phases to become a global company.
Ultimately, at the global marketing level, a company trying to speak with one voice is faced
with many challenges when creating a worldwide marketing plan. Unless a company holds
the same position against its competition in all markets (market leader, low cost, etc.) it is
impossible to launch identical marketing plans worldwide.
7. Product
A global company is one that can create a single product and only have to tweak elements for
different markets. For example, Coca-Cola uses two formulas (one with sugar, one with corn
syrup) for all markets. The product packaging in every country incorporates the contour
bottle design and the dynamic ribbon in some way, shape, or form. However, the bottle or can
also includes the country’s native language and is the same size as other beverage bottles or
cans in that country.
8. Price
Price will always vary from market to market. Price is affected by many variables: cost of
product development (produced locally or imported), cost of ingredients, cost of delivery
(transportation, tariffs, etc.), and much more. Additionally, the product’s position in relation
to the competition influences the ultimate profit margin. Whether this product is considered
the high-end, expensive choice, the economical, low-cost choice, or something in-between
helps determine the price point.
9. Placement
How the product is distributed is also a country-by-country decision influenced by how the
competition is being offered to the target market. Using Coca-Cola as an example again, not
all cultures use vending machines. In the United States, beverages are sold by the pallet via
warehouse stores. In India, this is not an option. Placement decisions must also consider the
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product’s position in the market place. For example, a high-end product would not want to be
distributed via a “dollar store” in the United States. Conversely, a product promoted as the
low-cost option in France would find limited success in a pricey boutique.
10. Promotion
After product research, development and creation, promotion (specifically advertising) is
generally the largest line item in a global company’s marketing budget. At this stage of a
company’s development, integrated marketing is the goal. The global corporation seeks to
reduce costs, minimize redundancies in personnel and work, maximize speed of
implementation, and to speak with one voice. If the goal of a global company is to send the
same message worldwide, then delivering that message in a relevant, engaging, and costeffective way is the challenge.
Effective global advertising techniques do exist. The key is testing advertising ideas using a
marketing research system proven to provide results that can be compared across countries.
The ability to identify which elements or moments of an ad are contributing to that success is
how economies of scale are maximized. Market research measures such as Flow of Attention,
Flow of Emotion and branding moments provide insights into what is working in an ad in any
country because the measures are based on visual, not verbal, elements of the ad.
3.4
Global marketing Advantages and Disadvantages
Advantages
•
•
•
•
•
•
•
•
Economies of scale in production and distribution
Lower marketing costs
Power and scope
Consistency in brand image
Ability to leverage good ideas quickly and efficiently
Uniformity of marketing practices
Helps to establish relationships outside of the "political arena"
Helps to encourage ancillary industries to be set up to cater for
Disadvantages
•
•
•
•
Differences in consumer needs, wants, and usage patterns for products
Differences in consumer response to marketing mix elements
Differences in brand and product development and the competitive environment
Differences in the legal environment.
Differences in the institutions available.
•
Differences in administrative procedures
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•
Differences in product placement
3.5 Review Questions
1. What are all the strategies of International Markeitng?
2. Briefly explain about Business model?
3. Explain about the evolution to global marketing.
4. Furnish the advantages and disadvantages of global marketing.
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Module IV
INTERNATIONAL MARKETING PROGRAMME
4.0
Learning Outcomes
Introduction
International Marketing Programme
Marketing Mix and Product Mix:
International Distribution Channels
International Agencies
4.1
Introduction
The distribution of intangible financial goods and information and the use of network based
financial services in general is experiencing a tremendous growth in recent years. In this
research briefing we will investigate the use of pricing models in pricing the distribution of
financial information and the use of financial services over electronic distribution lines. We
will present up to date data about current information pricing models as well as possible
future trends.
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It appears that the ease of replication and distribution of electronic data is making the use of
traditional pricing schemes (e.g. Price=Marginal Cost) obsolete. In their efforts to maximize
their revenues, providers of digital financial information goods are experimenting with
different pricing schemes. The Internet has made it possible to repackage content using
bundling, site licensing, subscriptions, rentals, and differential pricing and per-use fees. All of
the above pricing techniques could be considered as examples of aggregation or
disaggregation of information goods along some dimension. Aggregation can be across
products as with bundling stock price quotes from different exchanges; it could be across
consumers as with the provision of a site license by Lexis to MIT; and it could also be across
time as with the subscription that a Bloomberg Customer has to pay to get several services
and products for a specific period of time.
Our research is focused on the distribution of information and the provision of services in the
capital market data industry. We provide an overview of the key competitors, markets, and
products. Finally, we make an in-depth analysis of the different pricing schemes used by the
industry players.
4.2
International Marketing Programme
Key Competitors /Markets/Products
The capital market data industry has experienced a slow growth of less than 5% / year in the
past five years. The market is divided into two distinct segments:
•
•
•
The market for integrated data market applications. It is the high-end subset of the
total capital market data market: institutional front office users who need real-time
prices and news as well as historical and analytical information. The applications are
targeted specifically for institutional brokers and investment managers whose needs
are research intensive, e.g. Morgan Stanley.
The retail capital data market. This market segment includes the brokers who
emphasize transaction services, charging lower commissions by minimizing ancillary
advisory services (e.g. Charles Schwab). It also includes the aggregators of financial
information who target individual investors (e.g. Hoovers)
During our research, we observed that several institutional brokers (e.g. Merrill
Lynch) and some exchanges (e.g. Nasdaq) have also joined the market for catering to
the retail sector. The flow of market data is best illustrated in Figure 1. The three
vendors of capital market data, e.g. Bloomberg, Reuters, Bridge, buy data from
exchanges and distribute them to institutional and retail brokers as well as directly to
the retail market.
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Integrated Data Market
The capital market data industry has changed the traditional boundaries and relationships
between market data vendors & their customers. The movement in the industry from video
page feeds to digital feeds has led to increasing commodization of market data by allowing
users to easily replace data sources. This force has squeezed data vendors in their traditional
market and forced them to look for opportunities in other areas.
Market data vendor’s responses have been twofold: expand across the financial markets
(equity, fixed income, foreign exchange and commodities) and expand the range of product
offerings, which include data distribution and integration, trading systems and electronic
messaging, news and media.
Bloomberg, Bridge and Reuters are virtually the only vendors who are attempting to deliver
integrated market data application. All three are concentrating much of their current efforts
on equities. The vendors focus on equities, particularly equities trading, seeks to maximize
penetration among its users. Trading functions require a screen on every desktop and is
particularly important for Bloomberg, which lacks full exposure on equity trading floors. All
three vendors also offer electronic messaging capability, via their proprietary global
networks, which further encourages customers to purchase a screen per user to enable secure
and confidential messaging.
Retail Data Market
Retail oriented brokers provide access to their product and services either through the use of
the Internet or through the use of their proprietary software and the use of standard telephone
lines. Some companies use both methods of providing access to their services to the retail
market. This research briefing focuses on the Web sites managed by financial information
aggregators and brokerage and mutual fund companies. We came up with the range of
services these Web Sites provide. The companies with Web presence can be divided into
three groups, characterized by their services, products and target messages. The range of
investment services that can be offered on the Web, from which these companies can choose
in defining their Web Strategies, can be categorized into three groups as follows:
•
•
•
Information Support – Current and archival price and performance data and research
and analysis resources to help users in their investment decisions.
Account Services – Services that promote and support a user’s application for an
account, and for a few, access to account information on the Web.
Trading – Instructions and directions to the company’s manual and automated trading
services, and, for a few, Web trading services.
Several companies, have both on-line and offline services (e.g. Schwab Co). As of July 1997,
Charles Schwab had over 908,000 active on-line accounts, approximately 30% of the industry
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total of three million accounts. These accounts generated approximately 36% of the
company’s average daily trading volume of 114,700 trades [5].
Analysis of Pricing Schemes
Managers of firms in the capital data market industry have a hard job in making pricing
decisions regarding their products and services. The pricing decision is made hard because of
the ease of replication and distribution of electronic data, which makes the traditional pricing
scheme Price=Marginal Cost not desirable. Therefore, the managers of these firms are
beginning to use alternative pricing strategies. The basic objective of every pricing strategy in
use is to capture as much consumer surplus as possible and convert it into additional profit for
the firm. Therefore, managers are using bundling, two-part tariffs, and price discrimination to
capture as much consumer surplus as possible.
There are two dimensions to pricing schemes. A pricing scheme is composed of the
aggregation (or disaggregation) schemes and the accompanying fee structures.
Aggregation
Aggregation is beneficial for capital market data vendors for two reasons:
•
•
It increases the value of a set of goods, because of technological complementarities in
production, distribution and consumption.
There is a price discrimination effect resulting from bundling. Vendors are able to price a
bundle of goods in different distinct and inseparable markets.
It is important to note, that one aggregation technique, namely bundling makes sense when
customers in each of the product markets involved have heterogeneous demands. In technical
terms, we can say that bundling makes sense when demands of each individual product are
negatively correlated.
Retail broker institutions, whose domain of activities extends to the physical off-line world,
tend to bundle their online with their offline services. Consider for example E.Schwab, which
is the online trading service of the Schwab Co. Schwab Co. was offering the same kind of
service through telephone (both through the use of a customer service agent and of touch
tone) before deciding to go online. At the beginning the two services (web-based and
telephone) were subject to different pricing schemes, then they were bundled and offered at a
discount to the subscribers who decided to join both. At a later stage, Schwab Co. expanded
its online service to include their phone service for the same price, at a time when prices for
on-line services were falling. In essence, Schwab bundled together two negatively correlated
services to maximize their profits.
Another form of bundling practiced by online retail focused broker firms, is to combine two
different online services. The online trading firm E*Trade, bundles financial information with
its trading services. E*Trade is a competitor of e.Schwab that offers only online services.
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This difference is due to the fact that E*Trade entered the business of online trading as its
focus from the beginning, while e.Schwab existed as an offline service before. E*Trade
provides real stock quotes, stock market history, risk analysis and other relevant financial
information to its subscribers as long as the customers have a minimum amount of $1000
deposited in their portfolio and they commit a minimum of two transactions per year using
E*Trade.
Dow Jones, bundles financial information with other electronic services such as a news-track
email service and a services that monitors and filters news about specific companies,
industries, or general areas of interest. Dow Jones offers to its subscribers the table of
contents of the filtered articles for free, but they have to pay for them on a per article basis if
they want to retrieve the whole text of any of them. Thus, they can exercise price
discrimination based on the sensitivity of their subscribers to the depth of each information
good.
As we have seen some companies exercise price discrimination by charging different prices
for different depths of information. For example they can charge smaller fees for the
headlines of the articles, something more for the abstract and even more for the full text of
the article. For example the Dow Jones, charges on top of its annual fee of $29.95, a fee of
$1.00 per cite, a fee of $2.00 per lead and a fee of $2.95 per article when users access the
company’s archive.
Aggregating different products and services was also used as a marketing tool. Our research
showed, that Investment Companies often attempted to entice visitors at their Web sites to
enter into higher levels of participation with the company (i.e. "sell them up"), by offering
discriminated services at various levels of participation, and by actively promoting the higher
level services to visitors of the pages available for perusal at the lower level. Visitors at Web
Sites could typically be assigned into three "participation" classes with increasing privileges
in each as follows:
•
•
•
•
Causal Browser accesses the site without self-identification or any relationship with the
site owner.
Registered User – Registers Using an online application, often augmented by a short
survey, and in return, receives a free user identification and password that provides access
to certain restricted pages and services.
Client – Has an active account with the site owner, with a user identification and
password that provides access to full site privileges.
Integrated Capital Market Data Vendors offer a combination of product bundles to
institutionalized brokers. However, our research was unable to reveal any information
concerning the nature of such bundles.
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Fee Structure
In addition to developing distinct product bundles, purveyors of goods advertised or sold
through electronic markets may implement any number of complex fee schedules. Fee
schedules cover a set of options that range from simple, one-time, fixed fee charges through
complex, non-linear schemes. In between lie a myriad of "mixed" strategies. We discuss a
number of possible fee structures and illustrate those schedules with examples drawn from
on-line products offered by the financial information services industry.
The fee structure for information products can vary along three dimensions: price, quantity,
and time. Different pricing strategies will vary price as a function of one (or both) of quantity
and time. A pure, fixed fee strategy would charge users a single price for access to all of the
data and information, which the vendor has to offer over time.
"Subscription" pricing is a variant on a pure, fixed fee model that enables users unlimited
access to the producer’s data and information for a pre-specified amount of time.
Subscription pricing is commonly associated with periodicals. The Wall Street Journal
Interactive Edition, for example, charges users a single, fixed fee of $49.00 per year. That
print subscribers to the Wall Street Journal are charged the fixed fee of $29.00 per year is an
illustration of how fee structures and ability to divide consumers interact to form a pricing
strategy. Lexis-Nexis charges a single, flat, yearly subscription fee for live feeds of EDGAR
SEC filings. A less expensive yearly subscription fee for 24-hour delayed tape delivery of all
SEC filings provides another example of the interaction between discrimination and pricing
strategies.
More than just traditional periodicals, however, subscription pricing is also applicable to
more sophisticated financial information services. For $12.95 per month, Hoover’s On-line
provides users with access to the Hoover archive of market research and company financial
profiles. Moreover, that Hoover charges $124.95 for a yearly subscription (a $30.00 discount
over the monthly subscription) illustrates how fixed fee structures combine with bundling
over time (monthly versus yearly subscription).
A pure, standard linear fee schedule holds one of quantity or time constant and sets price as a
linear function of the third variable. With respect to quantity, a linear schedule might, for a
given user session, charge a user a constant amount for every document accessed. Because
the marginal cost of offering an additional document or piece of information is virtually zero
relative to the cost of adding an additional user to the billing and accounting system, pure
linear schedules are less common than the non-linear "mixed" strategies that combine a linear
model schedule with other schemes.
Two-tier pricing schemes impose both a fixed fee component and a linear-cost structure. A
common two-tier structure might include a flat fee in order to subscribe to the service and
then a constant charge for every item ordered. Investext’s Telecom Securities on-line archive
of market research reports charges both a periodic subscription fee and then $6.00 per page
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from any report in the archive. The Investext pricing strategy combines a two-tier fee
schedule with a service bundle that allows users to search the archive and to view report
titles, bibliographic reference information, and blurbs for free. In addition, users may elect to
pay a fixed fee of $75.00 per report for the entire report rather than $6.00 per page.
Variations on two-tier pricing like three-tier or n-tier pricing are also possible. The Wall
Street Journal Interactive Edition provides subscribers with access to the Dow Jones
Interactive periodicals archive. Both searching and the first ten articles retrieved are free.
This three-tiered model with respect to quantity therefore charges users a flat subscription
which applies to the first ten articles after which there is a constant, per article charge for
every additional article retrieved.
The Dow Jones Interactive fee schedule is an even more complex variant on the three-tier
model. Dow Jones Interactive is essentially a data source aggregation service, which permits
users to search multiple sources in a uniform manner. After paying a flat, $29.95 yearly
subscription, the customer pays a per document cost that varies depending upon the source of
the content. Articles from the Dow Jones archives are charged at a constant cost per each
additional article. Reports from Investext are charged at $7.50 per page. Reports from market
research range from $6.00 per page to more than $20 per page.
Second-degree price discrimination schemes such as block pricing are also seen in the on-line
financial information services industry. Lexis-Nexis employs a block fee schedule with
respect to time for archives of the SEC filings archives. Depending upon the year of the
archive, Lexis-Nexis charges a different fee for the different quarterly and yearly filings.
Therefore as you buy more tapes and/or older tapes, the price per tape is lower.
To demonstrate, the complexity and variability of pricing an information good, we examined
the pricing of stock quotes as they flow down the supply chain; from their producers (the
exchanges) to their users (both the retail data market and the institutionalized brokers).
Exchanges provide stock data to information vendors through contracted private line services.
Some of these vendors (e.g. Reuters), in turn, consolidate feeds from various exchanges into a
comprehensive quotes service which they provide their investment company clients via
private lines or satellite feed. The exchanges consider 15-20 minute delayed stock quotes to
be "in the public domain" and provide them to the information vendors as part of a basic
service with basic information services. (Flat fee pricing) However, the exchanges charge the
information vendors for access to and release of real-time quotes, according to contracts that
include a rate structure that typically accounts for the number of end-users who may get
assess to the information.(Two-part tariff, Linear fee, Site Licensing) Brokerages purchase
price quotes services from the information vendors, paying them fees that reflect the
exchange charges. In turn, brokers provide price quote services that reflect these costs.
Servers that provide delayed cost quotes free of charge are available at a number of brokerage
sites. However, only a few of these sites support real-time quotes. Some of the real-time
quote services are promoted as privileges reserved for account holders (e.g. Lombard), while
others are offered on a fee basis (e.g. $ 20/month at Aufhauser).
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The schemes illustrated above are only a fraction of the possible fee structures, which could
contribute to an overall pricing strategy. In addition to non-linear variants on linear fee
structures, virtually any non-linear, monotonically increasing relationship between payment
and quantity or payment and time is a valid scheme. Only time will tell whether the finegrained customer discrimination afforded by complex pricing schemes will prevail or
whether customers will opt for the simple, flat fee subscription pricing that is so prevalent in
other computing and communications markets such as Cable television or Internet Service
Provision.
Conclusion
The examples drawn from real financial information services that are included in the previous
sections serve to illustrate how aggregation and fee structures combine to form a pricing
strategy. At the same time, perhaps the examples demonstrate the often-fuzzy distinction
between the two components.
Fee structures can look a lot like bundling. A three-part tariff can look like a bundle, which
combines a subscription with a number of articles. Some customers will prefer a bundle,
which offers 10 free trades whereas others will prefer five free trades and five free industry
reports. Finally, pricing schemes and customer can also look alike. Some customers will opt
for a monthly subscription over a yearly subscription despite a discount for the yearly
subscription.
On one hand, the future of markets in the on-line capital data market industry has never
looked brighter. Producers today have access to an endless supply of electronic data and at
the same time, the ever-expanding information infrastructure serves to grow the customer
base for electronic data service markets. On the other hand, the low marginal cost of
production and distribution has allowed increased commodization of the capital data market.
We therefore believe that the differentiation of products and services is critical to the
profitability of the capital data vendors. Not only would aggregation techniques allow
vendors to differentiate their products and services, but would also have a significant effect
on improving social welfare by reducing the monolistic deadweight loss.
International marketing Program
Market planning:•
•
•
•
Planning Analysis
Planning strategy
Planning process
Global market planning
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Marketing Planning
Introduction
Global marketing is not a revolutionary shift, it is an evolutionary process. While the
following does not apply to all companies, it does apply to most companies that begin as
domestic-only companies.
Market information should include anything we need to know in order to formulate strategy
and make business decisions. We can carry out our own research through customer feedback, surveys, questionnaires and focus groups (obtaining indicators to wider views through
discussion among a few representative people in a controlled situation). This is called
primary research, and is tailored to our precise needs. It requires less manipulation, but all
types of research need careful analysis. Be careful when extrapolating or projecting. If the
starting point is inaccurate the resulting analysis will not be reliable. The main elements you
typically need to understand and quantify are:
•
customer profile and mix
•
product mix
•
demographic issues and trends
•
future regulatory and legal effects
•
prices and values, and customer perceptions in these areas
•
competitor activities
•
competitor strengths and weaknesses
•
customer service perceptions, priorities and needs
Primary research is recommended for local and niche services. Keep the subjects simple and
the range narrow. Formulate questions that give clear yes or no indicators (ie avoid three and
five options in multi-choices) always understand how we will analyse and measure the data
produced. We should convert data to numerical format and manipulate on a spreadsheet. Use
focus groups for more detailed work. Be wary of using market research organizations as this
can become extremely expensive. If we do the most important thing to do is get the brief
right. One should establish their corporate aims.
Business strategy is partly dictated by what makes good business sense, and partly by the
subjective, personal wishes of the owners. There is no point in developing and implementing
a magnificent business growth plan if the owners wish the business to maintain its current
scale.
State the business objectives - short, medium and long term.
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Mindful of the trading environment (external factors) and the corporate aims (internal
factors), there should be stated the business's objectives.
Developing emphases
Develop our service offer to emphases our strengths, which should normally relate to our
business objectives, in turn being influenced by corporate aims and market research. The
tricky bit is translating our view of these services into an offer that means something to our
customer. Think about what our service, and the manner by which we deliver it, means to our
customer. In the selling profession, this perspective is referred to as translating features into
benefits. The easiest way to translate a feature into a benefit is to add the prompt 'which
means that'. For example, if a strong feature of a business is that it has 24-hour opening, this
feature would translate into something like:
"We're open 24 hours (feature) which means that we can get what we need when we need it day or night."
Clearly those offers as a significant benefit over competitors who only open 9 - 5.
Our service-offer should be an encapsulation of what we do best, that we want to do more of
to meet our business objectives.
Planning
Write the business plans involves a pivotal role in the modern trend i.e which include costs,
resources and 'sales' targets.
Our business plan, which deals with all aspects of the resource and management of the
business, will include many decisions and factors fed in from the marketing process. It will
state sales and profitability targets by activity.
There may also be references to image, reputation and to public relations. All of these issues
require some investment and effort if they are to result in a desired effect, particularly any
relating to increasing numbers of customers and revenue growth. We would normally
describe and provide financial justification for the means of achieving these things, together
with customer satisfaction improvement, in a marketing plan.
Quantify what we need from the market.
Before attending to the detail of how to achieve our marketing aims we need to quantify
clearly what they are. How many new customers? Limit of customer losses? Sales values
from each sector? Profit margins per service, product, sector? Percentage increase in total
sales revenues? Market share required? Improvement in customer satisfaction? Reduction in
customer complaints? Response times? Communication times?
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Implied planning
Our marketing plan is actually a statement, supported by relevant financial data, of how we
are going to develop our business. "What we are going to sell to whom, when and how we are
going to sell it, and how much we will sell it for."
In most types of businesses it is also essential that we include measurable aims concerning
customer service and satisfaction. The marketing plan will have costs that relate to a
marketing budget in the business plan. The marketing plan will also have revenue and gross
margin/profitability targets that relate to the turnover and profitability in the business plan.
The marketing plan will also detail quite specifically those activities, suppliers and staff
issues critical to achieving the marketing aims. Being able to refer to aspects of
organizational Philosophy and Values is very helpful in formulating the detail of a marketing
plan.
Domestic marketing
A marketing restricted to the political boundaries of a country, is called "Domestic
Marketing". A company marketing only within its national boundaries only has to consider
domestic competition. Even if that competition includes companies from foreign markets, it
still only has to focus on the competition that exists in its home market. Products and services
are developed for customers in the home market without thought of how the product or
service could be used in other markets. All marketing decisions are made at headquarters.
The biggest obstacle these marketers face is being blindsided by emerging global marketers.
Because domestic marketers do not generally focus on the changes in the global marketplace,
they may not be aware of a potential competitor who is a market leader on three continents
until they simultaneously open 20 stores in the Northeastern U.S. These marketers can be
considered ethnocentric as they are most concerned with how they are perceived in their
home country.
Export marketing
Generally, companies began exporting, reluctantly, to the occasional foreign customer who
sought them out. At the beginning of this stage, filling these orders was considered a burden,
not an opportunities.
International marketing
If the exporting departments are becoming successful but the costs of doing business from
headquarters plus time differences, language barriers, and cultural ignorance are hindering
the company’s competitiveness in the foreign market, then offices could be built in the
foreign countries. Sometimes companies buy firms in the foreign countries to take advantage
of relationships, storefronts, factories, and personnel already in place. These offices still
report to headquarters in the home market but most of the marketing mix decisions are made
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in the individual countries since that staff is the most knowledgeable about the target markets.
Local product development is based on the needs of local customers.
Multinational marketing
At the multi-national stage, the company is marketing its products and services in many
countries around the world and wants to benefit from economies of scale. Consolidation of
research development, production, and marketing on a regional level is the next step. An
example of a region is Western Europe with the US. But, at the multi-national stage,
consolidation, and thus product planning, does not take place across regions; a regiocentric
approach.
Global marketing
When a company becomes a global marketer, it views the world as one market and creates
products that will only require weeks to fit into any regional marketplace. Marketing
decisions are made by consulting with marketers in all the countries that will be affected. The
goal is to sell the same thing the same way everywhere.
Product
A global company is one that can create a single product and only have to tweak elements for
different markets. For example, Coca-Cola uses two formulas (one with sugar, one with corn
syrup) for all markets. The product packaging in every country incorporates the contour
bottle design and the dynamic ribbon in some way, shape, or form. However, the bottle or can
also includes the country’s native language and is the same size as other beverage bottles or
cans in that country.
Global marketing is not a revolutionary shift, it is an evolutionary process. While the
following does not apply to all companies, it does apply to most companies that begin as
domestic-only companies.
1 Marketing planning in the context of corporate planning
Corporate planning or strategic company planning comprises the following sequential steps:
Mission statement (or defining the company mission) has an influence on all planning
throughout the organization, for it is a statement of the company’s overall business
philosophy. It is normally a set of guidelines, rather than something that is stated in hard and
fast quantitative terms.
•
situational analysis means evaluating external and internal factors that will affect the
planning process and asks the question ‘Where are we now?’. This means researching
and analyzing all information that might have a bearing on the organization and its
operations, from internal factors like individual departmental company resources, to
external factors like current political events that might impinge on the activities of the
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company.
•
set organizational objectives requires company management to put forward guidance
as to how the company should fulfill its mission and this clarifies where the company
wants to be. These, unlike the mission statement, should be expressed in achievable
quantitative terms.
•
choose strategies to achieve these objectives which are the concrete ideas that set
about achieving company objectives and they relate to how the mission will be
accomplished.
It is from this latter point that we can then start to plan strategically and tactically for
marketing, as can other major divisions of the organization which include: finance,
production, human resource management and distribution. The function entrusted with
bringing all of these separate planning functions together is termed corporate planning, and it
is up to the person entrusted with corporate planning to ensure that one department’s plans
are in harmony with other departments’ plans, and that they all work towards achieving the
overall organizational objectives.
In forward thinking organizations it is the managing director or chief executive who is the
corporate planner and in such an event strategic planning is seen to be at the core of
managerial activity, for it is this activity that drives the organization.
However, all too often it is the case that as strategic planning concerns the longer term future,
it can be put to one side in the interests of dealing with everyday tactical matters. To this
extent, in larger organizations, corporate planning is often set up as a separate function
reporting directly to top management, with the specific remit of bringing together and
synergizing all individual departmental plans into the final corporate plan. It is placed directly
under top management in what is called a ‘staff’ relationship, but is not a ‘line’ relationship
that is in the line of command of the company from the board of directors downwards (e.g.. it
is not alongside marketing management in terms of the hierarchical structure).
An overview of marketing planning
Strategic marketing planning is the application of a number of logical steps in the planning
process. There is no one clear formula that must always be applied, and indeed one specific
model would not suit every marketing planning situation. Different textbooks also cite
slightly different models that are a variation on a similar general theme.
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Measure and control:
Strategic marketing planning process
Situational analysis
The mission statement has already been explained, but the next stage that relates to an
analysis of the current situation is now explained for it has two inputs. The first input relates
to the organization's macro environment and these are factors over which the company has
little or no control. They are listed under four separate headings: Political; Economic; Sociocultural and Technological and are known by the acronym ‘PEST’. Added to these factors,
some marketing planners also add ‘Legal’ (the acronym then being SLEPT) and some add
‘Competition’ if these are felt to be specific issues.
This is the external audit part of what is called the company audit. From this external audit a
number of very short statements are made in respect of each of the P.E.S.T. + C + L subdivisions. The statements do not have to be justified, as they are mere observations that will
help formulate more detailed plans at a later stage. Even more recently, some analysts have
added both ‘Legal’ and ‘Environmental’ (making the acronym PESTLE).
The next part concerns what is called the company audit, or in corporate planning terms, the
internal audit. This looks at the individual capabilities of the company, SBU by SBU, and
again short statements or observations are made that do not have to be justified.
These two actions are what is called the corporate auditing process and they go up to form the
situational analysis. Marketing’s part of this total corporate auditing procedure is termed the
‘marketing audit’ and it is included here as part of marketing planning because it forms the
beginning of the marketing planning process.
SWOT Analysis
The SWOT analysis (strengths, weaknesses, opportunities, threats) is an attempt to translate
company specific factors from the company audit into company strengths and weaknesses
plus external environmental factors (from the PEST analysis) into external opportunities and
threats. As was the case with the PEST analysis, no attempt should be made to justify the
points being placed in each of the categories as it is meant as a statement which will assist
marketing planning in the later stages.
In terms of its presentation the SWOT analysis is normally put into a four box matrix with
internal strengths and weaknesses being listed in the top two boxes and external opportunities
and threats being listed in the lower two boxes. Experience has shown that for most
companies, ranging from the very large to the very small, the number of strengths and
weaknesses is around 10 - 15 each and the number of opportunities and threats is about 5 - 12
each. Any less normally indicates that the SWOT is incomplete and more indicates that a
number of points are being repeated in different words.
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Marketing Objectives
These are concerned with what is to be achieved, unlike strategies that are the means of
achieving objectives. These objectives are obtained from corporate level strategies and should
be very specific. An acronym used in this context is that marketing objectives should be
‘SMART’ - which stands for: specific; measurable; achievable; realistic and timely. An
objective must, therefore, have some kind of measurable characteristic which might relate to
a standard of performance like a percentage level of profit or a situation that has to be
achieved like penetrating a specific market.
Forecast market potential
This is a stage that a lot of marketing planning texts seem to miss. It is illogical really, for
without a forecast of the market potential, a company does not really know for what it should
be making its plans. Forecasting is at the very base of company planning, and it is for
medium and long term planning horizons that medium and long term sales forecasts are
needed.
Generate Marketing Strategies
Strategies are of course the means through which marketing objectives can be achieved. They
are meant to detail selected approaches that the company will use to achieve its objectives.
Determining strategies leads to a series of action statements that are clear sets of steps to be
followed to achieve the objectives. Operational decisions then spill out of these marketing
strategies and these form the tactical foundations of the detailed marketing mix programs.
Conclusion
A marketing plan cannot be operated without some measure to monitor, measure and control
its progress. A system of controls should be established whereby the plan is reviewed on a
regular and controlled basis and then updated as circumstances change. Such controls can
address the tactics in terms of sales analyses that will commence with a comparison of
budgeted sales revenue against actual sales revenue. Variations might be due to volume or
price variances - perhaps an unfavorable variance being due to having to cut prices to match
the tactical actions of competitors.
The marketing information system provides key inputs to the marketing planning. This
information comes from market intelligence, marketing research and the organization's own
internal accounting system. This information then inputs into the marketing plan. It is also
control mechanism, because customer reactions are also fed into this MkIS from market
intelligence through the field sales force or from marketing research studies. Information on
sales analyses is also fed into the system so assessments can be made as to whether forecasted
sales are being achieved or not.
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As the planning horizon unfolds and plans do not go exactly as anticipated, action can be then
taken as required, and this is the reason for the feedback loop in Figure 3. These measures of
performance allow planners an opportunity to adjust and fine tune plans as necessary during
the planning period.
International marketing program
4.3
•
Relationship of market mix with marketing
•
Product promotion
•
Pricing
•
Distribution
•
Product mix
Marketing Mix and Product Mix
The term marketing mix refers to the primary elements that must be attended to in order to
properly market a product or service. Also known as The 4 Ps of Marketing, the marketing
mix is a very useful, if a bit general, guideline for understanding the fundamentals of what
makes a good marketing campaign. Here is a brief description of each component of the 4 Ps
of the marketing mix. The marketing mix is generally accepted as the use and specification of
the 'four Ps' describing the strategy position of a product in the marketplace. One version of
the marketing mix originated in 1948 when James Culliton said that a marketing decision
should be a result of something similar to a recipe. This version was used in 1953 when Neil
Borden, in his American Marketing Association presidential address, took the recipe idea one
step further and coined the term "marketing-mix". A prominent marketer, E. Jerome
McCarthy, proposed a 4 P classification in 1960, which has seen wide use. The four Ps
concept is explained in most marketing textbooks and classes. Combination of marketing
elements used in the sale of a particular product. The marketing elements center around four
distinct functions, sometimes called the Four Ps: product, price, place (of distribution), and
promotion. All these functions are considered in planning a marketing strategy, and any one
may be enhanced, deducted, or changed in some degree in order to create the strategy
necessary to efficiently and effectively sell a product.
Definition
The variety of integrated decisions made by a marketing manager to ensure successful
marketing. These decisions are made in four key areas known as the 4 Ps of marketing
“product, price, place, and promotional” and cover issues such as the type of product to be
marketed, brand name, pricing, advertising, publicity, geographic coverage, retailing, and
distribution.
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The 'marketing mix' is a set of controllable, tactical marketing tools that work together to
achieve company's objectives.
The levels and interplay of the elements of a product's or service's marketing efforts,
including product features, pricing, packaging, advertising, merchandising, distribution, and
marketing budget; especially as these elements affect sales results.
Marketing decisions generally fall into the following four controllable categories:
•
Product
•
Price
•
Place (distribution)
•
Promotion
Figure 1: 4 Ps
Four Ps
Elements of the marketing mix are often referred to as 'the four Ps':
• Product - A tangible object or an intangible service that is mass produced or
manufactured on a large scale with a specific volume of units. Intangible products are
often service based like the tourism industry & the hotel industry or codes-based
products like cell phone load and credits. Typical examples of a mass produced
tangible object are the motor car and the disposable razor. A less obvious but
ubiquitous mass produced service is a computer operating system.
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• Price – The price is the amount a customer pays for the product. It is determined by a
number of factors including market share, competition, material costs, product
identity and the customer's perceived value of the product. The business may increase
or decrease the price of product if other stores have the same product.
• Place – Place represents the location where a product can be purchased. It is often
referred to as the distribution channel. It can include any physical store as well as
virtual stores on the Internet.
• Promotion – Promotion represents all of the communications that a marketer may use
in the marketplace. Promotion has four distinct elements - advertising, public
relations, word of mouth and point of sale. A certain amount of crossover occurs
when promotion uses the four principal elements together, which is common in film
promotion. Advertising covers any communication that is paid for, from cinema
commercials, radio and Internet adverts through print media and billboards. One of
the most notable means of promotion today is the Promotional Product, as in useful
items distributed to targeted audiences with no obligation attached. This category has
grown each year for the past decade while most other forms have suffered. It is the
only form of advertising that targets all five senses and has the recipient thanking the
giver. Public relations are where the communication is not directly paid for and
includes press releases, sponsorship deals, exhibitions, conferences, seminars or trade
fairs and events. Word of mouth is any apparently informal communication about the
product by ordinary individuals, satisfied customers or people specifically engaged to
create word of mouth momentum. Sales staff often plays an important role in word of
mouth and Public Relations (see Product above).
Broadly defined, optimizing the marketing mix is the primary responsibility of marketing. By
offering the product with the right combination of the four Ps marketers can improve their
results and marketing effectiveness. Making small changes in the marketing mix is typically
considered to be a tactical change. Making large changes in any of the four Ps can be
considered strategic. For example, a large change in the price, say from $19.00 to $39.00
would be considered a strategic change in the position of the product. However a change of
$130 to $129.99 would be considered a tactical change, potentially related to a promotional
offer.
The term 'marketing mix' however, does not imply that the 4P elements represent options.
They are not trade-offs but are fundamental marketing issues that always need to be
addressed. They are the fundamental actions that marketing requires whether determined
explicitly or by default.
Extended marketing mix
There have been attempts to develop an 'extended marketing mix' to better accommodate
specific aspects of marketing.
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For example, in the 1970s, Nickels and Jolson suggested the inclusion of packaging.
In the 1980s Kotler proposed public opinion and political power and Booms and Bitner
included three additional 'Ps' to accommodate trends towards a service or knowledge based
economy:
• People – all people who directly or indirectly influence the perceived value of the
product or service, including knowledge workers, employees, management and
consumers.
• Process – procedures, mechanisms and flow of activities which lead to an exchange of
value.
• Physical evidence – the direct sensory experience of a product or service that allows a
customer to measure whether he or she has received value. Examples might include
the way a customer is treated by a staff member, or the length of time a customer has
to wait, or a cover letter from an insurance company, or the environment in which a
product or service is delivered.
Four Cs
The Four Ps is also being replaced by the Four Cs model, consisting of consumer, cost,
convenience, and communication. The Four Cs model is more consumer-oriented and fits
better in the movement from mass marketing to niche marketing. The product part of the Four
Ps model is replaced by consumer or consumer models, shifting the focus to satisfying the
consumer. Another C replacement for Product is Capability. By defining offerings as
individual capabilities that when combined and focused to a specific industry, creates a
custom solution rather than pigeon-holing a customer into a product. Pricing is replaced by
cost, reflecting the reality of the total cost of ownership. Many factors affect cost, including
but not limited to the customers cost to change or implement the new product or service and
the customers cost for not selecting a competitors capability. Placement is replaced by the
convenience function. With the rise of internet and hybrid models of purchasing, place is no
longer relevant. Convenience takes into account the ease to buy a product, find a product,
find information about a product, and several other considerations. Finally, the promotions
feature is replaced by communication. Communications represents a broader focus than
simply promotions. Communications can include advertising, public relations, personal
selling, viral advertising, and any form of communication between the firm and the
consumer.
Four Cs in 7Cs Compass Model
A formal approach to this customer-focused marketing mix is known as 4C(Commodity,
Cost, Channel, Communication) in 7Cs COMPASS MODEL. This system is basically the
four Ps renamed and reworded to provide a customer focus. The four Cs Model provides a
demand/customer centric version alternative to the well-known four Ps supply side model
(product, price, place, promotion) of marketing management.
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•
Product→ Commodity
•
Price → Cost
•
Place → Channel
•
Promotion→ Communication
The four elements of the “7Cs COMPASS MODEL” are:
1. Commodity: the product for the consumers or citizens.
2. Cost: total marketing cost.
3. Channel: marketing channels.
4. Communication: not promotion, marketing communication.
7Cs Compass Model is in a customer oriented marketing mix.
Framework of 7Cs Compass Model
•
•
•
•
7Cs: (C1) Corporation (and Competitor), (C2) Commodity, (C3) Cost, (C4)
Communication, (C5) Channel, (C6) Consumer, (C7) Circumstances
Compass:
to Consumer: N = Needs, W = Wants, S = Security, E = Education
Circumstances: N = National and International, W=Weather, S = Social and Cultural,
E = Economic
(C1) Corporation (and competitor) is the core of 4Cs.
1)It is necessary to place more emphases on the organization of the companies;
2) It is necessary to execute marketing plans in conjunction with the company's objectives;
3) It is necessary to tackle the internal communication related problems like corporate
communication or corporate identity system(CIS), etc.
4) In the market, there are the companies of the same business, the competitors.
But at the time of economic downturn, companies or corporations produce the convenient
(C2) “commodities” for the consumers or citizens with the consideration of the total
marketing (C3) “cost”, and first of all gain their consents through the sufficient.
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(C4) “communications” and then their confidences by selecting the effective.
(C4) “channels” in conjunction with the uncontrollable external circumstances. This is the
way to survive in the period of low growth economics.
(C6) Consumer Consumers are those people encircling the companies. Instead of just the
customers of 4P marketing model, they are the ordinary citizens nurtured by the motto of the
consumerism. However of course they are also including the customers and the potential
customers.
•
four directions marked on the compass: the factors related to the consumer can be
explained by the first characters of four directions marked on the Compass.(N,W,S,E)
•
N = Needs: companies can offer more alternatives to meet the various needs of the
consumers.
•
W = Wants: the substantiated needs to expect the accordingly commodities.
•
S = Security: the safety of the commodities, the safety of the production process and
the adequate after-sell warranty.
•
E = Education: consumer right to know the information of the commodities.
(C7)Circumstances Besides the customers, there are also various uncontrollable external
environmental factors encircling the companies.
The same as the factors of the consumers, they can also be explained the first character of the
four directions marked on the compass. (N,W,S,E).
•
N= National and International Circumstances
The National Circumstances are related to politic and law. International environment now
also becomes important.
•
W=Weather
For most of the natural disasters, the companies can do little but try to predict when they will
happen and adjust the marketing plans.
•
S=Social and Cultural Circumstances
When exploring a new oversea market, it is essential to study the social circumstances of that
nation.
• E=Economic Circumstances: economics climate is changing due to many other
uncontrollable factors like energy, resources, international income and expense, financial
circumstances and economic growth etc.
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Product-Mix Management and Responsibilities
•
•
•
•
It is extremely important for any organization to have a well-managed product mix.
Most organizations break down managing the product mix, product line, and actual
product into three different levels.
Product-mix decisions are concerned with the combination of product lines offered by
the company. Management of the companies' product mix is the responsibility of top
management. Some basic product-mix decisions include: (1) reviewing the mix of
existing product lines; (2) adding new lines to and deleting existing lines from the
product mix; (3) determining the relative emphasis on new versus existing product
lines in the mix; (4) determining the appropriate emphasis on internal development
versus external acquisition in the product mix; (5) gauging the effects of adding or
deleting a product line in relationship to other lines in the product mix; and (6)
forecasting the effects of future external change on the company's product mix.
Product-line decisions are concerned with the combination of individual products
offered within a given line. The product-line manager supervises several product
managers who are responsible for individual products in the line. Decisions about a
product line are usually incorporated into a marketing plan at the divisional level.
Such a plan specifies changes in the product lines and allocations to products in each
line. Generally, product-line managers have the following responsibilities: (1)
considering expansion of a given product line; (2) considering candidates for deletion
from the product line; (3) evaluating the effects of product additions and deletions on
the profitability of other items in the line; and (4) allocating resources to individual
products in the line on the basis of marketing strategies recommended by product
managers.
Decisions at the first level of product management involve the marketing mix for an
individual brand/product. These decisions are the responsibility of a brand manager
(sometimes called a product manager). Decisions regarding the marketing mix for a
brand are represented in the product's marketing plan. The plan for a new brand would
specify price level, advertising expenditures for the coming year, coupons, trade
discounts, distribution facilities, and a five-year statement of projected sales and
earnings. The plan for an existing product would focus on any changes in the
marketing strategy. Some of these changes might include the product's target market,
advertising and promotional expenditures, product characteristics, price level, and
recommended distribution strategy.
Product-Mix Analysis
Since top management is ultimately responsible for the product mix and the resulting profits
or losses, they often analyze the company product mix. The first assessment involves the area
of opportunity in a particular industry or market. Opportunity is generally defined in terms of
current industry growth or potential attractiveness as an investment. The second criterion is
the company's ability to exploit opportunity, which is based on its current or potential
position in the industry. The company's position can be measured in terms of market share if
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it is currently in the market, or in terms of its resources if it is considering entering the
market.
These two factors—opportunity and the company's ability to exploit it—provide four
different options for a company to follow.
1.
High opportunity and ability to exploit it result in the firm's introducing new
products or expanding markets for existing products to ensure future growth.
2.
Low opportunity but a strong current market position will generally result in the
company's attempting to maintain its position to ensure current profitability.
3.
High opportunity but a lack of ability to exploit it results in either (a) attempting
to acquire the necessary resources or (b) deciding not to further pursue
opportunity in these markets.
4.
Low opportunity and a weak market position will result in either (a) avoiding
these markets or (b) divesting existing products in them.
These options provide a basis for the firm to evaluate new and existing products in an attempt
to achieve balance between current and future growth. This analysis may cause the product
mix to change, depending on what management decides.
The most widely used approach to product portfolio analysis is the model developed by the
Boston Consulting Group (BCG). The BCG analysis emphasizes two main criteria in
evaluating the firm's product mix: the market growth rate and the product's relative market
share. BCG uses these two criteria because they are closely related to profitability, which is
why top management often uses the BCG analysis. Proper analysis and conclusions may lead
to significant changes to the company's product mix, product line, and product offerings.
The market growth rate represents the products' category position in the product life cycle.
Products in the introductory and growth phases require more investment because of research
and development and initial marketing costs for advertising, selling, and distribution. This
category is also regarded as a high-growth area (e.g., the Internet). Relative market share
represents the company's competitive strength (or estimated strength for a new entry). Market
share is compared to that of the leading competitor. Once the analysis has been done using
the market growth rate and relative market share, products are placed into one of four
categories.
•
•
Stars: Products with high growth and market share are know as stars. Because these
products have high potential for profitability, they should be given top priority in
financing, advertising, product positioning, and distribution. As a result, they need
significant amounts of cash to finance rapid growth and frequently show an initial
negative cash flow.
Cash cows: Products with a high relative market share but in a low growth position
are cash cows. These are profitable products that generate more cash than is required
to produce and market them. Excess cash should be used to finance high-opportunity
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•
•
areas (stars or problem children). Strategies for cash cows should be designed to
sustain current market share rather than to expand it. An expansion strategy would
require additional investment, thus decreasing the existing positive cash flow.
Problem children: These products have low relative market share but are in a highgrowth situation. They are called "problem children" because their eventual direction
is not yet clear. The firm should invest heavily in those that sales forecasts indicate
might have a reasonable chance to become stars. Otherwise divestment is the best
course, since problem children may become dogs and thereby candidates for deletion.
Dogs: Products in the category are clearly candidates for deletion. Such products have
low market shares and unlike problem children, have no real prospect for growth.
Eliminating a dog is not always necessary, since there are strategies for dogs that
could make them profitable in the short term. These strategies involve "harvesting"
these products by eliminating marketing support and selling the product only to
intensely loyal consumers who will buy in the absence of advertising. However, over
the long term companies will seek to eliminate dogs.
As can be seen from the description of the four BCG alternatives, products are evaluated as
producers or users of cash. Products with a positive cash flow will finance high-opportunity
products that need cash. The emphasis on cash flow stems from management's belief that it is
better to finance new entries and to support existing products with internally produced funds
than to increase debt or equity in the company.
Based on this belief, companies will normally take money from cash cows and divert it to
stars and to some problem children. The hope is that the stars will turn into cash cows and the
problem children will turn into stars. The dogs will continue to receive lower funding and
eventually be dropped.
Conclusion
Managing the product mix for a company is very demanding and requires constant attention.
Top management must provide accurate and timely analysis (BCG) of their company's
product mix so the appropriate adjustments can be made to the product line and individual
products.
Product Promotion
Promotion involves disseminating information about a product, product line, brand, or
company. It is one of the four key aspects of the marketing mix. (The other three elements are
product marketing, pricing, and distribution).
Promotion is generally sub-divided into two parts
Above the line promotion: Promotion in the media (e.g. TV, radio, newspapers, Internet and
Mobile Phones) in which the advertiser pays an advertising agency to place the add. Below
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the line promotion: All other promotion. Much of this is intended to be subtle enough for the
consumer to be unaware that promotion is taking place. E.g., sponsorship, product placement,
endorsements, sales promotion, merchandising, direct mail, personal selling, public relations,
trade shows.
The specification of these four variables creates a promotional mix or promotional plan. A
promotional mix specifies how much attention to pay to each of the four subcategories, and
how much money to budget for each. A promotional plan can have a wide range of
objectives, including: sales increases, new product acceptance, creation of brand equity,
positioning, competitive retaliations, or creation of a corporate image.
The term "promotion" is usually an "in" expression used internally by the marketing
company, but not normally to the public or the market - phrases like "special offer" are more
common. An example of a fully integrated, long-term, large-scale promotion are My Coke
Rewards and Pepsi Stuff.
Product
The noun product is defined as a "thing produced by labour or effort" or the "result of an act
or a process", and stems from the verb produce from the Latin produce(re), (to) lead or bring
forth. Since 1575, the word "product" has referred to anything produced. Since 1695, the
word has referred to "thing or things produced". The economic or commercial meaning of
product was first used by political economist Adam Smith.
In marketing, a product is anything that can be offered to a market that might satisfy a want
or need. In retailing, products are called merchandise. In manufacturing, products are
purchased as raw materials and sold as finished goods. Commodities are usually raw
materials such as metals and agricultural products, but a commodity can also be anything
widely available in the open market. In project management, products are the formal
definition of the project deliverables that make up or contribute to delivering the objectives of
the project.
In general usage, product may refer to a single item or unit, a group of equivalent products, a
grouping of goods or services, or an industrial classification for the goods or services.
Equivalent or interchangeable product
The specific meaning of generic product names varies over time and location. It can be
defined as anything that can offer to a market for attention, acquisition. Some products such
as bread, milk, and salt have been bartered or sold for centuries, but the meaning of "bread"
or "milk" as a product varies. The technologies were not available for pasteurization and
homogenization of milk until the 20th century, and these food processing technologies are not
used worldwide. Bread varies by type of grain, specific recipe, and size of loaf. In 1924,
Morton Salt introduced iodized table salt, a product previously unavailable. Since 1961, pork
bellies have traded on the Chicago Mercantile Exchange, but due to selective breeding and
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changes in hog feed, today's pork belly is not exactly equivalent to a 1960s pork belly.
Certain products may be considered equivalent or interchangeable for the purposes of trade,
record-keeping, and reporting, despite gradual changes in the product or variations among
geographical locations.
The distinction between a new product and a minor modification to an existing product is not
always clear. Certain products have a product life cycle in which the supply and demand for
the product increases then decreases over time. The demand for certain food products such as
bread will tend to increase with population, but the supply and demand for a specific brand of
bread may decline over time. In the United States, a patent for a product is recognition that
the product is new in a legal sense. "Utility patents may be granted to anyone who invents or
discovers any new and useful process, machine, article of manufacture, or composition of
matter, or any new and useful improvement thereof; design patents may be granted to anyone
who invents a new, original, and ornamental design for an article of manufacture; and, plant
patents may be granted to anyone who invents or discovers and asexually reproduces any
distinct and new variety of plant." In business an equivalent, interchangeable or fungible
product is defined by a company and its customers. A company's inventory is a set of
physical products, or goods, that are usually recorded as counts of equivalent unique
products. The equivalent unique products may be assigned a product code or item code. If the
company carries two brands, it may assign separate item codes to the brands, or it may use a
single item code for both brands.
Product numbers in many businesses clearly identify the product by linking to a full
description.
Product identification codes such as Universal Product Code, Global Trade Item Number and
International Standard Book Number allow multiple businesses to use a single product
identification code to indicate one unit of a mass-produced product.
Lots or batches Lot numbers, batch numbers or control numbers are used in manufacturing to
sub-divide equivalent product by its manufacturing batch or run. The publishing page of a
book lists the printing run that produced that unique book. Industries such as
pharmaceuticals, food processing, and petroleum use some form of control number to subdivide equivalent product for product testing or expiration dating. See also shelf life. Two
separate lots may vary slightly, but they are not assigned separate product identification codes
because the variation does not give them significantly different features or uses as products.
Barcode labels on vaccines in the UK contain a product code but do not currently contain the
batch number or expiry date. Inventory records of controlled substances in the United States
must include a "batch number or other appropriate identifying number".
Product groups
Tangible and Intangible Products
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Products can be classified as tangible or intangible. A tangible product is any physical
product like a computer, automobile, etc. An intangible product is a non-physical product like
an insurance policy.
Categories
In its online product catalog, retailer Sears, Roebuck and Company divides its products into
departments, then presents products to shoppers according to (1) function or (2) brand. Each
product has a Sears item number and a manufacturer's model number. The departments and
product groupings that Sears uses are intended to help customers browse products by function
or brand within a traditional department store structure.
Sizes and colors
A catalog number, especially for clothing, may group sizes and colors. When ordering the
product, the customer specifies size, color and other variables.[14] example: you walk into a
store and see a group of shoes and in that group are sections of different colors of that type of
shoe and sizes for that shoe to satisfy your need.
Product line
A product line is "a group of products that are closely related, either because they function in
a similar manner, are sold to the same customer groups, are marketed through the same types
of outlets, or fall within given price ranges."
Many businesses offer a range of product lines which may be unique to a single organization
or may be common across the business's industry. In 2002 the US Census compiled revenue
figures for the finance and insurance industry by various product lines such as "accident,
health and medical insurance premiums" and "income from secured consumer loans" Within
the insurance industry, product lines are indicated by the type of risk coverage, such as auto
insurance, commercial insurance and life insurance.
National and international product classifications
Various classification systems for products have been developed for economic statistical
purposes. The North American Industry Classification System (NAICS) classifies companies
by their primary product [this is not even close to true, NAICS is a production-oriented
classification system, not a product-oriented classification system the NAFTA signatories are
working on a system that classifies products called NAPCS as a companion to NAICS
http://www.census.gov/eos/www/napcs/napcs.htm.]. The European Union uses a
"Classification of Products by Activity" among other product classifications. The United
Nations also classifies products for international economic activity reporting.
The Aspinwall Classification System[citation needed] (Leo Aspinwall, 1958) classifies and
rates products based on five variables:
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1. Replacement rate (How frequently is the product repurchased?)
2. Gross margin (How much profit is obtained from each product?)
3. Buyer goal adjustment (How flexible are the buyers' purchasing habits with regard to this
product?)
4. Duration of product satisfaction (How long will the product produce benefits for the user?)
5. Duration of buyer search behavior (How long will consumers shop for the product?)
The National Institute of Governmental Purchasing (NIGP) developed a commodity and
services classification system for use by state and local governments, the NIGP Code. The
NIGP Code is used by 33 states within the United States as well as thousands of cities,
counties and political subdivisions. The NIGP Code is a hierarchical schema consisting of a 3
digit class, 5 digit class-item, 7 digit class-item-group and an 11 digit class-item-group-detail.
Applications of the NIGP Code include vendor registration, inventory item identification,
contract item management, spend analysis and strategic sourcing.
Product lining is the marketing strategy of offering for sale several related products. Unlike
product bundling, where several products are combined into one, lining involves offering
several related products individually. A line can comprise related products of various sizes,
types, colors, qualities, or prices. Line depth refers to the number of product variants in a line.
Line consistency refers to how closely related the products that make up the line are. Line
vulnerability refers to the percentage of sales or profits that are derived from only a few
products in the line.
The number of different product lines sold by a company is referred to as width of product
mix. The total number of products sold in all lines is referred to as length of product mix. If a
line of products is sold with the same brand name, this is referred to as family branding.
When you add a new product to a line, it is referred to as a line extension. When you add a
line extension that is of better quality than the other products in the line, this is referred to as
trading up or brand leveraging. When you add a line extension that is of lower quality than
the other products of the line, this is referred to as trading down. When you trade down, you
will likely reduce your brand equity. You are gaining short-term sales at the expense of long
term sales.
Image anchors are highly promoted products within a line that define the image of the whole
line. Image anchors are usually from the higher end of the line's range. When you add a new
product within the current range of an incomplete line, this is referred to as line filling.
Price lining is the use of a limited number of prices for all your product offerings. This is a
tradition started in the old five and dime stores in which everything cost either 5 or 10 cents.
Its underlying rationale is that these amounts are seen as suitable price points for a whole
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range of products by prospective customers. It has the advantage of ease of administering, but
the disadvantage of inflexibility, particularly in times of inflation or unstable prices.
There are many important decisions about product and service development and marketing.
In the process of product development and marketing we should focus on strategic decisions
about product attributes, product branding, product packaging, product labeling and product
support services. But product strategy also calls for building a product line.
Brand
A brand is a name or trademark connected with a product or producer. Brands have become
increasingly important components of culture and the economy, now being described as
"cultural accessories and personal philosophies".
Concepts
Some people distinguish the psychological aspect of a brand from the experiential aspect. The
experiential aspect consists of the sum of all points of contact with the brand and is known as
the brand experience. The psychological aspect, sometimes referred to as the brand image, is
a symbolic construct created within the minds of people and consists of all the information
and expectations associated with a product or service.
People engaged in branding seek to develop or align the expectations behind the brand
experience, creating the impression that a brand associated with a product or service has
certain qualities or characteristics that make it special or unique. A brand is therefore one of
the most valuable elements in an advertising theme, as it demonstrates what the brand owner
is able to offer in the marketplace. The art of creating and maintaining a brand is called brand
management. Orientation of the whole organization towards its brand is called integrated
marketing.
Careful brand management, supported by a cleverly crafted advertising campaign, can be
highly successful in convincing consumers to pay remarkably high prices for products which
are inherently extremely cheap to make. This concept, known as creating value, essentially
consists of manipulating the projected image of the product so that the consumer sees the
product as being worth the amount that the advertiser wants him/her to see, rather than a
more logical valuation that comprises an aggregate of the cost of raw materials, plus the cost
of manufacture, plus the cost of distribution. Modern value-creation branding-and-advertising
campaigns are highly successful at inducing consumers to pay, for example, 50 dollars for a
T-shirt that cost a mere 50 cents to make, or 5 dollars for a box of breakfast cereal that
contains a few cents' worth of wheat.
Brands should be seen as more than the difference between the actual cost of a product and
its selling price - they represent the sum of all valuable qualities of a product to the consumer.
There are many intangibles involved in business, intangibles left wholly from the income
statement and balance sheet which determine how a business is perceived. The learned skill
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of a knowledge worker, the type of metal working, the type of stitch: all may be without an
'accounting cost' but for those who truly know the product, for it is these people the company
should wish to find and keep, the difference is incomparable. By failing to recognize these
assets that a business, any business, can create and maintain will set an enterprise at a serious
disadvantage.
A brand which is widely known in the marketplace acquires brand recognition. When brand
recognition builds up to a point where a brand enjoys a critical mass of positive sentiment in
the marketplace, it is said to have achieved brand franchise. One goal in brand recognition is
the identification of a brand without the name of the company present. For example, Disney
has been successful at branding with their particular script font (originally created for Walt
Disney's "signature" logo), which it used in the logo for go.com.
Consumers may look on branding as an important value added aspect of products or services,
as it often serves to denote a certain attractive quality or characteristic (see also brand
promise). From the perspective of brand owners, branded products or services also command
higher prices. Where two products resemble each other, but one of the products has no
associated branding (such as a generic, store-branded product), people may often select the
more expensive branded product on the basis of the quality of the brand or the reputation of
the brand owner.
Brand name
The brand name is often used interchangeably within "brand", although it is more correctly
used to specifically denote written or spoken linguistic elements of any product. In this
context a "brand name" constitutes a type of trademark, if the brand name exclusively
identifies the brand owner as the commercial source of products or services. A brand owner
may seek to protect proprietary rights in relation to a brand name through trademark
registration. Advertising spokespersons have also become part of some brands, for example:
Mr. Whipple of Charmin toilet tissue and Tony the Tiger of Kellogg's.
Brand names will fall into one of three spectrums of use - Descriptive, Associative or
Freestanding.
Descriptive brand names assist in describing the distinguishable selling point(s) of the
product to the customer (eg Snap, Crackle and Pop or Bitter Lemon).
Associative brand names provide the customer with an associated word for what the product
promises to do or be (e.g. Walkman, Sensodyne or Natrel).
Finally, Freestanding brand names have no links or ties to either descriptions or associations
of use. (eg Mars Bar or Pantene).
The act of associating a product or service with a brand has become part of pop culture. Most
products have some kind of brand identity, from common table salt to designer jeans. A
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brandnomer is a brand name that has colloquially become a generic term for a product or
service, such as Band-Aid or Kleenex, which are often used to describe any kind of adhesive
bandage or any kind of facial tissue respectively.
Brand identity
A product identity, or brand image are typically the attributes one associates with a brand,
how the brand owner wants the consumer to perceive the brand - and by extension the
branded company, organization, product or service. The brand owner will seek to bridge the
gap between the brand image and the brand identity. Effective brand names build a
connection between the brand personality as it is perceived by the target audience and the
actual product/service. The brand name should be conceptually on target with the
product/service (what the company stands for). Furthermore, the brand name should be on
target with the brand demographic. Typically, sustainable brand names are easy to remember,
transcend trends and have positive connotations. Brand identity is fundamental to consumer
recognition and symbolizes the brand's differentiation from competitors.
Brand identity is what the owner wants to communicate to its potential consumers. However,
over time, a products brand identity may acquire (evolve), gaining new attributes from
consumer perspective but not necessarily from the marketing communications an owner
percolates to targeted consumers. Therefore, brand associations become handy to check the
consumer's perception of the brand.
Brand identity needs to focused on authentic qualities - real characteristics of the value and
brand promise being provided and sustained by organizational and/or production
characterstics. Managing the whole organization to this prurpose is called Integrated
Marketing.
Brand parity
Brand parity is the perception of the customers that all brands are equivalent.
4.4
International Distribution Channels
Distribution (or place) is one of the four elements of marketing mix. An organization or set of
organizations (go-betweens) involved in the process of making a product or service available
for use or consumption by a consumer or business user.
The other three parts of the marketing mix are product, pricing, and promotion.
The distribution channel
Chain of intermediaries, each passing the product down the chain to the next organization,
before it finally reaches the consumer or end-user. This process is known as the 'distribution
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chain' or the 'channel.' Each of the elements in these chains will have their own specific
needs, which the producer must take into account, along with those of the all-important enduser.
Channels
A number of alternate 'channels' of distribution may be available:
* Distributor, who sells to retailers
* Retailer (also called dealer or reseller), who sells to end customers
* Advertisement typically used for consumption goods
Distribution channels may not be restricted to physical products alone. They may be just as
important for moving a service from producer to consumer in certain sectors, since both
direct and indirect channels may be used. Hotels, for example, may sell their services
(typically rooms) directly or through travel agents, tour operators, airlines, tourist boards,
centralized reservation systems, etc.
There have also been some innovations in the distribution of services. For example, there has
been an increase in franchising and in rental services - the latter offering anything from
televisions through tools. There has also been some evidence of service integration, with
services linking together, particularly in the travel and tourism sectors. For example, links
now exist between airlines, hotels and car rental services. In addition, there has been a
significant increase in retail outlets for the service sector. Outlets such as estate agencies and
building society offices are crowding out traditional grocers from major shopping areas.
Channel members
Distribution channels can thus have a number of levels. Kotler defined the simplest level, that
of a direct contact with no intermediaries involved, as the 'zero-level' channel. The next level,
the 'one-level' channel, features just one intermediary; in consumer goods a retailer, for
industrial goods a distributor. In small markets (such as small countries) it is practical to
reach the whole market using just one- and zero-level channels.
In large markets (such as larger countries) a second level, a wholesaler for example, is now
mainly used to extend distribution to the large number of small, neighborhood retailers or
dealers.
In Japan the chain of distribution is often complex and further levels are used, even for the
simplest of consumer goods. In Bangladesh Telecom Operators are using different Chains of
Distribution, especially 'second level'.
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In IT and Telecom industry levels are named "tiers". A one tier channel means that vendors
IT product manufacturers (or software publishers) work directly with the dealers. A one tier /
two tier channel means that vendors work directly with dealers and with distributors who sell
to dealers. But the most important is the distributor or wholesaler.
The Internal Market
Many of the marketing principles and techniques which are applied to the external customers
of an organization can be just as effectively applied to each subsidiary's, or each departments,
'internal' customers.
In some parts of certain organizations this may in fact be formalized, as goods are transferred
between separate parts of the organization at a `transfer price'. To all intents and purposes,
with the possible exception of the pricing mechanism itself, this process can and should be
viewed as a normal buyer-seller relationship. The fact that this is a captive market, resulting
in a `monopoly price', should not discourage the participants from employing marketing
techniques. Less obvious, but just as practical, is the use of `marketing' by service and
administrative departments; to optimize their contribution to their `customers' (the rest of the
organization in general, and those parts of it which deal directly with them in particular). In
all of this, the lessons of the non-profit organizations, in dealing with their clients, offer a
very useful parallel. But in spite of this many, organizations prefer not to operate at a
'transfer' price because costs gradually increase as they undergo the distribution process.
Channel decisions
•
Channel strategy
•
Gravity
•
Push and Pull strategy
•
Product (or service) Cost Consumer location
Managerial concerns
The channel decision is very important. In theory at least, there is a form of trade-off: the cost
of using intermediaries to achieve wider distribution is supposedly lower. Indeed, most
consumer goods manufacturers could never justify the cost of selling direct to their
consumers, except by mail order. Many suppliers seem to assume that once their product has
been sold into the channel, into the beginning of the distribution chain, their job is finished.
Yet that distribution chain is merely assuming a part of the supplier's responsibility; and, if
they have any aspirations to be market-oriented, their job should really be extended to
managing all the processes involved in that chain, until the product or service arrives with the
end-user. This may involve a number of decisions on the part of the supplier:
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•
Channel membership
•
Channel motivation
•
Monitoring and managing channels
In addition to marketing considerations, channel design has important financial (such as
working capital) and risk impacts that need to be considered as part of management decision.
Channel membership
1.
2.
3.
Intensive distribution - Where the majority of resellers stock the 'product' (with
convenience products, for example, and particularly the brand leaders in consumer
goods markets) price competition may be evident.
Selective distribution - This is the normal pattern (in both consumer and industrial
markets) where 'suitable' resellers stock the product.
Exclusive distribution - Only specially selected resellers or authorized dealers
(typically only one per geographical area) are allowed to sell the 'product'.
Channel motivation
It is difficult enough to motivate direct employees to provide the necessary sales and service
support. Motivating the owners and employees of the independent organizations in a
distribution chain requires even greater effort. There are many devices for achieving such
motivation. Perhaps the most usual is `incentive': the supplier offers a better margin, to tempt
the owners in the channel to push the product rather than its competitors; or a competition is
offered to the distributors' sales personnel, so that they are tempted to push the product. Dent
defines this incentive as a Channel Value Proposition or business case, with which the
supplier sells the channel member on the commercial merits of doing business together. He
describes this as selling business models not products.
Monitoring and managing channels
In much the same way that the organization's own sales and distribution activities need to be
monitored and managed, so will those of the distribution chain. In practice, many
organizations use a mix of different channels; in particular, they may complement a direct
sales force, calling on the larger accounts, with agents, covering the smaller customers and
prospects.
In order to sustain the growth of the international marketplace and the integration of the
world’s economic activities it is vital to conduct efficient and cost-effective distribution. Ross
(1996). When a firm enters a market abroad, international distribution channel structure is
very important. Distribution channel structures are not only difficult to change but initial
wrong decisions may lead to poor results.
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All products whether they be consumer goods, industrial goods or services require a channel
of distribution. Most international firms would prefer to run a direct channel when using the
firm's own sales force, but instead they are forced to use intermediaries, i.e.
agents/distributors, due to low sales volume, high start-up costs and local knowledge.
Figure 2: Monitoring and managing channels
Types of consumer channels
1. Producer → Consumer
2. Producer → Retailer → Consumer
3. Producer → Wholesaler → Retailer → Consumer
4. Producer → Agent/Distributor → Retailer → Consumer
5. Producer → Agent/Distributor → Wholesaler → Retailer → Consumer
1. Producer → Consumer
Cutting out distributor profit margin may make this option attractive to producers. Direct
selling between producer and consumer has been a feature of the marketing of Avon
Cosmetics and Tupperware plastic containers and Amway. Direct marketing is of growing
importance in Europe and includes the use of for example direct mail, telephone selling and
direct response advertising.
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2. Producer → Retailer → Consumer
The growth in retailer size has meant that it becomes economic for producers to supply
retailers directly rather than through wholesalers. Consumers then have the convenience of
viewing and/or testing the product at the retail outlet.
3. Producer - wholesaler - retailer - consumer
For small retailers with limited order quantities, the use of wholesalers makes economic
sense. Wholesalers can buy in bulk from producers, and sell smaller quantities to numerous
retailers. In Europe long channels involving wholesalers are common in France and Italy. In
France, for example, small independent wholesalers dominate the distribution of vehicle
spare parts.
4. Producer - agent/distributor - retailer - consumer
This type of channel is most common when companies enter international markets, due to the
fact that it does not require as much investment in terms of time and money. (Jobber, 2001)
Exporting companies may delegate the task of selling the product to an agent/distributor. An
agent contacts wholesalers or retailers in the exporting company’s name and receives
commission on sales. For example, overseas sales of books are sometimes generated in this
way. A distributor is an independent company which purchases the products of the producer
and sells it in its own brand name or uses the exporter’s brand name. The distributor has the
entire responsibility of the rest of the distribution channel such as choice of intermediaries,
storage and marketing and an agent has various responsibilities depending on the agreement
with the producer. (Bradley, 1999) Some companies use multiple channels to distribute their
products. Grocery products, for example, use both producer to wholesaler to retailer (small
grocers), and producer to retailers (supermarkets). The choice of these various distribution
channels is affected by how much control the producer desire of the distribution. If utilizing a
distribution channel which is not direct, the company hands over some of the marketing
responsibilities, the sales and the storage of products to the foreign intermediary. Therefore, it
is vital to put much effort into the selection of the intermediaries.
Distribution Channel Function
Information
•
•
•
•
•
•
•
Promotion
Contact
Matching (including such things as manufacturing, grading, assembling, and
packaging)
Negotiation
Physical Distribution (transporting and storing)
Financing
Risk taking
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It's not a question of WHETHER we do these functions but of WHO does them; they must be
done in order for products to be sold.
How can an international distribution channel be described?
Based on results from our study we have seen that exporting companies that act in the
international market use two types of distribution channels. The first type of international
distribution channel is for the producer to use agents/distributors which in their turn use
retailers in order to reach the end consumer. The second type of international distribution
channel is also for the producer to use agents/distributors, but which in their turn use
wholesalers that use retailers in order to reach the end consumer.
We have found that exporting companies choose one agent/distributor in each country which
covers the entire country market. In addition to this we have found that an exporting company
uses two agents/distributors in its major market which is invested the most time and money
in. The two agents/distributors handle different target segments. From these findings, we can
more specifically conclude that our study found that:
•
Exporting companies use agents/distributors in order to reach the end consumer.
•
Agents/distributors used by exporting companies cover their entire country market.
•
The higher level of investment in a country market, the more agents/distributors are
utilized.
How can the selection process of an international distribution channel be described?
When selecting an international intermediary there is a four phase process to practice.
•
the first phase is drawing up the intermediary profile,
•
the second phase is locating prospective intermediaries,
•
the third phase is evaluating prospective intermediaries and
•
the fourth phase is to choose the intermediary.
Exporting companies apply all the four phases. When exporting companies draw up an
intermediary profile, the criteria Goals and Strategies and Willingness to cooperate with the
exporting company are considered as the most important. Goals and strategies of the
exporting company must correspond to the goals and strategies of the agent/distributor in
order to collaborate in the same direction. Willingness to cooperate with the exporting
company is a determinant criterion in order for a successful collaboration.
The following are the most important criteria - Financial strength and Lines handled.
Financial strength is important in order to get a general picture of the agent/distributor and
Lines handled is important in order to make sure that the agent/distributor only handles
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complementing products and not competitive. Furthermore exporting companies use an
additional criterion on the list which is “commitment” for the product” and is considered as
the single most important criterion. Many criteria are not considered when drawing up the
intermediary profile. They are Compatibility, Experience in products/with competitors, Aftersales service capability, Knowledge/use of promotion, Record of sales performance,
Communications and Cost of operations.
Exporting companies usually do not collect information from banks, trade publications,
government agencies or perform personal visits, in the second phase when locating
prospective intermediaries. Exporting companies do turn to trade organizations for
information regarding the intermediaries. Moreover, exporting companies use word-ofmouth, ask contacts and previous collaborators in order to locate prospective intermediaries.
Advertising in trade shows, press releases, to visit and participate actively in trade fairs in
order to locate prospective agents/distributors are used methods by exporting companies.
Furthermore, there are exporting companies that gets many spontaneous inquiries and does
not need to put much effort in phase two.
In phase three, when exporting companies evaluate prospective intermediaries, references
from banks and suppliers are used. Moreover, in order to find out the history of the
prospective intermediary, exporting companies use various sources to collect information.
During phase three, when establishing contact by letters or email, exporting companies use it
either frequently or rarely depending on what relation the exporting company tries to achieve.
Exporting companies compare intermediary prospects from one another and apply the criteria
list from phase one when evaluating prospective intermediaries. Exporting companies find
phase three as a natural process during the selection of- and collaboration with the
agent/distributor.
When it is time for phase four – choosing the intermediary – exporting companies always
perform personal meetings with the intermediaries that are still prospects after phase three.
Exporting companies would have normally met the prospective intermediaries in an earlier
phase than this.
From these findings, we can more specifically conclude, that our study found that:
•
•
•
•
When selecting an intermediary, “drawing up the intermediary profile” is the most
important phase
The most important criteria are “goals and strategies” and “willingness to cooperate” with
the exporting company when drawing up the intermediary profile
The higher level of spontaneous inquiries, less use is necessary of phase two - locating
prospective intermediaries
In addition to theory exporting companies apply the trade press in order to locate
prospective intermediaries.
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International market prices
International market prices for sorghum are largely determined by the supply and demand
situation in the United States, and export prices are based on the reference sorghum, US Milo
no. 2, yellow. Since sorghum is almost exclusively traded for feed, market quotations are
closely related to price movements for other feed-quality grains, mainly maize, wheat and
barley. The prices of feed grains are generally influenced by such factors as world
production, the size of carryover stocks and the number of grain-consuming animals. There
are no internationally recognized, regularly published prices for white (food) sorghum.
Export prices for white sorghum are usually quoted irregularly and only for geographically
restricted sub-regional markets, and bear little relation to sorghum (mainly feed sorghum)
prices quoted on the international market.
In 1986, sorghum was sold f.o.b. US Gulf at an average price of US$ 83 per ton. But during
the same period, the World Food Programme purchased sorghum at widely varying prices
from different suppliers - US$ 117 per ton in Sudan, US$ 261 in Burkina Faso and US$ 263
in Niger. (Source: WFP Occasional Papers no. 11. A study of triangular transactions and
local purchases in food aid Jul 1987).
Export prices were relatively low during the 1960s, when cereal stocks were high, but they
more than doubled during the world food crisis of 1972-74. Prices increased from US$ 52 per
ton in 1971/72 to US$ 123 in 1974/75. They climbed to another peak of US$ 141 per ton in
1980/81 but remained depressed during the second half of the 1980s and the early 1990s, in
line with the level of other coarse grains. They began to increase sharply only in mid 1995,
after world cereal output remained below global demand for three consecutive years, causing
cereal stocks to fall to their lowest level in 20 years.
Competition between different grains for animal feed depends on relative feed values and
prices. Although feed values of each grain vary for different types of animals, some rough,
general rules have been established. Total digestible nutrients in sorghum are 95 percent of
those in maize. Sorghum, therefore, becomes attractive as a feed only when its price declines
to below 95 percent of the maize price. Consequently, international sorghum prices move
very closely with those of maize, the world's most important feed grain, but are usually
slightly lower.
Price Determination
Under most circumstances, a farmer's primary consideration in his decision to hold or sell his
canola will be the price he will receive. In order to develop a marketing strategy, you need to
be aware of the factors which enter into price determination. While the price for oilseeds is
established internationally, there are domestic influences which also contribute to the final
price you receive for your canola. Price is a result of the interaction of supply and demand.
Basic economics says that, as long as there is no interference with market forces, demand in
excess of supply will drive prices up stimulating more production. Conversely, supply in
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excess of demand drives prices down, causing decreased production and the possibility of
increased demand. Where there is no market interference or artificial barriers, supply and
demand always try to seek a balance or equilibrium point. Supply and demand situations can
change from day to day, month to month and year to year. For example:
An exporter makes a sale which requires seed from the country; demand at the company's
country points increases.
There is more supply in September/October when the crop is harvested than in July.
As world population increases, demand for vegetable oil increases from year to year
One other fact to consider related to supply and demand is price elasticity. Price elasticity is
an indicator of what will happen to sales as prices move up or down. If we compare wheat to
canola seed, wheat is relatively price inelastic. As there is a limit to the amount of wheat
humans can or will consume, a decrease in price will not necessarily stimulate increased
demand. However, in the case of vegetable oil, because it is used as a source of food and as a
cooking medium, decreased prices will increase demand.
People become less conscious of conserving their frying and cooking oils, and consequently
use more. In a declining market then, producers are relatively better off with a price elastic
commodity than they would be with an inelastic one.
When considering the supply side of the picture it is important to keep in mind not just the
year's production but also carryover or carry-in stocks. These are stocks of canola from the
previous year's production which have not yet been used. Canadian carryover stocks would
consist of canola on hand at the end of the year either on farms or in commercial channels
which had not yet been crushed or exported. World carryover stocks consist of all
commercial and farm stocks held anywhere in the world. (The level of carryover stocks is a
measure of how tight or loose the supply/demand balance is expected to be.) For example, if
carryover stocks are high, buyers will bid less aggressively because they know there are
ample stocks; sellers will be more willing to sell (within limits), prices will decline.
While carryover stocks are a good indicator of price trends from year to year, they are not
that helpful over a longer period of time. This is because carryover stocks alone give no
indication of changing consumption patterns over time. A more effective indicator is the
stocks/use ratio. This is a measure of the canola carryover as a percent of the annual canola
usage. This ratio allows for changes in usage. For example, a carryover of 600,000 tonnes in
1977/78 would have been quite burdensome representing a stocks/use ratio of 36 percent. In
1986/87 that same tonnage would be considered toward the tight side and represents a
stocks/use ratio of 15 percent. Therefore, a useful way to measure supply/demand trends, and
gain an indication of future price, is to calculate the stocks/use ratio for the current year and
compare that to historical ratios.
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Now that we've established that the supply/demand balance is the foundation on which price
is based, we're almost ready to take a look at some of the international and domestic factors
that can affect price movement in both the short and long term. Before we do that we need to
discuss how you, as a canola grower, can follow price movement in order to determine the
timing of your canola sales. No doubt you are familiar with grain and oilseed market or price
reports which are broadcast daily or listed in farm publications weekly. You will be familiar
with three market prices: futures, cash and street. There is often confusion between the terms
cash and street price, and there sometimes is uncertainty as to how the future price is
established, and its relationship to the cash and street price.
Futures prices are determined through a bid system at a public commodity exchange. In its
most simplistic sense, the futures market allows buyers and sellers to come together to
publicly discover what one is willing to pay for a commodity and what the other is willing to
sell it at, at some time in the future. Prices rise if domestic and/or international indicators
suggest there will be a shortage or improved demand, and prices will fall if oversupply or
decreased demand is expected. The cash price is the price paid for immediate delivery at a
given location (spot oilseeds). Most cash prices are quoted for oilseeds at a terminal position
(e.g., Vancouver). In a perfect market cash and futures differ by the cost of carrying the
canola from the present to the future month.
However, because perfect markets are rare, cash prices could be at a discount or premium to
the futures price depending on the supply and demand at the current time at the terminal
location. In a perfect market situation the cash price will be equal to the futures price during
the delivery month. The street price is the price you receive locally at your elevator, crushing
plant, or from the grain dealer. The street and futures prices are related. The spread (or
difference) between them is referred to as the basis and it reflects the cost of marketing
canola. It includes such costs as elevation. freight, cleaning, storage and interest.
International Factors
The world oilseed market is very complex. Oil World, a German publication which is the
Bible of those in the edible oil trade, classes twelve commodities as major sources of edible
oils and fats in the world. Not only is edible oil obtained from plant sources, it can be
produced from marine and animal sources. Besides producing vegetable oil, oilseeds also
produce meal. Not only does each oilseed have its own unique oil and meal content, but it can
also have considerable quality differences. Oil has different fatty acid ratios. Meal has
different protein levels. For example canola has an oil content of approximately 41 percent
and meal content of 58 percent. Soybeans have an oil content of about 18 percent and a meal
content of 80 percent. The protein of canola meal ranges from 35 to 38 percent while soybean
meal protein is around 45 percent. All these factors play a role in the level of demand for a
particular oilseed at a particular time of the year. Price levels for world oilseeds are
determined by the world demand for their two by-products, oil and meal. Taking into account
quality differences, the various oils or meals must remain price competitive with each other.
The relative price of any one oilseed will depend to a certain degree on the availability of,
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and demand for, its oil or meal. However, if the price gets too far out of line, substitution will
occur and bring prices back into line.
Before we look at some of the factors which can be used to predict movements in price
levels, is worth noting that in the 1980's production and export subsidies significantly altered
supply patterns in the international marketplace and are one of the leading contributors to
depressed prices. Productions subsidies present producers with artificially high prices
unrelated to the realities of world supply and demand and have led to excess production. In
response to increasing stocks, export subsidies have developed in an attempt to artificially
stimulate demand. The subsidized exports take market share from traditional exporters. Those
exporters which are strong enough react with their own subsidies fueling a trade war. Those
countries with limited national treasuries are caught in the middle, facing increased and unfair
competition in the world marketplace.
Another factor entered the vegetable oil market in the 1980's which radically altered the price
structure for vegetable oils. Malaysian palm oil began to be marketed very aggressively.
Changes in production management allowed the Malaysians to put palm oil onto the world
market not only at a low price, but in increased volumes. In the early 1980's pollinating
insects were introduced to the palm plantations, which increased yields substantially. Prior to
this period, high volumes of palm oil entered the marketplace at irregular intervals,
depending on precipitation levels. With improved pollination, yield levels appear to have
been regulated and now move in a two year cyclical pattern. After a year of high yields, as a
result of increased pollination, the palm trees enter a year of semi-dormancy and reduced
yields. Every second year then, there is some opportunity for other vegetable oils to move
into the palm oil market share.
There is another consideration regarding palm. It is not a meal producing commodity. So not
only does it depress prices through increased volumes, but it can cause problems for oilseed
crushers who are crushing for meal, by making it more difficult for them to market their
"residual" oil. Generally speaking, canola prices follow soybean prices because of the
dominant position of soybeans in the world oilseed market. Soybeans account for about half
of the world oilseed production. However the price relationship between soybeans and canola
will depend on the relative values of oil and meal. In many years world oilseed crushers crush
to meet meal demand. Consequently, oilseeds with a high meal content, like soybeans, are
preferred in this situation and canola would trade at a discount. In years when there is a
contraction of world livestock numbers, meal demand decreases and high oil bearing seeds
like canola are preferred. As a result canola would trade at a premium to soybeans. So when
watching the markets you should take a look at the relative change in livestock numbers, as
well as any developments in animal feeds which would displace oilseed meal protein.
While the overall price level may be trending up or down for the crop year and the immediate
future, occurrences during the year can cause price rallies and declines independent of the
overall trend. Rallies will occur if there is an indication that anticipated production levels of
an oilseed crop will not be reached. Declines can occur when harvested crops enter the
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market or production appears to be more than anticipated. Prices react to news, founded or
unfounded.
As the U.S. soybean crop is the predominant contributor to world oilseed supplies, any news
about the crop will affect world soybean and canola prices. The U.S. soybean crop year is
from September to August. The United States Department of Agriculture (U.S.D.A.)
regularly releases crop, stocks and supply demand estimates. The markets will react to these
reports if the news is different than expected.
For example, if the trade, through market intelligence, estimates that farmers intend to seed
58 million acres, but the U.S.D.A. planting intentions report indicates farmers anticipate only
56 million acres, prices will rally for the period immediately after the report until other
factors, such as weather, start to affect buyers' outlook. Prices may hold or decline.
Early in the crop year, from September to about January, the market tends to concentrate on
the final size of the crop just being harvested and the demand prospects. As the crop year
advances, traders begin to be increasingly concerned about the size of the upcoming crop.
Early in the crop year the market is concerned about the size of the carryover stocks
following July 31. From January on, the market concentrates on both carryover stocks in
August of the same year and one year later.
Throughout the growing season weather is an important consideration in the movement of
prices. You may hear the term "weather" market. That means prices are reacting to changes in
weather. Early in the growing season if conditions are dry around seeding time, prices may
strengthen in anticipation of lower than expected production. If a generalized rain occurs,
prices fall. In addition to the American soybean situation, there is another factor which
impacts soybean prices and canola prices accordingly. That is the South American soybean
crop. South America produces about one third the amounts of beans produced by the U.S.
That crop is harvested in the February/March period, and is in effect a "second harvest".
Consequently the size and condition of the harvest will impact prices in the late winter.
Further, because of the need for foreign exchange, South American suppliers price their
beans to sell. They work towards having all their beans sold by September to avoid
competing with the U.S. harvest. In effect this leaves the U.S. as a residual supplier to the
world. While the South American crop is much smaller than the American, it is of concern to
traders. Any increases in production take market share from the U S impact prices during the
period of the crop's marketing, and add to world inventories by the amount of displaced U.S.
exports.
There are a number of other factors which contribute to movement in prices and price trends
which are more difficult to monitor for those who are not regular followers of world
economics. World economic conditions impact prices. The relative wellbeing of importing
nations impacts demand. Relative values of currencies could increase or decrease the demand
for a certain oilseed or its products and shift demand to substitutes. Alternatively, currency
movement could make other countries competitive in the traditional market of another
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country. For example, if the American dollar strengthens in comparison to the Japanese yen
and Canadian dollar, American soybeans become more expensive for the Japanese. The
Japanese tendency in such a situation is to increase canola purchases.
Domestic Factors
While the world marketplace sets the general price trend, and international conditions during
the growing season will cause temporary fluctuations, there are also factors specific to
Canada which will affect the price of canola on a day to day basis. As there is a domestic
crushing industry in Canada, and because canola is the dominant oil used in this country,
canola prices do not necessarily follow a fixed price ratio to soybeans. If Canadian canola
supplies are tight there will be a tendency for canola to trade at a premium to soybeans and
soybean products.
Localized situations will also affect the price you receive for your canola. For example, you
may find that one elevator company is offering a lower or higher price relative to the others.
If the price is higher, the company is trying to attract your canola because it has sales for it. It
can afford to increase its price (by narrowing the basis) because it has a sale arranged and
consequently has a lower carrying cost. If a company has ample supplies of canola in store
and anticipates it will have to carry that canola for a period of time before it can sell it, it will
consider the number of months it may have to carry the canola, calculate the cost, and widen
its basis accordingly.
If supplies are tight, basis levels tend to be narrow as companies compete to purchase canola
to fulfill their market commitments. Ample supplies widen basis. This can occur, in
particular, at harvest time when there is substantial canola available. As commercial channels
fill, the basis may widen to discourage further deliveries until the product can be exported or
processed.
Basis also tends to narrow in periods of low prices because farmers become reluctant sellers.
They become willing to carry their canola in expectation of improved prices. In order to
attract canola supplies, companies with sales commitments offer the farmer more by
narrowing the basis. As well, the cost of carrying company-held canola is less as prices
decline, so this will affect basis.
In the international market there are two kinds of industries they are small scale industries
and large scale industries. In the large scale industries there are Advertising, marketing,
promotions, public relations, and sales managers coordinate their companies’ market
research, marketing strategy, sales, advertising, promotion, pricing, product development, and
public relations activities. In small scale industries, the owner or chief executive officer might
assume all advertising, promotions, marketing, sales, and public relations responsibilities. In
large firms, which may offer numerous products and services nationally or even worldwide,
an executive vice president directs overall advertising, marketing, promotions, sales, and
public relations policies.
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Advertising managers
Advertising managers oversee advertising and promotion staffs, which usually are small,
except in the largest firms. In a small firm, managers may serve as liaisons between the firm
and the advertising or promotion agency to which many advertising or promotional functions
are contracted out. In larger firms, advertising managers oversee in-house account, creative,
and media services departments. The account executive manages the account services
department, assesses the need for advertising and, in advertising agencies, and maintains the
accounts of clients. The creative services department develops the subject matter and
presentation of advertising. The creative director oversees the copy chief, art director, and
associated staff. The media director oversees planning groups that select the communication
media—for example, radio, television, newspapers, magazines, the Internet, or outdoor
signs—to disseminate the advertising.
Marketing managers
Marketing managers develop the firm’s marketing strategy in detail. With the help of
subordinates, including product development managers and market research managers, they
estimate the demand for products and services offered by the firm and its competitors. In
addition, they identify potential markets—for example, business firms, wholesalers, retailers,
government, or the general public. Marketing managers develop pricing strategy to help firms
maximize profits and market share while ensuring that the firm’s customers are satisfied. In
collaboration with sales, product development, and other managers, they monitor trends that
indicate the need for new products and services, and they oversee product development.
Marketing managers work with advertising and promotion managers to promote the firm’s
products and services and to attract potential users.
Promotions managers
Promotions managers supervise staffs of promotions specialists. These managers direct
promotions programs that combine advertising with purchase incentives to increase sales. In
an effort to establish closer contact with purchasers—dealers, distributors, or consumers—
promotions programs may use direct mail, telemarketing, television or radio advertising,
catalogs, exhibits, inserts in newspapers, Internet advertisements or Web sites, in-store
displays or product endorsements, and special events. Purchasing incentives may include
discounts, samples, gifts, rebates, coupons, sweepstakes, and contests.
Public relations managers
Public relations managers supervise public relations specialists. (See the Handbook statement
on public relations specialists.) These managers direct publicity programs to a targeted
audience. They often specialize in a specific area, such as crisis management, or in a specific
industry, such as health care. They use every available communication medium to maintain
the support of the specific group upon whom their organization’s success depends, such as
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consumers, stockholders, or the general public. For example, public relations managers may
clarify or justify the firm’s point of view on health or environmental issues to community or
special-interest groups.
Public relations managers also evaluate advertising and promotions programs for
compatibility with public relations efforts and serve as the eyes and ears of top management.
They observe social, economic, and political trends that might ultimately affect the firm, and
they make recommendations to enhance the firm’s image on the basis of those trends.
Public relations managers may confer with labor relations managers to produce internal
company communications—such as newsletters about employee-management relations—and
with financial managers to produce company reports. They assist company executives in
drafting speeches, arranging interviews, and maintaining other forms of public contact;
oversee company archives; and respond to requests for information. In addition, some of
these managers handle special events, such as the sponsorship of races, parties introducing
new products, or other activities that the firm supports in order to gain public attention
through the press without advertising directly.
Sales managers
Sales managers direct the firm’s sales program. They assign sales territories, set goals, and
establish training programs for the sales representatives. (See the Handbook statement on
sales representatives, wholesale and manufacturing).
Sales managers advise the sales representatives on ways to improve their sales performance.
In large, multi-product firms, they oversee regional and local sales managers and their staffs.
Sales managers maintain contact with dealers and distributors. They analyze sales statistics
gathered by their staffs to determine sales potential and inventory requirements and to
monitor customers’ preferences. Such information is vital in the development of products and
the maximization of profits.
Advertising, marketing, promotions, public relations, and sales managers work in offices
close to those of top managers. Working under pressure is unavoidable when schedules
change and problems arise, but deadlines and goals must still be met.
Substantial travel may be involved. For example, attendance at meetings sponsored by
associations or industries often is mandatory. Sales managers travel to national, regional, and
local offices and to the offices of various dealers and distributors. Advertising and
promotions managers may travel to meet with clients or representatives of communications
media. At times, public relations managers travel to meet with special-interest groups or
government officials. Job transfers between headquarters and regional offices are common,
particularly among sales managers.
Long hours, including evenings and weekends are common. In 2006, about two-thirds of
advertising, marketing, and public relations managers worked more than 40 hours a week.
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Publicity and promotion are rarely at the forefront of people's minds when planning an
information gateway, yet they are often essential ingredients for a gateway's success.
Good publicity can help enormously to bring an information gateway to the attention of the
people that really matter, i.e. the gateway's target users.
An effective publicity and promotional campaign takes time and effort to plan and deliver; it
can also cost money. This chapter attempts to highlight some of the issues that should be
considered when planning publicity and promotion activities.
Advertising is the promotion of a product or service and is extremely pervasive in
contemporary society. To maximize sales, companies will pay a premium for wide exposure
through the mass media. Advertising space is common, but not restricted to these realms;
billboards, public transportation, movies (product placement), schools, clothing, even
bathroom stalls carry ads and the industry is constantly finding new ways to advertise.
Advertising and promotion
Here are some guidelines on planning and managing advertising and promotion activities for
small businesses. The principles are obviously transferable to very large businesses, and it's
common for very large organizations to forget these basics, which is why I make no apology
for this information to 'STBO' (state the bleeding obvious).
Available mix of methods
Advertising is a complex business and an ever-changing science. New ideas and media uses
are being devised all the time, and as the advertising industry switches emphasis from media
to media, and as new technologies and lifestyle trends develop, so new advertising and
promotional methods need assessing and comparing with traditional available methods as to
which is more or less cost-effective for your given purposes. For example through the 1980's
and 1990's there was a huge trend towards direct mail (junk mail), which seems to show no
signs of abating - many very large consumer brands switched significant advertising spending
into direct mail, often switching away from TV. TV on the other hand is increasingly
attractive to small local businesses. Loyalty schemes demonstrated significant success rates
through the 1990's through to present times. Internet advertising is arguably now more
popular than radio advertising - the importance of websites and internet listings are very
significant now for small local businesses just as much as larger corporations. 'Viral
marketing' (exploiting electronic communications and the 'word of mouth' instinct) is an
example of a new method of advertising that simply never existed until about the mid-1990's.
Advertising methods change with lifestyle and technology developments - learn what's
available to you - learn what your competitors are doing. Read about advertising methods and
developments and trends. Historically (1980's-90's) advertising agencies were commonly
'multi-services' agencies, and split their operations to handle the creative, production and
media-buying processes. Nowadays however, multi-services agencies are far less common 115
the range of advertising methods is so vast that advertising agencies are now most commonly
specialized in one or a small number of advertising services (types of advertising), because
there's so much to consider and to use. Whether you work with an advertising agency or not,
learn about the methods that are available to you - keep up with developments so you can
make informed decisions about where to put your advertising emphasis, and what 'mix' of
methods to use.
Advertise to build awareness and to generate response
Within the advertising purpose you should define whether you seek to create awareness or to
generate a direct response. Effective marketing generally demands that each is employed, but
on a limited budget you may be restricted to concentrating on one or the other, so think
carefully about what will help most. Different media and methods are better suited to one or
the other. Direct Mail is very good at generating a direct response, as are magazine and
newspaper adverts, and inserts. Posters TV radio and press editorial are all much better at
creating awareness and building credibility.
Use language that your customers understand
In all of your advertising material take care to see things and hear things form your
customers' viewpoint. As a knowledgeable supplier there is always a tendency to write copy
and present information from a technical and 'product/service' standpoint. Remember that
your customers are people without good technical or detailed understanding of your products
and services. You need to help them understand things in terms that really mean something to
the reader - as it relates to their needs and priorities and challenges. Focus on what your
propositions do for them, not what your propositions are in technical detail. You should spell
things out, using clear simple language. Do not fall into the trap of thinking that complicated
language will help build an image of professionalism and intelligence - people will just turn
off. The mark of truly effective advertising and marketing is the ability to convey complex
issues to the audience in a manner that is interesting, relevant, meaningful, and easy to digest
very quickly.
Thomas Jefferson suggested that "The most valuable of all talents is that of never using two
words when one will do" and this is a good maxim for writing good advertising material.
If you or the 'copy-writer' at your advertising agency cannot achieve this in your advertising
and marketing communications then find someone who can, or you will be wasting a lot of
your advertising effort and investment.
Having decided through the processes described above to focus your message on a few key
strengths of your business (your 'service offer' or 'proposition') you must now express these in
terms of benefits to your customers. What does it all mean to them? Give them something to
relate to, so that you explain more than simply what you do or provide - explain what your
proposition means to your customers. How will it make their business more profitable, more
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streamlined, more ethical and sustainable, more socially responsible; how your proposition
will improve the quality of their service to their own customers; how it will make their
employees lives' easier, better, less stressful - whatever you believe to be the strongest most
relevant and meaningful customer outcomes.
The following are useful tips for trade show booth promotion
1. Not every tradeshow is appropriate for promoting a particular product or service. You
should research the trade show to make sure it will draw your targeted customers. You should
also determine the costs of attending a trade show versus how much money you will likely
make. If your costs exceed your estimated earnings, you may want to consider another trade
show. You should also check to see who else is displaying booths to make sure they promote
quality products and services.
2. Making sure your booth is well advertised and promoted prior to the trade show is a crucial
element of success. Send out a press release to newspapers, television, and radio. You should
also email or mail advertising fliers to those on your contact list. Make sure you advertise the
event on your website. When you are working at your booth, make sure you are kind,
courteous, and can answer all of your customer's questions. You want to be able to effectively
give them information in a way that will stimulate their interest. You should have a couple of
staff working the booth so consumers are not stuck waiting in line where they can lose
interest and walk away.
3. Promotional activities are essential to having a successful trade show booth. People love
freebies and getting special gifts. Some promotional activities that will encourage consumers
to stop at your booth include: holding a raffle, giving away flyers and coupons, giving out
free inexpensive gifts such as pens, notepads, calendars, mints, deck of cards...etc. Games of
chance are a very popular activity. Make sure any gift or freebie has your business name,
address, website address, logo, and contact information on it.
4. Your booth's appearance is important to encouraging customers to stop. Make sure you
have bright decorations, large lettering, a central vision or branding message, and that items
on display are neat, organized, and accessible. You can also have posters or banners with
professional graphics and images.
5. The purpose of the trade show is make new business contacts that can help improve your
sales. After the trade show, it is essential to follow up with any new contacts you may have
made. This can be achieved in the form of a follow up letter or phone call.
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Advertisement
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As a small business owner are you looking at promotional strategies that could, while
giving you a steady stream of prospects can also save costs?
Do you know that thousands of website owners use few simple techniques to generate
targeted visitors to their websites without spending a penny on advertising? Yes. It is
the web’s most well kept marketing secret.
These are the strategies used by fortune 500 companies as well as some of the most
successful internet marketing wizards. The principle behind this incredible internet
marketing strategy is first GIVE and then GET. When used effectively, the results
could be mind boggling.
How Does This Strategy Work?
Imagine for a moment that you are selling insurance. It is just an illustration. It could
be a healthcare product, credit cards, housing or innumerable other loans or anything
under the bright blue skies. The moment you talk of insurance to any prospect who is
already hunted (pardon my term hunted. that is what a prospect feels about sales
approaches) day in and day out by insurance sales persons, immediately erects a
barrier and comes up with innumerable excuses for not wanting insurance.
Now there is another way. You offer people valuable information about choosing the
right insurance in the form of a free report, an article, or a book. Would people take
it? They definitely would. Because they are under no obligation or pressure to buy
anything in the first place. They are also getting a benefit which is valuable
information about choosing the right kind insurance.
Now this free information product that you offer has subtle messages or links to your
website with your address and phone no's as the sponsor of the book. The person
reading the book has already started to build a good image about you because you
have offered him valuable information which is going to benefit him. He is obliged to
you for the free service that you have rendered him. So he is more likely to call you if
he needs your product than any other competing product.
Let's assume for a moment he does not require insurance. But just because he
appreciates the valuable information contained in your info product he forwards it to
five more of his friends or relatives. Your information with your ads has now been
exposed to 6 persons whereas you gave it to only one with no involvement of time,
money, or effort. These five people again find the information valuable and each
person shares it with 5 more of their friends. Now you have reached 31 more people.
This way it continues on may be not in the same arithmetical progression mentioned
here. It could be more or less. But be rest assured you have created a viral advertising
tool that keeps moving and replicating and spreads across.
Display advertising
The taking of advertising space in the editorial sections of magazines or newspapers, as
opposed to the classified sections, which are a less expensive, and generally lower
performing method. All significant publications will be pleased to provide you with their
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'Media Pack', which gives full details of all the types of display advertising available, for how
much, together with lots of information about their readership profile and circulation. If you
are trying to generate a direct response from display advertising you may need to feature a
coupon of some kind. Otherwise display advertising is concerned with image-building and
creating awareness. As with other advertising methods, the use of Free-phone telephone
numbers and Free-post addresses all increase response rates.
Door to door leaflets and advertising distribution
Large quantity leaflet drops to consumer households and business addresses, without the need
for envelopes or normal postal charges, can usually be arranged through the postal services
(the Post Office in the UK), so that your leaflet is delivered at the same time as the normal
post, or at other times of the day if required. Demographic targeting, based on postcodes and
population census data, is possible to a degree, and the cost is often inclusive in the
distribution charges.
Other specialized household distributors provide similar services, sometimes incorporated
within local newspaper deliveries.
Conclusion
Research proves that where responses are required, the best adverts are those which offer an
impressive, relevant benefit to the reader. This 'promise' should ideally contain the business
brand name, take no longer to read than is normal for the media (direct mail is about 4 - 8
seconds, or about fifteen words) and be clearly the most striking part of the advert. This point
cannot be stressed enough; you must keep it quick, simple and to the point. And the trend is
forever quicker points: David Lewis, an eminent consumer psychologist, says, "Copy is
getting shorter, and a major factor behind this is that people these days suffer from acute
shortages of both time and attention. Younger generations are extremely visually literate.
They have been brought up on computer games, so they couldn't deal with a lot of polished
copy, even if they wanted to complete it.
Pricing:
Definitions
Pricing is the process of determining what a company will receive in exchange for its
products. Pricing factors are manufacturing cost, market place, competition, market
condition, Quality of product.
The effective price is the price the company receives after accounting for discounts,
promotions, and other incentives.
Price lining is the use of a limited number of prices for all your product offerings. This is a
tradition started in the old five and dime stores in which everything cost either 5 or 10 cents.
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Its underlying rationale is that these amounts are seen as suitable price points for a whole
range of products by prospective customers. It has the advantage of ease of administering, but
the disadvantage of inflexibility, particularly in times of inflation or unstable prices.
A loss leader is a product that has a price set below the operating margin. This results in a
loss to the enterprise on that particular item, but this is done in the hope that it will draw
customers into the store and that some of those customers will buy other, higher margin
items.
Promotional Pricing
Pricing refers to an instance where pricing is the key element of the marketing.
The price/quality relationship refers to the perception by most consumers that a relatively
high price is a sign of good quality. The belief in this relationship is most important with
complex products that are hard to test, and experiential products that cannot be tested until
used (such as most services). The greater the uncertainty surrounding a product, the more
consumers depend on the price/quality hypothesis and the more of a premium they are
prepared to pay. The classic example of this is the pricing of the snack cake Twinkies, which
were perceived as low quality when the price was lowered. Note, however, that excessive
reliance on the price/quantity relationship by consumers may lead to the raising of prices on
all products and services, even those of low quality, which in turn causes the price/quality
relationship to no longer apply.
Premium pricing (also called prestige pricing) is the strategy of consistently pricing at, or
near, the high end of the possible price range to help attract status-conscious consumers. A
few examples of companies which partake in premium pricing in the marketplace include
Rolex and Bentley. People will buy a premium priced product because:
1. They believe the high price is an indication of good quality;
2. They believe it to be a sign of self worth - "They are worth it" - It authenticates their
success and status - It is a signal to others that they are a member of an exclusive
group;
3. They require flawless performance in this application - The cost of product
malfunction is too high to buy anything but the best - example: heart pacemaker.
The 9 Laws of Price Sensitivity
In their book, "The Strategy and Tactics of Pricing", Thomas Nagle and Reed Holden outline
9 laws or factors that influence a buyer's price sensitivity with respect to a given purchase:
1. Reference Price Effect Buyer’s price sensitivity for a given product increases the
higher the product’s price relative to perceived alternatives. Perceived alternatives can
vary by buyer segment, by occasion, and other factors.
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2. Difficult Comparison Effect Buyers are less sensitive to the price of a known / more
reputable product when they have difficulty comparing it to potential alternatives.
3. Switching Costs Effect the higher the product-specific investment a buyer must make
to switch suppliers, the less price sensitive that buyer is when choosing between
alternatives.
4. Price-Quality Effect Buyers are less sensitive to price the more that higher prices
signal higher quality. Products for which this effect is particularly relevant include:
image products, exclusive products, and products with minimal cues for quality.
5. Expenditure Effect Buyers are more prices sensitive when the expense accounts for a
large percentage of buyers’ available income or budget.
6. End-Benefit Effect the effect refers to the relationship a given purchase has to a larger
overall benefit, and is divided into two parts: Derived demand: The more sensitive
buyers are to the price of the end benefit, the more sensitive they will be to the prices
of those products that contribute to that benefit. Price proportion cost: The price
proportion cost refers to the percent of the total cost of the end benefit accounted for
by a given component that helps to produce the end benefit (e.g., think CPU and PCs).
The smaller the given components share of the total cost of the end benefit, the less
sensitive buyers will be to the component's price.
7. Shared-cost Effect The smaller the portion of the purchase price buyers must pay for
themselves, the fewer prices sensitive they will be.
8. Fairness Effect Buyers are more sensitive to the price of a product when the price is
outside the range they perceive as “fair” or “reasonable” given the purchase context.
9. The Framing Effect Buyers are more prices sensitive when they perceive the price as
a loss rather than a forgone gain, and they have greater price sensitivity when the
price is paid separately rather than as part of a bundle.
Time-based pricing is a special case of price discrimination in which producers charge
different rates for a given good or service depending on the time, day, month, and so on. For
instance, it is common practice in the tourism industry to charge higher prices during the peak
season, or during special-event periods and only charge the operating costs of the
establishment during the off-peak season. Investments for business expansion in this case are
funded out of profit earned during the peak season. Another common example of this pricing
strategy is found in transportation sectors, which may charge higher prices during rush-hours.
Electricity Industry
Time-based pricing of services such as provision of electric power includes, but is not limited
to;
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Time-of-use pricing (TOU pricing), whereby electricity prices are set for a specific
time period on an advance or forward basis, typically not changing more often than
twice a year. Prices paid for energy consumed during these periods are reestablished
and known to consumers in advance, allowing them to vary their usage in response to
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such prices and manage their energy costs by shifting usage to a lower cost period or
reducing their consumption overall;
critical peak pricing whereby time-of-use prices are in effect except for certain peak
days, when prices may reflect the costs of generating and/or purchasing electricity at
the wholesale level
Real-time pricing (also: dynamic pricing) whereby electricity prices may change as
often as hourly (exceptionally more often). Price signal is provided to the user on an
advanced or forward basis, reflecting the utility’s cost of generating and/or purchasing
electricity at the wholesale level; and
Peak load reduction credits for consumers with large loads that enter into preestablished peak load reduction agreements that reduce a utility’s planned capacity
obligations.
Time-based pricing is recommended for utilities both in regulated or market based
environment. The use of time-based pricing is limited in case of low difference
between peak- and off-peak demands, unavailability of adequate time-of-use metering.
Also, customer response to time-based pricing should be considered (see: Demand
response).
A regulated utility will develop a time-based pricing schedule on analysis of its cost on
a long-run basis, including both operation and investment costs. A utility operating in a
market environment, where electricity (or other service) is auctioned on a competitive
market, time-based pricing will reflect the price variations on the market. Such
variations include both regular oscillations due to the demand pattern of users, supply
issues (such as availability of intermittent natural resources: water flow, wind), and
occasional exceptional price peaks.
Price peaks reflect strained conditions on the market (possibly augmented by market
manipulation, see: California electricity crisis) and convey possible lack of investment.
General Issues
Why do retail stores need dynamic pricing? With respect to the key objectives of growth and
profit for any retail entity, dynamic pricing should significantly improve sales margins and
increase sales by enabling the vendor to price variably and hence suitably and to control its
product range based on profit margins. The retail stores will be able to compete more
effectively with rivals in the form of mixed multiples, mail order and online retailers, who are
often able to undercut but who do not generally have the same understanding of the retail
market. In particular dynamic pricing is recognized as encouraging impulse buys, crossselling of products and repeat sales.
Process and Implementation
Dynamic pricing is facilitated through pricing range over the product lines by pricing and
demand forecasts based on past trends identified from the data available. Weekly meetings to
sign off new product ranges and change in prices while time reviewing existing products for
promotion (for obsolescence).
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EPOS needs to be integrated with electronic pricing in stores by installing electronic price
displays on shelves and setting up interactive store links. This could help in monitoring and
displaying direct co-related sales value and price variation responses with the suppliers
through vendor managed inventory.
Monthly evaluation and comparison of competitor prices and self-analysis based on activity
based costing (from supplier to sale) will be required for which EPOS serves as the source for
collating information on demand while activity based costing serves as basis of prices.
Business growth can be propagated by analysis of profitability and statistics of existing stores
to identify trends, for which a formal business case may need to be prepared, needing the
involvement of regional managers to assess demand.
Dynamic pricing could involve significant business redesign depending on the present
infrastructure and the ability to deliver desired data. In order to record and monitor customer
data, key activities such as loyalty card schemes, updating of EPOS to record sales and staff
training for recording sales would required to be initiated. EPOS needs to be updated to
record and monitor by product range as well as by stores which would facilitate price and
product changes in response to changes in demand as well as developing future decision
making process.
In benchmarking of competitor pricing and product range, key activities would involve
setting up of an integrated data base at head office recording weekly price and product data
fluctuations of competitors. New methodologies will be required to analyze total costs per
product and its contribution to bottom line in proposing a full costing method for product
lines.
Dynamic pricing could also help increase the volume of repeat customers indicating
strengthening and retaining of existing customers leading to reduced churn rate. This could be
further fostered by use of loyalty card schemes under the supervision of the marketing
department. Ordering inventory restricted to requirement saves holding additional and
perhaps outdated stocks which results in reduced inventory levels. This effect could be
measured by the declining value of products held in the warehouses.
Sales of discounted products taken from EPOS could be a measurement of the effect of
higher discounts and increased promotions and marketing campaigns, under the direction of
the marketing department, as a causal effect of dynamic pricing.
4.5
International Agencies
World Health Organization its functions, Role & Needs
At the early stage in September 1999 to January 2000, WHO together with UNICEF acted as
a "Temporary Ministry of Health" coordinating health sector activities in the Territory. ICRC
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and fifteen International NGOs, together with military medical teams from INTERFET
provided curative services to the general population.
On 25 October 1999, by Resolution 1272/1999, the Security Council established the United
Nations Transitional Administration in East Timor (UNTAET) with overall responsibility for
the administration of East Timor through exercise of all legislative and executive authority,
including the administration of justice. UNTAET was mandated to consult and cooperate
with the East Timorese people to develop national democratic institutions, and to transfer to
these institutions its administrative and public service functions.
WHO actively participated in and technically supported the review of health services of East
Timor (conducted in December 1999 and January 2000) and the subsequent establishment in
February 2000 of the Interim Health Authority - a precursor of the present Division of Health
Services.
On 15 July 2000, a transitional Government of East Timor was established, headed by the
Transitional Administrator, a Cabinet consisting of 8 Members - four East Timorese and four
international staff from ETTA - and a National Council with 33 members. WHO will work in
partnership with the Divisions of Health Services and Water & Sanitation under the charge of
Cabinet Members for Social Affairs and Infrastructure.
Now as East Timor is ready to move from a state of emergency to long term development,
WHO’s collaborative activities will be aligned accordingly. In the current situation in East
Timor, more than 80% of the population have inadequate income, poor health status, lack of
access to adequate health care, safe water & sanitation, insufficient food and nutrition and are
faced with poor housing, especially due to wide scale destruction of buildings. Consequently,
health would be a major priority for the development of East Timor
Health Status
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In the 12 months since September 1999, clinical services have provided over 660 000
consultations.
Pre-crisis estimates suggest an infant mortality rate (IMR) of 70 to 95 per 1000 live
births; the most common causes were infections, prematurity and birth trauma.
Appropriately skilled personnel attend only one out of five births. Prior to the crisis,
this figure was approximately 40%.
The maternal mortality ratio (MMR) has been estimated to be as high as 890 per 100
000 live births, more than twice as high as in Indonesia. Postpartum haemorrhage is
the most common cause of maternal death.
The under 5 mortality rate (U5MR) was at least 125 per 1000 live births.
The most common childhood illnesses are acute respiratory infection, diarrhoea and
malaria. An estimated 80% of children have intestinal parasitic infection.
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Cross sectional nutritional surveys suggest that, in some districts, 3-4% of children
aged 6 months to five years are acutely malnourished, while one in five are
chronically malnourished.
Malaria is highly endemic in all districts, with 133,750 suspected malaria cases (and
110 deaths) reported since September 1999. P falciparum and P vivax malaria occur
almost equally, and chloroquine resistant P falciparum is present.
Tuberculosis is a major public health problem, with an estimated 8 000 active cases
nationally (over 1% of the total population).
East Timor is endemic for leprosy; the registered leprosy case prevalence rate is 1.8
per 10 000.
East Timor is highly endemic for lymphatic filariasis. Three species are present
(Brugia timori, Bruga malayi and Wuchereria bancrofti).
Clinical services report that sexually transmitted infections (STI) are not uncommon
in sexually active age groups.
Due largely to a special vaccination campaign after the crisis of 1999, only 1392 cases
of measles have been reported (representing a crude attack rate of 14.9 cases per 100
000 per month).
Communicable diseases account for the majority of deaths (approximately 60%,
particularly in children), followed by the non-communicable and chronic diseases and
road traffic accidents.
Health System
WHO played a catalytic role in East Timor in the formation of future direction of health
development, the formation of its health authority and in formulating health policy, planning
and health regulations. Starting from the emergency phase, many NGOs, national and
international institutions, UN agencies and donors wished to be involved in the process of
restoration of health services in East Timor. To harmonize and coordinate these efforts, WHO
had the responsibility for the overall coordination. Later, the Interim Health Authority
successfully had took over this function.
A working group was formed composed of representatives from WHO, UNICEF, UNFPA,
International NGOs and East Timorese Health Professionals. In the first workshop held in
mid December 1999, WHO facilitated discussions and provided technical backup. Later in
January 2000 the group undertook a review of health service provision throughout the
territory and drafted a document defining minimum standards for its provision. At the second
workshop, which took place in mid February 2000, a consensus was reached on the minimum
standards document and the formation of the Interim Health
Authority was formally announced. The Interim Health Authority was composed of 16 senior
East Timorese health professionals supported by seven international UNTAET staff.
Later on 15 July 2000 as a result of reorganization and establishment of an East Timor
Transitional Authority (ETTA) the Interim Health Authority was renamed as Division of
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Health Services (DHS). The Division of Health Services, with support of WHO is in the
process of formulating health policy guidelines for East Timor, and a draft for the reform of
health services in the country is under preparation. The reform is based on an integrated
approach to health care delivery. Health services are proposed to be free at the point of
delivery for now. However, for the future, the policy makers are considering options for
contributory financing, including health insurance schemes and patient co-payments.
Health services in East Timor are currently provided by a large number of different entities.
Coverage of the population is uneven both in terms of physical access and in terms of
services provided. This situation has arisen from the necessary involvement of NGOs in
health service provision during the emergency and early development phases. A strategy is
being developed to take the transition phase to the future health system. This strategy must:
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Be rapidly implementable
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Ensure delivery of basic services to the maximum possible population
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Build capacity among East Timorese health staff
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Ensure more efficient use of resources
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Not interfere with the development of the future health system
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Take into account the principles developed by the East Timorese
Professional Working Group (technically supported by WHO) including sensitivity to
culture, religion and traditions of the East Timorese people.
To ensure more equitable coverage, more efficient use of resources, and a clear division of
responsibilities along with greater accountability, the Division of
Health Services (DHS) has proposed that a single lead agency be identified in each district to
plan, organize and manage the provision of services. Other health agencies working in the
district will need to collaborate and coordinate their activities with this lead agency. DHS has
requested proposals from key NG0s for the provision and management of health services for
each district, in the form of a District Health Plan.
Drug Supply System
With WHO support, a national essential drugs list has been developed and steps have been
taken for further drug legislation and policy development.
In order to facilitate future development of a National Essential Drugs Programme, WHO
supported the development of a national Essential Drugs List for East Timor during June/July
2000. Since most of the health facilities will have to be staffed by nurses/auxiliary staff in the
absence of qualified doctors, detailed instructions within the Essential Drugs List have also
been prepared for use by such staff.
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WHO has also recommended a system for a comprehensive essential drugs programme for
East Timor, including framing of national drug policy, drafting of drug legislation and
promoting the concept of rational use of drugs among the health services. Activities relating
to the preparation of a national formulary, capacity building and training of pharmacists are
included in the Plan of Action for 2001 formulated by WHO in support of East Timor.
4.6
Review Questions:
1. Discuss about Strategic Marketing planning process.
2. Explain briefly about Marketing Mix and Product Mix.
3. Explain the types of consumer channels.
4. What are all the functions and roles of WHO?
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Module V
INTERNATIONAL MARKETING INFRASTRUCTURE
5.0
Learning Outcomes
Introduction
International Management Infrastructure
Indian Export Promotion Council
EXIM bank's Export-Finance Role
Export Credit Guarantee Corporation of India (ECGC)
Trade Development Authority of Pakistan (TDAP)
Trade Fair Authority of India (TFAI)
5.1
Introduction
The Clinton (1993) Administration quickly targeted small exporters in the export-finance
arena, promising that the Export-Import Bank of the United States (Eximbank) "...will
become more of an active consumer-friendly Bank, one that will...give more attention to
small and medium-sized businesses." At his swearing-in, Eximbank Chairman Brody (1993)
promised "...a more proactive, consumer-friendly bank that services the small and medium
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size business community much more broadly." The Trade Promotion Coordinating
Committee (TPCC 1993) then made three recommendations to improve Eximbank for small
firms. For a diverse literature--congressional hearings (e.g., U.S. House of Representatives
1988, 1989), business and trade associations (e.g., Institute of International Finance 1990;
National Association of Manufactures 1994), and academia (e.g., Lancioni 1989; Samiee
1987; Weekly 1992)--had shown inadequate financing to be an international obstacle.
This paper assesses one path enabling small firms to overcome that burden: a City-State
(CIS) Program that, by mid-1995, links Eximbank and 31 largely state agencies. A survey of
CIS agency managers and a case study of 1995 C/S success clarify how small exporters can
take advantage of a program generating more than $100 million in 1991-94 average annual
exports.
5.2
International Marketing Infrastructure
Stages in the International Involvement of a Firm. We discuss through which a firm may go
as it becomes increasingly involved across borders. A purely domestic firm focuses only on
its home market, has no current ambitions of expanding abroad, and does not perceive any
significant competitive threat from abroad. Such a firm may eventually get some orders from
abroad, which are seen either as an irritation (for small orders, there may be a great deal of
effort and cost involved in obtaining relatively modest revenue) or as "icing on the cake." As
the firm begins to export more, it enters the export stage, where little effort is made to market
the product abroad, although an increasing number of foreign orders are filled. In the
international stage, as certain country markets begin to appear especially attractive with more
foreign orders originating there, the firm may go into countries on an ad hoc basis—that is,
each country may be entered sequentially, but with relatively little learning and marketing
efforts being shared across countries. In the multi-national stage, some efficiencies are
pursued by standardizing across a region (e.g., Central America, West Africa, or Northern
Europe). Finally, in the global stage, the focus centers on the entire World market, with
decisions made optimize the product’s position across markets—the home country is no
longer the center of the product. An example of a truly global company is Coca Cola.
Note that these stages represent points on a continuum from a purely domestic orientation to
a truly global one; companies may fall in between these discrete stages, and different parts of
the firm may have characteristics of various stages—for example, the pickup truck division of
an auto-manufacturer may be largely domestically focused, while the passenger car division
is globally focused. Although a global focus is generally appropriate for most large firms,
note that it may not be ideal for all companies to pursue the global stage. For example,
manufacturers of ice cubes may do well as domestic, or even locally centered, firms.
Some forces in international trade. The text contains a rather long-winded appendix
discussing some relatively simple ideas. Comparative advantage, discussed in more detail in
the economics notes, suggests trade between countries is beneficial because these countries
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differ in their relative economic strengths—some have more advanced technology and some
have lower costs. The International Product Life Cycle suggests that countries will differ in
their timing of the demand for various products. Products tend to be adopted more quickly in
the United States and Japan, for example, so once the demand for a product (say, VCRs) is in
the decline in these markets, an increasing market potential might exist in other countries
(e.g., Europe and the rest of Asia). Internalization/transaction costs refers to the fact that
developing certain very large scale projects, such as an automobile intended for the World
market, may uneconomic of International Trade
Exchange rates come in two forms:
“Floating”—here, currencies are set on the open market based on the supply of and demand
for each currency. For example, all other things being equal, if the U.S. imports more from
Japan than it exports there, there will be less demand for U.S. dollars (they are not desired for
purchasing goods) and more demand for Japanese yen—thus, the price of the yen, in dollars,
will increase, so you will get fewer yen for a dollar.
“Fixed”—currencies may be “pegged” to another currency (e.g., the Argentine currency is
guaranteed in terms of a dollar value), to a composite of currencies (i.e., to avoid making the
currency dependent entirely on the U.S. dollar, the value might be 0.25*U.S.
dollar+4*Mexican peso+50*Japanese yen+0.2*German mark+0.1*British pound), or to some
other valuable such as gold. Note that it is very difficult to maintain these fixed exchange
rates—governments must buy or sell currency on the open market when currencies go outside
the accepted ranges. Fixed exchange rates, although they produce stability and predictability,
tend to get in the way of market forces—if a currency is kept artificially low, a country will
tend to export too much and import too little.
Trade balances and exchange rates. When exchange rates are allowed to fluctuate, the
currency of a country that tends to run a trade deficit will tend to decline over time, since
there will be less demand for that currency. This reduced exchange rate will then tend to
make exports more attractive in other countries and imports less attractive at home.
Measuring country wealth. There are two ways to measure the wealth of a country. The
nominal per capita gross domestic product (GDP) refers to the value of goods and services
produced per person in a country if this value in local currency were to be exchanged into
dollars. Suppose, for example, that the per capita GDP of Japan is 3,500,000 yen and the
dollar exchanges for 100 yen, so that the per capita GDP is (3,500,000/100)=$35,000.
However, that $35,000 will not buy as much in Japan—food and housing are much more
expensive there. Therefore, we introduce the idea of purchase parity adjusted per capita GDP,
which reflects what this money can buy in the country. This is typically based on the relative
costs of a weighted “basket” of goods in a country (e.g., 35% of the cost of housing, 40% the
cost of food, 10% the cost of clothing, and 15% cost of other items). If it turns out that this
measure of cost of living is 30% higher in Japan, the purchase parity adjusted GPD in Japan
would then be ($35,000/(130%) = $26,923. (The Gross Domestic Product (GPD) and Gross
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National Product (GNP) are almost identical figures. The GNP, for example, includes income
made by citizens working abroad, and does not include the income of foreigners working in
the country. Traditionally, the GNP was more prevalent; today the GPD is more commonly
used—in practice, the two measures fall within a few percent of each other.)
Purchasing Power Parity
In general, the nominal per capita GPD is more useful for determining local consumers’
ability to buy imported goods, the cost of which are determined in large measure by the costs
in the home market, while the purchase parity adjusted measure is more useful when products
are produced, at local costs, in the country of purchase. For example, the ability of
Argentineans to purchase micro computer chips, which are produced mostly in the U.S. and
Japan, is better predicted by nominal income, while the ability to purchase toothpaste made
by a U.S. firm in a factory in Argentina is better predicted by purchase parity adjusted
income.
It should be noted that, in some countries, income is quite unevenly distributed so that these
average measures may not be very meaningful. In Brazil, for example, there is a very large
underclass making significantly less than the national average, and thus, the national figure is
not a good indicator of the purchase power of the mass market. Similarly, great regional
differences exist within some countries—income is much higher in northern Germany than it
is in the former East Germany, and income in southern Italy is much lower than in northern
Italy. ail such large costs that these must be spread over several countries.
Washington is attempting to alleviate one of the primary obstacles confronting small
exporters: an inadequacy of export financing. One path designed to permit small exporters to
overcome that international marketing obstacle is the City/State Program instituted by the
Export-Import Bank of the United States (Eximbank). This paper surveys managers of
city/state agencies to evaluate the program's usefulness. The authors conclude by: (a)
clarifying how small firms can improve their candidacy to receive export-finance support;
and (b) suggesting how Eximbank and city/state agencies could upgrade their cooperative
effort.
The problem in perspective
International pricing and payment calculations are typically complicated by: various costs
and risks associated with getting paid in a timely manner; special concerns by banks about
quality of a firm's export receivables; competition from foreign exporters supported by their
governments; and delays in obtaining U.S. export-finance support. Such issues are
exacerbated if the U.S. firm is small or new to exporting. Smallness in transaction size, in
trade experience, in balance sheet terms, and in profitability for a participating bank makes it
difficult for exporters to take advantage of private or official programs for obtaining working
capital loans, for extending credit to foreign buyers, and for discounting or insuring the
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export receivable. That was worsened as many regional banks ceased trade-finance activity,
as noted by U.S. Department of Commerce (DoC 1988) and Eximbank (1988).
Not only do such export-finance shortcomings continue, but there is anecdotal evidence that
many small exporters hesitate to approach an Eximbank reputed to deal primarily with large
firms and to demand considerable documentation. Are Washington's hopes for small
exporters realistic unless Eximbank is customer-friendly? Since provision of export education
can be very time consuming and costly for a Washington-based agency of some 450
employees, what efforts can be undertaken to permit small exporters to share in a national
export strategy?
5.3
Indian Export Promotion Council
The Export Promotion Councils are non-profit organizations registered under the Indian
Companies Act or the Societies Registration Act, as the case may be. They are supported by
financial assistance from the Government of India.
Role
The main role of the EPCs is to project India’s image abroad as a reliable supplier of high
quality goods and services. In particular, the EPCs encourage and monitor the observance of
international standards and specifications by exporters. The EPCs keep abreast of the trends
and opportunities in international markets for goods and services and assist their members in
taking advantage of such opportunities in order to expand and diversify exports.
Functions
The major functions of the EPCs are as follows:
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To provide commercially useful information and assistance to their members in
developing and increasing their exports
To offer professional advice to their members in areas such as technology upgradation,
quality and design improvement, standards and specifications, product development and
innovation etc.
To organize visits of delegations of its members abroad to explore overseas market
opportunities.
To organize participation in trade fairs. Exhibitions and buyer-seller meets in India and
abroad.
To promote interaction between the exporting community and the Government both at the
Central and State levels
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To build a statistical base and provide data on the exports and imports of the country, exports
and imports of their members, as well as other relevant international trade data.
There are at present eleven Export Promotion Councils under the administrative control of
the Department of Commerce and nine export promotion councils related to textile sector
under the administrative control of Ministry of Textiles. These Councils are registered as
non-profit organizations under the Companies Act/Societies Registration Act. The Export
Promotion Councils perform both advisory and executive functions. These Councils are also
the registering authorities under the Export Import Policy, 1997-2002. These Councils have
been assigned the role and functions under the said policy.
The Committee constituted to look into the aspects of rationalization of election procedure of
the Export Promotion Councils (EPCs) and the criteria to be adopted for their restructuring so
that they retain their relevance to the national export effort in the context of globalization and
economic liberalization, has made recommendations to streamline and strengthening the
functioning of the EPCs. The Government has since accepted the recommendations of the
Committee and issued Model Bye-Laws and guidelines to all EPCs for adoption.
Export Promotion Councils under Department of Commerce
1. Engineering Export Promotion Council
2. Project Exports Promotion Council of India
3. Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council
4. Chemicals and Allied Products Export Promotion Council
5. Council for Leather Exports
6. Sports Goods Export Promotion Council
7. Gem and Jewellery Export Promotion Council
8. Shellac Export Promotion Council
9. Cashew Export Promotion Council
10. The Plastics Export Promotion Council
11. Export Promotion Council for EOUs & SEZ Units
12. Pharmaceutical Export Promotion Council
Export Promotion Councils under Ministry of Textiles
1. Apparel Export Promotion Council
2. Carpet Export Promotion Council
3. Cotton Textile Export Promotion Council
4. Export Promotion Council for Handicrafts
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5. Handloom Export Promotion Council
6. Indian Silk Export Promotion Council
7. Powerloom Development export Promotion Council
8. Synthetic & Rayon Textile Export Promotion Council
9. Wool & Woolens Export Promotion Council
Export Inspection Council, New Delhi:
The EIC, and autonomous bode, is responsible for the enforcement of quality standards and
compulsory pre-shipment inspection of the various commodities meant for export and
notified under the Export (Quality Control & Inspection) Act, 1963. It was set up under
Section (3) of the Export (Inspection and Quality Control) Act, 1963. It is headed by a
Director. EIC is assisted in its functions by the Export Inspection Agencies (EIAs) located at
Chennai, Delhi, Kochi, Kolkata and Mumbai along with a network of 42 sub-offices and
laboratories to back up the pre-shipment inspection and certification activities.
Marine Products Export Development Authority, Cochin:
The MPEDA was set up under Section (4) of MPEDA Act, 1972 and became functional from
20th April, 1972. It is a statutory body functioning under the Department of Commerce. The
MPEDA, a statutory body, is responsible for development of the marine products industry
with special reference to exports. It is headed by a Chairman. It has its headquarters at Kochi
and has a number of Regional and Sub-Regional Offices. Besides, it has Trade Promotion
Offices at Tokyo and New York.
Agricultural and processed Food Products Export Development Authority, New Delhi:
The APEDA was set up be an Act of Parliament of 1986 and came into being on 13 th
February 1986. The APEDA is also a statutory body which is entrusted with the tasks of
agricultural exports, including the export of processed foods in value added form. It is headed
by a Chairman. The Headquarter is located at New Delhi and it has a number of Regional
Offices.
Organisation Structure of PDEXCIL
Powerloom Development & Export Promotion Council, set up by the Ministry of Textiles,
Govt. of India in the year 1995. The Council has been registered under Section 25 of The
Companies Act, 1956, having it. S Registered/Head Office at Mumbai, Maharashtra &
Regional Office at Erode, Tamil Nadu.
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Functioning & Objectives of the PDEXCIL
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The main objectives of the PDEXCIL is to promote, support, develop, advance and
increase powerlooms and export of Powerloom fabrics and made-ups thereof and to carry
out any such activity in such manner as may be necessary or expedient.
To undertake or assist in research in methods, designs, etc., and schemes of a technical
nature intended to improve the efficiency of the powerloom sector.
PDEXCIL is constantly carrying out its developmental & export promotional activities to
boost the exports by way of participation in the International Textile Exhibitions,
gathering market information, survey, dissemination of trade enquiries, giving
information about the latest development in the export front, latest notifications, circulars
etc. as well as taking up the cause of the powerloom sector with relevant authorities. The
Council is constantly serving powerloom industry at large in general & its members in
particular, to remove hurdles in export and provide platform to the exporters.
PDEXCIL has been actively involved in urging manufacturers to achieve quality
benchmarked through up-gradation of technology. Various seminars are organized to
create awareness and encourage powerloom units to modernize under the Technology
Up-gradation Fund (TUF) Scheme.
PDEXCIL is carrying out the following activities & after becoming the member they can
avail the various benefits viz;
Participation in Trade Fairs and Exhibitions abroad which helps to find importers/buyers
abroad.
Members of the PDEXCIL can avail MDA grant (financial assistance from the Govt. of
India through PDEXCIL, on air travel/stall charges) subject to certain conditions as per
the MDA guidelines while participation in the Trade Fairs, Exhibitions.
PDEXCIL organizes seminars at different clusters to create awareness about the need to
export, giving details of the market direction & other details related to exports through
Powerloom Centre Development Committee (PCDC).
Member can participate & display their products to the visitors in the Buyer-Seller Meets
organized by the PDEXCIL within India at a very nominal cost.
Enthusing the powerloom units in various clusters to undertake up gradation of
technology and modernization of the units, under the Technology up gradation Fund
Scheme (TUFS)/Modified Group Work Shed Scheme.
Represent members cause to the various Govt. agencies.
Organizing various training programmes/workshops/seminars to educate the
Entrepreneurs on various business related issues.
Assistance in resolving manufacturers/exporters problems.
Exploration of overseas markets.
Identification of saleable items.
Deputation of sales-oriented research teams and trade delegations to foreign markets.
Every month PDEXCIL publishes Newsletter, to disseminate valuable market
informations & other informations.
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These the success of the powerloom industry today, is in no small measure, due to the support
and assistance offered by the PDEXCIL. Spurred on by the developmental activities initiated
by PDEXCIL, Indian power-loom textiles are equipped to meet the challenges posed by the
global supermarket.
Indian exports around the world:
Way back in 1955-56, the nascent Indian engineering sector was in the process of
diversifying and restructuring the narrow export based of the industry and it needed a strong
push – the EEPC INDIA (Formerly Engineering Export promotion Council) was set up in
1955 under the sponsorship of Ministry of Commerce, Govt. of India, for export promotion
of engineering goods, projects and services from India. Initially started with a few hundreds
of engineering units as an small outfit, with a passage of time it has grown to be the largest
Export promotion Council having membership of nearly 12,000 from amongst large
Corporate Houses, Star Trading Houses, Small & Medium Scale Units (SME), Trading
Houses, etc. Out of the total membership of the Council, 60% constitutes the SMEs. The
steady growth in the export of engineering goods from India has been the continuous
innovation and setting up quality standards in manufacturing and in delivering services – this
is evident as a large number of exporters are ISO 9000 or equivalent accredited. EEPC – right
from its inception has been insisting the exporting community on the quality parameter – and
the Council itself has the distinction of achieving the ISO 9002 accreditation from worked
renowned KPMG. This has further been upgraded to ISO 9001:2000 for designing and
organizing exclusive Indian Engineering Exhibitions abroad. Engineering exports from India
has been steadily growing and the performance has probably exceeded all expectations even
since the birth of the Council. Apart from being one of the largest stakeholders in the total
exports out of India, - the engineering exporters are the foremost net foreign exchange earner
in the country. As the engineering sector is extremely diversified, the Council has set up
different Product Panels with a view to ensure that all possible & potential Indian products
reach out to the global markets. EEPC aggressively peruses a number of activities & services
for its exporting community, its members & the potential overseas buyers with a two-point
objective of facilitation exports of Indian engineering products & services to the global
market and to provide the overseas buyers true value.
The Handloom industry mainly exports fabrics, bed linen, table linen, toilet and kitchen linen,
towels, curtains, cushions and pads, tapestries and upholstery’s carpets and floor coverings,
etc. The Handloom industry has adopted various measures and techniques to provide high
quality and eco-friendly products to the world market.
In the world of handlooms, there are Madras Checks from Tamil Nadu, ikats from Andhra
and Orissa, tie and dye from Gujarat and Rajasthan, brocades from Banaras, Jacquards from
Uttar Pradesh, Daccai from West Bengal, and phulkari from Punjab.
The Surat tanchoi based on a technique of satin weaving with the extra weft floats that are
absorbed in the fabric itself has been reproduced in Varanasi. Besides its own traditional
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weaves, there is hardly any style of weaving that Varanasi cannot reproduce. The Baluchar
technique of plain woven fabric brocaded with untwisted skill thread, which began in
Murshidabad district of borrowed the jamdani technique.
In the deportment of Woolen textiles, Woolen weaves are no less subtle. The Kashmiri
weaver is known the world over for his Pashmina and Shahtoosh shawls. The shawls are
unbelievably light and warm.
The states of Kashmir and Karnataka are known for their mulberry silk. India is the only
country in the workd producing all four commercially known silks – mulberry, tasser
(tussore), eri and muga. Now gaining immense popularity in the U.S,A. and Europe Assam is
the home of eri and muga silk. Muga is durable and its natural tones of golden yellow and
rare sheen becomes more lustrous with every wash. The ikat technique in India is commonly
known as patola in Gujarat, bandha in Orissa, pagdu bandhu, buddavai and chitki in Andhra
Pradesh. The plastics Export promotion Countil (popularly known as PLEXCONCIL)
sponsored by the Ministry of Commerce & Industry, Department of Commerce, Government
of India, represents the exporting community in the Indian Plastics industry. The export
promotion strategies evolved since 1955, the year when PLEXCONCIL was born, have
fetched rich dividends, which is exhibited in the form of high export growth rates. From a
meager export turnover of 16.5 million US Dollars worth of exports in 1955-56, the exports
from the Indian plastic industry has reached about 3187 million US Dollars in 2006-2007 and
is poised to well exceed the Four billion US Dollars mark in the near future.
These achievements represent the dedicated efforts of the over 2000-strong PLEXCONCIL
members who are always in the process f creating a niche for themselves in the world
markets by virtue of their determination to achieve technological excellence, a sense of
commitment to satisfy their customer’s requirements and their inherent entrepreneurial
qualities. The PLEXCONCIL on its part is committed to support the efforts of its members to
achieve export excellence and service the overseas buyers to find appropriate trade partners
in the Indian plastic industry.
In its pursuit to achieve export excellence, various export promotional activities are
undertaken by PLEXCONCIL. These include participation in international trade fairs;
sponsoring delegations to target markets; inviting business delegations from the overseas to
India; organizing buyer-seller meets both in India and the overseas etc. and servicing the need
of its members.
Products from the Indian plastic industry are exported to over 150 countries round the globe
with the major trading partners being USA, United Arab Emirates, Italy, United Kingdom,
Belgium, China, Hong Kong, Germany, Saudi Arabia, Singapore, Sri Lanka, South Africa,
Russia, The Netherlands, Turkey, Egypt, Finance, Australia, Kenya and Oman.
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Product Exported by plexconcil:
Raw Materials
PVC, Polypropylene, Polyethylene, Polystyrene, ABS, Polyester Chips, Urea / Phenol
Formaldehyde, Masterbatches, Additives, etc
Packaging
PP / HDPE Woven Sacks / Bags / Fabrics, Poly – lined jute goods, Box strapping, BOPP
Tapes, a range of plastic sheeting / firms (of PVC, PP, HDPE, Nylon, FRP, PTFE, Acrylic,
etc.), pouches, crates, bottles, containers, barrels, cans, carboys, shopping / carrier / garbage
bags.
Films
Polyester Film, BOPP Film, Mesh, Metallised / Multilayer Films, Photo Films.
A Range of Consumer Goods
Toothbrushes, Cleaning brushers, hair brushes, nail / cosmetic brushes, combs, moulded
furniture (chairs, tables, etc.) houseware, kitchenware, insulated moulded houseware,
microwave re-heatable containers, mats and mattresses, water bottles, gifts and novelties, a
range of stationery items like files, folders, mathematical instruments, etc.
Writing Instruments
Pens, ball pens, markers, sign pens, refills, etc.
Travel Ware
Moulded luggage, soft luggage, a range of bags like school bags / ladies handbags, wallets,
etc.
Leather Cloth / Artificial Leather Floor Coverings
Vinyl floor coverings and linoleums
Foam Boards Drip Irrigation Systems / Components Pipes & Pipe Fittings
Made of PVC, HDPE, PP, FRP, Nylon
Water Storage Tanks Toys and Games Engineering Plastics
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Auto components, parts for various machinery / equipment in telecommunications,
railways, electronics, etc.
Electrical Accessories Frp / Grp Products
Safety helmets / equipment, pipes, storage tanks, etc.
Sanitary Fittings
Cisterns, toilet seats, bathroom fittings, etc.
Construction
PVC profiles, doors, windows, etc.
Tarpaulins Laminates Fishnets / Fishing Lines Cordage / Ropes / Twins Eyewear
Lenses, spectacle frames, goggles, etc.
Laboratory Ware Surgical / Medical
Disposable syringes, blood / urine bags, I.V. sets.etc.
Dental products cine x-ray films human hair and products thereof.
Apart from this India is the no:1 producer of cashew and the no:2 producer of coffee. This is
exported all over the world which helps in earning a lot of national income.
India is developing and its export trade is growing as well. There is a share of credit which
goes to the government as well for framing such policies that not only helps these exporters
but also help in getting inspired to do so. In today’s modern world export is considered to be
a valuable business.
These days there is a special course that is being offered to students and this educates the
students more about export trade. The trade of export is on a hike these days.
5.4
EXIM bank's Export - Finance Role
Eximbank's (1995a) a reports document activity under its loan, guarantee, and export credit
insurance programs, while promoting agency goals, including an emphasis on small business.
The User's Guide (Eximbank 1995b) details each program. Press releases permit exporters to
judge Eximbank priorities and to see how other firms are structuring export finance packages.
Table I summarizes activity by program, especially since 1986 when Eximbank has been
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obligated to "set aside" at least 10% of aggregate loan, guarantee, and insurance authority for
small business.
Eximbank's (1995c) annual Competitiveness Report carries export- community rankings of
U.S. programs vis a vis those of other major ("G-7") countries. Eximbank (1995d) describes
this global role in semi-annual reports and before Congress (e.g., Brody 1995), when the U.S.
General Accounting Office (e.g., 1993) usually testifies. Academic research also examines
delivery of Eximbank support (e.g., Altschul 1992; Holden 1989; Letovsky 1990; Preeg
1989); most focus upon Washington's traditional unwillingness to make Eximbank as
competitive as the agencies of other G-7 countries.
In sum, there is considerable literature describing Eximbank's role and its response to
pressures. But, a need to get closer to small exporters remains, a demand partially addressed
by the C/S Program.
Eximbank's CIS initiative: getting closer to small exporters
An Eximbank (1987) "pilot program" of 198889 was intended to test Washington's capacity
to enhance export education and to deliver services to small/new exporters in cooperation
with C/S agencies in seven U.S. locations ("Class of 1989"). In following up Eximbank's
(1989) review of that effort, Holden (1990, 1992) concluded that the C/S Program could gain
by: (a) training agency managers to market Eximbank programs; (b) delegating credit
authority as agencies demonstrate mastery; and (c) mobilizing C/S agencies for the localized,
labor-intensive export.
The global listed infrastructure market - size, indices and activity
The global listed infrastructure sector accounts for 4 - 5% of the world equity market as
measured by broad market capitalization indices. This equates to an investable universe of
around $US1.5 trillion.
There are currently two official indices available for benchmarking the Global Listed
infrastructure sector. These are the FTSE Macquarie Global Infrastructure Index (MGII) and
the UBS Global Infrastructure and Utilities Index series. The indices share a number of
similar features such as total market cap, bias towards utilities (especially electricity) and the
largest weightings to the US and Europe.
More important for prospective investors is the expected strong growth of the listed market
over the next 10 years. The market cap of FTSE Macquarie Global Infrastructure Index has
grown three fold from July 2000; while this is unlikely to continue, the market could double
over the next 5 -7 years. A significant portion of the growth has been via new equity issues.
For example, out of 240 stocks in the index as at June 2005, 10 stocks were new issues
compared to 15 months before.
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Listed infrastructure has achieved a much stronger deal flow than unlisted infrastructure in
the past decade. With respect to deal flow, Lazard Asset Management cites the following
statistics:
•
Since January 2000, US$100bn of "deals" were consummated
•
More than 80% of acquirers were listed players
•
Since January 2006, US$29bn has been raised for equity investment in infrastructure,
most of this by unlisted funds; and
•
This represents more than the total value of unlisted deals consummated in the past
and a half years.
According to Lazard 12 IPOs (worth ~US$30bn+) came to market before the end of 2006.
Another interesting development in the infrastructure market over the past year has been
unlisted/direct players acquiring listed companies at significant premiums. This may reflect
the lack of opportunities in the unlisted space relative to the money committed to these
funds. Two examples are ABP Ports, acquired by Goldman Sachs and BAA Plc, acquired by
Ferrovial.
M&A in the infrastructure sector is forecast to remain strong thus providing additional
opportunities for adding value.
To ascertain performance benchmarks, we looked at the relative performance of global listed
infrastructure using UBS and MGII indices over 3 and 5 years to May 2006.
•
•
•
Most property assets have more commodity-like characteristics. Individual
infrastructure assets are more specialized and frequently have monopoly-like
characteristics which result in considerable pricing power.
Property is more sensitive to the vagaries of the economy which leads to higher
variability in cash flows. Where infrastructure has a monopoly position, it generates
more predictable cash flows and hence lower risk (although this varies across projects
depending on a number of factors, including the maturity of the project and the
gearing).
Individual properties generally meet a ‘ready’ market and scope exists to refurbish or
redevelop properties to maintain their viability as demand changes. Individual
infrastructure projects are invariably highly specialized and if revenues are threatened
by the arrival of a rival technology or rival facility, the flexibility to respond may be
low.
We acknowledge a number of problems with data and advise caution in extrapolating these
into the future. Given the fundamental differences in risk characteristics between global listed
property, global equities and global listed infrastructure, it is reasonable to expect that over
the very long term global listed infrastructure should generate lower returns compared to
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these two asset categories accompanied with lower risk. However, given the newness of the
sector (it is still not well understood) the returns of global listed infrastructure may exceed
both those of global listed property and global equity over the next five years.
EXIM Bank (The Export-Import Bank of India)
EX-IM is an Indian government-owned financial institution for the public sector created by
Act of the Parliament of India: the Export-Import Bank of India Act 1981. EX-IM Bank is
managed by a Board of Directors, which has representatives from the Government, Reserve
Bank of India, Export Credit Guarantee Corporation of India (ECGC), a financial institution,
public sector banks, and the business community.
The Bank's functions are segmented into several operating groups including:
Corporate Banking Group which ABN, MN handles a variety of financing programs for
Export Oriented Units (EOUs), Importers, and overseas investment by Indian companies.
Project Finance / Trade Finance Group handles the entire range of export credit services such
as supplier's credit, pre-shipment credit, buyer's credit, finance for export of projects &
consultancy services, guarantees, forfeiting etc.
Lines of Credit Group Lines of Credit (LOC) is a financing mechanism and export
transactions in the agricultural sector for financing. Small and Medium Enterprises Group to
the specific financing requirements of export oriented SMEs. The group handles credit
proposals from SMEs under various lending programs of the Bank.
Export Services Group offers variety of advisory and value-added information services aimed
at investment promotion. Fee based Export Marketing Services Bank offers assistance to
private Affairs.
The Government of India's Planning Commission's Committee on Infrastructure estimates
that $585 billion (about $240 billion in debt-financing) in total investment is necessary to
achieve its Eleventh Plan. The Plan, released in December 2006 for the period 2007-2012,
includes projections for power, roads and bridges, telecommunications, railways, irrigation,
water supply and sanitation, ports, airports, storage, and gas. U.S. exporters that supply goods
and services related to these sectors will find many opportunities in the Indian market.
Exim Bank extends lines of credit to overseas governments/agencies nominated by them or
financial institutions overseas to enable buyers in those countries to import
capital/engineering goods, industrial manufactures and related services and any other items
(with the approval of Exim Bank and the Borrower) from India on deferred payment terms.
This facility enables importers in those countries to import from India on deferred credit
terms as per the terms and conditions already negotiated between Exim Bank and the
overseas agency. The Indian exporters can obtain payment of eligible value from Exim Bank
against negotiation of shipping documents, without recourse to them.
142
Features of the Programme
The lines of credit are denominated in convertible foreign currencies/agencies and extended
to sovereign governments/agencies nominated by them or financial institutions. Such
governments/ agencies/institutions are the borrowers and Exim Bank the lender. Terms and
conditions of different lines of credit are varying and details in respect of each line of credit
can be obtained from Exim Bank. It would also need to be ascertained from time to time that
the lines of credit have come into effect and uncommitted balance is still available for
utilization.
EX-IM Bank Financing Programs in India:
Ex-Im Bank is open in the short-, medium-, and long-term in India offering direct loans and
loan guarantees to support U.S. exports. In April 2008, Ex-Im Bank's Board of Directors
approved the “India Infrastructure Facility” (IIF), a $2.45 billion special delegated line of
credit involving nine Indian financial institutions. Under this new facility, transactions for
infrastructure financing will receive expedited processing.
EX-IM Bank’s Mission
The Export-Import Bank of the United States (Ex-Im Bank) - the official export credit agency
of the United States - supports the purchases of U.S. goods and services by creditworthy
international buyers that are unable obtain credit through traditional trade and structured
finance sources. Ex-Im Bank does not compete with private sector lenders but provides
produc ts that fill in the gaps in areas of trade and structured financing. The Bank assumes
country and credit risks that the private sector is unable or unwilling to accept, and helps to
level the playing field for U.S. exporters by matching the financing those other governments
provide to their exporters. In more than 70 years of operation, Ex-Im Bank has supported
more than $400 billion of U.S. exports to international markets.
How it works
The buyer arranges to obtain allocation of funds under the credit line from the borrower. The
exporter then enters into contract with the buyer, for the eligible items covered under the line
of credit. The contracts would need to conform to the basic terms and conditions of the
respective credit lines. (Particulars of effective lines of credit are available separately).
The delivery period stipulated in the contracts should be such that credit can be drawn from
Exim Bank within the terminal disbursement date stipulated under the respective line of
credit agreements. Also, all contracts should provide for pre-shipment inspection by the buyer
or agent nominated by buyer.
The buyer arranges to comply with procedural formalities as applicable in his country and
then submits the contract to the borrower for approval. The borrower, in turn forwards copies
of the contract to Exim Bank for approval.
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Exim Bank advises approval of the contract to the borrower, with copy of exporter, indicating
approval number, eligible contract value, last date for disbursement, and other conditions
subject to which approval is granted.
Exporter ships the goods covered under the contract and presents documents for negotiation
to the designated bank. The Bank forwards negotiated documents to the buyer.
On receipt of clean non-negotiable set of shipment documents along with the relative
invoices, inspection certificate and a certificate that documents negotiated are as per terms of
L/C and without reserve from the negotiating bank and after having satisfied itself, that all
formalities have been complied with in conformity with the terms of the Credit Agreement,
Exim Bank reimburses the eligible value to the negotiating bank for onward payment to the
exporter. Exim Bank debits the borrower’s account and arranges to collect interest and
principal receivable on due dates as per the terms of the line of credit agreement between
Exim Bank and the borrower.
Organization of EX-IM
EX-IM Bank is managed by a Board of Directors, which has representatives from the
Government, Reserve Bank of India, Export Credit Guarantee Corporation (ECGC) of India,
a financial institution, public sector banks, and the business community.
The Bank's functions are segmented into several operating groups including:
Corporate Banking Group which handles a variety of financing programmes for Export
Oriented Units (EOUs), Importers, and overseas investment by Indian companies.
Project Finance / Trade Finance Group handles the entire range of export credit services such
as supplier's credit, pre-shipment Agricultural Business Group, to spearhead the initiative to
promote and support Agricultural-exports. The Group handles projects and export
transactions in the agricultural sector for financing.
Small and Medium Enterprise: The group handles credit proposals from SMEs under various
lending programs of the Bank.
Export Services Group offers variety of advisory and value-added information services aimed
at investment promotion.
Export Marketing Services Bank offers assistance to Indian companies, to enable them
establish their products in overseas markets.
Besides these, the Support Services groups, which include: Research & Planning, Corporate
Finance, Loan Recovery, Internal Audit, Management Information Services, Information
Technology, Legal, Human Resources Management and Corporate Affairs.
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1. EX-IM (Committees):
I. The Board may constitute such Committees whether consisting wholly of directors or
wholly of other persons or partly of directors and partly of other persons for such
purpose or purposes as it may think fit.
II. Any Committee constituted under sub-section (1) shall meet at such times and places
and shall observe such rules of procedure in regard to the transaction of business at its
meetings as may be prescribed.
III. Fees and allowances of directors and members of Committees. The directors and the
members of a Committee shall be paid such fees and allowances as may be prescribed
for attending the meetings of the Board or of any Committee constituted in pursuance of
this Act and for attending to any other work of the EX-IM Bank: Provided that no fees
shall be payable to the chairman, if he is appointed as a whole-time chairman, or to the
managing director or to any other director or member who is an official of the
Government, the Reserve Bank or the Development Bank.
No person shall be a director of the Board constituted under this Act, who1.
2.
3.
4.
5.
Is, or at any time has been, adjudged insolvent, or
Is of unsound mind and has been so declared by a competent court, or
Is, or has been, convicted of an offence which, in the opinion of the Central
Government, involves moral turpitude, or
Has, in the opinion of the Central Government, so abused his position as a director, as
to render his continuance on the Board detrimental to the interests of the general
public, or
Has been, for any reason, removed from the Board. CHAP BUSINESS OF THE
EXIM BANK CHAPTER IV BUSINESS OF THE EXIM BANK
2. Business of EX-IM Bank:
1.
2.
3.
4.
The EX-IM Bank may grant in or outside India loans and advances by itself or in
participation with any bank or financial institution whether in or outside India for the
purposes of export or import and shall also function as the principal financial
institution for coordinating the working of institutions engaged in financing of the
export and import in such manner as it may deem appropriate.
The EX-IM Bank shall furnish, from time to time, to the Central Government such
returns as the Central Government may require.
The EX-IM Bank may receive in consideration of any of theservices mentioned in
sub-sections (1) and (2) such commission, brokerage, interest, remuneration or fees as
may be agreed upon.
The EX-IM Bank shall not grant any loan or advance or other financial
accommodation on the security of its own bonds or debentures.
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3. Resources of the EX-IM Bank:
Borrowings and Acceptance of Deposits by EX-IM Bank:
a.
b.
1.
2.
1.
2.
3.
a)
b)
The Central Government may, on a request being made to it by the EX-IM Bank,
guarantee the bonds and debentures issued by that Bank as to the repayment of
principal and the payment of interest at such rate as may be fixed by that Government.
The EX-IM Bank may, for the purposes of carrying out its functions under this Act,Issue and sell bonds and debentures with or without the guarantee of the Central
Government;
Borrow money from the Reserve Bank
Repayable on demand or on the expiry of fixed periods not exceeding ninety days
from the date on which the money is so borrowed against the security of stocks, funds
and securities (other than immovable property) in which a trustee is authorized to
invest trust money by any law for the time being in force in India;
Against bills of exchange or promissory notes arising out of bona fide commercial or
trade transactions and bearing two or more good signatures and maturing within five
years from the date of the borrowing;
out of the National Industrial Credit (Long Term Operations) Fund established under
section 46C of the Reserve Bank of India Act, 1934 (2 of 1934) for any of the
purposes specified in that section;
Borrow money from such other authority, organization or institution in India as may
generally or specially be approved by the Central Government;
Accept deposits repayable after the expiry of a period which shall not be less than
twelve months from the date of the making of the deposit on such terms as may
generally or specially be approved by the Reserve Bank. 169
Loans in Foreign Currency:
Not with standing anything contained in the Foreign Exchange Regulation Act, 1973 (46 of
1973) or in any other law for the time being in force relating to foreign exchange, the EX-IM
Bank may, for the purpose of granting loans and advances under this Act, borrow, with the
previous consent of the Central Government, foreign currency from any foreign State or from
any bank or financial institution in any foreign country or otherwise.
Grants, Donations to EX-IM Bank:
The EX-IM Bank may receive gifts, grants, donations or benefactions from Government or
any other source in or outside India.
Export Development Fund:
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With effect from such date as the Central Government may, by notification, appoint, the ExIM Bank shall establish a special fund to be called the Export Development Fund.
Credits to Export Development Fund:
To the Export Development Fund shall be credited
a.
b.
c.
d.
All amounts received for the purposes of that Fund by way of loans, gifts, grants,
donations or benefactions from Government or any other source in or outside India;
Repayments or recoveries in respect of loans, advances or other facilities granted
from the Fund;
Income or profits from investments made from the Fund; and
Income accruing or arising to the Fund by way of interest or otherwise, on account of
the application of the Fund in accordance with the provisions of section 17.
147
Utilization of Export Development Fund:
a.
b.
c.
Where the EX-IM Bank considers it necessary or desirable so to do, it may, subject to
the provisions of sub-sections (2) and (3), disburse or spend from the Export
Development Fund any amount on account or in consequence of the grant of any loan
or advance, or on account or in consequence of entering into any arrangement under
sub-section (1) or clause (b) or clause (c) or clause (d) or clause (q) or Clause (r) or
clause (s) or clause (w) or clause (x) of sub-section (2) of section 10: Provided that
before granting any such loan or advance or entering into any such arrangement, the
EX-IM Bank shall obtain the prior approval of the Central Government. 170
Before seeking the approval of the Central Government under sub-section (1) The
EX-IM Bank shall satisfy itself that banking or other financial institutions or other
agencies are not likely to grant such loan or advance, or to enter into any such
arrangement in the ordinary course of business.
The Central Government shall, before giving its approval, satisfy itself that such loan,
advance or arrangement is necessary as a matter of priority in the interests of the
international trade of the country.
Audit of EX-IM:
1. 1.The accounts of the Ex-IM Bank shall be audited by auditors duly qualified to act as
auditors under sub-section (1) of section 226 of the Companies Act, 1956 (1 of 1956),
who shall be appointed by the Central Government for such term and on such
remuneration as the Central Government may fix.
2. The auditors shall be supplied with a copy of the annual balance-sheet of the EX-IM
Bank and it shall be their duty to examine it together with the accounts and vouchers
relating thereto and they shall have a list delivered to them of all books kept by the
EX-IM Bank and shall at all reasonable times have access to the books, accounts,
vouchers and other documents of the EX-IM Bank.
3. The auditors may, in relation to such accounts, examine any director or any officer or
other employee of the EX-IM Bank and shall be entitled to require from the Board or
officer or other employee of the Ex-IM Bank such information and explanation as
they may think necessary for the performance of their duties
4. The auditors shall make a report to the Ex-IM Bank upon the annual balance-sheet
and accounts examined by them and in every such report they shall state whether in
their opinion the balance-sheet is a full and fair balance-sheet containing all necessary
particulars and properly drawn up so as to exhibit a true and fair view of the state of
affairs of the EX-IM Bank and in case they had called for any explanation or
information from the Board or any officer or other employee of the EX-IM Bank
whether it has been given and whether it is satisfactory.
5. The EX-IM Bank shall furnish to the Central Government within four months from
the date on which its accounts are closed and balanced, a copy of its balance-sheet and
accounts together with a copy of the auditors' report and a report of the working of the
EX-IM Bank during the relevant year, and the Central Government shall, as soon as
148
may be after they are received by it, cause the same to be laid before each House of
Parliament.
6. Without prejudice to anything contained in the preceding sub- sections, the Central
Government may, at any time, appoint the Comptroller and Auditor-General of India
to examine and report upon the accounts of the EX-IM Bank and any expenditure
incurred by him in connection with such examination and report shall be payable by
the EX-IM Bank to the Comptroller and Auditor-General of India.
5.5
Export Credit Guarantee Corporation of India (ECGC):
Export Credit Guarantee Corporation of India Limited was established in the year 1957 by
the Government of India to strengthen the export promotion drive by covering the risk of
exporting on credit. Being essentially an export promotion organization, it functions under
the administrative control of the Ministry of Commerce & Industry, Department of
Commerce, and Government of India. It is managed by a Board of Directors comprising
representatives of the Government, Reserve Bank of India, banking, insurance and exporting
community. ECGC is the fifth largest credit insurer of the world in terms of coverage of
national exports.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Established 30 July 1957
Mandated to promote exports
50 Years of committed service
5th Largest Credit insurer of the world
Admin control – Min of Commerce & Industry
Authorized capital Rs.1000cr
Paid-up capital Rs. 900cr
Registered office MUMBAI, 5 ROs, 52 Branches
WAN connectivity,
Member of BERNE union (Intl Union of Credit Investment Insurers) 53 members
from 42 Countries
Alliance with Coface (France), D&B.
Registered with IRDA during Sep 2002.
Maintains list of buyers with adverse experience.
Full fledged 'factoring’ scheme launched.
Domestic credit Insurance Policies are now offered for exporters.
All Branches of ECGC and its HQ are ISO 9001:2000 certified.
Largest data base of buyers.
Largest Policy – short term Rs.250 crores.
Largest database on buyers 3 lakhs.
Largest credit limits Rs.80 Crores.
Largest claim paid Rs.120 Crores.
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•
•
•
•
•
•
•
Quickest claim paid 2 days.
Highest compensation-Iraq Rs 788 Crores.
Accredited with “IAAA” by ICRA, associate of Moody’s Investors Service,
indicating highest claim paying ability & best prospects of meeting PH’s obligation.
Tie-up with NSIC (National Small Industries Corporation) to offer our products to a
number SMEs spread over India.
Refined and simplified Policy to suit SMEs. Criteria: Should possess certificate issued
by MSME.
Offers MARINE INSURANCE cover FREE for its Policy Holder as add-on benefit.
Tied up with United India Insurance for this purpose.
Signs MOU with MOC every year and is expected to achieve “excellent” grade for
the financial year 2005-06.
Cooperation agreement with “Multilateral Investment Guarantee Agency” (MIGA) an arm of
World Bank. MIGA provides:
1. Political insurance for foreign investment in developing countries.
2. Technical assistance to improve investment climate.
3. Dispute mediation service. Under this agreement protection is available against
political and economic risks such as transfer restriction, expropriation, war, terrorism
and civil disturbances etc.
Role of ECGC
•
•
•
Provides a range of credit risk insurance covers to exporters against loss in export of
goods and services
Offers guarantees to banks and financial institutions to enable exporters to obtain
better facilities from them
Provides Overseas Investment Insurance to Indian companies investing in joint
ventures abroad in the form of equity or loan
How does ECGC help exporters?
•
•
•
•
•
•
Offers insurance protection to exporters against payment risks
Provides guidance in export-related activities
Makes available information on different countries with its own credit ratings
Makes it easy to obtain export finance from banks/financial institutions
Assists exporters in recovering bad debts
Provides information on credit-worthiness of overseas buyers
Need for Export Credit Insurance:
Payments for exports are open to risks even at the best of times. The risks have assumed large
proportions today due to the far-reaching political and economic changes that are sweeping
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the world. An outbreak of war or civil war may block or delay payment for goods exported.
A coup or an insurrection may also bring about the same result. Economic difficulties or
balance of payment problems may lead a country to impose restrictions on either import of
certain goods or on transfer of payments for goods imported. In addition, the exporters have
to face commercial risks of insolvency or protracted default of buyers. The commercial risks
of a foreign buyer going bankrupt or losing his capacity to pay are aggravated due to the
political and economic uncertainties. Export credit insurance is designed to protect exporters
from the consequences of the payment risks, both political and commercial, and to enable
them to expand their overseas business without fear of loss.
ECGC Schemes:
Maturity Factoring:
Factoring is the purchase of accounts receivables. The supplier (exporter) assigns his
accounts receivables in favor of the Factor and gives notice of assignment to the debtor.
Factoring provides;
•
•
•
•
Financing, by way of pre-payment of the receivables;
Sales ledger maintenance;
Collection of receivables/recovery of bad debts and
Credit protection against bad debts.
Construction Works Policy:
Construction Works Policy is designed to provide cover to an Indian contractor who executes
a civil construction job abroad.
Overseas Investment Guarantee:
ECGC has evolved a scheme to provide protection for Indian Investments abroad. Any
investment made by way of equity capital or untied loan for the purpose of setting up or
expansion of overseas projects will be eligible for cover under investment insurance. The
investment may be either in cash or in the form of export of Indian capital goods and
services. The cover would be available for the original investment together with annual
dividends or interest receivable. The risks of war, expropriation and restriction on remittances
are covered under the scheme. As the investor would be having a hand in the management of
the joint venture, no cover for commercial risks would be provided under the scheme.
Exchange Fluctuations Risk Cover:
The Exchange Fluctuation Risk Cover is intended to provide a measure of protection to
exporters of capital goods, civil engineering contractors and consultants who have often to
receive payments over a period of years for their exports, construction works or services.
Where such payments are to be received in foreign currency, they are open to exchange
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fluctuation risk as the forward exchange market does not provide cover for such deferred
payments.
Export (Specific Buyers) Policy:
Buyer wise Policies - Short Term (BP-ST) provide cover to Indian exporters against
commercial and political risks involved in export of goods on short-term credit to a particular
buyer. All shipments to the buyer in respect of whom the policy is issued will have to be
covered (with a provision to permit exclusion of shipments under LC). These policies can be
availed of by
•
•
Exporters who do not hold SCR Policy and
By exporters having SCR Policy,
In case all the shipments to the buyer in question have been permitted to be excluded from
the purview of the SCR Policy.
Buyer Exposure Policies:
Presently, in the policies offered to exporters premium is charged on the export turnover,
though the Corporation’s exposure on each buyer is controlled through a system of approval
of credit limits on the buyer for covering commercial risks.
Transfer Guarantee:
When a bank in India adds its confirmation to a foreign Letter of Credit, it binds itself to
honor the drafts drawn by the beneficiary of the Letter of Credit without any recourse to him
provided such drafts are drawn strictly in accordance with the terms of the Letter of Credit.
The confirming bank will suffer a loss if the foreign bank fails to reimburse it with the
amount paid to the exporter. This may happen due to the insolvency or default of the opening
bank or due to certain political risks such as war, transfer delays or moratorium, which may
delay or prevent the transfer of funds to the bank in India. The Transfer Guarantee seeks to
safeguard banks in India against losses arising out of such risks. Transfer Guarantee is issued,
at the option of the bank to cover either political risks alone, or both political and commercial
risks.
Export Finance (Overseas Lending) Guarantee:
If a bank financing an overseas project provides a foreign currency loan to the contractor, it
can protect itself from the risk of non-payment by the contractor by obtaining Export Finance
(Overseas Lending) Guarantee. The premium rate is 0.90% per annum for 75% cover and
1.08% per annum for 90% cover. Premium is payable in Indian Rupees. Claims under the
Guarantee will also be paid in Indian Rupee
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Small Exporters Policy:
The Small Exporter's Policy is basically the Standard Policy, incorporating certain
improvements in terms of cover, in order to encourage small exporters to obtain and operate
the policy. It is issued to exporters whose anticipated export turnover for the period of one
year does not exceed Rs.50 lacks.
Software Project Policy:
The Services Policies of the Corporation which have been in existence for some time were
offered to provide protection of exporters of services including software and related services.
However it was found that the general services policy does not meet with the exact
requirements of software exporters. It was therefore decided to introduce a new credit
insurance cover to meet the needs of the software exporters, namely, software projects policy,
where the payments will be received in foreign exchange. The general services policies will
continue to be offered for the export of services other than software and related services.
Insurance covers for Buyer's Credit and Line of Credit:
Buyer's Credit is a credit extended by a bank in India to an overseas buyer enabling the buyer
to pay for machinery and equipment that he may be importing from India for a specific
project. A Line of Credit is a credit extended by a bank in India to an overseas bank,
institution or government for the purpose of facilitating import of a variety of listed goods
from India into the overseas country. A number of importers in the overseas country may be
importing the goods under one Line of Credit.
1. Service Policy:
Where Indian companies conclude contracts with foreign principals for providing them with
technical or professional services, payments due under the contracts are open to risks similar
to those under supply contracts. In order to give a measure of protection to such exporters of
services, ECGC has introduced the Services Policy.
The Various types of service policy are:
•
•
•
•
Specific Services Contract (Comprehensive Risks) Policy;
Specific Services Contract (Political Risks) Policy;
Whole-turnover Services (Comprehensive Risks) Policy; and
Whole-turnover Services (Political Risks) Policy
(i) Consignment Exports Policy (Stockholding Agent and Global Entity):
Economic liberalization and gradual removal of international barriers for trade and commerce
are opening up various new avenues of export opportunities to Indian exporters of quality
goods. One of the methods being increasingly adopted by Indian exporters is consignment
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exports where the goods are shipped and held in stock overseas ready for sale to overseas
ready for sale to overseas buyers, as and when orders are received. To protect the Indian
Exporters from possible losses when selling goods to ultimate buyers, it was decided to
introduce Consignment Policy Cover.
There are two policies available for covering consignment export viz;
•
•
Consignment Exports (Stock-holding Agent)
Consignment Exports (Global Entity Policy)
(ii) Specific Shipment Policy - Short Term (SSP-ST):
Specific Shipment Policies - Short Term (SSP-ST) provide cover to Indian exporters against
commercial and political risks involved in export of goods on short-term credit not exceeding
180 days. Exporters can take cover under these policies for either a shipment or a few
shipments to a buyer under a contract. These policies can be availed of by
•
•
Exporters who do not hold SCR Policy
Exporters having SCR Policy,
(iii) SCR or Standard Policy:
Shipments (Comprehensive Risks) Policy, commonly known as the Standard Policy, is the
one ideally suited to cover risks in respect of goods exported on short-term credit, i.e. credit
not exceeding 180 days. This policy covers both commercial and political risks from the date
of shipment. It is issued to exporters whose anticipated export turnover for the next 12
months is more than Rs.50 lakhs.
IT - Enabled Service (Specific Customer) Policy:
IT-enabled Services (Specific Customer) Policy is issued to cover the following commercial
and political risks involved in rendering IT-enabled services to a particular customer:
a. Commercial Risks:
•
•
Insolvency of the customer.
Failure of the customer to make the payment due within a specified period, normally
four months from the due date
• Buyer's failure to accept the services rendered (subject to certain conditions).
b. Bank Risks:
•
Bankruptcy of A/c opening bank.
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•
Failure of A/c opening bank to make the payment due within a specified period,
normally within four months from the due date (Non-payment due to discrepancies in
the document will not be covered).
c. Political Risks:
•
•
•
•
Imposition of restrictions by the Government of the customer’s country or any
Government action which may block or delay the transfer of payment made by the
customer;
War, civil war, revolution or civil disturbances in the customer’s country;
New import restrictions or cancellation of a valid import license by authorities in the
customer’s country;
Cancellation by the Govt. of India a legally valid and binding contract between the
exporter and the customer.
2. Export Turnover Policy:
Turnover policy is a variation of the standard policy for the benefit of large exporters who
contribute not less than Rs. 10 lacs per annum towards premium. Therefore all the exporters
who will pay a premium of Rs. 10 lacs in a year are entitled to avail of it.
Packing Credit Guarantee:
Timely and adequate credit facilities at the pre-shipment stage are essential for exporters to
realize their full export potential. Exporters may not, however, be easily able to obtain such
facilities from their bankers for several reasons, e.g. the exporter may be relatively new to
export business, the extent of facilities needed by him may be out of proportion to the equity
of the firms or the value of collateral offered by the exporter may be inadequate. The Packing
Credit Guarantee of ECGC helps the exporter to obtain better and adequate facilities from
their bankers. The Guarantees assure the banks that, in the event of an exporter failing to
discharge his liabilities to the bank, ECGC would make good a major portion of the bank's
loss. The bank is required to be co-insurer to the extent of the remaining loss.
3. Specific Policy for Supply Contract:
The Standard Policy is a whole turnover policy designed to provide a continuing insurance
for the regular flow of an exporter's shipments for which credit period does not exceed 180
days. Contracts for export of capital goods or turnkey projects or construction works or
rendering services abroad are not of a repetitive nature and they involve medium/long-term
credits. Such transactions are, therefore, insured by ECGC on a case-to-case basis under
specific policies.
The Oxford University Press defines global marketing as “marketing on a worldwide scale
reconciling or taking commercial advantage of global operational differences, similarities and
155
opportunities in order to meet global objectives.” Oxford University Press’ Glossary of
Marketing Terms.
Here are three reasons for the shift from domestic to global marketing as given by the authors
of the textbook, Global Marketing Management—3rd Edition by Masaaki Kotabe and
Kristiaan Helsen, 2004.
5.6
Trade Development Authority of Pakistan [TDAP]
Activities: Demand
On the demand side, EPB helps exporters to participate in exhibitions abroad and sends
delegations to export markets to explore new markets and develop the traditional markets.
Product and market reports are developed and shared through the website as well. Export
promotional activities are carried out in coordination with trade bodies at home and Pakistan's
trade missions abroad.
Supply
On the supply side, EPB has established 24 training institutes and projects in various export
sectors to train necessary manpower that can manage the export trade and industry
professionally, meeting the requirements of the export markets. Moreover EPB has
financed/part-financed 3 pollution control projects and 2 laboratories for the export
industries. EPB also provides product specific and general policy advice to the government to
realize and enhance the export potential of the economy.
Remaining Competitive
Like many countries, Pakistan is facing greater export competition in the region. To retain
competitive edge in the traditional markets and to acquire the same in the new markets, EPB
is emphasizing quality, modernization, and innovation in Pakistan's export drive.
The products of Pakistan always maintain a greater export quality. For example, black soft
leather is carrying a vast market in European and American countries with great statistics for
exporting to Latin countries.
Replacement of EPB to TDAP
Now the government of Pakistan has taken a decision by replacing the Export Promotion
Bureau (EPB) to Trade Development Authority of Pakistan (TDAP) and in connection of
these changes and replacement all the assets and authorities of EPB are being transferring to
TDA.
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Introduction to TDAP
The Trade Development Authority of Pakistan (TDAP) is a body corporate established on 8
November, 2006, under a Presidential Ordinance. The Ordinance will be tabled in the
Parliament as an Act for approval. The TDAP is the successor organization to the Export
Promotion Bureau (EPB) and is mandated to become a dedicated, effective and empowered
organization that is professionally managed. TDAP, as part of its trade ‘development’
mandate, as opposed to ‘export promotion’ only, will be dedicated to the ‘holistic’
development and promotion of goods and services for exports globally. TDAP in this
enhanced responsibility and role will create direct linkages with stakeholders, local and
abroad, aiming for a ‘Quantum Leap’ in exports. The administrative ministry of the TDAP
will be the Ministry of Commerce.
Set up in 1963 as an attached department of the Ministry of Commerce, the Export Promotion
Bureau facilitated exporters across the country, helping them overcome challenges by
leveraging opportunities on the supply and demand side. It funded initiatives, and assisted in
establishing common facilities with stakeholders. For 43 years, the erstwhile organization
was the primary agency of the Government of Pakistan that played a vital role in promoting
Pakistan’s goods and services internationally.
Over the 43 year period EPB played a critical role in helping exporters to participate in 30 to
80 exhibitions abroad each year. Regularly sent and received between 20 and 40 business
delegations each year to and from export destinations to explore new markets and enhance
market share through sustainable growth and diversification. Over the years EPB has
supported the development of equal number of trade policies, implementing the consequential
initiatives it was assigned. Its role in Textile Quota management is especially significant. It
has issued millions of GSP Certificates and management of gold and jewelry export
regulations. More than 20,000 exporters have been facilitated and part-funded to exhibit and
grow their exports; over 2,000 delegates have been sent or hosted in Pakistan.
The setup of the Expo Centre in Karachi, and now in progress in Lahore, is a milestone in
assisting exports, managing Pakistan’s image and providing the country and the city of
Karachi significant new economic opportunities. The organization has carried out mega
export promotional activities, within and outside Pakistan, hosted individually and also in coordination with trade bodies. On supply side, EPB established over 22 training institutes and
projects in various export sectors to train necessary manpower to manage the export trade. It
has provided the forum for exporters and importers dispute resolution through the mechanism
of commercial courts in collaboration with the judiciary.
One of the most significant contributions of the EPB, as desired by the then President of
Pakistan, General Pervez Musharraf, was to provide Pakistan with its first ever Export
Strategy and a roadmap for export growth. Undertaken in close consultation with
stakeholders in year 2000, analysis of Pakistan’s Strengths, Weaknesses, Opportunities and
Threats (SWOT) resulted in the development of the strategy for exports. This strategy
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differentiated between strategic thrusts directly impacting achievement of Volume and Value
in exports and those that would cause a more Enabling Environment for the private sector to
realize their aspirations. This strategy articulated enhancement of market share of Pakistan’s
Core product categories in the major markets, achieving value addition and increased
competitive strength, specifically focusing on selected product sectors (‘Developmental’) and
weak geographical areas, for product and market diversification. The strategy also
emphasized the energizing of women entrepreneurship in support of Pakistan’s exports and
enhancing overall economic value addition in the country, achieving bilateral and multilateral
trade agreements for gaining market access, leveraging economic relations with countries
where Pakistan already enjoyed strong bilateral relationships.
The significance of EPB’s achievements in more than four decades is evident from the
significant rise in exports. Pakistan’s exports reported at just under quarter of a billion
dollars, increased by over 70 fold since 1963, to touch nearly US $ 16.5 billion in 2005/06.
The growth in the last 7 years alone has been US $ 8.68 billion i.e. 112 % more than 1998/99
(US $7.78 billion).
TDAP Vision
The established TDAP would usher in significant changes to the business of trade
development and go beyond the relatively narrower and restricted promotion mandate of the
Export Promotion Bureau. The TDAP would be involved in the holistic planning and
development of the national supply side to fully realize and leverage the true potential of
different sectors. The establishment of a new, dedicated and empowered organization with
the capacity of meeting the demand side of new business challenges has also been most
opportune at a time when the country’s export sector is under some pressure within the core
product sectors.
TDAP will be overviewed by a Policy Board, chaired by the Commerce Minister and its
membership will be of public and private sector stakeholders. TDAP will be staffed by highly
qualified professionals, who will be paid at market- based compensation levels and offer
career advancement opportunities and continuity of employment to build up institutional
knowledge and expertise of trade development and marketing. They will be empowered to
run the day to day affairs of the Authority from its Head Office in Karachi.
Exports and trade development will be playing an increasingly important role in the future
strengthening of the country’s economy and also helping bring prosperity to more and more
of its people. TDAP invites you to visit our website and learn more about us.
Trade protection
Definition:
The imposition of duties or quotas on imports in order to protect domestic industry against
foreign competition
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World Trade has grown rapidly in the last decades; but goods do not yet ship freely from
place to place. Discussions on trade barriers usually focus on tariffs, but nontariff measures
are increasingly considered to be major obstacles to trade. This is why both types of barriers
are Included as key components of the Enabling Trade Index (ETI). There are different
methods of measuring trade barriers. The direct method is to consider tariffs, while indirect
methods are to consider either deviation from the Law of One Price (LOP) or from expected
trade patterns. The latter method is either based on the residuals derived from augmented
gravity equations, or it relies on the methodology of border effects.
With the rise of the information age and growth of the knowledge economy, managing and
protecting information, as well as enforcing against its misuse, have become increasingly
critical to business enterprises. Aside from protecting the intellectual capital of a business
through the patent, copyright and trademark registration systems, the law further protects
against misuse of confidential information, including trade secrets, to a business that takes the
appropriate steps to protect such information.
A business may choose to keep certain business information confidential and to maintain
trade secrets rather than seeking statutory protection through patent or copyright laws. Patents
and copyright are statutorily protected for a limited time only, and only in the jurisdictions in
which protection is applied for and registered. On the other hand, trade secrets and
confidential information, if properly protected and managed, can be preserved indefinitely
and are not restricted to specific jurisdictions. Furthermore, in many situations, the subject
matter of a trade secret might not be suitable or even eligible for patent or copyright
protection under the relevant statutes, thus leaving trade secret protection as the only option.
The law relating to confidential information and trade secrets has developed partly to
promote certain desirable commercial behaviour. While aiming to enforce good faith
behaviour between commercial parties and provide remedies for misuse of confidential
information, the law has also evolved to discourage undue restraints on trade, especially in
the area of non-competition by former employees. This paper examines the fundamental
concepts in the law regarding confidential information and trade secrets in the context of
commercial dealings. Issues relating to confidentiality of personal information, such as under
the Freedom of Information and Protection of Privacy Act and the Personal Information
Protection and Electronic Documents Act (Canada), are not examined in this paper, but it
should be noted that these and other statutes can create obligations that should be considered
in the formation of an information-management strategy for a Canadian business.
Trade protection is on the rise around the world and risks pushing the economy into
prolonged contraction. Officials have proposed more than 60 new trade restrictions since the
beginning of the financial crisis. While a serious outbreak of protectionism has yet to occur,
vigilance and leadership are required.
With the global economy teetering on the abyss of severe recession, political pressures
demanding import protection to protect employment are surfacing with increasing intensity
159
around the world. However, if there is one lesson from the experience of the 1930s, it is that
raising trade barriers merely compounds recessionary forces – and risks pushing the economy
into prolonged contraction.
For this reason, G20 leaders signed a pledge on 15 November 2008, to avoid protectionist
measures. However, since then, several countries, including 17 of the G20, have implemented
47 measures whose effect is to restrict trade at the expense of other countries. While the trend
is of concern, to date, these measures have probably had only marginal effects on trade. The
sharp contractions in trade volumes evident in recent months are a consequence of the global
recession and financial feedbacks through skyrocketing costs of a shrunken pool of trade
finance, not protection. Nonetheless, the trend in protection is up and the full effects of the
recession have not yet been felt, raising concern.
Several countries have adopted new protectionist measures
Since the beginning of the financial crisis, officials have proposed and/or implemented
roughly 78 trade measures, according to the World Bank’s monitoring list of trade and traderelated measures. Of these, 66 involved trade restrictions, and 47 trade-restricting measures
eventually took effect (Figure 1). The trade effects of these measures are difficult to evaluate
due to the prevalence of non-tariff barriers, subsidies and contingent protection – a task that
nevertheless remains to be done. Nonetheless, the effects of these measures so far are
probably minor relative to size of unaffected markets, but of considerable importance for
particular exporters shut out of protected markets.
World Bank staff, List of Trade-related Measures, February 2009. Excludes anti-dumping
cases.
Figure 1: Numerous trade restrictions
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Tariff increases comprise only about half of these actions (Figure 2). For example, Russia
raised tariffs on used automobiles, and Ecuador raised tariffs on more than 900 items. Nontariff measures include Argentina’s imposition of non-automatic licensing requirements on
auto parts, textiles, TVs, toys, shoes, and leather goods and Indonesia’s requirement that five
categories of goods (including garments, footwear, toys, electronics, food and beverages)
would be permitted through only five ports and airports. In some countries, tightening
standards have slowed import entry. For example, India banned Chinese toys, and China
banned imports of n Irish pork and rejected some Belgian chocolate, Italian brandy, British
sauce, Dutch eggs and Spanish dairy products.
Figure 2: Rich countries use subsidies, poor countries use duties
Export subsidies are particularly egregious because they contravene the draft Doha
modalities. The EU announced new export subsidies on butter, cheese, and milk powder.
Less obviously, both China and India have increased the rebate on the duty drawback system
for exporters, and, although the subsidy component is a matter of discussion, the timing of
these measures raises questions.
Subsidies proposed for the auto industry have proliferated and total some $48 billion
worldwide, mostly in high-income countries ($42.7 billion). In addition to the US direct
subsidy of $17.4 billion to its three national companies, Canada, France, Germany, the UK,
China, Argentina, Brazil, Sweden and Italy have also provided direct or indirect subsidies –
not including Australia’s support to its car dealers and South Korea’s and Portugal’s support
to their component suppliers. To the extent that the industry is laden with excess capacity,
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these subsidies impede exit and delay adjustment. Even worse, subsidies may be linked to
requirements that companies preserve domestic employment, even at the cost of shutting
more efficient plants abroad in developing countries. (President Sarkozy reportedly proposed
that Renault and Peugeot-Citroen shut plants in the Czech Republic to maintain employment
in France as part of its €6 billion package.) Moreover, to prevent this, governments have had
to react to the policies of neighbours –Canada has matched the subsidies given to Detroit
automakers to ensure that Canadian plants of American producers remain open.
A remarkable trend emerging from these actions is the reliance of developed countries on
subsidies rather than border barriers, while developing countries have deployed all forms of
protection (Figure 2). This undoubtedly is testimony to the superior financial strength of
public budgets in developed countries. However, once economic pressures to stimulate
economies are replaced with the inevitable need to reduce deficits; this pattern may portend
equally severe pressures to wall off trade competition.
Antidumping cases are on the rise
After a period of slowdown, the number of antidumping cases (both investigations initiated
and imposition of duties) surged in 2008, especially in the second semester (Figures 3 and 4).
Compared to 2007, antidumping initiations grew by 15% and findings with imposition of
duties grew by 22%. Developing countries accounted for the majority of initiations, though
developed countries accounted for the greatest number of duty impositions. India was the
most active, accounting for 29% of total initiations. In December alone, India initiated antidumping investigations involving both hot- and cold- rolled stainless steel products, affecting
19 countries. In addition to Japan, three developing countries -- China, South Africa, and
Thailand – were the target in both investigations. The US and EU were the two countries that
most frequently imposed duties. For example, the EU in December 2008 imposed duties on
preserved fruits from China as well as on imports of welded tubes and pipes of iron or nonalloy steel from Belarus, China and Russia.
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Figure 3: Antidumping cases are up
Figure 4: Growth anti-dumping cases
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Trends in agriculture, finance and labour movement warrant monitoring
Protection to agriculture may not require new measures because existing laws automatically
provide increases in subsidies with declines in agricultural prices. Many programmes – such
as those of the EU, US, Japan, South Korea, to name a few – entail price supports, so when
commodity prices fall, direct payments to producers increase. For example, we estimate that
US overall trade distorting subsidies of about $8.1 billion in 2008 are likely to rise to $9.9
billion 2009 if current price projections materialise. Trade-distorting subsidies push the
global burden of adjustment onto commodity producers in Africa, Asia, and Latin America,
where governments do not have resources to match subsidies of the wealthier countries.
These measures also ignore the protectionist bias in the financial sector. While serving the
urgent public purpose of re-establishing financial stability, virtually all nations have focused
their financial subsidies on domestically owned banks rather than subsidiaries of foreign
banks (perhaps a consequence of relative size more than national protection).
Workers in some countries have campaigned for increased restrictions on foreign labour. In
the UK, for example, the dispute over the use of Portuguese and Italian contractors in oil
refining at a time of surging unemployment led workers to strike in protest at the end of
January and triggered several sympathy protests across Britain. Workers complained that
foreign companies were overlooking skilled British workers. Malaysia in January banned the
hiring of foreign workers in factories, stores, and restaurants to protect its citizens from mass
unemployment amid the global economic downturn. To their credit, the Swiss voted in a
referendum in early February to accept EU labour rules, including foreign labour from newly
acceded countries.
America generates a storm
In late January, the US House of Representatives passed a stimulus bill that would provide a
25% competitive margin for US iron and steel for all expenditures under the bill. Several
governments, including those of Canada and the EU, and well-known economists objected
forcefully to the provisions (Hufbauer and Schott 2009). The final version, which passed last
week, expanded the coverage of the provision to all manufactured goods but added a
stipulation that the provision “be applied in a manner consistent with US obligations under
international agreements” (Sec. 1604 (d)). This apparently exempts the 27 EU member states
and the 12 other countries that have signed the WTO Agreement on Government
Procurement and the countries with Free Trade Agreements. These countries collectively
supply about 25% of US iron and steel imports. According to USTR and private lawyers, this
seemingly small change puts the new stimulus legislation into conformity with existing
legislation and would imply no new restriction on federal purchases. It would still mean that
government purchases of iron, steel and other manufactures from China, India, and Russia,
among others, would be subject to the provisions.
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But trade integration and stronger rules have thus far muted protectionism
Several factors have clearly muted protectionist pressures and distinguish this global
downturn from the pressures of the 1930s. Countries are far more interdependent through
supply chains, imported inputs, and even services, and so export interests are far more
powerful than before relative to pure import-competing industries. The simple average of
trade-to-GDP today is 96% compared to 55% in 1970 – and parts and components trade, an
indicator of supply chains, has more than doubled as a proportion of total trade. Successive
GATT/WTO agreements have provided much greater legal stability of trading relations.
Because of this quite different political economy today, a few proposed restrictions have been
rejected or not enacted. In Brazil, for example, the bureaucracy attempted to impose
widespread licensing arrangements and import controls reminiscent of the 1970s, only to
provoke a response of outrage from the private sector that led to immediate reversal.
Similarly, the more egregious forms of the Buy America provision appear to have been
circumvented. Moreover, about 10 of the 77 proposed and implemented changes in trade
policies involved steps toward greater liberalisation, mostly related to free trade agreements.
Also, most countries have flexible exchange rates, and, as capital has sought safety in US
Treasuries, nominal exchange rates against the US dollar have plummeted. This shift in
relative prices domestically has given import-competing interests considerable protection.
The floating rate regimes have arguably pre-empted a wave of competitive devaluations that
disrupted markets in the 1930s. For the handful of countries intervening in exchange rate
markets, it generally has been to prevent further depreciations – such as Argentina and
Russia. China has apparently ceased accumulating reserves since October, and the nominal
rate has stabilised after a two-year 20% appreciation.
Forceful leadership can help
The cost of inaction on the Doha Agenda is rising. While thus far most countries have not
raised tariffs to bound levels or taken full advantage of headroom on agricultural subsidies, as
the recession deepens, many countries may well do so. By the recession’s end, it is a safe bet
that the lower bindings and caps on agricultural subsidies contained in the draft texts would
have kept many markets open that will be closed by the end of 2009. This underscores the
importance of pushing forward with a rapid conclusion of the Doha round.
The recent decision by the WTO membership on 9 February 2009, in the Trade Policy
Review Body will, in the meantime, contribute to regular multilateral surveillance of the
world trading system (WTO 2009).
The G20, for its part, could adopt additional measures that would strengthen the fragile
consensus against further protectionism. It could, for example:
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•
•
•
•
•
Commit to greater transparency by agreeing to provide quarterly reports on new trade
restrictions and industrial and agricultural subsidies to the WTO, together with a
mandatory analysis of the trade restriction on employment (since this would create
new room for technical analysis and political discussion within member countries).
Agree to promote use of standard safeguard provisions in lieu of antidumping laws.
Agree to accelerate progress on technical issues still separating negotiators on the
Doha round, including producing new working texts on the special safeguards
mechanism, sectoral negotiations, and cotton.
Advocate greater Aid for Trade for low-income countries.
And decide to endorse voluntary implementation of the trade facilitation provisions,
not as an “early harvest”, but in a non-binding fashion linked to overall trade
facilitation reforms design to lower trading costs.
Arguments for Trade Protection:
The trade between nations-international trades/foreign trade-despite many merits also has its
limitations and shortcomings as well as its opponents. Some of the limitations and
shortcomings are:
1. Political constraints.
2. Restrictions on mobility of resources.
3. Greater risk involved.
4. Payments in foreign exchange.
Thus, opponents of free trade offer the following arguments:
1. Infant industry argument:
New domestic industries needs protection from foreign competition until it is ready for and
mature.
Counter argument:
It is difficult developed countries such as to make such a case U.S. and Japan.
2. National security argument:
That the defence related industries must be protected to ensure national security. A nation
cannot be dependent on foreign nations for its defence needs.
Counter argument:
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Such an argument holds ground during a war period. Moreover, the many countries have
more than enough weapons already.
3. Employment argument;
The domestic industries need protection from "cheap" imports in order to protect jobs of our
workers. It is especially true when foreign nations dump their products (sell below cost) to
capture our markets. Also this argument is politically very appealing for politicians.
Counter argument:
We can save jobs in our domestic industries at the cost of making imports more expensive for
the consumers. Moreover, domestic products may also be expensive and of lower quality.
4. Cheap foreign labour argument;
That how can we compete with nations where wages may be far lower than what pay our
workers?
Counter argument:
Cheap labour does not necessarily mean cheap products. Workers need to be more
productive.
Despite these arguments the major flaw for protection is the possibility of retaliation by other
nations who will restrict imports from abroad. Moreover, other nations can only buy from us
by selling their products to us and by earning rupees. Protection from imports can save job
our domestic industries but retaliation by other nations will result in the loss of jobs in our
export industries.
Forms of Protection
1. Embargo: Legal restriction on trading with "unfriendly" countries. 2. Non-trade barrierssuch as:
a. using health and safety standards to discourage imports.
b. Restrictions on opening consulates to collect trade and other data.
c. Refusal by labour unions to unload cargo from ships docked at ports. 4. Tariff: A tax on
imports to increase their price and decrease their quantity demanded. 5. Quotas: A limit on
the quantity of goods to be imported, thus, decreasing their supply.
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However, 154-member World Trade Organization (WTO) helped negotiate trade agreements
by the bulk of the world's trading nations and ratified in their parliaments. WTO's goal is to
help all nations to remove restrictions on international trade and promote free trade.
Indian Trade Production:
History of Indian Trade
Right from ancient times till the establishment of the British Empire, India was famed for her
fabulous wealth. Even during the medieval period, i.e. roughly from the 12th to the 16th
centuries, the country was prosperous despite the frequent political upheavals. A notable
feature of this period was the growth of towns in various parts of the country. This
development was the result of the political and economic policies followed by the Muslim
rulers. These towns grew into trade and industrial centres which in turn led to the general
prosperity.
During the Sultanate period, which lasted from the early 13th to the early 16th centuries, the
economy of the towns flourished. This was due to the establishment of a sound currency
system based on the silver tanka and the copper dirham. Ibn Batuta the 14th century Moorish
traveller had visited India during the Sultanate period. He had described the teeming markets
of the big cities in the Gangetic plains, Malwa, Gujarat and Southern India. The important
centres of trade and industry were Delhi, Lahore, Bombay, Ahmedabad, Sonargaon and
Jaunpur. Coastal towns also developed into booming industrial centres with large
populations.
During the two hundred years of Mughal rule i.e. from the 16th to the 18 th centuries the
urbanisation of India received a further impetus. The Mughal era witnessed the establishment
of a stable centre and a uniform provincial government. During this age of relative peace and
security, trade and commerce flourished. The burgeoning foreign trade led to the
development of market places not only in the towns but also in the villages. The production
of handicrafts increased in order to keep up with the demand for them in foreign countries.
The prime urban centres during the Mughal era were Agra, Delhi, Lahore, Multan, Thatta and
Srinagar in the north. The important cities in the west included Ahmedabad, Bombay (then
known as Khambat), Surat, Ujjain and Patan (in Gujarat). The flourishing trade centres in the
eastern part of the country were Dacca, Hoogli, Patna, Chitgaon and Murshidabad. Most of
these cities boasted of sizeable populations.
1). Products and Manufactures
The accounts of foreign travellers contain descriptions of the wide variety of exquisite goods
sold in the markets of those days. India was famous for its textiles, which formed one of the
chief items of export. Duarte Barbosa a Portuguese official in Cochin in the early 16th century
described Gujarat, in the western region as a leading cotton trade centre. Textiles from
Gujarat were exported to the Arab countries and to South-east Asia. Patola, which is a kind of
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silk, dyed in natural colours, was highly popular in South-east Asia. It was very much in
demand among the wealthy classes in Malaysia, Indonesia, and the Phillipines.
In the east Bengal was another important region for a wide variety of textiles. Ibn Batuta the
14th century Moorish traveller saw many cotton trade centres during his sojourn in Bengal.
Silks were also manufactured there. The textile products included quilts of embroidered
tussar, or munga on a cotton or jute, silk and brocade edged handkerchiefs. Dhaka muslin was
renowned for its fineness. Kasimbazaar in Bengal was an important trade centre for cotton
and silk goods. Sirbund, a type of cloth used for tying turbans was manufactured in Bengal. It
was highly popular in Europe.
Similarly, Malabar in Kerala was also famous for its coloured and printed cloth material. The
other important textiles producing centres in the south were Golconda, Shaliat and Pulicat.
The last two were major trading centres for a wide variety of cottons. Golconda was famous
for its Kalamkaaris. These were finely painted cotton fabrics with motifs from Hindu
mythology. They were exported through the port city of Masulipatnam. Palampores, which
were another variety of painted fabrics, were popular in the Mughal and Deccan courts. These
were bedspreads made of Calico cloth. The borders of these pieces were block printed while
the centre depicted deoicted the ‘Tree of Life’ motif made by hand. Indian textiles whether
from Bengal, Gujarat or the South were highly appreciated abroad for their fine texture,
elaborate design and brilliant colours.
Hardwood furniture, embellished with inlay work was a very popular item. The furniture was
modelled on the European design but the expensive carvings and inlays were inspired by the
ornate Mughal style. The production centres were in Sindh, Gujarat and the Deccan. Motherof pearl inlay against a black lac background was a traditional design in Gujarat.
Carpets were used both in ancient and medieval India but it was in the 16th century during the
Mughal era that the skill of carpet weaving touched new heights. It had become an important
profession by then and all the major courts of the country encouraged it. The carpets
produced during the Mughal era depicted either animals in combat or flowers. The flowers
were woven so meticulously that they could be easily identified. The affinity of the Great
Mughals with nature is evident from the designs of the carpets made during their times.
Many varieties of ornamental work in cut stones, ivory, pearl and tortoise shells were
produced in South India. Pearl fishing was a major industry here. Diamonds were procured
from the Deccan while sapphires and rubies were imported from Pegu and Ceylon. Major
centres were established at Pulicat, Calicut and Vijaynagar for cutting and polishing these
stones.
Indian arts and crafts were patronised by Indian rulers. They were unmatched for their beauty
and skill and were popular in the European countries. During the Mughal era the European
traders used to employ local artisans at the manufacturing centres set up by them at various
places in India.
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2). Domestic Trade
Foreign travellers gave extensive accounts about domestic trade in medieval India. Ibn Batuta
had described Delhi as a major trade centre. The most superior quality rice and sugar from
Kannauj, wheat from Punjab and betel leaves from Dhar in Madhya Pradesh found their way
to the markets of Delhi.
Well-maintained roads linking various parts of the country facilitated domestic trade. The
threat from bandits did not in any way affect the flow of goods as merchants travelled in
well-armed groups to ensure their security. According to Barbosa’s account, trade between
Gujarat and Malwa was possible owing to the routes established in this area. The roads
facilitated the exchange of goods between the different parts of the country. Limbodar in
Gujarat and Dabhol in Maharashtra were major trade centres, which linked the northern and
southern halves of the country. Accounts of foreign travellers give instances of the trade
between Vijaynagar and Bhatkal in Goa with 5000-6000 bulls carrying goods between the
two places. Vijaynagar traded in diamonds with other southern cities.
River routes also facilitated trade between different parts of the country. Boats carrying goods
used to ply on the Indus and the Ganges. Some of the merchants had their own large boats.
Different communities dominated trade in various parts of the country. Multani and Punjabi
merchants handled the business in the north, while in Gujarat and Rajasthan it was in the
hands of the Bhats. Foreign traders from Central Asia, known as Khorasanis engaged in this
profession all over India. Members of the nobility and the royalty took an interest in trading
activities. They set up their own manufacturing centres wherein local artisans were employed.
Internal trade flourished due to the organized system set up by the government. The 14 th
century Sultan Alauddin Khilji for instance, used to strictly supervise the market places.
Shopkeepers, who were caught violating the rules, were severely punished. However, the
trading community used to face unfair treatment from the government officials. Sometimes
they were forced by these officials to sell their products at reduced rates or on credit, thus
incurring heavy losses in the process. The price list fixed by the government brought in low
returns for the traders.
During the period of the later Mughals in the 18th century, the royalty and the nobility either
purchased luxury goods at very low prices or did not pay at all. Such circumstances forced
the trader to hoard his wealth and lead a frugal existence.
3). Foreign Trade
India’s exports far exceeded her imports both in the number of items as well as in volume.
The chief articles of import were horses, from Kabul and Arabia, dry fruits and precious
stones. India also imported glassware from Europe, high grade textiles like satin from West
Asia, while China supplied raw silk and porcelain. Foreign luxury goods were highly popular
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among the royalty and the nobility. These included wines, dry fruits, precious stones, corals,
scented oils, perfumes and velvets.
During the Sultanate period articles of everyday use as well as luxury articles were exported
to Syria, Arabia and Persia from Bengal and Cambay. These included silks, goldembroidered cloth caps, exquisitely designed clay pots and pans, guns, knives and scissors.
The other prime articles of export were sugar, indigo, oils, ivory sandalwood, spices,
diamonds and other precious gems and coconuts.
Arab traders shipped Indian goods to European countries through the Red Sea and the
Mediterranean ports. Indian products were also sent to East Africa, Malaya, China and the
Far East. In China, Indian textiles were valued more than silk. Trade was also conducted
through overland routes with Afghanistan, Central Asia and Persia. The route lay through
Kashmir, Quetta and the Khyber Pass. Iraq and Bukhara were the other countries with which
India conducted trade via the land route.
Foreign trade was in the hands of both local and foreign merchants. Many European
travellers had settled in the coastal regions. Limbodar in Gujarat was a major exporting
centre. Horses imported from Arabia were sent from the port of Bhatkal in Goa to the
southern kingdoms. Imports like bronze, iron, wax, gold and wool were brought in through
Goa, Calicut, Cochin and Quilon. The traders of Malabar, Gujarat and foreign settlers
controlled business in the port cities of Calicut, Khambat, and Mangalore. Chinese ships
docked at Quilon and Calicut while in Khambat the volume of trade was such that 3000 ships
visited this port annually. This fact gives an idea of the magnitude of India’s foreign trade
during the medieval period.
Trade with China and Southeast Asia was mainly carried on through the port of Sonargaon
now known as Dacca. Vijaynagar, which was the richest and most extensive state in the 15th
and 16th centuries, enjoyed the most voluminous maritime trade with diverse countries such
as Persia, Arabia, Africa, the Malayan Archipelago, Burma, China and the numerous islands
in the Indian Ocean. The magnitude of trade can be surmised from the fact that there were
300 ports to facilitate the movement of goods. The shipbuilding industry flourished in the
coastal towns.
The city of Vijaynagar was a teeming marketplace for both exports and imports. The fabulous
wealth of the Empire left the foreigners dumbfounded. The people, irrespective of which
strata of society they belonged to, possessed vast quantities of gold, diamonds and material
wealth. Domingo Paes described the citizens as being heavily bejewelled. Abdur Razzak, the
Khurasani ambassador to the court of Vijaynagar, refers to the treasury which had chambers
filled with molten gold.
The merchant community in the other parts of the country was a prosperous lot. The Gujarati
and Marwari businessmen who controlled the trade between the coastal towns and North
India were extremely wealthy and spent large sums for the construction of temples. The
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Multanis who were Hindus and the Khurasanis who were Muslim foreigners controlled the
trade with Central and West Asia. Many of these Multanis and Khurasanis settled in Delhi
where they lived luxurious lives. Cambay was also home to an affluent mercantile
community.
Thus India had always enjoyed a favourable balance in her trade relations with other
countries. Her earnings from the export of textiles, sugar, spices and indigo alone went up to
crores of rupees. The state coffers were amply stocked with gold and silver.
The Decline in Prosperity
However the political conditions in India in the 18th century brought about a sea change in the
situation. This period was marked by decline of the Mughal government and the rise of the
Maratha power. After Aurangzeb, who was the last of the great Mughal Emperors, the state
crumbled and it could not protect the mercantile community as before. Though the regional
powers did extend patronage to the artisans and manufacturers, they did not have the
economic and military means to sustain it. Consequently trade dwindled. The Maratha
invasions in northern India also adversely affected trade and commerce.
The rise of the British East India Company in the mid 18th century dealt a fatal blow to the
prosperity of the country. The victory of the English over the Nawab of Bengal at the Battle
of Plassey in 1757 marked a turning point in the fortunes of the country. In order to disrupt
the trade relations between the Indian mercantile community and the foreigners, the
Company imposed heavy duties on both imports and exports. After the Company had
established its supremacy in Bengal, it prevented merchants from Asian countries from
coming to the eastern provinces for trading purposes. The export of Indian textiles to England
was totally banned.
The Company increasingly monopolised the foreign trade in India thereby reducing the
mercantile community to bankruptcy. Not only did it cripple the indigenous manufactures,
but also it started importing various items such as cloth, utensils, horses, etc. from England.
This so adversely affected the Indian traders that they turned to other professions for their
livelihood. The great trading community, which had flourished during the Mughal rule, had
dwindled to non-existence by the end of the eighteenth century. Thus the once glorious arts
and crafts of India died a natural death.
The global trade system
The conclusion of the Uruguay Round (UR) in 1994 saw the establishment of a new trading
system and related agreements under the auspices of the World Trade Organization (WTO).
The
WTO oversees implementation of the agreements by which member countries, especially
those that are developed, reduce tariff rates over a wide range of products. They have made
tradeweighted tariff cuts that average 40 per cent on industrial products. The WTO also
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tightens rules on non-tariff barriers (NTBs) by expecting members to replace NTBs with
bound tariff rates. The UR has converted all NTBs for agricultural products into bound
tariffs, which have to be cut by an average of 35 per cent.
These developments have helped to open potential new markets for emerging agriculture- and
resource-based Central Asian countries. However, as the international trading system
becomes more rule-based, it will also be highly competitive. Therefore, new export
approaches will be needed.
A.
Trade characteristics of Central Asia:
The export base of Central Asian economies is narrow, comprised mainly of oil and gas,
minerals, base metals and cotton. Furthermore, many of the products exported are in their
unprocessed forms. Most exports from the Central Asian economies depend on the Russian
Federation and other members of the Commonwealth of Independent States (CIS). However,
efforts have been made to extend markets beyond the Russian Federation and the CIS to the
United Kingdom of Great Britain and Northern Ireland (United Kingdom), Germany, Turkey,
the Republic of Korea and China. Central Asian economies will have to focus on the use of
new marketing tools as one priority export-related issue over the next five years in order to
meet the following objectives: diversifying the number of markets for their products
developing downstream products for export.
Central Asian economies formerly had access to materials, machinery, equipment, consumer
goods and foodstuffs from a limited number of supply sources, mainly the Russian Federation
and some of the other CIS countries. As a result, Central Asian economies developed strong
trade links with the Russian Federation and the CIS and could use these links to increase their
exports. However, as the Russian Federation opens its market as a preparation for joining the
WTO, Central Asian countries will find increased competition. Therefore, they will have to
develop ways to enhance their competitiveness.
Central Asian countries are aware of the need for adjustment to the international market
environment. They also need to be aware of the major events that have taken place that may
influence their trade policies.
B. Declining significance of trade concessions for developing countries.
Previously, developed countries allowed certain exports of developing countries to enter their
markets either tariff-free or at preferential tariff rates. For example, under the Lomé
Convention, the European Union (EU) grants preferential treatment to imports from countries
in Africa, the Caribbean and the Pacific (ACP). Similarly, Australia and New Zealand grant
preferential treatment to imports from Pacific Island nations. However, following the
conclusion of the UR and the subsequent reduction of tariff rates by developed countries,
such preferential rates will become marginalized.
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Furthermore, quota restrictions on imports will gradually be lifted. For example, trade in
textiles had been governed by the Multifibre Arrangement (MFA), which is a series of
bilateral import quotas for textiles and garments produced by developing economies. The
MFA has now been replaced by the new Agreement on Textiles and Clothing (ATC). Items
covered under the MFA are to be liberalized under ATC.
The liberalization of the multilateral trade system will create export opportunities for Central
Asia countries, because it allows them to compete on an equal footing in new markets.
However, such new markets will require the use of different marketing strategies.
C. The aftermath of the Asian economic crisis:
The Asian economic crisis, which started in July 1997 spread throughout the region, and
extended as far as the Russian Federation and parts of Latin America, resulting in the severe
financial collapse of their currencies and financial systems. The impact was greater in the
emerging Asian economies, especially in South-East Asia and the Republic of Korea. Heavy
debt burdens, massive corporate failures and declining production and output have been
common characteristics among the Asian economies hit by the crisis.
The subsequent fall in demand, especially for commodities, had a serious impact on countries
with highly commodity dependent economies. The decline in commodity prices reduced real
incomes of producers, especially in developing countries of Africa and Latin America.
Japan, the world's second largest economy, also went into recession during the later part of
1998. The Japanese banking system was burdened by corporate debt from the 1980s. If it
continues, the crisis would have severe effects on countries that export oil and raw material
commodities. However, the situation in Asia has stabilized and optimism slowly returning to
the region. With the exception of Indonesia and Hong Kong, China, the rest of Asia was
expected to register positive growth in 1999. Japan's economy also rebounded, achieving 1.9
per cent growth during the first quarter of 1999.
The recovery of Asian economies would include increased demand for commodities like
cotton, grain, and minerals, creating export opportunities for Central Asian countries. They
need to market their products as well as attract Asian investors from Japan and the newlyindustrialized Asian economies to invest in downstream production for subsequent export
from Central Asian countries back to their home countries.
D. Private sector and public sector cooperation:
Central Asian economies already have existing state trading entities that focus on export and
trading. However, changes in the international trade environment make it important for the
government to consult with the private sector about the assistance they will need in order to
adapt.
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Governments should have feedback mechanisms and dialogues with the private sector to
ensure that rules and regulations facilitate business development. An example would be the
establishment of industry advisory groups that include people from the public and private
sector. Similarly, economic agencies should develop channels for feedback as well as
information for disseminating to the business community. The regulatory framework should
be friendly and relevant to business and should not block business development.
The process of two-way communication will also help in providing appropriate assistance for
exports and product development and will enable companies in Central Asian countries to
compete. The right institutions to implement policies need to be set up and nurtured. Private
and public sector interactions will influence the bureaucracy to have pro-business attitudes.
State trading enterprises (STEs) could be restructured to do trading for production companies
in the private sector. This form of collaboration between the private and public sector will
help the small and medium-sized enterprises (SMEs) in Central Asian countries to persuade
STEs to export their products to new markets with minimum transaction costs.
E. Developing trade capacity:
Central Asian economies are well endowed with abundant natural resources such as oil, gas
and metals, as well as commodities like cotton, grain, and cereals. These natural resources
create the potential to develop horizontal and vertical industrial linkages, which can help to
broaden the export base.
The republics of the former Soviet Union were traditional markets for the exports of Central
Asian economies. However, when the Russian economy opened, the result was more foreign
competition for Central Asian countries. Therefore, Central Asian countries have had to adopt
two new approaches: upgrade the quality of their exports in order to compete in the Russian
market· diversify into other export markets.
The Central Asian governments need to increase their efforts to develop institutions designed
to have more efficient trade activities. Trade efficiency can be defined as the effective
facilitation and promotion of both exports and imports without friction and at the appropriate
cost. Without trade efficiency, export sectors and the supporting physical infrastructure
would be unable to help improve economic development of the country.
F. The need for a trade promotion organization:
Government institutions should be designed and created in order to provide support for the
business community, which will build productive capacity, upgrade industrial and
agrotechnology, and expand exports and markets. There is therefore an urgent need to create
a trade promotion organization (TPO). If a TPO is given the right direction and managed
effectively, it can play an important, catalytic role in developing and promoting the country's
exports.
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The TPO can also act as an advisor and facilitator for the government's trade development
strategies. The role of the TPO is explained in this book. TPOs are generally created to be the
government's instrument for export promotion and development. However, a TPO could have
an expanded role if the government thinks that it would be a suitable complement to help
implement the national trade policy. TPOs could help to restructure selected STEs to become
export development arms for non-exporting companies.
Political environment has a very important impact on every business operation no matter
what its size, its area of operation. Whether the company is domestic, national, international,
large or small political factors of the country it is located in will have an impact on it. And the
most crucial & unavoidable realities of international business are that both host and home
governments are integral partners. Reflected in its policies and attitudes toward business are a
governments idea of how best to promote the national interest, considering its own resources
and political philosophy. A government control s and restricts a company s activities by
encouraging and offering support or by discouraging and banning or restricting its activities
depending on the government.
Here steps in international law. International law recognizes the right of nations to grant or
withhold permission to do business within its political boundaries and control its citizens
when it comes to conducting business. Thus, political environment of countries is a critical
concern for the international marketer and he should examine the salient features of political
features of global markets they plan to enter.
Trade and the Environment
A strong majority accepts the view that trade has implications for the environment and
supports the idea that environmental standards should be incorporated into trade agreements.
A very strong majority rejects the WTO's current position that, in general, countries should
not be able to restrict imports based on the environmental effects of their production.
For some time now Americans have been responsive to the idea that trade has implications
for the environment. In particular, Americans have responded to the idea that businesses may
seek to avoid abiding by US trade standards by moving their factories outside of the US and
then exporting their products back to the US. This idea was prominent in the early 1990s
surrounding the NAFTA debate. Two Gallup polls from that period, taken in September and
November 1993, presented a series of arguments against NAFTA, including one that said:
"the environment will suffer, as businesses move to Mexico to avoid the stricter
environmental standards in the US." About 3 in 5 agreed with this argument, while about
one-third disagreed.
Similarly, in October 2005 59% agreed with the proposition that “Freer trade puts the United
States at a disadvantage because of our high labor and environmental standards”; 36%
disagreed. Incorporating Environmental Standards Into Trade Agreements To respond to the
possibility that increased trade might put downward pressure on environmental standards,
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many have argued that environmental standards should be incorporated into trade
agreements. As discussed in "Reservations About the Effects of Trade in Practice," numerous
polls have shown that a very strong majority of Americans endorse the view that a variety of
considerations, including environmental standards, should be incorporated into the process of
developing trade agreements. In addition, poll questions that ask specifically about
incorporating environmental standards find very strong support. In a June 2005 PIPA poll, an
overwhelming majority of 93% said that countries that are part of international trade
agreements should be “required to maintain minimum standards for protection of the
environment.” In January 2004 PIPA also found 93% agreement. CCFR polls in 2002 and
2004 also found over 90% agreeing to this same statement. In November 2000, a poll by the
Tarrance Group and Greenberg Quinlan Research presented respondents with two statements
on the issue. More than 3 in 5 (62%) chose the one that said, "Future trade agreements should
contain safeguards that require the US (United States) and other countries to enforce strong
environmental protections, even if it limits trade." Only 22% percent chose the opposing
statement, "Expanding trade is critical to the US economy and trade agreements are good for
our economy, even if they do not contain strong environmental protections." Seven percent
said "both" and 10% did not know. This attitude is consistent with a broader attitude in
support of having more international agreements on environmental issues. In the October
1999 PIPA study, arguments in favor of such agreements were found convincing by very
strong majorities, while con arguments fared poorly.
Barring Imports Made in Environmentally Harmful Ways Another major controversy
surrounding trade and the environment centers on the WTO Secretariat's current position that
countries cannot put up barriers to products based on the process of how they were made. The
primary concern is that if such exceptions were allowed, countries would make them very
freely and thus create a barrier to trade. In PIPA’s 1999 and 2004 trade polls, strong
majorities rejected the WTO Secretariat's position that, in general, countries should not be
able to restrict imports based on the environmental effects of their production, even though
the argument defending the WTO position also mentioned the potential costs to the economy
and jobs.
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Some critics of environmental considerations in trade agreements say that concern for the
environment is really old-fashioned protectionism in a new form; that the real goal is to save
jobs rather than the environment. But other data shows that Americans are willing to place
the long-term health of the environment over short-term concerns about jobs. In 1998, a poll
by The Washington Post, Harvard University and the Kaiser Family Foundation asked the
following question:
Here are some values that everyone agrees are important. But sometimes we have to choose
one value over another. If you absolutely had to choose between each of the following two
values, which is more important to you, personally, protecting the environment, or increasing
jobs and economic growth?.
A majority of Americans (52%) chose the environment, 37% chose jobs, and 10%
volunteered that both were equally important. This result falls in the middle of results from
surveys from 1992: in a Los Angeles Times question, 49% chose the environment and 30%
chose jobs; in a Gallup question, 62% chose the environment while 29% chose jobs. Also in
1992, the New York Times asked whether protection of the environment should be given
priority, even if it cost jobs "in your community." In this case, the public was evenly split at
45%, with 10% undecided.
International Marketing Intelligence
1. Role of marketing intelligence
The task of marketing research is to provide management with relevant, accurate, reliable,
valid, and current information. Competitive marketing environment and the ever-increasing
costs attributed to poor decision making require that marketing research provide sound
information. Sound decisions are not based on gut feeling, intuition, or even pure judgment.
Marketing managers make numerous strategic and tactical decisions in the process of
identifying and satisfying customer needs. They make decisions about potential opportunities,
target market selection, market segmentation, planning and implementing marketing
programs, marketing performance, and control. These decisions are complicated by
interactions between the controllable marketing variables of product, pricing, promotion, and
distribution. Further complications are added by uncontrollable environmental factors such as
general economic conditions, technology, public policies and laws, political environment,
competition, and social and cultural changes. Another factor in this mix is the complexity of
consumers. Marketing research helps the marketing manager link the marketing variables
with the environment and the consumers. It helps remove some of the uncertainty by
providing relevant information about the marketing variables, environment, and consumers.
In the absence of relevant information, consumers' response to marketing programs cannot be
predicted reliably or accurately. Ongoing marketing research programs provide information
on controllable and non-controllable factors and consumers; this information enhances the
effectiveness of decisions made by marketing managers.
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Traditionally, marketing researchers were responsible for providing the relevant information
and marketing decisions were made by the managers. However, the roles are changing and
marketing researchers are becoming more involved in decision making, whereas marketing
managers are becoming more involved with research. The role of marketing research in
managerial decision making is explained further using the framework of the "DECIDE"
model:
D
Define the marketing problem
E
Enumerate the controllable and uncontrollable decision factors
C
Collect relevant information
I
Identify the best alternative
D
Develop and implement a marketing plan
E
Evaluate the decision and the decision process
The DECIDE model conceptualizes managerial decision making as a series of six steps. The
decision process begins by precisely defining the problem or opportunity, along with the
objectives and constraints. Next, the possible decision factors that make up the alternative
courses of action (controllable factors) and uncertainties (uncontrollable factors) are
enumerated. Then, relevant information on the alternatives and possible outcomes is
collected. The next step is to select the best alternative based on chosen criteria or measures
of success. Then a detailed plan to implement the alternative selected is developed and put
into effect. Last, the outcome of the decision and the decision process itself are evaluated.
Marketing intelligence characteristics
First, marketing research is systematic. Thus systematic planning is required at all the stages
of the marketing research process. The procedures followed at each stage are
methodologically sound, well documented, and, as much as possible, planned in advance.
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Marketing research uses the scientific method in that data are collected and analyzed to test
prior notions or hypotheses.
Marketing research is objective. It attempts to provide accurate information that reflects a
true state of affairs. It should be conducted impartially. While research is always influenced
by the researcher's research philosophy, it should be free from the personal or political biases
of the researcher or the management. Research which is motivated by personal or political
gain involves a breach of professional standards. Such research is deliberately biased so as to
result in predetermined findings. The motto of every researcher should be, "Find it and tell it
like it is." The objective nature of marketing research underscores the importance of ethical
considerations, which are discussed later in the chapter.
Marketing research involves the identification, collection, analysis, and dissemination of
information. Each phase of this process is important. We identify or define the marketing
research problem or opportunity and then determine what information is needed to investigate
it., and inferences are drawn. Finally, the findings, implications and recommendations are
provided in a format that allows the information to be used for management decision making
and to be acted upon directly. It should be emphasized that marketing research is conducted
to assist management in decision making and is not: a means or an end in itself. The next
section elaborates on this definition by classifying different types of marketing research.
Comparison with other forms of business intelligence
Other forms of business research include:
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Market research is broader in scope and examines all aspects of a business environment.
It asks questions about competitors, market structure, government regulations, economic
trends, technological advances, and numerous other factors that make up the business
environment. Sometimes the term refers more particularly to the financial analysis of
companies, industries, or sectors. In this case, financial analysts usually carry out the
research and provide the results to investment advisors and potential investors.
Product research - This looks at what products can be produced with available
technology, and what new product innovations near-future technology can develop (see
new product development).
Advertising research - is a specialized form of marketing research conducted to improve
the efficacy of advertising. Copy testing, also known as "pre-testing," is a form of
customized research that predicts in-market performance of an ad before it airs, by
analyzing audience levels of attention, brand linkage, motivation, entertainment, and
communication, as well as breaking down the ad’s flow of attention and flow of emotion.
Pre-testing is also used on ads still in rough (ripomatic or animatic) form. (Young, p. 213)
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Classification of marketing intelligence
Organizations engage in marketing research for two reasons: (1) to identify and (2) solve
marketing problems. This distinction serves as a basis for classifying marketing research into
problem identification research and problem solving research.
Problem identification research is undertaken to help identify problems which are, perhaps,
not apparent on the surface and yet exist or are likely to arise in the future. Examples of
problem identification research include market potential, market share, brand or company
image, market characteristics, sales analysis, short-range forecasting, long range forecasting,
and business trends research. A survey of companies conducting marketing research indicated
that 97 percent of those who responded were conducting market potential, market share, and
market characteristics research. About 90 percent also reported that they were using other
types of problem identification research. Research of this type provides information about the
marketing environment and helps diagnose a problem. For example, a declining market
potential indicates that the firm is likely to have a problem achieving its growth targets.
Similarly, a problem exists if the market potential is increasing but the firm is losing market
share. The recognition of economic, social, or cultural trends, such as changes in consumer
behavior, may point to underlying problems or opportunities. The importance of undertaking
problem identification research for the survival and long term growth of a company is
exemplified by the case of PIP printing company
Once a problem or opportunity has been identified, as in the case of PIP, problem solving
research is undertaken to arrive at a solution. The findings of problem solving research are
used in making decisions which will solve specific marketing problems. More than two-thirds
of companies conduct problem solving research.
The Stanford Research Institute, on the other hand, conducts an annual survey of consumers
that is used to classify persons into homogeneous groups for segmentation purposes. The
National Purchase Diary panel (NPD) maintains the largest diary panel in the United States.
Standardized services are research studies conducted for different client firms but in a
standard way. For example, procedures for measuring advertising effectiveness have been
standardized so that the results can be compared across studies and evaluative norms can be
established. The Starch Readership Survey is the most widely used service for evaluating
print advertisements; another well-known service is the Gallup and Robinson Magazine
Impact Studies. These services are also sold on a syndicated basis.
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Customized services offer a wide variety of marketing research services customized to
suit a client's specific needs. Each marketing research project is treated uniquely.
Limited-service suppliers specialize in one or a few phases of the marketing research
project. Services offered by such suppliers are classified as field services, coding and
data entry, data analysis, analytical services, and branded products. Field services
collect data through mail, personal, or telephone interviewing, and firms that specialize
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in interviewing are called field service organizations. These organizations may range
from small proprietary organizations which operate locally to large multinational
organizations with WATS line interviewing facilities. Some organizations maintain
extensive interviewing facilities across the country for interviewing shoppers in malls.
Coding and data entry services include editing completed questionnaires, developing a
coding scheme, and transcribing the data on to diskettes or magnetic tapes for input
into the computer. NRC Data Systems provides such services.
Analytical services include designing and pretesting questionnaires, determining the
best means of collecting data, designing sampling plans, and other aspects of the
research design. Some complex marketing research projects require knowledge of
sophisticated procedures, including specialized experimental designs, and analytical
techniques such as conjoint analysis and multidimensional scaling. This kind of
expertise can be obtained from firms and consultants specializing in analytical
services.
Data analysis services are offered by firms, also known as tab houses, that specialize in
computer analysis of quantitative data such as those obtained in large surveys. Initially
most data analysis firms supplied only tabulations (frequency counts) and cross
tabulations (frequency counts that describe two or more variables simultaneously).
With the proliferation of software, many firms now have the capability to analyze their
own data, but, data analysis firms are still in demand.
Branded marketing research products and services are specialized data collection and
analysis procedures developed to address specific types of marketing research
problems. These procedures are patented, given brand names, and marketed like any
other branded product.
Types of marketing intelligence
Marketing research techniques come in many forms, including:
Ad Tracking – periodic or continuous in-market research to monitor a brand’s
performance using measures such as brand awareness, brand preference, and product
usage. (Young, 2005)
Advertising Research – used to predict copy testing or track the efficacy of
advertisements for any medium, measured by the ad’s ability to get attention,
communicate the message, build the brand’s image, and motivate the consumer to
purchase the product or service. (Young, 2005)
Brand equity research - how favorably do consumers view the brand?
Brand association research - what do consumers associate with the brand?
Brand attribute research - what are the key traits that describe the brand promise?
Brand name testing - what do consumers feel about the names of the products?
Commercial eye tracking research - examine advertisements, package designs,
websites, etc by analyzing visual behavior of the consumer
Concept testing - to test the acceptance of a concept by target consumers
Coolhunting - to make observations and predictions in changes of new or existing
cultural trends in areas such as fashion, music, films, television, youth culture and
lifestyle
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Buyer decision processes research - to determine what motivates people to buy and
what decision-making process they use
Copy testing – predicts in-market performance of an ad before it airs by analyzing
audience levels of attention, brand linkage, motivation, entertainment, and
communication, as well as breaking down the ad’s flow of attention and flow of
emotion. (Young, p 213)
Customer satisfaction research - quantitative or qualitative studies that yields an
understanding of a customer's of satisfaction with a transaction
Demand estimation - to determine the approximate level of demand for the product
Distribution channel audits - to assess distributors’ and retailers’ attitudes toward a
product, brand, or company
Internet strategic intelligence - searching for customer opinions in the Internet: chats,
forums, web pages, blogs... where people express freely about their experiences with
products, becoming strong "opinion formers"
Marketing effectiveness and analytics - Building models and measuring results to
determine the effectiveness of individual marketing activities.
Mystery Consumer or Mystery shopping - An employee or representative of the
market research firm anonymously contacts a salesperson and indicates he or she is
shopping for a product. The shopper then records the entire experience. This method is
often used for quality control or for researching competitors' products.
Positioning research - how does the target market see the brand relative to
competitors? - what does the brand stand for?
Price elasticity testing - to determine how sensitive customers are to price changes
Sales forecasting - to determine the expected level of sales given the level of demand.
With respect to other factors like Advertising expenditure, sales promotion etc.
Segmentation research - to determine the demographic, psychographic, and
behavioural characteristics of potential buyers
Online panel - a group of individual who accepted to respond to marketing research
online
Store audit - to measure the sales of a product or product line at a statistically selected
store sample in order to determine market share, or to determine whether a retail store
provides adequate service
Test marketing - a small-scale product launch used to determine the likely acceptance
of the product when it is introduced into a wider market
Viral Marketing Research - refers to marketing research designed to estimate the
probability that specific communications will be transmitted throughout an individuals
Social Network. Estimates of Social Networking Potential (SNP) are combined with
estimates of selling effectiveness to estimate ROI on specific combinations of
messages and media.
All of these forms of marketing research can be classified as either problem-identification
research or as problem-solving research.
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A company collects primary research by gathering original data. Secondary research is
conducted on data published previously and usually by someone else. Secondary research
costs far less than primary research, but seldom comes in a form that exactly meets the needs
of the researcher.
A similar distinction exists between exploratory research and conclusive research.
Exploratory research provides insights into and comprehension of an issue or situation. It
should draw definitive conclusions only with extreme caution. Conclusive research draws
conclusions: the results of the study can be generalized to the whole population.
Exploratory research is conducted to explore a problem to get some basic idea about the
solution at the preliminary stages of research. It may serve as the input to conclusive
research. Exploratory research information is collected by focus group interviews, reviewing
literature or books, discussing with experts, etc. This is unstructured and qualitative in nature.
If a secondary source of data is unable to serve the purpose, a convenience sample of small
size can be collected. Conclusive research is conducted to draw some conclusion about the
problem. It is essentially, structured and quantitative research, and the output of this research
is the input to management information systems (MIS).
Exploratory research is also conducted to simplify the findings of the conclusive or
descriptive research, if the findings are very hard to interpret for the marketing managers.
1. Marketing intelligence methods
Methodologically, marketing research uses the following types of research designs:
Based on questioning:
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Qualitative marketing research - generally used for exploratory purposes - small number
of respondents - not generalizable to the whole population - statistical significance and
confidence not calculated - examples include focus groups, in-depth interviews, and
projective techniques
Quantitative marketing research - generally used to draw conclusions - tests a specific
hypothesis - uses random sampling techniques so as to infer from the sample to the
population - involves a large number of respondents - examples include surveys and
questionnaires. Techniques include choice modelling, maximum difference preference
scaling, and covariance analysis.
Based on observations:
Ethnographic studies -, by nature qualitative, the researcher observes social phenomena in
their natural setting - observations can occur cross-sectionally (observations made at one
time) or longitudinally (observations occur over several time-periods) - examples include
product-use analysis and computer cookie traces. See also Ethnography and
Observational techniques.
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Experimental techniques -, by nature quantitative, the researcher creates a quasi-artificial
environment to try to control spurious factors, then manipulates at least one of the
variables - examples include purchase laboratories and test markets.
Researchers often use more than one research design. They may start with secondary research
to get background information, then conduct a focus group (qualitative research design) to
explore the issues. Finally they might do a full nation-wide survey (quantitative research
design) in order to devise specific recommendations for the client.
2. Business to business market intelligence
Business to business (B2B) research is inevitably more complicated than consumer research.
The researchers need to know what type of multi-faceted approach will answer the objectives,
since seldom is it possible to find the answers using just one method. Finding the right
respondents is crucial in B2B research since they are often busy, and may not want to
participate. Encouraging them to “open up” is yet another skill required of the B2B
researcher. Last, but not least, most business research leads to strategic decisions and this
means that the business researcher must have expertise in developing strategies that are
strongly rooted in the research findings and acceptable to the client.
There are four key factors that make B2B market research special and different to consumer
markets:
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The decision making unit is far more complex in B2B markets than in consumer
markets
B2B products and their applications are more complex than consumer products
B2B marketers address a much smaller number of customers who are very much
larger in their consumption of products than is the case in consumer markets
Personal relationships are of critical importance in B2B markets.
Marketing intelligence in small businesses and nonprofit organizations
Marketing research does not only occur in huge corporations with many employees and a
large budget. Marketing information can be derived by observing the environment of their
location and the competitions location. Small scale surveys and focus groups are low cost
ways to gather information from potential and existing customers. Most secondary data
(statistics, demographics, etc.) is available to the public in libraries or on the internet and can
be easily accessed by a small business owner.
Below some steps that could do by SME (Small Medium Entreprise) to analyze the market:
1. Provide secondary and or primary data (if necessary);
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2. Analyze Macro & Micro Economic data (e.g. Supply & Demand, GDP,Price change,
Economic growth, Sales by sector/industries,interest rate, number of investment/
divestment, I/O, CPI, Social anlysis,etc);
3. Implement the marketing mix concept, which is consist of: Place, Price,
Product,Promotion, People, Process, Physical Evidence and also Political & social
situation to analyze global market situation);
4. Analyze market trends, growth, market size, market share, market competition (e.g.
SWOT analysis, B/C Analysis,channel mapping identities of key channels, drivers of
customers loyalty and satisfaction, brand perception, satisfaction levels, current
competitor-channel relationship analysis, etc),etc.;
5. Determine market segment, market target, market forecast and market position;
6. Formulating market strategy & also investigating the possibility of partnership/
collaboration (e.g. Profiling & SWOT analysis of potential partners, evaluating business
partnership.)
7. Combine those analysis with the SME's business plan/ business model analysis (e.g.
Business description, Business process, Business strategy, Revenue model, Business
expansion, Return of Investment, Financial analysis (Company History, Financial
assumption, Cost/Benefit Analysis, Projected profit & Loss, Cashflow, Balance sheet &
business Ratio,etc).
Note as important: Overall analysis is should be based on 6W+1H (What, When, Where,
Which, Who, Why and How) question.
3. International Marketing intelligence
International Marketing Research follows the same path as domestic research, but there are a
few more problems that may arise. Customers in international markets may have very
different customs, cultures, and expectations from the same company. In this case, secondary
information must be collected from each separate country and then combined, or compared.
This is time consuming and can be confusing. International Marketing Research relies more
on primary data rather than secondary information. Gathering the primary data can be
hindered by language, literacy and access to technology.
4. Commonly used marketing intelligence terms
Market research techniques resemble those used in political polling and social science
research. Meta-analysis (also called the Schmidt-Hunter technique) refers to a statistical
method of combining data from multiple studies or from several types of studies.
Conceptualization means the process of converting vague mental images into definable
concepts. Operationalization is the process of converting concepts into specific observable
behaviors that a researcher can measure. Precision refers to the exactness of any given
measure. Reliability refers to the likelihood that a given operationalized construct will yield
the same results if re-measured. Validity refers to the extent to which a measure provides data
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that captures the meaning of the operationalized construct as defined in the study. It asks,
“Are we measuring what we intended to measure?”
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Applied research sets out to prove a specific hypothesis of value to the clients paying
for the research. For example, a cigarette company might commission research that
attempts to show that cigarettes are good for one's health. Many researchers have
ethical misgivings about doing applied research.
Sugging (from "SUG", for selling under the guise of market research) forms a sales
technique in which sales people pretend to conduct marketing research, but with the
real purpose of obtaining buyer motivation and buyer decision-making information to
be used in a subsequent sales call.
Frugging comprises the practice of soliciting funds under the pretense of being a
research organization.
5. Selecting a intelligence supplier
A firm that cannot conduct an entire marketing research project in-house must select an
external supplier for one or more phases of the project. The firm should compile a list of
prospective suppliers from such sources as trade publications, professional directories, and
word of mouth. When deciding on criteria for selecting an outside supplier, a firm should ask
itself why it is seeking outside marketing research support. For example, a small firm that
needs one project investigated may find it economically efficient to employ an outside
source. Or a firm may not have the technical expertise undertake certain phases of a project
or political conflict-of-interest issues may determine that a project be conducted by an outside
supplier.
When developing criteria for selecting an outside supplier, a firm should keep some basics in
mind. What is the reputation of the supplier? Do they complete projects on schedule? Are
they known for maintaining ethical standards? Are they flexible? Are their research projects
of high quality?
What kind and how much experience does the supplier have? Has the firm had experience
with projects similar to this one? Do the supplier's personnel have both technical and
nontechnical expertise? In other words, in addition to technical skills, are the personnel
assigned to the task sensitive to the client's needs and do they share the client's research
ideology? Can they communicate well with the client?
The cheapest bid is not always the best one. Competitive bids should be obtained and
compared on the basis of quality as well as price. A good practice is to get a written bid or
contract before beginning the project. Decisions about marketing research suppliers, just like
other management decisions, should be based on sound information.
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6. Careers in marketing intelligence
Some of the positions available in marketing research include vice president of marketing
research, research director, assistant director of research, project manager, field work
director, statistician/data processing specialist, senior analyst, analyst, junior analyst and
operational supervisor.
The most common entry-level position in marketing research for people with bachelor's
degrees (e.g., BBA) is as operational supervisor. These people are responsible for supervising
a well-defined set of operations, including field work, data editing, and coding, and may be
involved in programming and data analysis. Another entry-level position for BBAs is
assistant project manager. An assistant project manager will learn and assist in questionnaire
design, review field instructions, and monitor timing and costs of studies. In the marketing
research industry, however, there is a growing preference for people with master's degrees.
Those with MBA or equivalent degrees are likely to be employed as project managers.
A small number of business schools also offer a more specialized Master of Marketing
Research (MMR) degree. An MMR typically prepares students for a wide range of research
methodologies and focuses on learning both in the classroom and the field.
The typical entry-level position in a business firm would be junior research analyst (for
BBAs) or research analyst (for MBAs or MMRs). The junior analyst and the research analyst
learn about the particular industry and receive training from a senior staff member, usually
the marketing research manager. The junior analyst position includes a training program to
prepare individuals for the responsibilities of a research analyst, including coordinating with
the marketing department and sales force to develop goals for product exposure. The research
analyst responsibilities include checking all data for accuracy, comparing and contrasting
new research with established norms, and analyzing primary and secondary data for the
purpose of market forecasting.
As these job titles indicate, people with a variety of backgrounds and skills are needed in
marketing research. Technical specialists such as statisticians obviously need strong
backgrounds in statistics and data analysis. Other positions, such as research director, call for
managing the work of others and require more general skills. To prepare for a career in
marketing research, students usually:
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take all the marketing courses.
take courses in statistics and quantitative methods.
acquire computer skills.
take courses in psychology and consumer behavior.
acquire effective written and verbal communication skills.
think creatively.
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Career ladder in marketing research:
1. Vice-President of Marketing Research: This is the senior position in marketing
research. The VP is responsible for the entire marketing research operation of the
company and serves on the top management team. Sets the objectives and goals of the
marketing, research department.
2. Research Director: Also a senior position, the director has the overall responsibility
for the development and execution of all the marketing research projects.
3. Assistant Director of Research: Serves as an administrative assistant to the director
and supervises some of the other marketing research staff members.
4. (Senior) Project Manager: Has overall responsibility for design, implementation, and
management of research projects.
5. Statistician/Data Processing Specialist: Serves as an expert on theory and application
of statistical techniques. Responsibilities include experimental design, data
processing, and analysis.
6. Senior Analyst: Participates in the development of projects and directs the operational
execution of the assigned projects. Works closely with the analyst, junior analyst, and
other personnel in developing the research design and data collection. Prepares the
final report. The primary responsibility for meeting time and cost constraints rests
with the senior analyst.
7. Analyst: Handles the details involved in executing the project. Designs and pretests
the questionnaires and conducts a preliminary analysis of the data.
8. Junior Analyst: Handles routine assignments such as secondary data analysis, editing
and coding of questionnaires, and simple statistical analysis.
9. Field Work Director: Responsible for the selection, training, supervision, and
evaluation of interviewers and other field workers.
5.7
Trade Fair Authority of India (TFAI)
The India Trade Promotion Organization (ITPO) is the nodal agency of the Government of
India for promoting the country's external trade. ITPO, during its existence of nearly three
decades, in the form of Trade Fair Authority of India and Trade Development Authority, has
played a proactive role in catalyzing trade, investment and technology transfer processes. Its
promotional tools include organizing many things such as fairs and exhibitions in India and
abroad, Buyer-Seller Meets, Contact Promotion Programmes, Product Promotion
Programmes, and Promotion through Overseas Department Stores, Market Surveys and
Information Dissemination and many other activities.
ITPO is synonymous with the country's trade promotion around the world all round the year.
Indeed at ITPO, the promotion of trade is an exacting mission, translating into a search for
new frontiers and new horizons in the world of commercial interactions, both at macro and
micro levels. A mission that finds expression in the successful organization of trade
exhibitions in India and abroad, buyer-seller meets, promotion through department stores,
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contact promotion and product development programmes apart from dissemination of
information on products and markets.
ITPO, the premier trade promotion agency of the Ministry of Commerce & Industry, Govt. of
India has clearly stated its commitment towards showcasing the excellence achieved by the
country in diverse fields especially trade and commerce.
ITPO provides a wide spectrum of services to trade and industry and acts as a catalyst for
growth of India's trade. ITPO approves holding of international trade fairs in India and
regulates holding of various expositions in India primarily to avoid any duplication of efforts
while ensuring proper timing.
It manages India's world class exhibition complex which is constantly upgraded to keep it in
a high standard of readiness. Spread over 149 acres of prime land in the heart of India's
capital, New Delhi, Pragati Maidan offers about 61,290 sq. metres. of covered exhibition
space in 16 halls, besides 10,000 sq. metres, of open display area. The state-of-the-art
exhibition halls have enhanced the appeal of Pragati Maidan as the ideal centre for an
increasing number of fair organizers and business visitors from different parts of the world.
ITPO has an extensive infrastructure as well as marketing and information facilities that are
availed by both exporters and importers. ITPO's overseas offices assist buyers seeking
information relating to sourcing products from India. ITPO's overseas offices at New York,
Frankfurt, Tokyo" Moscow and Sao Paulo are pursuing opportunities for enhancement of
India's trade and investment.
Similarly, ITPO's regional offices at Bangalore, Chennai, Kolkata and Mumbai, through their
respective profile of activities, ensure a concerted and well coordinated trade promotion drive
throughout the country. With the commissioning of the state-of-the-art Chennai Trade Centre
(CTC) in January 2001 and the Trade Centre Bangalore in September 2004, ITPO has
successfully completed the first phase of the setting-up of modern exhibition facilities outside
Delhi. The Chennai Trade Centre which addresses a long-felt need for a permanent and
modern exhibition venue in Tamil Nadu, has already emerged as a hub of trade-related
activities in the region. During the year 2006-07, CTC hosted 49 trade fairs and 85
conventions related programmes.
Likewise, the formal commissioning of the Trade Centre Bangalore (TCB), at Whitefield on
September 20,2004 as a joint initiative of TPO and the Karnataka State Industrial Area
Development Board, is the harbinger of an added impetus to trade promotion through fairs,
exhibitions and associated activities of the State and Southern region. During 2006-07, TCB
hosted 21 trade-related events.
On the advice of Department of Commerce, ITPO has been coordinating the construction of
an exhibition-cum-trade complex 'North East Trade Centre' at Sarusajai, Guwahati under
'Assistance to Sates for Developing Export Infrastructure and Allied Activities(ASIDE)'
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Scheme, for facilitating trade in North-Eastern States.Spread over an area of 10 acres on the
NH-37; the constructed exhibition complex under Phase-I of development, consists of three
fully air-conditioned halls of 800 sq meters each; entrance lobby and plaza, mini conventioncum-conference room in a total plinth area of 8,700 sq. metres.
ITPO is also providing assistance to State Governments in setting up Regional Trade
Promotion Centres (RTPC) in various State's Capital and major cities. Initiatives have been
taken by ITPO for establishing Trade Fair Complexes and Convention Centres at Kolkata
(West Bengal), Bhopal (Madhya Pradesh) and Sri nagar (Jammu & Kashmir), in close
association by the State Governments and Industrial Development Corporations/Boards of
these States.
Thus, it is clearly visible that, under the direction of the Ministry of Commerce, the ITPO is
majorly committed towards development in terms of trade in all parts of the country.
Objectives:
The man objectives of the ITPO are as follows;
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To organize and participate in international trade fairs in India and abroad.
To organize trade development and promotion through specialized programmes such
as buyer-seller meets: contact promotion programmes: India promotion through
department stores, market surveys; exchange and coordinate business delegations etc;
and conduct need based research on trade and export promotion.
To develop quality exhibition space, premises, services and management so as to
enable holding of trade promotion events of international standards.
To enlist the involvement and support of the State Governments in the promotion of
India's foreign trade and promote establishment of exhibition centres in selected
regions of the country.
To disseminate trade information.
The Main Activities of ITPO are:
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4.
5.
6.
The ITPO, as mentioned earlier, has a wide ranging array of activities. Not all of these
are directly concerned with business activities but all are business related. They are as
follows
Managing the extensive trade fair complex, Pragati Maidan in the heart of Delhi.
Organizing various trade fairs and exhibitions at its exhibition complex in Pragati
Maidan and other centers in India.
Facilitating the use of Pragati Maidan for holding of trade fairs and exhibitions by
other fair organizers both from India and abroad.
Timely and efficient services to overseas buyers in vendor identification, drawing
itineraries, fixing appointments and even accompanying them where required.
Establishing durable contacts between Indian suppliers and overseas buyers.
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7.
8.
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10.
11.
12.
Assisting Indian companies in product development and adaptation to meet buyers'
requirements
Organizing Buyer-Seller Meets and other exclusive India shows with a view to
bringing buyers and sellers together.
Encouraging small and medium scale units in export promotion efforts.
Conducting in-house and need-based research on trade and export promotion.
Enlisting the involvement and support of the State Governments in India for
promotion of India's foreign trade
Trade information services through electronic accessibility at the various Business
Information Centres. As can be seen from the above, the main idea is to help people
get in touch with others and thereby encouraging trade between people.
(i) Services of ITPO:
A comprehensive range of services is also provided to the overseas buyers. They are
informed and advised on various matters such as
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Product Availability
Price Structure
Reliable Sources of Supply
Delivery Schedules
Quality Control Status; and
Special Information that an overseas buyer may need.
(ii) Aims of ITPO:
ITPO aims to act as a catalyst, while having a selective integrated approach to exports. ITPO
concentrates on specific overseas buyers in overseas markets, specific exports and specific
products. It is this micro or pinpointed approach to export promotion that marks it out from
other export promotion bodies in the country. The aim is to ensure that foreign business only
need to arrive in India and the rest of the preliminary work will be handled by the ITPO. This
includes things such as:
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Fix appointments with Indian exporters.
Organize visits to manufacturing units.
Identify manufacturing units for export-oriented joint ventures.
Locate suitable manufactures to carry out modification and product adaptation.
Supply data on capacity, equipment, quality control, etc., about ITPO's member firms.
And all services to the overseas buyers are free.
Activites of ITPO (2009-2010)
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Buyer Seller Meets (BSM)
Contact Promotion Programs (CPP)
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Seminars in India (SI)
Sales Mission (SM)
Product Promotion Programs (PPP)
Services to Overseas Buyers:
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Product Availability
Price Structure
Reliable Source of Supply
Delivery Schedules
Quality Control Status
Special Information that an Overseas Buyer may need.
A catalyst with a selective integrated approach to exports. ITPO concentrates on specific
buyers in overseas buyers in overseas markets. Specific exports and specific products. It is
this micro or pinpointed approach to export promotion that marks it out from other export
promotion bodies in the country.
IITF
Trade fair (trade show or expo) is an exhibition organized so that companies in a specific
industry can showcase and demonstrate their latest products, service, study activities of rivals
and examine recent trends and opportunities. Some trade fairs are open to the public, while
others can only be attended by company representatives (members of the trade) and members
of the press, therefore trade shows are classified as either "Public" or "Trade Only". They are
held on a continuing basis in virtually all markets and normally attract companies from
around the globe. For example, in the U.S. there are currently over 2500 trade shows held
every year, and several online directories have been established to help organizers, attendees,
and marketers identify appropriate events.
Trade fairs often involve a considerable marketing investment by participating companies.
Costs include space rental, design and construction of trade show displays,
telecommunications and networking, travel, accommodations, and promotional literature and
items to give to attendees. In addition, costs are incurred at the show for services such as
electrical, booth cleaning, internet services, and drayage (also known as material handling).
Trade Fairs or Trade shows have now become an integral part of the urban life style of Indian
people. Gone are the days when these trade shows were generally based on Industrial goods
or basically for the business class. Now days the biggest trade shows are organized for the
middle income groups.
Indian trade has traditionally been legendary and this was the reason why so many countries
in the past tried to establish a trade route with India. Today India has established itself in the
commercial market of the world and countries from far and wide find this as a great
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opportunity to benefit from the continuous boom in the Indian economy. Trade shows are
organized in every major city to encourage the locals as well as the multinational companies
to come and see the response of the Indian market towards their products.
These trade shows and fairs are organized on different basis like the yearly India International
Trade Fair is organized for business class and also for the household purchasing and the local
people thus benefiting both the business class and the local people.
These Trade fairs provide an incredible opportunity to the companies that operate on the local
level and also for the companies that operate on the international level to get in touch with the
real end consumers and to understand the needs and also the demand of their product by the
consumers. On the other hand consumers can have a direct interface with the new and cheap
products in the markets and can also enjoy purchasing and browsing through the new
products in the market.
These trade shows presents a win -win situation for both the consumers and the companies.
These trade shows and fairs are one of the best way to expand and learn about the new
business strategies and market conditions of India. Arguably the most important trade show
in India is the India International Trade Fair.
The 29th India International Trade Fair (IITF) the premier event of India Trade Promotion
Organization (ITPO), the nodal trade promotion agency of the Government of India will be
organized at Pragati Maidan, New Delhi during November 14- 27' 2009 Having evolved into
arguably the largest show of its kind in Asia, the sheer magnitude of IITF in leveraging
India's intra country and global trade exchange cannot be overemphasized. It serves to
showcase India's industrial progress and project the country as a worthy global trade
destination and a high potential market of one billion plus consumers.
IITF highlights India over a broad sectoral canvas eminently focusing on technological
advancements of the various States / Union Territories, State Pavilions offer a dynamic
window to reach out to large Indian & International populace- with the spectrum of high-tech
services at one end and traditional wares on the other adding to a befitting display of India's
versatility.
The fair display amazing strides of achievements in different halls in the form of Special
displays of Techmart, Buildtech, SARAS, Good living etc, to comprising a wide range of
products and services, engineering, automobiles, electronics, chemicals, drugs and
pharmaceutical, jute, rubber, handicrafts, jewelry, consumer goods and other sectors.
Pragati Maidan:
For a program, the size and importance of which is very great, the venue used should also be
up to the mark. In the case of the IITF, it is held annually at the Pragati Maidan.
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ITPO manages India's only world class exhibition complex which is being renovated,
modernised and upgraded from time to time to keep it in a high standard of fair-worthiness.
Spread over 149 acres of prime land in the very heart of India's capital and bustling mega
polis, New Delhi, Pragati Maidan offers 62650 sq. meters of covered exhibition space in 17
halls besides 10,000 sq. meters of open display area. New halls have been added recently
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These state-of-the-art exhibition halls have enhanced the appeal of Pragati Maidan as an
ideal business proposition for an increasing number of fair organizers and business
visitors from different parts of the world. In general, Pragati Maidan offers the kind of
ambience that is conducive to an increasing variety of exhibitions featuring gigantic
machinery and equipment to delicate exhibits like watches and jewellery having handlewith-care tags besides a whole range of precision engineering products. Every year as
many as 50 exhibitions are organized at Pragati Maidan by ITPO and other agencies The
halls at Pragati Maidan ranges from 715 sq.mtrs to 6909 sq.mtrs.
Conference and Convention Halls for hosting workshops, symposia, seminars and trade
meets
Air-conditioned and open-air theatres for cultural programmes, films and fashion shows
Quality restaurants serving delectable Indian and Continental cuisine.
From the above details we realise that a venue of the quality of Pragati Maiden is perfect to
hold such large scale affairs.
Ministry of Commerce:
The ITPO, and its subordinate bodies, the Trade fair authority of India and the Trade
development authority are, in laymen terms, governed by the Ministry of Commerce,
Government of India.
The mandate of the Department of Commerce is regulation, development and promotion of
India’s international trade and commerce through formulation of appropriate international
trade & commercial policy and implementation of the various provisions thereof. The basic
role of the Department is to facilitate the creation of an enabling environment and
infrastructure for accelerated growth of international trade.
The Department formulates implements and monitors the Foreign Trade Policy which
provides the basic framework of policy and strategy to be followed for promoting exports and
trade. The Trade Policy is periodically reviewed to incorporate changes necessary to take care
of emerging economic scenarios both in the domestic and international economy. Besides, the
Department is also entrusted with responsibilities relating to multilateral and bilateral
commercial relations, Special Economic Zones, state trading, export promotion & trade
facilitation, and development and regulation of certain export oriented industries and
commodities.
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India Trade Promotion Organization has been formed by merging erstwhile Trade
Development Authority (TDA) with Trade Fair Authority of India (TFAI) with effect from
1st January 1992. India Trade Promotion Organization is the premier trade promotion agency
of India and provides a broad spectrum of services to trade and industry so as to promote
India’s exports. These services include organization of trade fairs and exhibitions in India and
abroad, Buyer-Seller Meets, Contact Promotion Programmes apart from information
dissemination on products and markets.
5.8
Review Questions
1. What is EPC? Explain its functions.
2. Explain the functioning and objectives of PDEXCIL?
3. What is the mission of EXIM bank and how it works in India?
4. Explain briefly about ECGC?
5. Explain the history of Indian Trade production?
6. Discuss the classification of marketing intelligence.
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