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PES INSTITUTE OF TECHNOLOGY – BANGALORE SOUTH CAMPUS
Hosur Road (1Km before Electronic City), Bangalore -560100
INTERNAL TEST # 3
ANSWER KEY
INTERNATIONAL MARKETING MANAGEMENT-14MBAMM412
Course: MBA Semester IV
Time Allowed: 90 Minutes
Faculty: Divya Mathur
Max. Marks: 50 (Fifty Marks)
Date: 01-6-16
Time: 11:30 AM – 1:00 AM
Note:
Answer all the Questions.
1 (a) What are Cartel's? Explain with an example.
(3 marks)
-A cartel is an organization created from a formal agreement between a
group of producers of a good or service, to regulate supply in an effort to
regulate or manipulate prices. A cartel is a collection of businesses or
countries that act together as a single producer and agree to influence prices
for certain goods and services by controlling production and marketing. A
cartel has less command over an industry than a monopoly - a situation
where a single group or company owns all or nearly all of a given product or
service's market. In the United States, cartels are illegal; however, the
Organization of Petroleum Exporting Countries (OPEC) - the world's largest
cartel - is protected by U.S. foreign trade laws.
(b) What are distribution patterns? Explain some general distribution patterns in
International market with example.
-Understanding these general patterns is important:
1. Middlemen services
2. Line Breadth
3. Costs and margins
4. Channel length
5. Non-existent channels
6. Blocked channels
7. Stocking
8. Power and Competition
9. Retail Patterns
a. Size patterns
b. Direct Marketing
c. Resistance to Change
(c) What is a new product explain the product life cycle with example.
-According to Raymond Vernon there are four stages in a product’s life
cycle: “introduction”, “growth”, “maturity” and “decline”. The length of a
stage varies for different products, one stage of the product life cycle may
last some weeks while others even last decades. This shows that the product
life cycle is very similar to the diffusion of innovation model that was
(7 marks)
(10 marks)
developed by Everett Rogers in 1976. The life span of a product and how
fast it goes through the entire cycle depends on for instance market demand
and how marketing instruments are used.
1. When an organization has developed a product successfully, it will be
introduced into the national (and international) outlet. In order to
create demand, investments are made with respect to consumer
awareness and promotion of the new product in order to get sales
going. At this stage, profits are low and there are only few
competitors. When more items of the product are sold, it will enter
the next stage automatically.
2. Growth stage the demand for the product increases sales. As a result,
the production costs decrease and high profits are generated. The
product becomes widely known, and competitors will enter the
market with their own version of the product. Usually, they offer the
product at a much lower sales price. To attract as many consumers as
possible, the company that developed the original product will still
increase its promotional spending. When many potential new
customers have bought the product, it will enter the next stage.
3. In the maturity stage of the Product life cycle, the product is widely
known and is bought by many consumers. Competition is intense and
a company will do anything to remain a stable market leader. This is
why the product is sold at record low prices. Also, the company will
start looking for other commercial opportunities such as adaptations
or innovations to the product and the production of by-products.
Furthermore, consumers will also be encouraged to replace their
current product with a new one. There is fear of decline of the product
and therefore all the stops will be pulled out in order to boost sales.
The marketing and promotion costs are therefore very high in this
stage.
4. At some point, however, the market becomes saturated and the
product is no longer sold and becomes unpopular. This stage of the
Product life cycle can occur as a natural result but can also be
stimulated by the introduction of new and innovative products.
Despite its decline in sales, companies continue to offer the product
as a service to their loyal customers so that they will not be offended.
(3 marks)
2(a) Differentiate between domestic and international retailing.
- International Retail business consists of two groups of businesses. The
(b)
(c)
biggest value and volume business happens to be the International Multi
brand grocery Retailers like Wal-Mart, Tesco, Metro and Carrefour etc. The
second group of international retail business refers to the fashion brands
mainly in fashion, luxury brands and personal product category of
businesses. Though International Retail Companies are Global businesses,
the business and products are hugely influenced by the multi cultural and
pan country specific product requirements. The product categories largely
comprise of fashion clothes, food, gadgets as well as personal and luxury
products. Each country and each market is characterised by different fashion
trends and consumer behaviour. While the products are fast moving and
have very short shelf life, the local culture and outlook has a large part to
play in the localisation of the international brands in domestic markets.
These global companies therefore are forced to work on global branding as
well as local brand promotion and have international as well as domesticcountry specific customer reach programs and marketing as well as
promotional methods.
Personal selling is most influential promotional tool in International Market. (7 marks)
Explain with example.
- Although advertising is often
equated with the promotional effort but in the early stages of globalization
of company’s operation, marketers rely heavily on personal contact. The
marketing of industrial goods, especially of high priced items, requires
strong personal selling efforts at global level. in some cases personal selling
may be truly global. For example, Boeing salespeople engage in sales
efforts around the world. Personal selling is also the most cost-effective tool
at the later stages of the buying process, particularly in building up buyers’
preference, conviction, and action.
The reason is that personal selling, when compared with advertising, has
three distinctive qualities:
Personal Confrontation: Personal selling involves an alive, immediate, and
interactive relationship between two or more persons. Each party is able to
observe each other’s needs and characteristics at close hand and make
immediate adjustments.
Cultivation: Personal selling permits all kinds of relationships to spring up,
ranging from a matter-of-fact selling relationship to a deep personal
friendship. Effective sales representatives will normally keep their
customers’ interests at heart if they want long run relationship.
Response: Personal selling makes the buyer feel under some obligation for
having listened to the sales talk. The buyer has a greater need to attend and
response, even if the response is a polite ‘thank you.’
(10 marks)
Write in detail the issues of international retailing.
-Ethical and Legal Issues in Retailing
Consumer Fraud
Supplier Labor Practices
Retail Theft
Slotting Allowances
Use of Customer Information
Ecological Considerations
International Retail Companies have several inherent challenges that they
face in their line of business. Product innovation and product mix happen to
be the biggest challenges for these companies both at global as well as
country specific domestic levels. The survival and growth of the brand is
directly dependent upon these challenges. The global retailers have to be
tuned in to the international as well as domestic specific fashion in each of
the countries and get their product mix right for each of the markets. Service
quality and merchandising methods too, play an important role in the brand
visibility and reputation. Pricing of products is yet another challenge faced
by the brands. Developing and emerging markets are highly price sensitive.
When the international brands are trying to make an entry into the new
markets, they have got to have an entry strategy that takes into account the
price sensitivity and profitability as well.
Procurement and Supplier reliability as well as quality marks one of the
challenges that these companies face as they happen to source materials and
products from several countries. Quality and reliability as well as in time
supplies and logistics is always a challenge that can make or break the
business which is highly seasonal in each country. In the recent years we
have seen the emergence of ethical practices playing a vital role in the
procurement policies of these international companies. The companies have
got to ensure that their sourcing partners do not employ child labour or
employ unethical methods in manufacturing the products and as principle
buyers these companies are held responsible. Ethical buying has gained
global visibility and these companies have had to be watchful to ensure
compliance or risk unwanted publicity and public outcry.
3
(10 marks)
Case StudyThe Costs of Delay
The public sector Indian Oil Corporation (IOC), the major oil refining and marketing
company which was also the canalizing agency for oil imports and the only Indian
company in the Fortune 500, in terms of sales, planned to make a foray into the foreign
market by acquiring a substantial stake in the Balal Oil Field in Tran of the Premier Oil.
The project was estimated to have recoverable oil reserves of about 11 million tones and
IOC was supposed to get nearly four million tones.
When IOC started talking to the Iranian company for the acquisition in October 1998, oil
prices were at rock bottom ($11 per barrel) and most refining companies were closing
shop due to falling margins. Indeed, a number of good oil properties in the Middle East
were up for sale. Using this opportunity, several developing countries "made a killing by
acquiring oil equities abroad".
IOC needed government's permission to invest abroad. Application by Indian company
for investing abroad is to be scrutinized by a special committee represented by the
Reserve Bank of India and the Finance and Commerce Ministries. By the time the
government gave the clearance for the acquisition in December 1999 (i.e., more than a
year after the application was made), the prices had bounced back to $24 per barrel. And
the Elf of France had virtually taken away the deal from under IOC's nose by acquiring
the. Premier Oil.
The RBI, which gave IOC the approval for $15 million investment, took more than a
year for clearing the deal because the structure for such investments were not in place, it
was reported.
Questions:
a. Discuss the internal, domestic and global environments of business revealed by
this case.
b. What would have been the significance of the foreign acquisition to IOC?