Here is a compilation of notes on ‘International Marketing’ for B.Com students.
Note # 1. Definitions of International Marketing:
According to Cateora and Ghauri- “International Marketing is the performance of business activities that direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit.”
According to T.N. Beckman and Davidson- “The performance of all activities necessary for ascertaining the needs and wants of market planning product availability, effecting transfers in ownership of products, providing for their physical distribution and facilitating the entire marketing process in more than one country.”
According to Harold Barson- “International Marketing is the process of establishing multinational distribution programmes and to coordinate a series of national programmes in countries with potentials for product and service consumption.”
According to Van Terpestra- “The process of marketing beyond the country’s border is called International Marketing.”
According to Philip Ketiora and John M. Hess- “To make available company’s products and services to more than one country’s customers for use, is- known as International Marketing.”
From the above definitions, we can conclude that when marketing activities, i.e., buying, selling, transportation, storage and warehousing, financing, risk bearing, pricing, standardising, advertising and sales promotion etc., are performed in foreign markets across the national borders, it may be called International Marketing.
The definition of American Marketing Association, regarding International Marketing can be considered the best as it defines following characteristics:
1. It places individual objectives at one end and organisational object at the other end of the definition, thus stressing a relationship between a consumer and an organisation.
2. It makes clear what is to be exchanged is not restricted to only products but also includes services.
3. It recognises that it is improper for a firm to create a product first and then look for a place to sell it.
4. It acknowledges that place is just a part of the marketing mix, and that the distance between markets makes it neither more nor less important than the other parts of the mix.
5. It implies that ‘Multinational Process’ is not a mere repetition of international marketing process. The Four Ps (Product, Place, Promotion and Price) of marketing must be integrated and coordinated.
From the above it means in international marketing, activities are undertaken in several countries and such activities should be co-ordinated across the nations.
From the above, one may get the impression that international marketing is nothing but expansion of domestic marketing mix on a large scale, as we simply add the term ‘multinational’ to the definition of marketing. However, it is not true, because international marketing is not a simple extension of internal marketing mix to several countries.
While the marketing concepts may be the same, the environment within which marketing plan is implemented is quite different. The international marketing is different from domestic marketing both in the way of exchange and needs and requirements of international buyers.
Therefore, the knowledge of and the ability to perceive basic pattern in consumer behaviour is different environments is a particularly vital element in the makeup of the international marketing. Competition, legal provisions, language, government controls, weather, consumers’ behaviour, weight and measures, life style of the people of the country and many other elements affect international marketing.
Some persons use the word ‘export marketing’ for international marketing, but in fact international marketing is a wider term than export marketing. In export marketing, the firm does not undertake marketing effort in the foreign country. It exports the surplus products to foreign market. In international marketing focus changes from just exporting to marketing in foreign countries. Company establishes subsidiaries in the foreign countries to undertake marketing operations.
In international marketing not only the export but other activities, for example promotion, prices etc., are also extended to the foreign markets. International marketing is a process of designing, planning and executing marketing strategies to achieve marketing objectives in the markets of other countries or nations.
Foreign trade comes into existence only when one country produces goods or services considering the foreign customers and distribute them to these customers.
Natural resources are not equally distributed among all the nations. Technical development is also not equal among the nations. Because of all these, the trade between two nations comes into existence. Countries like USA, Japan, UK, France, Germany, and Switzerland exchange their technology and technical know-how for the agricultural products of developed or developing nations.
Note # 2. Resale Price Maintenance:
The meaning of the resale price maintenance concept is to resell the goods or services of a manufacturer at a maximum or minimum or at a fixed price. This concept is generally used in the case of those products which have a brand name.
This concept can be used in various chains of distribution. When the manufacturer asks the distributor to sell at a fixed price, it is called the concept at an individual or a standing level. This concept is deemed active at the group level when the group of wholesale distributors or retailers agree to resell at a fixed price.
Various methods are used to maintain a resale price. In America and many other countries written agreements are used in this regard. In some other countries the use of other manufacturer’s goods is banned. Sometimes the trade organisations also play an important role in this regard. In many European markets and in America the policy of resale price maintenance has been traditionally followed in the consumer goods industry.
Since 1950, many major trading nations have either stopped using this policy as a competitive weapon or make a limited use of it. The creation of international organisations like OPEC, GATT etc. has helped in breaking the traditional price maintenance system, but still this system runs according to the laws of different countries.
In Italy and Switzerland this system is fully recognised by government. Canada does not allow it and in Germany an improvised version of this system has been recognised. Basically the government in every country wants this policy to protect the rights of consumers in the country.
Note # 3. Responsibilities and Organisation of Product Planning and Development in International Market:
Decisions concerning the design, development and management of new products are both crucial and complex, therefore the responsibilities for the various tasks in the development and marketing of new products must be clearly defined. New product planning and development generally is a task of top management.
Generally, any new concept about any of the goods is furnished before the top managers and their consent is obtained. This concept may be related to manufacture of a new product. Having obtained the approval from the top managers, proper inquiry is made through the product planning and several informations relating to the product are collected.
All these informations are then given to the engineering department for converting it into a model. This department on completion of the model sends it to the manufacturing department. This department manufactures a small quantum of that product and sends it for sale to the marketing department. Marketing department introduces this product into the market on a trial basis.
Generally, the following organisation for Product Planning and Development is used:
The alternative organisational structures for new product development generally fall into one of the following types, namely New Product Department, New Product Committee, Marketing Manager, New Product Manager etc.
In reality it is better that responsibility of product planning and development works should be confined to the marketing manager. Because it is necessary that the goods should be manufactured according to the requirements of consumers. This fact is necessary because an enterprise is deemed to be customer oriented.
Note # 4. Product Planning and Development in Indian Industries:
The work of product development organisation and operation in Indian industries is in primary stage. Production is often made on the basis of products manufactured in foreign countries. But today many big companies have set up their research and development departments. They have started registering their discoveries and research in the foreign countries under patent rules. For example, Dabur Company has registered its medicines for cancer in many countries. The beginning of research was started in the industries of public sector after independence. Now there is much progress in this direction. The government of our country is conscious about this. Now the conclusions of many government laboratories are available to the industries.
The government is also motivating industries by making weighted deduction of the expenditure incurred on the research from the income tax. In our country much information is available on product planning. Even then many companies are working in this direction and other countries are also availing of this research.
The following information is available about some main companies:
1. Multinational company Hindustan Lever Limited is the first company regarding consumer’s goods and this is the reason this company has earned a huge fame. It has a research department for product planning and development. It has a very big research centre for testing. It has developed many new products.
2. Tata Iron Steel Company Limited is also doing research vigorously.
3. Government Company Hindustan Teleprinters Limited has produced Arabic Teleprinters, switch board etc., as a result of product planning and development.
4. Radio and Electric Manufacturing Company Limited, Bangalore which was manufacturing radio in the beginning is now manufacturing Transistors, Electricity Meters, Water Meters and Electrical PVC cables and Loudspeakers etc. This is the result of product planning and development.
5. Government of India’s institution, Indian Telephone Industries Limited is equipped with research and development department.
6. Dabur India Limited has set up a research and development department of its own. It has developed many Ayurvedic products. The research is going on the medicines for cancer and very soon these products will be supplied to the market for marketing.
7. Ranbaxy Company has its own laboratories and has brought many life-saving drugs for marketing.
8. Dainik Bhaskar made a detailed and vast (survey) study of the market before introducing its Hindi publication in Haryana, Punjab and Chandigarh. In the same way much expenditure has been incurred on research before starting Gujarati publication in Gujarat.
9. The Fertiliser Corporation of India is also equipped with planning and development department which is working on the development of fertilisers.
10. Apart from companies, other institutions are working on development and research. They provide the results of their research to the companies and on this basis they improve their products and manufacture them. For example, National Dairy Research Institute, Karnal has provided much information to many companies about the new products of milk.
In addition to these companies, many other companies are also working on product development. Such type of companies are in hundreds. There is no exact data about the money spent per annum by these companies.
Note # 5. Marking of Goods for International Trade:
Care should be taken in marking of goods meant for international trade, because the transporter, ship or any other mode, carry a very large number of consignments belonging to numerous exporters at one and the same time. To identify a particular consignment, it is necessary to mark the name and address of the exporter, importer, port of origin and port of destination, place of destination, quantity, weight (gross/ net), exporter’s and importer’s special marks, code number, date of manufacture, bill of landing number etc.
These markings help the consignment not only in easy and effective delivery of goods but also reach safely to the ultimate buyer out of a large lot of consignments.
Marking is made with black ink or coloured ink. Some use stencils. In some cases marking is made on metal sheets or good quality paper. These should be mailed and paper shall be pasted. Generally the marking shall be inscribed directly on the cases to be exported.
The International Cargo Handling Co-ordination Association has put out certain recommendations for the marking of goods carried by ocean going vessels.
Some of the recommendations are as follows:
1. The material used for marking should be of fast dyes and should not harm/affect the contents of the package.
2. The appearance of marks should be in certain order and in certain size.
3. Declaration of large package should be placed on two continuous sides, and for consignments bound together on a pallet and also on top. Handling instructions should be placed on all four sides of the package. In case of sacks/bags both the sides should be marked.
4. Letters used for marking should be in capitals and size of it should be in proportionate to the package. The colour used for writing should be careful because red and orange letters indicate dangerous goods.
5. In case of using recycled or already used package for fresh consignment, old or any label appearing on the package should be removed and should stick fresh marking label to avoid mishandling.
6. Marking should be made by a stencil or by branding or by pencil or brush without stencil.
7. The marking made on packets should find in all packets and one should not leave or omit any packet.
8. English is taken as language used for marking in international trade.
9. The strapping used on packing should not cover the markings. The loading and unloading person will get confused and may load or unload a different pack which he thinks to be correct.
10. The figures should indicate the total number of packages marking up the consignment and consecutive number of the individual package. The name of the ship and bill of lading number should be shown and language of the marking should be in accordance with the importer’s instructions or the official language of the country at final destination.
Due to different nature, characteristics, durability, chemical properties etc., of the product contained in the packaging shall not be known to the loader of the consignment and the transporters. If consignment is properly marked, it will help them to handle and store according to given instructions in the marking.
Some goods are highly inflammable, some goods are breakable, and some are to be kept away from heat. So the exporter should instruct through the marking that during loading and unloading of consignment, the workers at port identify the marks and act accordingly.
Note # 6. International Marketing and Labels:
In international market labelling of the products is very important. Labelling may be regarded as part of packaging because decision making on packaging also involves consideration of labelling requirements. Sanitary obligations are a very
important aspect of labelling. Many countries have laid down labelling requirements in respect of a number of products.
According to the regulations in many countries labelling of food items should disclose information about a number of aspects like date of manufacturing, expiry date or optimum storage period for goods, composition, storage conditions, if necessary, method of use, etc. In some countries, labelling of certain products like cigarettes should also include a statutory warning that cigarette smoking is injurious to health.
Besides, there are regulations in certain countries with regard to the size of the label and the size of the alphabets in the label. Sometimes the overseas buyer insists for a particular type of label, which he wants and even he may send the sample, accordingly the exporter is required to do so. Exporter can import such labels without import trade control restrictions, provided that labels or articles for labels are required for bona fide use for confirmed export order.
Many countries insist that labelling should be done in the popular language of the country. This should preferably be done even in the absence of such a statutory requirement. Besides satisfying the statutory and social requirements, labelling should help promote sales. In self-service stores labelling performs the services of a salesman in informing and attracting the customers.
Colour, size, shape, language, numbers on the labels may differ from country to country, therefore these should be as per the buyer’s choice. Different countries have different beliefs in shapes, size, colours of the labels. Therefore, labels must be designed in such a manner that they shall not carry any negative reactions in the minds of people.
The number plays positive and negative remarks for the goods in the importing country. For example, 13 has negative effect for Germany, Greece, whereas it is positive for India. 1, 3, 5, and 8 are positive for Japan. Black colour is negative for Pakistan, Malaysia etc. Many countries like red, green, blue. Some symbols, size and shape also indicate positive and negative reactions in different countries. Pigs and dogs indicate negative reactions in Islamic countries. Hearts are positive for Denmark.
Note # 7. Role of Price and Non-Price Factors in International Marketing:
In an international market, prices are fixed taking into account a combination of various conditions and there may be other factors which put pressure on the pricing of a product. These factors may be termed as price factors and non-price factors.
1. Price Factors in International Marketing:
To determine the prices in international marketing, cost, demand and competition, all the three items necessarily need to be considered. While pricing the product, not only its cost, but different expenses regarding import-export are also to be considered.
As regards demand in international markets, it is subject to a number of factors which are different from those operating in the domestic market. For example, tastes and customs of the foreign importers may differ from those of the domestic population. Elasticity of demand for the products is an equally important factor. A reduction in price may not help an exporter to sell more if the demand for the product is not price elastic. The demand for some products may be elastic in relation to income.
The competition in foreign markets is much more severe than in the domestic market. In the domestic market, a manufacturer has to face competition only from the domestic manufacturers but in foreign markets, exporters have to compete with not only the domestic manufacturers but also with foreign manufacturers. As a result, the elasticity of demand for the exported products becomes higher than it is otherwise.
In this way, price factors affect the pricing in international marketing.
2. Non-Price Factors in Pricing Decisions:
An importer considers a product not by its price alone. Many other non-price factors are considered by the importer. They play rather important roles in creating demand in foreign countries.
Such factors are:
(i) Confidence:
Most often, the importers of developed countries do not have much confidence in the quality of products manufactured in developing countries irrespective of the fact that the quality of their product is much better than developed countries. Indians and exporters of other developing countries have to sell their products at a lower price than their competitors.
For example, Indians had to sell their storage batteries at lower prices in Saudi Arabia than U.S. and European batteries though the quality was comparable. Fixing lower price is inevitable to make our product acceptable in foreign markets.
(ii) Product Differentiation and Brand Image:
If products are well differentiated and they have built up a brand image in the minds of foreign customers, the manufacturers of such products may charge higher prices for their products. Brand names like Kirloskar, Reliance, Century, Birla, Ajanta Clocks, and Tata have already earned a good brand image and are able to sell their products in foreign markets at higher prices.
(iii) Frequency of Purchase:
Frequency of purchase, in some cases, decides the price. If consumers purchase the goods very often as in the case of non-durable consumer items, they, very often, think of the price. When it is durable consumer item or having snob value or meant for gift, price will not be the main consideration.
People may be willing to pay very high price if the particular product appeals them or particular item catches their fancy. Thus prices of durable consumer items, artistic items or gift items may be sold at much higher prices. Similarly this factor also applies on the handicrafts manufactured by developing countries.
(iv) Association of Price and Quality:
There appears to be a close association in the consumer minds between the price and the quality of the product. It is most commonly understood that lower priced goods do not carry adequate value. The higher priced goods carry a much greater conviction about quality than the low priced goods. Particularly in periods of inflationary price rise, a reduction in price may lead to a reduction in demand because it has an adverse reaction on the consumers.
Reduction in prices or fixing a low price for the product in comparison to others is regarded not a good strategy unless there are chances to increase sales by reducing the price. Similarly, in this respect, it may be useful to note that it may be easier to sell in developed countries with a higher price tag but in developing countries, lower prices may help increase sales.
(v) Comprehensive Knowledge of the Product:
In the case of industrial goods, price is not likely to be an indicator of quality as in the case of industrial goods, the importer may have a good knowledge of the quality of brands available in the world market. Therefore, apart from the quality, he considers other factors like technical soundness of the product, steady availability at reasonable price and comprehensive after sale service offered by the manufacturer. Price is not the indicator of quality alone, but it is a composite of all other related factors.
(vi) Before and After Sale Service:
In case of valuable industrial and engineering products both before and after sale service count much more than a lower price. Before sale, service in the case of engineering goods covers advising the importer about the relative suitability of competing products, and demonstrating the use of his product.
After sale service in case of sale of engineering goods and durable consumer goods includes rectification of genuine technical fault in the product, educating the users on the proper use of the product and providing training for its proper maintenance, free service during warranty period, and ensuring supply of spare parts and components after the warranty period. If these services are undertaken by the exporter in the foreign markets, price may be fixed comparatively higher. In India Matiz car was not popular only due to lack of after sale service.
(vii) Prompt Deliveries and Continuity of Supply:
Prompt and regular supply of the original product and its ancillary products assumes great importance in foreign trade. If prompt and regular supplies of the product or ancillary products are not maintained the country has all the chances to lose the markets. The development of substitutes for a number of products exported by developing countries is also due to the failure of these countries to maintain regular supplies.
An uninterrupted supply of the product may assure better prices and in the same manner prompt deliveries may attract the foreign customers to pay better prices.
(viii) Settlement of Claims:
In international market the exporter and importer are not close to each other. In most cases, they even do not know each other. The importer will not hesitate to pay somewhat higher prices if there is an arrangement between them for prompt acceptance and settlement of claims, if it is found correct during the course of inquiry. It is also an important consideration.
(ix) Supply of Complete Range in Huge Quantity of Products:
In certain cases, the price of the product depends upon the fact that the producer (exporter) is in a position to supply complete range of the products and in large quantities. Generally, in developing countries the exporters could not supply the products in huge quantities because of lack of resources. Moreover, in developing countries, one manufacturer does not manufacture the complete range of product. They produce only one or two items of the range.
(x) Terms of Credit:
In case of exports of capital goods, i.e., machinery and equipment, availability of finance and terms of credit are very often the determining factors. In this respect developed countries dominate. They supply goods on credit while exporters from developing countries, including India, could not do so because of their limited resources. Therefore, in some cases terms of credit also affect price determination in international market.
It is clear that in international markets non-price factors are more influential in pricing than price factors. The price factors, i.e., cost, demand and competition also affect the prices and play an important role in determining the price strategy, but their role is limited.