TYBBA SEM-V Prof. V.B.

Shah Institute of Management, Amroli

PROF. V.B.SHAH INSITUTE OF MANAGEMENT, AMROLI,

SURAT

COURSE: B.B.A
YEAR: T.Y.BBA (SEM –V)
SUBJECT: International Marketing Management
Faculty: Dr. Sudhadhara Samal
Unit 1: International Marketing (25%)
Content:
 International Marketing: Meaning, Nature and Importance; International Marketing
Orientation: E.P.R.G. – Approach, An overview of the International Marketing
Management Process; International Marketing Environment, Various factors affecting
International Marketing Environment, International Marketing vs. Domestic
Marketing
 International Market Segmentation and Positioning; Screening and Selection of
Markets; International Market Entry Strategies: Exporting, licensing, Contract
Manufacturing, Joint Venture M & A, Setting-up of Wholly Owned Subsidiaries Aboard,
Strategic Alliances.
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Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

Chapter-1
Introduction
(Section I)
1. Introduction:
Export business is also known as International business or overseas business. International
business focuses on global resources, opportunities to buy/sell world-wide. The term export
derives from the conceptual meaning as to ship the goods and services out of the port of a
country. It means movement of goods and services from National boundaries to other
countries by following proper procedure of export business.

Meaning: The word 'International Marketing' is defined as the exchange of goods and
services across national borders to meet the requirements of the customers. It includes
customer analysis in foreign countries and identifying the target market.

International marketing is also known as global marketing. It is the one which enables
companies in reaching out to customers internationally. They are easily able to sell their
products in several countries which increase their sale and profitability.

For example: Nokia – Dust resistant phone, anti-slip grip and in-built flash light for India
rural consumer. Hindustan Unilever – Introduced shampoo sachets priced at Re 1 for price
sensitive Indian consumer.

2. Nature of International Marketing:

The nature of international marketing is as under:-

(A) Large Scale Operations: - Price is an important factor that determines the success of
an exporter in the highly competitive international market. Large-scale operations, full
utilisation of installed capacity and transactions in bulk reduce overall cost of production and
thereby price of the product.

(B) Dominance of MNCs/TNCs from Developed Countries: - The international trade is

dominated by MNCs and TNCs originating from developed countries especially from USA,
Japan and European countries. These companies have huge financial and physical resources
and operate throughout the world.

(C) Trade Barriers: - Trade barriers are the artificial restrictions on the free movement of
goods from one country to other. These barriers are of two types, viz., tariff and non-tariff.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

Tariff barriers are in the form of taxes and customs duties. Non-tariff barriers care in the form
of quotas and licences.

(D) Trading Blocs: - Trading blocs are the associations of countries situated in a particular
region whereby they come on to a common understanding regarding rules and regulations to
be followed while exporting and importing goods among them. For example, European
Union (EU).

(E) International Marketing Research:- The needs and requirements of individuals differ
from region to region. Therefore, an effective marketing research technique should be applied
in order to understand the needs and requirements of consumers in different parts of the
world.

(F) Importance of Advanced Technology: - Technology plays an important role in building

competitive strength. MNCs originating from countries like USA, Japan and Germany
dominate the world trade due to continuous research, innovations and inventions.

(G) Foreign Exchange Regulations:- Different countries have different currencies and
conversion rates. These rates are subject to fluctuation. Therefore, each country has a separate
set of rules for collection of export proceeds and payment for imports. For example, In India,
all foreign currency transactions are regulated by the Foreign Exchange Regulation Act,
1973. (FERA).

(H)Three-faced Competition:- International market is highly competitive. An exporter faces

competition from three angles:-

1. Exporters from his own country.

2. Exporters from other countries.

3. Local suppliers in importing country.

(I) International Organisations: - international trade is subject to the rules and regulations
framed by the international organisation such as the World Trade Organisation (WTO) and
the United Nations Conference on Trade and Development (UNCTAD). These organisations
have been formed in order to promote world trade by removing unnecessary trade barriers
and help underdeveloped countries to develop export potentials.

3. Importance of International Marketing:

No country in the world is self-sufficient in all its domestic requirements. The slogan export
or perish by Shri Jawaharlal Nehru is applicable to all the countries of the world developed as
well as developing. There are various factors which give rise to interdependence among
countries. Therefore, international trade plays an important role in the economic development
of a country.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

A) Division of Labour and Specialisation: - Certain countries enjoy comparative cost

advantage in the production of specific commodities due to favourable climatic conditions,
technical know-how, easy access to raw materials and efficient human resource. Such
countries produce commodities in excess of their requirements and exchange surplus
production with other countries for the commodities they are deficient in.

B) Increases National Income and Per-capita Income: - Due to division of labour and
specialisation, each country produces commodities for which it is best suited and exports
surplus production. Similarly, each country imports commodities for which it has
comparative cost disadvantage. This generates additional income and saves real income by
making available imported articles at competitive rates.

(C) Facilitates Transfer of Technology: - Some countries like Japan, USA, UK and
Germany are highly developed in terms of technology while most of the Afro-Asian and
South American countries are backward in technology. This directs the flow of technology
from technically advanced countries to technically backward countries of the world.

(D) Resolves Balance of Payments Crisis: - Balance of payments may be defined as the
difference between the monetary value of exports and imports of a country. When the
outflow of foreign currency exceeds the inflow, a country suffers from an unfavourable
balance of payments. In order to solve such imbalance a country needs to export.

(E) Global Peace: - In the age of nuclear weapons, there is a greater need of promoting
dialogue between various countries of the world. International trade may be a medium for
promoting exchange of ideas and thoughts and thereby help promoting international peace
and friendly relations among the countries of the world.

(F) Optimum Utilisation of Resources: - A country can make optimum utilisation of its
natural and human resource by promoting exports. Resources remain unutilised or
underutilised due to the want of demand in the domestic market, the same can be well utilised
by promoting exports of surplus production.

(G) Employment Opportunities: - Development of export brings about multiple increases

in employment opportunities. It not only creates employment opportunities in the export
sector but also in other related service sectors such as banking, insurance, advertising,
transport etc. This helps overpopulated countries in solving their unemployment problem.

(H) Research and Development: - International market is highly competitive. In order to

survive cut-throat competition at international level needs to undertake continuous research
and development. This leads to development of technology in backward and developing
countries of the world.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

 Special Problems of International Marketing:-

International marketing is a very complex and time-consuming process as it is subject to rules
and regulations of both exporting as importing country. At the same time, there are other
problems such as long distance, currency fluctuations and high degree of competition.
Some of the common problems of International Marketing have been analysed below:-

(A) Long Distance: - International market is spread over the world and therefore, goods are
to be transported over a considerable distance. During transportation goods are exposed to
risks and uncertainties of transportation and perils of sea. Again delay is caused due to
lengthy customs formalities.
However, risk during transportation can be insured by taking suitable marine insurance
policies.

(B) High risk and uncertainty: - International trade is subject to political as well as
commercial risk. Political risk arises due to the political actions of the governments such as
war and internal aggression. Commercial risk arises due to insolvency of buyer or buyers
failure to accept goods. However, these risks can be insured by taking suitable policies from
the Export Credit and Guarantee Corporation of India ( ECGC)

(C) Customs Formalities: - Customs formalities are different in different countries. Again,
these formalities are very lengthy, time consuming and complicated. Sometimes, these
formalities act as barriers to the free flow of trade between countries of the world.
In order to solve the difficulties created by customs formalities, an exporter can obtain
assistance of the Clearing and Forwarding (C&F) agents.

(D) Trade Barriers: - Trade barriers are the artificial restrictions on the free movement of
goods from one country to other. These barriers are of two types, viz., tariff and non-tariff.
Tariff barriers are in the form of taxes and customs duties. Non-tariff barriers are in the form
of quotas and licences.
However, efforts are being made by the World Trade Organisation (WTO) to eliminate and
simplify trade barriers.

(E) Three-faced Competition: - An international marketer faces competition from three

angles:-
1. Suppliers from his own country.
2. Suppliers from other countries.
3. Local suppliers in importing country.
However, an international marketer can face cut throat competition by continuously
upgrading the quality of product, innovations and inventions and reducing cost of production.

(F) Payment Difficulties: - Different countries have different currencies and conversion
rates. These rates are subject to fluctuations. Thus, an exporter may suffer a loss if there is a
change in the exchange rate after entering into a contract with foreign buyer.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

Losses on account of fluctuations in the exchange rates can be eliminated by entering into
forward contracts.

(G) Documentation Formalities: - There are a number of documents to be filed with various
authorities while exporting goods. For example, in India, an exporter is required to prepare
and file as many as 25 documents of which 16 are commercial and 9 are regulatory.

Aligned Documentation System (ADS) has simplified the export import documentation
procedure to a great extent.

(H) Diverse Languages, Customs and Traditions: - Languages, customs and traditions are
very sensitive issues and must be taken into consideration while exporting goods to foreign
countries.
A company going abroad must study each foreign market carefully and become sensitive to
its social and cultural needs by tapping first-hand information about such issues.

4. International Business Approaches:

International business approaches are similar to the stage of internationalisation or
globalisation. Douglas Wind and Pelmutter advocated four approaches of international
business. They are:
1. Ethnocentric Approach
2. Polycentric Approach
3. Regiocentric Approach
4. Geocentric Approach

1. Ethnocentric Approach: Here the domestic companies view foreign markets as

an extension to domestic markets.

2. Polycentric Approach: Here the companies establish foreign subsidiary and

empowers its executives.

3. Regiocentric Approach: Here the company’s subsidiaries consider regional

environment for policy/ strategy formulation.

4. Geocentric Approach: Here companies view the entire world as a single country/
market.

1. Ethnocentric Approach:
The domestic companies normally formulated their strategies, their product design and their
operations towards the national markets among customers and competitors. But among the
excessive production more than the demand for the product either due to competition or due
to changes in customer preferences pushes the company to export the excessive production to

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

foreign countries. The domestic company continues the exports to the foreign countries
and views the foreign markets as an extension to the domestic markets just like a new
region.
The executive at the head office of the company make the decisions relating to exports and
the marketing personnel of the domestic company monitor the export operations with the help
of an export department. The company exports the same product design for domestic
markets to foreign countries under this approach. Thus, maintenance of the domestic
approach towards international business is called ethnocentric approach. This approach is
suitable to the companies during the early days of internationalisation and also to the
smaller companies.

2. Polycentric Approach:
The domestic company which are exporting to foreign countries using the ethnocentric
approach find at the later stage that the foreign markets need an altogether different approach.
Then the company establishes a foreign subsidiary company and decentralize all the
operations and delegates decision making and policy making authority to its executives.
In fact, the company appoints executives and personal including a chief executive who
reports directly to the Managing Director of the company. Company appoints the key
personnel from the home country and all other vacancies are filled by the people of the
host country. The executive of the subsidiary formulate the policies and strategies, design
the product based on the host country's environment (culture, customs, laws,
government policy etc.) and the preferences of the local customers. Thus, the polycentric
approach mostly focuses on the conditions of the host country in policy formulation
strategy implementation and operations.

3. Regiocentric Approach:
The company after operating successfully in a foreign country thinks of exporting to the
neighbouring countries of the host country. At this stage the foreign subsidiary considered
as the regional environment (for example Asian environment like laws,culture, policies
etc.) for formulating policies and strategies. However it markets more or less the same
product design under polycentric approach in other countries of the region, but with different
market strategies.

4. Geocentric Approach:
Under this approach the entire world is just like a single country for the company they
select the employees from the entire globe and operate with a number of subsidiaries.
The headquarters are co-ordinate the activities of the subsidiaries. Each subsidiary functions
like an independent and autonomous company in formulating policies, strategies,
product design, human resource policies, operations etc.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

5. An overview of the International Marketing Management

Process:

International marketing decisions are same as domestic marketing; only difference is

that all marketing decisions are taken with reference to foreign or international
markets (or customers). More clearly, product, price, promotion, and distribution
decisions are made for international buyers.

Those firms planning to enter the global markets have to decide on following key /
strategic decisions:

1. International Business Decision

2. Market Selection Decision

3. Entry and Operating Decision

4. Marketing Mix Decision and

5. International Organization Decision

1. International Business Decision (Whether to go for international market?)

The first few important questions a firm has to answer are should a company go for
international market? Why should a company prefer to enter global market? Does Company
capable to transact in international markets? Obviously, answers come from company’s
current domestic market position and types of opportunities available in the foreign markets.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

When international markets seem to more attractive and the company is capable to exploit
these markets, the company decides to enter the international markets.

In short, a company prefers to enter the international market in following situations:

1. When company’s has excess production capacity and there exists attractive opportunities
outside, and/or

2. When, company has enough capabilities to deal with international markets, and/or

3. When, compared to domestic markets, foreign markets seem more attractive or profitable,
and/or

4. When domestic government insists, force and/or encourage businessmen for international
markets.

2. Market Selection Decision (To whom of which country to sell?)

Once a firm has decided to enter the international market, the next important marketing
decision is market selection. As per company’s present product mix, production capacity, and
proposed expansion strategy, it selects one or more countries to operate in. In the same way,
it has to decide on type of foreign buyers to be served.

Market segmentation and target market selection are two basic issues in the decision.
Initially, a firm targets the most attractive and comparatively easy international markets.
Global marketing research can help a company to study international consumer behaviour,
segment international market, and select a few most profitable markets.

To assess international markets, following criteria may be used:

1. Present market opportunities

2. Future market opportunities

3. Market share

4. Uncertainties and challenges

5. Cost-profit estimates

6. Return on investment

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

3. Entry and Operating Decision/ Market Entry Decision (How to enter the
international market?)

A firm has selected international markets to operate in. Now, the next imperative marketing
decision is market entry, i.e., how to enter the market; which of the options to be used for
foreign market entry. There are several options to choose an appropriate entry strategy.

1. Exporting:

Exporting involves selling domestic products in foreign markets. It is easier and common
entry option. Exporting consists of producing the products in home country and selling or
exporting the same in the international market. There are two options in exporting, the first,
company itself exports products in foreign markets, and, the second, company exports
through intermediate agency or agent.

Some entry options in exporting, as suggested by Philip Kotler, include:

i. Export Department:

A company maintains a full-fledged export department to sell its products in foreign markets.
The department is responsible for searching export opportunities, promotion and selling
products, and performing all activities related to export business.

ii. Opening Branch in Foreign Market:

Some companies open their branches or shops in foreign markets to serve consumers. The
head of the branch is responsible for all activities related to promotion and distribution of the
company’s products.

iii. Appointing Traveling Salesmen:

Some companies appoint salesmen to search customers in foreign market and serve them.
They collect orders and manage necessary procedures. They can help develop relations with
foreign agencies, retailer, and customers.

iv. Appointing Distributors:

In this entry option, a firm appoints agents, representatives, or middlemen in foreign markets.
They are responsible to carry out all activities to promote and sell the company’s products.

2. Direct Foreign Investment:

A company sets up its own factory in other countries. It carries out all the production and
marketing activities in foreign land. But, the option depends on a lot of factors such as market
stability, costs of production and marketing, competition, government policies, and other
factors determining favourableness of situation. Company should select this strategy carefully
as there are considerable risk and uncertainties in some countries.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

3. Joint Venture:

The joint venture is jointly owned and managed by host and foreign companies, by two
companies of two nations. A foreign company holds necessary equity to get voice in
management but not enough to completely dominate the venture. Structure of joint venture
depends on government policies and approach of host country.

In underdeveloped and developing countries, many multinational corporations are operating

as joint ventures. For example, HMT represent joint venture with Swiss Machines and Tools,
Proctor and Gamble has joint venture with Godrej, Suzuki of Japan has with Maruti Udyog,
etc.

At present Indian governments and companies operate with more than 50 countries as joint
ventures. When a giant company invests directly in many countries, it is called multinational
companies (MNCc). There are several forms of joint venture, such as mixed companies, joint
ownership companies, licensed companies, contract manufacturing, management contract,
etc.

4. Marketing Mix Decision (Which type of marketing mix should a firm prepare?)

Marketing mix decision involves preparing marketing mix (strategies) for international
market. Marketing mix consists of 4P’s – product decisions, pricing decisions, promotion
decisions, and place or distribution decisions.

Marketing mix decisions remain same as domestic market except the target market. Here, all
marketing mix decisions are taken with reference to foreign customers and global marketing
environment.

5. International Organization Decision (What type of organisation should a firm adopt

to manage international business?)

Organisation for global marketing is an important decision. In order to implement, direct, and
control international marketing efforts, a company must adopt an appropriate organization
structure. The organisation is responsible to regulate foreign trade.

It is same as domestic marketing organisation; the only difference is that it is prepared to

administer international marketing operations and activities. Structure depends on a lot of
factors such as type of products, number of countries, type of buyers, etc. Sometimes, it is
treated as the department or part of main organisation, for example, foreign trade department.

There are different types of organisation structures suit with international marketing
such as:

i. Product-wise Organisation

ii. Country-wise Organisation

iii. Customer-wise Organisation

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

iv. Place-wise organisation

v. Matrix or Mix Organisation, etc.

6. International Marketing Environment:

International Marketing environment refers to the controllable and uncontrollable forces
that influence upon the marketing decision making of a firm globally. International
Marketing environment is comprised of those components which shape policies,
programmes and strategies of an international marketer.

An international firm must resort to systematic study of international marketing environment

to collect the inputs of marketing decision making. To serve the international markets
effectively, a firm is in need of understanding international marketing environment properly.

The needs, preferences and expectations of buyers in different overseas markets are not
necessarily similar. The environmental differences influence the international marketing
decisions of a firm
The international marketing environment surrounds and impacts upon the organisation.
Marketers aim to deliver value to satisfied customers, so they need to assess and evaluate the
internal environment and the external environment which is subdivided into micro and
macro.
International Marketing environment opportunities vary among the nations. Some economies
have enormous potentials of growth while other has not.
The knowledge of economic environment helps an international marketer to understand
which market to select for reaping lasting benefits.
Such strategic decisions as whether a company should enter a given foreign market or not,
what market entry strategy should it employ, what strategy it should adopt in respect of
product, promotion, pricing and distribution, etc. are based on two sets of factors, viz., the
company related factors and the foreign market related factors. The decision as to whether to
go international or not is based, in addition to the above two, on yet another set of factors,
viz., the domestic marketing environment.
The company related factors refer to such factors as the company objectives, resources, and
international orientation. The domestic marketing environment consist of factors like growth
prospects including the competition, government policies etc. The foreign market related
factors which are relevant to the international business strategy formulation or which affect
the international business are often described as the international business environment.
What makes a business strategy which is successful in one market a failure in another market
is often the differences in the business environment. In other words, the differences in the
business environment may call for changes in the business strategies, i.e., there should be

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

adaptation of the business strategy to suit the environment of the market. In short, it is the
differences in the marketing environment which may make the international business strategy
different from the domestic one.
International Marketing Environment has 2 Main Components: Internal and External
Environment
The international marketing environment surrounds and impacts upon the organisation.
Marketers aim to deliver value to satisfied customers, so they need to assess and evaluate the
internal environment and the external environment which is subdivided into micro and
macro.
Thus, there are mainly two components of international marketing environment:
The international marketing environment surrounds and impacts upon the organisation.
Marketers aim to deliver value to satisfied customers, so they need to assess and evaluate the
internal environment and the external environment which is subdivided into micro and
macro.
Thus, there are mainly two components of international marketing environment:
1. Internal Environment
2. External Environment
Component # 1. Internal Environment:
Internal environment refers to the firm related factors. The firm related factors are referred to
as controllable variables because the firm has control over them and can (relatively easily)
change them as may be thought appropriate as its personnel, physical facilities, organisation
and functional means such as marketing mix, to suit the environment.
The internal environment of the company includes all departments, such as management,
finance, research and development, purchasing, operations and accounting. Each of these
departments has an impact on international marketing decisions. For example, research and
development have input as to the features a product can perform and accounting approves the
financial side of marketing plans.
The ability of a firm to do international business depends on a number of internal
factors like the mission and objectives of the firm; the organisational and management
structure and nature; internal relationship between employees, shareholders and Board
of Directors, etc.; company image and brand equity; physical assets and facilities; R&D
and technological capabilities; personnel factors like skill, quality, morale, commitment,
attitude, etc.; marketing factors like the organisation for marketing, quality of the
marketing men and distribution network; and financial factors like financial policies,
financial position and capital structure.

A useful tool for quickly auditing the internal environment is known as the Five Ms
which are Men, Money, Machinery, Materials and Markets. Some might include a sixth

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

M, which is minutes, since time is a valuable internal resource. All these factors are
company related factors which are fully controllable. All these have to be considered while
entering in the international market.

Component # 2. External Environment:

External environment refers to the factors outside the firm. These factors are uncontrollable
or we can say that these are beyond the control of a company. The external environmental
factors such as the economic factors, socio-cultural factors, government and legal factors,
demographic factors, geographical factors etc. are generally regarded as uncontrollable
factors.
The external environment may further be divided in two parts:
a. Micro Environment and
b. Macro Environment.
a. Micro Environment:
The micro environment is made from individuals and organisations that are close to the
company and directly impact the customer experience. They can be defined as the actors in
the firm’s immediate environment which directly influence the firm’s decisions and
operations. These include suppliers, various market intermediaries and service organisations,
competitors, customers, and publics. The micro environment is relatively controllable since
the actions of the business may influence such stakeholders.

i. Suppliers:
Marketing managers must watch supply availability and other trends dealing with suppliers to
ensure that product will be delivered to customers in the time frame required in order to
maintain a strong customer relationship.
ii. Marketing Intermediaries:
Marketing intermediaries refers to resellers, physical distribution firms, marketing services
agencies, and financial intermediaries. These are the people that help the company promote,
sell, and distribute its products to final buyers. Resellers are those that hold and sell the
company’s product. They match the distribution to the customers and include places such as
Wal-Mart, Target, and Best Buy.
Physical distribution firms are places such as warehouses that store and transport the
company’s product from its origin to its destination. Marketing services agencies are
companies that offer services such as conducting marketing research, advertising, and
consulting. Financial intermediaries are institutions such as banks, credit companies and
insurance companies.
iii. Customers:
Another aspect of microenvironment is the customers. There are different types of customer
markets including consumer markets, business markets, government markets,

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

international markets, and reseller markets. The consumer market is made up of

individuals who buy goods and services for their own personal use or use in their household.
Business markets include those that buy goods and services for use in producing their own
products to sell.
This is different from the reseller market which includes businesses that purchase goods to
resell as is for a profit. These are the same companies mentioned as market intermediaries.
The government market consists of government agencies that buy goods to produce public
services or transfer goods to others who need them. International markets include buyers in
other countries and includes customers from the previous categories.
iv. Competitors:
Competitors are also a factor in the micro environment and include companies with similar
offerings for goods and services. To remain competitive a company must consider who their
biggest competitors are while considering its own size and position in the industry. The
company should develop a strategic advantage over their competitors.
v. Publics:
The final aspect of the microenvironment is publics, which is any group that has an interest in
or impact on the organisation’s ability to meet its goals. For example, financial publics can
hinder a company’s ability to obtain funds affecting the level of credit a company has.
Media publics include newspapers and magazines that can publish articles of interest
regarding the company and editorials that may influence customers’ opinions.
Government publics can affect the company by passing legislation and laws that put
restrictions on the company’s actions. Citizen- action publics include environmental
groups and minority groups and can question the actions of a company and put them in the
public spotlight. Local publics are neighbourhood and community organisations and will
also question a company’s impact on the local area and the level of responsibility of their
actions.
The general public can greatly affect the company as any change in their attitude,
whether positive or negative, can cause sales to go up or down because the general public
is often the company’s customer base and finally those who are employed within the
company and deal with the organisation and construction of the company’s product.

b. Macro Environment:

The macro environment is less controllable. The macro environment consists of much
larger all-encompassing influences (which impact the micro environment) from the broader
global society. The macro environment includes culture, political issues, technology, the
natural environment, economic issues and demographic factors amongst others.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

A number of factors constitute the international environment: social, cultural, political,

legal, competitive, economic, and technology. Each should be evaluated before a company
makes a decision to go international.

i. Social/Cultural Environment:
The social/cultural environment consists of the influence of religious, family, educational,
and social systems in the marketing system. Marketers who intend to market their products
overseas may be very sensitive to foreign cultures. While the differences between home
country and those of foreign nations may seem small, marketers who ignore these differences
risk failure in implementing marketing programmes. Failure to consider cultural differences
is one of the primary reasons for marketing failures overseas.
This task is not as easy as it sounds as various features of a culture can create an illusion of
similarity. Even a common language does not guarantee similarity of interpretation. For
example, in the US customers purchase ―cans‖ of various grocery products, but the Britishers
purchase ―tins‖. A number of cultural differences can cause marketers problems in attempting
to market their products overseas.
These include:
(a) Language,
(b) Colour,
(c) Customs and taboos,
(d) Values,
(e) Aesthetics,
(f) Time,
(g) Business norms,
(h) Religion, and
(i) Social structures.
ii. Political Environment:
The political environment abroad is quite different from that of India. Most nations desire to
become self-reliant and to raise their status in the eyes of the rest of the world. This is the
essence of nationalism. The nationalistic spirit that exists in many nations has led them to
engage in practices that have been very damaging to other countries’ marketing
organisations.
For example, foreign governments can intervene in marketing programmes in the
following ways:
(1) Contracts for the supply and delivery of goods and services
(2) The registration and enforcement of trademarks, brand names, and labelling
(3) Patents
(4) Marketing communications

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

(5) Pricing
(6) Product safety, acceptability, and environmental issues
iii. Legal Environment:
Businesses are affected by legal environments of countries in many ways. Legal
environments are not just based on different laws and regulations concerning businesses,
these are also defined by the factors like rule of law, access to legal systems by foreigners,
litigations systems etc. Variations in legal environments, rule of law, laws, and legal systems
affect foreign business firms in a number or areas.
Key areas of business that are affected by legal environments are listed below:
(a) Laws concerning employment and labour affect managing of workforce in international
markets.
(b) Different laws in foreign countries regulate financing of operations by foreigners. In some
countries foreign firms are restricted access to local deposits/funds.
(c) Various countries around the world have different laws concerning marketing of products,
especially food products, pharmaceuticals, hazardous materials and strategic products to a
nation.
(d) Countries also control and regulate developing and utilising of technologies through
various laws and regulations.
(e) Many countries also have different laws and regulations that affect ownership of
businesses by foreigners.
(f) Countries also regulate /restrict remittances to foreign countries and repatriation of profits.
(g) Some countries regulate closing of operations and in some countries businesses are not
allowed to close shop especially when they have sold products that have guarantees and
warranties from the foreign firms.
(h) Various countries around the world have implemented different trade and investment
regulations.
(i) Countries also have their own taxation requirements, systems and laws.
(j) Countries also differ on the accounting reporting requirements from various categories of
firms.
(k) Countries around the world have also actively implemented environmental regulations
that affect businesses.
iv. Technological Environment:
Technological know-how impacts all spheres of an international marketer’s operations
including production, information system, marketing etc. The international marketers must
understand technological development and its impact on its total operations. The marketing
intelligence system may help the international firm to know technological orientations of
other enterprises and to update its own technologies to remain competitive. Research and
Development (R&D) has a vital role to play in increasing technological ability of a firm.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

New technologies create new markets and opportunities. However, every new technology
replaces an old technology. Xerography hurt carbon-paper industry, computer hurt typewriter
industry, and examples are so on. Any international marketer, when ignored or forgot new
technologies, their business has declined. Thus, the marketer should watch the technological
environment closely. Companies that do not keep up with technological changes, soon find
their products out-dated.
The level of technological development of a nation affects the attractiveness of doing
business there, as well as the type of operations that are possible. Marketers in developed
nations cannot take many technological advances for granted. They may not be available in
lesser developed nations.

v. Economic Environment:
The international marketer tries to understand economic environmental variables of the
global markets for identifying the right marketing opportunities for the enterprise.
The economic environment is comprised of the following economic variables:
(a) National Income
(b) Gross Domestic Product (GDP)
(c) Industrial Structure
(d) Currency floating (Open/fixed) issue
(e) Demand patterns
(f) Balance of Payment (BOP) status
(g) Economy base (Import/Export)
(h) Rate of Economic Growth
(i) Occupational Pattern
(j) State of Inflation
(k) Consumer Mobility.
The economic situation varies from country to country. There are variations in the levels of
income and living standards, interpersonal distribution of income, economic organisation,
and occupational structure and so on. These factors affect market conditions. The level of
development in a country and the nature of its economy will indicate the type of products that
may be marketed in it and the marketing strategy that may be employed in it.
In high income countries there is a good market for a large variety of consumer goods. But in
low-income countries where a large segment does not have sufficient income even for their
basic necessities, the situation is quite different. A nation’s economic situation represents its
current and potential capacity to produce goods and services. The key to understanding
market opportunities lies in the evaluation of the stage of a nation’s economic growth.
A way of classifying the economic growth of countries is to divide them into three
groups:

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TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

(a) Industrialised,
(b) Developing, and
(c) Less-developed nations.
The industrialised nations are generally considered to be the United States, Japan, Canada,
Russia, Australia, and most of Western Europe. The economies of these nations are
characterised by private enterprise and a consumer orientation. They have high literacy,
modern technology, and higher per capita incomes. Developing nations are those that are
making the transition from economies based on agricultural and raw materials production to
industrial economies.
Many Latin American nations fit into this category and they exhibit rising levels of
education, technology, and per capita incomes. Finally, there are many less developed nations
in today’s world. These nations have low standards of living, literacy rates are low, and
technology is very limited.
Usually, the most significant marketing opportunities exist among the industrialised nations,
as they have high levels of income, one of the necessary ingredients for the formation of
markets. However, most industrialised nations also have stable population bases, and market
saturation for many products already existing. The developing nations, on the other hand,
have growing population bases, and although they currently import limited goods and
services, the long-run potential for growth in these nations exists.
Dependent societies seek products that satisfy basic needs-food, clothing, housing, medical
care, and education. Marketers in such nations must be educators, emphasising information in
their market programmes. As the degree of economic development increases, so does the
sophistication of the marketing effort focused on the countries.
vi. Competitive Environment:
To plan effectively international marketing strategies, the international marketer should be
well-informed about the competitive situation in the international markets.
By competitive environment we mean the following variables:
(a) Nature of competition
(b) Players in the competition
(c) Strategically weapons used by the participants
(d) Competition regulations
Entering an international market is similar to doing so in a domestic market, in that a firm
seeks to gain a differential advantage by investing resources in that market. Often local firms
will adopt imitation strategies, sometimes successfully. When they are successful, their own
nation’s economy receives a good boost. When they are not successful, the multinational firm
often buys them out.
Japanese marketers have developed an approach to managing product costs that has given
them a competitive advantage over US competitors. A typical American company will design

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

a new product, and then calculate the cost. If the estimated cost is too high, the product will
be taken back to the drawing board.
Following are the ways an international marketer can handle competition:
(i) Proper knowledge about the competitors
(ii) Knowledge of competitors’ objectives
(iii) Knowledge of competitors’ strategies
(iv) Knowledge of competitors’ reaction patterns
(v) Knowledge of competitors’ strengths and weakness.

7. Various factors affecting International Marketing Environment:

Factor # 1. Geographical Environment:

Geographical environment is determined on the basis of the analysis of various geographical
units such as, neighbourhoods, cities regions, states and nations etc. The business firm
operates its business in one or a few geographical areas or in all but pay its specific attention
on the potential areas.
A firm divides the market into different targeted units on the basis of geographical
characteristics. The environment prevailing in the particular location helps a marketer to
decide the marketing mix in the international business. For example the purchasing power of
the consumers of two nations may be different. It influences the buying behavior of the

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

individuals, which ultimately influences the marketing decision making process as well as
market mix.
If a company has planned to enter the U.S. market, the firm should understand the geography
of that country before deciding about the marketing strategy to be adopted there. It must
understand the characteristics of the buyers at different locations and to decide the product
and other features accordingly. The geographical characteristics should be examined very
carefully in the international marketing decisions.
The geographical environment can be determined by the following:
i. Geographical characteristics of the people.
ii. Consumer’s taste for the product.
iii. Geographical characteristics of the market.
iv. Attitude of the host country.
v. Potential for growth.
The manufacturers should distinguish carefully among the regions, in which they are
planning to operate and to select those markets where they have favourable environment to
operate and also have a comparative advantages of business in the international marketing.
The world market can be subdivided on the basis of following market characteristics:
i. High market potential zones.
ii. Less market potential zones.
iii. Average market potential zones.
iv. High risk countries.
v. Low risk countries.
vi. Developed economies.
vii. Developing economies or third world countries.
viii. Market potential in the home country.
ix. Other demographical factors.
The marketing strategy is determined on the basis of above mentioned characteristics of the
world market in the international business. It varies from market to market and product to
product. In one market setup one product can be a luxurious, whereas it may be necessities in
the other market.
The marketing environment of a particular nation is also depends upon the market
characteristics. In high risk nations the marketing environment is always different in
comparison to low risk countries. It also more or less depends upon the political structure
of that country and how frequently the government of that country is accepting the different
changes in the market.
The marketing environment of developed nations and developing nations is also different
in many ways. The people of the developed nations do have good purchasing power. They

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

are very quality conscious. Their approach to every aspect is always advanced and refined.
On the other hand the purchasing power of the people is low in the developing nations.
They are having compromising nature. The market environment in both the cases is always
different. But it is pertinent to mention here that some of the developing nations like India are
adopting the changes and marketing requirements from time to time, by keeping their
national objectives and interest on the top priorities.
Therefore they have attracted the attention of the developed nations to make investment in
their country. The developed nations are also looking these markets as a big potential market
for their product. It is only the reason that U.S. based firms has shown very keen interest in
the Indian market and in other similar kind of markets.
The demographical variables also play an important role to analyse all the above mentioned
variables in depth. The age groups of a particular zone, educational qualification, household
system, sex, marital status and background etc. are the basis for examining the geographical
environment in the international business.
Therefore it is for the marketers to analyse, examine and scan all other variables while taking
any decision and making any strategy about the marketing mix in the international business.
The geographical environment helps the marketers to concentrate their marketing efforts to
the potential countries so that all other marketing efforts could be utilized fruitfully. It is
evident that geographical mobility always changes the habits of the consumers. Therefore the
scanning of geographical environment should be carried out scientifically in the international
business.
Factor # 2. Demographic Environment:
Demographic environment of a country explain the pattern of population and other changes
in the societies, cities, regions and nations. It is explained on the basis of Age classification,
Gender classification, Educational level, Marital status, Household patterns, Religion
based classification and Nationality etc.
The analysis of demographical environment is useful for market segmentation, taking
marketing decisions and formulating marketing strategies.
Demography provides an analysis of quantitative as well as qualitative aspects of the
population.
Factor # 3. Economic Environment:
The economic environment can be studied in two ways- (i) From macro point of view and
(ii) Micro point of view. The macro views of studying economic environment deals with
needs and requirements of the consumer and the economic policy of a country. The
economic policy of a nation also establishes the scope of market and the economic outlook of
a business firm.
On the other hand micro environment focuses to study firm’s ability to compete in a
market. The economic environment of a country defines the marketing opportunities in the

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

foreign business. The economic environment of the home country influences international
marketing, to the great extent.
(i) Macro Economic Environment:
The macro environment of a country can be studied by taking a vast perspective. It
includes the study of population, national income, economic advancement of a country
and the study of consumption patterns etc. It is pertinent to mention here that a clear cut
idea of the economic environment of a particular host country is always useful to form an
appropriate marketing strategy in the international business.
(ii) Micro Economic Environment:
A micro environmental view of economic environment emphasizes on a firm’s ability to
compete within a market. It refers to that environment within which a firm takes decision
regarding to its product and market. It further indicates that whether a firm can enter in a
particular market successfully or not?
It considered the competition factor as an important variable in this regard.

 Competitiveness and Demand Analysis:

The competition can be analysed by defining characteristics of the products.
There may be the following categories of a product, which are considered in the analysis
of competition:
a. Unique innovation at entry level – It is mainly technical in nature. The company enters in
the market by introducing its new innovations.
b. Competitive range – It is that range of the product, which is available in the market as to
compete with other similar brands in the market.
c. High quality product – It is generally unique and much superior in quality to other
existing brands.
The demand for the product of all three categories varies in every situation. Therefore the
nature of the competition will also be different in all these categories. With the help of
analysis of the competition, a company can ascertain that which product is to be pursued and
in which segments it is to be marketed. An analysis of demand is also considered in this view
point.
Advantages of Competitiveness:
The following questions should be examined while analysing advantages
of competitiveness:
a. Who the competitors are?
b. Competitor’s strategies and their targeted objectives.
c. Competitor’s strengths.
d. Competitor’s weaknesses.
e. Opportunities available in the market.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

f. Various implications and threats of competitors.

It is very difficult to make an analysis of a firm in the international business. Because it is
difficult to know that from which part of the world a firm will enter the market. The
demographic profile of the industry is the best base to examine the competition in the
international business.
Factor # 4. Socio-Cultural Environment:
The socio-cultural environment can be defined as a set of traditional benefits and values that
are passed and shared among different societies. This is a way of thinking process and a
system of life culture, which is transmitted from generation to generation. It can be
considered as a concept which encompasses different values, different customs and different
norms.
The human behaviour is based upon the cultural forces. The culture can be said to be a total
pattern of human behaviour embodied in a country, state and its small subdivisions. It is
considered to be most important force in international market which enables a marketer to
decide whether the products or services are compatible with a particular market.
For examples: Language-The Media of Communication, Customs, Education, and
Religion.

Factor # 5. Political Environment:

Political environment is an important ingredient in the international business. The political
environment does not remain constant. The changing political environment is uncontrollable
in nature. Therefore it is necessary to understand the political risks in the international
business.
The multinational companies are to face different political environment and they are also to
cope with the politics of different nations. The political environment of different nations may
influence product, price, place and promotional factors in the international business.
The above decisions lead to the conclusion that political environment of a country affect the
international marketing activities. The political environment may have the following
types- (1) Foreign (2) Domestic and (3) International political environment.
The most of the multinational companies do have little control over the changes in
international politics.
It depends upon the positive relationships among the nations that how they are prepared to
respond to the changes. The government policies play a vital role in this regard.
For Example: In India, until 1991 there was closed economy and the foreign investments
were discouraged. After 1991 the new Indian government started a reform programmes in
this context.
The foreign direct investments were encouraged and it transformed India into one of the most
dynamic and highly potential economy in the world. This was possible only because of

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

political will. If the government of such kind comes into power, which again discouraged the
foreign participation, the whole of the world’s attention can divert once again to any other
nation. It is because of the political risks.
Therefore the MNCs are always keen to study the political prospect of a particular nation,
where they are willing to do business. To assess the potential of international marketing
environment, the study of political risks is very important. The indicators which are
responsible for the political risks should be identified and studied.
The following are some factors which are responsible for the political instability:
(a) Social unrest
(b) Attitude of the people
(c) Government policies.

8. Difference between Domestic Marketing and International

Marketing
Basically, domestic marketing and international marketing operate on similar lines. But there
are certain differences between this two marketing. The significant differences between these
two emerge from foreign exchange, quotas, tariff, regulations of a number of governments,
wide variations in culture and the like. Table presents the differences between domestic
marketing and international marketing.

Point of Difference Domestic Business International Business

Approach Domestic marketing International marketing

approach is ethnocentric. It approach can be
does mean that domestic polycentric or regiocentric
companies formulate or geocentric.
strategies, product design
etc. towards the national International marketing
markets, customers and under polycentric approach
competitors. enters foreign markets by
establishing foreign
subsidiaries.

Under the regiocentric,

they export the product to
the neighbouring countries
of the host country. Under
the geocentric approach,
they treat the entire world
as a single market for

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

production, marketing
investment and drawing
various inputs.

Geographic Scope Domestic marketing International marketing

geographic scope is within varies from the national
the national boundaries of boundaries of a minimum
the domestic country. of two countries up to a
maximum of the entire
globe.

Operating Style Domestic marketing Operating style of the

operating style including international marketing can
production, marketing, be spread to the entire
investment, R&D, etc. is globe.
limited to the domestic
country.

Environment Domestic marketing International marketing

mostly analyses and scans analyses and scans the
the domestic environment relevant international
environment.

Quotas The quotas imposed by The international

various countries on their marketing has to operate
exports and imports not within the quotas imposed
directly and significantly by various countries on
influence domestic their exports and imports.
marketing

Tariffs The tariff rates of various The tariff rates of various

countries do not directly countries directly and
and significantly influence significantly influence the
the domestic business. international marketing
The tariff rates of various
countries directly and
significantly influence the
international marketing

Foreign Exchange Rate Foreign exchange rates and Foreign exchange rates and
their fluctuations do not their fluctuations directly
directly and significantly and significantly affect the

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

affect the domestic international marketing

marketing

Culture Mostly domestic culture of Mostly culture of various

the country affects the countries affects the
business operating business operations
including product design. including product design of
international marketing.

Export- Import Procedure Domestic marketing is not International marketing is

normally influenced by significantly influenced by
export-import procedures export-import procedures
of the country. of various countries. They
need to follow those
country procedures.

Human Resource Domestic marketing International marketing

normally employs the normally employs the
people from the same people from various
country. Therefore, the countries. Therefore, the
task of human resource task of human resource
management is not much management is much
complicated. complicated.

Markets and Customers Domestic companies meet International marketing

the needs of the domestic should understand markets
markets and customers. As and customers of various
such, it would be countries.
appropriate for them to
understand the domestic
market and customers.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

(Section II)

1. International Market Segmentation and Positioning

A) International market segmentation refers to the process of dividing its

total international market into one or more parts (segments or sub-markets) each of
which tends to be homogeneous in all significant aspects. International markets can
therefore be segmented in a two-step process. First, the macro segment composed of
individual or groups of countries can be identified based on
national market characteristics. Second, identify specific customer segments to
serve within each country based on product and marketing mix factors.

1. Segmenting international markets

Few companies have either the resources or the will to operate in all or even most of the
countries in the globe. Although some large companies such as Coca Cola or Sony sell
products in 200 countries but most international firms focus on a smaller set.
Global market segmentation can be viewed as the process of identifying segments
whether they are country groups or individual buyer groups of potential customers with
homogeneous attributes who are likely to exhibit similar buying behavior patterns.

Operating in many countries presents new challenges. Because of differences in cultural,

economic and political environment among various countries, international markets
tend to be more heterogeneous than domestic markets.
For Example: Companies can segment international markets using one or a combination of
several variables. They can segment by geographic location, by regions such as Western
Europe, the Middle East, Africa or the Pacific Rim. Geographic segmentation assumes that
nations close to one another will have many common traits and behaviours. Although this is
often the case, there are many exceptions. For example, although the United States and
Canada have much in common, both differ culturally and economically from
neighbouring Mexico.
World markets can also be segmented on the basis of economic factors. For example,
countries might be grouped by their level of economic development and by population
income levels. A country’s economic structure shapes its population’s product needs and
therefore, the marketing opportunities it offers.
Countries can be segmented by political and legal factors such as the type and stability of
government, its receptivity of foreign firms, monetary regulations, and the complexity of
bureaucracy. Such factors play a crucial role in a company’s choice of which countries to
enter and how. Cultural factors can also be used i.e. grouping markets according to common
language, religions, values and attitudes.
Segmenting international markets on the bases of the aforementioned factors assumes
that segments should consist of clusters of countries. However, many companies use a

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

different approach called inter-market segmentation. Using this approach, they form
segments of consumers who have similar needs and buying behavior even though they
are located in different countries. For example, Mercedes Benz targets the world’s well-
to-do groups regardless of their country.
In domestic markets, customer characteristics such as age, gender, social class, personality,
brand loyalty, product usage and attitudes toward the given brand are often used as bases for
segmentation. In international markets, on the other hand a further dimension has to be
considered, namely that of country characteristics. International markets can therefore be
segmented in a two-step process.
First the macro segment composed of individual or groups of countries can be identified
based on national market characteristics. Then, within each macro-segment, the market can
be further sub-divided based on customer characterization.
The operational distinction between country characteristics and customer
characteristics is that country characteristics are common to all customers of the given
country such as national character or dominant cultural patterns. Customer
characteristics on the other hand are those characteristics which enable a distinction
among various customers within a country such as social classes, age, gender, etc.
The predetermined country characteristics of cultural, economic, geographic,
technological, etc. are inadequate for segmentation when considered without
behavioural bases like buyers’ responsiveness to the global marketing program.

Kale and Sudharshan (1987) propose a three-step analysis. First, select the appropriate
countries to enter based on factors such as political climate and communications
infrastructure. Second, identify specific customer segments to serve within each country
based on product and marketing mix factors. Finally, select customer segments across a
range of countries that may be served with a common marketing mix without regard to
geographic boundaries.
This inter-market segmentation approach refers to “ways of describing and reaching
market segments that transcend national boundaries or that cut across geographically
defined markets”
 Process of Target Market:

1. Evaluating and selecting market segments

In evaluating different segments, a firm must look at the segment’s current size and growth,
overall attractiveness and the firm’s resources and objectives.
Some attractive segments may not mesh with the firm’s long-run objectives or the firm may
lack one or more necessary competencies to offer superior value.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

2. After evaluating different segments, the firm can consider five patterns of target
market selection.

1. Single segment concentration

Through concentrated marketing, the firm gains a strong knowledge of the segment’s needs
and achieves a strong market presence. Furthermore, the firm enjoys operating economies
through specializing its production, distribution and promotion.
However, the risk of segment’s taste change/sour and competitors’ invasion of the segment
may be high. For example, when digital camera technology took off, Polaroid’s earnings fell
sharply. For these reasons, many companies prefer to operate in more than one segment. If
selecting more than one segment to serve, a firm should pay close attention to segment
interrelationships on the cost, performance and technology side. Companies can try to operate
in super segments rather than in isolated segments. A super segment is set of segments
sharing some exploitable similarity.

2. Selective specialization:

A firm selects a number of segments each objectively attractive and appropriate. There may
be little or no synergy among segments but each promising to be a money maker. This multi-
segment strategy ensures the firm’s risk diversification tendency.

The best way to manage multiple segments is to appoint segment managers with sufficient
authority and responsibility for building the segment’s business.

3. Product specialization

The firm makes a certain product that it sells to several different market segments. An
example would be a microscope manufacturer that sells to university, government agencies
and commercial laboratories. The firm makes different microscopes for the different
customer groups and builds a strong reputation in the specific product area.

4. Market specialization

A firm concentrates on serving many needs of a particular customer group. For example, a
firm that sells an assortment of products only to university laboratories represents market
specialization. The firm gains a strong reputation in serving this customer group and becomes
a channel for additional products the customer group can use. The downside risk is that the
customer group may suffer budget cuts or shrink in size.

5. Full market coverage

A firm attempts to serve all customer groups with all the products they might need. Large
firms can cover a whole market in two broad ways: through undifferentiated marketing
(shotgun approach) or differentiated marketing (rifle approach).

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

Costs of segmented marketing

Differentiated marketing typically creates more total sales than undifferentiated marketing.
However, it increases the costs of doing business as follows:

1. Product modification costs: modifying a product to meet different market segment

requirements usually involves R & D costs.
2. Manufacturing costs: it is usually more expensive to produce 10 units of 10 different
products than 100 units of one product. The longer the production setup time and the
smaller the sales volume of each product, the more expensive the product becomes.
However, if each model is sold in sufficiently large volume, the higher setup costs
may be quite small per unit.
3. Administrative costs: the company has to develop separate marketing plans for each
market segment. this requires extra marketing research, forecasting, sales analysis and
channel management
4. Inventory costs: it is more costly to manage inventories containing many products
5. Promotion costs: the company has to reach different market segments with different
promotional programs. The result is increased promotion planning costs and media
costs.

Segmented marketing gains

 The firm gains more knowledge about customers’ needs, more sales
 More customer satisfaction and loyalty (brand bonding)
 Efficient resource allocation

2. Positioning for Competitive Advantages

Beyond deciding which segments of the market it will target, the company must decide what
positions it wants to occupy in those segments. A products position is the place the
product occupies in consumers’ mind relative to competing brands. It is the way the
product is defined by consumers on important attributes. Positioning involves implanting
the brand’s unique benefits and differentiation in customers’ mind.
Customers are overloaded with information about products. They cannot revaluate products
every time they make a buying decision. To simplify the buying process, customers organize
products and companies into categories and position them in their mind. So, a product’s
position is the complex set of perceptions, impression and feelings that customers have
for the product compared with competing brands.
Customers position products with or without the help of marketers. But marketers do not
want to leave their product’s position to chance. They must plan positions that will give the
products the greatest advantage in selected target markets and they must design marketing
mixes to create these planned positions imitable.

1. Choosing positioning strategies

The goal of positioning is to locate the brand in the minds of consumers to maximize the
potential benefit to the firm. The result of positioning is the successful creation of a
customer-focused value proposition.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

Some firms find it easy to choose their positioning strategy. For example, a firm that will be
known for quality in certain segments will go for this position in a new segment if there are
enough buyers seeking quality. Each firm must differentiate its offer by building a unique
bundle of benefits that appeal a substantial group within the segment.
The positioning task consists of the following steps: identifying a set of possible
competitive advantages up on which to build a position, choosing the right competitive
advantages, selecting an overall positioning strategy and effectively communicate and
deliver the chosen position to the market.

2. Identifying Possible Competitive Advantages

The key to win and keep the target customers is to understand their needs than competitors do
and to deliver more value. To the extent that a company can position itself as providing
superior value, it gains competitive advantage. But solid positions cannot be built on empty
promises. If the company positions its product as offering the best quality, it must then
deliver the promised quality. Thus, positioning begins with actually differentiating the
company’s marketing offer so that it will give consumers more value than competitors’ offers
do.
Competitive advantage is an advantage over competitors gained by offering consumers
greater value, either through lower prices or by providing more benefits that justify
higher prices.
To find points of differentiation, marketers must think through the customers’ entire
experience with the company’s product. An alert company can find ways to differentiate
itself at every point where it comes into contact with customers. A company’s marketing
offer can be differentiated along the line of product, services, channel, people or image.
Product differentiation takes place along a continuum. At one extreme, we find products
that allow little variation like steel, aspirin. On the other extreme, there are products that
can be highly differentiated such as automobile, clothing, furniture. Such products can
be differentiated on features, performance, or style and design. Companies can also
differentiate their products on such attributes as consistency, durability, reliability or
reparability. Beyond differentiating its physical product, a firm can also differentiate
the service that accompanies the product. Some companies gain service
differentiation through speedy, convenient and careful delivery. Installation can also
differentiate one company from another. Some companies differentiate their offers by
providing customer training service or consulting service, information system that
buyers need. Firms that employ channel differentiation (coverage, expertise and
performance), gain competitive advantage through the way they design their channels
coverage, expertise and performance.
Companies can gain a strong advantage through people differentiation-hiring and training
better people than competitors.
Cultural symbol positioning involves an item or brand achieving unique status within a
culture or region. Cultural symbols reflect a characteristic of a nation or region and may
evolve from popular culture, religion, or other factors that make an area distinct.
Consumers often buy a product when it is viewed as a cultural symbol.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

3. Choosing the right Competitive Advantages

Suppose a company is fortunate enough to discover several potential competitive advantages.

It now must choose the one on which it will build its positioning strategy. It must decide how
many differences to promote and which ones.

 How many points of difference to promote?

Many marketers think that companies should aggressively promote only one benefit to the
target market. Other marketers think that companies should position themselves on more than
one points of difference. This may be necessary if two or more companies are claiming to be
best on the same product attribute. Today, it is a time where mass market is fragmented into
many small segments. Companies are trying to broaden their positioning strategies to appeal
to more segments.

 Which difference to promote?

Not all differences are meaningful or worthwhile; not every difference makes a good
differentiator. Each difference has the potential to create company costs as well as customer
benefits. Therefore, the company must carefully select the ways in which it will distinguish
itself from competitors. A difference is worth establishing to the extent that it satisfies the
following criteria:
Important: the difference delivers a highly valued benefit to target buyers.
Distinctive: competitors do not offer the difference, or the company can offer it in a more
distinctive way.
Superior: the difference is superior to other ways whereby customers might obtain the same
benefit.
Communicable: the difference is communicable and visible to buyers.
Pre-emptive: competitors cannot easily copy the difference.
Affordable: buyers can afford to pay for the difference.
Profitable: the company can introduce the difference profitably.
Brand’s points of parity:
Category points of parity are associations to the brand which consumers view as essential to
be a legitimate and credible offering within a certain product category. In other words they
represent necessary but not necessarily sufficient conditions for brand choice. For example
travellers might not consider a travel agency truly a travel agency unless it is able to make air
and hotel reservations, provide advice about leisure packages, and offer various ticket
payment and delivery options.
On the other hand, competitive points of parity are associations designed to negate
competitors’ points of difference. If, in the eyes of consumers the brand association designed
to be the competitors’ point of difference is as strong for a brand as for competitors and the
brand is able to establish another association as strong, favourable, and unique as part of its
point of difference, then the brand should be in a superior competitive position. In other
words if a brand can break-even in those areas where competitors are trying to find an

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

advantage and can achieve an advantage in other areas the brand should be in a strong and
perhaps unbeatable competitive position.

4. Selecting an overall positioning strategy

Consumers typically choose products that give them the greatest value. Thus, marketers need
to position their brands on the key benefits that they offer relative to competing brands. The
full positioning of the brand is called the brand’s value proposition-the full mix of benefits
upon which the brand is positioned. It is the answer to the customers’ question ―why should I
buy your brand‖. The following are some of winning value propositions upon which
companies can position their products:
More for more: this positioning strategy involves providing the most upscale product and
charging a higher price to cover the higher costs.
More for the same: companies can attack competitors’ having more for more positioning by
introducing a brand offering comparable quality but at a lower price than the former.
The same for less: can be a powerful value proposition everyone likes. Companies following
this positioning do not claim to offer different or better products; instead they offer many of
the same brands at deep discounts based on superior purchasing power and low cost.
Less for much less: a market always exists for products that offer less and therefore costs
less. Few people need, want or can afford ―the very best‖ in everything they buy. In many
cases, consumers will gladly settle for less than optimal performance.
More for less: of course, the winning value proposition would be to offer more for less.

5. Communicating and delivering the chosen position

Once it has chosen a position, the company must take strong steps to deliver and
communicate the desired position to target customers. All the company’s marketing mix
efforts must support the positioning strategy. Positioning the company calls for concrete
action not just talk. If the company decides to build a position on better quality and
service, it must first deliver that position. Designing the marketing mix-product, price,
place and promotion involves working out the tactical details of the positioning strategy.
Thus, a firm that seizes on a more-for-more position knows that it must produce high quality
products, charges a high price, distribute through high quality dealers and advertise in high
quality media. It must hire and train more service people, find retailers who have a good
reputation for service and develop sales and advertising messages that broad cast its superior
service. This is the only way to build a consistent and believable more-for-more position.
Companies often find it easier to come up with a good positioning strategy than to implement
it. Establishing a position or changing usually takes a long time. In contrast, positions that
have taken years to build can quickly be lost. Once the company has built the desired
position, it must closely monitor and adapt the position over time in order to match changes
in customers’ needs and competitors’ strategies. However, the company should avoid abrupt
changes that might confuse consumers. Instead a product’s position should evolve gradually
as it adapts to the ever changing marketing environment.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

(B) Screening and Selection of Markets:

Introduction
One of the most important decisions in international marketing is market selection.

The global market, made up of well over 200 independent nations with their own distinctive
characteristics, is too vast indeed.

It would be very difficult for a company to operate in all these markets. There are barriers
which make entry to a number of markets impossible or very difficult. There may be markets
which are not profitable or are not worth the trouble. Further, there may be markets which are
very risky due to political or other reasons.

Moreover, the company resources may not permit the operation in a large number of
countries. There are, of course, companies which operate in majority of the countries of the
world. These companies have not achieved such a massive expansion overnight. It' has been a
gradual expansion achieved over a long period. Further, all types of business do not lend
themselves for such substantial international expansion.

A company which wants to enter many markets should do it systematically. Too fast an
expansion without the resource and organisational strength for such an expansion could be
suicidal. The Bulova Watch Company expanded into over one hundred countries. It spread
itself too thin made profits in only two countries and lost around $ 40 million

All these factors highlight the need for market selection. Even a company with ambitious
plans and good prospects for global expansion has got to rank the markets for prioritisation of
the expansion plans.

Market selection is based on a thorough evaluation of the different markets with reference to
certain well defined criteria, given the company resources and objectives. Marketing
research, therefore, becomes necessary to obtain the data required for evaluating the markets.
Important source of information are given in the chapter international Marketing Intelligence.

It is also necessary to prepare a profile of the selected markets to help the company to
formulate the marketing strategy. It may be noted that many of the items of information
contained in the market profile are collected for the purpose of evaluation of the markets for
market selection.

Market Selection Process

The important steps involved in the market selection process are depicted in figure 5.1.
1. International Marketing Objectives
The first step in any management decision making process is to determine/ascertain the
objectives. The market selected to serve a particular international marketing objective need

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

not necessarily be the best suited to achieve some other international marketing objective.
Different international marketing objectives have been described in Chapter I. Various
markets may have different degrees of attractiveness from the point of view of different
objectives. More about this is stated under the subtitle firm related factors little later in this
chapter.

Fig. 5.1 Market Selection Process Parameters for Selection

2. Determine Parameters for Market Selection
For proper evaluation and selection of the markets, it is essential to clearly lay down the
parameters and criteria for evaluation. Important parameters often used for market selection
are shown in the evaluation matrix described elsewhere in this chapter.
3. Preliminary Screening
After determining the criteria for market selection, the next important step in market selection
process is to conduct a preliminary screening of the markets. The objective of the preliminary
screening process is to eliminate the markets which are obviously not potential enough as
revealed by a cursory look.
The parameters used for the preliminary screening may vary from product to product.
However, parameters like the size of population, per capita income, structure of the economy,
infrastructural factors, political conditions etc. are commonly used. Information about some
of the factors would enable a company to eliminate certain markets from its consideration.
For example, in a country where there is no telecasting, there is obviously no market for TV
sets. Similarly if the rural areas are not electrified, there may be no demand for electrical
agricultural pump sets. If the household income of the majority of a country with a small
population is very low, the demand for costly consumer durables will be limited. Further,
there may be countries which should be omitted due to political reasons, including
government policies.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

A lot of information required for the preliminary screening is available from such
publications as the Statistical Year Book of the United Nations and the World Bank's World
Development Report.
4. Detailed investigation & Short Listing
Preliminary screening enables to eliminate markets which obviously do not merit
consideration at the very outset. There would be a large number of markets left even after the
preliminary screening. They are further screened with the help of more information than was
used at the preliminary screening stage. The objective is to filter out a small number of
markets which are likely to satisfy the company's criteria for market selection for a detailed
analysis for ranking them and final selection.
5. Evaluation & Selection
A thorough evaluation of the short-listed markets is done with reference to the specific
parameters and criteria and the markets are ranked on the basis of their overall attractiveness.
One or more market(s) is/are selected from the rank list. For further details. see the section
evaluation matrix.

Determinants of Market Selection

The market selection is normally based on two sets of factors, viz, the firm - related factors
and the market-related factors.

Firm Related Market Market

Factors Selection Related
Decision Factors

Fig. 5.2 Determinants of Market Selection

Firm related factors refer to such factors as the objectives, resources, product mix and
international orientation etc. of the firm.

Firm Related Factors:

A firm whose export objective is only to sell out a marginal surplus will select a foreign
market suited to serve this purpose. Another firm with the same product, which wants to
export a very large quantity, forming a very significant share of its total output, may have

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

different considerations than the first firm in market selection. In the case of the second firm,
as the total quantity involved is large and as it forms a significant share of its total output,
market diversification would be important to minimise the risk. If we think of a third firm
which also wants to export the same product as the first two firms but which wants to export
several other products also, the market(s) which it selects may perhaps be different from what
the first two firms have chosen; it would give more importance to the total exports of all its
products than that of any single product, Further, the market selection may be influenced by
other objectives like growth. When business 'growth is an important objective, growth
potential of the market will be an important criterion for selection.
The planned business strategy may also influence the market selection. For example, a
market considered the most important from the point of view of exporting need not
necessarily be the one that would be selected for locating production base or a sales office. A
company that has plans for large expansion of foreign business may choose a market, to start
with, which can serve as a hub of international business.
The market selection is also influenced by the international orientation (refer Chapter 1 for
details) of the company.
Another very important determinant is the company resources comprising financial, human,
technological and managerial factors.
The dynamism and philosophy of the top management and the internal power relations may
also influence the market selection decision.
Market Related Factors:
There are a number of market related factors which need to be carefully evaluated for market
selection. The market related factors may be broadly grouped into general factors and specific
factors. General factors are factors general to the market as a whole whereas the specific
factors are factors which are specific to the industry concerned.

General Factors:
(i) Economic Factors: Include factors like economic stability, GDP growth trend income
distribution, per capita income, sectorial distribution of GDP and trends, nature of and trends
in foreign trade and BOP, indebtedness, etc.
(ii) Economic Policy: Includes industrial policy, foreign investment policy, commercial
policy, monetary policy, fiscal policy and other economic policies.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

(iii) Business Regulations: Regulations of business like industrial licensing; restrictions on

growth, takeovers, mergers etc., restrictions on foreign remittances, repatriations etc. tax
laws; import restrictions and local content stipulations; export obligations and so on.
(iv)Currency Stability: Stability of the national currency is another very important
consideration in the market selection.
(v) Political Factors: Character of the political system including the nature and: behaviour of
the ruling party/parties and opposition party/parties, the government system etc. and political
stability are among the most important determinants of market selection.
(vi) Ethnic Factors: Ethnic factors like ethnic characteristics, including ethnic differences,
and their implications for the business, ethnic harmony etc. should also be analysed.
(vii) Infrastructure: Infrastructural facilities seriously affect business. For example, power
shortage, could cause considerable production losses. Shipping and other communication
bottlenecks could cause lot of delays and loss of business, in addition to high costs.
(viii) Bureaucracy and Procedures: The nature and behaviour of the bureaucracy and the
procedural system or styles are also important factors to be considered.
(ix) Market Hub: The ability of a market to act as a hub, a base from where the company
can operate in a contiguous region or countries, is a very important factor in the market
selection of a company with plans for expansion of international business. South Africa, for
example, could be such a hub for the entire sub-Saharan Africa."
A large number of Indian companies have opened offices in Singapore to use it as a hub to
trade with the booming markets of South-East Asia and the Pacific. Singapore is attractive for
Indian companies because of its infrastructure, tax incentives and the large Indian population.
A company which sets up an operational headquarters (OHQ): in Singapore has to pay only
10 per cent corporate tax against the normal 30 per cent.
Indian industrialists feel that Sweden could be used as a base for exporting to third countries,
especially the Baltic States. They also feel that the Swedish industrialists could use India as a
sourcing ground to manufacture goods for export to the Asia-Pacific.
Specific Factors: Besides the general factors, there are a number of factors specific to the
industry which needs to be analysed for evaluating the market. Important specific factors are:
(i) Trends in domestic production and consumption and estimates for the future of the
product(s) concerned,
(ii) Trends in imports and exports and estimates for the future.
(iii) Nature of competition.
(iv) Government policy and regulations pertaining to the industry

Dr. Sudhadhara Samal

 TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

(v) Infrastructure relevant to the industry.

(vi) Supply conditions of raw materials and other inputs
(vii) Trade practices and customs.
(viii) Cultural factors and consumer characteristics.
Market characteristics including the number and nature of market segments, price trends etc.

Evaluation Matrix
An evaluation matrix is often used for ranking the markets with reference to their
attractiveness for the company.
The evaluation matrix will include the relevant general and specific factors. These factors
will be expressed in such specific terms so that they lend themselves for clear measurement
and evaluation.
The countries to be evaluated may be listed on the horizontal axis and the factors on the
vertical axis. Each factor is assigned a raw score and a weightage: The weighted score is
obtained by: multiplying the raw score with the respective weightage. Markets are ranked by
comparing the total weighted scores.
Table 5.1 EVALUATION MATRIX
Attributes Weighting Country A Country B
Country C
Factor RS WS RS WS RS
WS

Political stability 10 10 100 7 70 10 100

Economic stability 10 80 7 56 8 64
8
Currency strength and
stability 9 72 7 56 64
8 8
Government policy 64 64 64
8 8 8 8
Infrastructural facilities 9 72 48 7 56
8 6
Ability to serve as
marketing hub 10 80 5 50 6 60
8 Dr. Sudhadhara Samal

Tax incentives 7 35 6 30 7 35
5
 TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

Ethnic factors 4 7 28 4 16 7 28
Bureaucracy and procedure 7 56 6 42 6
8 42
Sum of weighted scores 587 432 513

Specific
Competition 8 4 32 7 56 8 64
Demand 10 10 100 6 60 8 80
Labour costs 7 7 49 8 56 7 49
Labour 7 6 42 6 42 8 56
productivity
Infrastructure 8 8 64 6 48 8 64
Govt. policy 8 9 72 7 56 8 64
and
regulation
Incentives 5 6 30 5 25 6 30
Sum of 389 343 407
weighed
scores
Grand Total 976 775 920

Ranking counties 1 3 2
___________________________________________________________________________________
RS= Raw Score WS= Weighted Score (Weighted Factors x RS)

Market Profile
Profiles of selected markets are prepared to help formulate appropriate marketing strategies.
The term market profile is used in two contexts. It may refer to the overall profile of a
market, i.e., the general characteristics of a nation like the demographic characteristics,
economic characteristics, political characteristics, economic policies and business regulations
in general, nature and pattern of foreign trade etc.

Dr. Sudhadhara Samal

TYBBA SEM-V Prof. V.B.Shah Institute of Management, Amroli

In other case, the market profile is a description of relevant characteristics of the market for a
specific product in a country. Even the market profile for specific product usually includes, in
the beginning, a brief general profile of the country,
The market profile of product is a fairly detailed account of relevant market characteristics. It
provides that information which is needed for the formulation of the marketing strategy. A
market profile will, for example, help in the formulation of appropriate product strategy,
pricing strategy, distribution strategy and promotion strategy.
The market profile for a product should contain the following:
 Trends in the domestic production, demand, imports and exports and the forecasts of the
same for the future.
 Competitive characteristics — the competitors, their competitive strategies and strengths
and weakness of the competitors.
 Market segment characteristics — the number of segments and there size, the success
factors in each segment, determinants of demand in each segment, competitive
characteristics of each segment, growth potentials of the segments etc.
 Customer characteristics including tastes and preferences, attitudes, buying habits, usage
characteristics, etc.
 Channel characteristics including trade practices.
 Promotion characteristics.
 Factors relevant to pricing, laws related to product, price, promotion, distribution, imports
etc.

(C) International Market Entry Strategies:

 Exporting
 Licensing
 Contract Manufacturing
 Joint Venture
 M&A
 Setting-up of Wholly Owned Subsidiaries Aboard
 Strategic Alliances.

(Note: Detailed material of PDF is given for following Market entry

strategies)
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Dr. Sudhadhara Samal