Alkesh Dinesh Mody Institute for Financial &

Management Studies

International Marketing

Presentation 1
TYBMS – Sem VI

Sushmita Mukerji
 What is International
Marketing?
• Buying and selling of goods and services across national frontiers
refers to International Trade.

• Selling of goods to other countries refers to exports, while buying the

goods from a foreign country is imports.

• Marketing of such goods and services across between two or more

nations, is known as international Marketing.
 Features
• Large scale operations
• Domination of MNCs/developed countries in the world trade
• Tariff and non tariff restrictions
• Acute competition from domestic and global markets
• International Research for marketing strategies
• Advanced technology
• Need for long term planning
• Lengthy and time consuming
• Vast scope in comparison with national trade
• Support from specialized institutions (banks, financial institutions,
marketing consultants) needed
 Need for International
Marketing
• Unequal distribution of natural resources among nations
• Helps in earning foreign exchange
• Helps to maintain favorable balance of payments position
• Assistance to underdeveloped countries
• Optimum utilization of available resources
• Significant source of employment generation
• Contribution to GDP – as source of income generation among nations.
• Contributes to progress and development of nations with special focus on
developing and least developed nations.
 Advantages of International Marketing
• Broadly divided into push and pull factors- proactive and reactive :

• Profit Advantage: Cheap labor, low cost of production, better technology available in
international markets makes international business more motivating and profitable than
the domestic business.
• Growth Opportunities: Tremendous potential, population and income rising. Even though
no present demand for the product, a future potential demand is predicted. Companies
are eager to establish a strong foothold in such countries.
• Domestic market constraints: Saturation of local demand creates new opportunities.
• Competition: Post liberalization (July 1991), a protected domestic market ceased to exist.
This made domestic players to plan for international strategies.
• Govt. policies and regulations: Incentives by local govt. to export or foreign investment
policies of other governments may be more favorable in an international market.
• Additional benefits: International business may aid in improving domestic business. It also
helps in Image building in domestic and international markets. Foreign exchange
earnings, helps in importing technology and economic incentives are attached to exports.
 Challenges in International Marketing

• Political and legal differences

• Social/Cultural/language difference
• Economic differences
• High costs of distance
• Differences in currency units
• Differences in marketing infrastructure
• Technological challenges
• Trade restrictions
• Trade blocs
• Trade barriers
 Definition of International Marketing &
Business Environment.
• According to AMA (American Marketing Association) – “International Marketing
is the multi-national process of planning and executing the conception, pricing,
promotion and distribution of ideas, goods and services to create exchanges that
satisfy individual and organizational objectives.”

• According to Keith Davis – “Business environment is an aggregate of all the

conditions, events and influences that surround and affect it. It is broad and
ever-changing as its separate elements interact with one another. A single firm’s
environment is narrower in scope than the total environment of business. It is
complicated and continuously changing.
 International Marketing
Strategies
• Strategic Alliances
• Strategic alliances are cooperative relationships between two or more independent
organizations, designed to achieve mutually beneficial goals for as long as it is
economically viable.

Analysis of Entry Strategies:

• Market Analysis
• Market potential
• Economic growth
• Availability of natural resources
• Availability of labor
• Political risk
• Market access & trade barrier
 Classification of Markets
• Platform Countries
• Emerging Countries
• Growth Countries
• Maturing and established countries
• Free Trade Zones are geographical areas defined within the national territory,
for the development of industrial goods and services or commercial activities
under a special tax, customs and foreign trade regime.
 Components of International Business
Environment.
• Economic Environment
• Political Environment
• Social & Cultural Environment
• Technological Environment
• International Environment - Competition
• Legal Environment
• Ecological Environment
 Economic Environment
• Home Country
• Economic Policies
• Promotional and Regulatory Measures

• Host Country
• Size of Market
• Gross Domestic Product (GDP)
• Industrialization
• Development of Banking Facilities
• Purchasing Power and Standard of Living
• Foreign Exchange
• Income Levels
• Economic Diversity

• Global Environment
• International Organizations
• Trading Blocs
 Political Environment
• Home Country Political Environment
• Host Country Political Environment
• Global Political Environment

Political Scenario:
• Political system accepted by the country, including political ideology.
• Constitutional provisions
• Judiciary system
• Political awareness of citizens and participation of PPP.
• Nature of external business relationships.
• Freedom of expression, role of opposition party.
• Progressive or regressive policies, awareness and education level of citizens.
 Socio-Cultural Competitive Environment
Environment
• National taste, Language, Values & Beliefs • Impact of (local) competition
• Demography, Literacy rate, Female workforce, on global markets.
Double income families • Strategic scope – demand-
• Impulse buying options, level of progress and supply position.
• Strategic strength – Product
development.
cost (efficiency) & Product
• Learned culture, symbolic culture, adaptive differentiation.
culture, shared culture, trans-generational • Market segmentation, Cost
culture. leadership, differentiation.
• Sub-culture – Enculturation & Acculturation
• National culture, Business culture, organizational
culture, global culture.
• Influence of culture on International business.
Cross Culture Dimensions – Asian v/s American Perspective
Demographic Environment Legal Environment
• Constitutional Provisions
• Age, gender, Life cycle stage,
Family size, Education • Judiciary
• Income, Occupation, Lifestyle, • Economic Policies
Future prospects • Home Country Laws
• Race and religion, geographical • Host Country Laws
location – rural, urban area of • International Laws
living.
 Multi-National Corporations
(MNC)
• Multi-National Corporations are huge industrial organizations having a wide
network of branches and subsidiaries spread over a number of countries.
• The two main characteristics of MNC’s are that they are large in size and that
their world-wide activities are centrally controlled by parent companies.
• Their operations extend beyond their own country and they are usually at
different stages of Product Life cycle in each country or market.
• Their global policies and outlook is apparent in their functioning, advertising
and communication, human resource policies, compensation and handling of
legal issues.
• At times they may work in close association with State or Central
Governmental bodies too in participation vide PPP (Public-Private Partnership)
• Multi-national companies are an invaluable dynamic force and instrument for
wider distribution of capital, technology and employment.
 Advantages of MNC to Host
Country
• MNC’s fill up the savings gap in the economy by transferring surplus savings of
one country to the deficient savings in some other country.
• MNC’s bring about increase in the national income and per capita income of
the host country.
• MNC’s bring about increase in the level of investment, employment and
income in the host country.
• MNC’s helps the host country to solve the problem of trade deficit through
export promotion and import substitution.
• MNC’s help to fill up the technological gap by transferring technology from
technically advanced country to technologically backward or growing country.
• MNC’s create employment opportunities in manufacturing as well as allied
industries and service sectors.
 Advantages of MNC to Host Country
• MNC’s back protectionism, create competition among domestic companies and
thus enhance their competitiveness.
• The marketing skills of the MNC’s are impressive particularly in providing
marketing infrastructure.
• MNC’s help in rapid industrialization and improve general standard of living in the
host country.
Advantages of MNC to Home Country
• MNC’s create opportunities for domestic firms to market their products in the
global markets.
• They create employment opportunities for resources both in home country and
internationally as well.
• Earning of valuable foreign exchange strengthens the Balance of payments
position for the home country.
 Dis-advantages of MNC to Host
Country
• Although the initial impact of MNC’s investment is to improve the foreign
exchange position of the recipient nation, its long-run impact may reduce
foreign exchange earnings on both current and capital accounts and lead to
domination of domestic industries.
• MNC’s exercise economic power to influence government lobbies, markets and
consumers.
• They typically produce non-essential items leading to surplus investment in the
MNC sector.
• They may exploit the human resources of the least developing nations by
paying low wages to workers.
• MNC’s impact on development of host country is uneven and uncertain.
• They may pose threat to sunrise industries.
• They may have irreversible impact on the natural resources.
Transnational organizations
Transnational organization is
a term used for global
organizations having multiple
set-ups, branches and
subsidiaries and not
operating from a single
country as a base. It refers to
international organizations
(usually, international
nongovernmental organizatio
ns) that "transcend" the idea
of a nation-state and
boundaries.
 FDI – Foreign Direct Investment
• FDI occurs when an investor based in one country (the home country) acquires
an asset in another country (the host country) with the intent to manage that
asset.
• The management dimension is what distinguishes FDI from portfolio
investment in foreign stocks, bonds and other financial instruments. In most
instances both the investor and the asset it manages abroad are business firms.
In such cases, the investor is typically referred to as the “parent firm” and the
asset as the “affiliate” or “subsidiary”.
• FDI plays a major role in internationalization of business and rapid
development in global investment patterns. The broadened investment in an
enterprise generates long term goals and motives to continue the association
in future.
• FDI plays an extraordinarily significant role in developing economies worldwide.
 FDI – Foreign Direct Investment
Advantages of FDI:

• Economic Development
• Transfer of Technologies
• Human Capital Resources
• Employment Creation
• Research and Development
• Income generation
• Beneficial to small firms.
 Types of FDI
• Inward & Outward FDI:
Inward FDI is when Foreign capital is invested on local resources. Outward FDI is
when local capital is invested on foreign resources. An outward FDI is backed by
the government against all types of associated risks.

• Vertical & Horizontal FDI:

Vertical FDI takes place when an MNC owns some shares of a foreign enterprise,
which supplies input for it or uses the output produced by the MNC.
Horizontal FDI occurs when an MNC carries out a similar business operation in
different nations.
 Types of FDI
• Market-seeking FDI & Resource-seeking FDI:
FDI that is undertaken to strengthen the existing market structure or explore the
new market opportunities are known as Market-seeking FDI.
Resource-seeking FDI’s are aimed at factors of production which have more
operating efficiency than those available in the home country of the investor.

• Efficiency seeking FDI:

Some FDI’s involve the transfer of strategic assets and technology. FDI activities
may also be carried out to ensure optimization of available opportunities and
economies of scale. In this case the FDI investment is termed as “Efficiency-
seeking FDI.”
 Trade Barriers
• Trade barriers are artificial restrictions on
trade imposed by the government on free
flow of goods and services between the
countries.

• Tariff, quotas, taxes, duties, foreign

exchange restrictions, trade agreements
and trading blocs are the techniques used
for restricting free movement of goods
from one country to another.

• Trade barriers are classifies into two

categories:
• Tariff barriers or fiscal controls
• Non-Tariff barriers or quantitative restrictions
 Objectives of Trade Barriers
• To Protect Home Industries from Foreign Competition:
In many developing countries, majority of basic and heavy industries are in the
initial stage of their development. The cost of production in such industries is
comparatively high and quality is poor. Therefore, such industries need protection
from foreign competitors through high tariffs and quantitative restrictions.

• To Promote New Industries and Research & Development:

Developing countries like India are conducting research in various areas of
technological development. In order to motivate the efforts of scientists and
enable them to focus with greater initiative and determination in areas of potential
development, there is a need for protection from foreign technology transfers.
 Objectives of Trade Barriers
• To Conserve Foreign Exchange Reserves:
The immediate solvency of any country depends on its foreign exchange reserves.
Excessive imports (especially of non-essential goods) leads to erosion of valuable
foreign currency from the country. Hence, the government uses quotas and tariffs
as instruments of controlling imports and conserve foreign exchange.

• To Maintain favorable balance of payments position:

Balance of payment is the difference between inflow and outflow of foreign
currency in the economy. Countries having favorable Balance of payment position
commands high goodwill and reputation in the international markets. Trade
barriers help in reducing imports and thereby improve balance of payments
situation of a country.
 Objectives of Trade Barriers
• To protect economy from dumping:
Dumping is the situation whereby a MNC tries to sell its products in foreign
markets at a price which is much below its cost of production. The immediate
effect of dumping is that it drives away domestic suppliers and leads to closure of
inefficient domestic industries. To prevent this the government may use tariffs to
increase the price of dumped goods.

• To curb conspicuous consumption:

Luxuries goods Art work, precious jewels, antiques, rare articles, collectables, coins
have inelastic demand. Generally such goods are brought when their prices are
high. Such consumptions are known as conspicuous consumptions. These
consumptions cannot be curtailed by charging high duties and hence quotas are
used for curtailing their imports.
 Objectives of Trade Barriers
• To make economy self-reliant:
Infant industries need protection from government at the initial stage of development.
Gradually these protected industries develop competitive strength. At that juncture, the
domestic market can be thrown open to foreign competitors to enable domestic
companies to improve further. This helps countries to become self-reliant in the long-run.

• To mobilize public revenue:

In every economy, whether capitalist or socialist, the government plays a key role in the
economic development. The government undertakes various development activities which
require huge finance. Customs duties charged on import and export of goods can serve as
a significant source of finance for undertaking such developmental activities.

• To counter trade barriers imposed by other countries:

Sometimes, in order to counteract trade barriers imposed by other countries, a country
may be forced to impose trade restrictions.
 Tariff Barriers. Types of Tariff Barriers:

Classification of Tariffs on the Basis of Origin:

Tariff barriers are extensively used Export Duty
as trade barriers. Tariffs are in the Import Duty
Transit Duty
form of customs duties and taxes
imposed on intentionally traded Classification of Tariffs on the Basis of Criteria:
Specific Duty
commodities when they cross the Ad-valorem Duty
national boundaries. Tariff may be Compound Duty
used as a revenue-generating tax or
Classification of Tariffs on the Basis of Purpose:
to discourage the importation of Revenue Tariff
goods or both reasons. The main Protective Tariff
Anti-dumping Tariff
aim of tariffs is to increase prices of Countervailing Tariff
imported goods and thereby
discourage their consumption and Classification of Tariffs on the Basis of Trade Relations:
Single Column Tariff
reduce their demand. Double Column Tariff
Triple Column Tariff
 Types of Tariff Barriers.
Classification of Tariffs on the Basis of Origin:
• Export Duty:
Export Duty is a tax imposed on commodities exported from a country. Generally, no duties
are levied on exports. However, a country may impose a duty on exports with the following
objectives:
To earn revenue, if demand for exported products is inelastic.
To check the outflow of commodity, deficient in supply in the domestic market.

• Import Duty:
Import duty is a tax imposed on commodities imported by a country. Such duties are generally
levied with the following objectives:
To protect domestic producers from international competition.
To conserve foreign exchange.
To promote use of swadeshi.
 Types of Tariff Barriers.
• Classification of Tariffs on the Basis of Origin:
• Transit Duty:
Transit duty is a tax imposed on a commodity when it passes through the national
frontiers of a country, originating from and designed for other countries. Such
duties are levied by countries having strategic location from international trade
point of view.

For example, Port of Singapore.

 Types of Tariff Barriers.
• Classification of Tariffs on the Basis of Criteria:
• Specific Duty:
Specific duty is a duty imposed on each unit of a commodity imported or
exported. For eg. Rs 50/- on each metre of cloth imported or Rs 500/- on each TV
set imported. In this case, the value of commodity is not taken into
consideration.

• Ad Valorem Duty:
Ad Valorem Duty is a duty imposed on the total value of a commodity imported
or exported. For eg. 5% of FOB value of cloth imported or 10% of CIF value of TV
sets imported. In this case, the physical units of commodity are not taken into
consideration.
 Types of Tariff Barriers.
• Classification of Tariffs on the Basis of Criteria:

• Compound Duty:
Compound Duty is the combination of specific and ad-valorem duties. In this
case, the quantity as well as the value of the commodity are taken into
consideration while computing tariff. For eg. 5% of FOB value plus Rs. 15 per
meter of cloth imported.
 Tariff Barriers.
Classification of Tariffs on the Basis of Purpose:
• Revenue Tariff:
Revenue tariff is the tariff imposed in order to earn revenue for the country.
Generally, the rates of such duties are low and are levied on the terms of mass
consumption. Revenue tariff also serves other objectives like discouraging imports
or giving protection to home industries.

• Protection Tariff:
Protective tariff is imposed in order to protect infant industries by restricting or
eliminating competition from foreign companies. The rate of protective duties is
quite high. However, such duties may give rise to many anti-social activities like
black marketing, smuggling, illegal sales.
 Tariff Barriers.
Classification of Tariffs on the Basis of Purpose:
• Anti-dumping Duty:
Dumping is the strategy by which foreign companies try to penetrate into
overseas markets by selling goods at a very low price. Once established, such
companies charge high prices and exploit the consumers. Anti-dumping duties
have been devised to eliminate the harmful effects of dumping.

• Countervailing Duty:
Countervailing Duty is similar to anti-dumping duty to some extent. In many
countries (including India) duty drawback is given to exporters in order to enable
them to sell their products at competitive rates in the world market. To
countervail the effect of such incentives, countervailing duties have been
devised.
 Types of Tariff Barriers.
Classification of Tariffs on the Basis of Trade Relations:
• Single Column Tariff:
Under this system of tariff, a flat rate of duty is charged on imports from all the
countries. No discrimination is made between different countries of the world with
regard to tariff.

• Double Column Tariff:

Under this system of tariff, two rates of duties are fixed – lower rates for countries
having bilateral trade agreements with the duty levying country and higher rates for
countries having no such agreements.

• Triple Column Tariff:

Under this system of tariff, in addition to the higher and lower rates mentioned above,
there is a third rate called preferential rate, which is substantially lower and is
 Types of Non-Tariff Barriers:
Non-Tariff Barriers.
• Quota:
Non-tariff barriers are • Tariff quota
• Mixing Quota
quantitative restrictions • Unilateral Quota
that are more effective • Bilateral Quota
than tariff barriers in • Import Licensing
controlling the total • Consular Formalities
inflow of goods in physical • Trading Blocs
• Customs Regulations
terms in the country. • State Trading
• Export Obligation

• Exchange Control:
• Blocked Currency
• Differential Exchange Rate
• Government Rationing

• Boycott
• International Standards
• Miscellaneous Non-tariff Barriers
 Types of Non-Tariff Barriers
• Quota: Quota means a restriction on the physical volume of import or export of
a commodity. There are various types of quotas:

• Tariff quota: Under this quota the import & export of a commodity up to a specific limit is
allowed duty free or at a lower rate. Any import or export above this limit is charged with
a higher rate of tariff.
• Mixing quota: Under mixing quota, it is compulsory for a manufacturer to use certain
quantity of domestic raw materials in combination with the imported raw materials to
manufacture finished products for exports.
• Unilateral quota: Under the system of unilateral quota, a country on its own fixes the
minimum quantity of a commodity to be imported or exported without consulting other
countries.
• Bilateral quota: Under the bilateral quota system, importing and exporting countries fix
up quotas for various commodities in consultation with each other.
 Types of Non-Tariff Barriers
• Import Licensing:
As a part of liberalization process, a majority of items have been delicensed for
international trade in many countries. However, there are some items, which are
subject to compulsory licensing. For importing or exporting such items a formal
approval in the form of license is required to be taken, which involves a lot of
time and expenses.

• Consular Formalities:
Some importing countries have laid down strict consular formalities in order to
restrict the inflow of inferior quality goods in the economy. Under consular
formalities, an exporter is required to obtain a consular certificate from the
consulate of importing country situated in his country. Penalties are levied for
non-compliance with such formalities.
 Types of Non-Tariff Barriers
• Trading Blocs:
Trading blocs are the regional associations of countries whereby they come to a
common understanding regarding rules and regulations to be followed while
exporting and importing goods among them. Such blocs offer special concessions
and preferential treatment to member countries. As a result trade with non-
members is discouraged.

• Customs Regulations:
Most of the countries of the world have laid down complicated customs
regulations in order to put a check on excessive inflow and outflow of goods.
These formalities differ from country-to-country and are very lengthy, time-
consuming and complicated. These formalities act as barriers to the free flow of
trade between the countries of the world.
 Types of Non-Tariff Barriers
• State Trading:
Import and export of certain commodities have been taken over by the
government of countries. There is an exclusive monopoly of governments in such
sectors. Such action on the part of the government puts check on the activities of
private individuals. For eg. MMTC (Minerals and Metals Trading Corporation)
looks after foreign trade of metals and minerals in India.

• Export Obligation:
Many countries have imposed compulsory export obligations in order to
compensate for the outflow of foreign exchange due to imports. Thus, it
becomes obligatory for every importer to export goods of certain value as
specifically by the Foreign Trade Policy. For eg. Import of capital goods under the
Export Promotion Capital Goods (EPCG) scheme in India.
 Types of Non-Tariff Barriers
• Exchange Control:
A government can effectively regulate its international trade position by exercising
various exchange control restrictions. For eg. In India, the Foreign Exchange
Regulation Act (FERA) 1973 used to regulate transactions in foreign currency.
However after full convertibility of rupee, the Foreign Exchange Management Act
(FEMA) 1999 has replaced the FERA. There are three ways of controlling transactions
in foreign currency:
Blocked Currency: At times it is used as a political weapon to cut off all imports or
imports above a certain limit. Blockage is accomplished by refusing to allow
importers to exchange national currency for seller’s currency.
Differential Exchange Rate: It is particularly an ingenious method of controlling
imports whereby lower exchange rate is fixed for desirable imports and higher one is
fixed for undesirable imports.
Government Rationing: The government may also ration the use of foreign currency
whereby all receipts and payments of foreign currency may be routed through the
 Types of Non-Tariff Barriers
• Boycott:
A governmental boycott is an absolute restriction against the import of certain
goods from other countries. Boycott may be either formal or informal. It may be
government sponsored or sponsored by an industry.

• International Standards:
Non-tariff barriers in this category include standards to protect health, safety and
product quality. However, these restrictions are sometimes used in an unduly
stringent and discriminating ways to restrict the trade. They also include local
content requirements, whereby it is obligatory for importers to import only these
goods, which contain a certain percentage of domestic contents.
 Types of Non-Tariff Barriers
• Miscellaneous Non-tariff Barriers:

In addition to the above non-tariff the following non-tariff barriers have been
specified:
• Prior import deposits.
• Import restrictions due to environmental regulations.
• Foods and drugs regulations.
• Provision of subsidies to domestic industries.
• Health and safety regulations.
• Anti-dumping regulations
• Government procurement regulations.
 Trade Blocs
• Trading blocs are usually groups of countries in specific regions that manage
and promote trade activities. Trading blocs lead to trade liberalization (the
freeing of trade from protectionist measures) and trade creation between
members, since they are treated favorably in comparison to non-members.
• These Regional Economic Groups are the associations of countries situated in a
particular region whereby they come to a common understanding regarding
rules and regulations to be followed while conducting trade.
• Economic grouping of the countries of the same region or areas increases the
size of the market, aggregate demand for products and services, overall
productivity, employment and ultimately economic activities of the region.
• At the same time consumers get variety of products available in wide range at
lower price rates.
• The number of Regional economic groups has grown rapidly in recent decades.
More than one-third of world trade takes place within such groups.
 Trade Blocs

• The World Trade Organization (WTO)

permits the existence of trading blocs,
provided that they result in lower
protection against outside countries
than existed before the creation of
the trading bloc.
 Trade Blocs
The most significant trading blocs currently are:

• South Asian Association for Regional Cooperation (SAARC)

• European Union (EU) – a customs union, a single market and now with a single currency
• European Free Trade Area (EFTA)
• Greater Arab Free Trade Area (GRAFTA)
• Central European Free Trade Agreement (CEFTA)
• Economic and Monetary Community of Central Africa (CEMAC)
• North American Free Trade Agreement (NAFTA) between USA, Canada and Mexico
• Mercado Comun del Cono Sur (Mercosur) - a customs union between Brazil, Argentina, Uruguay, Paraguay and
Venezuela
• Association of Southeast Asian Nations Free Trade Area (ASEAN)
• Common Market of Eastern and Southern Africa (COMESA)
• Central American Common Market (CACM)
• South African Customs Union (SACU)
• African Economic Community (AEC)
• South Asian Free Trade Area (SAFTA) created in 2006 with countries such as India and Pakistan
• Pacific Regional Trade Agreement (PARTA)
Positive Effects of Trade Blocs
Negative Effects of Trade Blocs

• Increases trade in the region. • Overestimation of Trade Benefits.

• Promotes efficient firms. • Loss of Sovereignty.
• Improves performance. • Threat to infant industries.
• Reduction in transaction costs. • Over-exploitation of resources of
• Price transparency. under-developed member nations.
• Promotes investment. • Restricted international trade.
• Reduces dependence.
• Promotes international peace.
• Optimum use of resources.
 Types of Trade Blocs
• Free Trade Area:
This is the simplest form of economic integration which provides for internal free
trade between member countries. Each member is allowed to determine its own
commercial policy with respect to non-members. For eg. Latin-American Free
Trade Association (LAFTA)

• Customs Union:
A customs union is more advanced form of economic integration which not only
provides for internal free trade between member countries but also adopts a
uniform commercial policy against non-members. For eg. European Economic
Community (EEC)
 Types of Trade Blocs
• Common Market:
A common market allows free movement of labor and capital within the common market in
addition to having free movement of goods between the member countries. The member
countries of common market also adopts a common commercial policy with respect to
non-members.

• Economic Union:
In the case of economic union, the member countries have the same economic policies
including monetary and fiscal policies, in addition to the features of common market. For
eg. The European Union introduced a common currency Euro for it’s members.

• Political Union:
Political union is the ultimate type of economic integration, whereby member countries
achieve not only monetary and fiscal integration but also political integration. For eg. EU is
moving towards a political union similar to the one created by 52 states of Amercia.
 WTO – World Trade Organization
• The World Trade Organization (WTO) is the only global international organization dealing with
the rules of trade between nations. At its heart are the WTO agreements, negotiated and
signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is
to ensure that trade flows as smoothly, predictably and freely as possible.

• The WTO has many roles: it operates a global system of trade rules, it acts as a forum for
negotiating trade agreements, it settles trade disputes between its members and it supports
the needs of developing countries.

• It has 164 members since 29 July 2016.

• It has a diverse environment with high focus on development and growth of industrialization
for all nations.

• The four Deputy Directors-General are Yonov Frederick Agah of Nigeria, Karl Brauner of
 WTO – World Trade Organization
• Geneva, Switzerland, where the WTO headquarters is located, is a unique place, with many
United Nations and other international organizations, as well as missions to the WTO. The
Centre William Rappard (CWR) is the name of the building that has been home to the WTO
Secretariat since the WTO was established in 1995.

• India has been a WTO member since 1 January 1995 and a member of GATT since 8 July 1948.

• The WTO derives most of the income for its annual budget from contributions by its
Members. These are established according to a formula based on their share of international
trade. Miscellaneous income is earned from rental fees and sales of WTO print and electronic
publications.

• The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many
countries, whose overall purpose was to promote international trade by reducing or
eliminating trade barriers such as tariffs or quotas. The WTO replaced GATT as an
international organization, but the General Agreement still exists as the WTO's umbrella treaty
for trade in goods, updated as a result of the Uruguay Round negotiations.
 WTO and it’s Functions
• Administering WTO Agreements
• Reduction of Trade Barriers
• Settlement of International Trade disputes.
• Cooperation with other international organizations.
• Forum for trade negotiations.
• Trade Policy Review Mechanism.
• Consultancy
• Services (providing technical assistance, training & consultancy.)
 WTO – World Trade Organization – The Uruguay Round

The Uruguay Round negotiations concluded on the 15th April 1994 at Marrakesh,
Morocco. According to the Marrakesh declaration, the results of the Uruguay round
strengthen the world economy and would lead to more trade, investment, employment
and income growth throughout the world. In order to implement the final act of Uruguay
Round agreement of GATT, the WTO was established on 1st January 1995 with the
following objectives: WTO Agreement :
• Agreement on Agriculture (long-term agricultural trade)
• Agreement on Trade in Textile & Clothing (earlier known as
MFA – Multi-Fibre Agreement)
• Trade Liberalization • Agreement on TRIM’s (for introducing national treatment
• Non-discrimination foreign investment & removal of quantitative restrictions)
• Agreement on TRIP’s (minimum standards of protection to be
• Raising standards of living adopted by parties in respect to intellectual property,
trademarks, copyrights, patents, industrial designs, layout
• Ensuring optimum use of world resources. designs, geographical indications)
• Environmental concern. • Agreement on Services (banking, insurance, travel, maritime
transportation, mobility of labor)
• Development of less developed countries. • Agreement on Subsidies & Countervailing Measures
(discipline use of subsidies)
• Full employment. • Dispute Settlement Body (fast movement on dispute
settlements)
 WTO – Doha Declaration
• The November 2001 declaration of the Fourth Ministerial Conference in Doha,
Qatar, provides the mandate for negotiations on a range of subjects, and other
work including issues.

• The Doha Declaration included:

• Doha Ministerial Declaration
• Intellectual Property Declaration
• China’s Accession to the WTO
• Current Progress
• Benefits of Negotiations
Factors affecting Product Promotion in International Market

Various factors that affect promotion mix at the international markets are:
• Product Related Factors:
• Nature of product
• Nature and amount of product information
• Unit price of product
• Product’s stage in the Product Life Cycle

• Consumer Related Factors:

• Size and characteristics of the target market.
• Types of buying decisions.

• Environment Related Factors:

• Competitor’s actions.
• Visibility of the firm.
Factors affecting Product Promotion in International Market

• Company Related Factors:

• Promotion Strategy
• Branding Strategy
• Pricing Strategy
• Advertising Budget
• Company Personnel
 Objectives of entering foreign markets

• Domestic Market Saturation

• Competitive Pressure
• Domestic Recession
• Poor domestic response
• Excess capacity.
• Government Actions
• Full export obligation.
Ethnocentrism – Home country orientation – considers home country as base and international markets as secondary markets
to dispose surplus production.
Polycentrism - Host country orientation – views overseas market significantly, operates vide subsidiaries, distinguishes
domestic & overseas markets.
Regiocentrism – Regional orientation – Views each region as separate market. Strategic integration, organizational approach
and product policy are implemented at regional level.
Geocentrism – World orientation – Views the entire world as one single market. Develops standardized product mix, protecting
uniform image of organization in global markets. (mostly MNC’s)
 Identifying Foreign Markets
Market Related factors:

• General factors – Economic factors, economic policy, business regulations,

political factors.
• Specific factors – Trends in domestic markets, production, consumption, import
& exports.
• Nature of competition in both domestic & international markets.
• Government policy and regulation pertaining to the industry.
• Supply conditions of raw materials and other inputs.
• Trade practices and customs.
• Cultural factors and consumer characteristics.
 Identifying Foreign Markets
Other Factors:

• Political Embargo
• Special requirements
• Product specification
• Distant location
• Market Accessibility
• Business Community
• Preferential Treatment
 International Market Selection Process

• International Marketing
Objectives
• Parameters of selection.
• Preliminary Screening
• Shortlisting of Markets.
• Evaluation & Selection
• Test Marketing
• Commercial Production.
 Pricing Decisions in International Markets

• Pricing is one of the most important factor in global marketing.

• Price is the value of utility of goods and services expressed in monetary terms.
• It is one of the important factors that determines success in an ever-evolving &
competitive global market.
• Pricing is inclusive of all factors of production such as cost, quality, demand,
competition, international marketing & distribution costs before arriving at the
final price.
• The price fixed must be reasonable, competitive and high on return-value to
consumers.
Factors affecting determination of Importance of Export Pricing:
price in the International Market:
• Helps to achieve objectives.
• Cost of Product
• Helps to penetrate market.
• Competition
• Increases profitability.
• Elasticity of demand.
• Helps to skim the market.
• Government policies.
• Helps to increase market share.
• Frequency of purchase.
• Helps to develop brand loyalty.
• Incentives offered by the
Government. • Helps to face competition.
• Product differentiation and brand • Reflects the quality of the
image. product.
• Other miscellaneous factors.
 Export Pricing Strategies
• Skimming Pricing Strategy:
A pricing strategy where the exporter charges a higher price in order to
dominate, create supremacy, recover initial market development cost or
establish itself as a market leader. After exploiting the upper class segment, the
marketer can reduce it’s price to target the middle class segment.

• Penetration Pricing Strategy:

A pricing strategy which is the opposite of Skimming Strategy, where the
marketer charges low price initially in order to capture the market and gain a
strong foothold. This is done to overtake competitors and gain popularity in new
market among mass markets.
 Export Pricing Strategies
• Transfer Pricing:
Transfer Pricing refers to the pricing of goods transferred from one subsidiary to
another or to the parent company. Due to this, profits of one subsidiary are
transferred to another subsidiary or to the parent company. Transfer pricing
decisions are affected by factors such as tax & tariff differences, foreign exchange
regulations & import restrictions.

• Marginal Cost Pricing:

Marginal Cost is the cost of producing one extra unit of a product. Under this
approach an exporter simply considers variable costs or direct costs while
arriving at the place to be charged in the international market and fixed costs are
fully recovered from the domestic market. This approach can be used when
unused production capacities are available.
 Export Pricing Strategies
• Market-oriented Pricing:
This is a very flexible method of arriving at a price as it takes into consideration
the changing market conditions. The price charged maybe higher when demand
conditions are favorable and vice-versa. It is a very realistic method that
considers market demand & competition primarily.

• Competitor’s Pricing:
Under this method, the pricing strategy of dominant competitors is taken into
consideration while arriving at the pricing decisions. A price leader is the firm,
which initiates the price trends in the market. However, if the competitor’s
pricing policy is erroneous it will affect the organization too.
 Advantages of Break-even Point:
• It is simple to construct and understand.
• It helps to understand relation between cost, volume and profit.
• It helps management to decide production level.
• It indicates the impact of change in production level on profit.
FOB & CIF
 PACKAGING
• An International Marketer should ensure packaging instructions as per International
standards, contract specifications and packing regulations laid down by the exporting
countries.

• In case no specifications are mentioned regarding packaging, then the standards laid
down by BIS – Bureau of Indian Standards should be observed.

• The decision regarding type of packing material in the International Markets depends
upon the following factors such as:
• Nature of the product.
• Mode of transportation to be used.
• Time taken in transportation.
• Trans-shipment involved.
• Physical and physio-chemical properties of the product.
• Specifications of the importer.
 REQUISITES OF A GOOD
PACKAGING
A product’s packaging mix is the combination of various requirements.
Packaging is an additional overhead expenditure & should be used judiciously.

An idea packaging mix should possess the following features:

• Protection: The primary function of packaging is the physical protection of goods. An ideal
packaging protects goods from vibration, compression, mechanical shock, temperature &
moisture changes.

• Preservation: Packaging is done with the objective of preserving the contents and quality of the
product. The packaging material should preserve and protect the goods against the effect of
atmosphere, oxygen, moisture, light, flame, bacteria, fungi, odor, flavor change and chemical
reaction. (Especially crucial for food and pharmaceutical products.)

• Convenience: Packaging should be convenient for the marketing intermediaries as well the
consumers. A good package should be convenient to handle, identify, display, reuse, dispense,
 REQUISITES OF A GOOD PACKAGING
• Presentation: Packaging acts as a silent salesman. It is a promotional tool. It should
give appropriate message to consumers and salespersons. An ideal packaging
attracts potential buyers and arouses their interests.

• Identification: Packaging should help in identification and differentiation of product

from those of competitors. This can be achieved by unique packaging features such
as look, design, shape, size, color and others.

• Lightness: The packaging material should be as light as possible in weight so that the
overall weight of the product should not increase much after packaging. This
facilitates easy handling and reduces transportation cost.

• Conformity: A good package must confirm to legal requirements of both seller &
buyers country. (For eg. Some laws require potentially dangerous goods such as
gasoline or drugs to be stored in specially constructed containers.)
 REQUISITES OF A GOOD
PACKAGING
• Reusable: An ideal packaging is one that can be re-used. Some products such
as food items, soft drinks are stored in reusable containers or jars which makes
it attractive and useful for storing and re-use and removes the problem of
disposal or re-cycling.

• Recyclable: Packages should be recyclable as far as possible. This saves cost of

disposal and makes the package environment friendly. It also prevents
fraudulent activities such as re-use of packaging boxes and containers for
selling duplicate products.
 Primary Functions of Packaging.
• Protection: The primary function of packaging is the physical protection of
goods. An ideal packaging protects goods from vibration, compression,
mechanical shock, temperature & moisture.

• Preservation: Packaging is done with the objective of preserving the contents

and quality of the product. The packaging material should preserve and protect
the goods against the effect of atmosphere, oxygen, moisture, light, flame,
bacteria, fungi, odor, flavor change and chemical reaction. (Especially crucial for
food and pharmaceutical products.)

• Presentation: Packaging acts as a silent salesman. It is a promotional tool. It

should give appropriate message to consumers and salespersons. An ideal
packaging attracts potential buyers and arouses their interests.
 Secondary Functions of
Packaging.
• Identification: Packaging should help in identification and differentiation of
product from those of competitors. This can be achieved by unique packaging
features such as look, design, shape, size, color and others.

• Information: Packaging also provides valuable information about contents,

weight, number of units, brand name, place of production, handling instructions,
instructions to consumers, statutory warnings, details of guarantee or warranty if
any. Thus, it acts as a information manual of necessary details for consumers.

• Self-service: Self-servicing as a method of sale has become popular due to global

branding and descriptive packaging. Under this the package performs the role of
a salesman by attracting attention, arousing interest, creating desire, providing
information, cost details and converting the prospective buyer into a customer.
 Secondary Functions of
Packaging.
• Handling & Transportation: Packaging should be economical and must
facilitate easy handling and transportation. The shape, size, weight, material
should help in minimizing the handling and transportation cost.

• Integrated Marketing Approach: Many MNC’s such as Taj Mahal Tea, Pepsi,
Coke, Lux, try to endow their product packages with celebrities and distinctive
personalities. This aids in advertising the product and supports its brand
personality and image in the minds of potential consumers.
Factors influencing Packaging decisions at International
Markets.
There are a number of factors influencing packaging decisions at International
level. They are as follows:

• General conditions affecting packaging decisions:

• Physical characteristics of product

• Physio-chemical factors or properties
• Economy (Cost – packaging should be durable & economical)
• Convenience
• Purpose (aimed at being attractive and highly presentable or basic)
• Statutory regulations (Health & Safety instructions or warnings)
• Environmental factors (bio-degradable or not, adhering to specifications at buyer’s end)
Factors influencing Packaging decisions at International
Markets.
• Special conditions affecting packaging decisions: In addition to general
considerations there are certain special factors to be considered while designing
packaging for international markets.

• Regulation in Foreign Countries. -Labelling must be done in local language also

• Buyer’s Specifications – specific instructions such as “Duty free” must be displayed
on request.
• Socio-cultural factors – National taste, color preference, signs and shapes and other
cultural norms must be respected to protect cultural sentiments.
• Retailing requirements – specifications for self-service, discounts or bulk packing
• Environmental factors – climatic conditions during transit humid or dry or cold or
windy
• Disposability – safe disposal, not using banned materials, preferably bio-degradable
and recyclable material
 Transport Packaging
Transport packaging includes protective packaging during distribution. It includes
containerization and movement of goods in bulk during transit.

“Packaging maybe defined as the means of ensuring the safe delivery of a product to
the ultimate consumer in sound condition, at the minimum overall costs.” – British
Institute of Packaging.

Materials used for Transport Packaging are:

• Wood – for safety
• Corrugated boxes – for protection
• Paper-based materials – for protection against pilferage
• Plastics – for cost saving
• Cushioning materials – for protection against breakage
• Textile packing materials – for low weight protection
 Criteria for Transport Packaging
• Transport packaging in relation to mode of transport. – the selection of mode of transport
has great influence on type of packaging during transit.

• Transport damage in relation to packaging cost – faulty packaging can result in directly
damaging the product so care has to be taken to design suitable, light-weight, low cost
transport packaging.

• Risk of pilferage. – usually 25% margin is kept to avoid risk of pilferage.

• Marking for Shipping and Handling – signs & symbols used to communicate with staff and
labor at ports.

• Containerization – Containerization is a system of inter-modal freight transport using

standard inter-modal containers specified by ISO standards. These are usually sealed
containers that maybe loaded on ships, air, cargo or railways. 90% of cargo is done vide
 Labelling in International
Marketing.
• Labelling maybe regarded as part of packaging.
• International marketers need to design appropriate labelling for various
international markets as per specifications & regulations.
• Many countries lay down labelling requirements for specific category of products.
• Certain mandatory information is disclosed as part of labelling such as – date of
expiry, ingredients, storage instructions, contents, reactions if any.
• Some of the criteria's for labelling are:
• Information details to be provided.
• Different languages of foreign markets.
• Instructions for use.
• Different price or currencies.
• Different promotions
• Rules & regulations in foreign currencies.
• Issues in warranty, guarantee and service policies.
• Consumer preference in various markets (color, style)
 Marking in International Marketing
• Adequate marking is an indispensable component of transport packaging.
• Correct and complete marking of packages helps to prevent incorrect handling,
incorrect delivery, accidents and customs regulations.
• Marking should be clear and precise.
• Color should be specific so it stands out.
• Adhesive should be applied aptly.
• Marking should be legible, clear and durable.

Types of Marking:
• Shipping Mark
• Information Mark
• Handling Mark
 Types of Marking.
• Shipping Mark – helps to identify goods in transport packaging, acts as a
document in packing list along with invoice, helps in providing basic details
such as number of products, place & port of destination, identification, order
number, details of shipment.

• Information Mark – provides country of origin, weight in kilograms, dimensions

of packaging in centimeters

• Handling Mark – give details about type of handling, sensitivity to heat or

moisture, risk of breakage, loading specifications like sling, top or bottom
center of gravity.
 Precaution to be taken while
Marking.
• It should be neat and legible.
• It can be printed or stenciled in letters of adequate size.
• It must correspond to shipping documents.
• It should be waterproof, smear proof and permanent.
• Black pigment type of permanent ink should be used ideally.
• Old marks if any should be completely deleted.
• Large packages should have marks on both surfaces and sides.
• If handling marking is inadequate then one may not be able to claim any
damages arisen due to mis-handling or damage.
• In case markings do not match specifications there maybe a objection at
customs clearance.
 Product Warranties and After-sales Service in
International Marketing.
• A Warranty attests the supplier’s commitment to quality and performance of
the product as stipulated or claimed during time of sale.
• An exporter has three options regarding warranty:
• Uniform warranty in domestic & international market.
• Different warranties in domestic & international market.
• Different warranties in different markets.

• After-sales service is provided by the seller to maintain the product in working condition
and address complaints and repairs in time.
• After-sales service is a key factor in selection of automobiles, electronics and gadgets.
• Certain products require regular maintenance and after-sales service which is a crucial
part for longevity of product performance.
• It also encourages long-term association with customers and helps in customer
retention.
 Factors affecting issuance of
• Nature of product
Warranties.
• Climatic conditions
• Competitor’s Policy
• Cost Factor
• Estimated life of the product.

Reasons for providing Warranties & After-sales service:

• To maintain product in working condition for longer duration.
• To build customer’s confidence and thereby make them brand loyal.
• To attract consumer by efficient after-sales service and increase market share.
• To enhance goodwill of company in global markets.
 Indian Institute of Packaging –
IIP
• Indian Institute of Packaging was set up jointly with the Ministry of Commerce,
Government of India and the Indian Packaging Industry and allied interests in
the year 1966 with it’s headquarter in Mumbai and principal laboratories in
Mumbai and regional laboratory in Kolkata, Chennai, Hyderabad, Ahmedabad &
Delhi.

• IIP is a training cum research institute that endeavors to improve the standards
of packaging needed for exporting, promotion of packaging material,
infrastructural facilities and overall consultation and testing.

• They also engage in training and education, Research & Development, Problem
solving, consultancy, industrial co.ordination, information dissemination,
promotional efforts and participating and conducting exhibitions and releasing
journal on packaging regularly.
 Functions of IIP
• Research & Development – IIP undertakes Research & Development in latest packing
materials & trends in packaging industry globally. Also for creating and improving overall
infrastructural facilities for improvement and prevention of losses during transportation. It
also undertakes self-sponsored industry projects in areas of new packaging design,
substitution of packaging material with environment friendly materials and others.

• Educational Programs – Courses offered are 2 year Post graduate diploma to 3 month
certificate course in packaging. It also offers an 18 month distance learning program for
working professionals. This course is recognized by the World Packaging Organization and
accredited by the Asian Packaging Federation.

• Training Programs – IIP organizes a number of short-training programs, seminars and

conferences at it’s head office & regional offices in various parts of the country. IIP is the first
packaging institute in the world to have held a training program exclusively for women
entrepreneurs. It also organizes a one-month Entrepreneurship Development Program (EDP)
annually.
 Functions of IIP
• Consultancy Projects - IIP offers consultancy services for package design and
development and cost effective packaging. It undertakes on the spot advisory
visits, techno-economic feasibility studies and market research to study the
potential of new projects. It has also launched a joint project with Coir Board
of India to promote nature-based packaging such as coir composite and
cushioning for packaging applications.

• Testing facilities - IIP laboratories extent testing facilities to industry for

domestic distribution and for exports as per National & International
standards like the Bureau of Indian Standards (BIS), International Standard
Organization (ISO), British Standards (BS), American Society for Testing
Materials (ASTM) and others. IIP issues UN certification of export packages for
hazardous goods and equipment calibration standardization certificates.
 Functions of IIP
• Exhibitions and Design – IIP organizes INDPACK, an annual national exhibition
at varies cities, to offer the packaging industry an opportunity to display
developments in the machinery and materials sector. It also organizes INDPACK
International, a collaborative effort with exhibition organizers from overseas. It
has permanent exhibition centers in Mumbai, Chennai and Delhi which offers
display outlets for the products of the industries.

• Information & Publications – PACKAGING INDIA, the official journal of the

Institute is published six times in a year, is an invaluable source of information
for the packaging industry. It is mailed free of cost to the members of the
Institute, packaging and related institutions all over the world. Individual
subscriptions are also available on request. Monographs, text books, seminar
papers and directories are also published periodically.
 Functions of IIP
• Awards – IIP has instituted a number of awards to encourage innovations in the
industry and motivate new entrepreneurs. The biennial INDIASTAR Award and
the PACHAMACHE Award are the recognitions of excellence in packaging
development. The INDIASTAR contest is also open to students under the student
category. Winners of INDIASTAR entries are also eligible to compete for the
ASIASTAR and the WORLDSTAR awards.

• Library & Internet Services – IIP has one of the best reference libraries in the
world with vast varieties of books, journals, reports, international periodicals.
Database on products and materials are also available. Library facilities are open
to the members, students and faculty. IIP also has its website which updates
visitors regarding it’s activities and developments. Library also offers reprographic
facility. Reprography is the reproduction of graphics through mechanical or
electrical means, such as photography or xerography. Reprography is commonly
used in catalogs and archives, as well as in the architectural, engineering, and
 Functions of IIP
• International Membership – The institute is closely linked with International
organizations and is recognized by The United Nations Industrial Development
Organization (UNIDO) and the International Training Centre (ITC) for
consultancy and training. It is a member of the Asian Packaging Federation &
the Institute of Packaging Professionals (IOPP, USA) The Institute of Packaging
(IOP, UK) Technical Association of Pulp & Paper Industry (TAPPI, USA) & The
World Packaging Organization (WPO).

• Other Functions –
• It carries out graphic designing for international products.
• It advises the Government of India for all export related packages.
• It collects information on various packing and packaging strategies and disseminates
them to the exporter for their benefits.
• It has an environment cell, which guides exporters on usage of environment friendly
packing materials.
 IIP Contact Details.

Website:
https://iip-in.com/about_iip/message-from-the-director.aspx
Indian Institute of Packaging, Plot E2, MIDC Area, Andheri East, Road No.8, Post Box No. 9432, Mumbai 400093,
Maharashtra, India

Tel : Land Line : 91-022-28219803 / 28216751 / 28219469 / 28391506 / 28329623 / 28254631 / 28209625 / 28328178
Fax : 91-22-28375302
Email : director-iip@iip-in.com