2008 international marketing management mathur

International Marketing Management


2

International Marketing Management


International
Marketing Management
Text and Cases

U.C. Mathur


Copyright © U.C. Mathur, 2008

All rights reserved. No part of this book may be reproduced or utilised in any form or by any means, electronic
or mechanical, including photocopying, recording or by any information storage or retrieval system, without
permission in writing from the publisher.

First published in 2008 by
SAGE Publications India Pvt Ltd
B 1/I-1 Mohan Cooperative Industrial Area
Mathura Road, New Delhi 110 044, India
www.sagepub.in
SAGE Publications Inc
2455 Teller Road
Thousand Oaks, California 91320, USA
SAGE Publications Ltd

1 Oliver’s Yard, 55 City Road
London EC1Y 1SP, United Kingdom
SAGE Publications Asia-Pacific Pte Ltd
33 Pekin Street
#02-01 Far East Square
Singapore 048763

Published by Vivek Mehra for SAGE Publications India Pvt Ltd, typeset in 9/11 pt Palatino by Star Compugraphics
Private Limited, Delhi and printed at Chaman Enterprises, New Delhi.

Library of Congress Cataloging-in-Publication Data
Mathur, U.C., 1938–
International marketing management: text and cases/U.C. Mathur.
p. cm.
Includes index.
1. Export marketing—Management. 2. Export marketing—India—Management. 3. International trade.
4. International trade—India. I. Title.
HF1416.M32
ISBN: 978-0-7619-3640-4 (Pb)

658.8'4—dc22

2008

2008007161
978-81-7829-786-6 (India-Pb)

The SAGE Team: Sugata Ghosh, Vikas Jain, Sanjeev Kumar Sharma and Trinankur Banerjee

Dedicated to Bina
my best friend and wife
with gratitude and love.


6

International Marketing Management


Contents
List of Tables
List of Figures
List of Abbreviations
Preface

8
10
13
15

1.
2.
3.
4.
5.
6.
7.
8.
9.

10.
11.
12.
13.
14.
15.

International Marketing: An Introduction
Market Potential of Countries
International Organisations
International Trading
International Competitive Advantage and Buyer’s Profile
International Environment for Business, Customer, Competition and Controls
International Pricing
International Business-to-Business Marketing
International Marketing of Services
International Strategic Marketing
International Stakeholders
International Brands
International Marketing Concepts
Market Competitive Forces Worldwide
Advertising and Promotion in International Markets

17
56
75
100
129
160
183

194
204
217
249
259
279
316
335

16.
17.
18.
19.
20.
21.
22.
23.

International Public Relations
International Marketing Research
Distribution of Goods Worldwide
International Markets for the Twenty-first Century, Imports and Exports
International Management for Marketing Personnel
International Marketing Audit
International Collaborations, Controls and Global Manufacturing
Understanding Case Studies

417
425
454

467
487
496
521
532

Index

573

About the Author

583

7


List of Tables
1.1
1.2
1.3
1.4
1.5

Difference between TQM and CPR
Product Acceptance Plan
India’s Ranking in the World
Cultural Diversity between Japan and the US
Percentage of GNP Spent by Nations on Advertising

32
40
44
48
50

2.1
2.2
2.3

Classification of Countries on the Basis of Per Capita Income (1994)
Country Classification on the Basis of Per Capita Income and GNP
Comparison of Business Environment amongst Countries

62
63
70

3.1
3.2
3.3

Top 10 IDA Borrowers (FY ’05)
Rating Countries for Business Potential
Business Attractiveness and Competitive Strength

79
94
94

4.1

World Trade and Output Developments, 2002–2005
(At Constant Prices, Annual Percentage Change)
GDP and Merchandise Trade by Region, 2004–2005
(Annual Percentage at Constant Prices)

102

5.1

Product Development Process

155

6.1
6.2
6.3
6.4

Country-wise Inventory Register
Multi-product Sales Register
Outstanding Payment Register
Complaint Register

175
175
175
175

9.1
9.2
9.3

Product and Related Services
Hotel Industry Supply Demand Paradigm
Customer Value Analysis

208
209
211

10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8

Product–Market Correlation
Correlation between Markets and Competition
Market, Firm and Competitive Analysis Summary
Benefit Rating for Cars
Decision Concepts and Benefits
Customer Analysis Matrix
Marketing Strategies for Decline Stage of PLC
Product Life Cycle Audit

219
219
222
224
224
227
237
238

11.1

Stakeholders of a Firm

250

4.2

8

104


List of Tables

9

12.1

Stakeholders of a Firm

260

13.1
13.2

Changes in Industrial Concepts
Selling Price Components

287
303

14.1
14.2

Customer Assessment of Competitors
Product Price Parity

322
332

15.1
15.2
15.3
15.4
15.5
15.6
15.7
15.8

Personal Selling Effort and Advertising

The Benefit Story Relating to Maruti Esteem Car
Advertising Expenditure in Different Countries
Women at the Workplace
Analysis of a Company’s Marketing Factors with Competitive Factors
Marketing Strengths of Different Countries
Media-wise Advertising—USA, 1980
Advertising Analysed

337
345
378
394
395
397
399
409

17.1
17.2

Country Ratings
Country’s Market Attractiveness and Competitive Company Strength

431
431

18.1

Analysing Distribution Channels

463

21.1
21.2
21.3
21.4

Yearly Growth Rate and their Weightage
Link between Cash Flow and Value Chain
Working Capital Accounting
Market Segment Variables

505
507
507
512

22.1
22.2

Equity Based International Operations
Non-Equity Based International Operations

522
522

23.1
23.2
23.3
23.4

23.5
23.6
23.7
23.8
23.9

Imports and Exports GE
Head Count vs Revenue—Microsoft
Indian Software Industry
Indian Software Companies
Infosys International Revenue Generating Countries
Market Share of Refrigerator Brands
Manufacturing Capacity of Refrigerators in India
Market Share of Washing Machine Brands in India
Ranking of Price Waterhouse

537
541
542
543
544
551
551
552
554


List of Figures
1.1
1.2

1.3
1.4
1.5
1.6
1.7 (a)
1.7 (b)
1.8

Five Force Model
CPR and TQM: Process Improvement
Difference between CPR and TQM
International Business Route
International Marketing Channel
Foreign Currency Dealings
Organisation for Exports
Alternative Organisation for Exports
Relative Importance of Advertising and Personal Selling

22
31
32
33
43
48
48
49
51

3.1
3.2

Growth in IMF Membership, 1945–2003
Michael Porter’s Five Force Model

87
98

4.1

Import Prices of Major Product Groups in Selected Economies, 2005
(Annual Percentage Change)

103

5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9

Value Chain
Selling in the Twentieth Century
External and Internal Customers
Maslow’s Hierarchy of Needs
Habitual Buying Behaviour
Buyer’s Motivation

Id, Ego and Superego
Price and Quality Relationship
Communication Process

136
138
139
141
142
148
149
151
152

6.1
6.2
6.3
6.4
6.5
6.6

Company’s Stakeholders
Priorities in Business for a Firm
Mackenzie’s Seven S Model
Ordering on the Internet
Plan Modification Process
Profit and Loss Chart

163
164

172
174
179
181

7.1
7.2
7.3
7.4
7.5
7.6
7.7

Barter System
Today’s Trade
High-End Price Demand Parity
Consumer Durable Price Demand Parity
Break-even Analysis
International Pricing
Sample of Customer Groups for Determining CVA

184
184
187
188
189
191
192

10

List of Figures

11

8.1
8.2

Final Approval before Order
Purchase Decision Triangle

196
196

9.1

Brand Equity and Profitability

214

10.1
10.2
10.3
10.4
10.5
10.6

Product Life Cycle (PLC)
Boston Consultancy Group (BCG) Matrix

Investment Cycle in BCG Matrix
GE Matrix
Overview of Marketing Strategy Planning
Steps Leading to Purchase Decision

229
239
241
241
245
247

13.1
13.2
13.3
13.4
13.5
13.6
13.7
13.8
13.9
13.10
13.11
13.12
13.13
13.14
13.15
13.16
13.17
13.18

13.19
13.20

Chains of Distribution
Continuous Marketing Process
Functional Structures
Cross-functional Structures
Supply Chain Sample
Core Processes
Marketing Process before 1970
Marketing Process Post-1970
Marketing Planning Process
Value Chain Analysis
Supply Chain Information Process Flow
Supply Chain 1960 Model
Organisational Structure Based on Sales
International Marketing Department Based Organisational Structure
Special International Marketing Department Structure
Cross-functional Teams
Cross-functional Structure
Flat Organisation Structures
Networking Teams
Virtual Organisation Structures

285
288
289
289
291
294

300
300
300
302
305
306
308
308
310
310
311
312
312
313

14.1

Michael Porter’s Five-force Model

317

15.1
15.2
15.3
15.4
15.5
15.6
15.7
15.8
15.9

15.10
15.11
15.12
15.13
15.14

Advertising—A Part of Business Strategy
The Income Triangle
Full Function Advertising Agency
Advertising Agency Creative Department
Functional Areas of a Full Service Advertising Agency
Advertising Agency in Operation
Balance in Press Advertisements
Proportion in Press Advertisements
Sales Graph Showing Changes in Sales due to Promotion
Marketing Plan Process
The Functional Areas of a Company
Organisations in the Advertising Ambit
Advertising and Related Agencies
Advertising Factors

342
347
351
352
353
355
376
377
383

390
391
391
392
393


12

International Marketing Management

15.15
15.16
15.17 (a)
15.17 (b)
15.18
15.19
15.20
15.21
15.22
15.23
15.24
15.25

Price Comfort Matrix for Cars
Advertising Expense, Sales and Profit Matrix
Effect of Advertising Campaigns on Sales
Effect of Spot Campaigns on Sales
Suggested Team for the Students’ Task
Channels for Achieving Marketing Goals

Advertising and Socio-cultural and Economic Relationships
Retailers to Manufacturers and Raw Materials
Marketing—Advertising Process for Goal Achievement
Market Life Cycle
Advertising to Purchase Action
Market Life Stages

396
396
398
398
403
404
406
406
409
411
412
413

16.1
16.2
16.3

Tools for Achieving the Sales Targets
Role of PR in a Firm
PR Impact on Firm’s Stakeholders

418
419

421

17.1
17.2
17.3

Marketing Research Process
The Marketing Research Process Results
Market Research Methodology

428
435
447

18.1
18.2
18.3
18.4

Simple Distribution System
Next Stage Distribution System
Industrial Product Distribution System
Consumer Goods Distribution Channels

455
455
455
456

19.1

19.2
19.3

Marketing Strategy Creation with Feedback Loop
Marketing Plan Dynamics
A BCG Matrix

470
473
475

20.1
20.2

Organisational Chart for HR
The Organisational Structure of International Firms

488
491

21.1
21.2
21.3
21.4
21.5

Competitive Analysis Model
Analysing Firms for Adding Value to them
Core Process and Systems
Capital Expense and Cash Flow

Experience Effect

498
501
502
508
508

23.1
23.2
23.3
23.4

India’s Relative Position in the Software World
Infosys Competitive Position
Growth of Consumer Durables (1996–98)
Chrysler’s Operating Income (in US$ million)

542
543
551
572


List of Abbreviations
AAA
AE
AMA
ASEAN
BITs

CIS
CPR
CSF
DAVP
DGFIPC
DGS&D
DSL
EOUs
EPZs
EU
EVA
FDI
FMCG
FTAs
FTP
GATT
GDP
GE
GNP
HDZ
HECPB
HEG
HIPA
HSBC
IBRD
ICC
ICSID
IDA
IFC
IMF

IP
ISPs

American Arbitration Association
account executive
American Marketing Association
Association for South East Asian Nations
bilateral investment treaties
Commonwealth of Independent Countries
core process reengineering
critical success factors
Directorate of Advertising & Visual Publicity
Dongguan Foreign Investment Promotion Centre
Director General of Supply and Disposals
digital subscriber line
export-oriented units
export processing zones
European Union
economic value added
foreign direct investment
fast moving consumer goods
free-trade areas
file transfer protocol
General Agreement on Tariffs and Trade
gross domestic product
graphite electrodes
gross national product
Harbin Development Zone
Harbin Economic Cooperation Promotion Bureau
Hindustan Electro-Graphites

Heilongjiang Investment Promotion Agency
Hong Kong and Shanghai Banking Corporation
International Bank for Reconstruction and Development
International Chamber of Commerce
International Centre for Settlement of Investment Disputes
International Development Association
International Finance Corporation
International Monetary Fund
Internet protocol
Internet service providers

13


14

International Marketing Management

JIT
LANs
LC
MIME
MIS
MIGA
MNC
MRTPC
NAFTA
NSF
OTS
PLC

POP
RBI
R&D
ROI
RTA
SAARC
SCA
SEZs
SPS
TCM
TCP
TRPs
TQM
UN
UNCITRAL
UNCTAD
UNDP
UNIDO
URL
USP
VoIP
VRS
WTO

just in time
local area networks
letter of credit
multipurpose Internet mail extensions
market information system
Multilateral Investment Guarantee Agency

multinational corporation
Monopolies and Restrictive Trade Practices Commission
North Atlantic Free Trade Agreement
National Science Foundation
opportunity to see
product life cycle
point of purchase
Reserve Bank of India
research and development
return on investment
regional trade agreement
South Asian Association for Regional Cooperation
sustainable competitive advantage
special economic zones
sanitary and phytosanitary measures
total customer management
transmission control protocol
television rating points
total quality management
United Nations
United Nations Commission on International Trade Law
United Nations Conference on Trade and Development
United Nations Development Fund
United Nations Industrial Development Organization
Uniform Resource Locator
unique selling proposition
voice over IP
voluntary retirement scheme
World Trade Organization

Preface
Indian business has to accept the fact that it can no longer remain isolated from the rest of the world
as international players are increasingly making inroads into its territory and creating unprecedented
competitive problems for business. The wise have reconciled to the situation and, in fact, shaken hands with
foreign players for mutual benefit. The country has made great strides in joining the market economy and
has emerged as a major voice in the comity of nations and world bodies like the World Trade Organization
(WTO), as several Indian companies have already become and others are on their way to becoming
multinational corporations (MNCs).
Companies planning to enter the arena of international marketing need to be fully aware of the way host
countries like to do business, their cultural ethos and parameters of social contacts in business. This book
contains fact files on these issues for 29 selected countries. It is recommended that students study these fact
files. However, as the general business environment and the political scenario keep changing, they would
do well in finding out the latest through organised market research or through coordinated efforts with noncompeting companies doing business there and through the embassies in these countries. These should form
guidelines for similar research when companies plan international marketing in other countries.
With the full convertibility of the rupee even in capital account in the offing, no business can consider
itself removed from the process of internationalisation of business. This process started in 1991, when
liberalisation, privatisation and globalisation emerged as the political policies of the government. It was
the political will of the government of that time that manifested itself in the economic reforms, which have
been the hallmark of the Indian business scene since then.
Managers of tomorrow are, therefore, required to be fully aware of the art and science of international
marketing. It is for this reason that the subject has been in focus in most business schools of repute. This book
attempts to make learning the nuances of the subject easy to understand from the viewpoint of students.
International trade, economic free trade zones, embargoes on exports, tariff and non-tariff barriers that
companies face overseas form a major part of the book. Besides, the role of international organisations under
the aegis of the United Nations Organization (UNO) have been given due importance. Students can learn
how companies can make use of these organisations to their advantage from this book.
The systems and the forms used in international marketing in India are discussed in Chapter 4
(‘International Trading’). The existing forms have been discussed here. Each group of products has its
own export promotion council. A list of these councils has been given in the book. These councils provide

detailed information to its members. The address details of these councils, however, may need verification
as these keep changing.
The stakeholders of a company are the essential partners who need careful nurturing by the company.
Considering their importance in international marketing, a separate chapter has been provided to study
the various facets associated with stakeholders (see Chapter 11).
An attempt has been made to make the book interactive. To this end, tasks have been provided for students
that can be performed with some guidance from the faculty teaching the subject.

15


16

International Marketing Management

Management games dealing with the different aspects of international marketing have been carefully
selected and included at the end of some of the chapters. The teaching faculty may divide the students into
teams of four to six members and get them to perform the tasks of these games. The faculty should guide the
students in these games and evaluate their progress. This can form part of the students’ internal assessment
process. These games also provide a hands-on learning experience to the students.
Marketing functions in the international arena depend on the business environment in the host countries,
including their cultural ethos as buyer behaviour and pattern is dependent on the economic levels, political
systems prevalent in the host countries and their competitive environment. Companies need to know how
to scan these factors before planning international forays.
Success in international marketing comes from the following areas:
1.
2.
3.
4.

Knowledge of the demand pattern across several countries.
Selection of the right country or countries for doing business with.
Understanding the general and competitive business environments of the chosen countries.
Establishing and then understanding the company’s core competencies that can create competitive
advantage in the host country.
5. Estimating the resources needed for getting into international markets and their proper deployment.
6. Time-bound marketing programmes with built-in monitory systems.

This book contains topical, relevant and thought-provoking case studies for students. At the beginning
of the case studies, methods for attempting case studies have been provided. The case studies are meant to
take the students into a virtual corporate world, to make learning a practical and interesting exercise.
This book tries to create a knowledge base for these topics, with interactive plans enabling both the
students and the faculty to make the learning process easy and interesting. The book deals with the subject
of international marketing in a lucid style using simple language for the benefit of students. Chapter 21
(‘International Marketing Audit’) will help students gain a practical understanding of how to conduct
an international marketing audit by providing them the example of an actual international marketing
company.
The author wishes to thank Pankaj Mathur, Sanjoy Mathur and Punam Dayal who provided valuable
support and encouragement during the writing of this book.
SAGE Publications deserves special mention and gratitude for all the support they provided.
U.C. Mathur


1

International Marketing:
An Introduction

AIMS AND OUTCOMES OF THE CHAPTER
The students will learn the basic concepts of International Marketing, which will become the foundation

for understanding the subject details unfolding in the subsequent chapters. It offers a broad spectrum
of the various topics covered in detail later on. The chapter is meant to whet the students’ appetite for
the subtleties of the highly relevant and important subject in an easy-to-understand language.

17


18

International Marketing Management

INTRODUCTION

T

his chapter introduces students to the different aspects of international marketing that will
enable them to learn its various nuances with relative ease. Students will learn about the major
differences between domestic and international marketing. The methods of scanning the business
and competitive environment are discussed in this chapter. This will help students to plan marketing
in a number of host countries with diverse cultural backgrounds.
The students are expected to have a healthy curiosity of the subject as they master the art and
science of international marketing. They will learn about the theories of international marketing
and the United Nations (UN) bodies that help in international marketing including the World Trade
Organization (WTO). Real life case studies have been provided at the end of each chapter that both
simulate the corporate world as well as stimulate the student’s psyche into probing the subtleties of
international marketing. The systems of coordinating foreign exchange and the organisations that
facilitate international marketing have been given major importance. Countries and businesses are
now increasingly focusing on international marketing and this forms the theme of the book. The
selection process of the countries and strategic planning for going international take away the limitations created by traditional minds.
The discipline of studying international marketing is meant to provide students and practitioners

of marketing with a systematic methodology and intellectual framework to understand and work in
the global marketplace and to enjoy and exploit the underlying unity within the diversity of the laws
of business found in different countries.
It is important for students to learn the basics of international marketing, international business,
exports and international trade.
International business, today covers areas like outsourcing, third country manufacturing and
manpower deployment in different countries. International trade covers the areas of imports and
exports, including transfer of technology and international financing for projects. International
marketing takes care of functions like international market research, selection of products, pricing,
distribution channels, advertising and promotion in selected countries.
International marketing differs from local marketing as it has to deal with the rules and regulations
of the host countries as well as take care of the cultural diversities that exist between nations as companies try to take advantage of these various cultures, by promoting ethnic products that have exotic
value for the host-country buyers. Multinational corporations (MNCs) have to understand the work
pattern of business in several countries and they have the option of retaining a global focus in all the
locations they operate from. They can also arrange to have multi-domestic operations where each host
country gets to have separate work system as desirable and conducive to the host country. Indian
business establishments have several advantages in international markets due to low-cost labour,
availability of raw materials and trained manpower.

OBJECTIVES OF STUDYING INTERNATIONAL MARKETING
1. To develop skills in analysing marketing challenges and opportunities.
2. To develop decision-making capabilities in marketing.
3. To gain experience in developing marketing strategies and plans that integrate functional
policies through concrete, actionable recommendations.


International Marketing

19

4. To develop the verbal and written skills for communicating the recommendations, conclusions
and analytical points.
5. To introduce students to the latest thinking in the field of marketing theory.
6. To develop new principles of marketing that are ethical, life supporting, nourishing and
evolutionary.
7. To develop both the intuition and analytical skills necessary for success in business.
International marketing has gained in importance in the last decade because most countries have
opted for globalisation and have embraced the market economy. In India, the marketing scenario has
changed dramatically since 1991, with international players entering the market with better brands
and ostensibly better products. It is the lure of foreign goods that tempts most Indians. Besides, with
the partial convertibility of Rupee, Indian companies find marketing overseas lucrative as well as an
excellent image-building venture.
India has been flooded with so many international players that for some, even survival has become
a difficult task. If these companies are guided properly, they can plan overseas marketing; while at
times even hitting the foreign companies that have taken over their market share in their home
countries in a fashion by organising Cross Parry. (Cross Parry can be defined as taking action against
competition by hitting them in their strongholds.)

Some Definitions
For the purpose of this book the following definitions would hold good:
Home country: The country whose company wants to go for overseas marketing.
Host country: The country where the company wants to market its products.
In the last century, especially the period before 1991, Indian companies found the local markets
profitable, growing and with low levels of competition. Surprisingly, in spite of the various incentives like cash incentives (provided to help Indian exporters match international prices), duty
drawbacks (which are still given to cover customs duty, excise duty and the like), and replenishment
licences, most companies preferred to operate only in the Indian markets.
However, since 1991, with the changes being brought about by the policies of the government, Indian
business and industry have woken up to the realities of international marketing and their associated
challenges. Companies have realised that no country can remain in isolation or as an island.
Companies have to take the following decisions as they plan international marketing:

1. Countries they want to do business with.
2. The level of involvement they want to have with respect to financial, human, managerial and
technological inputs in the host country.
3. The marketing organisation best suited to the host country.
4. Advertising and promotional plans.
5. Selection of the distribution channels.
6. Optimising resource usage (human resources, finance, information and technology) with better
allocation and monitoring.
7. Global or multi-domestic management positioning.


20

International Marketing Management

INTERNATIONAL MARKETING CONCEPTS
Companies venturing into international marketing have to decide which of the following plans they
want to implement in the host country:
1.
2.
3.
4.

Ethnocentric
Polycentric
Region-centric
Geocentric

Ethnocentric plans take into account only the host country’s cultural ambience, while polycentric
plans consider the cultural values of both the host country and the home country. Region-centric plans

consider the culture only of the region in which the company is operating and a geocentric view takes
the cultural ethos of the geographic coverage the company plans to have.

GOING INTERNATIONAL
Companies need to operate within a general environment framework as follows:
1.
2.
3.
4.
5.
6.
7.
8.

Demographic
Social
Cultural
Political
Legal
Macroeconomic
Technology
Global

These factors need to be studied, assessed, screened and monitored in the context of the host
country for correct planning of marketing strategies.

Demographic Factors
Demographic data like population dispersion in towns and villages, income levels of families, sex
ratios and affiliations to religious groups are available through the census of the host country. Shifts of
population from villages to towns, from small towns to metro towns provide business opportunities,

which no marketer can afford to miss. For a start, shifts in population indicate a need for low-cost
housing, clothing, transportation, eateries and the like.

Social Factors
Social factors like the increase in the number of working women in towns at all levels of income have
given rise to a big boost in the demand for time-saving equipments like washing machines, vacuum


International Marketing

21

cleaners, microwave ovens and precooked foods. As women are coming out of homes, better dresses,
cosmetics, health gyms are required. With families earning a double income, leisure time activity
products, holiday packages and travel are becoming fast growing sectors.

Cultural Factors
India is a land of rich cultural heritage. Marketeers and advertisers take full advantage of the knowledge
of the buying season in different parts of the country. During Deepavali, Hindus buy new clothes,
household articles and exchange gifts. Muslims do the same around Eid, while Christians shop a lot
around Christmas. The cultural ethos provides innumerable themes for promoting sales. India is a
vast country, where more than 20 languages are spoken. It is home to several religions and varied
cultures and subcultures. For example, in Punjab, there is a Punjabi culture and within it is the Sikh
subculture. Karnataka has a Kannad culture, while the Coorg District within Karnataka has its
own subculture.

Political Factors
It was the political will of the government that led to liberalisation, privatisation and globalisation
in 1991. The influx of foreign capital, setting up of manufacturing bases and joint ventures all sprung
up from then onwards. Changes in the cash reserve ratio, taxation rates and duties are the political

factors that have a major impact on business.

Legal Factors
The Supreme Court’s directives have made car manufacturers adopt the emission standards to
Euro II. Diesel buses are on their way out in Delhi for the same reason. Ignoring the law of the land
can be detrimental to the interests of firms operating in the country.

Macroeconomic Factors
The interest rates, taxes and duties, the balance of payment situation of the countries that the firms
want to do business with, fluctuations in foreign currency rates and the like are all macroeconomic
factors that have a major impact on business and they must be well understood by business houses.

Technology Factors
In the past decade, information technology, telecommunication, biotechnology and genetic engineering
have revolutionised the business scene in India and abroad.


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International Marketing Management

Global Factors
With the breaking of the Berlin Wall, the reunification of Germany, the breaking up of the USSR, and
more recently, the attacks on the World Trade Center in New York, the Indian Parliament, and the
liberation of Afghanistan, have affected business worldwide and most countries are trying to recover
the lost ground. On the brighter side, developments in the area of medicine, agriculture, farming and
cloning have helped the world take big strides towards a better future for its children.
Companies face certain basic situations as they plan international marketing. Some situations arise
from within the company while others from outside:
1. Company-specific problems:

z
z
z
z

Fear of the unknown.
Reluctance to go international because of a good domestic market.
Lack of resources; financial, manpower or information problems.
The company’s inability to face international competition in the host countries.

2. Government barriers:
z

z

Host country regulations like stringent laws regarding international investments (this was
the case in India prior to 1991) that discourage companies.
Tariff barriers.

Companies face competitive environment factors that can be seen with the help of Michael Porter’s
Five Force Model.

COMPETITIVE BUSINESS ENVIRONMENT
Let us discuss the competitive business environment with the help of Michael Porter’s Five Force
Model (see Figure 1.1).
Figure 1.1 Five Force Model
Threat of new entrants
Bargaining power of suppliers

Rivalry among existing players

Bargaining power of buyers

Threat of substitute products

Rivalry among existing players: The most important factor a company must deal with is the existing competition. Over the past decade, this has become a very important issue for Indian companies
as competition has increased severalfold. Marketeers in India enjoyed a virtual oligopoly situation in
most products till the epoch making year 1991, when the government opened up the country’s economy
to foreign players. The severity of competition is manifested in the innovations brought about in the
marketing mix by most firms. Foreign players have brought with them the latest technology, wellknown brands and management skills. However, they lack basic information about Indian buyers,
their culture and mindsets. Indian firms can, therefore, make use of this intrinsic weakness in the
foreign players and gain an advantage over them.


International Marketing

23

1. Bargaining power of suppliers:
z

z

z

z

When there are several suppliers of undifferentiated products and a few buyer firms (like
suppliers of nuts and bolts), the buyers have the bargaining power and the large volume
buyer gets a better price as quantity discount.

When the suppliers are limited and there are several buyers, the bargaining power shifts
to the suppliers as then the suppliers can pick and choose their buyers on the basis of their
purchase value, proximity and adherence to payment schedules.
When the suppliers are limited but make unique products for a particular firm (like car seat
manufacturers), the buyers have the power to the extent that the supplier has to conform
to the standards and delivery norms of the buyer firm. As there are no other buyers for the
product, they can acquire bargaining power by cornering the firm into a tight supply position
and the firm will accept any terms of business as long as it can keep its production going.
When the supplier is a part of the firm’s own group, the bargaining power is decided by
the head of the group, who then has to make a decision about profit distribution among the
various members of the group.

2. Bargaining power of buyers:
z

z

z

The customer gets his power to bargain when there are several firms supplying the same
product and the customer gets his choice of buying from any one of the sellers.
When the product demand is in the growth stage of the product life cycle and entry barriers
like high investment costs or government restrictions are few, then newcomers find it difficult
to start business in that area and in that product.
Threats to the product may come from substitute products. For example, paint manufacturers
may face competition from manufacturers of chuna, wallpaper, cement and wood panelling.

In order to effectively counter the problems faced by firms on account of changes in business general
environment factors and competitive environment factors, they must carry out market research/scan
continuously in order to have accurate information about the international market at all times.

Most Indian companies that are doing well in the local market are concerned about the response
they will have in the overseas markets. This fear can be removed by getting market surveys done to
locate the market position including the competition, tariff and non-tariff barriers to their entry in the
host-country market. Indian private companies plan international marketing purely for profit motives.
However, it must be understood that companies must remain patient as profits in the international
markets may come slowly because of the unknown and unexpected business environment that
may be prevailing there. In international marketing, perseverance pays as fast growing companies
disappear fast too.

INTERNATIONAL COMPETITION
Companies planning to go international must take international competition into account. With
many countries joining the market economy, most countries face severe competition in their markets
with several players in the field. While the WTO has been trying to arrange a level-playing field for
the various companies, there are basic advantages that certain companies and certain countries enjoy.
Companies with high international brand equity like Coke and Pepsi in soft drinks and Mercedes
in cars are recognised as major brands the world over. Others, therefore, find it difficult to compete
with these brands.


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International Marketing Management

Applying seventeenth century law on competition by Adam Smith, it can be reiterated that companies and countries that have absolute advantage in terms of low-cost production will gain ground.
However, in the twenty-first century, other factors like comparative advantage rather than absolute
advantage take precedence. Comparative advantage comes from cost leadership gained through
economies of scale, experience curve and better technology. Better maintenance of manufacturing
equipment reduces time and adds to the lowering of cost. Market response and quick redressal of
complaints create competitive advantage for companies.
‘Vasudhaiv Kutumbhkam’ (the world is one family) aptly describes the business world of the

twenty-first century. With supersonic jets, travel time has been drastically reduced. The internet,
fax and cell phones have made communication as fast as anybody can want. The flow of technology,
finance and market information has become rapid, making it easier to plan global business. It, however, has opened the doors to a wide range of countries, creating severe international competition in
practically all areas of business. There have been international or multinational firms in India for a
long time now like the Lever Brothers, Shell, Exxon, Ford, Nestlé. Today, a much larger contingent of
firms is either already in the market or is entering it to vie for the customers. There is hardly a nation
left which is not a player in the international arena. It depends on the supply–demand paradigm,
which decides the supply point, while the economic levels of the countries define the product demand
support and the product sales in different countries.
International marketing helps companies in expanding their sales with benefits accruing in terms
of foreign currency for themselves and for their country. Of late, several countries, including India,
have liberalised their trade policies. Technological advances have helped in bringing about improvements in manufacturing processes that have helped products achieve international quality standards.
The UN organisations like the World Bank, the International Monetary Fund (IMF) and the WTO
assist companies in establishing international trade.
Companies need to assess their core competencies with respect to the requirements in the overseas
markets and dovetail the same for obtaining the maximum advantage from them. The conditions in
the host countries, and their economic, cultural and political ambience should be studied thoroughly
for best results. Companies start with exporting their products, and as they succeed they get into
strategic alliances with groups in the host countries to further expand their trade.
Multinational corporations take the global marketing scenario into account as due to their financial
muscle, they can pick and choose the most appropriate country to do business with. However, all companies, both first-time exporters and even well-established MNCs have to learn about the following
areas of the host country in order to ensure the success of their business:
1.
2.
3.
4.
5.
6.
7.

Social environment
Political environment
The legal system and laws on business, trade and commerce
Economic situation
The consumer behaviour
Its geography
Its historical past

International marketing provides a company with an inbuilt force that propels it to achieve better
technology, quality standards and finance that spin-off in the domestic markets as well giving the
company an edge over competitors. The forces that impede the company’s progress in the international
markets are discussed next: