Students from #JNTU-H, IGNOU can refer to this Notes

1. 1) Difference betweenInternational Marketing and Domestic marketing
Marketing is defined as the set of activities which are undertaken by the companies to provide
satisfaction to the customers through value addition and making good relations with them, to
increase their brand value. It identifies and converts needs into products and services, so as to
satisfy their wants. There are two types of marketing namely, domestic and international
marketing. Domestic marketing is when commercialization of goods and services are limited to
the home country only.
On the other hand, International marketing, as the name suggests, is the type of marketing
which is stretched across several countries in the world, i.e. the marketing of products and
services is done globally. In this article excerpt you can find the difference between domestic and
international marketing in detail.
BASIS FOR
COMPARISON
DOMESTIC
MARKETING
INTERNATIONAL MARKETING
Meaning Domestic marketing refers to
marketing within the
geographical boundaries of
the nation.
International marketing means the activities of
production, promotion, distribution,
advertisement and selling are extend over the
geographical limits of the country.
Area served Small Large
Government
interference
Less Comparatively high
Business operation In a single country More than one country
Use of technology Limited Sharing and use of latest technology.
Risk factor Low Very high
Capital
requirement
Less Huge
Nature of
customers
Almost same Variation in customer tastes and preferences

2. BASIS FOR
COMPARISON
DOMESTIC
MARKETING
INTERNATIONAL MARKETING
Research Required but not to a very
high level.
Deep research of the market is required because
of less knowledge about the foreign markets.
Definition of Domestic Marketing
Domestic Marketing refers to the marketing activities employed on a national scale. Marketing
strategies were undertaken to cater customers of a small area, generally within the local limits of
a country. It serves and influences the customers of a specific country only.
Domestic Marketing enjoys a number of privileges like easy to access data, fewer
communication barriers, deep knowledge about consumer demand, preferences and taste,
knowledge about market trends, less competition, one set of economic, social & political issues,
etc. However, due to the limited market size, the growth is also limited.
Definition of International Marketing
International Marketing is when the marketing practices are adopted to cater the global market.
Normally, the companies start their business in the home country, after achieving the success
they proceed their business to another level and become a transnational company, where they
seek to enter in the market of several countries. So, the company must be known about the rules
and regulations of that country.
International marketing enjoys no boundaries, keeping the focus on the worldwide customers.
However, some disadvantages are also associated with it, like the challenges it faces on the path
of expansion and globalisation. Some of which are socio-cultural differences, changes in foreign
currency, language barriers, differences in buying habits of customers, setting and international
price for the product and so on.
Key Differences Between Domestic and International Marketing
The significant differences between domestic and international marketing are explained below:
The activities of production, promotion, advertising, distribution, selling and customer
satisfaction within one’s own country is known as Domestic marketing. International
marketing is when the marketing activities are undertaken at the international level.
Domestic marketing caters a small area, whereas International marketing covers a large area.
In domestic marketing, there is less government influence as compared to the international
marketing because the company has to deal with rules and regulations of numerous countries.
In domestic marketing, business operations are done in one country only. On the other hand,
in international marketing, the business operations conducted in multiple countries.

3. In international marketing, there is an advantage that the business organisation can have access
to the latest technology of several countries which is absent in case domestic countries.
The risk involved and challenges in case of international marketing are very high due to some
factors like socio-cultural differences, exchange rates, setting an international price for the
product and so on. The risk factor and challenges are comparatively less in the case of domestic
marketing.
International marketing requires huge capital investment, but domestic marketing requires less
investment for acquiring resources.
In domestic marketing, the executives face less problem while dealing with the people because
of similar nature. However, in the case of international marketing, it is quite difficult to deal
with customers of different tastes, habits, preferences, segments, etc.
International marketing seeks deep research on the foreign market due to lack of familiarity,
which is just opposite in the case of domestic marketing, where a small survey will prove
helpful to know the market conditions.
2 .) The international product lifecycle (IPL) is an abstract model briefing how a company
evolves over time and across national borders. This theory shows the development of a company’s
marketing program on both domestic and foreign platforms. International product lifecycle
includes economic principles and standards like market development and economies of scale,
with product lifecycle marketing and other standard business models.
The four key elements of the international product lifecycle theory are −
 The layout of the demand for the product
 Manufacturing the product
 Competitions in international market
 Marketing strategy
The marketing strategy of a company is responsible for inventing or innovating any new product
or idea. These elements are classified based on the product’s stage in the traditional product
lifecycle. These stages are introduction, growth, maturity, saturation, and decline.
IPL Stages
The lifecycle of a product is based on sales volume, introduction and growth. These remain
constant for marketing internationally and involves the effects of outsourcing and foreign
production. The different stages of the lifecycle of a product in the international market are given
below −

4. Stage one (Introduction)
In this stage, a new product is launched in a target market where the intended consumers are not
well aware of its presence. Customers who acknowledge the presence of the product may be
willing to pay a higher price in the greed to acquire high quality goods or services. With this
consistent change in manufacturing methods, production completely relies on skilled laborers.
Competition at international level is absent during the introduction stage of the international
product lifecycle. Competition comes into picture during the growth stage, when developed
markets start copying the product and sell it in the domestic market. These competitors may also
transform from being importers to exporters to the same country that once introduced the product.
Stage two (Growth)
An effectively marketed product meets the requirements in its target market. The exporter of the
product conducts market surveys, analyze and identify the market size and composition. In this
stage, the competition is still low. Sales volume grows rapidly in the growth stage. This stage of
the product lifecycle is marked by fluctuating increase in prices, high profits and promotion of
the product on a huge scale.
Stage three (Maturity)
In this level of the product lifecycle, the level of product demand and sales volumes increase
slowly. Duplicate products are reported in foreign markets marking a decline in export sales. In
order to maintain market share and accompany sales, the original exporter reduces prices. There
is a decrease in profit margins, but the business remains tempting as sales volumes soar high.
Stage four (Saturation)
In this level, the sales of the product reach the peak and there is no further possibility for further
increase. This stage is characterized by Saturation of sales. (at the early part of this stage sales
remain stable then it starts falling). The sales continue until substitutes enter into the market.
Marketer must try to develop new and alternative uses of product.
Stage five (Decline)
This is the final stage of the product lifecycle. In this stage sales volumes decrease and many such
products are removed or their usage is discontinued. The economies of other countries that have
developed similar and better products than the original one export their products to the original
exporter's home market. This has a negative impact on the sales and price structure of the original
product. The original exporter can play a safe game by selling the remaining products at
discontinued items prices.

5. 2. ) International Distribution Channel :
Meaning and Definitions of International Distribution Channels:
The sole objective of production of any commodity is to help the goods reach the ultimate
consumers. In the era of modem large scale production and specialization it is not possible for
the producer to fulfill this work in all circumstances. The size of market has become quite large.
Therefore, the producer has to face numerous difficulties if he undertakes the distribution works
himself.
Besides, in the age of specialization it is not justified on the part of a single person or
organisation to entertain both production as well as distribution work. Thus the producer has to
take help of many distribution channels to transfer the goods to the ultimate consumers. In other
words, many different distribution channels are needed between producers and consumers for
effective distribution of products.
Definitions:
According to Philip Kotler, “Every producer seeks to link together the set of marketing
intermediaries that best fulfil the firm’s objectives. This set of marketing intermediaries is called
the marketing channel.”
After studying the definitions, the appropriate definition of distribution channel can be
given as follows:
“Distribution channel is that path which includes all individuals and institutions which work to
make goods reach the consumers from producers without interruption.” Thus distribution
channel helps in the transfer of goods in original form from producers to consumers.
2. Types of Distribution Channels:
There are different types of channels of distribution and a manufacturer may select any one of
these channels.
These channels may be broadly divided into two parts:
i. Distribution Channel of Consumer Goods:
The channels of distribution for consumer products may be as follows:
1. Manufacturer → Agent → Wholesaler → Retailer → Consumer:

6. In this method of distribution channel, product reaches the agent from the manufacturers and
from the agent to wholesaler and then to consumers through retailers. In India, most of the textile
manufacturers adopt this method of distribution.
2. Manufacturer → Agent → Retailer → Consumer:
In this method of distribution, the wholesaler is eliminated and goods reach from manufacturer to
agent and then consumers through retailers only. Manufacturers who want to reduce cost of
distribution adopt this method.
3. Manufacturer → Agent → Consumer:
As per this method of distribution channel, there is only one middleman that is the agent. In
India, for the distribution of medicines and cosmetics, this channel of distribution is commonly
adopted.
4. Manufacturer → Wholesaler → Retailer → Consumer:
A manufacturer may choose to distribute his goods with the help of two middlemen. These two
middlemen may be wholesalers and retailers.
5. Manufacturers → Retailer → Consumer:
In this method of distribution channel, manufacturers sell their goods to retailers and retailers to
consumers. In India, Gwalior Cloth Mills and Bombay Dyeing adopt this channel of distribution
to sell textiles.
6. Manufacturers → Consumers:
A producer of consumer goods may distribute his products directly to consumers. The goods
may be sold directly to consumers through vending machines, mail order business or from mill’s
own shops.
ii. Distribution Channel of Industrial Products:
The channels for industrial products are generally short as retailers are not needed.
However, following methods may be adopted:
1. Manufacturer → Agent → Wholesaler → Industrial Consumer:
Under this method, product reaches from manufacturer to agent and then to industrial consumer
through the wholesaler.
2. Manufacturer → Agent → Industrial Consumer:

7. Under this system, goods reach industrial consumer through the agent. Thus there is only one
middleman.
3. Manufacturer → Wholesaler → Industrial Consumer:
This distribution channel is the same as above, the only difference is that in place of agent, there
is wholesaler.
4. Manufacturer → Industrial Consumer:
Under this channel there is no middleman and goods are directly sold to industrial consumer.
Railway engines, electric production equipment are sold by this system.
Direct channel is popular for selling industrial products since industrial users place orders with
the manufacturers of industrial products directly.
To plan about an export distribution, knowledge on two different aspects are a must:
(i) The marketing channel that is available in the Foreign Market.
(ii) The most appropriate channel is to link the domestic operations to the overseas channels.
The principal forms of penetrating exports markets are selling to local export houses or buying
organisations for indirect exporting and appointing agents or distributors for direct exporting.
If these forms are combined with the domestic channel of distribution in the importing
country, the export distribution channel can be identified as follows:
a. Direct Distribution Channel:
This figure is illustrative of distribution of channel of consumer goods. In case of industrial
products, the channel will be shorter because there is no need of retailers. In fact, in many cases,
there may not be any wholesaler.
Producer → Agent → Industrial buyer
b. Indirect Distribution Channel:

8. In indirect exporting, the firm delegates the task of selling products in a foreign country to an
agent or export house.
This figure is illustrative of distribution channel of goods. In case of industrial products, the
channel will be shorter because there is no need of retailers. In fact, in many cases, there may not
be any wholesaler.
The channels of distribution may differ from country to country, market to market and product to
product. So, the first task of the producer is to find out the possible distribution channel through
which he wants to reach the consumers on the foreign market, keeping in view the characteristics
of his product and the marketing strategy he wants to follow in the market.
While selecting a distribution channel for foreign markets, the management of the
exporting company should consider the following aspects:
(i) Who are the consumers? Which are the available retail outlets to reach them?
(ii) Which type of market coverage is required, keeping in view the product and consumer
characteristics?
(iii) Are there any internal constraints for the exporter like finance which will influence the
decision regarding choice of the distribution channel?
(iv) What are the expectations from the channel members? Are there some specific expectations?
(v) What is the required support system to satisfy the expectations of the channel members?
It should be realised that the distribution channel is the mechanism through which the seller
reaches the consumers and, therefore, the selected channel must be suitable to the company’s
operations and marketing strategy.
3. International Marketing Researchprocess
The Market Research Process: 6 Steps to Success
The market research process is a systematic methodology for informing business decisions. The
figure below breaks the process down into six steps:

9. The Market Research Process
Step 1. Define the Objective & Your “Problem”
Perhaps the most important step in the market research process is defining the goals of the
project. At the core of this is understanding the root question that needs to be informed by
market research. There is typically a key business problem (or opportunity) that needs to be
acted upon, but there is a lack of information to make that decision comfortably; the job of a
market researcher is to inform that decision with solid data. Examples of “business problems”
might be “How should we price this new widget?” or “Which features should we prioritize?”
By understanding the business problem clearly, you’ll be able to keep your research focused and
effective. At this point in the process, well before any research has been conducted, I like to
imagine what a “perfect” final research report would look like to help answer the business
question(s). You might even go as far as to mock up a fake report, with hypothetical data, and
ask your audience: “If I produce a report that looks something like this, will you have the
information you need to make an informed choice?” If the answer is yes, now you just need to
get the real data. If the answer is no, keep working with your client/audience until the objective
is clear, and be happy about the disappointment you’ve prevented and the time you’ve saved.
Step 2. Determine Your “Research Design”
Now that you know your research object, it is time to plan out the type of research that will best
obtain the necessary data. Think of the “research design” as your detailed plan of attack. In this
step you will first determine your market research method (will it be a survey, focus group,
etc.?). You will also think through specifics about how you will identify and choose your sample
(who are we going after? where will we find them? how will we incentivize them?, etc.). This
is also the time to plan where you will conduct your research (telephone, in-person, mail,
internet, etc.). Once again, remember to keep the end goal in mind–what will your final report
look like? Based on that, you’ll be able to identify the types of data analysis you’ll be

10. conducting (simple summaries, advanced regression analysis, etc.), which dictates the structure
of questions you’ll be asking.
Your choice of research instrument will be based on the nature of the data you are trying to
collect. There are three classifications to consider:
Exploratory Research – This form of research is used when the topic is not well defined or
understood, your hypothesis is not well defined, and your knowledge of a topic is
vague. Exploratory research will help you gain broad insights, narrow your focus, and learn the
basics necessary to go deeper. Common exploratory market research techniques include
secondary research, focus groups and interviews. Exploratory research is a qualitative form of
research.
Descriptive Research – If your research objective calls for more detailed data on a specific topic,
you’ll be conducting quantitative descriptive research. The goal of this form of market research
is to measure specific topics of interest, usually in a quantitative way. Surveys are the most
common research instrument for descriptive research.
Causal Research – The most specific type of research is causal research, which usually comes in
the form of a field test or experiment. In this case, you are trying to determine a causal
relationship between variables. For example, does the music I play in my restaurant increase
dessert sales (i.e. is there a causal relationship between music and sales?).
Step 3. Design & Prepare Your “Research Instrument”
In this step of the market research process, it’s time to design your research tool. If a survey is
the most appropriate tool (as determined in step 2), you’ll begin by writing your questions and
designing your questionnaire. If a focus group is your instrument of choice, you’ll start
preparing questions and materials for the moderator. You get the idea. This is the part of the
process where you start executing your plan.
By the way, step 3.5 should be to test your survey instrument with a small group prior to broad
deployment. Take your sample data and get it into a spreadsheet; are there any issues with the
data structure? This will allow you to catch potential problems early, and there are always
problems.
Step 4. Collect Your Data
This is the meat and potatoes of your project; the time when you are administering your survey,
running your focus groups, conducting your interviews, implementing your field test, etc. The
answers, choices, and observations are all being collected and recorded, usually in spreadsheet
form. Each nugget of information is precious and will be part of the masterful conclusions you
will soon draw.
Step 5. Analyze Your Data
Step 4 (data collection) has drawn to a close and you have heaps of raw data sitting in your
lap. If it’s on scraps of paper, you’ll probably need to get it in spreadsheet form for further

11. analysis. If it’s already in spreadsheet form, it’s time to make sure you’ve got it structured
properly. Once that’s all done, the fun begins. Run summaries with the tools provided in your
software package (typically Excel, SPSS, Minitab, etc.), build tables and graphs, segment your
results by groups that make sense (i.e. age, gender, etc.), and look for the major trends in your
data. Start to formulate the story you will tell.
Step 6. Visualize Your Data and Communicate Results
You’ve spent hours pouring through your raw data, building useful summary tables, charts and
graphs. Now is the time to compile the most meaningful take-aways into a digestible report or
presentation. A great way to present the data is to start with the research objectives and business
problem that were identified in step 1. Restate those business questions, and then present your
recommendations based on the data, to address those issues.
When it comes time to presenting your results, remember to
present insights, answers and recommendations, not just charts and tables. If you put a chart in
the report, ask yourself “what does this mean and what are the implications?” Adding this
additional critical thinking to your final report will make your research more actionable and
meaningful and will set you apart from other researchers.
While it is important to “answer the original question,” remember that market research is one
input to a business decision (usually a strong input), but not the only factor.
Here’s an Example
So, that’s the market research process. The figure below walks through an example of this
process in action, starting with a business problem of “how should we price this new widget?”
International Marketing Research
Introduction
Today the environment in modern business arena is highly uncertain and rapidly changing.
Advances in communications and information systems technology are further accelerating the pace
of change. Expansion of business operations from home country toward other countries is making
the uncertainty more prominent and stronger. This may be due to cultural, political, and legal
differences. This makes it increasingly critical for management to keep abreast of changes and to
collect timely and pertinent information to adapt strategy and market tactics in expanding local
markets. As a consequence, international marketing research becomes essential for effective
decision making when organizations start to internationalize toward foreign markets.
In this post we're going to explain - what exactly the international marketing research is. Process
of international marketing research.

12. Definition of Marketing Research
According to American Marketing Association - "Marketing Research is the systematic
gathering, recording and analyzing of data about problems relating to the marketing of goods and
services".
According to Philip Kotler - “Marketing research is a systematic problem analysis, model
building and fact finding for the purpose of improved decision-making and control in the
marketing of goods and services".
According to Paul Green and Donald Tull - "Marketing research is the systematic and objective
search for, and analysis of, information relevant to the identification and solution of any problem
in the field of marketing".
According to David Luck, Donald Taylor, and Hugh Wales - "Marketing Research is the
application of scientific methods in the solution of marketing problems".
Definition of International Marketing Research
International marketing research is the systematic design, collection, recording, analysis,
interpretation, and reporting of information pertinent to a particular marketing decision facing a
company operating internationally.
International Market Research is a particular discipline of Market Research, focusing on certain
geographical areas.
International Market Research is concerned with consumer goods, but also with any resource or
service within a value chain which will be commercially utilized or further processed – which is
the area of industrial goods and B2B-Marketing.

13. International Marketing ResearchProcess
Conduct preliminary research - Do some preliminary research on your topic of interest. For this
you can go online and search existing survey reports related to your topic of interest. the searched
reports may not be too specific to your requirement, but it might give you some ideas on how to
go about your primary research.
Develop a Research Brief
Research Brief is a statement setting out the objectives and background to the case in sufficient
detail to enable the researcher to plan an appropriate study. A good research brief must include - a
background to the problem, a description of the product or service to be researched, a description
of the market to be researched, a statement of the objectives, timing and budget constraints.
Identify the Right Marketing Research Agency
Using a professional market research agency can ensure that you get the information you need, so
that you can make strategic decisions based on reliable evidence.
First, find some marketing research agencies with the help of trade association, business contacts,
market research society, business intelligence group, independent consultant group, local or online
directories, etc.
Draw up a market research agency shortlist - As long as you understand your own research needs,
a quick check of what each agency offers will allow you to eliminate unsuitable ones. Smaller
businesses tend to find that smaller agencies know how to get useful insights from a tight budget.
Unless you know what type of research you need, you may prefer to work with a company that
offers a wide range of market research services, rather than a specialist who only offers one
particular type of research.
Choosing a market research agency - Ask each market research agency to provide a brief proposal,
setting out what kind of research they would suggest, their timelines and costs, and enclosing

14. examples of past projects. Choose an agency that understands what you need to know, and has
shown that they know how to get the right information within your budget.
Determine Data Collection Mode
The data collection mode you use will impact both the type of data you collect and how it is
collected. Data is generally grouped into two categories, qualitative and quantitative.
Qualitative data is unstructured and is often exploratory by nature. When analyzed, responses may
be grouped into similar categories but they cannot be ranked in the same way quantitative data
can.
Quantitative research is the mathematical approach to collecting data, which can more clearly be
measured and structured. Quantitative data includes survey data where respondents have a clear
choice of answers, and quantitative questions often appear with radio buttons, check boxes and
Likert scales which are easy to measure and compare.
Focus groups, unstructured interviews, and open-ended questions are typically collecting
qualitative data, while surveys with answer choices collect quantitative data. Understanding the
different modes and what type of data they can collect is important: Text message surveys can
collect some qualitative data, but perform better with quantitative questions that are easily
answered from a list of choices.
You also need to consider how robust and agile the different modes of data collection are. Can
your selected mode work across multiple countries and languages? How much data are you looking
to collect and in what time-frame? The level of scalability of the mode is important, especially if
your project will entail a multi-country survey. In addition, some modes will collect data more
slowly than others.
Some examples of different modes of data collection include:
• Face-to-face
• Text message (SMS) survey
• Online survey
• Mobile web survey

15. • Mobile application survey or passive data collection
• CATI (Computer Assisted Telephone Interviews)
• CAPI (Computer Assisted Personal Interview)
• Focus groups
Conduct Data Analysis
The most important aspect of market research is being able to analyze the data once it has been
collected. A thorough analysis should guide you on how to act on the insights you have gathered.
It is therefore crucial that the research agency, through their insights report, address the questions
you had set out at the start of your survey.
Complete a Post Project Review
Having a session with the research team after completion of your project to share feedback and
discuss the project execution is sometimes overlooked. Such an undertaking involves various
departments but is important to understand why a project did or did not go as smoothly as planned.
A post-project review session helps in both parties knowing what areas worked and which ones
the agency or the client will need to improve for their next project.
4. ) What are the Different Modes of Entry into International Business?
Some of the modes of entry into international business you can opt for include direct export,
licensing, international agents and distributors, joint ventures, strategic alliance, and foreign
direct investment.
Each of these entry strategies for international markets are different in terms of the costs involved,
level of risk, level of ease of execution, and the level of reward. I have arranged these 5 modes of
entry into international business on a graph which suggests what are the trade-offs in each of
these entry strategies for international markets.

16. I will put in my effort to explain to you what each of these entail for an offline product as well as
for an online product based company. While the crux remains the same for both the types of
businesses, how you carry out the strategy could have slight differences.
Let’s understand in detail what each of these modes of entry entail.
1. Direct Exporting
Direct exporting involves you directly exporting your goods and products to another overseas
market. For some businesses, it is the fastest mode of entry into the international business.
Direct exporting, in this case, could also be understood as Direct Sales. This means you as a
product owner in India go out, to say, the middle east with your own sales force to reach out to the
customers.
In case you foresee a potential demand for your goods and products in an overseas market, you
can opt to supply your goods to an importer instead of establishing your own retail presence in
the overseas market.
Then you can market your brand and products directly or indirectly through your sales
representatives or importing distributors.
And if you are in an online product based company, there is no importer in your value chain.
Advantages of Direct Exporting
 You can select your foreign representatives in the overseas market.
 You can utilize the direct exporting strategy to test your products in international markets
before making a bigger investment in the overseas market.
 This strategy helps you to protect your patents, goodwill, trademarks and other intangible
assets.
Disadvantages of Direct Exporting
 For offline products, this strategy will turn out to be a really high cost strategy. Everything
has to be setup by your company from scratch.

17.  While for online products this is probably the fastest expansion strategy, in the case of offline
products, there is a good amount of lead time that goes into the market research, scoping and
hiring of the representatives in that country.
2. Licensing and Franchising
Companies which want to establish a retail presence in an overseas market with minimal risk,
the licensing and franchising strategy allows another person or business assume the risk on
behalf of the company.
In Licensing agreement and franchise, an overseas-based business will pay you a royalty or
commission to use your brand name, manufacturing process, products, trademarks and other
intellectual properties.
While the licensee or the franchisee assumes the risks and bears all losses, it shares a proportion
of their revenues and profits you.
When does this work the best?
I explored this strategy in the case where one of the established companies of the other country
already had a loyal audience with them.
At the same time, their product line had gaps which I was able to fill up. Therefore, just like two
pieces of jigsaw, it made complete sense for them to carry my product.
How is this different from a Joint Venture, you would think? It is.
And in this case, I shall explain the little difference in the subsequent part of the article.
Advantages of Licensing and Franchising
 Low cost of entry into an international market
 Licensing or Franchising partner has knowledge about the local market
 Offers you a passive source of income
 Reduces political risk as in most cases, the licensing or franchising partner is a local business
entity
 Allows expansion in multiple regions with minimal investment
Disadvantages of Licensing and Franchising
 In some cases, you might not be able to exercise complete control on its licensing and
franchising partners in the overseas market

18.  Licensees and franchisees can leverage the acquired knowledge and pose as future
competition for your business
 Your business risks tarnishing its brand image and reputation in the overseas and other
markets due to the incompetence of their licensing and franchising partners
3. Joint Ventures
A joint venture is one of the preferred modes of entry into international business for businesses
who do not mind sharing their brand, knowledge, and expertise.
Companies wishing to expand into overseas markets can form joint ventures with local businesses
in the overseas location, wherein both joint venture partners share the rewards and risks associated
with the business.
Both business entities share the investment, costs, profits and losses at the predetermined
proportion.
This mode of entry into international business is suitable in countries wherein the governments
do not allow one hundred per cent foreign ownership in certain industries.
For instance, foreign companies cannot have a 100 hundred per cent stake in broadcast content
services, print media, multi-brand retailing, insurance, power exchange sectors and require to opt
for a joint-venture route to enter the Indian market.
Here is what’s the difference between a Licensing/Franchisee kind of a setup and a Joint
Venture.
The subtle nuance that I came across while recently creating a strategy was that a franchise setup
would work well when you as a franchiser are a bigger brand in that particular product.
You could be big in your own country and not necessarily in the franchisee’s country.
In case of a Joint Venture, both the brands have a similar level of brand strength for that particular
product. And therefore, they wish to explore that product in that international market together.
Advantages of Joint Venture
 Both partners can leverage their respective expertise to grow and expand within a chosen
market

19.  The political risks involved in joint-venture is lower due to the presence of the local partner,
having knowledge of the local market and its business environment
 Enables transfer of technology, intellectual properties and assets, knowledge of the overseas
market etc. between the partnering firms
Disadvantages of Joint Venture
 Joint ventures can face the possibility of cultural clashes within the organisation due to the
difference in organisation culture in both partnering firms
 In the event of a dispute, dissolution of a joint venture is subject to lengthy and complicated
legal process.
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4. Strategic Acquisitions
Strategic acquisition implies that your company acquires a controlling interest in an existing
company in the overseas market.
This acquired company can be directly or indirectly involved in offering similar products or
services in the overseas market.
You can retain the existing management of the newly acquired company to benefit from their
expertise, knowledge and experience while having your team members positioned in the board of
the company as well.
Advantages of Strategic Acquisitions
 Your business does not need to start from scratch as you can use the existing infrastructure,
manufacturing facilities, distribution channels and an existing market share and a consumer
base
 Your business can benefit from the expertise, knowledge and experience of the existing
management and key personnel by retaining them
 It is one of the fastest modes of entry into an international business on a large scale
Disadvantages of Strategic Acquisitions
 Just like Joint Ventures, in Acquisitions as well, there is a possibility of cultural clashes
within the organisation due to the difference in organisation culture
 Apart from that there mostly are problems with seamless integration of systems and process.
Technological process differences is one of the most common issues in strategic acquisitions.

20. 5. Foreign Direct Investment
Foreign Direct Investment involves a company entering an overseas market by making a
substantial investment in the country. Some of the modes of entry into international business using
the foreign direct investment strategy includes mergers and acquisitions, joint ventures and
greenfield investments.
This strategy is viable when the demand or the size of the market, or the growth potential of the
market in the substantially large to justify the investment.
Some of the reasons because of which companies opt for foreign direct investment strategy as
the mode of entry into international business can include:
 Restriction or import limits on certain goods and products.
 Manufacturing locally can avoid import duties.
 Companies can take advantage of low-cost labour, cheaper material.
Advantages of Foreign Direct Investment
 You can retain your control over the operations and other aspects of your business
 Leverage low-cost labour, cheaper material etc. to reduce manufacturing cost towards
obtaining a competitive advantage over competitors
 Many foreign companies can avail for subsidies, tax breaks and other concessions from the
local governments for making an investment in their country
Disadvantages of Foreign Direct Investment
 The business is exposed to high levels of political risk, especially in case the government
decides to adopt protectionist policies to protect and support local business against foreign
companies
 This strategy involves substantial investment to be made for entering an international market
Conclusion
While every business dreams of global domination within its industry, you need to plan its
internationalization strategy based upon your finances, existing capabilities, the growth potential
of the overseas market etc. before opting for different modes of entry into the international
business.
5 . ) Export Promotion Councils

21. Export Promotion Council of India | Functions & Registration procedures
What is the meaning of Export Promotion?
From finding buyers to understanding markets to accessing subsidies and incentives, there are several
functions that may be daunting for a new exporter. It means that the role of government bodies have an
impact on the export performance of the economy. Fortunately, you can get assistance for many of these
activities from industry bodies, including government-approved ones called Export Promotion Councils.
What is Export Promotion Council?
Export Promotion Councils are government-initiated authorities that promote and support export firms in
developing their overseas trade and presence by providing technical and industry insights. Additionally,
EPCs also promote government schemes, act as a data store and conduct overseas tours and studies. They
also act as an intermediary between the government and the export industry and are critical in formulating
the foreign policies of the country.
These Councils are registered as non-profit organizations under the Companies Act/ Societies Registration
Act. EPCs perform both advisory as well as executive functions. Export Promotion Councils are
responsible for country’s image abroad as a council of reliable suppliers of high quality goods and services.
The EPCs encourage and monitor the observance of international standards and specifications by exporters.
Each product has its own Export Promotion Council, hence the promoter should register under a certain
EPC as per their line of product.
What is the role of Export Promotion Council?
 To provide information which is useful for exporters or its members in increasing their exports,
they are supposed to make the exporters aware of the Government Schemes and other benefits.
 Export Promotional Council collects export and import data of its members, as well as other data
which is relevant to International Trade to build a statistical base to compare industry growth.
 They organise Trade Delegations to explore opportunities of exporting products in other countries.
 They offer advice to their members related to Technology, quality control, standards and
specifications etc.
 They organise Trade Fairs, Exhibitions, Seminars, Meets between buyers and sellers to promote
business etc.
 They are also responsible for promoting communication between Export business community and
the Government.
What are the functions and benefits of Export Promotion Council?
 On being admitted the member is granted Registration cum Membership Certificate (RCMC) of
the EPC concerned.
 For availing export import advantages or concessions in Foreign Trade Policy.
 To meet prospective buyers by participating in events conducted by EPCs.
 To stay updated about latest trends in the respective industry through the informational events and
activities conducted by EPCs for its members.

22. For example, members of APEDA, an export promotion council which is responsible for promoting export
of agricultural and processed foods can avail rebates under its Financial Assistance Scheme on
Infrastructural, Quality and Market Development activities undertaken by them.
Export Promotion Council - Registration procedure
 An exporter has to apply to the appropriate EPC as per his product, for eg. an apparel exporter has
to register with AEPC.
 On being accepted the exporter will receive his RCMC
For registering with an Export Promotion Council you’ll need the following documents
 Digital signature certificate
 Copy of IEC Code certificate
 A certificate from a Chartered Accountant, certifying the export turnover figure (FOB value in
Rupees)
 List of Partners/Directors with residential address
 MSME registration certificate (if available)
There is also a fee which is applicable along with the application which varies from council to council, the
details of which can be obtained from the respective council’s website. (The links are given below)
Membership to an EPC may also have different categories including Lifetime Membership, Individual
Ordinary Membership, Corporate Membership, and others.
If you deal in a product which has an EPC or a commodity board, you can apply for an RCMC at the
concerned EPC, which has different RCMCs for various parties. For example, the export RCMC for
Apparel Export Promotion Council has two separate RCMCs—one for merchants and one for
manufacturers. RCMC is also issued by FIEO. To know if your relevant product has an EPC or commodity
board, refer to the list below to see the existing 34 Promotion Councils, as of June 2019.
Federation of Indian Export Organisations (FIEO)
The Federation of Indian Export Organisations (FIEO) is the apex body of all export promotion
organizations and institutions of India. Set up in 1965 by the Ministry of Commerce, the FIEO head office
was in New Delhi and its regional offices were across India. FIEO’s primary responsibility is to promote
export by providing its services to a network of over 20,000 members including Export Promotion
Councils, Commodity Boards, Export Development Authorities, Chambers of Commerce, Export Houses,
Star Export Houses, Trading Houses, Star Trading Houses, Premier Trading Houses, Consultancy
Organisations, Trade Associations, and many more. For registration purposes, the Government of India has
authorized FIEO, and considered it as an export promotion council.
6 .) Transfer Pricing

23. Types of Transfer Pricing Methods
What is Transfer Pricing in Taxation?
The definition of Transfer Pricing states that it is the value which is allocated to the good or
services transferred between the related parties. In other words, when goods or services are
transferred from one unit of the organization to another unit situated in another country, the price
which is pad for such goods or services is calculated as per the concepts of Transfer Pricing.
Which transactions are priced under Transfer Pricing rules?
Following are the examples of transactions that fall under the purview of Transfer Pricing:
1. Purchase of raw materials, fixed assets, etc.
2. Sale or purchase of tangibles or intangible assets
3. Sale of Finished Goods
4. IT enabled or Support related services
5. Software Development services
6. Reimbursement of expenses
7. Payments in nature of fees for Management, Technical Service, Royalty, Corporate Guarantee,
etc.
8. Loans paid or received
Objective of Transfer Pricing Rules:
In terms of better accountability, subsidiary units are often considered as standalone business
units. As a result, any transaction between such subsidiaries and parent company has to be
valued as per the Transfer Pricing rules. This ensures appropriate allocation of revenue and
expenses to the subsidiary companies situated in different countries.
In the recent times, Government has increased their scrutiny over the transactions between the
related parties because such intra-organization cross-border transactions often impact the
profitability of such units. This in turn impacts the shareholder’s wealth.

24. What are the different types of Transfer Pricing methods?
Before we discuss the different types of Transfer Pricing methods, it is important to understand
the meaning of arms- length price.
Arms-length Price can be defined as the price applied to a similar transaction between unrelated
parties in an uncontrolled condition.
The Organization for Economic Co-operation and Development (OECD) Guidelines lay out 3
methods for examining the arms-length price of the controlled transactions. They are:
1. Comparable Uncontrolled Price (CUP) Method:
In this method, the price which is earmarked for an uncontrolled transaction between comparable
firms is evaluated for determining the Arm’s Length Price.
2. Resale Price Method or Resale Minus Method:
For determination of the Arm’s Length Price between related firms, the price of the good or
services rendered to unrelated third parties is considered, also known as the Resale Price. Then
Gross Margins and Costs associated with the purchase of such products are deducted to finally
arrive to the Arm’s Length Price for a controlled transaction.
3. Cost Plus Method:
In order to arrive to the Arm’s Length Price under Cost Plus Method, the costs of the supplier of
goods or services in the controlled transaction is added to a markup which includes profit for the
associated enterprise on basis of functions performed and risks.
6. ) Letter Of Credit
Letters Of Credit – Definition, Types & Process
A letter of credit is a document that guarantees the buyer’s payment to the sellers. It is Issued by
a bank and ensures the timely and full payment to the seller. If the buyer is unable to make such
a payment, the bank covers the full or the remaining amount on behalf of the buyer. A letter of
credit is issued against a pledge of securities or cash. Banks typically collect a fee, ie, a
percentage of the size/amount of the letter of credit.
Importance of letters of credit
Since the nature of international trade includes factors such as distance, different laws in each
country and the lack of personal contact during international trade, letters of credit make a
reliable payment mechanism. The International Chamber of Commerce Uniform Customs and
Practice for Documentary Credits oversees letters of credit used in international transactions

25. Parties to a letter of credit
Applicant (importer) requests the bank to issue the LC
Issuing bank (importer’s bank which issues the LC [also known as the Opening banker of LC])
Beneficiary (exporter)
Types of a letter of credit
The letters of credit can be divided into the following categories:
Sight Credit
Under this LC, documents are payable at the sight/ upon presentation of the correct
documentation.
For example, a businessman can present a bill of exchange to a lender along with a sight letter of
credit and take the necessary funds right away. A sight letter of credit is more immediate than
other forms of letters of credit.
Acceptance Credit/ Time Credit
The Bills of Exchange which are drawn and payable after a period, are called usance bills. Under
acceptance credit, these usance bills are accepted upon presentation and eventually honoured on
their respective due dates. For example, a company purchases materials from a supplier and
receives the goods on the same day. The bill will be delivered with the shipment of goods, but
the company may have up to 30 days to pay it. This 30 day period marks the usance for the sale.
Revocable and Irrevocable Credit
A revocable LC is a credit, the terms and conditions of which can be amended/ cancelled by the
Issuing Bank. This cancellation can be done without prior notice to the beneficiaries.
An irrevocable credit is a credit, the terms and conditions of which can neither be amended nor
cancelled. Hence, the opening bank is bound by the commitments given in the LC.
Confirmed Credit
Only Irrevocable LC can be confirmed. A confirmed LC is one when a banker other than the
Issuing bank, adds its own confirmation to the credit. In case of confirmed LCs, the beneficiary’s
bank would submit the documents to the confirming banker.
Back-to-Back credit
In a back to back credit, the exporter (the beneficiary) requests his banker to issue an LC in
favour of his supplier to procure raw materials, goods on the basis of the export LC received by
him. This type of LC is known as Back-to-Back credit. Example: An Indian exporter receives an
export LC from his overseas client in the Netherlands. The Indian exporter approaches his
banker with a request to issue an LC in favour of his local supplier of raw materials. The bank
issues an LC backed by the export LC.

26. Transferable Credit:While an LC is not a negotiable instrument, the Bills of Exchange drawn
under it are negotiable. A Transferable Credit is one in which a beneficiary can transfer his rights
to third parties. Such LC should clearly indicate that it is a ‘Transferable’ LC
STAGES IN INTERNATIONAL MARKETING
Earlier in our discussion on definitions, we identified several terms that relate to how committed
a firm is to being international. Here we expand on these concepts and explain the rationale behind
this process. Two points should be noted. First, the process tends to be ranked in order of “least
risk and investment” to “greatest involvement”. Second, these are not necessarily sequential steps,
even though exporting is apparently most common as an initial entry.
Firms typically approach involvement in international marketing rather cautiously, and there
appears to exist an underlying lifecycle that has a series of critical success factors that change as a
firm moves through each stage. For small-and medium-sized firms in particular, exporting remains
the most promising alternative to a full-blooded international marketing effort, since it appears to
offer a degree of control over risk, cost, and resource commitment. Indeed, exporting, especially
by the smaller firms, is often initiated as a response to an unsolicited overseas order-these are often
perceived to be less risky. Therefore, the following possibilities exist:
Domestic marketing. This involves the company manipulating a series of controllable variables,
such as price, advertising, distribution, and the product, in a largely uncontrollable external
environment that is made up of different economic structures, competitors, cultural values, and
legal infrastructure within specific political or geographic country boundaries.
International marketing. This involves the company operating across several markets in which
not only do the uncontrollable variables differ significantly between one market and another, but
the controllable factor in the form of cost and price structures, opportunities for advertising, and
distributive infrastructure are also likely to differ significantly.
Export marketing. In this case the firm markets its goods and/or services across national/political
boundaries. In general, exporting is a simple and low risk-approach to entering foreign markets.
Firms may choose to export products for several reasons. First, products in the maturity stage of
their domestic life cycle may find new growth opportunities overseas, as Perrier chose to do in the
US. Second, some firms find it less risky and more profitable to expand by exporting current
products instead of developing new products. Third, firms who face seasonal domestic demand
may choose to sell their products to foreign markets when those products are “in season” there.
Finally, some firms may elect to export products because there is less competition overseas.
A firm can export its products in one of three ways: indirect exporting, semi-direct exporting, and
direct exporting. Indirect exporting is a common practice among firms that are just beginning their
exporting. Sales, whether foreign or domestic, are treated as domestic sales. All sales are made
through the firm’s domestic sales department, as there is no export department. Indirect exporting
involves very little investment, as no overseas sales force or other types of contacts need be

27. developed. Indirect exporting also involves little risk, as international marketing intermediaries
have knowledge of markets and will make fewer mistakes than sellers.
In semi-direct exporting, an American exporter usually initiates the contact through agents,
merchant middlemen, or other manufacturers in the US. Such semi-direct exporting can be handled
in a variety of ways: (a) a combination export manager, a domestic agent intermediary that acts as
an exporting department for several noncompeting firms; (b) the manufacturer’s export agent
(MEA) operates very much like a manufacturer’s agent in domestic marketing settings; (c) a
Webb-Pomerene Export Association may choose to limit cooperation to advertising, or it may
handle the exporting of the products of the association’s members and; (d) piggyback exporting,
in which one manufacturer (carrier) that has export facilities and overseas channels of distribution
handles the exporting of another firm (rider) noncompeting but complementary products.
When direct exporting is the means of entry into a foreign market, the manufacturer establishes an
export department to sell directly to a foreign film. The exporting manufacturer conducts market
research, establishes physical distribution, and obtains all necessary export documentation. Direct
exporting requires a greater investment and also carries a greater risk. However, it also provides
greater potential return and greater control of its marketing program.
Multinational marketing. Here the marketing activities of an organization include activities,
interests, or operations in more than one country, and where there is some kind of influence or
control of marketing activities from outside the country in which the goods or services will actually
be sold. Each of these markets is typically perceived to be independent and a profit center in its
own right.
Global marketing. The entire organization focuses on the selection and exploration of global
marketing opportunities and marshals resources around the globe with the objective of achieving
a global competitive advantage. The primary objective of the company is to achieve a synergy in
the overall operation, so that by taking advantage of different exchange rates, tax rates, labor rates,
skill levels, and market opportunities, the organization as a whole will be greater than the sum of
its parts.

28. Reasons for entering international markets
Many marketers have found the international marketplace to be extremely hostile. A study by
Baker and Kynak, for example, found that less than 20 per cent of firms in Texas with export
potential actually carried out business in international markets. But although many firms view in
markets with trepidation, others still make the decision to go international. Why?
In one study, the following motivating factors were given for initiating overseas marketing
involvement (in order of importance):
1. large market size
2. stability through diversification
3. profit potential
4. unsolicited orders
5. proximity of market
6. excess capacity
7. offer by foreign distributor
8. increasing growth rate
9. smoothing out business cycles
Other empirical studies over a number of years have pointed to a wide variety of reasons why
companies initiate international involvement. These include the saturation of the domestic
market, which leads firms either to seek other less competitive markets or to take on the
competitor in its home markets; the emergence of new markets, particularly in the developing
world; government incentives to export; tax incentives offered by foreign governments to
establish manufacturing plants in their countries in order to create jobs; the availability of
cheaper or more skilled labor; and an attempt to minimize the risks of a recession in the home
country and spread risk.
Reasons to avoid international markets
Despite attractive opportunities, most businesses do not enter foreign markets. The reasons given
for not going international are numerous. The biggest barrier to entering foreign markets is seen
to be a fear by these companies that their products are not marketable overseas, and a consequent
preoccupation with the domestic market. The following points were highlighted by the findings
in the previously mentioned study by Barker and Kaynak, who listed the most important barriers:
1. too much red tape
2. trade barriers
3. transportation difficulties
4. lack of trained personnel
5. lack of incentives
6. lack of coordinated assistance
7. unfavorable conditions overseas
8. slow payments by buyers
9. lack of competitive products

29. 10. payment defaults
11. language barriers
It is the combination of these factors that determines not only whether companies become
involved in international markets, but also the degree of any involvement.
Meaning of Deemedexports
What is deemed exports in export import policy
Deemed Exports
This post explains about Meaning of Deemed exports. what are the benefits of deemed exports.
The Government may, on the recommendations of the Council, notify certain supplies of goods
as deemed exports, where goods supplied do not leave India, and payment for such supplies is
received either in Indian rupees or in convertible foreign exchange, if such goods are
manufactured in India.
‘Deemed Exports’ as defined in the Export and Import Polilcy, 1997-2002 means those
transactions in which the goods supplied do not leave the country and the supplier in India
receives the payment for the goods. It means the goods supplied need not go out of India to treat
them as ‘Deemed Export’.
"Deemed Exports" refers to those transactions in which the goods supplied do not leave the
country and the payment for such supplies is received either in Indian rupees or in free foreign
exchange.
The following categories of supply of goods by the main/ sub-contractors shall be regarded as
"Deemed Exports" under this Policy, provided the goods are manufactured in India:
Supply of goods against Advance Licence/Advance Licence for annual requirement/DFRC under
the Duty Exemption /Remission Scheme;
Supply of goods to Export Oriented Units (EOUs) or Software Technology Parks (STPs) or
Electronic Hardware Technology Parks (EHTPs) or Bio Technology Parks (BTP);
Supply of capital goods to holders of licences under the Export Promotion Capital Goods
(EPCG) scheme;
Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by the
Department of Economic Affairs, Ministry of Finance under International Competitive Bidding
in accordance with the procedures of those agencies/ funds, where the legal agreements provide
for tender evaluation without including the customs duty;
Supply of capital goods, including in unassembled/ disassembled condition as well as plants,
machinery, accessories, tools, dies and such goods which are used for installation purposes till

30. the stage of commercial production and spares to the extent of 10% of the FOR value to fertiliser
plants.
Supply of goods to any project or purpose in respect of which the Ministry of Finance, by a
notification, permits the import of such goods at zero customs duty .
Supply of goods to the power projects and refineries not covered in (f) above.
Supply of marine freight containers by 100% EOU (Domestic freight containers–manufacturers)
provided the said containers are exported out of India within 6 months or such further period as
permitted by the Customs; and
Supply to projects funded by UN agencies.
Supply of goods to nuclear power projects through competitive bidding as opposed to
International Competitive Bidding.
Benefits for Deemed Exports
Deemed exports shall be eligible for any/all of the following benefits in respect of manufacture
and supply of goods qualifying as deemed exports.
Advance Licence for intermediate supply/ deemed export/DFRC/ DFRC for intermediate
supplies.
Deemed Export Drawback.
Exemption from terminal excise duty where supplies are made against International Competitive
Bidding. In other cases , refund of terminal excise duty will be given.
The information on deemed exports is detailed above. Comment below your thoughts on
deemed exports

31. Export Import: Pricing, Quotations, and Terms
Proper export import pricing, complete and accurate quotations, and choice of terms of sale and
payment are four critical elements in selling a product or service internationally. Of the four,
export import pricing is the most problematic, even for the experienced exporter.
EXPORT IMPORT PRICING CONSIDERATIONS
At what price should the firm sell its product in the foreign market?
Does the foreign price reflect the product's quality?
Is the price competitive?
Should the firm pursue market penetration or market-skimming pricing objectives abroad?
What type of discount (trade, cash, quantity) and allowances (advertising, trade-off) should the
firm offer its foreign customers?
Should prices differ with market segment?
What should the firm do about product line pricing?
What pricing options are available if the firm's costs increase or decrease? Is the demand in the
foreign market elastic or inelastic?
Are the prices going to be viewed by the foreign government as reasonable or exploitative?
Do the foreign country's dumping laws pose a problem?
As in the domestic market, the price at which a product or service is sold directly determines a
firm's revenues. It is essential that a firm's market research include an evaluation of all of the
variables that may affect the price range for the product or service. If a firm's price is too high,
the product or service will not sell. If the price is too low, export activities may not be
sufficiently profitable or may create a net loss.
The traditional components for determining proper pricing are costs, market demand, and
competition. These categories are the same for domestic and foreign sales and must be evaluated
in view of the firm's objective in entering the foreign market. An analysis of each component
from an export perspective may result in export prices that are different from domestic prices.
FOREIGN MARKET OBJECTIVES
An important aspect of a company's pricing analysis involves determining export import market
objectives. Is the company attempting to penetrate a new market? Looking for long-term market
growth? Looking for an outlet for surplus production or outmoded products? For example, many
firms view the foreign market as a secondary market and consequently have lower expectations
regarding market share and sales volume. Pricing decisions are naturally affected by this view.

32. Firms also may have to tailor their marketing and pricing objectives for particular foreign
markets. For example, marketing objectives for sales to a developing nation where per capita
income may be one tenth of per capita income in the local market are necessarily different from
the objectives for Europe or Japan.
COSTS
The computation of the actual cost of producing a product and bringing it to market or providing
a service is the core element in determining whether exporting is financially viable. Many new
exporters calculate their export price by the cost-plus method alone. In the cost-plus method of
calculation, the exporter starts with the domestic manufacturing cost and adds administration,
research and development, overhead, freight forwarding, distributor margins, customs charges,
and profit.
The net effect of this pricing approach may be that the export price escalates into an
uncompetitive range. For a sample calculation see table 10-1 below. The table shows clearly that
if an export product has the same ex-factory price as the domestic product, its final consumer
price is considerably higher.
A more competitive method of pricing for market entry is what is termed marginal cost pricing.
This method considers the direct, out-of-pocket expenses of producing and selling products for
export as a floor beneath which prices cannot be set without incurring a loss. For example, export
products may have to be modified for the export market to accommodate different sizes,
electrical systems, or labels. Changes of this nature may increase costs. On the other hand, the
export product may be a stripped-down version of the domestic product and therefore cost less.
Or, if additional products can be produced without increasing fixed costs, the incremental cost of
producing additional products for export should be lower than the earlier average production
costs for the domestic market.
In addition to production costs, overhead, and research and development, other costs should be
allocated to domestic and export products in proportion to the benefit derived from those
expenditures. Additional costs often associated with export sales include
market research and credit checks;
business travel;
international postage, cable, and telephone rates;
translation costs;
commissions, training charges, and other costs involving foreign representatives;
consultants and freight forwarders; and
product modification and special packaging.

33. After the actual cost of the export product has been calculated, the exporter should formulate an
approximate consumer price for the foreign market.
MARKET DEMAND
As in the domestic market, demand in the foreign market is a key to setting prices. What will the
market bear for a specific product or service?
For most consumer goods, per capita income is a good gauge of a market's ability to pay. Per
capita income for most of the industrialized nations is comparable to that of ours'. For the rest of
the world, it is much lower. Some products may create such a strong demand - chic goods such
as "Levis," for example - that even low per capita income will not affect their selling price.
However, in most lower per capita income markets, simplifying the product to reduce selling
price may be an answer. The firm must also keep in mind that currency valuations alter the
affordability of their goods. Thus, pricing should accommodate wild fluctuations in currency, if
possible. The firm should also consider who the customers will be. For example, if the firm's
main customers in a developing country are expatriates or the upper class, a high price may work
even though the average per capita income is low.
COMPETITION
In the domestic market, few companies are free to set prices without carefully evaluating their
competitors' pricing policies. This point is also true in exporting, and it is further complicated by
the need to evaluate the competition's prices in each export market the exporter intends to enter.
Where a particular foreign market is being serviced by many competitors, the exporter may have
little choice but to match the going price or even go below it to establish a market share. If the
exporter's product or service is new to a particular foreign market, it may actually be possible to
set a higher price than is normally charged domestically.
PRICING SUMMARY
Determine the objective in the foreign market.
Compute the actual cost of the export product.
Compute the final consumer price.
Evaluate market demand and competition.
Consider modifying the product to reduce the export price.
QUOTATIONS AND PRO FORMA INVOICES
Many export transactions, particularly first-time export transactions, begin with the receipt of an
inquiry from abroad, followed by a request for a quotation or a pro forma invoice.
A quotation describes the product, states a price for it, sets the time of shipment, and specifies
the terms of sale and terms of payment. Since the foreign buyer may not be familiar with the

34. product, the description of it in an overseas quotation usually must be more detailed than in a
domestic quotation. The description should include the following 15 points:
Buyer's name and address.
Buyer's reference number and date of inquiry.
Listing of requested products and brief description.
Price of each item.
Gross and net shipping weight (in metric units where appropriate).
Total cubic volume and dimensions (in metric units where appropriate) packed for export.
Trade discount, if applicable.
Delivery point.
Terms of sale.
Terms of payment.
Insurance and shipping costs.
Validity period for quotation.
Total charges to be paid by customer.
Estimated shipping date to factory or port.
Estimated date of shipment arrival.
Sellers are often requested to submit a pro forma invoice with or instead of a quotation. Pro
forma invoices are not for payment purposes but are essentially quotations in an invoice format.
In addition to the foregoing list of items, a pro forma invoice should include a statement
certifying that the pro forma invoice is true and correct and a statement describing the country of
origin of the goods. Also, the invoice should be conspicuously marked "pro forma invoice."
These invoices are only models that the buyer uses when applying for an import license or
arranging for funds. In fact, it is good business practice to include a pro forma invoice with any
international quotation, regardless of whether it has been requested. When final collection
invoices are being prepared at the time of shipment, it is advisable to check with reliable source
for special invoicing requirements that may prevail in the country of destination.

35. International Marketing - EPRG Framework
Different attitudes towards company’s involvement in international marketing process are called
international marketing orientations. EPRG framework was introduced by Wind, Douglas and
Perlmutter. This framework addresses the way strategic decisions are made and how the
relationship between headquarters and its subsidiaries is shaped.
Perlmutter’s EPRG framework consists of four stages in the international operations evolution.
These stages are discussed below.
Ethnocentric Orientation
The practices and policies of headquarters and of the operating company in the home country
become the default standard to which all subsidiaries need to comply. Such companies do not
adapt their products to the needs and wants of other countries where they have operations. There
are no changes in product specification, price and promotion measures between native market
and overseas markets.
The general attitude of a company's senior management team is that nationals from the
company's native country are more capable to drive international activities forward as compared
to non-native employees working at its subsidiaries. The exercises, activities and policies of the
functioning company in the native country becomes the default standard to which all subsidiaries
need to abide by.
The benefit of this mind set is that it overcomes the shortage of qualified managers in the
anchoring nations by migrating them from home countries. This develops an affiliated corporate
culture and aids transfer core competences more easily. The major drawback of this mind set is
that it results in cultural short-sightedness and does not promote the best and brightest in a firm.

36. Regiocentric Orientation
In this approach a company finds economic, cultural or political similarities among regions in
order to satisfy the similar needs of potential consumers. For example, countries like Pakistan,
India and Bangladesh are very similar. They possess a strong regional identity.
Geocentric Orientation
Geocentric approach encourages global marketing. This does not equate superiority with
nationality. Irrespective of the nationality, the company tries to seek the best men and the
problems are solved globally within the legal and political limits. Thus, ensuring efficient use of
human resources by building strong culture and informal management channels.
The main disadvantages are that national immigration policies may put limits to its
implementation and it ends up expensive compared to polycentrism. Finally, it tries to balance
both global integration and local responsiveness.
Polycentric Orientation
In this approach, a company gives equal importance to every country’s domestic market. Every
participating country is treated solely and individual strategies are carried out. This approach is
especially suitable for countries with certain financial, political and cultural constraints.
This perception mitigates the chance of cultural myopia and is often less expensive to execute
when compared to ethnocentricity. This is because it does not need to send skilled managers out
to maintain centralized policies. The major disadvantage of this nature is it can restrict career
mobility for both local as well as foreign nationals, neglect headquarters of foreign subsidiaries
and it can also bring down the chances of achieving synergy.

37. What is political risk?
Political risk is generally defined as the risk to business interests resulting from political instability
or political change. Political risk exists in every country around the globe and varies in magnitude
and type from country to country. Political risks may arise from policy changes by governments
to change controls imposed on exchange rates and interest rates.1 Moreover, political risk may be
caused by actions of legitimate governments such as controls on prices, outputs, activities, and
currency and remittance restrictions. Political risk may also result from events outside of
government controls such as war, revolution, terrorism, labor strikes, and extortion.
Political risk can adversely affect all aspects of international business from the right to export or
import goods to the right to own or operate a business. AON (www.aon.com), for example,
categorizes risk based on economic; exchange transfer; strike, riot, or civil commotion; war;
terrorism; sovereign non-payment; legal and regulatory; political interference; and supply chain
vulnerability.
How to evaluate your level of political risk
Forms of investment and risk
For a firm considering a new foreign market, there are three broad categories of international
business: trade, international licensing of technology and intellectual property, and foreign direct
investment. A company developing a business plan may have different elements of all three
categories depending on the type of product or service.
The choice of entry depends on the firm’s experience, the nature of its product or services, capital
resources, and the amount of risk it’s willing to consider.2 The risk between these three categories
of market entry varies significantly with trade ranked the least risky if the company does not have
offices overseas and does not keep inventories there. On the other side of the spectrum is direct
foreign investment, which generally brings the greatest economic exposure and thus the greatest
risk to the company.
Protection from political risk
Companies can reduce their exposure to political risk by careful planning and monitoring political
developments. The company should have a deep understanding of domestic and international
affairs for the country they are considering entering. The company should know how politically
stable the country is, strength of its institutions, existence of any political or religious conflicts,
ethnic composition, and minority rights. The country’s standing in the international arena should
also be part of the consideration; this includes its relations with neighbors, border disputes,
membership in international organizations, and recognition of international law. If the company
does not have the resources to conduct such research and analysis, it may find such information at
their foreign embassies, international chambers of commerce, political risk consulting firms,
insurance companies, and from international businessmen familiar with a particular region. In
some countries, the governments will establish agencies to help private businesses grow overseas.
Governments may also offer political risk insurance to promote exports or economic development.

38. Private businesses may also purchase political risk insurance from insurance companies
specialized in international business. Insurance companies offering political risk insurance will
generally provide coverage against inconvertibility, expropriation and political violence, including
civil strife (US Small Business Administration). Careful planning and vigilance should be part of
any company’s preparation for developing an international presence.
Government policy changes and trade relations
A government makes changes in policies that have an impact on international business. Many
reasons may cause governments to change their policies toward foreign enterprises. High
unemployment, widespread poverty, nationalistic pressure, and political unrest are just a few of
the reasons that can lead to changes in policy. Changes in policies can impose more restrictions on
foreign companies to operate or limit their access to financing and trade. In some cases, changes
in policy may be favorable to foreign businesses as well.
To solve domestic problems, governments often use trade relations. Trade as a political tool may
cause an international business to be caught in a trade war or embargo.3 As a result, international
business can experience frequent change in regulations and policies, which can add additional
costs of doing business overseas.
What is the influence of culture on international marketing?
Culture is the way that we do things around here. Culture could relate to a country (national
culture), a distinct section of the community (sub-culture), or an organization (corporate culture).
It is widely accepted that you are not born with a culture, and that it is learned. So, culture
includes all that we have learned in relation to values and norms, customs and traditions, beliefs
and religions, rituals and artefacts (i.e. tangible symbols of a culture, such as the Sydney Opera
House or the Great Wall of China).
Values and Attitudes
Values and attitudes vary between nations, and even vary within nations. So if you are planning
to take a product or service overseas make sure that you have a good grasp the locality before
you enter the market. This could mean altering promotional material or subtle branding
messages. There may also be an issue when managing local employees. For example, in France
workers tend to take vacations for the whole of August, whilst in the United States employees
may only take a couple of week’s vacation in an entire year.
 In 2004, China banned a Nike television commercial showing U.S. basketball star LeBron James
in a battle with animated cartoon kung fu masters and two dragons, because it was argued that
the ad insults Chinese national dignity.
 In 2006, Tourism Australian launched its ad campaign entitled "So where the bloody hell are
you?" in Britain. The $130 million (US) campaign was banned by the British Advertising
Standards Authority from the United Kingdom. The campaign featured all the standard icons of
Australia such as beaches, deserts, and coral reefs, as well as traditional symbols like the Opera
House and the Sydney Harbour Bridge. The commentary ran:

39. "We’ve poured you a beer and we’ve had the camels shampooed, we’ve saved you a spot on the
beach. We’ve even got the sharks out of the pool,".
Then, from a bikini-clad blonde, come the tag line:
"So where the bloody hell are you?"
Education
The level and nature of education in each international market will vary. This may impact the
type of message or even the medium that you employ. For example, in countries with low
literacy levels, advertisers would avoid communications which depended upon written copy, and
would favour radio advertising with an audio message or visual media such as billboards. The
labelling of products may also be an issue.
 In the People’s Republic of China a nationwide system of public education is in place, which
includes primary schools, middle schools (lower and upper), and universities. Nine years of
education is compulsory for all Chinese students.
 In Finland school attendance is compulsory between the ages of 7 and 16, the first nine years of
education (primary and secondary school) are compulsory, and the pupils go to their local
school. The education after primary school is divided to the vocational and academic systems,
according to the old German model.
 In Uganda schooling includes 7 years of primary education, 6 years of secondary education
(divided into 4 years of lower secondary and 2 years of upper secondary school), and 3 to 5 years
of post-secondary education.
Social Organizations
This aspect of Terpstra and Sarathy’s Cultural Framework relates to how a national society is
organized. For example, what is the role of women in a society? How is the country governed –
centralized or devolved? The level influence of class or casts upon a society needs to be
considered. For example, India has an established caste system – and many Western countries
still have an embedded class system. So social mobility could be restricted where caste and class
systems are in place. Whether or not there are strong trade unions will impact upon management
decisions if you employ local workers.
Technology and Material Culture
Technology is a term that includes many other elements. It includes questions such as is there
energy to power our products? Is there a transport infrastructure to distribute our goods to
consumers? Does the local port have large enough cranes to offload containers from ships? How
quickly does innovation diffuse? Also of key importance, do consumers actually buy material
goods i.e. are they materialistic?

40.  Trevor Baylis launched the clockwork radio upon the African market. Since batteries were
expensive in Africa and power supplies in rural areas are non-existent. The clockwork radio
innovation was a huge success.
 China’s car market grew 25% in 2006 and it has overtaken Japan to be the second-largest car
market in the world with sales of 8 million vehicles. With just six car owners per 100 people
(6%), compared with 90% car ownership in the US and 80% in the UK, the potential for growth
in the Chinese market is immense.
Law and Politics
As with many aspects of Terpstra and Sarathy’s Cultural Framework, the underpinning social
culture will drive the political and legal landscape. The political ideology on which the society is
based will impact upon your decision to market there. For example, the United Kingdom has a
largely market-driven, democratic society with laws based upon precedent and legislation, whilst
Iran has a political and legal system based upon the teachings and principles Islam and a Sharia
tradition.
Aesthetics
Aesthetics relate to your senses, and the appreciation of the artistic nature of something,
including its smell, taste or ambience. For example, is something beautiful? Does it have a
fashionable design? Was an advert delivered in good taste? Do you find the color, music or
architecture relating to an experience pleasing? Is everything relating to branding aesthetically
pleasing?
Therefore international marketing needs to take into account the local culture of the country in
which you wish to market.
The Terpstra and Sarathy Cultural Framework helps marketing managers to assess the
cultural nature of an international market. It is very straight-forward, and uses eight categories in
its analysis. The Eight categories are Language, Religion, Values and Attitudes, Education,
Social Organizations, Technology and Material Culture, Law and Politics and Aesthetics.
Language
With language one should consider whether or not the national culture is predominantly a high
context culture or a low context culture (Hall and Hall 1986). The concept relates to the balance
between the verbal and the non-verbal communication.

41. In a low context culture spoken language carries the emphasis of the communication i.e. what is
said is what is meant. Examples include Australia and the Netherlands.
In a high context culture verbal communications tend not to carry a direct message i.e. what is
said may not be what is meant. So with a high context culture hidden cultural meaning needs to
be considered, as does body language. Examples of a high context cultures include Japan and
some Arabic nations.
Religion
The nature and complexity of the different religions an international marketer could encounter is
pretty diverse. The organization needs to make sure that their products and services are not
offensive, unlawful or distasteful to the local nation. This includes marketing promotion and
branding.
Containerization
Containerization is a system of intermodal freight transport using intermodal containers (also
called shipping containers and ISO containers). The containers have standardized dimensions.
They can be loaded and unloaded, stacked, transported efficiently over long distances, and
transferred from one mode of transport to another—container ships, rail transport flatcars, and
semi-trailer trucks—without being opened. The handling system is completely mechanized so that

42. all handling is done with cranes and special forklift trucks. All containers are numbered and tracked
using computerized systems.
Containerization originated several centuries ago but was not well developed or widely applied
until after World War II, when it dramatically reduced the costs of transport, supported the post-
war boom in international trade, and was a major element in globalization. Containerization did
away with the manual sorting of most shipments and the need for warehousing. It displaced many
thousands of dock workers who formerly handled break bulk cargo. Containerization also reduced
congestion in ports, significantly shortened shipping time and reduced losses from damage and
theft.
The main advantages of containerization are:
(i) Standardization
Standard transport product that can be handled anywhere in the world (ISO standard) through
specialized modes (ships, trucks, barges and wagons) and equipment. Each container has an unique
identification number and a size type code.
(ii) Flexibility
Can be used to carry a wide variety of goods such as commodities (coal, wheat), manufactured
goods, cars, refrigerated (perishable) goods. There are adapted containers for dry cargo, liquids
(oil and chemical products) and refrigerated cargo. Discarded containers can be recycled and
reused for other purposes.
(iii) Costs
Lower transport costs due to the advantages of standardization. Moving the same amount of break-
bulk freight in a container is about 20 times less expensive than conventional means. The
containers enables economies of scale at modes and terminals that were not possible through
standard break-bulk handling.
(iv) Velocity
Transshipment operations are minimal and rapid and port turnaround times have been reduced
from 3 weeks to about 24 hours. Containerships are faster than regular freighter ships, but this
advantage is undermined by slow steaming.
(v) Warehousing
The container is its own warehouse, protecting the cargo it contains. This implies simpler and less
expensive packaging for containerized cargoes, particularly consumption goods. The stacking

43. capacity on ships, trains (doublestacking) and on the ground (container yards) is a net advantage
of containers.
(vi) Security and safety
The contents of the container is unknown to carriers since it can only be opened at the origin
(seller/shipper), at customs and at the destination (buyer). This implies reduced spoilage and losses
(theft).
Drawbacks of containerization:
(i) Site Constrains
Containers are a large consumer of terminal space (mostly for storage), implying that many
intermodal terminals have been relocated to the urban periphery. Draft issues at port are emerging
with the introduction of larger containerships, particularly those of the post-panamax class. A large
post-panamax containerships requires a draft of at least 13 meters.
(ii) Capital intensiveness
Container handling infrastructures and equipment (giant cranes, warehousing facilities, inland
road, rail access) are important capital investments that require readily sources. Further, the push
towards automation is increasing the capital intensiveness of intermodal terminals.
(iii) Stacking

44. Complexity of arrangement of containers, both on the ground and on modes (containerships and
double-stack trains). Restacking difficult to avoid and incurs additional costs and time for terminal
operators. The larger the mode or the yard, the more complex the management.
(iv) Repositioning
Many containers are moved empty (20% of all flows). However, either full or empty, a container
takes the same amount of space. The observed divergence between production and consumption
at the global level requires the repositioning of containerized assets over long distances
(transoceanic).
(v) Theft and Losses
High value goods and a load unit that can forcefully opened or carried away (on truck) implied a
level of cargo vulnerability between a terminal and the final destination. About 1,500 containers
are lost at sea each year (fall overboard), but these figures vary substantially depending on if a
specific incident takes place on any given year.
(vi) Illicit Trade
The container is an instrument used in the illicit trade of goods, drugs and weapons, as well as for
illegal immigration (rare). There are concerns about the usage of containers for terrorism but no
documented use has emerged.
What are INCOTERMS?
INCOTERMS (International Commercial Terms) are an internationally recognised set of trade
term definitions developed by the International Chamber of Commerce (ICC). The terms define
the trade contract responsibilities and liabilities between a buyer and a seller. They cover who is
responsible for paying freight costs, insuring goods in transit and covering any import/export
duties, for example. They are invaluable as, once importer and exporter have agreed on an
INCOTERM, they can trade without discussing responsibilities for the costs and risks covered by
the term.
2. Commonly used INCOTERMS
Full details of all the INCOTERMS and their definitions are available from the International
Chamber of Commerce.
EXW - Ex Works
The seller makes the goods available at his or her premises. The buyer is responsible for
uploading. This applies to any mode of transport, but should only be used for domestic
transactions, because the seller has only to 'provide the buyer'… assistance in obtaining any

45. export licence, or other official authorisation. The seller also has no obligation to load the goods.
In addition the buyer has limited obligations to provide the seller with proof of export. For
international trade, FCA, below, is more appropriate.
FCA - Free Carrier
The seller must 'deliver the goods to the carrier ... nominated by the buyer ... at the named place'.
This term is suited for international sales with minimum obligations for the seller. Its advantage
over EXW is that the seller is responsible for any export licensing and Customs export clearance,
which eases the problem of proof of export, and the seller must load the goods (which is usually
the case). There is a new focus on 'FCA ... seller's premises' as the appropriate term for
international sales when the seller wants to limit their obligations to the loading of the goods and
export clearance.
CPT Carriage Paid To
(… named place of destination). The seller pays for carriage. This term is used for all kinds of
shipments. Risk is transferred from the seller to the buyer upon handing over of the goods to the
first carrier at the place of shipment in the country of export.
CIP - Carriage and Insurance Paid
(...named place of destination) - any mode of transport. The seller must 'deliver to the first carrier
at the named place'. It’s strongly recommended that the parties define the place of delivery (in
the seller's country) as well as the place of destination (in the buyer's country) due to the fact that
risk passes to the buyer at the named place of delivery in the seller's country.
'When CPT or CIP terms are used, the seller fulfils their obligation to deliver when it hands the
goods over to the carrier, and not when the goods reach the place of destination.' So these are '
shipment contracts' not ' arrival contracts'. Therefore, it is strongly recommended that the place
of delivery, in the seller's country, is identified as precisely as possible in the contract.
DAT - Delivered at Terminal
(...named terminal at destination). The seller pays for carriage to a nominated ‘terminal’ or
‘point’, except for costs related to import clearance. The seller also assumes all risks up to the
point that the goods are unloaded at the terminal.
DAP would be inappropriate in these circumstances as the seller has only to place the goods
'ready for unloading'.
DAP - Delivered At Place
(...named place of destination). This is appropriate to both domestic and international sales.

46. The seller delivers when 'the goods are placed at the disposal of the buyer ready for unloading by
the buyer ... at the named place'. All import Customs formalities and costs are the responsibility
of the buyer.
DDP - Delivered Duty Paid
(...named place of destination). This applies to any mode of transport. The seller must deliver the
goods to the buyer, cleared for import, and not unloaded at the named place of destination.
Maritime-only terms - These are only used for conventional sea or inland waterway transport.
 FAS - Free Alongside Ship (...named port of shipment). If the goods are containerised, use the
FCA term.
 FOB - Free On Board (...named port of shipment). The seller must deliver the goods by
'placing them on board the vessel ... at the loading point'. The FCA term should be used where
the goods are handed over to the carrier before they are on board the vessel – goods in
containers, for example.
 CFR - Cost and Freight (...named port of destination).
 CIF - Cost Insurance and Freight (...named port of destination).
The seller must deliver the goods by 'placing them on board the vessel'. Where the goods are
handed over to the carrier before they are on board the vessel – goods in containers, for example,
the CPT or CIP term should be used.
When CFR or CIF terms are used, the seller fulfils its obligation to deliver when it hands the
goods over to the carrier and not when the goods reach the place of destination. So it’s important
that the port of shipment is identified as precisely as possible in the contract.
International Marketing Mix
When launching a product into foreign markets firms can use a standard marketing mix or adapt
the marketing mix, to suit the country they are carrying out their business activities in. This
article takes you through each element of the marketing mix and the arguments for and against
adapting it suit each foreign market.
The diagram below illustrates the two options available to firms when they are devising their
international marketing mix strategy.