InternationalMarketing-NotesfExams

7/29/2019 InternationalMarketing-NotesfExams

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International Marketing

Module Notes : By Professor Naveen Baweja.

-BUZZ Marketing

-MNC & TNC effects on globalisation

INTRODUCTION

Eg. We want to sell carpets to foreign markets we need - Exports and

International Trading company has to become MNC or TNC . It needs to

show $100 Million T/0 per year so incentives by government along-with for

the industry organization has to be making sure that child labor is removed

with more incentives from the government at the same time making sure

the International Marketing goes on well with the Social audit and

Marketing Responsibility.

If a foreign country supply products for low price better buy it is a way that

we have some advantage _ ADAM SMITH

Eg. Organized retail industry Levis, Loreal, Nike as brand communication

international image & Benneton are the examples the how the examples

promotes clothing as a retailer also NYC STORE Grandest interior space

at the NY Fifth Avenue, Screbner Building Similarly Tommy Hilfiger built a

store on Rodeo Drive in Los Angeles, CA, USA, Sngtel the Telecom

service opened at three storey phone, Pager, handsets, customer service

areas, internet browsing caf.

Closer to home, Aurveda has a conceptual range on show case with low

prices. Hence Int. Mkt. is a complete marketing process across National

Boundaries.

Marketing process conceived as :

Social Human Attitude, Value, Perception etc..

Technical Technical 4Ps + Brand + Non Human Factors


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From Phillip Kotler Needs & Wants Consulting

Organising Buying & Selling

Planning Warehouse

Facilitation Transportation

Financing

AMA (American Marketing Association) defines the IM as the following :

International Marketing is multinational process of planning executing the

conception , pricing, promotion & distribution of ideal goods & services to

create exchanges that satisfy individual & organizational objectives .e.g. Of

Boing , BHEL , Hindustan Earth movers do applies as well to B2B area

IM has clearly got definition that

1. Includes both products & Services .eg. UN for the Int. Social Mkt.

Birth Control, Breast Feeding, Nosmoking worlds AIDS day.

2. This to market of all types give & takes not for profit marketing , govt.

religious of CNN advertizing new $100 Bill for no one asking, recalling

the old one; Khalsa 300 year celebrated at Anantpur Sahib in 1999,

NRIS & Foreigners contributed to success.

3. Complete R&D of needs & wants should have done prior to the

product launch eg. Maruti Suzuki consumers are a for a small car &

be a leader in the car industry.

4. Distance makes or be or no difference in the place part of the MIX for

products taken from our country to another.

5. Coke, Pepsi, Whirlpool Corporation making new customized /

standardized models for break down to National Traditions.

Scope of the IM is the:-Resources & objectives of an organization

to

Environmental Needs & Opportunities.


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This marketing discipline is equally applicable from china to India, US to

Japan, Australia. The concepts, tools, theories, practices, procedures and

experiences

The customers, competitors, channels of distribution media are different sochanges in marketing plan are important .The Mc Donalds, Gillette, Coca

Cola , Pepsi & tailor their products have 4PS applied to Business.

Difference in Domestic & International Marketing

1. Import & Export duties may be different for several items .

a. Custom duty or tariff (Reduction) GATT Agreement

b. Quantitative Restrictions put in to present some commodities

restriction.

c. Exchange control Doesnt Ban the entry of certain good but

exchange control & quantitative controls.

d. These is an imposition of local tax as on the imported goods in

order to make imported good costlier is a restriction is Inter. Mkt.

2. Different legal system Most countries may follow British system

modified from time to time e.g. Japan & Latin America follow an

exceptional system.

3. Each Country has their own monetary (financial system) system

exchange rates IMF( International Monitory Fund) fixes thatNowadays the IMF has determined the exchange rates cause of the

demand & supply forces .

4. Low mobility of factors of production between nations than in the

country itself.

- Air Transport- Increased Labour

- Banking- Increased capital & Labour as in country itself.

5. Differences in market characteristics i.e. Demand Patterns,

distribution, promotion are quite different from market to market, govt.regulations and the govt. control.

6. Procedure & Documentation Documentation differs from country to

country.


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The Concepts of IM.

1. Making Product to Better Product (Standardized Product) is the

Strategy in concept of International Marketing. .

2. Shifting focus from theCustomer or Product --- To Customer & Broader External

Environment & Competition, government policies, regulations,

economic ,social, political and the macro forces.

3. From profit to Stake holder Benefit (employees and management)

this includes innovation and the quantity of flow.

4. Profitability is not forgotten as a strategy, at the same time creating

value for stake holder, having a better pricing policy then the

competition.

eg. Entry of clones ( a model) into IBMS PC market has emerged

as looking for lower profit returns.

Needs & Wants ----- R&D------ Engg. ------ Manufacturing -----

Customer value

BOUNDRY LESS MKT.

Jack willn GE (CEO)It is not only a micro economics maximization paradigm to a focus of

partnerships, positioning with the help of vendors and customers in

value chain creating value for customers 4PS & Probe (Research)

The essence of market with three Principles

1. Customer value V= B/P

Cost Adv B= (Perceived benefits perceived costs

2. Competitive Advantage & Differential Advantage superior products atlow prices.

3. Focus to create competitive Adv ---- needs & wants differential

advantage . eg. Dell, Compaq, offered computing at low prices

US ----- UK

Another way to understand IM :


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Domestic Marketing

Foreign Marketing

Comparative Marketing --- Similarities & Differences in Mkt

Systems

International Trade Marketing ---- Flow of goodsMultinational Marketing --- vs im (tnc)

But the authors say they are the same

Transition phase

Mkt. is Tech & Social

Segmentation in the IM

-Product Specific

- Purchase patterns

- Usage

- Benefits Sought

- Intentions

- Preference

- Loyalty

EU MARKET : International Sophisticate

Semi Sophisticate

Provincial Solely

(On basis of receptivity & common advertizing )

1980s Prof. Theodore Levitt Concepts

Phusalization of consumption Segment Simultaneity

Sushi Geography

Greek Demography

Hamburger Proximity


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Psychographics e.g. Japan-

high income

Veitnam low income

emerges, less developedAnnual Per capita income

$81 in Congo

$38.587 in Luxemberg

Eg. World Bank segments countries into

High income ,upper middle income

US - $ 29,953 & NI of $ 8.3 Trillion in 2000 NI with popularity 275 million

people

Sweden $ 24,487, smaller population for 9 million

Hence , income factor of --- EU --- North America ---- Japan maximum

Personal income and better off Demographic Variable

I6) Also smaller products like cigarettes, soft drinks as well as an important

income China per capita income =$ 930 , India as well shall be requiringin expensive consumer products . Hence products like Uniliver , P&G , J&J

Kao where it has been realized that chinese have cents-14 to pay for

single use Shampoo with a population of 100 million

India 100 million are upper middle class average income $ 14,00 & 250 to

300 million people within middle class with people own refrigerator 30

million people which is or TV which is with the 100 125 million .

In general the income in the countries reflect the standard of living in thesecountries, purchasing power .

Age is in general 12- 19 Fashion , Music , Youth, Coca cola , Benetton ,

Swatch may have a particular teenage segment over teenage segment

over MTV can help produce a lot of commercial in India, China & other

countries.


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There can be exclusive segments as well with product like luxury

automobile ,Wines , champagnes, AMEX, AT&T. Upscale retailer are like

Harrods, Laura Ashley, Feragamo.

Psychographic Segmentation (Attitudes , Values , Life Style )Porsche AG, a German sports car was put under segmenting survey and

realized that it is for college males & 40+ with income of $ 200,000

exceeded.

Five categories they divided the segment as

Backer Spinogel & Battell International scan . This is a keeping tool for

identifying consumer similarities across national boundaries U.S. Strives

are having ample monetary resources they buy cars ; Japanese striverswill use extension of homes like curtains, high end stereo system etc. .

Darey Massing Banton & Bowlers Euro consumer case study

Pg 19

Young & RubicanCross Cultural characterization

Young & Rubicans 4cs is a 20 country

Psychographic Segmentation

Time grouping formed out by the International Firm are the following

Constrained Struggling & Resigned Poor

Middle majority ( Main streamers Aspires successedors)

Innovators ---- Reformers

Mainly the goals , motivation , values of these segmentations are survival,

betterment , work attitude

These are the cross cultural consumer characterization

Attitude -Work -- Life style - Purchase Behaviour


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Behavioral Segmentation

China Cigarettes ( as they are having smokers )

Pakistan is being having Nestle for the RS18/= Willing to pay Possibility

Japan dispenses most cash in the world followed by Swiss, Canada , (US)

Japan AV withdras is $ 289, Swiss $ 187 , Italy $ 185 , US $ 68.

Benefit Segmentation v = B/P eg. Nestle discovered Nestle Friskies dry

cat food as an example of Pan- European campaign that cats are and their

food is recognized universally for their independent nature .

Vertical V/S Horizontal Segmentation

Modality & Various Markets

Price Prompts (Same as home country have many mkts.covered in

foreign mkts)

x-ray (cat scan

MRI Scan)

Coordination & Control

Language, Customs, distance can create a lot of communication Problems.

Control mainly has a fact with marketing control managerial literature, data

measures & evaluating international and it & planning process .

Marketing Potential

How a large is mkt. size?

Product Plan ?

Competition?

More entrenched is the competition; much difficult to win market share


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Subsitute Products

Eg. Columbia major competition is for the boxes & other facts aging

products like women, boys wood boxes in handicraft is a tough market to

handle as low cost , low labor.Process. International Company HQS guide the subsidiaries management

as guidance and the countries they manage the team themselves .

HQS do not understand the market in depth eg. HQs guide for electrical

products motor to French buyer & generating capacity in France the HQ

can give more analytical data, demand in France & subsidiary in France

can have the idea for sales (expected) & earnings. This is called as

indicative Planning process.

Share of market --- This can be agree measure of performance. Auditing

can be done by the markets on product by product basis (large markets).

Small markets independent Utilizing audit services hence the idea is to

beep on generating a good sales & services and so on.

Control Methods :

The employee transfers to different markets with good communication in

HQs & subsidiaries & set standards with annual meetings.

So, a recap Needs & wants & Goodwill R&D & Ps & Informal factors &

goodwill

MNCs (Nature in India )

- Exploitation Resource exploration

- Ruthlessness

Eg. Variety of Corp. of Canada in 1991

For US Canadian Trade agreement advantage moved from Toronto to

Buffalo, N.Y., USA .India thought it as partial colonization for a long time.

To many Indians Pepsi, Coca Cola , KFC are foreign devils . But in defence

Pepsi , coke represent a lot of sports in India also maintain economic

balances . Miller says the food & drink are spread unevenly across the


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Planet & complex item distribution is more essential . MNCS are not a one

dimensional concept.

MNCS are by size of market value sales , profits , , returns , equity eg.

Dymer chysler German Automotive no. 1 in sales .No. 7 in Assets . GM isno. 2 in Assets (sales) and No. 4 in sales .

TNI Trans nationality Index

This index is calculated with the help of Foreign Assets : Total Assets

Foreign Sales to Total Sales ; Foreign employment to total employment

Securities Exchange Commission represent a body to calculate in countries

like AUS , Asia , North America , EU , NZ , MY , UN Deptt. Of economic &

social Affairs $ 100 million sales by a company shall be ignored ; 300

million exporting companies is Germany do not qualify for being MNC to

make export success . The mid size firms for 2/3GNP& 4/5 of all workers.

The UN national conference on Trade Development UNCTAD say 40000

TNCs

250,000 Affiliates (foreign )

$ 5 Trillion Annual sales

TNCs control 1/3 of the world private fact or productive assets

Foreign assets is 1 % only of TNCs .

Eg. IBM did not go multinational being so big it may depend on various

factors liked not only to corporate size.

Structure MNC has three different dimensions .

-Structure no. of countries in coverage eg. Singer in 181

countries in sew machine etc.

- Performance

- Behavioural


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Also citi corp has citizen Mgrs / Management . Diversified mgmt

people A Pakistani Asian is responsible for $ 800 million assets

except Japan ; 8 Non US people , 15 exec. Vice presidents

Performance is dependent generally on sales & assets ;commitment & reward , greater degree of internationalization .

80% of citi corp sales coming from overseas.

Petsokos De Venezula

Samsung has 20 % of overall sales from abroad

NEC 25 manu 45 mkt. employ 22,000 people overseas

AVON 370, 000 women from Japan to sell goods

Siemens 300,0000 employees Industrial Products 124 countries

Difference between MNC& TNCGlobal Marketing

Global Segment

Eg. South America countries market Asia ( S. Korea , Taiwan )

Samsung is venturing car production (passenger)

Samsung is venturing Jetliner 100 seater has 150 million

Samsung is invested $ 9.92 Billion in seol in various expansion in

opportunities

KFC has 2200 restt. in Asia

P& G in China aggressively pays dividends

Management Orientation & Company

Ethnocentric Home country is superior ; seas similarities in

foreign countries Nissan had orientation while exporting this to

USA.

Polycentric This means each country is unique eg. Citi corp CEO

are in medieval state & times.

Jack Walch CEO GE

Regiocentric - Region Specific Geography are unique .

NAFTA countries US believes in US , Canada , Mexico as

regiocentric orientation .


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Geocentric Orientation is for the whole Geography enthno &

polycentric

Gts wants to have Geocentric policies of European Silicon

structures although in Luxemburg are first HQ in Munich .

R&D in England , factory in South France

CH- 2 INTERNATIONAL TRADE THEORIES

These are patents of India exporting Basmati Rice from India to U.S.

Europeon Union Germany in a large scale making sure it reaches

optimally & timely , while the selling of rice we have to case relative

advantage comparative advantage, competitive advantage & the

agricultural product . Here IPLC is being applied Monsan to Inc. patented it

by giving it a new name texmati .

When Fours company Distribution centres , inventory management , ware

housing ,Packaging, bitting , stock , transfer your party logistics a team

comed by Anderson consulting the next evolution in supply chain

Management .

What it does mean HP has appointed a logistics company , circle

Internationals its four PL partner for the Asia Pacific region IW singapore ,

circle has a hub where it buys and stocks HPs requirement . These are

Satellites hubs which are stalled for help . It delivers value across by chain

The 4 PL delivers and manages resources , capabilities , technology withcomprehensive supply chain solution 4PL concentrated on increased

revenue , operating cost reduction , working capital reduction , fixed capital

, reduction .

INTERNATIONAL TRADE THEORIES ;


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1993 experienced North American free trade agreement NAFTA ,uraguay

Round of General agreement on Trade & Tariff , GATT to bring closer all

the borders .

Free trade is a western economic thought , Intellectual development &Trade , protectionism . There can be Tariff & Non- Tariff Barriers to free

trade .

It helps to grow the world economy. How various governments &

international organizations seek to regulate the trade relates to how

exporting shall be done . This makes them gain something from produce of

country extra.

PPC Countries have to produce only what resources & revenues they

have got eg. Products like computers , & automobiles , these can be

number of products substituted for the available resources of computers A)

Automobiles , B) At the point these the logics international trade ; based

opportunity cost whether first or second Fig. 2.1 in book and as per

discussion in the class..

Free Trade :-

US CEOS

NY times 490 CEOS were choosing the correct statement 61% agreed

for free trade ; 56% of public disagreed free trade .

1970s 100 top economists - 81% agreed on Tariffs and imports Quota

reduce economic welfare 3 % disagree.

Theory of Mercentalism Wealth is defined as accumulation of precious

metal such as Gold . The government needs to facilitate exports & imports

with also monopoly of govt. by subsidization , intervation to more exportbuilt the imports eg. Imply Quota on imports .

This concept is with two mallacies

1. Gold & silver or precious metals have an intrinsic value and cannot

be used for production & consumption . Hence , some countries


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willing to follow the motion would conclude it as non productive

wealth whilst they agree on non productive wealth.

2. It believes in collecting masses of power and wealth instead of a cost

effective / efficient production.

It was made Neo mercentallism by correcting the unfavorable andfavorable Balance of Trade where exports exceeded imports and all

countries started increasing exports immunizing imports to control the

deficit .

Second jallay , was now on the Classical Trade . Theory which is

on the Theory of Comparative advantage .

Adam Smith Theory (1800) - Adam Smith put forward that

International Trade shall take place in a situation of AbsoluteAdvantage which is in focus of labour , capital , outputs to match to

match the country needs of Trading internationally for All products

which may be favourable in comparison to countrys capacities &

situations of producing less.

The concept of comparative advantage has been there to produce

various items and not complete product differences amongst trading

countries.

Classical Economic Theory This is based on economic theory of

free Trade . In the to of Industrial Revolution , American Revolution

The cost of production should dictates what shall produced by each

nation or trading partner also taken the natural resources and climatic

conditions. Under the concept of the AbsoluteAdvantage is from

favourable resources , climate advantages eg. Trained & Skilled

labour , capital resources, tech. advances and tradition of

entrepreneurship.eg. Greece & Sweden example have capacity to

produce olives & Martini Glasses respectively and using the

minimum unit number of resources of inputs a product of the

maximum output is seen in the fact olives shall be produced by

Greece ( as it is in abundance in Greece ) & Sweden should produce

glasses to create perfect cocktail . The cost factor determine when &


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how many to produces . Sweden should concentrate on Martini

glasses , Greece on production of olives. Hence the countries can

also sustain economic growth. They also believe in labour supply ,

low wages ,motivate employees , finite suppliers of food, increase the

competition for such employments.

Theory of Economic Development The relationship between the

size of internal market per unit cost of production , export

competitiveness , in the domestic market shall be able to reach

higher output level of productivity reaping a large scale production

and easily enter the export market .

Rowstow stages of economic Growth Theory The growth can be inFive stages :

1. Traditional Society : Static economy

2. Pre condition for take - off Imports ,Agri Transportation

expansion

3. Take off Transformation of technology net investment in

national products production to increase supply also Banks ,

Capital markets , tax system , entrepreneurship should grow .

4. The drive to maturity Labour pool becomes more skilled &

technology showed to reach the highest means of advancements .

5. Age of Mass conception The shift to consumer durables , high

standard of living Automobiles , TV , & Appliances , technology ,

This takes place in 20 30 yrs time duration of UK , GER, Sweden

Japan

Theory of Absolute Advantage The US can produce more

computers as lower cost also the Japan can produce more cars .

Hence , they can take mutual help a free trade to make a both

things traded mutually . Also a doctor cannot be a mechanic

cannot mutually master all the techniques consumable in the

country . Hence one should practice which skill he / she is good at

.


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Relative or Comparative advantage says even if there is

combination of goods traded off whether there import or exports

we need to take care of the production . Similarly , the production

of olives VS Martini glasses is an example for relative or

comparative Advantage .Its considerable that interplay of forces & factor like transport , land

, capital may be looked forward .

Factor Endowment Theory Each country has cost differences in

production & Trading.This theory postulates that each country has

endowments land , labour , capital , technology , production

facilities distribution networks. The relative availability eg. Canada

Agri plus areas , Australia- cattle grazing . As they are endowedwith land .

&US , UK be the import nations to compare the capital

intensiveness

Also french ware , Italian leather , how great pride .

The H O model Heabsher Ohhin model is generally talking

about the capital intensive to labor intensive methods of

production for specific cases of products based on what

endowments they personally carry .

India labour intensive (& import capital intensive goods )

USA &UK Capital Intensive ( vice versa )

The endowments are static supply ; only transaction relates to the

facts that if it may limit such theory .

The major implication of these theories ;

1. Equalize the prices across the traded nation eg. Lobour

intensive goods shall have also a rise in labour wages .

2. Production will not increase in others factors eg. Country

producing capital intensive the labour intensive shall get hurt.

3. Protection shall be demanded precisely for those sectors of

economy which are hurt or less efficient sectors shall have a

demand for protection . Hence , asking for the labour intensive


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incentive or the protection shall cause a lot of hurt factor in the

capital intensive area / sectors . Hence also creates a lot of

competition ,short term employment loss Analysis : said that

1. Individual firms & people conduct business in the nations

2. Perfect competition & information exists between partners3. No theory can explain the trade & financial flows

Human Capital approach - Labour can be divided into unskilled and skilled

labour of India would export labour intensive products & import in tech

skilled labour oriented products

Identical Presence theory If domestic demand is large enough an industry

can reach its optimum level . eg. US & Japan have been brilliantly

industrialized and are having almost same demand characteristics egcomputers , software A/C , Internet , fashion garments. Firms in both the

countries are export competitive as they have already catered domestic

demand and have the trade between the USA & Japan is highly substantial

and industrialized countries grow rapidly .Countries , Interplay motives &

factors , focus & products .

Strategies Trade Theory This theory is the essence of all new models &theories . This postulates the following :

1. Increased return to scale Obtaining the Greater scale of economies

by comparative Advantage .

2. Product Differentiation - eg. US can export different types of

automobiles Ford Escort & import BMWS .as in the same industry

these may be different Brand identities .

3. Imperfect Competition eg- Imposition of Quota shall have to

increase the foil for domestic area hence can produce the rents forthe foreign producers but at the same time the home country may

subsidize the products of domestic produces to put pressure on

foreign producers to counter balance it say !

4. Externalities & Spill over effects In innovation & R&D . We protect

all the R&D & innovation with security as of an incentive to do so is


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available as well eg. Specialize chip company may have protection

with national security being so greatly important .

5. Irreversible investments These can be price and quantity shifts due

to certain factors these entry & exit cost towards materials eg.

Caterpillar Tractor Company in early 1980s when the US dollar wasappreciated by 35% in real terms against Japanese Yen, yet firms

cannot exit because of cost of re entry because of increasing losses .

It is argued that price & Quantity restriction increase the welfare of

foreign producers . But , these should be effective competition .

GATT Agreement 1994 still imposes a lot of trade barriers and

combat incentives .

(Adjustments accord to Int. countries ) ( Integrate Glb units )

Whether it is to use fragmentation or unification we have to face socioeconomic , political & cultural environments .

Modern Investment Theory

1. Comparative Advantages out weigh the costs .

2. Of brand awareness , product identification , economies of scale

whether horizontal or vertical investments for soucec of suppliers

& impacts .

Firms mainly Olygopoly (monopolistic) with fewer competition

enter the foreign market . These are fewer sellers in the industry of

these products eg. Automobiles & still industry and prices are

identical for the oligopolistic products of companies.

Just because of dominance is by the cost .bew analysis & that can

out weigh the rest of the benefits that the company can provide in

the international market with efficiency & superiority .

International Product Life cycle This discusses four stages of life

cycle . First is the innovation & R & d in domestic country .

Secondly some competition is available only ; in foreign market

tend to increase . The product is increasingly standardized . The

production & service is adopted in foreign market to signify the

competition . Thirdly , maturity , exports from home country

because of increase in production of such goods in foreign . The

nations foreign manufacturing facilities are put in peace to counter


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competition and to maximize profits & sales turnover and it

becomes crucial determinant of foreign competitiveness .

Minimizing costs becomes important objectives of firms .They may

go to cheaper countries to produce at even lower costs , lower

labour costs . At this time the production may only be the thirdworld countries and produce can be sent back to domestic

nationeven . Finally the product enters the stage of decline

because of competition . The IFCC is namely having products like

the consumer disables , synthetic fabrics , electronic equipment .

They have a letter span in innovation & pricing of products with

demand factor . It does not hold obsolesome depreciation & span

of innovation . Once they become MNCs they shall not further be

home for production . Sometimes , in certain cases firms may justinvest multinationally with test marketing in domestic nation .

The technological gap and innovation , R& D investments plays a

big role . Industrialised countries do more R& D , Hence the

comparative Adv. Can have firms to produce in local countries at a

particular time in future which also minimize the labour costs. Eg.

Exporters of textiles from being net importers few years ago.

The IPLC is based on theory of comparative Advantage & diffusion

of innovation process across borders / boundaries . They can

exploit through the selling of Tech break through by selling

abroad .

The stages & characteristics of IPLC.

Fine Stages

Stage 0 It has a vertical importing & exporting at is represents

the regular and highly families . Product life cycle in operation

within its original market . Industrialist nations develop them most

of R &D ; innovations , have tech . know low capital to develop

new products .

Stage 1 Overseas Innovation We look for well developed

product to expand in the foreign market. Hence , it is an

international introduction stage . Also UK ,CAN ,AUS report /Buy

the of all US innovations . Market costs lower up as the


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production process improves with sales , economies of scale

improve . Here , the companies do not desire a low price .

Stage -2 Maturity Growing demand in other / foreign nations

provide impetus for firms and infant industries are given birth .Development of competition doesnot mean much to have yet .

Stage -3 World wide Invitation There is decline in exports / no

demand . This affects US , economies of scale , production costs .

At the expense of US firms the companies shall by low price ,

more differenciation , but invitation picks at faster pace . eg. US

automobile industry ; 30 different companies sell as in USA with

some on size only three US firms sell locally produceddomestically .

Stage 4 Reversal This stage has product standardized &

comparative dis- advantage . This comparative dis advantage

means this product is no longer capital intensive has become

labour intensive . There are sufficient productive facilities to meet

domestic needs as well as to produce for biggest market in the

world , the USA .

Implications of Trade Theories

1. Knowledge

2. Labour & production facility mobility

3. Employment fulfillment in each country .

4. Validity

There is labour productivity which determines trade partners . Exceptions in

trade of every types of commodity are possible .The more the countries are


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different ; the more they stand in interest to take the give from each other

but in reality its not same but vice versa .

1. Factor conditions

2. Demand3. Supporting industries

4. Strategy & structure

External determinents given by Micheal Poter.

Limitations :

1. It improves relationship

2. Comparative Advantage is followed .

3. Competition is primarily in foreign nations

4. The land , physical transfer of ownership are not there eg.

Seasure of CA from Mexico or Alaska by Russia not there.

5. Asian go do cheap labour in S. Korea , Thailand , India sends

labour to Dubai / Saudi Arabia .

Indias role Bribe , corruption , Black money conversion to white money is

a common example along with the high taxation .

Avoiding Taxes

Black Money Avoid & Steal taxes Releasing land to the black incomes

owners by government .

-- Bonds issued soak black cash -30 % tax paid to convest Black

income / earnings to be converted to white money for the national

some proper have paid in past Rs 16 crore , 4 crore (All Black

Money )but concept endowment theory , comparative adv. Applies.

International Trade distortious & Marketing Business ;


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Opening Case Plug & Play many products today many appliance support

this concept eg. CD player off its shelves could be connected to Pc at

home besides also the microwave & Television or CD player works with the

Net or also switching the Air conditioning while the way at home or DVD

player may be Net enabled or DVD player also in market which play on TV.They have something in common net working & inter connectivity protocols

. It is compatibility of appliances matter . Hence , voltage n input & output

channels are concerned . Such manufactures & Brands are available in

markets, making / sending commands . Yet another option can be using

JAVA & JINI language with each of its device . Most of the appliances can /

cant be used in foreign countries but the ideal option becomes to use such

items .

Trade Barriers Trade is done due to many seasons like the

1. Improving Balance of Payments (BOP= Exports & Imports )

2. Protecting own industries towards competition ( world ) for foreign

products

3. Exploiting the manpower and countrys economic development of

sustain growth . There can be two types Barriers :-

Tariff & Non Tariff Barriers ( Protective Barriers )Tariffs There are classical ways of regulating international trade .

They may be taxes implied on imports . They generally aim to

restricting inward flow of goods making them costlier in country . Duty

may become so steep that it doesnt worthwhile to import such

product . Most countries Balance the trade with tarrifs & customs .

The General Agreement on Trade & Tarrif . It enouses reduction in

duties implied and that every person enjoys so called the most

favoured Nation ( MFN) and minimize the barriers & duties to its

minimal .

These can be following kinds :

1. Rename Tarrif : This is to raise the government revenue w/o

intending to protect the industry . This is fairly low rate and do not

affect free flow of imports .


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2. Protective Tarrif : This is levied at high price to obstruct free flow of

imports . This is generally to obstruct free flow to local markets .

3. Specific Tarrifs or specific duties : Any unit value if fixed up eg .

weight , volume , length number and putting it in schedule of

duties is the same above eg . gross weight, net weight , far weightetc.

4. Ad volarem Tarrifs If we charge specific percentage of the value

of goods eg. Charged in form of ( C. I. F .) cost of product or f.o.b.

( Logistics cost ; free on Board ) cost mentioned in the invoice .

Sometimes in ethical practices , and practices sometime adops a

fair value in computation of the customs duty .

Other Tarrifs ;

1. Anti Dumping Duties When The foreign companies launchproducts at very low prices can create upper competition in the

local country . Hence , customs duty of a high price have to act

to cause the unfair competition to be counter balanced .

2. Counter acting duties Here , the duties cannot really exceeds

the subsidies introduced for the foreign for the manufacturers .

Non- tariff Barriers This has GATT agreement we shall prefer

a treatment called as the most favoured nation (MFN) while

importing the goods .

Many countries are evolving such measure also , called as Non

Tarrif Barriers These are the barriers that can be of

following types :

1. Quantitative restrictions Quotas and licencing procedures :

Under the system of quantitative restrictions , the maximum

quantity of different commodities shall be fixed in advance .

A licence is permit is obtained from the government

specifying the quantity and the country from which to import .

2. Foreign Exchange Restrictions This is to control and

regulates imports , Balance of Payments ( Exports Imports

) by obtaining an exchange control Authority clearance

contract with the supplier .

3. Technical & Administrative Regulations This is imposition

of standards of technical production , technical specification


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to which an importing commodity + conform of

pharmaceutical products . Administrative restrictions such as

adherence to certain documentary procedure are adopted to

regulate imports . The tech . & Admn. Measures can impede

free flow of a trade large extent .4. Consular formalities : There are certain documentary of

consular eg . Certificate of origin , certified invoices , import

certificates and these have to be drawn in the importing

country language. The fees charge documents to quite

heavy .

5. State Trading In most of the socialistic countries , foreign

trade , ie. Import & export is canalized by certain state

agencies . Each state agency have international tradeaccording to government prices of India State Trading is

followed in restricted sense Iron ore mica is canalized

through minerals & metal trading corporation ( MMTC)

Preferential Agreements : With the advants of such system .

A few member countries member countries agree to small

advantageous group to get the benefit of mutual benefit at a

preferential tarrif rate and applicable to small group number

countries eg.

EEC , ASEAN , LAFTA, BRICs

QUOTAS As we know that factor endownment and

comparative advantage are the basis of international trade &

advantages to be gained in each country specialized in their

countries . Such agreements implies free trade between

nations , This is to impose free trade , signify economic

objective for benefits , Hence they attain the maximum

world production of goods & services . Income redistribution

effects ; which means taxation , monetary welfare

,nationalization , charity and the income v/s benefit


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generation by the classes takes place on the ethical

economic & ethical grounds .

The Marginal social costs marginal private costs may diverse

from each other . The prices & costs diverse from each otherif there is production subsidy on certain products but not on

others . Price & marginal ratios diverse consing distortion of

trade . Neither production nor consumption is optimized .

Apart from Quota , tariffs , exchange control methods , state

trading are some policies to encourage , discourage trade.

A Quota may be also be called the physical quantity or

value of goods or services that may be traded in set period

of time . Quotas can be on imports & exports may apply toall countries with any type of mutual relationship & tarrif

quota is imposing tariff on imports at a certain quantity

/amount and further imports may be prohibited . If supply

and demand curve of a country are not in elastic we may

have a tariff quota for protective , redistribution effects for

quotas & tariffs .

The tariff quotas raise domestic prices of the commodity

reduce imports and the quantity demanded increase thedomestic ( supply) and redistribute the income from

consumers to producers . The government will accrue the

revenues . These may be that if

a. If imports are well organized have a monopoly of trade

may capture revenue .

b. Contrarily , the exporters may capture it , if they are

strong and organized to raise the price and compel weak

and dis organized importers ( domestic) to pay it .

c. Government , by auctioning the import license takes away

the excess values.

d. As in marketing situation , all the revenue cannot be

monopolized and shall be shared as a ratio of revenue


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earnings ( some ) in them .The elasticity of supply sing

about the terms of trade of foreign country .

When the foreign supply position in elastic Quotas are

proffered shall lead to full in imports tarrifs shall be fully

paid leading to decline in imports .In all the said , it is difficult to find several effects of a

tariff and its magnitude by which it would rise in an open

guess.

Similarly , demand for a commodity ( imported) is in

elastic hence , to reduce the imports . Quotas & Tariffs

may be in effective at times but Quotas are not tariffs in a

way that they can be flexibly raised , lowered or removed

also w/o charging money by the governments ( Quotas)these can be seen as costs incurred in a way that Quotas

can

1. Violate market mechanism & price mechanism

2. May have a quarrel with the amongst importers

3. Importers have to pay in foreign currency which

requires further conversions ; the state of exchange

can be altered to adverse the flow of goods & services

from country to another .

4. For exports if there are no discriminatory prospects

there can be no export control which can be the

exports to have country or exports to rest of the world

.

5. If exports in for a foreign country are having in elastic

demand shall raise the prices and shall help for the

home country in the domestic production & suppliers .

6. If domestic supply is restricted and no imports could be

seen in lieu with the above cases shall raise the

domestic prices and redistribution effects in home

country ; may cause monopolistic competition

domestically .


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7. Hence when the exports are to happen when demand (

foreign ) and domestic supply are in elastic be a

advantageous and is a good symbol .

8. The demand and competitive condition in foreign

markets is perfect and many conditions may imply a lotof supply & demand conditions and become elastic

demand with more substitutes like suppliers .

Implications of Tariffs Tariffs are of the following

collection of Revenue Revenue tariffs

Perfect Domestic industry Protective Tariffs the

duty can be specific is based on quantity measured

howsoever Ad valorem is percentage w.e.f. importedqty .

1. Protective effects We can calculate the Tariff ,

Which is effected by the elasticities of domestic &

foreign demand and supply we can calculate

effective tariff duty to reduce imports both selling

price shall increase in case of a B2B product is

levied the tariff . The protective tariffs enables the

encourage of technical change , breeds in efficiency

have the effects are in predictable .

2. Consumption effect The lack of endowments may

have to protect the growing ( to be growing industry

) of such type by the government where they amply

tarrif ; which when imposed can the reason for

imposition and produce those industries

domestically .

3. Revenues effect The revenues are raised by the

governments in numerous ways . Hence , they shall

be able (also) to correct many unbalances in the

country , financing the developments at the same

time . Hence, whether they are redistributive effects

of tariffs like development & inbalance controls .


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4. Redistributive effects There are the effects

redistribution of the money back to economy free

trade raises the price of abundant factor lowers of

scare factors to have a positive trade flow : weather

which eves enterprise ( small or large ) . Terms oftrade effect .

5. Terms of trade effect Weather or not the terms,

effects or burden is being shared by the exporting /

importing country or being both . These depend on

the supply & demand elasticities and supply

elasticities for the imposition of a tariff duty .

6. Employment /Income effect There is a raise in

domestic employment & income due to increase indomestic consumption levying tariff & increase in

prices .

7. Balance of payments BOP Exports & imports

tariff diverts the spending from foreign to domestic

goods raising national income

8. Competition effect The economic welfare will be

maximum if foreign country transfers resources to

manufactures other product than former product

where comparative advantage can be seen hence is

a matter of big conflict every where . Many

comparative advantages are just here buit up for

small reason like resources are there but needs

only certain provisions which can produce and help

commodity production .

Retailiation by importing nations

Difference between tarrif and non- tarrif barriers

1. Revenue earnings

2. Non tarrif barriers protect the producer and

wants them to secure them secure.

3. Customs & Aviations procedures are more strict

in non tarrif barriers .


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4. Non tarrif barriers produce monopolistic

competition in the market by inducing producers

and become a monopolistic competition due to

raise prices & lower the output .

5. Tarrifs can be raised & revised to a high level bythe country (home ) for foreign importers .

6. Tarrifs are simpler to operate hence licence ,

quota , exchange rates are pre fixed commodity .

7. Bilateral Agreements This is an agreement of

commodities information , administrative , or

economic or lighter stock to stabilize &

international way.

Bilateral Agreements This is an exchanginggoods in between countries , trade between

countries reducing & eliminating tarrifs , import

quotas , export restraints and other trade barriers

can help remove trade deficits US exports to

AVS , SINGAPORE , etc.

WTO World Trade Organisation

GATT General Agreement on Trade & Tariffs

This is a treaty amongst member of countries that lays

down the agreed rule for conducting International

trade . The member countries are contributing to four-

fifth of the total world trade . The main aim of the

GATT is to liberalise world trade negotiations among

member countries and from last many years on

reduction & elimination of trade barriers amongst

nations and the international trade flows swiftly &

freely .

GATT 10th April 30th October 1947 had 8 rounds

starting from Urngbay , Geneva . More & more sectors

eg. The agriculture , textile and many more sectors ;


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service industries development Also, because of

national standards protection of Intellectual property

rights such as patents , trademarks should be

protected . Certain other factors have been

1. Shift to policies ; developing countries for theexport oriented growth .

2. End cold war .

3. Implement market oriented reforms

4. It applies to trade in goods & services

5. It specially applies to intellectual property rights .

6. Trade without any discrimination .

7. The objective is sustainable development.

In relation to optimal use of worlds resources andprotect environment in national economic

development .& share of growth in international

trading .

The main function of WTO

1. Facilitate the GATT

2. Provide soon for further negotiations to the

countries

3. Settlement of differences & dispute amongst

Member countries .

4. Revies (periodic ) of trade prices of its member

countries .

Structure of WTO fig. 4.1

NORMS OF WTO

The balance of Payments have to be maintained with trade in leastdisruptive manner . i.e Import surcharges - / types of taxes

Import deposits

& not only quantitative restrictions


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Agreement on Agriculture The government assistance measures to

encourage agricultural and rural developments in developing countries .

These has to be an establishment of fair & market oriented trading system

Agreement on sanitary & pay to sanitary measure ;These are the road safety and plant and animal health regulations . It says

for the govt. to plant ,sanitary & phytosanitary measures with no

discrimination . The main base of international standards , guidelines

where they exist .

Agreement on Textiles & clothing The trade is currently subjected to

bilateral quotas negociated under the bilateral trade agreement all

members shall take actions in all the areas of textiles and clothing as may

be necessary to abide by GATT to improve the market .

Access, enouse the application of policies relating to fair & euitable trading

conditions .

Agreement on ( Anti dumping ) GATT provide the rights of the

contracting parties to apply anti dumping measures against imports of the

products below its normal value if causing injury to domestic country

amplied by domestic authorities .

Agreement on Pre shipment Inspection This is in terms of price, quality

, quantity , used by the government of the countries importing such of

goods and preventing fraud , fight ( capital ) , duty evasion etc. The

shipment preparation has to be according to the norms where the goods

are going .

Agreement on Subsidies The subsidies provided have to be under control

and a strict implementation by the govt . ( host ) . General agreement of

trade in services . India in general has submitted requests to its tradingpartners in computer related services , architecture service , health service

, audio visual services , tourism services , maxitime services , financial

services and has received a prompt from 22 countries as an initial offer


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Agreement on trade related aspects of the intellectual property rights

These abide the standards of protection and enforcement as some

counterfeiting of products is a matter of raise of tension . The protection of

intellectual property have to follow certain laws in order to safeguard the

interests which can be in the area of patent , trademark , copyright , licence.

The dispute settlement There is a dispute settlement Body These can

be consultations in securing dispute resolution which is a 30 day

consultation time and if no settlement in 60 days they can call a panel for

dispute settlement and not consultation any more .

The main implications of WTO in International Marketing

1. Promote peace

2. Handle disputes constructively

3. cost of living

4. More choice product vs quality

5. Trade raises income

6. Stimulate Economic Growth

7. Make life more efficient

8. Encourage good government

9. Sheild governments from narrow practices

Political Environment

T he types of government in political system

Parliamentary ( open )Peoples system eg. N.Korea

Absolutist ( closed ) Monarchies & Dictatorship eg. UK

There ca be 1. Single party 2. Bi party 3. Multi party system of thegovernment .

Economic Systems :

Communist- They mostly have the not for profit seeking enterprises for the

benefits of the society . The emphasis is human welfare eg . china.


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Centrally Planned Economy USSR , EU , China , Veitnam , & N . Korea

are have communist philosophy active govt. role in economic planning .

Socialist economy A socialist govt. owns , operates the basic in for

industries but leaves small business to private ownership .Capatalist economy Allows business , free market system to provide

goods & services & supply . Demand , supply , quality , efficiency at

relatively low prices . Japan , U.S. , U.K. , Germany

Hence countries keep changing the mode of economies and attain

sustainability .

Political perks The governments may pose a lot of risk on other

inhabitants in their home country eg . ownership of land w/o compensation, sell operations of inhabitants taking over operations of foreign

governments and building more domestic properties eg. Cocacola was

once sold to local company in S . Africa. Shah of Iran ; a leader took over

the local countrys production from foreign investors which includes the

transfer of payments , capital , profits out of the host country back to parent

firm .

The main indicates of political instability are the social interest , attitude of

nationals , policies of the host governments eg. Cooperative societiesspread experiences & new ideas . A liberated political climate may induce

territorial independence eg. Civil war in 1991 between Serbs & Croats in

Yoguslavia is an example . Romania & Hungry have deep rooted

greivences also India & Pakistan main cause of Kashmir problem .

Attitude of host country citizens can be a problem as well 12 US firm

decided to exit E1 Salvador in 1980s.

Policies of Host Government

The internal environment states the company / firms policy & environment

in a country . Chile & Argentina over dispute of borders restricted any type

of trade ,lly , India and Pakistan have restricted their exports imports .

Hence many MOU ( Memoranda of Understandings ) can be made to form


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complexes in Maharashtra in 1992, Eusow (USA) & Narsimha Raos

Government .

Management of political risk from other countries . Hence through

cooperation on contractual agreements , alliances , interlockingdirectorates , interfirm , personall flows flexibility , multinational production

trends we can face the challenges & opportunities privatization , Insurance

, Political , private Government . Chiles privatization had good effects on

the well being , efficiency , capital market development . Nigeria , Sengal ,

Tofo experienced that central help , investors help , transperancy are the

key to success . Also , the Indian Economy approached with a Big Bang

approach . A liberalised economy to foreign direct investments from all

nations across the whole world .

Insurance : Chubbs llyods of London are amongst the small group of

insures offer policies to cover ransom demands legal fees paid , psychiatis

fees paid and prevent trade secrets for canes such as kidnapping ,

terrorism , creeping expropriation ( taking overs ) . MNCs rely on the govts

private investment eg. United Insurance compant General Insurance

company & so on . Their main purpose is to provide stability in currency

conversion , taking ones , loss & damage in wars ( civil inclusive )

revolution eg. Motorola Inc. took th OPIL overseas private Investmentcorporation to operate maintain the Cell Phone , in Nicargua , which needs

it at must

MIGA Multinational Investment Guarantee Agency , 1988 Mission to

promote private investment in foreign countries with an insurance of

investment against political risk. We can insure (1) war ( 2) currency (3)

Expropriation ( take overs ) and break on contracts eg. Freeports Mc

Moran coppr wanted to spend $ 500 million to expand his copper , gold &

silver mining projects in the Indonesia in such risk activities these arehelpful .

IMF International Monetary Fund relates to Debt crises and make efforts

and landings for instability and distortions and structural investments in

developing countries .


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World Bank The main aim was to grow Europeon economies at a

affordable rate landing to take care of economies of Europe & after that the

developing nations . These are four main areas which is World Bank

Operatives

IBRD- International Bank for Reconstruction & Development

IDA International Development Association

IFC International Financial Corporation

MIGA Multilateral Investment Guarantee agency

IBRD Development of social & economic objectives in developing

countries ; invest in infrastructure ; economic projects , i.e. power &

transport , social services , education water supply , sanitation , housing .

The loans can be for

1. Agricultural & rural development

2. Oil & Energy sectors

3. Institutional & policy reforms to improve

4. Improve Technical capacities

5. Emergency Reconstruction Loans

IDA This is for long concessional projects since 1960 to poorest

nations ( members)

IFC Estd. In 1956 To promote and bring ahead the private

enterprises in the member countries . The worlds Bank staff overseas it

. Also promote capital flows to private sectors in various developing

countries also provides financial technical legal advice to investee

companies .

Legal & Regulatory Environment- There are two major legal systems

Common Law & Statue Law


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There are 25 common law or British law countries . The countries with

statue law are called as code or civil law. They include the Europe &

Japan approx 70 countries . The main rules of law are the legislation .

The two systems overlap and there is no clear distinction between them

. For statue law countries the laws are developed by collects . Incommon Law it is the judges ability to interpret law in personal way and

the situation aoolies to fit a law perfectly for a situation and the judges

must follow the law .

Legal Environments - - These can be domestic foreign and international

environments . If the laws are not followed can prohibited the product

selling in the market .

Eg. CuelS Meds policy was to turnover staff each 6 months (international staff ) was opposed by US immigration laws becomes to

rotate staff time consuming & costly . There are number of products

which cannot be legally imported to many countries like money , drugs ,

porn materials , explosives & certain equipments , like animals , fresh

fruits unless under certification & medical Authorities also products

include guns , are under contradictory legislative & law action .

Bribery The bribery is quite complex . According to foreign corrupt

practices Act no bribery is allotted inclusive of the foreign government ,politician , political party , The bribery is called as pay of grease

money etc. eg. US many firms try to win international contracts paying

Bribe .

Germanys Siemens , Frances, Aflcatel Husthom and Air bus industries

amongst the major practitioners . Sweden backed up bribe to give

pistols to Indian Army . These include the low income officials . This was

offered for winning up many things and moving ahead ( Bribes ) . This is

to be controlled nationally is the only possibility The legal forms of

organizations include in the world . Sole proprietorship , partnership ,

corporation can raise funds , sell securities . They hold a nomenclature

of the various American & British Terms .

Copy rights eg. Movies . recordings


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Trade marks Service works or regards to services .

Industrial Designs Shapes , lines , motives , colours , textiles , leathers

, leathers product s . Integrated circuits even can be produced under a

genuine agreement of the country masterminding to produce to produceit .

Eg. French champagne & wines

India Texmati rice ( Himalayan Tarai regional product )

COUNTER FEETING

Example is counter feet Gucci Bays pirated vids , CDs , movies . Any

intellectual property may have various consequences trade mark ,

patent , copy right , infringement , can cause losses to owner getting g

product poorly and we have to stop infringing products to the border . .

At the borders the custom can seize the products . The body called as

the ITC International Trade Commission for selling to the USA to

cease & forefeiture of the offending goods . The products should look

genuine eg. Apple computers believe in counterfecting and have local

police seize the products & leave production sites .

Section 301 , of trade Act , 1974 & GATT does that this requiringimposing heavy tarrifs and refeliation of unfair trade practices .

Effective Protection of Intellectual property rights can lead to refiliation

Hence , counter feiting ( illegal copy of products ) should be learned .

International Chambers of commerce London , Antipiracy Organisation

set up the Euro & American soft ware manufactures . In India there are

many softwares .

Cunter feting other products include the Hennescy Brandy , Prior ,Pieve , Cardin fashion , Samsonite , Levis , Cartier watches , Gucci ,

Louis vetlow , Caterpillar tractor parts . Apple has the law suit over many

countries including Taiwan , HK , NZ, SNG , AUS , EU etc. Grey Market

is actually dealing with goods through they imitate channels eg.

Unauthorized distt. And lly sold something at the rate of counterfeited


38/39

goods . The strategies can be supply interfearence , dealer development

, Marketing Information system , establishing legal practices to pricit any

lobbying activities . .

Production increases , inventory costs can be a good way of dealingwith the same Money Laundering - Parallel black money with the help

of practices of transactions , accountants , lawyers , FEMA Act manages

to watch the legal system in a country . Hence corporate status and

suspiction of money laundesing is to be controlled . They include credit

cards , online banking , electronic cash have to arked .

FEMA , 1999 Foreign Exchange Mgmt Act . The foreign currency

includes the deposits , credits , balances , drafts payable in foreign

currency ; travellers cheque , letters of credit bills of exchange . Theregulations of exchanging the rate in right way and rate is important so

personal dealing & all types of foreign exchange dealings are taken care

of foreign citizens , work , exchange rates & rights & control activities is

done by FEMA Act for India works under the RBI . ( Reserve Bank Of

India ) to manage affairs . FEMA prior was FERA , 1947, ( Federal

Exchange Regulations Act , 1947 ) .


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