International marketing presentation.pptx

International economics

1. Chapter one The concepts of international marketing Introduction The modern world is organized on the theory that each nation state is sovereign and independent from other countries. In reality, however, no country can completely isolate its internal affairs from external forces. Even the most inward-looking regimes realized the limitations of their own resources as well as the benefits of opening up their borders . Today most business activities are global in scope.

2. Cont … W h e ther or not a c o mpa n y w a nts to p a rticip a te dir e c t l y in in te rn a t i o n a l busin e ss, it ca n not e s ca pe the e f f ec t of the e v e r - inc r ea si n g number of domestic f i rms e x portin g , i m porti n g , a nd/or manu fac turi n g a b r o a d ; t h e number of f o r e i g n - b a s e d fi r ms op e r a t i n g in most ma r k e ts; the g r owth of re g ional tr a de a r ea s; the r a pid g r owth of wo r ld ma r k e ts; a nd the inc r e a sing number of c om p e t i tors for g lobal ma r k e ts.

3. Cont … Of a ll the tr e nds a f f e c t i n g g lobal busin e ss tod a y , some of them stand out a s the most d y n a m i c a nd a s the on e s that a re influ e n c i n g the s h a pe of inte r n a t i on a l bus i n e ss: The interdependence of the world economies . The rapid growth of regional free trade areas such as EU, NAFTA, ASEAN and APEC . The increase in wealth and growth in most parts of the world, causing enhanced purchasing power . Availability of advanced methods of communication and transportation due to developments in information technology etc.

4. Cont … These forces affecting the international business have led to a dramatic growth in international trade and have contributed to a perception that world has become a smaller and interdependent place. If we look at the Swiss Multinational Company , Nestlé, ‘The Food Company of the World’, it claims its products are sold in every country in the world. It has factories in more than 80 countries and it has many brands that are recognized all over the world.

5. Cont … The challenge of international marketing is to develop strategic plans that are competitive in these intensifying global markets . Strategic marketing is a method through which an organization differentiates itself from its competition by focusing on its strengths to provide better service and value to its customers . Strategic marketing concerns the choice of policies aiming at improving the competitive position of the firm, taking account of challenges and opportunities proposed by the competitive environment.

6. Cont … The difficulties created by different environments and culture are the international marketer’s primary concern . The prima r y obstacles to success in inte r national mar k eting are a person ’ s self- r efe r ence criterion (SRC) and an associated ethnocentrism . The SRC is an unconscious reference to one ’ s o wn cultural v alues, e xperiences, and kn o wledge as a basis for decisions. Close l y connected is ethnocentrism , that is, the notion that people in one ’ s o wn compa n y , culture, or count r y kn o w best h o w to do things.

7. Cont … A study of international marketing should begin with an understanding of what marketing is and how it operates in an international context. We hope you can remember the concepts of general marketing you have seen in your principles of marketing. Lets define what “marketing “means? " M ar k e ti ng i s t he hu m a n ac ti v i t y d i r ec t e d a t s a ti s f y i n g n ee ds & w a n t s t h r ou g h e x c h a nge p r o c e ss" ( P h ili p Ko tl er ). " M ar k e ti ng m a n a g e m e nt i s t he p r o ce ss of p l a nn i ng a nd e x ec u ti ng t he c o n ce p ti on, p r i c i n g , p r o m o ti on, a nd d i s t r i bu ti on of i d ea s, g oods, a nd s e r v i ce s t o crea t e a n e x c h a nge t h a t s a ti s f y i nd i v i du a l a nd o r g a n i z a ti on a l g o a l s . " ( P h ili p Ko tl er ) .

8. What is international marketing? I n t e rn a t i o n a l ma r k e t i ng : is the p e r f o r man c e of busin e ss ac t i vi t ies that d es i g n e d to p la n , p r ice, p r om o t e , a n d d ir ec t the flow of a c ompa n y ’s g oods a n d s e rvi ce s to c onsum e rs or use r s in more than o n e n a t i on for a p ro f i t . I t is m a rk eti n g a c r o ss b o u n d a r i e s . International marketing : can also be defined as the process of planning and conducting transactions across the national borders to create exchange that satisfies the objectives of individuals and organizations .

9. Domestic marketing versus International Marketing The basic nature of marketing does not changed when it extends beyond national boundaries, but international marketing , unlike domestic marketing, requires operating simultaneously in more than one kind of environment. Operations in different environment must be coordinated, and the experience gained in one country is used for making decisions in another country. Domestic marketing : is concerned with the marketing practices within the researchers or Marketers home country (domestic market).”

10. Cont … Domestic Marketing Awareness of domestic market is high, hence one can often do without market research. As the control is over a single set up, administration is relatively easy As the product is designed for the market, question of adapting does not raise Single market, single message, question of adaptation limited to sub segments, media choice, known with certainty

11. Cont … International marketing Market research is very important Multiple markets, multiple mix of marketing variables demand a new set up of administrative machinery. Product has to be adapted to every market segment Multiple market, multiple message depending on the emphasis demanded by each market message may be adapted to new markets or could be universal-complex media availability etc. There is two levels of uncontrollable uncertainity . (Discuss the meaning of adaption &adoption)

12. Cont … Export Marketing   This covers all marketing activities involved in exporting of organizations product to other countries. The primary focus of the organization is the domestic marketing but it also tries to search market outside home country and try to adapt the product to local requirement through product modification. The product is produced in the domestic market. The management tries to sell surplus product outside the home market.

13. Cont … E x port ma r k e t i ng me a n s e x porting g oods to o t h e r c ountri e s o f the wo r ld a s p e r the p r o ce d u r e s fra med b y t h e e x porting c ount r y a s w e ll a s b y t h e i m porting c ount r y . According to B. S. Rathor “ Export marketing includes the management of marketing activities for products which cross the national boundaries of a country”. “ Export marketing means marketing of goods and services beyond the national boundaries”.

14. International T rade Concept and Theory International T rade : is the exchange of goods and services between one country (and its resident) and other countries (and their residents). International trade is the exchange of capital, goods, and services across international borders. The theory, i nd e e d f o rm t h e bas i s f r o m w h ich we u nd er s tand w h y t w o n a ti o n s en g a g e in t ra d e. Export, In International Trade, "exports " refers to selling goods and services produced in the home country to other countries.

15. Cont … “Import In International Trade, “imports" refers to buying goods and services produced in a foreign country to other countries. A nation trades because it expects to gain something from its trading partner. One may ask whether trade is like a zero-sum game, in the sense that one must lose so that another will gain. Discuss what does it “zero sum game and positive sum game mean”?

16. Cont … T h e r e a r e a nu m b er o f f act o r s t h at i n f l u e n c e a c o u n t y ’ s d ecis i o n to i mp o r t o r e xpo r t ce r tain p r o d u c t s. S o m e c o un t r ies can p r o d u c e ite m s t h at m o s t c o un t r ies ca n no t. I n t h is case t h e y w ill w a n t to e xpo r t t h e p r od u ct si n ce t h e y w i ll b e a b le to g ain a l a r g e p a r t o f t h e g l o b al m a rk e t . T h e o r ies o f t r a d e : a r e t ho s e t h e o r ies t h at e x p lain w h y a n d h o w i n te r n a t i on al t r a d e b e n e f its c o u n t r ies i n v o l v ed in it . M a n y s u ch t h e o r i e s a d v a n c ed so f a r . S om e t h a t g ai n e d p o pu la r i t y , h o w e v e r , a r e t h e f o l l o w i n g on e s :

17. Absolute advantage A nation is said to have an Absolute Advantage (AA) over another nation when its cost of production of the good is less than the other nation’s cost of production of the good ( Adam Smith 1723-1790) . Smith’s theory was that trade between countries was based on who had the absolute advantage in producing a good or service. Absolute advantage is defined as the ability to produce a specific product more efficiently than any other nation. Eg . Ethiopian climate is appropriate for coffee production and not appropriate for the production of wheat/ sinde and the reverse is true for canada . Can they engaged in trade? How?

18. Comparative advantage A nation is said to have a Comparative Advantage over another nation in the manufacturing of a good when its opportunity cost in the manufacture of that good is less than the opportunity cost of the other nation’s manufacture of the same good ( D a v id Rica r d o 17 7 2 - 1 8 2 3 ) . H e b elie v ed t h at e v e n if a c o u n t r y c o u ld p r o du ce t h e i r o w n g o o d s a n d se r v i c es m o r e e c o n om i c al l y t h an o t h er c o un t r ies t h e y m a y sti l l d eci d e to t r a d e w it h a n o t h er c ou n t r y . Whenever an individual or a country decides to do one thing they are also choosing not to do something else, since countries and individuals have limited time and resources .

19. Cont … Comparative advantage is the ability of a nation to produce a specific product more efficiently than any other product The opportunity cost is the value of the next best alternative. It is the value you are giving up to do something else with the resource. If the profit from growing potato would be birr 10,000 and the profit from growing Teff would be birr 20, 000 the opportunity cost of not growing Teff would be birr 20,000 . In this example you may choose to grow wheat only if the profit you could make from wheat would be at least birr 20, 000 since that is the potential profit (opportunity cost) you are giving up by not growing Teff .

20. Management orientation/outlooks Managers consciously or unconsciously will be influenced by their philosophy of the world in respect of international marketing. According to Dr. Howard p. there are three stages of outlook of international marketing . Ethnocentric Orientation A person who assumes his/her home country is superior compared to the rest of the world in marketing strategy and practice as compared to others is said to have an ethnocentric orientation. The ethnocentric oriented personnel similarities in markets and assume the products and practices that succeeded in the home country will be successful anywhere.

21. Cont … Polycentric Orientation The polycentric orientation is the opposite of ethnocentrism. The term polycentric describes management’s often-unconscious belief or assumption that each country in which a company does business is unique . Region centric and Geocentric Orientations The geocentric orientation represents a synthesis of ethnocentrism and polycentrism; it is a “ worldview” that sees similarities and differences in markets and countries and seeks to create a global strategy that is fully responsive to local needs and wants.

22. Cont … A regiocentric manager might be said to have a worldview on a regional scale. For example, a U.S. company that focuses on the countries included in the North American Free Trade Agreement (NAFTA)— the United States, Canada, and Mexico --- has a regiocentric orientation. Similarly, a European company that focuses its attention on the EU or Europe is regiocentric .

23. International marketing involvement There are 4 phases of international marketing involvement; which are no direct foreign marketing, infrequent foreign marketing, regular foreign market and international marketing . In no direct foreign marketing stage , the company may not actively involve in international marketing. But yet there are still have possibility of the product to sell in oversea through the distributor or wholesaler without the knowledge of the producer. Products reach foreign markets indirectly–Trading companies–Foreign customers who contact firm–Wholesalers–Distributors–Web sites

24. Cont … Infrequent foreign marketing : caused by temporary surplus. Firm has little or no intention of maintaining continuous market representation. Regular foreign marketing : Firm has production capacity devoted to foreign markets. The primary focus of operations and production is to service domestic market needs. Based on overseas demand. International marketing : is a phase in which domestic companies have the capacity to produce goods to sell abroad on persistent basis and have the possibility to operate globally as well.

25. International marketing information system International marketing information system is a complex system, within the organizational structure, focused on information flow from a company towards the environment and vice versa. IMIS should integrate, lead and organize all communications between company and the environment . It is the system designed to capture, store, update, analyze, and display information about worldwide business activity.

26. Cont … The company`s environment should be widely seen, that takes information from all or most of the world market by various market segments, other industries, various centers of decision‐making and the like. The tasks of the IMIS , in addition to the above, are monitoring of business performance of organizational units of enterprises in various markets, as well as the transmission of ideas and experiences from other countries and regions of the world to the organization.

27. Cont … Collecting and processing data and information, and submission of processed information in decision‐making must be timely. This provides rationality in business decisions making. Marketing information can lead marketing manager to: Develop new products Improve existing products Make changes in promotion, price and distribution strategies and tactics etc IMIS should take a more important position in the organizational structure of companies that are proactive and market‐oriented.

28. Opportunities and challenges of international marketing Challenges Increasing global competition Income gap Environmental deterioration—pollution, over flooding, desertification etc . Infrastructural neglect / shortage—absence of roads, telephone and transportation services . Rapid technological changes Shortages of skilled man power

29. Cont … Opportunities It is possible to get sufficient market / expand the market territory Survival and growth,,,,(Volume of sale increases) Sales and profit Diversification and employment Inflation and Price Moderation

30. International product life cycle D es c r i b es t h e d i ff u s i o n p r o cess o f an i n no v at i o n a c r o ss n at i o n al b ou n d a r ies. P r odu cts g o t hr o u g h a c y c l e d u r i n g w h ich h i g h i n c o m e a n d m ass c o n s u mp t i o n c o un t r ies i n itial l y e xpo r t, t h en t h e y g r a d u al l y l o ss t h eir e x p o r t m a r k et p o s i ti o n a n d f i n al l y b e c o m e i mp o r t e r s o f n e w p r o d u cts f r o m t h e c ou n t r y o f i n v e n ti o n a n d t h en s h i f t fr o m t h e po siti o n o f i m por te r s to e x p o r te r s. F i n a ll y , least d e v e l op i n g c o un t r ies s h i f t f ro m b ei n g i m po r te r s to e xpo r te r s o f t h e p ro d u ct. T h e s e s h i f ts c o r r es p on d t o t h e st a g es in t h e p r o d u ct l i f e c y c l e. A dv a n ced n at i o n b e c o m es a v ict i m o f its o w n c r e ati on .

31. International product life cycle

32. Concept of foreign exchange and Balance of payment F o r e i g n e x c h a n g e t r a n s a c t i o n s i n vo l v e t h e p u r c h ase o r sale o f o n e n a t i o n al c ur r e n c y a g a i n st a no t h e r . P u r c h ase o f fo r e i g n g o o d s a n d se r v ices can b e t h o u g h t o f as i n v o l v i n g t w o se q u e n tial t r a n s a c t i o n s: p u r c h ase o f f or e i g n c u rr e n c y a n d pu r c h a s e o f f o r e i g n go od s. P u r c h ase o f f or e i g n c ur r e n cy i s m a d e t h r o u g h t h e f o r e i g n e x c h a n g e r a t e. T h u s , a n e x c h a n g e r ate is t h e r ate a t w h i c h o n e c u rr e n c y is c o nv e r ted i n t o a n o t h e r , o r a r atio t h at m eas ur es t h e v al u e o f on e c u r r e n c y i n t e r m s o f a n o t h e r c u r r e n c y . T h e f o r e i g n e x c h a n g e r a te is si m p l y a p r ice : t h e p r i c e o f o n e n ati on a l c u rr e n c y as e xp r essed b y t h e v al u e o f a n o t h e r .

33. Cont … The balance of payments is the record of all international trade and financial transactions made by a country's residents.  T h e b ala n ce o f p a y m e n t s ( B O P ) is t h e m et ho d c ou n t r ies u se t o m on it o r all i n t e r n at i o n al m o n et a r y t r a n s a cti o n s at a s p eci f ic p e r i o d o f ti m e. U s u al l y , t h e B O P i s ca l c u lated e v e r y q u a r t e r a n d e v e r y cale n d ar y e a r . A balance of payments  deficit  means the country imports more goods, services and capital than it  exports . A balance of payments  surplus  means the country exports more than it imports.

34. Barriers to International Trade Trade barriers: are restrictions on free flow of goods and service by government . We can classify trade barriers in two : Tariff barrier Non-Tariff barrier or administrative barrier. There are various reasons site by government why they are imposing measures to restrict free flow of goods and services in their boundary. To Protect infant home industry from advanced foreign competitors  

35. Cont … To conserve foreign currency: Uncontrolled import might result in shortage of hard currency To protect national economy from dumping; Dumping is selling products below production cost . This is done by multinational companies to get out domestic manufacturers from competition; governments are imposing various fines to curb this situation. To make economy self-reliant: Governments are protecting domestic industry to give time and opportunity for the industry so that they could compete in the future when the economy is open .

36. Types of tariffs barrier Tariffs are taxes imposed on goods crossing one country. There are various classification of tariffs based on various criteria. Based on Direction Import Tariff- is tariff imposed on imported goods to the country. Tariff is levied on products which are entering in the country. Export Tariff- is tariff levied on export of scarce resource to other countries. This is levied on products which are going out of the country when there is insatiable demand in the home market .

37. Cont … Based on Purpose Protective Tariff- the purpose of the tariff is to protect home country industry from foreign competitors heavy tariff will be levied to make that product more expense as compared to domestic competitors. Revenue Tariff- the purpose is to generate tax revenue’s for the government. Compared to a protective tariff it is relatively low. Based on length a. Tariff Surcharge- is protective tariff which is temporarily imposed for short period of time to stabilize local economy.

38. Cont … Countervailing Duty- a permanent surcharge, imposed on certain imports when products are subsidized by foreign governments until the foreign government stop its subsidy. Based on Rates   Specific duties- are duties which are charged fixed amount of money per volume or per weight. The duty is calculated based on standard physical unit of a product. Product cost or price is not used to calculate this tariff. Ad valorem duties- in this duty the tariff is calculated based on the invoice value of the product. The percentage is fixed. Combined rates - are a combination of specific duty and ad valorem.

39. Cont … Based on Production, Distribution, Consumption Single Stage sales tax - a tax is collected only at once in the supply value chain. Tax is not collected until the product is sold by final consumer. Value added Tax (VAT ) is a multistage, non-cumulative tax on multiple channels. At every stage the product is sold to other party tax is charged on the added value by deducting the tax already paid . This is applied to any type of firms which have more than ETB 500,000 turnover transaction. Excise tax - a one time tax levied on sale of specific type of product E.g . on alcohol.  

40. Cont … d. Cascade Tax- are collected at each stage in the manufacturing and distribution chain and tax is calculated on the total value of a product including taxe paid earlier in the value chain. Types of Non-Tariff Barriers/administrative tarrifs Non-tariff: barriers include all measures, other than traditional tariffs, that are used to distort international trade flows. There are various types of Non Tariff barriers the most common includes: a . Quotas : are restricting the amount of product imported in the country to protect the local firms from fierce competition.

41. Cont … b. Customs and entry procedures: like inspection, valuation etc c. Financial Control: like Exchange control : limiting the amount of hard currency Multiple exchange rates- For encouraging export for manufacturers the national bank sale hard currency to import raw materials. To discourage import the banks sale hard currency at higher rate . Credit restrictions etc THE END OF CHAPTER ONE THANK YOU