Documentos de Académico
Documentos de Profesional
Documentos de Cultura
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Module II (8 Hours)
Developing a global vision through marketing research: Breadth and scope of international
marketing research problems in availability and use of secondary data problems in gathering
primary data multicultural research
a special problem research on internet a new opportunity estimating market demand
problems in analyzing and interpreting research information responsibility for conducting
marketing research communicating with decision makers. Identifying foreign markets
classification based on demand based on the stage of development other bases for division of
world markets
Social and Cultural Environment: Basic aspects of society and culture, Approaches to cultural
factors, Impact of Social and Cultural Environment on Marketing Industrial and Consumer
Products
Module IV (6 Hours)
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Products and services for consumers: Quality Green marketing and product development,
products and culture analyzing product components for adaptation products for consumers in
global markets, product development, product adaptation, product standardization, marketing
consumer services globally marketing of services, brands in international markets
Products and services for businesses
Demand in global business to business markets quality and global standards business services
trade shows' crucial part of business to business marketing relationship markets in business to
business context
Module V (8 Hours)
Licensing, Strategic Alliances, FDI: Introduction, Licensing, Strategic Alliances, Manufacturing
Subsidiaries, Entry Modes and Marketing Control, Optimal Entry Strategies.
Global Distribution
Introduction, Distribution as Competitive advantage, Rationalizing Local Channels, Wholesaling,
Retailing, Global Logistics, Parallel Distribution, Global Channel Design
International retailing
International expansion of retailers international retailing defined retail format variations in
different markets general merchandise: retailing issues in international retailing
Module VI (7 Hours)
Pricing decisions: Global Pricing Framework, Pricing Basics, Marginal Cost Pricing and its
importance, Transfer Pricing, Counter trade, Systems Pricing, Pricing and Positioning, price
quotation INCO terms preparation of quotations.
Promotion Decisions
Promotions international advertising sales promotion in international markets international
advertising direct mailing personal selling exhibition generic promotions in international
marketing
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Contents
Sl No:
Modules
Page NO
5 14
15 - 28
29 39
40 49
50 72
Pricing decisions
73 82
83 100
101 119
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Module I (7 Hours)
Framework of international marketing: Definition scope and challenges difference between
international marketing and domestic marketing the dynamic environment of international trade
transition from domestic to international markets orientation of management and companies
2.
Till last decade competition for the company comes from the local market only, now it is
2.
Enron scandals
3.
4.
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6.
7.
8.
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The rapid growth of the World Trade Organization and regional free trade
areas, e.g., NAFTA and the European Union
General acceptance of the free market system among developing countries in Latin
Impact of the Internet and other global media on the dissolution of national borders, and
II.
Quantitative Restrictions
III.
Exchange Controls
IV.
Local Taxes
The Difference
More than one nation, Competition, Legal constraints, Govt. Control, Ecological factors,
Consumer traditions, or any uncontrollable elements.
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Access to resources
Survival
Pursuing Diversification
The effects of uncontrollable and controllable both in the domestic and foreign
environments
- International marketers deals with at least two uncontrollable Elements
1.
Domestic
2.
International
: 4 ps (MARKETING MIX)
Technology
- Foreign Uncontrollable elements
Continuum
Adaptation
(of Marketing Mix)
Standardization
(of Marketing Mix)
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1.
Firm Characteristics
2.
3.
4.
Motivation To Export
a.
Bulk Sales
b.
Relative Profitability
c.
d.
e.
Legal Restrictions
f.
g.
Social Responsibility
h.
Increased Productivity
i.
Technological Improvements
a)
No Involvement
b)
Temporary Involvement
c)
Continued Involvement
d)
Global Involvement
e)
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Orientation
EPRG Schema
Domestic
Marketing
Extension
(Ethnocentric)
Multi-Domestic
Marketing
(Polycentric)
Global Marketing
(Regio/Geocentric)
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A global orientation means operating as if all the country markets in a companys scope of
operations (including domestic market) are approachable as a single global market and to
standardize the marketing mix where culturally feasible and cost effective or to adapt the
marketing mix where culturally required and cost effective.
Regiocentric:
Sees the world as one market and develops a standardized marketing strategy for the entire
world
Geocentric:
Regiocentric and Geocentric are synonymous with a Global Marketing Orientation where a
uniform, standardized marketing strategy is used for several countries, countries in a region, or
the entire world
Importance of International Marketing
International expansion helps firm:
Keep pace with competition
Reach a larger market
Reap higher profits
Prolong the lifecycle of their products
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Export Marketing
International
Global
Marketing
Marketing
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Least
Limited
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Substantial
Extensive
international
international
international
international
commitment
commitment
commitment
commitment
Domestic
focus
Involves
Focus
on
Focus
or regions
on
rather
than countries or
regions
Ethnocentric
Polycentric or
Regiocentric
Geocentric
Competition
Technology
Economic Growth
Firm-Specific Drivers
Product Life Cycle Considerations: opportunity to prolong product lifecycle by entering
growth markets.
Intro
Growth
Maturity
Decline
Sales
Sales
Profits
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7
Domestic environment
(Uncontrollables)
(Controllables)
1. Competition
Environmental
uncontrollables
1. Competition country market A
2. Technology
Price
Product
Target
5. PoliticalEnvironmental
Market
Legal
uncontrollables
6. Geography and
Place
or
2
.Technology
country
Promotion
Infrastructure
Distribution
market B
4.
Culture
Environmental
3. Economy
uncontrollables
5. Political3. ECONOMY
country
Legal
market C
4. Culture
ECONOMISTS are beginning to notice that dear oil is having an impact on trade. By making
transportation more expensive, high fuel prices are turning back the clock a bit on the process of
globalisation
Many startup companies have technologies that are of interest to many different market
segments. Given a startups limited resources, the company needs to prioritize which customers
to target with their technology and marketing efforts.
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Relationship marketing
Relationship marketing was first defined as a form of marketing developed from direct response
marketing campaigns which emphasizes customer retention and satisfaction, rather than a
dominant focus on sales transactions
Speed to market
The elapsed time from order placement to arrival on the retail sales floor. Speed to market is
increasingly a factor in competitiveness of any company in the apparel chain.
New Millennium and the Age of the Internet we business journalists can look back knowing we
had front-row center seats at the great events of our time. I feel privileged to have helped
chronicle this extraordinary saga.
And it's not over. The Age of the Internet is, to borrow Peter Drucker's phrase, an Age of
Discontinuity. This is not just another story to cover. We are part of this story. For the spread of
the Internet has the potential to revolutionize the practice of journalism, like nothing since
Gutenberg's printing press.
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Module II (8 Hours)
Developing a global vision through marketing research: Breadth and scope of international
marketing research problems in availability and use of secondary data problems in gathering
primary data multicultural research a special problem research on internet a new
opportunity estimating market demand problems in analyzing and interpreting research
information responsibility for conducting marketing research communicating with decision
makers. Identifying foreign markets classification based on demand based on the stage of
development other bases for division of world markets
Social and Cultural Environment: Basic aspects of society and culture, Approaches to cultural
factors, Impact of Social and Cultural Environment on Marketing Industrial and Consumer
Products
Introduction
Marketing research is traditionally defined as the systematic gathering, recording, and analyzing
of data to provide information useful in marketing decision making.
Chicago must be able to translate their research questions into terms that consumers in
Guanszhou, China can understand.
(ii)
The environment within which the research tools are applied are often different in foreign
markets. Rather that acquire new and exotic method of research, the international marketing
research must develop the ability for imaginative and deft application of tried and tested
techniques in sometimes totally strange milieus.
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(i)
(ii)
(i)
(ii)
(i)
manufacturers, and facilitating services, are unavailable for many parts of the world, as are data
on population and income. Most countries simply do not have governmental agencies that
collect on a regular basis the kind of secondary data readily available in the united state.
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Reliability of data;- Available data may not have the level of reliability necessary for
confident decision making for many reasons. Official statistics are sometimes too optimistic,
reflecting national pride or politics rather that practical reality, while tax structures and fear of
the tax collector often adversely affect data.
(iii)
foreign marketers. In United States, current sources of reliable and valid estimates of
socioeconomic factors and business indicators are readily available. In other countries,
especially those less developed, data can be many years out of data as well as having been
collected on an infrequent and unpredictable in many of these countries makes the problem of
currency a vital one.
(iv) Validating secondary data:- many countries have similarly high standard
for the
collection and preparation of data as those generally found in the United States, but secondary
data from any source, including the United States must be checked carefully and interpreted
carefully..
:- If, after seeking all reasonable secondary data sources, research questions are still not
adequately answered, the market research must collect primary data.- that is , data collected
specially for the particular research project at hand.
In most primary data collection. The researchers questions respondents to determine what
they think about some topic or how they might behave under certain conditions. Marketing
research methods, can be grouped into two basic types: quantitative and qualitative research. In
both methods, the marketer is interested in gaining knowledge about the market.
(i)
asked to reply either verbally or in writing to structure questions using a specific response
format or to select a response from a set of choices. Questions are designed to obtain specific
responses regarding aspects of the respondents behavior, intentions, attitudes, motives and
demographic characteristics. Quantitative research provide the marketer with responses that can
be presented with precise estimations.
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Qualitative research:- In qualitative research, if questions are asked they are almost always
open-ended or in-depth, and unstructured responses that reflect the persons thoughts and
feelings on the subjects are sought. Direct observation of consumers in choice or product usage
situations in another important qualitative approach to marketing research.
Qualitative research is used in international marketing research to formulate and define
a problem more clearly and to determine relevant questions to be examined in subsequent
research. It is also used where interest is centered on gaining an understanding of a market,
rather the quantifying relevant aspects.
Qualitative research is also helpful in revealing the impact of socio-cultural factors on
behavior patterns and in developing research hypotheses that can be tested in subsequent studies
designed to quantify the concepts and relevant relationship uncovered in qualitative data
collection.
(i) Ability to communicate opinions:- The ability to express attributes and opinions about a
product or concept depends on the respondents ability to recognize the usefulness and value of
such a product or concept.
(ii) Willingness to respond;- Cultural differences offer the best explanation for the
unwillingness or the inability of many to respond to research surveys. The role of the male, the
suitability of personal gender-based inquiries, and other gender-related issues can affect
willingness to respond.
(iii)Sampling in Field Surveys:- The greater problem in sampling stems the lack of
demographic data and available lists from which to drawn meaningful samples. If current,
reliable lists are not available, sampling becomes more complex and generally less reliable.
(iv) Language and comprehension:(v) The most universal survey research problem in foreign countries is the language barrier.
Differences in idiom and the difficulty of exact respondents answer. Equivalent concept may
not exist in all language.
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MULTICULTURAL RESEARCH
As companies become global marketers and seek to standardize various parts of the
marketing mix across several countries, multicultural studies become more important. A
company need to determine to what extent adaptation of the marketing mix is appropriate. Thus
market characteristics across diverse culture must be compared for similarities and difference
before a company proceeds with standardization on any aspect of marketing strategy.
Multicultural research involves dealing with countries that have different languages,
economies, social structure, behavior, and attitude patterns. It is essential that these differences
be taken into account.
(ii)
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international
remain domestic
Which
markets
enter
Marketing intelligence
or Assessment of global market and firm's potential share in it, in view of
local and international competition, compared to domestic opportunities.
to A ranking of world markets according to market potential, local
competition and the political situation.
How to enter target Size of markets, international trade barriers, transport costs, local
markets
How
to
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In assessing current product demand and forecasting future demand reliable historical data are
required. Despite of limitations, there are approaches to demand estimation that are usable with
minimum information. The success of these approaches relies on the ability of the researcher to
find meaningful substitute or approximations for the needed economic, geographic, and
demographic relationships.
When the desired figures are not available, a close approximation can be made using local
production figure plus imports, with adjustments for exports and current inventory levels. In a
rapidly developing economy, extrapolated figures may not reflect rapid growth and must be
adjusted accordingly. Given the greater uncertainties and data limitations associated with
foreign markets, two methods of forecasting demand are particularly suitable for international
marketers:
(i)
Expert Opinion: - for many market estimation problems, particularly in foreign countries
that are new to the marketer, expert opinion is advisable. In this method, expert are polled for
their opinion about market size and growth rates. Such expert may be companies, own sales
managers or outside consultants and government officers. the key in using expert opinion to
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help in forecasting demand is triangulation, that is, comparing estimates produced by different
sources.
(ii)
Analogy: - This assumes that demand for a product develops in much the same way in all
First, the researcher must possess a high degree of cultural understanding of the market in
foreign markets often is called on to produce result under most difficult circumstances and short
deadlines.
Third, a skeptical attitude in handling both primary and secondary data is helpful.
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In some instances products to be exported might by their very nature have only a small number of
possible customers in any one country making it essential to approach a large number of foreign
areas simultaneously. This applies to some large items such as complete cement plants or to
extremely specialized apparatus like the equipment to measure electrical voltages in the human
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muscle. So also in some cases, success might depend on high volume of production that it is
essential to aim at every possible market simultaneously.
Criteria for classifying world Markets: The basic problem that a firm has to solve in the initial
stage of planning its international marketing strategy is to identify global marketing opportunities.
To identify and shortlist markets which offer or might offer in future opportunities that can be
exploited by it, a classification scheme for segmenting the world markets is required. There are
several bases of classification, principal among then are:
Classification based on demand
Classification on the basis of stages of demand: Keegan has produced a threefold classification of
world marketers:
1. Exiting markets
2. Latent markets
3. Incipient markets
In the existing markets, consumer needs are known and are already being serviced by some
products. The market opportunities can be assessed by estimating the consumption rate and the
share of imports in current consumption. Latent markets have potential customers but because no
one has offered a product to fill the latent need there is no existing market. Incipient markets do
not exist in the present, however conditions and trends can be identified that point towards the
emergence of future needs and preferences for product and services that will create a potent
market, which if supplied will become an existing market.
Based on the stage of development other bases for division of world markets
Classification on the basis of Stages of Development: The world markets can be divided into four
distinct segments, viz., industrial economies, more developed developing countries, raw material
exporting economies and subsistence economies. Industrial Economies: These countries lay more
emphasis on research and development and devote their resources to production of more
sophisticated products and will therefore like to import goods of simpler technology and simpler
manufactures. These countries also have an acute shortage of labor and would, therefore tend to
import intensive products like electronics and light engineering goods. They also tend to import
spares and components and raw materials to feed their industries and many decorative articles
because of their affluence. They are very particular about preventing further pollution and,
therefore they would like to import not only anti-pollution equipment but also articles whose
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production has been banned for risks of pollution. They are willing to provide technology to set
up production and processing facilities in developing countries. They provide a large market as
they have no import restriction. In fact, the five major importing countries viz., United States, the
United Kingdom, France, Japan and Germany, account for 40 per cent of world imports
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The anthropologist, though a time consuming process, considers behaviour in the light of
experiencing it at first hand. In order to understand beliefs, motives and values, the anthropologist
studies the country in question anthropology and unearths the reasons for what, apparently,
appears bizarre.
Maslow approach
In searching for culture universals, Maslow's (1964) hierarchy of needs gives a useful analytical
framework. Maslow hypothesized that people's desires can be arranged into a hierarchy of needs
of relative potency. As soon as the "lower" needs are filled, other and higher needs emerge
immediately to dominate the individual. When these higher needs are fulfilled, other new and still
higher needs emerge. The self-reference criterion (SRC)
Perception of market needs can be blocked by one's own cultural experience. Lee
(1965)4 suggested a way, whereby one could systematically reduce this perception. He suggested
a four point approach.
a) Define the problem or goal in terms of home country traits, habits and norms.
b) Define the problem or goal in terms of the foreign culture traits, habits and norms.
c) Isolate the SRC influence in the problem and examine it carefully to see how it complicates the
pattern.
d) Redefine the problem without the SRC influence and solve for the foreign market situation.
The problem with this approach is that, as stated earlier, culture may be hidden or non-apparent.
Uneartherning the factors in b) may, therefore, be difficult. Nonetheless, the approach gives
useful guidelines on the extent for the need of standardization or adaption in marketing planning.
Diffusion theory
Many studies have been made since the 1930's to assess how new innovations are diffused in a
society. One of the most prolific writers was Everett Rogers8. In his book, "Diffusion of
Innovations" (1962) he suggested that adoption was a social phenomenon, characterized by a
normal distribution
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GLOBAL MARKETING
Definition:
Marketing on a worldwide scale reconciling or taking commercial advantage of global
operational differences, similarities and opportunities in order to meet global objectives.
product and service categories, saturated their domestic markets and have turned to other countries
for new marketing opportunities. Companies in some developing economies have found
profitability by exporting products that are too expensive for locals but are considered inexpensive
in wealthier countries.
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With the proliferation of the Internet and e-commerce (electronic commerce), if a business is
online, it is a global business. With more people becoming Internet users daily, this market is
constantly growing. Customers can come from anywhere. According to the book, Global
Marketing Management, business-to-business (B2B) e-commerce is larger, growing faster, and
has fewer geographical distribution obstacles than even business-to-consumer (B2C) ecommerce.
GLOBAL MARKETING EVOLUTION
PHASE 1
Leverage of domestic capabilities:
Foreign market entry
Objective:- Economies of scale
PHASE 2
Expansion of foreign market presence
Objective :-Economies of Scope
PHASE 3
Coordination of global operations
Objective :-Exploit synergies
throughout network
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Economies of scale in production and marketing can be important competitive advantages for
global companies
Unifying product development, purchasing, and supply activities across several countries it
can save costs
Transfer of experience and know-how across countries through improved coordination and
integration of marketing activities
Diversity of markets by spreading the portfolio of markets served brings an important stability
of revenues and operations to many global firms
Helps to encourage ancillary industries to be set up to cater the needs of the global player.
Disadvantages
Differences in the legal environment, some of which may conflict with those of the home
market
Differences in the institutions available, some of which may call for the creation of entirely
new ones (e.g. infrastructure)
In the 1980s it was globalization vs. localization or Think local, act local
The basic issue is whether the global homogenization of consumer tastes allowed global
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Domestic Planning
International Planning
1.
1.
Multilingual/multinational/multicultural factors
2.
2.
3.
3.
4.
Political
factors
unimportant
4.
5.
Relative
freedom
government interference
from
5.
6.
6.
7.
Chauvinism helps
7.
Chauvinism hinders
8.
Relatively
stable
environment
8.
9.
9.
10
Single currency
10.
11
11.
12
Management
generally
accustomed
to
sharing
responsibilities
and
using
financial controls
12.
relatively
business
plans;
and
Planning allows for rapid growth of the international function, changing markets, increasing
competition, and the turbulent challenges of different national markets. The plan must be blend
the changing parameters of external country environments with corporate objectives and
capabilities to develop a sound, workable marketing program.
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Planning relates to the formulation of goals and methods of accomplishing them, so it is both a
process and a philosophy. Structurally, planning may be viewed as corporate, strategic, or
tactical. International Corporate Planning is essentially long term, incorporating generalized
goals for the enterprise as a whole. Strategic planning is conducted at the highest levels of
management and deals with products, capital, and research, and long and short-term goals of the
company. Tactical planning or market planning, pertains to specific and to the allocation of
resources used to implement strategic planning goals in specific markets.
The Key success of planning is evaluating company objectives, including managements
commitment and philosophical orientation to international business.
philosophies, and objectives must be matched with a countrys constraining factors and market
potential. In the first part of the planning process, countries are analyzed and screened to
eliminate those that do not offer sufficient potential for further considerations. The next step is
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to establish screening criteria against which prospective countries can be evaluated. These
criteria are ascertained by an analysis of company objectives, resources, and other corporate
capabilities and limitations. It is important to determine the reasons for enetering a foreign
market and the returns expected from such an investment.
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exporting
contractual agreements
EXPORTING
Exporting can be either direct or indirect. In direct exporting the company sells to a customer in
another country. In contrast, indirect exporting usually means that the company sells to a buyer
(importer or distributor) in the home country who in turn exports the product. The internet is
becoming increasingly important as a foreign market entry method. Direct sales, particularly for
high technology and big ticket industrial products a direct sales force may be required in a foreign
country. This may mean establishing an office with location expatriate managers and staff
depending of course on the size of the market and potential sales revenues.
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CONTRACTUAL AGREEMENTS
Contractual agreements are long term, non-eqauity associations between a company and another
in a foreign market.
An example of SIAs in the airlines industry is that of the Oneworld alliance partners made up of
American Airlines, Cathay Pacific, British Airways, Canadian Airlines, Aer Lingus, and
Qantas.
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CONSORTIA
Consortia are similar to joint ventures and could be classified as such except for two unique
characteristics.
(1)They typically involve a large number of participants.
(2)They frequently operate in a country or market in which none of the participants is currently
active.
Consortia are developed to pool financial and managerial resources and to lessen risks
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Conditions
Favoring
this Mode
Limited sales potential in
target country; little
product
adaptation
required
Distribution
channels
close to plants
Advantages
Disadvantages
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Licensing
Joint
Ventures
Direct
Investment
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an outsider
Overcomes
ownership
restrictions
and
cultural distance
Combines
resources of 2
companies.
Potential
for
learning
Viewed as insider
Less
investment
required
Greater knowledge
of local market
Can better apply
specialized skills
Minimizes
knowledge
spillover
Can be viewed as
an insider
Difficult to manage
Dilution of control
Greater risk than
exporting
a
&
licensing
Knowledge
spillovers
Partner may become
a competitor.
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3. A matrix organization consisting of either of these arrangements with centralized sales and
marketing run by a centralized functional staff, or a combination of area operations and global
product management.
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Module IV (6 Hours)
Products and services for consumers: Quality Green marketing and product development,
products and culture analyzing product components for adaptation products for consumers in
global markets, product development, product adaptation, product standardization, marketing
consumer services globally marketing of services, brands in international markets
Products and services for businesses
Demand in global business to business markets quality and global standards business services
trade shows' crucial part of business to business marketing relationship markets in business to
business context
QUALITY:
Both are important but consumer perception of a quality product often has to do more with
market perceived quality. It is also measured in many industries by objective third parties.
Maintaining performance quality is critical, but frequently a product that leaves the factory at
performance quality is damaged as it passes through the distribution chain.
A product may have to change in a number of ways to meet the physical or mandatory
requirements of a new market, ranging from simple package changes to total redesign of the
physical core product.
Green marketing is a term used to identify concern with the environmental consequences
of a variety of marketing activities.
Quality is associated with customer satisfaction. It is a means to an end.
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GREEN MARKETING
At the forefront of the green movement, with strong public opinion and specific legislation
favoring environmentally friendly marketing and products.
Green marketing is a term used to identify concern with the environmental consequences of a
variety of marketing activities. The designation that a product is environmentally friendly is
voluntary, and environmental success depends on the consumer selecting the eco-friendly
product. In some countries each level of the distribution chain is responsible for returning all
packaging, packing, and other waste materials up the chain
A product is the sum of physical and psychological satisfactions it provides the user. A
product is more than a physical item. It is a bundle of satisfaction that the buyer receives. A
products physical attributes generally are required to create its primary function. The meaning
and value imputed to the psychological attributes of a product can vary among cultures and are
perceived as negative or positive.
To maximize the bundle of satisfaction received and to create positive product attributes
rather than negative ones, adaptation of the nonphysical features of a product. The adoption of
some products by consumers can be affected as much by how the product concept conforms to
norms, values, and behavior patterns as by its physical or mechanical attributes.
An important first step in adapting a product to a foreign market is to determine the degree
of newness as perceived by the intended market. Any idea perceived as new by a group of
people is an innovation. Product diffusion is the process by which innovation spreads. A critical
factor in the newness of a product is its effect on established patterns of consumption and
behavior.
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A product is a multidimensional, and the sum of all its features determines the bundle of
satisfactions received by the consumer.
Core Component: It consists of the physical product, the platform that contains the essential
technology and all its design and functional features. It is on the product platform that product
variations can be added or deleted to satisfy local differences. Alterations in design, functional
features, flavors, color can be made to adapt the product to cultural variations. Functional features
can be added or eliminated depending on the market.
Packaging Component:
Includes style features, packaging, labeling, trademarks, brand name, quality, price of a
products package. Packaging component frequently require both discretionary and mandatory
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changes. Care must be taken to ensure that corporate trademarks and other parts of the
packaging component do not have unacceptable symbolic meanings. Labeling law create a
special problem for companies selling products in various markets with different labeling laws
and small initial demand in each.
Products are often classified as tangible, whereas services are intangible. The intangibility
of services results in characteristics unique to a services. It is inseparable, heterogeneous, and
perishable. A service can be marketed as a B2B or consumer service.
There are various barriers to entering global markets for consumer services:
Protectionism
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adapt their products to these needs are the ones that should be the most effective in the market
place.
The demand for products and services in B2B markets is by nature more volatile than in
most common markets. The demand also varies by level of economic development and the
quality of educational systems across countries. Ultimately, product or service quality is defined
by customers, but global quality standards such as ISO 9000 are being developed that provide
information about companys attention to matters of quality. After sale services are hugely
important aspect of industrial sales. The demand for other kinds of business services is
burgeoning around the world. Trade shows are an especially important promotional medium in
B2B marketing.
product adaptation
Definition
Marketing strategy whereby new products are based on modification or some improvement on
existing or competing products, and not on pioneering innovations. It is the strategy of a follower.
PRODUCT STANDARDISATION
Even though product adaptation becomes inevitable in the case of certain products, it should
be realized that there is sound economics logic behind a product policy which suggests
uniformity in all markets. Terpstra has identified six factors which may favour international
product standardization.
1.
Economies of Scale in Production: When only one standard version is marketed in all the
areas, it will be possible to have larger production runs, which will result in lower
manufacturing costs.
2.
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There are 3 marketing factors which may reinforce the standardization level:
2.
Made-in Image: When the name of a country is associated with a high standard of quality
in the minds of the consumers, a product manufactured in that country may enjoy a
psychological premium in the foreign markets.
3. Impact of Technology:
specifications and do not require much adaptation for foreign markets unless climatic and
similar considerations call for it.
Consumer services globally marketing of services
MARKETING OF SERVICE
Advice regarding adapting products for international consumer markets also applies to adapting
services or intangible products
However, many consumer services are distinguished by four unique characteistics:
1.intangibility,
2.inseparability,
3.heterogeneity, and
4.perishability
Most services are inseparable and require production and consumption to occur almost
simultaneously; thus, exporting is not a viable entry method for them.
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protectionism,
controls on transborder data flows,
protection of intellectual property, and
cultural requirements for adaptation
A GLOBAL BRAND is defined as the worldwide use of a name, term, symbol, design or
combination thereof intended to identify goods or services of one seller and to differentiate
them from those of competitors. A successful brand is the most valuable resource a company
has. Brand image is at the very core of business identity and strategy.
The brands are Kodak, Sony, Coca-cola, Toyota, Marlboro, Kellogg, Levis, Caterpillar, Nestle,
Mars, P&G, Gillette, and BMW.
A global brand gives a company a uniform worldwide image that enhances efficiency and
cost savings when introducing other products associated with the brand name, but not all
companies believe a single global approach is the best.
Country of origin (COE) can be defined as any influence that the country of
manufacture, assembly or design has on a consumers positive or negative perception of a
product.
TOP 20 GLOBAL BRANDS:
1. COCA-COLA
2. MICROSOFT
3. IBM
4. GE
5. INTEL
6. NOKIA
7. DISNEY
8. MC DONALDS
9. MARLBORO
10. MERCEDES
11. FORD
12. TOYOTA
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13. CITIBANK
14. HP
Stages of industrial and economic development affect demand for industrial products
The level of technology of products and services make their sales more appropriate for
some countries than others
Minor changes in consumer demand mean major changes in related industrial demand
Boeing
Worldwide demand for travel services related to demand for new airplanes
A global set of standards for medical education is not to be equated with a global core
curriculum. The core of the medical curriculum consists of the fundamental theory and
practice of medicine, specifically basic biomedical, behavioural and social sciences; general
clinical skills, clinical decision skills, communication abilities and medical ethics, and must be
Addressed by all medical schools aiming to produce safe practitioners of quality.
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Business services
For many industrial products the revenues from associates services exceed the revenues
from the products
Cellular phones
Printers
Client followers
Mode of entry
Licensing
Franchising
Direct investment
Protectionism
Preconditions
for take off
Stages of
Economic
Development
Drive to
maturity
Take off
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Web sites
Direct mail
Trade shows have become the primary and most important vehicle for doing business in
many foreign countries
Trade shows
Provide the facilities for a manufacturer to exhibit and demonstrate products to
potential users
Allow manufacturers to view competitors products
Are an opportunity to create sales and establish relationships with agents,
distributors, franchisees, and suppliers
Customer
Sales engineer
Application engineer
Project manager
Manufacturing technicians
Customer services
Suppliers
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Module V (8 Hours)
Licensing,
Strategic
Alliances,
FDI:
Introduction,
Licensing,
Strategic
Alliances,
Manufacturing Subsidiaries, Entry Modes and Marketing Control, Optimal Entry Strategies.
Global Distribution
Introduction, Distribution as Competitive advantage, Rationalizing Local Channels,
Wholesaling, Retailing, Global Logistics, Parallel Distribution, Global Channel Design
International retailing
International expansion of retailers international retailing defined retail format variations
in different markets general merchandise: retailing issues in international retailing
LICENCING:
A means of establishing a foothold in foreign markets without large capital outlays is
licensing patent right, trademarks right, and the rights to use technological processes are granted
in foreign licensing. It is a favorite strategy for small and medium sized companies, although it
is by no means. Common examples of industries that use licensing arrangements in foreign
markets are television programming and pharmaceuticals. Not many confine their foreign
operation to licensing alone it is generally viewed as a supplement to exporting or
manufacturing rather than the only mans of entry into foreign market.
Although licensing may be the least profitable way of entering a market, the risks and
headaches are fewer than for direct investments. It is a legitimate means of capitalizing on
intellectual property in a foreign market, and such agreements can also benefit the economies of
target countries.
A quick and easy entry tool with little capital investment in the foreign markets.
Some countries offer licensing as the only means of tapping the market.
Licensing is also considered to be an effective tool for life extension of products during
their stage of maturity in order of their life cycle.
In the licensing arrangement periodic royalties are guaranteed, whereas shared income
from investment fluctuates and stays risky.
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The company which has a strong domestic base can benefit through licensing arrangement
in developing customized products without expensive research.
Licensing provides an alternative when exports are no longer profitable because of intense
competition.
Licensing can reduce transportation costs and help promoting exports in non-competitive
markets.
One of the major advantages of licensing is the immunity over stringent political
intervention as expropriation.
STRATEGIC ALLIANCES
A strategic alliance is a type of cooperative agreements between different firms, such as shared
research, formal joint ventures, or minority equity participation. The modern form of strategic
alliances is becoming increasingly popular and has three distinguishing characteristics
1. They are frequently between firms in industrialized nations.
2. The focus is often on creating new products and/or technologies rather than distributing
existing ones.
3. They are often only created for short term durations.
Technology-based alliances
Production-based alliances
Distribution-based alliances
Resource-based alliances
Benefits
The organizational efficiency will be improved with the flexibility and informality in
strategic alliances.
The risk and expenses are shared among the allies reducing the impact of risk on the
participating members.
The alliance would help the partners build their independent brand and manage retailing of
goods and services.
Alliances can take various formsfrom simple research and development deals to heavy
budget projects.
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Manufacturing Subsidiaries
A subsidiary, subsidiary company, daughter company,or sister company is a company that is
completely or partly owned by another corporation that owns more than half of the
subsidiary's stock, and which normally acting as a holding corporation which at least partly or
(when as) a parent corporation, wholly controls the activities and policies of the daughter
corporation. The subsidiary can be a company, corporation, or limited liability company. In some
cases it is a government or state-owned enterprise. The controlling entity is called its parent
company, parent, or holding company.
An operating
subsidiary is
business
term
constantly
used
within
the
United
States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but
operates with its own identity, locomotives and rolling stock. In contrast, a non-operating
subsidiary would exist on paper only (i.e. stocks, bonds, articles of incorporation) and would use
the identity and rolling stock of the parent company.
Exporting
Contractual agreement
Licensing
Franchising
Joint venture
Strategic alliance
Wholly-owned subsidiaries
Market control
Each international market is different, so strategies and controls will vary
Distance, language differences and cultural variations cause communications problems
Resentment from subsidiaries of HQ control
Local marketing plan will need to controls appropriate for HQ and subsidiaries.
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Control techniques
Benchmarking
Balanced Scorecard
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Aim to translate strategic plans into actions (Drummond and Ensor 2001).
Organisations need to measure, compare and analyse variances so that timely corrections can
be made
Global Distribution
Introduction,
A worldwide computerized reservation network used as a single point of access for reserving
airline seats, hotel rooms, rental cars, and other travel related items by travel agents, online
reservation sites, and large corporations.
The premier global distribution systems are Amadeus, Galileo, Sabre, and Worldspan. They are
owned and operated as joint ventures by major airlines, car rental comopanies, and hotel groups.
Also called automated reservation system (ARS) or computerized reservation system (CRS).
Distribution channels
Forging an aggressive and reliable channel of distribution may be the most critical and
challenging task facing the international firms
Each market contains a distribution network with many channel choices whose structures are
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strange
Competitive advantage will reside with the marketer best able to build the most efficient
channel
Channel of distribution or marketing channels is defined as the whole set of interrelated
marketing agencies which are involved in making the goods available form the producer to
the consumers.
Channel of distribution structures
The distribution process includes the physical handling and distribution of goods, the
passage of ownership (title), and the buying and selling negotiations between producers and
middlemen and between middlemen and customers
Each country market has a distribution structure through which goods pass from producer
to use
Within this structure are a variety of middlemen whose customary functions, activities,
and services reflect existing competition, market characteristics, tradition, and economic
development
Channel structures range from those with little developed marketing infrastructure such as
those found in many emerging markets to the highly complex, multi-layered system found in
Japan
Japanese distribution structure
a structure dominated by many small middlemen dealing with many small retailershigh
density of middlemen,
Distribution in Japan has long been considered the most effective non-tariff barrier to the
Japanese market .The Japanese distribution structure is different enough from its U.S. or
European counterparts
It has four distinguishing features:
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a structure dominated by many small middlemen dealing with many small retailers
laws that protect the foundation of the system the small retailer.
Channel factor:
Manufacturers depend on wholesalers for a multitude of services to other members of
the
distribution
, warehousing , inventory ,
promotion and payment collection are provided to other channel members by wholesalers .
the system works because wholesalers and all other middlemen downstream are tied to
manufacturers by a set of practices and incentives designed to ensure strong marketing
support for their product and to exclude rival competitors from the channel .wholesaler
typically act as agent middlemen and extend the manufacturers control through the channel
the following element
1. Inventory financing :- sales are made on consignment with credit extending for several
months .
2.Cumulative rebates :- rebates are given annually for any number of reasons including
quantity purchases , early payments , achieving sales target , performing services ,
maintaining specific inventory levels , participating in sales promotions , remaining loyal to
suppliers , maintaining manufacturers price policies , cooperating and contributing to overall
success.
3. Merchandise returns :- all unsold merchandise may be returned to the manufacturers.
4. Promotional support :- intermediaries receive a host of displays , advertising layouts ,
management educations programs , in store demonstrations and other dealer aids that
strengthen the relationship between the middlemen and the manufacturer.
Distribution patterns
Even though patterns of distribution are in a state of change and new patterns are
developing , international marketers need a general awareness of the traditional distribution
base . The traditional system will not change overnight and vestiges of it will remain for
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years to come .Nearly every international firm is forced by the structure of the market to
use at least some middlemen in the distribution arrangement.
The following description should convey a sense of the variety of distribution patterns.
General patterns : generalizing about internal distribution channel patterns of various
countries is almost as difficult as generalizing about behaviors patterns of people. Despite
similarities, marketing channels are not the same throughout the world. Marketing methods
taken for granted in the United States are rare in many countries.
Middlemen Services:- The service attitudes of people in trade vary sharply at both the
Line Breadth:- every nation has a distinct pattern relative to the breadth of line
carried
by wholesalers
distribution
is
characterized by middlemen who carry or can get everything in other every middlemen is a
specialist dealing only in extremely narrow lines. Government regulation in some countries
limit the breadth of line that can be carried by middlemen and licensing requirement to
handle certain merchandise are not uncommon.
Costs and Margins :- cost levels and middlemen margins vary widely from country
to country depending
inefficiencies
on the level
of competition , service
and turnover
factors
offered , efficiencies
related
to market
for
size
development and the length of marketing channels . In every country , channels are likely to
be shorter for industrial goods and high priced consumer goods than for low priced
products. In general , there is an inverse relationship between channel length and the size of
the purchase .combinations wholesaler retailer or semi wholesaler exist in many countries
adding one or two link to the length of the distribution chain.
channel of distribution patterns is that in many countries adequate market coverage through
a simple channel of distribution is nearly impossible. In many instances , appropriate
channels do not exist .
channel of their choice. Blockage can result from competitors already established lines in
the various channel or from trade associations or cartels having closed certain channels.
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Stocking :- the high cost of credit , the danger of loss through inflation , a lack of
capital and other concerns cause foreign middlemen in many countries to limit inventories
this often results in out of stock conditions and sales lost to competitors.
middlemen
downstream . the
strong allegiances
they
command
from their
customers enables them to effectively block existing channels and force an outsiders to rely
on less effective and more costly distribution .
Distribution patterns are always evolving and new patterns are developing and marketing
channels are not the same throughout the world
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competition by creating value for customers through their sales and distribution structures. Take
Dell for example. Dell redefined the entire PC industry by using a direct selling model, the
shipping companies being the only intermediary. They entered the industry at a difficult but
quickly adapted to the retail chain evolution by adopting a radically different path and taking
orders on the phone. The move paid off as they have gone to become one of the industry leaders.
Rationalizing Local Channels,
Changing Distributors
The distribution channel configuration for entry into a foreign markets is rarely
optimal once the product is established on the market
The traditional reason for termination of a distributor is
The exporting firm finds that the distributor is not doing a good enough job
in the market
Multiple Channels (Parallel Distribution)
Channel changes do not necessarily involve termination of contracts
In some cases multiple channels emerge or are created
Wholesaling
The sale and distribution of goods to users other than end consumers. Wholesaling involves
selling merchandise to retailers, wholesalers and merchants, or to industrial, commercial and
institutional users. A wholesaler can act as a middleman, brokering deals between these
businesses. Wholesaling often occurs when large quantities of merchandise are reassembled,
sorted, then repackage, and distribute in smaller lots.
Wholesaling Functions
Primary functions of wholesaling
Making contact
Negotiating
Buying
Selling
Warehousing
Wholesaling is a major component of a countrys infrastructure and its structure
reveals important clues as to the countrys stage of development
Full-service wholesalers can usually be counted on in most countries
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However, because of their size and tie-ins with existing brands and chains
they might not be willing to distribute the firms products
The full-service concept should be carefully assessed for each country
entered, since a full-service wholesaler will retain market knowledge and
control the marketing.
For the experienced entrant, limited services wholesalers might be more beneficial,
because of increased control and more management learning.
Power and Competition
The size distribution of wholesalers in many countries approximates the well-known 80-20 rule
80 percent of the transactions are handled by 20 percent of the firms Efficiency
The trend toward integration is based on the technological developments that have make largescale economies and technical coordination feasible
These vertically and horizontally integrated firms become gate-keepers to the local market
entry barriers.
Retailing
Retail is the sale of goods and services from individuals or businesses to the end-user. Retailers
are part of an integrated system called the supply chain. A retailer purchases goods or products in
large quantities from manufacturers directly or through a wholesale, and then sells smaller
quantities to the consumer for a profit. Retailing can be done in either fixed locations like stores
or markets, door-to-door or by delivery. Retailing includes subordinated services, such as
delivery. The term "retailer" is also applied where a service provider services the needs of a large
number of individuals, such as for the public. Shops may be on residential streets, streets with few
or no houses or in a shopping mall. Shopping streets may be for pedestrians only. Sometimes a
shopping street has a partial or full roof to protect customers from precipitation. Online retailing,
a type of electronic commerce used for business-to-consumer (B2C) transactions and mail order,
are forms of non-shop retailing.
Different economies have different retail structures (e.g. Gillette blades are sold through
drugstores in the US, tobacco shops in Italy, department stores in Germany, on the street in
Moscow, at movie counters in Thailand, & from traveling vans in India)
GLOBAL LOGISTICS the transportation & storage activities necessary to transfer the
physical product from the manufacturing plants & warehouses in different countries to various
local market countries
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Nowadays, global distribution has been consolidated such that fully integrated transportation from
point to point across the world is possible at low cost.
Air Express
Technical innovations in computerized inventory systems and numerically controlled machines
for good handling made possible the growth of air express systems
Ocean Carriers
For shipments of bulky and low-value-per-unit products
Ocean vessels are still the most economical carrier alternative overseas
There have been a number of global carrier alliances in the shipping industry due to the savings
involved in sharing resources and the advantage in providing integrated one-stop services to the
shipper
Overland Transportation
The increasing volume of international trade has put the inland distribution system under pressure
One North American solution has been the roll-on-roll-off system in which a loaded container is
simply rolled onto a railcar and shipped by rail for part of the way, avoiding congested freeways
Warehousing
The competitive need on the part of global companies to be close to the customer and provide
fast and efficient service
This places increased demand on warehousing and inventory management
Parallel Distribution
Parallel distribution on genuine goods by intermediaries other than authorized channel members
Three main factors motivate entrepreneurs to engage in gray trade:
1. Wide price discrepancies between national markets
2. Limited availability of certain models or versions in one market
3. Inexpensive logistics means that transportation can be accomplished with relative ease
Global Channel Design
Two major considerations:
1. What type of channel/middlemen should be used to ensure that the strategic marketing
objectives are met in that country?
2. What are the important functions in the channel network for that country?
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infrastructure around the world have made producing and transporting goods considerably more
feasible.
However, entering new countries is not as simple as signing a lease and opening the doors. Market
entry requires careful consideration of external risks and internal parameters in order to understand
market dynamics, requisite competencies, and financial implications. There is no one size fits all
odel. Based on these considerations, retailers should select a method of entry that balances two
critical but often conflicting interests: speed and control.
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Introduction of retailing
Retailing is going through a process of rapid internalization: the retailing environment
worldwide is undergoing dynamic changes; with local retailers defensively countering
competitive moves of mammoth chains or successfully duplicating their strategies.
Major international retailers are no longer competing only for mature markets-and for
consumers in highly industrialized countries. Retailers competitive arena has expanded to all
emerging markets, where they are responding to an increasing affluence of consumers and to
their increasingly sophisticated consumer related demands. Numerous successful global retailers
and consumer-product-companies-cum-retailers such as Wal-Mart (US), Promodes/Carrefour
(France), Louis Vuitton Moet Henessy(France).
Retailers from America are expanding in Latin America, Asia and Europe. For example
Wal-Mart has adopted an aggressive strategy for international penetration; its purchase of the
Asda group (UK) has boosted its international sales to $25 billion, which is only a fraction of its
total sales figure of $165 billion. Its ambition is for its international operations to account for a
third of sales.
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Country
Sales in million
dollars
Wal-Mart
U.S
137,634
Metro AG
Germany
52,131
Sears Roebuck
U.S
36,704
Rewe Gruppe
Germany
36,212
Edeka Rruppe
Germany
32,573
Aldi Gruppe
Germany
32,403
Dayton Hudson
U.S
30,951
Carrefour
France
30,489
Tenzelmann
Germany
30,243
Gruppe
International retailing defined:International retailing is defined as all the activities involved in selling products and
services to final international consumers for their personal consumption.
International retailing differs from local retailing as defined in marketing management in
that it address operations of international retailers beyond home-country borders, as well as
operations of local retailers in different countries in world wide- in general and/or in response to
the presence or entry of international retailers aiming for their target market, as such an
examination international retail operations must include an evaluation of global and local
retailing formats, retail practices, and overview of local retailing environments.
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b. Specialized Markets
Specialized markets contain specialty stores specialized in a particular product category.
Example of such markets exist worldwide in both developed and development countries.
Examples of specialized markets are the Cairo Gold Market in the Khan El Khalili bazaar, the
Jade Market in Hong Kong, and the spice Market and Gold Market in the Covered Bazaar in
Istanbul, Turkey. Specialized market may even cover entire cities. For example, the town of
Otavalo Ecuador, house large and small retailers of leather goods.
c. Department Stores
Department stores offer a broad variety of goods and wide assortments. Among the
products they carry are clothing for men, women, and children; household appliances and
electronics; kitchenware; china; home furnishing; and toys and games. Outside the United
States, department stores typically also have large supermarkets sections, and some may even
carry fresh produce.
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In the United States and Canada, and department stores have suffered substantial losses in
the past decade, mostly attributed to the rise in the discount stores, off-price retailers, and
category killers. In an attempt to conquer new markets, however, a number of chains have been
looking overseas for expansion: Sears Roebuck and JCPenney, in particular, have been looking
at the Latin American Market, with JCPenney recently opening a number of stores in Mexico
and Chile.
Although department stores remain a dominant retail outlet in Asia, they are currently
displaying symptoms of decline, such as oversupply, over duplication of merchandise, fierce
competition, and declining profits. Shanghai alone witnessed the demise of five department
stores in 1997. Existing department stores in the city have done well when changing their
format, for example, specializing in European style clothing and furnishings, or emulating the
hypermarket environment by offering lower prices and maintaining a customer-friendly
environment.
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f. Catalog showrooms
Catalog showrooms usually offer high turn over, brand name goods at discount price. A
typical format for a catalog showroom is one in which customers order from a Catalog in the
showroom where the product is only displayed, and then pick up the merchandise at a
designated location. Internationally, the goods sold in retail formats are not typically brand
name goods, but, rather, they are goods that have not sold in season through a companies
catalog. For example, Neckrmann and Quelle, the well-known German catalog retailers, have
catalog showrooms in many of Germanys largest cities where they sell their catalog store
brands. In addition, Ikea uses this strategy to sell to consumers worldwide: customers receive a
catalog and in the showroom, they order in the store the product they would like to produce and
pick it up from a designated location in its unassembled state.
Retail Patterns
Retail Size Patterns: - the extremes in size in retailing are similar to those that predominate
in wholesaling. The retail structure and the problem it engenders cause real difficulties afro
the international marketing firm selling consumer goods .large dominant retailers can be sold
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direct , but there is no adequate way to directly reach small retailers who in the aggregate
handle a great volume of sales.
Direct Marketing :-selling directly to the consumer through the mail , by telephone or door to
door is often the approach of choice market with insufficient or underdeveloped distribution
systems. The approach of course also works well in the most affluent market.
Resistance to Change :- effort to improve the efficiency of the distribution system new types
of middlemen and other attempts to change traditional ways as typically viewed as
threatening and are thus resisted .
Alternative Middleman Choices :- A marketers options range from assuming the entire
distribution activity to depending on intermediaries for distribution of the product . channel
selection must be given considerable thought because once initiated it is difficult to change
and if proves inappropriate , future growth of market share may be affected
a) Agent middlemen ;- represent the principal rather than themselves
b) merchant middlemen:- take title to the goods and buy and sell on their own account.
International retailing shows even greater diversity in its structure than does wholesaling
Global Retailers:-as global retailer like Ikea , Costco, Sears Roebuck , Toys R Us
and Wallmart expand their global coverage , they are becoming a major domestic
middlemen for international markets.
relatively small international volume or for those unwilling to involve their own personnel
in the international function.
history as
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U.S. Export Trading Companies :-the ETC act allows producers of similar products to
form export trading companies .A major goal of the ETC Act was to increase U.S exports
by encouraging more efficient export trade services to producers and suppliers in order to
improve the availability of trade finance and to remove antitrust disincentives to export
activities.
countries with excess marketing capacity or a desire for a broader product line sometimes
take on additional lines for international distribution although the formal name for such
activities is complementary marketing.
agent
middlemen
or
an agent
domestic base and find foreign markets for products for local manufacturers
Frequently used types of domestic intermediaries include:
Home-Country Brokers:- the term broker
is a catchall
of arrangement
have developed
in which
various
This may take the form of complementary exporting or of selling to a combined business such
a Webb Pomerene export association.
Webb-Pomerene Export Associations:-are another major form of group exporting. WPEAs
Act of 1918 made it possible for American business firms to join forces in export activities
without being subject to the Sherman antitrust . WPEAs cannot participate in cartesl or other
international agreement that would reduce competition in the united states but can offer
four major benefits
1. reduction of export costs
2. demand expansion through promotion
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Managing Agents and Compradors :- A managing agent conducts business within a foreign
nation under an exclusive contract arrangement with the parent company. The managing agent
in some cases invests in the operation and in most instances operates under as contract with
the parent company.
Dealers :- generally speaking anyone who has a continuing relationship with a supplier in
buying and selling goods is considered a dealer . more specifically dealers are middlemen
selling industrial goods or durable consumer goods direct to customers they are the last step
in the channel of distribution.
Import Jobbers, Wholesalers, and Retailers :- import jobbers purchase goods directly from
the manufacturers and sell to wholesalers and retailers and to industrial customers . large and
small wholesalers and retailers engage in direct importing for their own outlets and for
redistribution to smaller middlemen . the combination retailer wholesaler is more important in
foreign countries than in the united states. It is not
Some of the more important foreign-country middlemen, who find markets for foreign
manufacturers include:
Factors Affecting Choice of Channels
The international marketers needs clear understanding of market characteristic and must have
established operating policies before beginning the selection of channel distribution . the
following points should be addressed prior to the selection process
Specify marketing goals in terms of volume, market share, and profit margin requirements.
distribution.
Once these points are established , selecting among alternatives middlemen choices to forge
the best channel can begin . marketers must get their goods into the hands of consumers
and must choose between handling all distribution or turning part or all of it over to various
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on target
market
,competition and
often
pose
longevity
middlemen firms tend to be small institution when one individual retires or moves out of a
line of business the company may find it has lost its distribution in that area. Wholesaler
and especially retailers are not noted for their continuity in business either. Most middlemen
have little loyalty to their vendors.
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The report also provides a US GAAP perspective to help companies (that must report under this
framework) understand the impact that IFRS might have on their operations.
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Module VI (7 Hours)
Pricing decisions: Global Pricing Framework, Pricing Basics, Marginal Cost Pricing and its
importance, Transfer Pricing, Counter trade, Systems Pricing, Pricing and Positioning, price
quotation INCO terms preparation of quotations.
Promotion Decisions
Promotions international advertising sales promotion in international markets international
advertising direct mailing personal selling exhibition generic promotions in international
marketing
Global Pricing Framework
Due to the increased shifting sales focussed towards e.g. China, India and other fast
developing countries, global Industrial companies are facing sooner that anticipated on the
complexity of regional pricing differences.
By using advanced price indexing techniques global price setpoint and differentiation
issues can be resolved by defining the relative and absolute price positioning.
Global Pricing is lot more complex than domestic pricing due to:
International Currency Fluctuations
Price Escalations due to Tariffs
Difficulties to access credit risks
Price controls, Anti-dumping laws
Regulation on transfer pricing
Methods of payment
Pricing Basics
Basic Principle of pricing considers:
Costs or Cost-Plus formula
Experience Curve Pricing I.e costs go down as more units are produced
Competition Pricing: Discount or premium pricing w.r.t competition
Demand factored pricing
For Global Pricing, there are several other factors to be considered in addition to the basics
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Transfer Pricing
MNCs have to determine transfer prices, I.e. the prices charged on subsidiaries for products,
components and supplies.
Transfer pricing must be:
Fair for local subsidiarys performance measurement
Help repatriate profits
Satisfy local tax laws governing transfer pricing
Global firms are setting up market related transfer prices to satisfy local laws
Counter trade & Systems Pricing
When local currency is not freely convertible, firms resort to counter trade.
Exchange local currency for some other goods that is then sold for US$ or other currency
Systems pricing or Pricing for turnkey projects have several subcomponents that may be
separately priced or priced as a bundle
Issues with Counter Trade
Counter Trade arises when a country does not have sufficient foreign exchange or its currency
is not freely convertible
Counter Trade is like a Barter, and the exchanged goods then has to be sold to realize any
profits
E.g: Pepsi for Stolichnaya Vodka in USSR
Counter trade can arise from counter purchase agreements to buy back a part of local
production for the right to export into that country
Product Buyback e.g : Hundai exporting cars from India
Third goods buy back e.g: Pepsi exporting potato chips from India
Major Problem is accessing the value of the bartered goods
Evaluation of Counter Trade
Counter Trade is done if its the only option for trade
Firms use trading houses to dispose of the goods received in trade
Firms need to be extra cautious in fixing the barter exchange rates as international value of
certain goods is difficult to valuate
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This guide outlines how to present your prices to your customers. It tells you how to create a price
list, describes the difference between a quotation and an estimate, details how to prepare
quotations and estimates and describes how to price a tender for a contract.
1. Prepare a price list
2. The difference between a quotation and an estimate
3. Prepare a written estimate
4. Prepare a written quotation
5. Prepare a price for a tender
6. Win contracts at the right price
PREPARE A PRICE LIST
Most businesses will need to draw up a price list at some stage. If you sell a fixed range of
products, this may be the only form of pricing you need. This type of standard price list can also
be used as the basis for pricing your non-standard orders.
It's a good idea to date your price lists - particularly if your customer is likely to keep it for a long
time. You should make it clear when any special offers expire. It can also be useful to include a
clause at the end of the price list stating that prices are subject to change.
You should make clear whether any delivery, packing or postage costs are included in your
prices. Additionally, although you don't have to indicate discounts for bulk purchases on your
price list, it might attract more business.
You may be able to use software packages such as Sage Simply Accounting to help you draw up
complex price lists.
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If you think this is likely to happen, it makes more sense to give an estimate. You can also specify
in the quotation precisely what it covers, and that variations outside of this will be subject to
additional charges.
An estimate is an educated guess at what a job may cost - but it isn't binding. To take account of
possible unforeseen developments, you should provide several estimates based on various
circumstances, including the worst-case scenario. This will prevent your customer from being
surprised by the costs.
To work out a quote or estimate you need to know your fixed and variable costs. These include
the cost-per-hour of manual labour and the cost of the materials you'll require. Your quote or
estimate is then calculated according to what you think the job will involve.
You should provide all your quotes and estimates in writing and include a detailed breakdown.
This will help to avoid any disputes about what work is included in your overall price.
You may also wish to set an expiry date. Your quote or estimate will no longer be valid after this
time.
INCO terms
Trade terms used in different countries may appear identical on the surface, but actually have
different meanings as they are used domestically. Incoterms are internationally recognized and thus
help to prevent confusion in terms of foreign trade contracts, by helping sellers and buyers understand
their obligations in any transaction. Examples of Incoterms include "DAT" (Delivered at Terminal),
"DDP" (Delivered Duty Paid) and "CIF" (Cost, Insurance and Freight).
PREPARATION OF QUOTATIONS
Quotation: - Its a financial document send from supplier to customer regarding service to be
provided. Its also called as temporary financial document for negotiations." A statement of price,
terms of sale, and description of goods or services offered by a supplier to a prospective purchaser, a
bid. When given in response to an inquiry, a quotation often is considered an offer to sell."
Preparation of price quotations will be discussed in classroom in detail.
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International Advertising
The basic framework and concepts of international advertising include the following seven steps:
1. Perform marketing research
2. Specify the goals of the communication
3. Develop the most effective message(s) for the market segments selected
4. Select effective media
5. Compose and secure a budget
6. Execute the campaign, and
7. Evaluate the campaign relative to the goals specified
Decisions involving advertising are those most often affected by cultural differences among
country markets
Consumers respond in terms of their culture, its style, feelings, value systems, attitudes,
beliefs, and perceptions
Sales promotions are marketing activities that stimulate consumer purchases and improve
retailer or middlemen effectiveness and cooperation
Sales promotions are short-term efforts directed to the consumer or retailer to achieve such
specific objectives as consumer-product trial or immediate purchase
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7. Contests
8. Sweepstakes
9. Sponsorship of Special Events,
10. Point-Of-Purchase Displays
International Advertising and the Communications
The international communications process consists of the following seven steps:
1. An information source. An international marketing executive with a product message to
communicate
2. Encoding. The message from the source converted into effective symbolism for transmission
to a receiver
3. A message channel. The sales force and/or advertising media that convey the encoded
message to the intended receiver
4. Decoding. The interpretation by the receiver of the symbolism transmitted from the
information source
5. Receiver. Consumer action by those who receive the message and are the target for the
thought transmitted
6. Feedback. Information about the effectiveness of the message that flows from the receiver
(the intended target) back to the information source for evaluation of the effectiveness of the
process
7. Noise. Uncontrollable and unpredictable influences such as competitive activities and
confusion that detract from the process and affect any or all of the other six steps
DIRECT MAIL ADVERTISING
It is highly selective.
This form of advertising is elastic as the retailer can add or delete the name of consumers at
his discretion.
Direct mail advertising is personal and specific. Home delivery of goods and services can be
assured. Performance of merchandise/service sales can be monitored and evaluated.
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PERSONAL SELLING
1. Happens via Sales Person
2. In the eyes of most of the customer, the sales person is the company
3. The sales Representative is the final link in the culmination of a companys marketing &
Sales effort.
4. Growing global competition coupled with the dynamic & complex Nature of international
business increases both the need & the means for closer ties with the both customers &
suppliers. Relationship marketing built on effective communication between the seller & the
buyer, focuses on building long term alliances rather than treating each sales as a one time
event.
5. Advances in IT are changing the nature of personnel selling & sales management
6. Following are the steps to manage the sales force:
a)
b)
Recruiting Marketing & Sales Personnel( Sales Personnel include Expatriates, Local
Nationals & Third Country Nationals. Virtual Expatriates are the new breed of Expatriates
developed through Internet)
c)
d)
e)
f)
Exhibition
An exhibition, in the most general sense, is an organized presentation and display of a selection
of items. In practice, exhibitions usually occur within museums, galleries and exhibition halls,
and World's Fairs. Exhibitions include (whatever as in major art museums and small art galleries;
interpretive exhibitions, as at natural history museums and history museums), for example; and
commercial exhibitions, or trade fairs
The word "exhibition" is usually, but not always, the word used for a collection of items.
Sometimes "exhibit" is synonymous with "exhibition", but "exhibit" generally refers to a single
item being exhibited within an exhibition.
Exhibitions may be permanent displays or temporary, but in common usage, "exhibitions" are
considered temporary and usually scheduled to open and close on specific dates. While many
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exhibitions are shown in just one venue, some exhibitions are shown in multiple locations and are
called travelling exhibitions, and some are online exhibitions.
Though exhibitions are common events, the concept of an exhibition is quite wide and
encompasses many variables. Exhibitions range from an extraordinarily large event such as
a World's Fair exposition to small one-artist solo shows or a display of just one item. Curators are
sometimes involved as the people who select the items in an exhibition. Writers and editors are
sometimes needed to write text, labels and accompanying printed material such as catalogs and
books. Architects, exhibition designers, graphic designers and other designers may be needed to
shape the exhibition space and give form to the editorial content. Organizing and holding
exhibitions also requires effective event planning, management, and logistics
Generic promotions in international marketing
In the US more than a billion dollars is spent annually on generic commodity promotion, with
spending in some individual product categories exceeding $100 million.
In South Africa R37 million was spent in 2008 on generic commodity promotion by way of statutory
measures. Extensive economic research has been done for many years to evaluate generic promotion
programs.
A number of studies evaluating the impacts of promotional programs on the demand for agricultural
commodities have been undertaken for a variety of generic promotion campaigns.
In the US more than a billion dollars is spent annually on generic commodity promotion, with
pending in some individual product categories exceeding $100 million.
In South Africa R37 million was spent in 2008 on generic commodity promotion by way of statutory
measures. Extensive economic research has been done for many years to evaluate generic promotion
programs.
A number of studies evaluating the impacts of promotional programs on the demand for agricultural
commodities have been undertaken for a variety of generic promotion campaigns. Generic promotion,
by definition, should be brand or market share neutral.
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It may increase total demand but it should not result in one firm or group of firms gaining market
share over another. In theory brands associated commodities are not expected to lose or gain market
share from the generic advertising of the commodity.
Under circumstances where a generic campaign enhances or reduces one brand share or market share
relative to others a significant equity problem occurs. Equally, if a commodity based firm is of
sufficient size to successfully promote its own brand and capture those gains the firm may argue that
their contributions to generic promotion efforts could be more effectively used to promote their own
brands.
In this regard the level of concentration and the competitive structure of the commodity sector
become major factors in determining the usefulness of generic promotional campaigns.
At some point, notwithstanding the economic arguments for or against generic promotional
campaigns, the implementation of these programs may move beyond the economics and into the
political, legislative, and judicial arenas.
The economic evidence is generally in favour of generic promotion via mandated marketing
programs.
General
evidence
confirming
the
positive
effects
of
generic
promotional
campaigns.Results generally vary between very low impacts in some instances to significantly
positives impacts in other instances.
Notwithstanding the varied impacts of these generic programs the evidence suggests that generic
promotion can expand total demand versus individual firm efforts that often compete only for market
are and shelf space with little impact on expanding the total pie.
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exporters to overcome the various constraints and extend to them the full range of services
for the development of market overseas.
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Trade policy of a country refers to the set of policies which govern the external sector of
its economy.
The twin objectives of Indias trade policy have been to promote exports and to restrict the
level of imports to the level of foreign exchange available to the government.
The basic objective of trade policy revolves around the instruments and techniques of
export promotion and import management.
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Export Assistance
Developing countries have started manufacturing industries only recently. As a result their
cost of production generally tends to be high because of the following reasons:
1. Total market availability within the country is small with the result that the
economies of large scale production cannot be reaped.
2. Productivity of labour is low because the level of mechanization as compared to that
in the developed countries is low.
3. The cost of production is generally a function of experience i.e. learning by doing.
4. Manufacturing units in developing countries being small and new, have considerably
less expertise in the field of international marketing and because the volume of
exports is low, the per unit cost of the trade promotion expenditure tends to be high.
India has to raise higher resources for development which has to be done through a number
of indirect levies which tend to push up the overall cost of production.
From 1992, export incentive system in India has been made simple. There are essentially
three major incentives. These are:
1. market based exchange rate
2. fiscal concessions
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Export documents
Standardized and Aligned Pre-shipment documents more than two dozen
commercial and regulatory documents are involved in the pre-shipment stage of
export transactions. These include 16 commercial documents and 9 regulatory
documents.
Commercial Documents
The commercial documents are those which, by customs of trade, are required for effecting
physical transfer of goods and their title from the exporter to the exporter to the important and
realization of export sale proceeds.
14 out of 16 commercial documents have been standardized and aligned to one another,
shipping order and Bill of exchange could not be brought within the fold of the aligned
documentation system because of their very different data elements and having very little in
common with other commercial documents.
The commercial documents are classified into principal documents and auxiliary documents.
1) commercial Invoice
2) packing list
3) bill of lading
4) combined transport document
5) certificate of inspection/quality control(where required)
6) insurance certificate
7) certificate of origin
8) Bill of exchange and shipment advice
Auxiliary Documents:
1) Proforma Invoice
2) Intimation for inspection
3) Shipping Instructions
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4) Insurance declaration
5) Shipping order
6) Mate receipt
7) Application for certificate of origin
8) Letter to the bnk for collection/negotiation of documents
Regulatory documents:
Regulatory pre-shipment export documents are those which have been prescribed by different
government departments/bodies in compliance of the requirements of various rules and
regulations under relevant laws governing export trade such as export inspection, foreign
exchange regulations, export trade control, customs etc.
Certificate of origin:
A certificate of origin, as the name indicates, is a certificate which specifies the country of the
production of the goods. This certificate also to be produced before clearance of goods and
assessment of duty, for the customs law of the country may require this procedure.
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shipment, description of packages, marks and numbers, condition of the cargo at the time of
receipt on board the ship, etc.
2) Shipping Bill:
The shipping bill is the main document on the basis of which the customs permission for
export is given. The shipping bill contains particulars of the goods exported, name of the vessel,
master or agents, flags, the port at which goods are to be discharged, the country of final
destination, etc.
3) Cart Ticket:
A car ticket, also known as a cart chit, vehicle and gate pass, is prepared by the exporter
and includes details of the export cargo in terms of the shippers name, the number of packages,
the shipping bill number, the port of destination and the number of the vehicle carrying the
cargo.
4) Certificate of Measurement:
Freight is charged either on the basis of weight or measurement. When it is charged on the
basis of weight, the weight declared by the shipper may be accepted. The certificate contains the
name of the vessel, port and destination, the description of goods, the quality, length, breadth,
depth, etc. of the packages.
5) Bill of Lading:
The bill of lading is a document wherein the shipping company gives its official receipts for the
goods shipped in its vessel and at the same time contracts to carry them to the port of
destination. It is also a document of title to then goods and, as such, is freely transferable by
endorsement and delivery.
A bill of lading serves 3 main purposes:
As a document of title to the goods;
As a receipt from the shipping company;
As a contract for the transportation of goods
6) Airway Bill:
An Airway bill, also called, an air consignment note, is a receipt issued by an airline
for the carriage of goods. As eah shipping company has its own bill of lading, each airline has
its own airway bill.
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G.P. Forms:
a.
A GP form is a gate pass for the removal of excisable goods from a factory or
warehouse. Form GP1 is used for the removal of excisable goods on payment of duty and form
GP 2 is used for the removal of excisable goods with payment of duty.
II.
a.
Form C:
Form c is to be used for applying for rebate of duty on the excisable goods ( other
III.
a.
sea/post. Form A.R.-4 is used for applying For excise inspection at the factory and form A.R.4A is used when the goods are to be exported under the claim for rebate of excise duty or under
bond.
Globalization in India
India had the distinction of being the world's largest economy in the beginning of the Christian
era, as it accounted for about 32.9% share of world GDP and about 17% The goods produced in
India had long been exported to far off destinations across the world. Therefore, the concept of
globalisation is hardly new to India.
India currently accounts for 1.2% of World trade as of 2006 according to the World Trade
Organisation (WTO). Until the liberalisation of 1991, India was largely and intentionally isolated
from the world markets, to protect its fledgling economy and to achieve self-reliance. Foreign
trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct
investment was restricted by upper-limit equity participation, restrictions on technology transfer,
export obligations and government approvals; these approvals were needed for nearly 60% of new
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FDI in the industrial sector. The restrictions ensured that FDI averaged only around $200M
annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid,
commercial borrowing and deposits of non-resident Indians.
India's exports were stagnant for the first 15 years after independence, due to the predominance of
tea, jute and cotton manufactures, demand for which was generally inelastic. Imports in the same
period consisted predominantly of machinery, equipment and raw materials, due to nascent
industrialization. Since liberalization, the value of India's international trade has become more
broad-based and has risen to
51. India's major trading partners are China, the US, the UAE, the UK, Japan and the EU. The
exports during April 2007 were $12.31 billion up by 16% and import were $17.68 billion with an
increase of 18.06% over the previous year.
India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and
its successor, the World Trade Organisation. While participating actively in its general council
meetings, India has been crucial in voicing the concerns of the developing world. For instance,
India has continued its opposition to the inclusion of such matters as labour and environment
issues and other non-tariff barriers into the WTO policies.
Opportunities, Constraints and Initiatives
1. In recent times, Indian exporters face a number of problems. The problems demotivate the
business firms to enter into foreign markets. Some of the problems are as follows:
2. Recession in World Markets: The world markets faced recession in 2008 and in the first
half of 2009. The recession was triggered due to sub-prime crisis of USA in Sept 2007.
Due to recession, the demand for several Indian items such as gems and Jewellery, textiles
and clothing, and other items were badly hit. During recession, exporters get low orders
from overseas markets, and they have to quote lower prices. Therefore, exporters get low
profits or suffer from losses.
3. Protectionist Measures by Developed Countries: The developing countries like India
have to face the problem of protectionist measures by developed countries. For instance,
in 2009, USA Govt. provided a bailout package to General Motors and other firms to
overcome from financial crisis. The bailout package contained Buy American Clause
which means the firms getting financial assistance from the Govt. have to use domestic
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content rather than importing from other countries. Since USA is the major importer from
India, some of the exporters such as auto parts suppliers have to face problems.
4. Reduction in Export Incentives: Over the years, the Govt. of India has reduced export
incentives such as reduction in DBK rates, withdrawal of income tax benefits for majority
of exporters, etc. The reduction in export incentives demotivates exporters to export in the
overseas markets:
5. Competition from China:India is facing stiff competition from China in the world
markets, especially in the OECD markets. As a result, Indias share of exports to OECD
markets has declined from 53% of total exports in 2000-01 to about 38% in 2007/8. Some
of the Indian exporters have lost their overseas contracts due to cheap Chinese goods arid
supplies.
6. Problem of Product Standards: Developed countries insist on high product standards
from developing countries like India. The products from developing countries like India
are subject to product tests in the importing countries. At times, the importing countries do
not allow imports of certain items like fruits, textiles, and other items on the grounds of
excessive toxic content. Therefore, Indian exporters lose markets especially in developed
countries.
7. Problem of Anti-dumping Duties: Developed countries impose anti-dumping duties on
certain goods imported from developing countries like India, Brazil, China and so on. For
instance, USA had imposed anti-dumping duties on Indian steel items in 2008. Quite
often, the anti-dumping duties are not justified. Therefore, India has to approach the
dispute settlement body of WTO to resolve the dispute regarding anti-dumping duties. Till
the dispute is resolved, Indian exporters lose business opportunities.
8. Problem of Sea Pirates Attacks: A major risk faced by international trade is attack by
pirates in the Gulf of Aden. More than half of Indias merchandise trade (exports and
imports) passes through the piracy infested Gulf of Aden. New exporters and importers
are facing problems because of increased pirate attacks as they find it difficult to get
insurance cover.
9. Problem of Subsidies by Developed Countries: The developed countries like USA
provide huge subsidies to their exporters. For instance, in case of agriculture exporters,
USA, UK and others provide huge subsidies to their exporters. Therefore, the exporters of
developing countries like India find it difficult to face competition in the world markets.
10. Documentation Formalities: There are a number of documents to be prepared in export
trade. In India, there are as many as 25 documents (16 commercial documents and 9
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regulatory documents) to be filled in. However, aligned documentation system (ADS) has
simplified export documentation procedure.
11. Foreign Exchange Regulations: Export marketing is subject to foreign exchange
regulations. For instance, in India, the exporters have to give a declaration in Form GR to
the Reserve Bank of India (RBI) that they will realize the full value of exports within a
period of 180 days.
Globalization of Markets: It refers to the merging of national markets into one huge global
marketplace. Globalization of Production: It refers to the sourcing of goods and services from
locations around the world to take advantage of national differences in the cost and quality of
factors of production. Falling Barriers to Trade and Investment: The falling of barriers to
international trade enables firms to view the world as their market. Technological Innovation:
Technological changes have achieved advances in communication, information processing, and
transportation technology, including the Internet and the World Wide Web.
FACTORS
DETERMINING
INBUILDING
GLOBAL
COMPANIES
POLITICAL
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Gujarat Hotels Limited Srinivasa Resorts Limited International Travel Fortune Park Hotels
Limited House Bay Islands Hotels Limited Gold Flake Corporation Limited
ITC INFOTECH The company services industries including, Banking Financial Services &
Insurance (BFSI), Consumer Packaged Goods (CPG), Retail, Manufacturing, Engineering
Services, Media & Entertainment, Travel, Hospitality, Life Sciences and Transportation &
Logistics. Ranked amongst Top 10 Specialty Application Development Providers - Global
Services, CMP Media
ITC CIGARETTES Market Value. The Indian tobacco market grew by 8.9% in 2012 to reach
value of $11.6 billion. Market Value Forecast In 2013, the Indian tobacco market is forecast to
have a value of $14.9 billion, an increase of 29.4% since 2008.
MAHINDRAMAHINDRA AND MAHINDRA FORGINGSMAHINDRA Their global presence
They are one of the largest and most means that you can find technologically advanced
Mahindra vehicles on the manufacturers of forged roadsboth paved and and machined
components in the world. unpavedof Australia, They create parts like Europe, Latin America,
links, knuckles, spindles, Malaysia, and South shafts, crankshafts, camshafts, pistons, ball Africa.
And they are joints, and stub axles that seeking out new terrain are used in automotive, every day
agriculture, railway, mining, construction and other industries throughout the world.
MAHINDRAMAHINDRA SATYAM TECH MAHINDRA Since commencing operations in
1986 as a joint Sathyam is a global player in venture between Mahindra and the global
Information, British Telecom (BT), they have Communication, and Technology (ICT) space.
They become one of Indias largest provide enterprise business software exporters and ranked
solutions, infrastructure No.1 in the Telecom Software services, industry native Category (Voice
& Data 2010-11). solutions, integrated For over two decades, they have engineering solutions,
been the chosen transformation consulting services, partner for wire-line, wireless and application
development and broadband operators in Europe, management services, and Asia-Pacific and
North America. business process outsourcing to more than 350 clients in We operate in more than
30 35 countries. countries through 17 sales offices and 13 delivery centers, working with major
players like British Telecom, Vodafone, among others
INFOSYS Infosys is a global leader in consulting, technology and outsourcing with revenues of
US$ 7.231 billion Infosys provides business consulting, technology, engineering and outsourcing
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services to help clients in over 30 countries build tomorrows enterprise. Infosys and its
subsidiaries have 155,629 employees as on Dec 31, 2012.
INFOSYS Infosys takes pride in building strategic long-term client relationships. 97.5% of our
revenues come from existing customers Infosys has a global footprint with 67 offices and 69
development centers in US, India, China, Australia, Japan, Middle East, UK, Germany, France,
Switzerland, Netherlands, Poland, Canada and many other countries.
DABUR Dabur has a special herbal health care and personal care range successfully selling in
markets ranging from the Middle East, Far East, North Africa and Europe Inroads into several
European and American markets that have good potential due to resurgence of the back-to-nature
movement Export of Active Pharmaceutical Ingredients (APIs), manufactured under strict
international quality benchmarks, to Europe, Latin America, Africa, and other Asian countries
Export of food and textile grade natural gums, extracted from traditional plant sources Six
modern manufacturing facilities spread across South Asia, Middle East and Africa to optimize
production by utilizing local resources and the most modern technology available
TATA Corus Group (U.K.) Tata Steel, one of the leading steel producers in India, acquired
Corus Group for U.S. $12.11 billion ( 8.5 billion) on January 31, 2007 This acquisition is
considered to be one of the biggest foreign acquisitions by an Indian company, and after this only
TATA Steel came out to be the fifth largest steel producer in the whole world.
TATA Jaguar Cars and Land Rover (U.K.) Tata Motors has acquired both Jaguar and Land
Rover, which are two iconic British brands with worldwide growth prospects This deal was for
a whooping U.S. $ 2.3 billion with Ford, the previous American owners. The deal was effective
from May 2008. The deal is seen as yet another endeavor of the fast growing Indian industries,
also the latest in a string of foreign acquisitions by Tata.
Bharti Airtel Zain Africa Bharti Airtel had acquired Zain Africa for a value of U.S. $10.7
billion. The acquisition gives Bharti Airtel a total customer base of 180 million, including 131
million subscribers it had in India at the end of April By expanding its business outside the
country, Bharti Airtel can in the long term benefit from economies of scale, including getting
better deals from suppliers
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Aditya Birla Novelis (U.S.) Has acquired the entire stake in the Atlanta based aluminium
company Novelis for U.S. $6 billion This company had separated from Alcan, a global
aluminium company
ONGC Imperial Energy (U.K.) Oil and Natural Gas Corp (ONGC) has acquired Imperial
Energy. This deal was for 1.3 billion pounds (U.S. $1.9 billion). The company owed the
acquisition to government support, which in the past seven years increase its number of projects
to 39 in 17 countries, from just a single project in Vietnam
Essar Steel Global Algoma Steel (Canada) Ruias owned Essar Steel Global acquires the Canadian
steel company Algoma Steel at a valuation of Canadian $1.85 billion. Essar Steel Holding, Essar
Groups overseas investment arm made the investment possible and easy. Algoma would
definitely provide Essar an excellent platform for the Canadian and North American market
Reliance Marcellus Shale Reliance, led by Indian billionaire Mukesh Ambani, got the right to
buy 40 percent of all new Marcellus Shale leases that Atlas acquires, after this purchase
acquisition and agreement was completed.
Acquisition Price ($m) Reliance Industries Flag Telecom, Bermuda 212 Trevira, Germany 95Tata
Motors Daewoo, Korea 118Infosys Technologies Expert Information 3.1 Services, Australia
Wockhardt CP Pharmaceuticals, UK 18Cadila Health Alpharma SAS, France 5.7Hindalco Straits
Ply, Australia 56.4Wipro NerveWire Inc, US 18.5Aditya Birla Dashiqiao Chem, China 8.5United
Phosphorus Oryzalin Herbicide, US 21.3Bharat Forge Carl Dan Peddinghaus Gmbh, Germany
28Ranbaxy RPG Aventis, France 80
WTO Regulations and their implications for India
The World
Trade
Organization (WTO)
is
an organization that
intends
to
supervise
and liberalize international trade. The organization officially commenced on 1 January 1995
under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT),
which commenced in 1948.The organization deals with regulation of trade between participating
countries; it provides a framework for negotiating and formalizing trade agreements, and a
dispute resolution process aimed at enforcing participant's adherence to WTO agreements, which
are signed by representatives of member governments and ratified by their parliaments. Most of
the issues that the WTO focuses on derive from previous trade negotiations, especially from
the Uruguay Round (19861994).
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The organization is attempting to complete negotiations on the Doha Development Round, which
was launched in 2001 with an explicit focus on addressing the needs of developing countries. As
of June 2012, the future of the Doha Round remained uncertain: the work programme lists 21
subjects in which the original deadline of 1 January 2005 was missed, and the round is still
incomplete. The conflict between free trade on industrial goods and services but retention
of protectionism on farm
subsidies to
domestic agricultural
sector (requested
by developed
countries) and the substantiation of the international liberalization of fair trade on agricultural
products (requested by developing countries) remain the major obstacles. These points of
contention have hindered any progress to launch new WTO negotiations beyond the Doha
Development Round. As a result of this impasse, there has been an increasing number of bilateral
free trade agreements signed. As of July 2012, there were various negotiation groups in the WTO
system for the current agricultural trade negotiation which is in the condition of stalemate.
Principles of the trading system
The WTO establishes a framework for trade policies; it does not define or specify outcomes. That
is, it is concerned with setting the rules of the trade policy games. Five principles are of particular
importance in understanding both the pre-1994 GATT and the WTO:
1. Non-discrimination. It has two major components: the most favoured nation (MFN) rule,
and the national treatment policy. Both are embedded in the main WTO rules on goods,
services, and intellectual property, but their precise scope and nature differ across these
areas. The MFN rule requires that a WTO member must apply the same conditions on all
trade with other WTO members, i.e. a WTO member has to grant the most favorable
conditions under which it allows trade in a certain product type to all other WTO
members. "Grant someone a special favour and you have to do the same for all other
WTO members." National treatment means that imported goods should be treated no less
favorably than domestically produced goods (at least after the foreign goods have entered
the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical
standards, security standards et al. discriminating against imported goods).
2. Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise
because of the MFN rule, and a desire to obtain better access to foreign markets. A related
point is that for a nation to negotiate, it is necessary that the gain from doing so be greater
than the gain available from unilateral liberalization; reciprocal concessions intend to
ensure that such gains will materialise.
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articles allowing for the use of trade measures to attain non-economic objectives;
articles aimed at ensuring "fair competition"; members must not use environmental
protection measures as a means of disguising protectionist policies.
Exceptions to the MFN principle also allow for preferential treatment of developing
countries, regional free trade areas and customs unions.
Undesirable effects of globalization
Globalization seems to be looked on as an unmitigated good by economists. Unfortunately,
economists seem to be guided by their badly flawed models; they miss real-world problems. In
particular, they miss the point that the world is finite. We dont have infinite resources, or
unlimited ability to handle excess pollution. So we are setting up a solution that is at best
temporary.
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Economists also tend to look at results too narrowlyfrom the point of view of a business that can
expand, or a worker who has plenty of money, even though these users are not typical. In real life,
businesses are facing increased competition, and the worker may be laid off because of greater
competition.
Globalization makes it virtually impossible for regulators in one country to foresee the
worldwide implications of their actions
Globalization tends to move taxation away from corporations, and onto individual
citizens.
Globalization of Markets: It refers to the merging of national markets into one huge global
marketplace. Globalization of Production: It refers to the sourcing of goods and services from
locations around the world to take advantage of national differences in the cost and quality of
factors of production. Falling Barriers to Trade and Investment: The falling of barriers to
international trade enables firms to view the world as their market. Technological Innovation:
Technological changes have achieved advances in communication, information processing, and
transportation technology.
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Global economies are so tightly interconnected that companies, governments and industries will
soon be forced to cooperate in ways we could not have imagined just a few years ago.
In fact, Ernst & Young believes the six trends are themselves connected by three underlying
drivers that have helped establish each trend and perpetuate it.
1. Demographic shifts. Population growth, increased urbanization, a widening divide
between countries with youthful and quickly aging populations and a rapidly growing
middle class are reshaping not only the business world, but also society as a whole.
2. Reshaped global power structure. As the world recovers from the worst recession in
decades, the rise of relationships between the public and private sectors has shifted the
balance of global power faster than most could have imagined just a few years ago.
3. Disruptive innovation. Innovations in technology continue to have massive effects on
business and society. We're now seeing emerging markets become hotbeds of innovation,
especially in efforts to reach the growing middle class and low-income consumers around
the globe.
Six global trends, interconnected by three key drivers of change
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As the greatest hope for growth in the global economy for the past two years, the
emerging markets have become the darlings of the financial press and a favorite talking
point of C-suite executives worldwide.
Once attractive only for their natural resources or as a source of cheap labor and low-cost
manufacturing, emerging markets are now seen as promising markets in their own right.
Rapid population growth, sustained economic development and a growing middle class
are making many companies look at emerging markets in a whole new way.
These emerging market leaders represent a major shift in the global competitive landscape
a trend that will only strengthen as they grow in size, establish dominance and seek
new opportunities beyond their traditional domestic and near-shore markets.
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Emerging market leaders will become a disruptive force in the global competitive landscape
As emerging market countries gain in stature, new companies are taking center stage. The rise of
these emerging market leaders will constitute one of the fastest-growing global trends of this
decade.
These emerging market companies will continue to be critical competitors in their home markets
while increasingly making outbound investments into other emerging and developed economies.
Working to serve customers of limited means, the emerging market leaders often produce
innovative designs that reduce manufacturing costs and sometimes disrupt entire industries.
A case in point: India's Tata Motors' US$2,900 Nano, priced at less than half the cost of any other
car on the market worldwide. A version is set to go on sale in Europe this year.
Many emerging market leaders have grown up in markets with "institutional voids," where
support
systems
such
as
retail
distribution
channels,
reliable
transportation
and
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As a result, these companies possess a more innovative, entrepreneurial culture and have
developed greater flexibility to meet the demands of their local and "bottom-of-the-pyramid"
customers.
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business-unit-level initiative for 89% of respondents; 33% spend 3% or more of total revenues on
cleantech and 75% expect cleantech spending to increase over the next five years.
national strategic platform for creating jobs, fostering innovation and establishing local industries.
According to Bloomberg New Energy Finance, investment in cleantech surged 30% in 2010 over
the previous year to US$243b, double the amount recorded in 2006 and nearly five times that of
2004.
There is still a large gap between the capital required and the capital available to fuel the
transition to a low-carbon economy. Primary energy demand is expected to grow by 36%
worldwide between 2019 and 2035, with the bulk of that new energy use (93%) coming from
emerging markets.
By 2035, China alone will see its energy needs rise by 75%, according to the International Energy
Agency (IEA) report, World Energy Outlook 2010.
In the coming years, surging demand, energy prices, energy security concerns and scarcity of
natural resources will encourage governments and companies to work harder to diversify their
energy portfolio mix and to continue investments in clean energy innovation, deployment and
adoption.
This inevitable move to a low-carbon, resource-efficient economy presents an opportunity to
stake out and capture a strategic competitive position not just for governments, but also for
innovators, investors and corporations, too.
The energy mix evolves
Renewable energy is still expensive in most places, which will limit its use in the short run. But as
wind, solar and other renewable projects scale up, their prices will continue to fall.
The IEA predicts that power generation using renewables will triple between 2010 and 2035.
Fossil fuels such as oil and coal will lose market share over time, as natural gas and nuclear power
contribute to the diversified energy mix.
There has been a surge in construction of nuclear power reactors worldwide. Natural gas, a
cleaner-burning fossil fuel, is expected to grow more important, serving as a bridge to a
renewables-based economy.
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Restrictions on proprietary trading and investments in hedge funds and private equity (PE)
funds in the US
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to lower 2010's aggregate bank bonuses in the UK from the previous year, increase transparency
and reduce clawbacks and deferred shares subject to vesting periods.
Regulation will drive up the cost of business for many large financial institutions
The substance of the new rules creates challenges. For instance, Basel III requires banks to boost
capital and liquidity levels, implement a leverage ratio, increase risk coverage for certain assets
and activities and raise standards for supervisory review.
In the US, the Dodd-Frank Act is more than 2,300 pages long and will require agencies to write
353 new rules and conduct 68 studies.
Not surprisingly, large financial institutions cite regulatory uncertainty as the biggest challenge
they face.
Their uncertainty is compounded by the fragmentation of regulations, as individual countries set
out to make their own rules.
And to make sure that the private sector grows in an economically sustainable manner and
ensures better employment
To achieve those goals, many governments are trying to further their national interests
through diverse vehicles and activities, including state-owned corporations, sovereign
wealth funds (SWFs), industrial planning and regulation.
The challenges are serious enough that we see governments taking an extremely active
role in the economy.
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Looking ahead, we believe governments will increasingly take the lead in five key areas:
After several years of rising debt-to-GDP ratios, most developed countries are now
struggling to put their finances in order.
From 2006 through 2009, the overall developed country market debt-to-GDP ratio rose
from less than 80% to 95%.
In 2011, the debt ratio is expected to break the 100% mark. Deutsche Bank projects that the debtto-GDP ratio for developed countries will reach 133% of GDP by 2020.
Alarmed by these numbers, developed economies at the G20 Summit in Toronto in June 2010
committed themselves to reducing their deficits by 2013, and to stabilizing or reducing
government debt-to-GDP ratios by 2016.
Emerging markets countries expand their social benefits
Emerging markets countries with a surplus need to boost social spending on pensions, health care
and infrastructure. In some markets, a stronger safety net is intended to promote economic
growth.
Most Chinese, for example, essentially insure themselves through extraordinarily high household
savings rates. To strengthen its consumer economy, China must first convince consumers that it is
safe for them to spend.
Emerging market countries also need to improve the effectiveness of their tax administration, and
to invest in infrastructure, telecommunications, transportation, education and housing. Publicprivate partnerships (PPPs) are likely to become important investment vehicles in these markets.
Aging populations and immigration inflows pose new spending challenges
Meeting the needs of people who are living longer, healthier lives will have a tremendous
financial impact. Standard & Poor's reports that the median age-related public spending for
developed economies (including health care, pensions, long-term care and unemployment) is
expected to rise from 17% of GDP in 2010 to 27% in 2050, versus 11% to 17% for emerging
market countries.
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Median public spending on age-related health care in developed economies is expected to grow
from 6% of GDP in 2010 to 11% in 2050, versus 4% to 11% of GDP for emerging market
economies.
Increased immigration flows are also expected to put upward pressure on future government
spending.
Governments direct their economies
Against the backdrop of uneven economic recovery around the globe, governments continue to be
active in economic life. An enormous amount of wealth remains concentrated under state control
in the form of SWFs.
Although SWF assets fell in value after the recession, they are set to grow again. The total assets
of SWFs are expected to climb from roughly US$3.5 trillion in 2010 to US$8 trillion by 2015,
making SWFs powerful sources of capital for years to come.
State-owned enterprises (SOEs) will remain important to defending strategic industries and
guaranteeing the adequacy of critical infrastructure in some countries. SOEs are becoming larger
and more globally competitive:
Sixty-two percent of Indian companies on the 2010 Fortune Global 500 list are SOEs.
Forty-six Chinese SOEs (excluding Taiwan-based companies) are on the 2010 list, up
from 34 in 2009.
Three of China's state-owned energy giants are now in the top 10.
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Trade and currency issues were high on the agenda at the G20 Summit in Seoul in November
2010.
Debate centered on varying perceptions of China's valuation of its currency to drive exports, as
well as quantitative easing in the US and its potential to increase capital inflows to emerging
countries and fuel asset bubbles.
Despite fragmented views, the G20 Seoul declaration managed to reaffirm the notion of working
together, with a focus on moving toward more market-determined exchange rate systems,
refraining from competitive devaluation of currencies and pursuing a full range of policies
conducive to reducing excessive imbalances.
Rapid technology innovation creates a smart, mobile world
Over the past 25 years, the digital revolution has changed the way we work and play almost
beyond recognition. Yet the smart, interconnected world we live in now is still neither as smart,
nor as connected, as we would like it to be.
Consumers want more powerful devices and applications, while businesses seek more costeffective technology to cope with increasingly complex challenges.
Satisfying these demands will lead to explosive growth in data and analytics, to new competition
in almost every field, and to the disruption and realignment of many industries.
Specifically, we expect to see the following changes:
Businesses will compete on analytics to differentiate themselves
The growing number of embedded sensors collecting information about the world, and the rise of
social networks that store the data people share, will generate immense quantities of information.
IDC, a market research firm, suggests that the amount of digital information created each year
will increase to 35 trillion gigabytes by 2020, requiring 44 times more data storage than in 2009.
For example, telematics applications, similar to global positioning systems, will allow
organizations to send, receive and store information via telecommunications devices while
controlling remote objects.
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Although commonly associated with the automotive industry, telematics applications are being
developed for use in medical informatics, health care and other fields. Despite these advances in
technology, simply collecting and managing the massive volumes of data will provide minimal
value.
The real payback comes when business intelligence is applied to enable companies to make better
strategic decisions.
Business intelligence, which enables organizations to gather quantifiable data on each area of the
organization and analyze it in a way that yields information they can act on helping them
enhance decision making, improve performance, mitigate risk and sometimes even create new
business models ; is growing in importance.
Smart mobility will change the way people interact
Increasingly, smart devices portable tools that connect to the internet have become a part of
our lives. In the last quarter of 2010, sales of smartphones outpaced those of PCs for the first time,
according to data from IDC.
By 2014, more smart devices could be used to access the internet than traditional computers. The
move to an increasingly mobile world will create new players and new opportunities for a variety
of industries.
We expect that new emerging market companies will be significant competitors, growing rapidly
in part because a lack of legacy systems will enable them to profit more quickly from new
technology as it becomes available.
Emerging markets will create plenty of opportunities related to smart technology, and they will
not be limited to for-profit enterprises
In Kenya, for example, mobile phones are being used to collect data and report on diseasespecific issues from more than 175 health centers serving over 1 million people. This technology
has reduced the cost of the countrys health information system by 25% and cut the time needed
to report the information from four weeks to one week.
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There is a growing mismatch between the skills employers need and the talent available
An estimated 31% of employers worldwide find it difficult to fill positions because of talent
shortages in their markets, reports the 2010 Talent Shortage Survey from Manpower, an
international employment agency.
When it comes to attracting employees with critical skills, the task becomes even more
challenging. Today, 65% of global companies and more than 80% of companies in fast-growth
economies are having problems finding employees with the skills they need, according to Towers
Watson, an HR consultancy.
Why cant companies find the right talent despite the growing ranks of college-educated workers
and the high unemployment in some of the best-educated markets?
Part of the answer has to do with the rising skill level needed in the evolving global economy.
Another element is the failure of educational systems to produce an adequate base of talent to
meet these changing needs. Although educational access is growing worldwide, not enough
students graduate with the skills desired by global employers.
Generation U and women to fill the skills gaps
Desperate for workers, many companies will become more accepting of diverse employees,
particularly older workers and women.
The leading US advocacy group for retired people, the AARP, believes that 80% of baby boomers
will keep working full- or part-time past their current retirement age.
The Pew Research Center predicts that Generation U (unretired) workers will fuel 93% of the
growth in the US labor market through 2016.
Women, an increasingly well-educated source of talent, have entered the workforce in ever
greater numbers in recent decades. However, their talents are still often underutilized.
This is particularly true in societies with traditional views of gender roles, including many fastgrowing economies.
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The employer will no longer define the workplace; rather, employees priorities and preferences
will dictate what the future workplace will look like, particularly now that technology makes it
easier than ever to design a variety of flexible arrangements.
Companies operating in aging societies will have to craft methods to engage or re-engage the
experienced base of talent. Companies that fail to respond to this change and do not succeed in
redefining their employee value proposition will fail to attract, retain or develop talent effectively.
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