International Marketing Total

UNIT-1: INTERNATIONAL MARKETING
STRUCTURE:
1.1 Objectives
1.2 Introduction to International Marketing
1.3 Meaning of International Marketing
1.4 Definitions of International Marketing
1.5 Scope of International Marketing
1.6 Difference between International and Domestic Marketing
1.7 Principles of International Marketing
1.8 Reasons to enter the international marketplace and how to enjoy new export
opportunities
1.9 Challenge and Opportunities in International Marketing:
1.10 Some Problems Faced by International Marketing
1.11 Advantages of International Marketing
1.12 Check your progress
1.13 Summary
1.14 Keywords
1.15 Questions for Self-Study
1.16 References
1.0 OBJECTIVES
After studying this unit, you will be able to:
 Define the term International Marketing
 Describe the Scope of International Marketing
 Distinguish between International and Domestic Marketing
 Outline the Principles of International Marketing
 Critically evaluate the challenges and opportunities of International Marketing
 Identify the benefits and problems of International Marketing
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1.1 INTRODUCTION
International Marketing involves all the activities that form part of domestic marketing.
An enterprise engaged in international marketing has to correctly identify, assess and interpret
the needs of the overseas customers and carry out integrated marketing to satisfy those needs.
International marketing refers to marketing carried out by companies overseas or across
national borders. This strategy uses an extension of the techniques used in the home country of
a firm. International marketing is simply the application of marketing principles to more than
one country. However, there is a crossover between what is commonly expressed as
international marketing and global marketing, which are similar terms. The intersection is the
result of the process of internationalization. Many American and European authors see
International Marketing as a simple extension of exporting, whereby the marketing mix 4Ps is
simply adapted in some way to take into account differences in consumers and segments.
According to American Marketing Association (AMA), international marketing is the

multinational process of planning and executing the conception, pricing, promotion, and
distribution of ideal goods and services to create exchanges that satisfy individual and
organizational objectives. The current development of the world economy is increasingly
influenced by integration and globalization tendencies. The competitive environment in foreign
markets enables entry and participation in international trade activities for many companies. The
decisions of the company related to the market selection and entry or operation on the foreign
market are based on the principles of international marketing, which can be defined as the
implementation of marketing activities exceeding the national borders of countries.
In this unit, you will learn various aspects of International Marketing. You must note
that in the definition, the word multinational has been added to the definition of marketing
given by other experts. That word implies that marketing activities are undertaken in several
countries and such activities should somehow be coordinated across nations.
1.2 CONCEPT OF INTERNATIONAL MARKETING
International marketing that is also known as global marketing has earned a great scope
today. No business can survive in the international market until they don’t have an internal
marketing plan. Thanks to globalization, the marketing strategies of today are not limited to
staying confined within the borders of a country. Instead, the world is like an open market for
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marketers and they can enter whichever market they want. In other words, the scope
of international marketing has grown wildly than it was in the past. Promoting a product
internationally is rising in Indonesia, China, India, Mexico, Korea, Chile, Argentina, and Brazil
in the form of new and potential markets. Moreover, the increased power of purchasing and ever-
changing customer taste along with the assistance in gaining knowledge about these tastes has
changed the shape of the world altogether.
International marketing involves all the activities that form part of domestic marketing.
An enterprise engaged in international marketing has to correctly identify, assess and interpret
the needs of the overseas customers and carry out integrated marketing operations to satisfy
those needs. In other words, the basic functions are the same in international marketing as well
as in domestic marketing.
At the same time, several characteristics are unique to international marketing. When
the business crosses the national borders of a given country, it becomes enormously more
complex. The resulting problems and management situations transcend those of marketing,
finance, and production. A wide range of legal, political, cultural, and sociological dimensions
enters the picture, adding a lot of complexity to the task. In addition, the one factor that
contributes maximum to the complexity is the environmental and cultural dynamics of the
global markets. Since the number of potential markets is growing, so it is important for any
brand for having complete information about how messy it can get for them out there, if they
are not fully aware of how far they can go for promoting their product. That is why the authors
wrote a full-fledged article for fulfilling the purpose of making you understand the limits and
freedom of international businesses.
Let us briefly touch upon the main functions involved in International Marketing. They are:
• Choosing the basic route for global marketing
• Market selection and product selection
• Selection of distribution channels
• Developing pricing strategy
• International marketing communication
• Mastering the procedural complexities
• Organizational adaptations
• Handling business ethics
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1.3 DEFINITIONS OF INTERNATIONAL MARKETING
Some of the definitions of international marketing are:
Cateora (1997) defines international marketing as the performance of business activities that
direct the flow of a company’s goods and services to consumers in more than one nation for
profit.
Keegan (1997) comprehends that international marketing is going beyond export marketing and
becoming more involved in the marketing environment in which it is doing business.
Jain (1989) refers to international marketing as exchanges across national boundaries for the
satisfaction of human needs and wants.
Terpestra (1972) looks upon international marketing as marketing carried on across national
boundaries.
According to AMA “It is the multinational process of planning, execution, conception, pricing,
promotion, and distribution of ideas, goods and services create exchanges that satisfy individual
and organizational objectives”.
According to Terpstra, Foley, and Sarathy, “International marketing consists of findings and
satisfying global customer needs better than the competition, both domestic and international and
coordinating marketing activities within the constraints of the global environment”.
1.4 SCOPE OF INTERNATIONAL MARKETING

The following aspects describe the scope of international marketing-
Exports Contractual Agreements

Imports Joint Venturing
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Scope of International
Management Contracts
Fully Owned Manufacturing
Strategic Alliances
1. Imports
Importing products for a brand works the same way as it does for a whole country.
Businesses buy up the products so that they can resale them to a potential customer base inland
that they have gathered with a lot of hard work and passing through tough times. But most of the
time, companies take help from imports for their use – creation and improving their product line.
They do so when they are sure that using the product can let them achieve their objective or can
help put up a unique solution.
2. Exports
Exporting is similar in terms of concept for a brand as it is for a country. Companies

export their finalized products to international markets or on to their other franchises in far-off
markets where they can sell the products to their localities for generating huge revenues. Not just
this, even semi-finalized products are exported for getting an extra boost for the brand’s treasury.
This revenue generated through exports is then used for paying up the costs of imports, covering
up the costs of development as well as ripening profits. Both the imports and exports help in
expanding the reach of the companies.
3. Contractual Agreements
Whenever a business moves out to the international level, its scope of international
marketing exposes it to greater chances of doing a lot more business. The fun part starts there
when you see your company making contractual agreements with many others. Those
agreements can either be in terms of licensing or co-production or even of technical assistance.
Licensing then moves further down the road and includes even more agreements in the form of
trademarks, patents, secrets of the brand, and brand names, too, which those companies are
allowed to use only if the fee is paid.
4. Joint Venturing
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A Joint Venture is the name of a collaborative association of two brands for a reasonable
period. This association then gives birth to an even new firm that works individually and pursues
goals other than parent companies. This new firm works under the banner of both the “venturing”
brands and the division of profits and losses takes place between both in a certain ratio. Most of
the time, a joint venture comes into being when a local company is of great interest for an
investor out of the game field or sometimes, the case can go opposite. This technique is of
extreme value to companies that are interested in doing business in countries where outsiders are
not allowed to have their businesses and thus, raises the scope of international marketing.
5. Contract Manufacturing
Contract manufacturing is one of the most used tactics and is awesome as well since it
reduced the costs of productions for the companies or better said the company takes off the
responsibility of assembling the products, itself. The other company, with which the contract is
made, assembles the product and keeps product marketing.
6. Fully Owned Manufacturing
This aspect of the scope of international marketing comes into play when it is in the best
interests of the company to take full control over both the production and promotion in the target
markets. For this purpose, the company sets up its facilities for the creation and assembling of the
product (if possible). This lets the brand work for long-term interests instead of pursuing short-
term goals and keeping the quality and prices under their consideration without having to rely on
others.
7. Strategic Alliances
Gaining a long-term competitive advantage over the competitors is not an easy task. But
at that point, you need to learn that what you can’t achieve alone, you can do so by making some
friends. It works just like the concept, which says that the enemy of your enemy, can be your
friend. It’s capabilities of increasing the innovative flow while boosting up the flexibility for
making the responses back to the market and that’s what makes this thing to be included among
the important points of the scope of international marketing.
8. Management Contracts
There is yet another point that’s describable among the scope of international marketing
and that’s the existence of management contracts. These contracts help achieve a skilled labor
force for the brand from the brand with comparatively experienced workers. In this way, the
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company can save itself from greater dangers easily with that skill-filled package supplied by the
supplier as the par contract.
1.5 DIFFERENCE BETWEEN INTERNATIONAL MARKETING AND

DOMESTIC MARKETING
Domestic Marketing is concerned with marketing practices within researchers or
marketers’ home countries. Foreign Marketing encompasses the domestic operations within the
foreign country. A US company considers marketing in the United States as domestic marketing
and marketing in Great Britain as foreign marketing.
Comparative Marketing is the one when its purpose is to contrast two or more marketing
systems rather than examine a particular country’s marketing system for its own sake.
International Trade is concerned with the flow of goods and services across national borders. The
focus of the analysis is on commercial and monetary conditions that affect the balance of
payment and resource transfer. International Marketing, on the other hand, is more concerned
with the micro-level of the market and uses the company as a unit of analysis.
BASIS FOR
DOMESTIC MARKETING INTERNATIONAL MARKETING
COMPARISON
International marketing means the

Domestic marketing refers to
activities of production, promotion,
marketing within the
Meaning distribution, advertisement, and selling are
geographical boundaries of the
extended over the geographical limits of
nation.
the country.
Area served Small Large
Government
Less Comparatively high
interference
Business operation In a single country More than one country
Use of technology Limited Sharing and use of latest technology.
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BASIS FOR
DOMESTIC MARKETING INTERNATIONAL MARKETING
COMPARISON
Risk factor Low Very high
Capital requirement Less Huge
Variation in customer tastes and

Nature of customers Almost same
preferences.
Deep research of the market is required

Required but not to a very high
Research because of less knowledge about the
level.
foreign markets.
Language and cultures Unique language and culture Variant language and culture
Product planning and According to the domestic

According to foreign markets
development market
1.6 PRINCIPLES OF INTERNATIONAL MARKETING

The essence of international marketing can be summarized in three great principles. The first
identifies the purpose and task of marketing; the second refers to the competitive reality of
marketing and the third is the principal means for achieving the first two.
1. Customer Value and the Value Equation

The task of marketing is to create customer value that is greater than the value created
by competitors. The value equation is a guide to this task. As suggested in the equation, value
for the customer can be increased by expanding or improving product and/or service benefits,
by reducing the price, or by a combination of these elements. Companies with a cost advantage
can use price as a competitive weapon. Knowledge of the customer combined with innovation
and creativity can lead to a total offering that offers superior customer value. If the benefits are
strong enough and valued enough by customers, a company does not need to be a low-price
competitor to win customers.
2. Competitive or Differential Advantage

The second great principle of international marketing is a competitive advantage. A
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competitive advantage is a total offer, the vis-à-vis relevant competition that is more attractive
to customers. The advantage can exist in any element of the company’s offer: the product, the
price, the advertising, and point-of-sale promotion, or the distribution of the product. One of the
most powerful strategies for penetrating a new national market is to offer a superior product at a
lower price. The price advantage will get immediate customer attention, and, for those
customers who purchase the product, the superior quality will make an impression.
V = B/P
V = Value
B = perceived benefits – perceived costs Example: switching costs
P = price
3. Focus
The third international marketing principle is the focus or the concentration of attention.
Focus is required to succeed in the task of creating customer value at a competitive advantage.
All great enterprises whether large or small, are successful because they have understood and
applied this great principle. IBM succeeded and became a great company because it was more
clearly focused on customer’s needs and wants than any other company in the emerging data-
processing industry was one of the reasons IBM found itself in crisis in the early 1990s was that
its competitors had become much more focused on customer needs and wants.
Example: Dell and Compaq, focused on giving customers computing power at low prices. IBM
was offering the same computing power at higher prices.
A clear focus on customer needs wants, and on the competitive offer is required to mobilize the
effort needed to maintain a differential advantage. This can be accomplished only by focusing or
concentrating resources and efforts on customer needs and wants and on how to deliver a product
that will meet those needs and wants.
1.7 REASONS TO ENTER THE INTERNATIONAL MARKET PLACE

AND HOW TO ENJOY NEW EXPORT OPPORTUNITIES
Many marketers have found the international marketplace to be extremely hostile. A study by
Baker and Kaynak, for example, found that less than 20 percent of firms in Texas with export
potential carried out business in international markets. However, although many firms view
international markets with trepidation, others still decide to go international. Why?. Reasons
behind entering the international market arena to enjoy the fruitfulness of foreign markets are
presented below-
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1. Increase sales
If your company has good market demand in foreign markets, expanding your business
globally will improve overall revenue. If your company has a unique product or technological
advantage not available to international competitors then this advantage should result in major
business success abroad. For example, if you run a software company and add a French and
German language version, you can easily extend your total market.
2. Improve profits
Another reason behind entering the international market arena to enjoy the fruitfulness of
foreign markets is to improve the overall profitability of the company. For example, many export
markets are not as competitive as the U.S and therefore price pressures are far less – ever wonder
why a Jaguar car made in Coventry, England costs more in Coventry than California.
3. Short-term security
Your business will be less vulnerable to periodic fluctuations and downturns in the
market conditions. Therefore, need not be holding products at the domestic market for their
vulnerability, there is huge market opportunities are open at the international level.
4. Long-term security
The mature market with intense competition from domestic and foreign competitors can
provide long-term security. Therefore, the U.S. currently has excess capacity so international
business trade may become a necessity if you want to keep up in an increasingly global
marketplace and enjoy the potential for cost savings.
5. Increase innovation
The firm can carry out several innovative activities with the help of intellectuals of
companies and demand huge finance; it can be managed by entering into the international
segment. The firm can extend its customer base internationally with the help of financial
resources raised from the international market for new product development.
6. Exclusivity
Reasons behind entering the international market arena to enjoy the fruitfulness of foreign
markets are company’s management may have exclusive market information about foreign
customers/prospects, marketplaces, or market situations that are not known to others.
7. Economies of scale
Exporting is an excellent way to expand your business with products that are more widely
accepted around the world. In many manufacturing industries, Although the fundamental reason
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for entering the Global Marketplace is to increase potential demand, frequently other factors can
drive international market investment and performance measurement decisions.
8. Education
Under certain circumstances, a company might undertake an international market entry
not solely for financial reasons, but to learn. For example, the consumer products division of
Koc, the Turkish conglomerate, entered Germany, regarded as the world’s leading market for
dishwashers, refrigerators, freezers, and washing machines in terms of consumer sophistication
and product specification.
9. Competitive Strike
This is driven by the belief that the competitor would gain a significant advantage if it
were allowed to operate alone in that market. A common scenario is the market entry as a
follower move, where a company enters the market because a major competitor has done so.
Another frequent scenario is “offense as defense,” in which a company enters the home market
of a competitor-usually in retaliation for an earlier entry into its domestic market. In this case, the
objective is also to force the competitor to allocate increased resources to an intensified level of
competition.
10. Government Incentives

It is common for governments to “incentivize” their country’s companies to export. This
often results in many companies entering markets they would otherwise not have tackled.
In one study, the following motivating factors were given for initiating overseas marketing
involvement (in order of importance):
 Large Market Size
 Stability Through Diversification
 Profit Potential
 Unsolicited Orders
 Proximity Of Market
 Excess Capacity
 Offer By Foreign Distributor
 Increasing Growth Rate
 Smoothing Out Business Cycles
Other empirical studies over several years have pointed to a wide variety of reasons why
companies initiate international involvement. These include the saturation of the domestic
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market, which leads firms either to seek other less competitive markets or to take on the
competitor in its home markets; the emergence of new markets, particularly in the developing
world; government incentives to export; tax incentives offered by foreign governments to
establish manufacturing plants in their countries to create jobs; the availability of cheaper or
more skilled labor; and an attempt to minimize the risks of a recession in the home country and
spread risk.
1.8 CHALLENGES AND OPPORTUNITIES IN INTERNATIONAL

MARKETING
There is a multitude of challenges and opportunities arising from the global business
environment. As the accelerating shift in the global economic landscape from Europe and North
America to Asia, Latin America, and Africa intensify, global business enterprises are happening
to find themselves operating in new and sometimes unfamiliar market environments. Such
global dynamics create new opportunities, challenges, risks, and threats, which would need to
be understood if such businesses are to succeed.
Inevitably, such challenges and opportunities vary between companies and sectors but
some frequently cited opportunities and challenges include:
OPPORTUNITIES CHALLENGES
Access to customers in new countries New competition for existing customers in

domestic markets
Learning about customers in new markets Adjusting products to local tastes and
cultural peculiarities
Access to new, cheaper sources of finance Global financial contagion
Government incentives to relocate Costs of meeting a multitude of

local/national laws and regulations
Access to regional trading Exchange rate fluctuations

agreements/avoidance of trade barriers
Economies of scale Managing long supply chains
Access to new resources (e.g. cheap of New competition for local resources (e.g.
skilled labor, natural resources) more demand for labor pushing up local
wage costs)
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OPPORTUNITIES CHALLENGES
Knowledge and cultural progress between Cross-cultural communication e.g.

nations and reaping global peace and language barriers, differing body
harmony language, and etiquette
Country image improvement Corporate social responsibility issues
Reaping the benefits of competitive Capricious political environments/political

advantage risk /bias in favors of domestic companies
1.9 SOME PROBLEMS FACED BY INTERNATIONAL MARKETING
International marketing faces several problems in its operations. The important thing is
that domestic marketing also faces many problems in executing its operations, but problems
faced internationally bit different and complex as compared to domestic challenges. International
marketing is that problems are country-specific and tend to change their shape/effects/scope as
per time and venue in specific. Furthermore, changing globalizations scale and drastic shifts in
consumers’ behavior worldwide only create problems to the scope of international marketing.
Some of the leading problems faced by international marketing are listed below-
 Tariff Barriers
 Administrative Policies
 Considerable Diversities
 Political Instability or Environment
 Place Constraints (Diverse Geography)
 Variations in Exchange Rates
 Norms and Ethics
 Terrorism and Racism
1.10 BENEFITS OF INTERNATIONAL MARKETING

The attainment of business exercises monitoring, directing, and controlling the channel of
a company’s products and services to its customers at the global level to earn profit and satisfy
the demands internationally is the motto of international marketing. The main advantages of
international marketing are discussed below-
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1. Provides higher standard of living
International marketing ensures a high standard lifestyle & wealth to citizens of nations
participating in international marketing. Goods that cannot be produced in the home country due
to certain geographical restrictions prevailing in the country are produced by countries that have
an abundance of raw material required for the production and also have no restrictions imposed
towards production.
2. Ensures rational & optimum utilization of resources

Logical allocation of resources and ensuring their best use at the international level is one
of the major advantages of international marketing. It invites all the nations to export whatever is
available as surplus. For example, raw materials, crude oil, consumer goods, and even machinery
and services.
3. Rapid industrial growth

Demand for new goods is created through the international market. This leads to growth
in an industrial economy. The industrial development of a nation is guided by international
marketing. For example, new job opportunities, complete utilization of natural resources, etc.
4. Benefits of comparative cost

International marketing ensures comparative cost benefits to all the participating
countries. These countries avail the benefits of division of labor & specialization at the
international level through international marketing.
5. International cooperation and world peace

Trade relations established through international marketing bring all the nations closer to
one another and give them the chance to sort out their differences through mutual understanding.
This also encourages countries to work collaboratively with one another. This thereby designs a
cycle wherein developed countries help developing countries in their developmental activities
and this removes economic disparities and technological gaps between the countries.
6. Facilitates cultural exchange

International marketing makes social and cultural exchange possible between different
countries of the world. Along with the goods, the current trends and fashion followed in one
nation pass to another, thereby developing cultural relations among nations. Thus, cultural
integration is achieved at a global level.
7. Better utilization of surplus production

Goods produced in surplus in one country are shipped to other countries that need the
goods in international marketing. Thus, the foreign exchange of products between exporting
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countries and importing countries meet the needs of each other. This is only possible if all the
participating countries effectively use surplus goods, services, raw materials, etc.
8. Availability of foreign exchange

International marketing eases the availability of foreign exchange required for importing
capital goods, modern technology & many more. Essential imports of items can be sponsored by
the foreign exchange earned due to exports.
9. Expansion of tertiary sector

International marketing promotes exports of goods from one country to another
encouraging industrial development. Infrastructure facilities are expanded through international
marketing. It indirectly facilitates the use of transport, banking, and insurance in a country
ensuring additional benefits to the national economy.
10. Special benefits at times of emergency

Whenever a country faces natural calamities like floods & famines, it is supported by
other countries in the international market. The international market provides an emergency
supply of goods and services to meet the urgent requirements of the country facing calamity.
This distribution can only be facilitated by a country, which has surplus imports.
A company exporting goods to other foreign countries earns substantial profit through
export operation, as domestic marketing is less profitable than international marketing. The loss a
company suffers in domestic marketing can be compensated from the profit earned through
exports in international marketing. Foreign exchange can be earned by exporting goods to
foreign countries. Thus, the profit earned can be used for the import of essential goods, new
machinery, technology, etc. This would further facilitate large-scale export in the future.
Advantages to the consumer's point of view:
 Consumption of unpronounced goods

 Consumption of goods at a low price
 Enjoying benefits of competition
 Consumption of new products
Advantages to the producer's point of view:
 Export of surplus production

 Expansion of the market in foreign countries
 Production of goods at a low cost
 Increase in production
 More profitable
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 Reduce business risk
 Reduce cost
Advantages to the economic point of view:
 Increases total production

 Increases export earnings
 Challenging natural calamities
 Knowledge and cultural progress
 Increases international peace and assistantship
 Extension of industry
 Export of unusual goods
 Optimum utilization of natural resources
 Progress in technological knowledge
 Image development.
 Increase in consumption
1.11 CHECK YOUR PROGRESS
Fill in the blanks with suitable answers:
1. _____________ is the activities of production, promotion, distribution, advertisement and

selling are extend over the geographical limits of the country.
2. ____________ is the name of a collaborative association of two brands for a reasonable
period.
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3. ____________ indicate taxes and duties imposed on imports
4. International marketing involves all the ____________that form part of domestic
marketing.
5. For the USA, ________ is the biggest market in the world of consumers and engineering
products.
6. According to experts, the best way to control inflation is to earn_________ through
exports.
Answer to Check Your Progress
1. International marketing
2. Joint Venture
3. Tariff barriers
4. Activities
5. India
6. Foreign Exchange
1.12 SUMMARY
This unit has provided an overview of the basic issues of international marketing. Similar
to domestic marketing, international marketing is concerned with the process of creating and
executing an effective marketing mix to satisfy the objectives of all parties seeking an exchange.
International marketing is relevant regardless of whether or not the activities are for profit. It is
also of little consequence whether countries have the same level of economic development or
political ideology since marketing is a universal activity that is applicable in a variety of
circumstances. The marketing principles may be fixed, but a company’s marketing mix in the
international context is not. Certain marketing practices may or may not be appropriate elsewhere
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and the degree of appropriateness cannot be determined without careful investigation of the
market in question.
International marketing is the process of focusing the resources and objectives of a

company on marketing opportunities at the international level. Companies are engaged in
international marketing for two reasons: firstly, to take advantage of opportunities for growth and
expansion, and secondly, to eventually lose their domestic markets because they will be pushed
aside by stronger and more competitive international competitors. The benefits of international
marketing are considerable. The trade moderates inflation and improves both employment and
the standard of living, while providing a better understanding of the marketing process at home
and abroad. For many companies, survival or the ability to diversify depends on the growth,
sales, and profits from abroad.
1.13 KEYWORDS
It is the performance of a business activity, directing the flow of
Marketing
products from producer to consumer.
It is the form of marketing in which the firm faces only one set of
Domestic
competitive, economic, and market issues
Marketing
Multinational Organizations that manage production or offer services in more than
Corporations one country.
International marketing consists of findings and satisfying global
International
customer needs better than the competition, both domestic and
Marketing
international, and coordinating marketing activities within the
constraints of the global environment.
The performance of business activities that direct the flow of goods
Global Marketing
and services to consumers or users in more than one nation.
Accumulated volume in production, resulting in lower cost price per
Economies of Scale
unit.
Tariff barriers It indicates taxes and duties imposed on imports.
1.14 QUESTIONS FOR SELF STUDY
1. What do you mean by International Marketing?

2. What are the advantages of International Marketing?
3. Distinguish between Domestic Marketing and International Marketing.
4. Describe the scopes of International Marketing?
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5. Explain the principles of international marketing.
6. What are the basic economic reasons that might influence a firm’s decision or motivate a
firm to plunge into international marketing?
7. How is international marketing differs from domestic marketing?
8. How can creating value for customers and customer focus give a competitive advantage
to the companies?
9. What is the importance of international marketing? Explain in brief.
10. “International Marketing has become indispensable in the economic development of a
developing country”. Comment concerning the Indian situation.
11. What are the benefits of international marketing? Explain in brief.
1.14 REFERENCES
1. Philip Kotler, Marketing Management, Prentice-Hall of India Private Limited, 1999.

2. William J Stanton, Fundamentals of Marketing, Tata McGraw Hill, International Edition,
1987.
3. P. Subba Rao, International Business –Text and Cases, Himalaya Publishing House.
4. Warren Keegan, International Marketing, Pearson Education Asia Ltd and Tsinghua
University Press.
5. Philip Kotler, International Marketing Management, Prentice-Hall International, Inc.
6. Philip R Cateora and John L Graham Irwin, International Marketing, /McGraw-Hill, Boston.
7. Cateora and Graham, International Marketing, McGraw Hill, 2007.
8. Charles W.L. Hill, International Business Competing in the Global Marketplace, 4th Edition,
Tata McGraw-Hill Publishing Company Limited
9. Chase Richard, Jacob Robert, Aquillano and Agarwal Nitin, Operations Management, 11th
Edition, Tata McGraw-Hill Publishing Company Limited.
10. Justin Paul, International Business, 3rd Edition, Prentice Hall of India Vasudeva, PK,
International Marketing, Excel Books, New Delhi, 2010
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UNIT-2: INTERNATIONAL MARKETING ENVIRONMENT
STRUCTURE:
2.0 Objectives
2.1 Introduction
2.2 Meaning of International Marketing Environment
2.3 International Marketing Environmental Factors
2.4 Demographical Environment
2.5 Economic Environment
2.6 Socio-Cultural Environment
2.7 Political Environment
2.8 Legal Environment
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2.9 Technological Environment
2.10 Check your progress
2.11 Summary
2.12 Keywords
2.13 Questions for Self-Study
2.14 References
UNIT–2 INTERNATIONAL MARKETING ENVIRONMENT
2 .0 OBJECTIVES
 Define the term International Marketing Environment
 Discuss the various factors of International Marketing Environment
 Describe the Economic Environment
 Discuss the Political Environment and Political System
 Discuss the Legal and Regulatory Environment
 Outline the Socio-Cultural Environment
 Describe the Technological Environment
2.1 INTRODUCTION
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The International Business Environment (IBE) is the essential context for international
marketing (IM) studies and the distinguishing factor from other management studies. The
international marketing environment is very important from the point of view of certain
categories of business. It is particularly important for industries directly depending on imports or
exports and import-competing industries. For example, recession in foreign markets, or the
adoption of protectionist policies by foreign nations, may create difficulties for industries
depending on exports. On the other hand, a boom in the export market or a relaxation of the
protectionist policies may help the export-oriented industries.
Liberalization of imports may help some industries, which use imported items, but may
adversely affect import-competing industries. It has been observed that major international
developments have their spread effects on domestic business. A good export market enables a
firm to develop a more profitable product mix and to consolidate its position in the domestic
market. Many companies now plan production capacities and investments taking into account
also the foreign markets. Export marketing facilitates the attainment of optimum capacity
utilization: a company may be able to mitigate the effects of the domestic recession by exporting.
However, a company, which depends on the export market to a considerable extent, faces the
impact of adverse developments in foreign markets.
2.2 MEANING OF INTERNATIONAL MARKETING ENVIRONMENT

 The International Marketing environment refers to the controllable and uncontrollable forces
that influence the marketing decision-making of a firm globally.
 The International Marketing environment is comprised of those components, which shape

policies, programs, and strategies of an international marketer.
 An international firm must resort to the systematic study of the international marketing
environment to collect the inputs of marketing decision-making. To serve the international
markets effectively, a firm requires to understand the international marketing environment
properly.
 International Marketing Environment consists of global forces, such as economic, social,

cultural, legal, geographical, and ecological forces, that affect international marketing
decisions.
 It can be defined as the environment in different sovereign countries, with factors exogenous
to the home environment of the organization, influencing decision-making on resource use
and capabilities. This includes the social, political, economic, regulatory, cultural, tax, legal
and technological environment.
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2.3 INTERNATIONAL MARKETING ENVIRONMENTAL FACTORS
Marketing-oriented companies look outside their premises to take advantage of the

emerging opportunities and to monitor and minimize the potential threats faced by it in its
businesses. The environment consists of various forces that affect the company’s ability to
deliver products and services to its customers. The International marketing environment is made
up of:
1. Micro Environment and

2. Macro Environment
We discuss them in detail.
1. Micro Environment
The Micro Environment of the company consists of various forces in its immediate
environment that affects its ability to operate effectively in its chosen international markets. This
includes the following:
a) The company
b) Company Suppliers
c) Marketing Intermediaries
d) Customers
e) Competitors
f) Public
2. Macro Environment
The macro-environment consists of broader forces that not only affect the company and
the industry, but also other factors in the micro-environment. The components of Macro
Environment are:
a) Demographical Environment
b) Economic Environment
c) Social-Cultural Environment
d) Political Environment
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e) Legal Environment
f) Technological Environment
Brief explanations are given below:
2.4 DEMOGRAPHICAL ENVIRONMENT
Demography is the study of population characteristics that are used to describe

consumers. Demographics provide marketers, who are the current and potential customers,
where are they, how many are likely to buy, and what the market is selling. Demography is
the study of human populations in terms of size, density, location, age, sex, race,
occupation, and other statistics. Marketers are keenly interested in studying the
demography ethnic mix, educational level, and standard of living of different cities, regions,
and nations because changes in demographic characteristics have a bearing on the way
people live, spend their money, and consume.
According to the 'World Health Organization, young people in the age group of 10-
24 years comprise 33% of the population and 42% of our population consists of age group,
0- 24 years. Ten-agers in the age group below 19 years comprise 23%. The senior citizen
age group (above 65 years comprise only 8% of the total population. About 58% of the
working population is engaged in agricultural activities, with the highest, that is, 78% in
Bihar and Chhattisgarh, and the lowest 22% in Kerala. Since the human population consists
of different kinds of people with different tastes and preferences, they cannot be satisfied
with any one of the products. Furthermore, they need to be divided into homogeneous
groups with similar wants and demands. For this, we need to understand demographic
variables, which are traditionally used by marketers, to segment the markets. The
demographical variables are Income, Life Style, Gender, Education, Social Class,
Occupation, and Age.
2.5 ECONOMIC ENVIRONMENT
The economic environment is the most significant component of the marketing

environment. It affects the success of a business organization as well as its survival. The
economic policy of the Government, needless to say, has a very great impact on business.
Some categories of business are favorably affected by the Government policy, some
adversely affected while some others remain unaffected. The economic system is a very
Page 24
important determinant of the scope of business and it is a very important external constraint
on business. The economical environmental forces can be studied under the following
categories:
i. General Economic Conditions: General economic conditions in a country are influenced by

various factors. They are:
 Agricultural Trends
 Industrial output trends
 Per capita income trends
 The pattern of income distribution
 The pattern of savings and expenditures
 Price levels
 Employment trends
 Impact of government policy
 Economic system
ii. Industrial Conditions: Economic environment of a country is influenced by the prevalent
industrial conditions as well as industrial policies of a country. A marketer needs to pay
attention to the following aspects:
 Market growth
 Demand patterns of the industry
 Product life cycle.
iii. Supply sources for production: Supply sources required for production determine inputs,
which are available for production. They are:
 Land
 Labour
 Capital
 Machinery and equipment etc.
The economic environment describes the overall economic situation in a country and helps in
analysing the GNP per capita rate of economic growth, inflation rate, unemployment problems,
etc.
2.5.1 FACTORS OF ECONOMIC ENVIRONMENT
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The following are the important factors of the economic environment, which are affecting the
business. They are:
1. Growth strategy of the company’s 6. Infrastructure

2. The economic system of the country 7. Financial and fiscal factor
3. Economic planning 8. Removal of regional imbalance
4. Industry 9. Price and distribution control
5. Agriculture 10. Economic reforms
The detailed explanations of the above factors are given below:
1. Growth strategy of the company: The Company pursuing growth may aspire to increase
its income, serve a larger customer, expand its operations, and generally embark on
increased business activities. The various types of growth strategies are as follows:
 Merger and Acquisition: A merger is the combination of two or more existing
companies.
 Joint venture: A joint venture (JV) is a business agreement in which parties agrees
to develop, for a given time, a new entity and new assets by contributing equity.
 Strategic Alliance: It is a relationship between two, more parties to pursue a set of
agreed-upon goals, or to meet a critical business need while remaining independent
organizations.
2. Economic systems of the country: An Economic System of a nation or a country may be

defined as a framework of rules, goals, and incentives that control economic relations
among people in a society. Economic systems of a nation can be of any one of the
following types:
 Capitalism: The economic system in which business units or factors of production are
privately owned and governed is called Capitalism.
 Socialism: Under the Socialism economic system, all the economic activities of the
country are controlled and regulated by the government in the interest of the public.
 Mixed Economy: The economic system in which both public and private sectors
coexist is known as the Mixed economy.
26
3. Economic planning: Economic Policies affect the different business units in different
ways. It may or may not have a favourable effect on a business unit. Economic systems of
a nation can be of any one of the following types:
 Monetary Policy: The policy formulated by the central bank of a country to control
the way and the cost of money (rate of interest). To attain some specific objectives is
called Monetary Policy.
 It is related to the income and expenditure of a country. Fiscal Policy works as an
instrument in the economic and social growth of a country.
 Foreign Trade Policy: It also affects the different business units differently. The
government has adopted a restrictive import policy then it will prevent domestic
business from foreign competition.
 Foreign Investment Policy: The policy related to the investment by foreigners in a
country is known as Foreign Investment Policy.
 Industrial Policy: Industrial policy of a country promotes and regulates
industrialization in the country. The government from time to time issues principles
and guidelines under the industrial policy of the country.
4. Industry: India is fourteenth in the world when it comes to factory output. The
manufacturing sector in addition to mine, quarrying, electricity, and gas together account
for 27.6% of the GDP and employ 17% of the total workforce.
5. Agriculture: India ranks second worldwide in farm output Agriculture and allied sectors
like forestry and fishing accounted for 1865 of the GDP in 2005, employed 60% of the
total workforce, and despite a steady decline of its share in the GDP, is still the largest
economic sector and play a militant role the overall socio-economic development of
India.
6. Infrastructure: A nation’s infrastructure development plays a significant role in its

economic growth. A fast-growing economy warrants an even faster development of
infrastructure.
27
7. Removal of Regional Imbalance: There are differences in per capita income. Literacy
rates, health and education services, levels of industrialization, etc., between two different
regions.
8. Price and Distribution Control: During the on-going post-communist economic

transitions, the relative well-being of many people is changing rapidly, and governments
are not well-positioned to accurately measure individual living standards. Under such
circumstances, continued price controls over basic consumer goods within the state
sector, and the associated queuing, can form a serviceable device for targeting poor
people for subsidies.
9. Economic Reforms: India was a latecomer to economic reforms, embarking on the

process in earnest only in 1991, in the wake of an exceptionally severe balance of
payments crisis. The need for a policy shift had become evident much earlier, as many
countries in East Asia achieved high growth and poverty reduction through policies,
which emphasized greater export orientation and encouragement of the private sector.
10. Per Capita Income and National Income: Per capita income or income per person is a
measure of mean income within an economic agrees such as a country or city is
calculated by taking a measure of all sources of income in the aggregate (such as GDP or
Gross National Income) and dividing it by the total population.
2.5.2 IMPACT OF ECONOMIC ENVIRONMENT ON MARKETING
The impact of economic environment on marketing considers the following concepts –
1. Demand and offer:
The need and offer are two primary elements that affect the working associated with a
business design. The need is the will as well as capability of shoppers to buy a specific item
and this enables the company to cater to the diversified needs of the customers.
2. Marginal and Complete Power:
The utility may be the quantity of fulfillment that is produced by consumers from the
consumption of goods. This so happens that whenever continuous and successive use of units
28
of the same goods, the fulfillment that is experienced by consumers begins decreasing. This
often results in a short-term or even long-term fall in sales. Some organizations get ready for
the actual launch of some other brand name before the fall in power and sales is experienced.
3. Cash as well as Finance:
Financial management allows for finance and financial policies which impact the
company as well as the clients from the business. Money in circulation dictates power to pay
or rather the demand of the actual customers and the financial facility dictates the borrowing
capability of people along with the business.
4. Financial Development and growth:
Financial development dictates the number of finances that the society, in particular,
is dreaming as well as improvement signifies the amount of money that is being spent in
channels associated with long-term up-gradation. Amongst all the financial elements
affecting marketing environment improvement is an essential one since the company needs to
focus on the actual need for a good economically dynamic society.
5. Income and Employment:
An additional very important facet of the economic climate that significantly impacts
the business may be the degree of work as well as the rate of earnings. The actual per capita
income, as well as density of work, determines the speed of need, density associated with
need, and purchasing power.
6. Common Price Level:
A very important facet of the actual economy, which impacts business, is the general
price levels that additionally modify the product sales from the business. Expenses of
recyclables, chasing power of individuals, price of production, and finally, cost of transport
are a few of the important components that determine the general cost level and also, the
actual product sales from the firm.
7. Industry Cycles:
Industry cycles are the changing expenses of products as well as commodities within
29
an economic climate Increase stability, a continual and drop are some of the important series
which modify the of all goods. For example uncooked materials, credit score, last products,
and so on. Trade cycles additionally often modify the general cost degree.
2.6 SOCIO-CULTURAL ENVIRONMENT
Socio-cultural forces refer to the attitudes, beliefs, norms, values, lifestyles of

individuals in a society. These forces can change the market dynamics and marketers can face
both opportunities and threats from them. Some of the important factors and influences
operating in the social environment are the buying, consumption habits of people, their
languages, beliefs and values customs and traditions, tastes, preferences, education, and all
factors that affect the business.
Socio-cultural Environment refers to the sum of all learned attitudes and behaviours
that influence how a person thinks and behaves. For example, the way a person dresses or
feels about the need to express their individuality is largely selected from a set of options
available in that person's socio-cultural environment
Understanding consumer needs is central to any marketing activity and those needs
will often be heavily influenced by social and cultural factors. These cover a range of values,
beliefs, attitudes, and customs, which characterize societies or social groups. Changes in the
lifestyle of people affect the marketing environment. Health problems in people have
increased because of significant changes in their lifestyle they have become concerned about
their food. They prefer to eat low-fat, low or no cholesterol food. This is especially true for
people over 40 years. Largely, social forces determine what customers buy, how they buy,
where they buy, when they buy, and how they use the products.
In India, the social environment is continuously changing. One of the most profound
social changes in recent years is a large number of women entering the job market. They have
also created or greatly expanded the demand for a wide range of products and services
necessitated by their absence from the home. There is a lot of change in quality-of-lifestyles
and people are willing to have many durable consumer goods like TV, fridge, washing
30
machines, etc. even when they cannot afford them because of their availability on hire
purchase or installation basis.
Culture influences every aspect of marketing. Marketing decisions are based on the
recognition of the needs and wants of the customer, a function of customer perceptions.
These help in understanding lifestyles and behavior patterns as they have grown in the
society's culture in which the individual has been groomed. Thus, a person's perspective is
generated, groomed und conditioned by culture.
2.6.1 FACTORS OF SOCIO-CULTURAL ENVIRONMENT

There are some factors that you will need to consider in a socio-cultural environment:
1. Language:
Language is central to the expression of culture. Within each cultural group, the use of
words reflects the lifestyle, attitudes, and many of the customs of that group. Language is not
only a key to understanding the group: it is the principal way of communicating within it. A
language usually defines the parameters of a particular culture. Thus if several languages are
spoken within the borders of a country, that country is seen to have many cultures.
2. Material Culture:
Material culture relates to how a society organizes and views economic activities. It
includes the techniques and know-how used in the creation of goods and services, how the
people of the society use their capabilities, and the resulting benefits. When one refers to
industrialized' or a 'developing nation, one is referring to material culture.
3. Aesthetics:
A culture's aesthetics refers to its ideas concerning good taste and beauty as
expressed in the fine arts - music, art, drama, and dance- and in the appreciation of color and
form. Insensitivity to aesthetic values can not only lead to ineffective advertising and package
design for products, but it can also offend prospective customers.
4. Social organization:
Social organization refers to how people relate to one another from groups organize
their activities, teach acceptable behavior, and govern themselves. It thus comprises the social
31
educational and political systems of a society.
.Religious beliefs, attitudes, values, space, and time:
A religious system refers to the spiritual side of a culture or its approach to being
supernatural. Although very few religions influence business activities directly, the impact of
religion on human value systems and decision-making is significant. Thus, religion
exerts a considerable influence on people's actions and outlook on life, as well as on the
products they buy in a certain part of the world.
2.7 POLITICAL ENVIRONMENT
The political environment consists of factors related to the management of public

affairs their impact on the business of an organization. The political environment has close
relations with the economic system and the economic policy. Some Governments specify
certain to stand for the products including packaging. Some other Governments prohibit the
marketing of certain products. In most nations, promotional activities are subject to various
types of controls. India is a democratic country having a stable political system where the
Government plays an active as a planner, promoter, and regulator of economic activity.
Businessmen, therefore, are conscious of the political environment that their organization
faces.
Most Governmental decisions related to businesses are based on political

considerations in line with the political philosophy following the ruling party at the center
and the state level. Substantial numbers of laws have been enacted to regulate business and
marketing to protect companies from each other, to protect the consumer from unfair trade
practices to protect the larger interests of society against unbridled business behavior.
Government agency enforcement and the growth of public interest groups bring in threats and
challenges.
The political environment in which the firm operates will have a significant impact on
a company’s international marketing activities. The greater the level of involvement in a
foreign market, the greater the need to monitor the political climate of the countries business
is conducted. Changes in government often result in changes in policy and attitudes towards
foreign business. Bearing in mind that a foreign company operates in a host country at the
32
discretion of the government concerned, the government can either encourage foreign
activities by offering attractive opportunities for investment and trade or discourage its
activities by imposing restrictions such as Import quotas, etc. An exporter that is
continuously aware of shifts in government attitude will be able to adapt export-marketing
strategies accordingly.
Governments Intervention in International Marketing: Governments have intervened in

international marketing through various mechanisms. Let us discuss some of the reasons
behind the Government interventions in International trading.
 A country's Government gets involved in international trade for a combination of

economic, political, and socio-cultural reasons.
 Governments are motivated by economic factors to intervene in trade. They may want to
protect young industries or to preserve access to local consumer markets for domestic
firms.
 Political Reason: A country’s government may strive to protect domestic industries. Some
industries may be considered very important for national security purposes such as
infrastructure, defence, and telecommunications.
 Socio-cultural Reason: Socio-cultural factors may also affect a government’s intervention

in international trade. For example, some countries’ governments have tried to limit the
influence of American culture on local markets by limiting or denying the entry of
American companies operating in the media, food, and music industries.
Modes of Governments Intervention in International Trade:
 Tariffs: Tariffs are taxes imposed on imports.
 Subsidies: A subsidy is a form of government payment to a producer. Types of subsidies

include tax breaks or low-interest loans; both of which are common.
 Export financing: Governments provide financial assistance to domestic companies to

promote exports.
33
 Currency Controls: A country's Government may limit the convertibility of its currency
into others for limiting the imports. Some governments will manage the exchange rate at
a high level to create an import disincentive.
 Antidumping Duty: Dumping occurs when a company sells its product below the market
price often to win the market share and weaken a competitor. To protect its domestic
companies, the government will levy anti-dumping duties.
 Import quotas and Voluntary Export Restraints: Import quotas and voluntary export
restraints (VER) are two strategies to limit the number of imports into a country.
2.8 LEGAL ENVIRONMENT
Marketing decisions are strongly affected by-laws about competition, price setting
and distribution arrangements, advertising, etc. A marketer must understand the
environment of the country and the jurisdiction of its courts. The following laws affected
business in India:
1. Indian Contract Act 1872
2. Factories Act 1948
3. Minimum Wages Act 1948
4. Essential Commodities Act 1955
5. Securities Contract Regulation Act 1956 (SEBI Act)
6. The Companies Act 1956
7. Trade and Merchandise Act 1958
8. Monopolies and Restrictive Trade Practice Act 1969
9. The water (Prevention and Control of Pollution) Act 1974
10. The Air (Prevention and Control of Pollution) Act 1981
11. Sick Industrial Companies (Special Provisions) Act 1985
12. Environment Protection Act 1986
13. Consumer Protection Act 1986
34
14. Securities and Exchange Board of India Act 1992
15. Different Taxation Laws
Key areas of business that are affected by legal environments are listed below:
 Laws concerning employment and labor affect the managing of the workforce in
international markets.
 Different laws in foreign countries regulate the financing of operations by foreigners. In

some countries, foreign firms are restricted access to local deposits/funds.
 Various countries around the world have different laws concerning the marketing of
products, especially food products, pharmaceuticals, hazardous materials, and strategic
products to a nation.
 Countries also control and regulate the development and utilizing of technologies through
various laws and regulations.
 Many countries also have different laws and regulations that affect the ownership of
businesses by foreigners.
 Countries also regulate /restrict remittances to foreign countries and repatriation of profits
 Some countries regulate the closing of operations and in some countries, businesses are
not allowed to close shop especially when they have sold products that have guarantees
and warranties from foreign firms.
 Various countries around the world have implemented different trade and investment
regulations.
 Countries also have their taxation requirements, systems, and laws.
 Countries also differ on the accounting reporting requirements from various categories of
firms.
 Countries around the world have also actively implemented environmental regulations
that affect businesses.
2.9 TECHNOLOGICAL ENVIRONMENT
35
Technological Environment is a systematic application of scientific knowledge to the
practical task is known as technology. Every day there have been vast changes in products,
services, lifestyle, and living conditions, these changes must be analysed by every business
unit and should adapt to these changes. Business prospects depend also on the availability of
certain physical facilities. The technological environment is the most dramatic force now
facing our destiny.
Technological discoveries and developments create opportunities and threats in the

market. The marketer should watch the trends in technology. The biggest impact that society
has been undergoing in the last few years is technological advancement, product changes, and
their effects on consumers. Technology has brought innumerable changes in human lives, be
it in the field of science, medicines, entertainment, communication, and travel or office
equipment. Name any field, and one can see changes in product or efficiency and faster
services.
One of the most dramatic forces shaping people's lives is technology. Technology has
released such wonders as penicillin, open-heart surgery, and birth control pill. It has released
such horrors as the hydrogen bomb, nerve gas, and the sub-machine gun. Every new
technology is a force for "creative destruction”, Transistors hurt the vacuum tube industry,
xerography hurt the carbon paper business, autos hurt the railroads, and television hurt the
newspaper. Instead of moving into new technologies, many old industries fought or ignored
them and their business declined. Yet the essence of market capitalism is to be dynamic and
tolerate the creative destructive technology as the price of progress.
Technology played a key role in the growth of commerce and trade around the world
that we have been doing business since time immemorial, long before there were computers;
starting of barter when the concept of a currency was not yet introduced but trade and
commerce were still slow up until the point when the computer revolution changed
everything. Almost all businesses are dependent on technology on all levels from R & D,
production, and delivery. Small to large scale enterprises depend on computers to develop
them with their business needs ranging from point of sales systems, information management
systems capable of handling all kinds of information such as employee profile, client profile,
accounting and tracking, automation systems for use in large scale production of
commodities, package sorting, assembly lines, all the way to marketing and communications.
It does not end there, all these commodities also need to be transported by sea, land, and air.
36
Benefits of Technology:
Technology has provided a lot of favourable utility to allied users and allied activities, among
which the most important ones are highlighted below
1. To Businesses:
This is a clear indicator of the benefits businesses are enjoying through the
implementation of technology. Today technology is an integral part of any business right
from the purchase of computers and software to the implementation of network and security
tools, This helps businesses to i) Remain up-to-date, ii) Drive the business forward iii)
Sustain and survive the competition.
2. In Communication:
From handheld computers to touch phones, technological advancements in the field of
communication are endless. The means and the modes of communication are unlimited.
3. In Education:
Technological advancements in the field of education are fast evolving. Today, e-
learning is a familiar and popular term such as personalized learning, self-paced learning,
greater accessibility of information.
4. In Healthcare:
The marriage between medicine and technology has reshaped healthcare, revolution,
and the medical profession. Technology allows physicians and patients to interact in a secure
and comfortable environment to discuss sensitive issues. Physicians can answer routine and
less critical queries at a convenient time. Physicians can follow-up provide advice and re-
direct patients to resources on the Internet. This saves cost and time by reducing office visits.
Medical aids allow patients to continue recovery at home reducing their hospital stay.
Consider some of the following technologically related problems that firms may
encounter in doing business overseas:
37
 Foreign workers must be trained to operate unfamiliar equipment.
 Poor transportation systems increase production and physical distribution costs.
 Maintenance standards vary from one nation to the next.
 Poor communication facilities hinder advertising through the mass media.
 Lack of data processing facilities makes the tasks of planning, implementing, and
controlling marketing strategy more difficult.

1. A liberalization of imports may help some industries, which use imported items,
but may adversely affect_____________________________
2. International Marketing environment refers to the controllable and uncontrollable

forces that influence upon the marketing __________________of a firm globally.
3. The ____________of the company consists of various forces in its immediate

environment that affects its ability to operate effectively in its chosen international
markets.
4. _____________is the study of population characteristics that are used to describe

consumers.
5. _________________of a country is influenced by the prevalent industrial conditions as

well as industrial policies of a country.
6. ___________forces refer to the attitudes, beliefs, norms, values, lifestyles of individuals

in a society.
7. _____________refers to the sum of all learned attitudes and behaviors that

influence how a person thinks and behaves.
8. ______________has close relations with the economic system and the economic policy.
9. ___________and ____________ are two strategies to limit the amount of imports into a
country.
10. Marketing decisions are strongly affected by _______about competition, price setting
and distribution arrangements, advertising, etc.
38
11. _________________is a systematic application of scientific knowledge to
practical task is known as technology.
1. Import-Competing Industries
2. Decision Making
3. Micro Environment
4. Demography
5. Economic environment
6. Socio-cultural
7. Socio-cultural Environment
8. Political environment
9. Import quotas and voluntary export restraints
10. Laws
11. Technological Environment
2.11 SUMMARY
International Business Environment can be defined as the environment in different

sovereign countries, with factors exogenous to the home environment of the organization,
influencing decision making on resource use and capabilities. This includes the social,
political, economic, regulatory, tax, cultural, legal, and technological environment. Economic
environment refers to that entire economic factor that has a bearing functioning of the
business unit; business depends on the economic environment for all the needed inputs. These
letters include gross national product, corporate profits, inflation rate, employment, the
balance of payments, interest rates consumer income, etc.
The social environment of business means all factors which affect business socially.
Every business Works in a society, so societies different factors like family, educational
institutions, and religion affects business. Socio-cultural Environment refers to the sum of all
learned attitudes and behaviors that influence how a person thinks and behaves. For example,
the way a person dresses or feels about the need to press their individuality is largely selected
from a set of options available to that person. Political environment means the set of activities
39
of the government, which include plans, policies, and controls that are directly or indirectly
involved with the business.
Technology refers to the method or technique for converting inputs to outputs in

accomplishing a specific task. Thus, the terms 'method' and 'technique' refer to not only the
knowledge but also the skills and the means for accomplishing a task. It is the application of
scientific knowledge for practical purposes. Technology is the usage and knowledge of tools,
techniques, crafts, systems, or methods of organization. Technological environment refers to
the firm's external environment in which changes in technology affect the firm's marketing
effort. The changing technological environment may pose then present opportunities.
2.12 KEYWORDS
International The International Marketing environment refers to the controllable and

Marketing
environment uncontrollable forces that influence the marketing decision-making of a
firm globally.
Demography Demography is the study of human populations in terms of size,

density, location, age, sex, race, occupation, and other statistics.
Economic The economic environment is the most significant component of the
environment marketing environment. It affects the success of a business
organization as well as its survival.
Economic System An Economic System of a nation or a country may be defined as a
framework of rules, goals, and incentives that controls economic
relations among people in a society.
Capitalism The economic system in which business units or factors of production are
privately owned and governed is called Capitalism.
Socialism Under a Socialist economic system, all the economic activities of the
country are controlled and regulated by the government in the interest
of the public.
Mixed Economy The economic system in which both the public and private sectors coexist
is known as the Mixed economy.
Monetary Policy The policy formulated by the central bank of a country to control the way
and the cost of money (rate of interest). To attain some specific
40
objectives is called Monetary Policy.
Foreign Trade It also affects the different business units differently. The government has
Policy adopted a restrictive import policy then it will prevent domestic
business from foreign competition.
Foreign The policy related to the investment by foreigners in a country is known as

Investment Policy Foreign Investment Policy.
Industrial Policy The industrial policy of a country promotes and regulates industrialization
in the country. The government from time to time issues principles and
guidelines under the industrial policy of the country.
Socio-cultural Socio-cultural Environment refers to the sum of all learned attitudes

Environment and behaviors that influence how a person thinks and behaves.
Currency A country's Government may limit the convertibility of its currency
Controls into others for limiting the imports. Some governments will manage
the exchange rate at a high level to create an import disincentive.
Import quotas Import quotas and voluntary export restraints (VER) are two
and Voluntary strategies to limit the number of imports into a country.
Export Restraints
1. What is International Business Environment?
2. Explain the concept of Demographical Environment?
3. Write an explanatory note on Economic Environment?
4. Give the meaning of Socio-Cultural Environment.
5. What is the Political and Legal Environment?
6. Give the meaning of Technological Environment.
7. Write an analytical note on Technological Environment?
8. Discuss the political and legal environment.
41
9. Write a note on the Socio-cultural environment.
10. What are the various types of factors that influence the International Marketing
Environment?
2.14 REFERENCES

2. William J Stanton, Fundamentals of Marketing, Tata McGraw Hill, International Edition,
1987.
University Press.
6. Philip R Cateora and John L Graham Irwin, International Marketing, /McGraw-Hill,
Boston.
8. Charles W.L. Hill, International Business Competing in the Global Marketplace, 4th Edition,
Tata McGraw-Hill Publishing Company Limited
9. Chase Richard, Jacob Robert, Aquillano and Agarwal Nitin, Operations Management,
11th Edition, Tata McGraw-Hill Publishing Company Limited.
10. Justin Paul, International Business, 3rd Edition, Prentice Hall of India Vasudeva, PK,
42
UNIT – 3: INTERNATIONAL TRADE ENVIRONMENT
STRUCTURE:
3.0 Objectives
3.1 Introduction
3.2 International Trade Theories
I.CLASSICAL TRADE THEORIES:
A. Mercantilism
B. Absolute Cost Advantage Theory
C. Theory of Comparative Cost Advantage theory
D. Relative Factor Endowments Theory
II.MODERN TRADE THEORIES:

E. Country similarity theory
F. Product life cycle theory
G. Global Strategic Rivalry Theory
H. Porter’s National competitive Advantage.
3.3 Trade Barriers
3.4 General Agreement on Tariffs and Trade (GATT)
3.5 World Trade Organization
3.6 Check Your Progress
3.7 Summary
3.7 Key Words
3.8 Question for Self Study
3.9 References
43
UNIT-3 INTERNATIONAL TRADE ENVIRONMENT
3.0 OBJECTIVES

 Define the origin of international trade theories.
 Analyze the various International Trade theories.
 Define the trade barriers
 Discuss the Quotas imposed by the countries
 Describe the objectives of GATT
 Describe the various agreements in GATT
 Evaluate the objectives and functions of WTO
 Differentiate between GATT and WTO
3.1 INTRODUCTION
International trade theories are helpful to understanding international trade patterns and
structures. International trade is a concept of exchanging goods and services among people or
entities in two different countries. International trade becomes possible for mutual benefit to
the two countries due to the differences in opportunity costs. International trade between two
countries can benefit both countries if each country exports the goods in which it has a
comparative advantage. However, initially, countries used to earn gold through international
trade. Several theories have been developed by international economists to explain how does
international trade take place. Managing any business strategically needs an understanding of
international business policies. However, in the case of international trade, a greater
understanding of trade policies and theories is essential. In addition, international trade
policies deal with the policies of the national governments relating to exports of various
goods and services to various countries equal either on equal terms and conditions or on
44
discriminatory terms and conditions.
Theories of international trade provide a conceptual understanding of the fundamental

principles of international trade and its behavior. Trade theories give an insight into the
different products that are bought and sold internationally as well as the pattern in which
international trade takes place. This enables the learner of international business how a
country emerges as a supplier of certain products as well as the user of certain other products.
The regulatory framework prevailing in each country has a greater say in determining and
defining its position in international business.
3.2 INTERNATIONAL TRADE THEORIES
Several theories have been developed by international economists to explain how does
international trade take place. These theories are classified into two broad categories like
classical trade theories and modern trade theories. These are discussed and presented below:
I. CLASSICAL TRADE THEORIES

A. Mercantilism
B. Absolute Cost Advantage Theory
C. Theory of Comparative Cost Advantage theory
D. Relative Factor Endowments Theory
II. MODERN TRADE THEORIES
E. Country similarity theory

F. Product life cycle theory
G. Global Strategic Rivalry Theory
H. Porter’s National competitive Advantage theory
I. CLASSICAL TRADE THEORIES
A. MERCANTILISM (Period: 1500 to 1800)

Mercantilism was the oldest theory of international trade, which was originated
during the foundation of economic thoughts. According to this theory, the holding of a
country’s treasure primarily in the form of gold constituted its wealth. This theory specifies
45
that countries should export more than they import and receive the value of trade surplus in
the form of gold from those countries, which experience trade deficits. Government-
imposed restrictions on imports and encourage exports to prevent trade deficit and
experience trade surplus.
Colonial powers like the British used to trade with their colonies like India, Sri
Lanka, etc., by importing the raw materials from and importing more valued goods. Thus,
colonies were prevented from manufacturing. This practice allowed the colonial powers to
enjoy a trade surplus and forced the colonies to experience trade deficits. The theory
benefited the colonial powers and caused much discontent in the colonies. This was the
background situation for the American Revolution.
The Mercantilism theory suggests maintaining a favorable balance of trade in the

form of import of gold for export of goods and services. This theory was modified in neo-
mercantilism. Neo-mercantilism proposes that countries attempt to produce more than the
demand in the country to achieve a social objective such as generating employment and
maintaining social peace in the domestic country. This theory was argued by Adam Smith
through developing the theory of Absolute cost advantage on the ground that the wealth of a
nation is measured based on the availability of goods and services rather than only gold.
B) ABSOLUTE COST ADVANTAGE THEORY

Adam Smith, the Scottish economist observed that mercantilism weakens a country.
He promoted free trade among countries to increase a country’s wealth. Free trade enables a
country to provide a variety of goods and services to its societies by specializing in the
production of some goods and services and importing the same to others. Adam Smith
advocated Absolute Cost Advantage Theory (1776) based on the principle of division of
labor. According to him, the application of this principle to the international scenario helps
the countries to specialize in the production of those goods in which they have a cost
advantage over other countries. According to Adam Smith, every country should specialize
in producing those products, which it can produce at less cost than that of other countries,
and exchange these products with other products produced cheaply by other countries.
For example, the Indian climate suits the production of sweet mangoes, coconuts, cotton, and
cashew nuts. Sri Lankan climate suits the production of tea, rubber. The USA climate
supports the production of wheat.
46
The countries having skilled labor and specialization advantage due to their environment can
avail the benefits from an absolute cost advantage. The following are some of the natural
advantages have by the countries due to these reasons:
 Due to Skilled labor and Specialization Advantage
 Due to the availability of Natural advantage
 The acquired advantage is due to technology and skill development.
The assumptions of Absolute Cost Advantage Theory

Adam Smith proposed the Absolute Cost Advantage theory based on the following
assumptions-
 Trade is between two countries
 Only two commodities are traded
 Free trade exists between the countries
 The only element of the cost of production is labor.
Implications of Absolute Cost Advantage Theory

Absolute cost advantage theory has the following implications-
 Increase in Standards of Living of both countries people
 Country can avoid inefficient product
 Global efficiency and effectiveness can be increased by trading
 Global labor and other resources productivity maximized
Criticism of Absolute Cost Advantage Theory

Despite many implications, this theory has been criticized on various grounds. Those are
depicted and presented below-
 This theory discourages the no absolute advantage countries.
 This theory does not compare country to country, due to countries varying in size.
 It deals with only labor and ignores all other resources.
 This theory ignores transport costs.
 It ignores the concept of the scale of economies.
These critics of the absolute cost advantage theory led to the development of other
theories. Important among them is the comparative cost advantage theory proposed by David
47
Ricardo. Now, we will discuss this theory.
C. COMPARATIVE COST ADVANTAGE THEORY

As indicated before, Absolute Cost Advantage Theory fails to explain the situation
when one country has an absolute cost advantage in producing many products. David
Ricardo a British economist- expanded the Absolute Cost Advantage Theory to clarify this
situation and developed the Theory of Comparative Cost Advantage.
The assumptions of Comparative Cost Advantage Theory

David Ricardo proposed the Comparative Cost Advantage Theory based on the following
assumptions-
 There exists full employment
 The only element of cost of production is labor
 There are no trade barriers
 Trade is free from the cost of production
 Trade takes place only between two countries
 Only two products are traded
 There are no costs of transport
This theory states that a country should produce and export those products for which it
is relatively more productive than that of other countries and import those goods for which
other countries are relatively more productive than it is. This theory is based on relative
productivity differences and incorporates the concept of opportunity cost.
Implications of Comparative Cost Advantage Theory

Comparative cost advantage theory has the following implications-
 Efficient allocation of global resources
 Maximization of global production at the least possible cost
 Product prices become more or less equal among world markets.
 Demand for resources and products among world nations will be optimized.
 This theory is based on the relative productivity differences
 It incorporates the concept of opportunity cost.
48
Criticism of Comparative Cost Advantage Theory
Despite many implications, this theory has been criticized on various grounds. Those are
depicted and presented below-
 Two countries: It is assumed that two countries participate in international trade.
However, in reality, more than two countries participate in international trade.
 Two Products: In reality, many products are involved in international trade. As such,
the assumption of the existence of two products does not hold good.
 Transportation Cost: It is criticized due to the assumption of the non-existence of
transportation costs. Because transportation cost is part of the process of global trade.
 Full employment: In reality, full employment is not valid because unemployment of
resources is a normal character in many countries.
 Division of Gains: It does not provide the ratio at which the gains are shared between
the trading nations.
 Mobility: It is criticized that this theory does not consider the mobility of resources
internationally.
This theory is an improvement over Adam Smith’s theory of Absolute Cost Advantage.
This theory is not only an extension to the principles of division of labor and specialization
but applies the opportunity cost concept. It is also argued that lower labor costs need not be a
source of comparative advantage. However, Ricardo fails to consider the monetary value of
the cost of production. These criticisms led to the development of other theories, which
among important one is the Relative Factor Endowments Theory. Now we will discuss this
theory.
D. RELATIVE FACTOR ENDOWMENTS THEORY

To remove the limitations of Comparative Cost Advantage Theory, Eli Heckscher and
Bertil Ohlin a Swedish economists was developed the Relative Factor Endowments theory.
This theory is popularly known as Heckscher-Ohlin Model. This theory was observed that
there are various factor endowments in the country to enhance the economy such Factor
endowments are land, capital, natural resources, labor, climate, etc. Eli Heckscher and Bertil
Ohlin were recorded some of the important observations, which explains the relative
advantage of the countries based on the factor endowment, which is highlighted in the
following paragraphs:
49
 Factor endowments vary among countries: For example, the USA is rich in capital
resources, India is rich in labor, Saudi Arabia is rich in oil resources, South Africa is
rich in gold mines, etc.
 If labor is available in abundance concerning land and capital in a country, the price of
labor would be low and the price of land and capital would be high in that country. The
vice versa is true in those countries where land and capital are available in abundance
concerning labor. These relative factor costs would lead countries to produce the
products at low costs.
 Countries have a comparative advantage based on the endowment factors and

result in the price of the factors: Countries acquire a comparative advantage in those
products for which the factors endowed by the country concerned are used as inputs.
For example, India and China have a comparative advantage in labor-intensive
industries like textile and tobacco.
 Countries participate in international trade based on endowed factors: Countries

enter into the international arena by exporting those products, which they can produce
at a low-cost consequent upon the abundance of factors, and import the other produces,
which they can produce comparatively at a high cost.
 Land and Labour Relationship: Countries where land is less concerning labor go for
multistoried buildings and produce lightweight products.
 Labour and Capital Relationship: Countries, where labor is abundant about capital,
can be used to export Labour intensive products, and vice-versa in the case of capital-
abundant countries. For example, Japan has export like computers, televisions,
refrigerators, cars, etc.
 Leontief Paradox: Leontief observed that capital abundant countries are expected to
produce labor-intensive products at a higher level due to a higher level of competitive
advantage of labor skills and vice versa in the case of labor abundant countries. This
kind of finding and surprising trend in international trade will refer as Leontief Paradox.
 Technological Complexities: Technology makes things easier; industries locate
50
different production processes in various countries to reduce cost by using machines
than labor.
Thus, this theory advocates that every country have its relative importance
II. MODERN TRADE THEORIES
E. PRODUCT LIFE CYCLE THEORY

The second firm-based theory of international trade is the product life cycle theory.
Raymond Vernon of the Harvard Business School developed the product life cycle theory.
International product life cycle theory traces the roles of innovation, market expansion,
comparative advantage, and the strategic response of global rivals in international
manufacturing, trade, and investment decisions.
The international product life cycle consists of four stages, viz.,
 New product introduction stage
 Growth stage
 Maturing product stage and
 Decline stage
Stage -1: New Product
Firms innovate new products based on needs and problems in the domestic country.
Observe the following examples:
 Photocopier and personal computers were innovated in the USA based on the perceived
need.
 US firms became the leader in the production of large kitchens, cheap electricity.
 French firms developed food-packaging products.
The domestic firms used to have new product innovation through considering various
aspects like the location of innovation, the significance of innovation, production process,
and feedback and development.
Stage-2: Growth
An increase in the sales of the new product attracts the competitors. At the same time,
the increased awareness of the new product in various countries particularly in advanced
countries increases the demand for the product. Added to this, further innovation in product,
cost reduction, market process, etc., takes place resulting in increased capital intensity of the
industry. These three factors influence either the innovator or competitor or both to produce
51
in foreign countries to attain lower cost of production, lower transportation cost, better
quality of the product, and the like. Production in foreign countries mostly increases the sales
in the foreign markets.
Stage-3: Maturity
Worldwide production increases during this stage along with the demand for the
product resulting in a decline in exports. The increased competition results in increased
product standardization and cost reduction. The producers start gaining economies of scale
reducing the cost of production per unit. The lower per-unit cost of production results in
exports to developing countries. At this stage, technology becomes standard. Therefore, the
producers start locating their plants in developing countries to take the advantage of lower
labor costs. This factor further reduces the cost of production per unit and increases the
competition based on cost.
Stage-4: Decline
Markets for the product at this stage concentrate in less developed countries as the customers
in advanced countries shift their demand to further new products. Thus, most of the
production plants at this stage are located in developing countries, and exports decline
considerably at this stage.
Suitability of the theory

The tests conducted to evaluate this theory found that this theory was inconsistent for certain
consumer durables, synthetic materials, and electronics. However, some studies found that
the production movements did not take place as predicted in the Product Life Cycle (PLC)
model.
F. COUNTRY SIMILARITY THEORY

International trade also takes place within each industry (i.e., intra-industry) between
two countries. Steffan Linder explained the phenomenon of intra-industry trade in 1961.
According to Linder, the similarities in consumer preferences in the countries that are at the
same stage of economic development provide the scope for intra-industry trade among
countries. For example, India and China are in the same stage of economic development.
India provides a market for low-cost motorcycles produced in china due to the price-
consciousness of the lower-income group customers; whereas China’s rich income group
52
customers provide a market for India’s motorcycles due to their quality–consciousness.
Thus, this theory suggests that intra-industry trade takes place between countries with similar
levels of development.
According to this theory, the companies that develop new products for the domestic
market export the products to those countries that are at a similar level of development after
meeting the needs of the domestic market. Example: Japan exports Toyota cars to Germany,
whereas Germany exports BMW cars to Japan. This peculiar phenomenon happens because
Japanese markets provide prestige and performance-seeking automobile buyers to BMW
cars, while German markets provide quality-conscious and value-oriented customers to
Toyota cars.
G. GLOBAL STRATEGIC RIVALRY THEORY

Global Strategic Rivalry theory explained with the instance, US airlines attracted both
the domestic and international passengers through networking with other airlines, after
liberalization in 1978. Consequently, European airlines lost significant business. KLM
entered a strategic alliance with Northwest Airlines, Jet Airways, and several other airlines
throughout the globe to recover the loss. Thus, MNC acquires and develop competitive
advantages to neutralize those of their rivals and to have leverage over their rivals in the
process of globalizing their operations.
International trade theories, emphasize the countries, international trade normally

takes place between two companies of two countries. Further, international trade takes place
only when the companies have a competitive advantage regardless of the country. This theory
focuses on a firm’s strategic decisions to acquire and develop a competitive advantage to
compete globally.
MNC acquire and develop competitive advantage in several ways. They are broadly
categorized as follows:
 Owning Intellectual Property Rights

 Investing in Research and Development
53
 Achieving Large-scale Economies
 Exploiting the Experience Curve
Owning Intellectual Property Rights: Firms that own intellectual property right in the
forms of patent, brand name, copyright, and trademark acquire a competitive advantage over
their competitors.
Investing in Research and Development: Investment in research and development would

probably result in the development of new products, improvements to the existing products,
and the development of new technologies, etc.
Achieving Large-scale Economies: Companies with large-scale operations enjoy a low cost
of production operations per unit. These companies may enjoy low-cot leadership.
Exploiting the Experience Curve: Production cost per unit tends to decline with the
increase in the experience of the firm in manufacturing in the case of certain industries. This
is due to an increase in employees' experience, expertise, and skills.
H. PORTER’S NATIONAL COMPETITIVE ADVANTAGE THEORY

Competitive superiority is derived from four factors such as demand conditions, factor
endowment, related and supporting industries and firm strategy, structure, and rivalry. The
determinants of global competitive advantage are also known as the Porter Diamond. We
should understand the combined effect of these factors on the development and continued
existence of competitive advantages.
The below figure shows the Determinants of Porter’s National Competitive
Advantage Theory
54
Firm Strategy,
Structure and Rivalry
Factor Demand
Conditions Conditions
Related and
Supporting Industries
Factor Conditions: Factor conditions include factors of production. Heckscher-Ohlin theory

deals with the classical factors such as land, labor, capital, and organization. Porter
emphasizes other factors like the educational level of labor and the quality of the country’s
infrastructure. A country’s ability to compete globally depends upon the country’s factor
resources such as research, innovation, and training.
Demand Conditions: The existence of a large number of sophisticated domestic consumers

who are economically able and willing to consume create and improves the demand for
various products in the country. Companies improve the existing products and develop new
products to meet increasing demand.
Related and Supported Industries: The emergence and growth of industry provide the
scope for the development of suppliers of raw material, market intermediaries, financial
companies, consulting agencies, ancillary industries, etc. These supporting service agencies
compete among themselves leading to high input quality and lower prices. Availability of
high-quality inputs at lower prices in the domestic country enhances the competitive
advantage of the firm internationally.
Firm Strategy, Structure, and Rivalry: Firms continuously improve the quality of product
design; invest in R&D to compete domestically. Firms also invest in human resource
development, technology, etc in the domestic market.
55
Porter’s theory blends the traditional country-based theories and the firm-based
theories. There is a need to consider all the theories to understand and explain the trade
structure, direction, and flows among countries. Firm-based theories are more useful
rather than firm country-based classical theories.
3.3 TRADE BARRIERS
Trade barriers are restrictions imposed on the movement of goods and services between
countries (import and export). The major purpose of trade barriers is to promote domestic
goods than exported goods and thereby safeguarding the domestic industries. Trade barriers
can be broadly divided into tariff barriers and non-tariff barriers.
A) TARIFF BARRIERS
 Term tariff means 'Tax' or 'duty'.
 Tariff barriers are the 'tax barriers' or the 'monetary barriers' imposed on internationally
traded goods when they cross the national borders.
Major Forms of tariff barriers:

The below depicted are the important forms of tariff barriers-
 Specific duty:
It is based on the physical characteristics of the good. A fixed amount of money can
be levied on each unit of imported goods regardless of their price. For example, imposing
$15 on imported shoes.
 Ad Valorem tariffs
The Latin phrase 'ad valorem' means "according to the value". This tax is flexible and
depends upon the value or the price of the commodity. For example, Imposing a tax of 5$
for a 50$ shoe and 10$ for a 100$ shoe.
 Combined or compound duty

It is a combination of specific and ad valorem duty on a single product, for instance,
there can be a combined duty when 10% of the value (ad-valorem) and 1$ per kilogram
(specific tax) are charged on metal M.
 Sliding scale duty
56
The duty, which varies along with the price of the commodity, is known as sliding
scale duty or seasonal duties. These duties are confined to agricultural products, as their
prices frequently vary because of natural and other factors.
 Countervailing duty
It is imposed on certain imports where it is being subsidized by exporting
governments. Because of the government subsidy, imports become cheaper than domestic
goods, to nullify the effect of subsidy; this duty is imposed in addition to normal duties.
 Revenue tariff
A tariff, which is designed to provide revenue or income to the home government, is
known as a revenue tariff. Generally, this tariff is imposed with a view of earning revenue
by imposing a duty on consumer goods, particularly on luxury goods whose demand from
the rich is inelastic.
 Anti-dumping duty
At times exporters attempt to capture foreign markets by selling goods at rock-
bottom prices, such practice is called dumping. Because of dumping, domestic industries
find it difficult to compete with imported goods. To offset anti-dumping effects, duties are
levied in addition to normal duties.
 Protective tariff
To protect domestic industries from stiff competition for imported goods, the
protective tariff is levied on imports. Normally a very high duty is imposed, either to
discourage imports or to make the imports more expensive as that of domestic products.
B) NON TARIFF BARRIERS

 Any barriers are other than the tariff.
 It is meant for constructing barriers to the free flow of goods.
 It does not affect the price of imported goods.
 It affects the quality and quantity of the goods.
Major Forms of Non-tariff barriers:

The below depicted are the important forms of Non-tariff barriers-
57
 Licenses
License is granted by the government and allows the importing of certain goods to the
country.
 Voluntary Export Restraint (VER)

The exporting country rather than the importing one creates these types of barriers.
These restraints are usually levied at the request of the importing company. For instance,
Brazil can request Canada to impose VER on the export of sugar to Brazil and this helps to
increase the price of sugar in Brazil and protects its domestic sugar producers.
 Quotas
Under this system, a country may fix in advance, the limit of import quantity of a
commodity that would be permitted for import from various countries during a given period.
This is divided into the following categories:
 Tariff quota: Certain specified quantities of imports are allowed duty-free or at a

reduced rate of import duty. A tariff quota, therefore, combines the features of a
tariff and import quota.
 Unilateral quota: the total import quantity is fixed without prior consultations
with the exporting countries.
 Bilateral quota: Here quotas are fixed after negotiations between the quota fixing
the importing country and the exporting country.
 Multi-lateral quota: a group of countries can come together and fix quotas for
each country.
 Product Standards
Here the importing country imposes standards for goods. If the standards are not met,
the goods are rejected.
 Domestic Content Requirements- Governments impose DCR to boost domestic

production.
 Product Labelling
Certain countries insist on specific labeling of the products. For instance, the EU
insists on product labelling in major languages in EU.
 Packaging requirements
58
Certain nations insist on the particular type of packaging of goods. For instance, the
EU insists on packaging with recyclable materials.
 Foreign exchange regulations

The importer has to ensure that adequate foreign exchange is available for the import
of goods by obtaining clearance from exchange control authorities before the conclusion of
the contract with the supplier.
 State trading
In some countries like India, certain items are imported or exported only through
canalizing agencies like MMTT (Minerals and Metals Trading Corporation of India).
 Embargo
Partial or complete prohibition of trade with any particular country, mainly trade with
any particular country, mainly because of the political tensions.
3.4 GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)
World War II, which lasted from 1939 to 1945, left many countries in Europe and
Asia ravaged. Their economies were shattered; there was a tremendous strain on political and
social systems resulting in widespread annihilation and migration of people. Intentional peace
was ruffled. Something has to be done to put these war-ravaged economies back in shape.
Simultaneously, the various colonies in Asia and Africa were acquiring political freedom. In
addition, there was urgent pressure on them for rapid economic development and political
stabilization. In this background, the United Nations Organization (UNO) was born on the
collective wisdom of the world.
Progressively, the UNO came to encompass the concern for development in the
economic, commercial, scientific, social, and cultural spheres of the member nations. It
formed various forums and agencies. One such forum under the UNO was the General
Agreement on Tariffs and Trade (GATT), which was established in 1947. GATT emerged
from the "ashes of the Havana Charter". In the International Conference on Trade and
Employment in Havana in the winter of 1947-48, fifty-three nations drew up and signed a
charter for establishing an International Trade Organization (ITO). However, the US
Congress did not ratify the Havana Charter with the result that the ITO never came into
existence. Simultaneously, twenty-three nations agreed to continue extensive tariff
59
negotiations for trade concessions at Geneva, which were incorporated in a General
International Business Agreement on Tariffs and Trade. This was signed on 30 th October
1947 and came into force from January 1948 when other nations had also signed it. The
critical juncture was reached during the Uruguay Round of multilateral trade negotiations,
which may be called the final act. It was signed by 12 countries in which India was a
signatory. Popularly known as the Dunkel agreement, it finally emerged as the World Trade
Organization (WTO) on 1st January 1995.
What is GATT?
The General Agreement on Tariffs and Trade (GATT) is neither an organization nor a
court of justice. It is simply a multinational treaty, which now covers eighty percent of the
world trade. It is a decision-making body with a code of rules for the conduct of international
trade and a mechanism for trade liberalization. It is a forum where the contracting parties
meet from time to time to discuss and solve their trade problems and negotiate to enlarge
their trade.
The GATT rules provide for the settlement of trade disputes, call for consultations,
waive trade obligations, and even authorize retaliatory measures. The GATT has been a
permanent international organization having a permanent Council of Representative with
headquarters in Geneva. 25 Governments have signed it. Its function is to call International
conferences to decide on trade liberalizations on a multilateral basis.
Objectives of GATT:
By reducing tariff barriers and eliminating discrimination in international trade, the GATT
aims at:
1. Expansion of international trade,

2. Increase of world production by ensuring full employment in the participating nations,
3. Development and full utilization of world resources, and
4. Raising the standard of living of the world community as a whole.
However, the articles of the GATT do not provide directives for attaining these
objectives. These are to be indirectly achieved by the GATT through the promotion of free
(unrestricted) and multilateral international trade. As such, the rules adopted by GATT are
based on the following fundamental principles:
60
1. Trade should be conducted in a non-discriminatory way;
2. The use of quantitative restrictions should be condemned; and
3. Disagreements should be resolved through consultations.
3.5 WORLD TRADE ORGANIZATION (WTO)
The WTO was established on January 1, 1995. It is the embodiment of the Uruguay
Round results and the successor to GATT. 76 Governments became members of WTO on its
first day. It has now 146 members, India is one of the founder members. It has a legal status
and enjoys privileges and immunities on the same footing as the IMF and the World Bank. It
is composed of the Ministerial Conference and the General Council. The Ministerial
Conference (MC) is the highest body; it is composed of the representatives of all the
Members. The Ministerial Conference is the executive of the WTO and is responsible for
carrying out the functions of the WTO. The MC meets at least once every two years.
The General Council (GC) is an executive forum composed of representatives of all

the Members. The GC discharges the functions of MC during the o 'intervals between
meetings of MC. The GC has three functional councils working under guidance and
supervision namely.
a) Council for Trade in Goods.
b) Council for Trade in Services.
c) Council for Trade-Related Aspects of Intellectual Property Rights (TRIP)
Director-General heads the secretariat of WTO. He is responsible for preparing the
budgets and financial statements of the WTO. WTO has now become the third pillar of the
United Nations Organization (UNO) after the World Bank and International Monetary Fund.
Objectives of WTO
In Its preamble, the Agreement establishing the WTO lays down the following objectives of
the WTO.
1. Its relation in the field of trade and economic endeavor shall be conducted to raise
standards of living, ensure full employment and large and steadily growing volume of
real income and effective demand, and expand the production and trade in goods and
services.
61
2. To allow for the optimal use of the world's resources following the objective of
sustainable development, seeking both (a) to protect and preserve the environment,
and (b) to enhance the means for doing so in a manner consistent with respective
needs and concerns at different levels of economic development.
3. To make positive efforts designed to ensure that developing countries especially the
least developed among them, secure a share in the growth in international trade
commensurate with the needs of their economic development.
4. To achieve these objectives by entering into reciprocal and mutually advantageous

arrangements directed towards substantial reduction of tariffs and other barriers to
trade and the elimination of discriminatory treatment in international trade relations.
5. To develop an integrated more viable and durable multilateral trading system

encompassing the GATT, the results of past trade liberalization efforts, and all the
results of the Uruguay Round of multilateral trade negotiations.
6. To ensure linkages between trade policies, environmental policies, and sustainable

development.
Functions of WTO
The following are the functions of the WTO:
1. It facilitates the implementation, administration, and operation of the objectives of the
Agreement and the Multilateral Trade Agreements.
2. It provides the framework for the implementation, administration, and operation of

the Plurilateral Trade Agreements relating to trade in civil aircraft, government
procurement, trade in dairy products, and bovine meat.
3. It provides the forum for negotiations among its members concerning their
multilateral trade relations in matters relating to the agreements and a framework for
the implementation of the result of such negotiations, as decided by the Ministerial
Conference.
4. It administers the Understanding on Rules and Procedures governing the Settlement

of Disputes of the Agreement.
62
5. It cooperates with the IMF and the World Bank and its affiliated agencies to achieve
greater coherence in global economic policymaking.
Differences between GATT and WTO

The WTO is not an extension of the GATT but a succession to the GATT. It completely
replaces GATT and has a very different character. The major differences between the two
are:
1. The GATT had no status whereas the WTO has a legal status. It has been created by
an international treaty ratified by governments and legislatures of member states.
2. The GATT was a set of rules and procedures relating to multilateral agreements of
selective nature. There were separate agreements on separate issues, which were not
binding on members. Any member could stay out of the agreement. The agreements,
which form part of the WTO, are permanent and binding on all members.
3. The GATT dispute settlement system was dilatory and not binding on the parties to
the dispute. The WTO dispute settlement mechanism is faster and binding on all
parties.
4. GATT was a forum where the member countries met once in a decade to discuss and
solve world trade problems. The WTO, on the other hand, is a properly established
rule-based World Trade Organization where decisions on the agreement are time-
bound.
5. The GAIT rules applied to trade in goods. Trade-in services were included in the
Uruguay Round but no agreement was arrived at. The WTO covers both trades in
goods and trade in services.
6. The GATT had a small secretariat managed by a Director-General. But the WTO has
a large secretariat and a huge organizational setup.
The implementation issues cover a whole range of demands. The issues requiring WTO
attention relate to:
i. TRIPS
63
ii. TRIMS
iii. Anti-dumping
iv. Involvement of natural persons
v. Agriculture
vi. Textiles
vii. industrial tariffs including peak tariffs
viii. Services
ix. Rules to protect investments
x. Competition policy
xi. Transparency in Government procurement
xii. Trade facilitation
Trade-Related Intellectual Property Rights Agreement:
TRIPS are an international agreement among various members of the WTO on

intellectual property rights. It is one of the most comprehensive multilateral agreements on
IP. This agreement came into effect on 1st January 1995. The objective of this act is the
protection and enforcement of all intellectual property rights. The Trade-Related Intellectual
Property Rights (TRIPs) Agreement covers the following seven categories of intellectual
property:
i. Copyright and Related Rights: The members are required for the protection of
literary and artistic works. Computer Programmes are included in literary works.
ii. Trademarks: The owner of a registered trademark has the inclusive right to prevent
all third parties not having the owner's consent from using in the course of trade
identical or similar signs for goods or services.
iii. Geographical Indications: Members are required to provide the legal means for
interested parties to prevent the use of any indication, which misleads the consumer as
to the origin of goods, and any use, which would constitute an act of unfair
competition.
iv. Industrial Designs: Industrial designs are protected for 10 years. Owners of
protected designs would be able to prevent the manufactures, sale, or importation of
64
articles bearing or embodying a design, which is a copy of the protected design for
commercial purposes.
v. Patents: Patents shall be available for any inventions, whether products or processes,
in all fields of technology, provided they are new, involve an intuitive step, and are
capable of industrial application.
vi. Integrated Circuits: The TRIPs Agreement protects the layout designs
(topographies) of integrated circuits for 10 years.
vii. Trade Secrets: Trade secrets and know-how having commercial value shall be
protected against breach of confidence and other acts.
Test data submitted to governments to obtain marketing approval for pharmaceuticals
or agricultural chemicals shall be protected against unfair commercial use. This Agreement
refers to the control of anti-competitive practices in contractual licenses about intellectual
property rights. It provides for consultations between governments to protect intellectual
property rights from being abused. The Agreement requires a one-year transition period for
developed countries to bring their legislation and practices into conformity with TRIPs.
Trade-Related Investment Measures (TRIMS) Agreement:
It is an agreement on Trade-Related Investment Measures, which specifies the rules

that apply to the domestic regulations a country applies to foreign investors. The agreement
rules apply to all members of the World Trade Organization (WTO). The agreement was
formalized in 1994 and came into effect in 1995.
The TRIMs Agreement prohibits certain trade-related investment measures that

violate the general elimination of quantitative restrictions and national treatment requirements
of GATT. It has put restrictions on some of the policies like local content requirements;
trade-balancing rules that have been used to both protect the interests of domestic industries.
Features of TRIMs:
The following are the important features of TRIMS-
65
i. Offering equal rights to the foreign investor on par with the domestic investor.
ii. Abolition of the restriction imposed on foreign capital.
iii. No limitation or ceiling on the quantum of foreign investment.
iv. Granting of permission without restrictions to import raw material and other
components
v. Abolition of restrictions on any area of investment
vi. Export of the part of the final product will not be mandatory
Agreement on Trade in Services:
This Agreement covers all internationally traded services. Foreign services and
service suppliers would be treated on equal footings with domestic and service suppliers.
However, governments may indicate Most Favoured Nation (MFN) exemptions, which will
be reviewed after 5 years, with a normal limit of 10 years. It requires transparency, which
includes the publication of all relevant laws and regulations relating to services trade.
International payments and transfers relating to trade in services shall not be

restricted, except in the event of balance of payments difficulties where such restrictions will
be temporarily limited and subjected to conditions. Any liberalization of trade in services
would be progressive; it would be through negotiations at five-year intervals to reduce or
remove the diverse effects of measures on trade in services and to increase the general level
of specific commitments by the governments.
1. Country Similarity Theory was proposed by

____________________________________
2. Theory of Absolute cost advantage was advocated by
66
____________________________
3. Comparative cost advantage developed by
____________________________________
4. Relative factor endowment theory developed by
________________________________
5. Full form of GATT _______________________________________
6. Expansion of TRIPS is _______________________________________
7. The Councils for ____________ under the General Council.
8. The WTO system tries also to improve______________ and stability, discouraging
the
use of quotas and other measures used to set limits on quantities of imports.
Answer to Check your Progress

1. Steffan Linder, a Swedish Economist
2. Adam Smith.
3. David Ricardo
4. Eli Heckscher and Ohlin
5. General Agreement on Tariff and Trade
6. Trade-related Intellectual Property Rights
7. Trade work
8. Predictability
3.6 SUMMARY
International trade takes place due to differences in opportunity costs. According to
mercantilism, countries should export more than they import and receive the differences in
gold. The decay of the gold standard reduces the validity of this theory. According to Adam
Smith, free trade enables the country to produce a variety of goods and services. Every
country specializes in producing those products at a cost less than that of other countries. The
natural advantage is due to climate conditions, natural resources, etc. acquired advantage is
due to technology and skill development. The country should produce and export those
67
products for which it is relatively more productive than other countries and import other
products. Factor endowments are land, capital, natural resources, labor, climate, etc. and they
vary among countries. International trade takes place among the countries that are at the same
stage of economic development. PLC theory provides inputs for manufacturing trade and
investment decisions. International trade takes place among the companies based on relative
competitive advantage, but not countries' competitive advantage. Companies get competitive
superiority from demand conditions, factor endowment, related and supporting industries,
firm strategy, structure and rivalry. Several theories have been developed by international
economists to explain how does international business takes place and how do countries get
benefit from international business.
The GATT came into existence on the 1st of January 1948. Dunkel proposed trade
liberalization in many areas like TRIMs and TRIPs. Uruguay round of negotiation of GATT
covers TRIMS, TRIPS. Subsidies, etc. The WTO was established on the 1 st January 1995 to
implement the final act of the Uruguay round agreement of GATT. GATT is a set of rules
and multilateral agreements, whereas the WTO S is a permanent institution. The basic
purpose of the W TO is to promote international trade without any discrimination. India is
expected to play a leader's role for the developıng countries in the WTO. Recently India is
experiencing problems with the WTO due to dumping. The Indian agricultural sector is
affected badly compared to the industrial sector by dumping.
3.7 KEYWORDS
General Agreements on An international treaty that committed signatories to lower

Tariffs and Trade barriers to the free flow of goods across national borders and
(GATT) led to the WTO
Trade Barriers These are restrictions imposed on the movement of goods
between countries (import and export).
Tariff barriers These are the 'tax barriers' or the 'monetary barriers' imposed on
internationally traded goods when they cross the national
borders.
Non-tariff Barriers Non-tariff barriers are restrictions arising from measures such
as licensing, product testing, certifications, procedural hurdles,
etc.
Quotas Under this system, a country may fix in advance, the limit of
import quantity of a commodity that would be permitted for
68
import from various countries during a given period.
Quota Restrictions Quota restrictions mean explicit limit (usually measured by
volume or sometimes by value) on the amount of a particular
product that can be imported or exported during a specified
period.
World Trade The organization that succeeded the General Agreement on
Organization (WTO) Notes Tariffs and Trade (GATT) as a result of the successful
completion of the Uruguay round of GATT negotiations.
1. What is mercantilism theory?

2. Discuss the theory of Absolute Cost Advantage.
3. What are the assumption and implications of Absolute Cost Advantage Theory?
4. What are the assumptions and implications of Comparative Cost Advantage
Theory?
5. Explain the grounds on which Absolute Cost Advantage and Comparative Cost
Advantage theories were criticized.
6. Discuss the Theory of Comparative Cost Advantage. What are its assumptions
and implication?
7. Explain the Relative Factor Endowment Theory of International Trade.
8. Discuss the National Competitive Advantage Theory of International trade.
9. Analyze the product life cycle theory of international trade in detail.
10. Discuss the global strategic rivalry theory of international trade.
11. What is a Trade barrier? State types of trade barriers.
12. Write an explanatory note on WTO.
13. Discuss the types of agreements under GATT.
14. What do you understand by GATT? Discuss its main objectives.
15. What is WTO? Discuss its functions and objectives.
3.9 REFERENCES
69
12. William J Stanton, Fundamentals of Marketing, Tata McGraw Hill, International
Edition, 1987.
University Press.
16. Philip R Cateora and John L Graham Irwin, International Marketing, /McGraw-Hill,
Boston.
18. Charles W.L. Hill, International Business Competing in the Global Marketplace, 4th
Edition, Tata McGraw-Hill Publishing Company Limited
19. Chase Richard, Jacob Robert, Aquillano and Agarwal Nitin, Operations Management,
70
UNIT-4: INTERNATIONAL MARKET ENTRY STRATEGIES
4.0 Objectives
4.1. Introduction
4.2. Different Entry Modes to Enter in International Market
4.3. Market Entry Strategies
4.4. Joint Ventures
4.5. Strategic Alliance
4.6. Direct Investment.
4.7. Check your progress
4.8. Summary
4.9. Keywords
4.10. Questions for Self-Study
4.11. References
71
UNIT-4: INTERNATIONAL MARKET ENTRY STRATEGIES
4.0 OBJECTIVES
 Discuss the various Entry Modes to Enter in International Market
 Describe the Market Entry Strategies
 Describe Concepts of the Joint Ventures
 Describe Concepts of the Strategic Alliance Concepts
 Describe Concepts of the Direct Investment Concepts
4.1. INTRODUCTION
All over the world, many countries are undergoing a fundamental shift in the way they
produce and market various products and services. And also, governments of different countries have
been a major contributory factor to the increased interactions and Market relations amongst the
nations. We are today living in a world where the difficulties to cross-border movement of goods and
persons have substantially come down. The national economies are increasingly becoming borderless
and getting combined into the world economy. Little wonder that the world has today come to be
known as a ‘global village’. Market in the present day is no longer restricted to the boundaries of the
domestic country. More and more firms are making ventures into the international Market which
72
presents them with numerous growth opportunities and increased profits. India has been trading with
other countries for a long time. But it has of late considerably raced up its process of integrating with
the world economy and increasing its foreign trade and investments. The national economies which
so far have been following the goal of independence are now becoming increasingly dependent upon
other countries for obtaining as well as supplying various kinds of goods and services. Due to
increased cross-border trade and investments, countries are no more out-of-the-way. The main reason
behind this fundamental change is the development of, technology communication, infrastructure, etc.
As we know International business refers to the All-economical activities that take place across
national boundaries. Though many authors use the terms international business and international trade
synonymously, International Business is a much broader term. International business involves not
only trade in goods and services but also other economic activities, such as production and marketing
of goods and services all over the world. Now we will discuss what are the different modes are there
enter the International Market.
4.2. DIFFERENT ENTRY MODES TO ENTER IN GLOBAL MARKET
Simply speaking, the term mode means the way. So, modes of entry refer to here different
ways of entry into the international market. In the following sections, we shall discuss in detail
important ways of entering into the international market along with their advantages and limitations.
Such a discussion will enable you to know which model is more suitable under what conditions.
The choice for entering a foreign market is another major issue with which international
business must struggle. The various modes for serving foreign markets are exporting, licensing, or
franchising to host country firms, establishing joint ventures with a host country firm, setting up a
new wholly-owned subsidiary in the host country to serve its market, or acquiring an established
enterprise in the host nation to serve the market. The optimal entry mode varies by situation
depending on factors like transport costs, trade barriers, political risks, economic risks, and firm
strategy Firms can use many modes to enter the International market but majorly countries use the
following five modes to enter foreign markets those are exporting, licensing, franchising, Contract
Manufacturing, Turnkey Projects. Each entry mode has advantages and disadvantages. Managers need
to consider these carefully when deciding which to use to enter the International Market. The
following modes are briefly discussed below.
4.2.1 Exporting
Exporting is the process of marketing and direct sale of the goods and services in another
country that are domestically produced in the country. Using domestic plants as a production base for
exporting goods to foreign markets is an excellent initial strategy for pursuing international sales. It is
73
a traditional and well-established method of reaching foreign markets. Since exporting does not
require that the goods be produced in the target country, no investment in foreign production facilities
is required. Most of the costs associated with exporting take the form of marketing expenses. For
effective exporting activities, we require coordination among four players those are Exporter,
Importer, Transport provider, and Government.
4.2.1.1 Advantages of Exporting

1. It creates many business opportunities and supports the development of Business.
2. It can protect the business from the downsides of the local market.
3. Domestic business houses can learn New skills from exporting. It helps businesses to increase the
gain from trade.
4. Firms of Domestic countries can access more consumers and businesses in the global market.
5. Exporting create Diversifying Market opportunities for the firms so that even if the domestic
market begins to falter firms may still have other growing market for their goods and services.
6. Exporting Expand the product life cycle of mature products. If the domestic market seems
saturated for goods and services.
4.2.1.2 Disadvantages of Exporting

1. While exporting product to target country exporter incur High cost comparatively selling product
in the domestic country.
2. Tariff obstructions can make trading uneconomical. Also, the threat of duty obstructions by the
host-country government can make it risky.
3. Exporting through nearby specialists may not be an acceptable recommendation since unfamiliar
specialists frequently convey the results of contending firms thus have separated loyalties.
4. The risk involved in more Exporting such as credit risk, financing, collection, currency rate, etc.
5. The international market involved high competition competitors cannot avoidable in the export
market too. Comparatively domestic market so it needs to exporter undertake many marketing
activates.
4.2.2 Licensing
Licensing is also one of the modes of entering into the International Market. Licensing
fundamentally permits a company in the target country to use the property or assets of the licensor.
Such property or assets are usually intangible, such as copy-right trademarks, patents, and production
techniques, etc. Licensing makes sense when a firm with valuable technical know-how or a unique
patented product has neither the internal organizational capability nor the resources to enter the
foreign markets. The licensee pays consideration in return to the licensor as a fee in exchange for the
rights to use the intangible property and possibly for technical assistance. Because little investment on
74
the part of the licensor is required, licensing has the potential to provide a very large Return on
Investment. However, because the licensee produces and markets the product, potential returns from
manufacturing and marketing activities may be lost. This mode of entering into foreign trade has
some advantages and disadvantages. Before entering a company in foreign it needs critically study its
merit and demerits. Some of the advantages and disadvantages are discussed below.
4.2.2.1 Advantages of Licensing

1. Licensing has the benefit of avoiding the risks of obligating resources to country markets that are
unfamiliar, present considerable politically volatile or are economic uncertainty.
2. By licensing the production rights or the technology can be transferred to foreign-based firms, the
firm need not have to bear the risks of entering foreign markets at its own cost, so it can generate
profit from royalties.
3. Licensing is can be used in the international market when a firm desires to participate in a foreign
market but is forbidden from doing so by barriers to investment.
4. Licensing is used in the global Market when a firm possesses some intangible property such as
Patent, Trademark, copyright, etc that might have business applications, but it does not want to
develop those applications itself.
4.2.2.2 Disadvantages of Licensing

1. Licensing involved the risk of providing valuable technological know-how to foreign companies
and thereby it loses some control over its uses; at the same time monitoring licensing contracts
and safeguarding the company's valuable Intangible property know-how can prove quite difficult
in some cases.
2. Competing in an international market may need a firm to properly coordinate strategic steps
crosswise countries by using profits earned in one country to support competitive attacks in
another country. By its changing nature, licensing limits a firm’s ability to do this. A licensee is
unlikely to allow an MNC to use its profits to support a different licensee operating in another
country.
3. Technological know-how constitutes the basis of many firms which are dealing across the
national boundaries to get a competitive advantage. Most firms wish to maintain control over how
their know-how is used, a firm can quickly lose control over its technology by licensing
4.2.3 Franchising
As we study above, licensing is the mode to enter into the international Market under where
the licensor allows the license to use rights of the property such as trademark, patent, etc, now we will
discuss another mode of entering in the International market, that is Franchising. Franchising is a
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specialized form of licensing in which the franchiser not only sells intangible property (normally a
trademark) to the franchisee but also insists that the franchisee agree to obey the strict rules as to how
it does business. The franchiser will also often help the franchisee to run the business on an ongoing
basis. While licensing works well for manufacturers, but franchising is often suited to the global
expansion efforts of service and retailing. The franchisor provided the following services to the
franchisee: 1. Trademarks, 2. Operating system, 3. Product reputations, 4. Continuous support
systems like advertising, employee training, reservation services, quality assurance programs, etc.
4.2.3.1 Advantages of Franchising

Franchising has much the same benefits as licensing. Under the franchising agreement, the
franchisee bears most of the risks and costs of establishing International locations; the franchiser has
to expend only the resource to recruit, train, and support franchisees. Thus, using a franchising
strategy, a service firm can build a global presence quickly and at a relatively low cost and risk, as
McDonald’s has.
4.2.3.1 Disadvantages of Franchising

Maintaining quality control is a big problem for a franchiser. foreign franchisees do not
always show a strong commitment to maintaining consistency and standardization, maybe because the
local culture does not stress or put much value on the same kinds of quality concerns.
4.2.4 Contract Manufacturing

Another significant mode to enter the International market is contract Manufacturing. In
present days an ever-increasing number of firms are implementing an imported technique which uses
contract producing abroad. Rather than essentially ordering items on a case-by-case basis, the
organization goes into an agreement with the unfamiliar provider, which fixes creation sums and
conveyance times and permits the provider to keep up active administration of the creation process.
That gives the shipper a more prominent affirmation of supply and quality control while
profiting by lower wage rates and as yet restricting the organization's obligation to the maker and the
nation of production. This program can be utilized either to secure a cheaper wellspring of segments
or for a creative base for a definite gathering of items.
4.2.4.1 Benefits of Contract Manufacturing
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In contractual arrangements between principal and a foreign market-based
manufacturer who produces branded products. both the head and sub-worker for hire anticipate the
accompanying advantage.
1. Contract Manufacturing allows the principal to access required raw material cheap labor supply.
And flexible production planning and the opportunity to circumvent restrictive employment
legislation in the host country.
2. The sub-contractor gets several advantages; such as the opportunity to manufacture to
international standards, create and sustain additional employment,
3. when produced products are re-exported to third parties’ markets, contract manufacturing is
stimulated by the host government as it contributes to an improved balance of trade.
4.2.4.2 Limitations of Contract Manufacturing

It is very problematic to find suitable sub-contractors in the host market, whose equipment,
facilities, and know-how are compatible with the requirement of the principal.
1. The principal might not have direct administrative power over the manufacturing cycle. This can
prompt major issues of value control.
2. Contract execution and supply of products might be disturbed either by neighborhood political
disturbances or industrial relations challenges in the host market.
3. For a sub-contractor for hire generally subject to the head, the end of the agreement by the chief
could cause transient challenges and may prompt liquidation over the long run.
4.2.5 Turnkey Projects

It is also one of the modes to enter the international market under his project the contractor
agrees to handle every detail of the foreign client’s project including the training of working
personnel. Turnkey Projects organization that specializes in the construction, design, and start-up of
turnkey plants are common in some industries. At the time of completion of the contract, the foreign
client has handled the “key” to a plant that is ready for full operation-hence the term turnkey. This is a
means of exporting process technology to other countries. Turnkey projects are most common in the
chemical, pharmaceutical, petroleum refining, and metal refining industries, all of which use complex,
expensive production technologies.
4.2.5.1 Advantages of Turnkey project

Turnkey projects have the following advantages:
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1. These projects are a way of earning economic returns from the asset and properties. This Turnkey
project strategy is particularly helpful where foreign direct investment is minimum by host-
government regulations. For example,
Oil-rich countries' governments have set out to build their Petroleum industries, so they limit Foreign
Direct Investment in their oil and refining sector only. But many of the countries are facing
problems in petroleum technology; they get technological support by entering into the turnkey
projects with International firms then had the technological support.
2. It can also less be less risky if we compared it to conventional strategy FDI. In a country with a
dynamic economic and political environment, a long-term investment may expose the firm to
undesirable political and or economic risks.
4.2.5.2 Disadvantages of Turnkey Projects

Some of the disadvantages of turnkey projects are mentioned below:
1. The companies which are entered into a turnkey project will have no long-term interest in the
foreign country. It can be a disadvantage if that country afterward proves to be a major market for
the output of the process that has been exported.
2. The companies which enter into a turnkey project with an International enterprise may
unintentionally create a competitor.
4.3. MARKET ENTRY STRATEGIES
Market Entry Strategies

Above we discussed various modes for entering into the International Market. Modern
companies stretch everywhere in the world and are not bound by a single country. In this modern,
world it is increasingly vital for managers to understand the International strategic management
process. Understanding this procedure will help managers to select the best markets, enter markets,
and improve and grow the firm in these new markets and continually manage and develop the firm
internationally.If a firm has entered an International market, it should develop strategic growth plans.
It includes creating the local reputation and market contribution, but it also included creating local
capabilities. Local capabilities are based on locally available resources. For Example, an Indian firm’s
branch might focus on the capabilities of IT because the market of India has a large population of IT
engineers.
Now we discuss some strategies to enter the international market
4.3.1 JOINT VENTURE
4.3.1.1 Introduction
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To enter into the foreign market one of the common strategies is Joint venture under this
firm is jointly owned by two or more two independent firms. If we see in the border sense of the term,
joint venture means any form of association which implies collaboration for more than a transitory
period. This joint venture is also known as a consortium, contractual joint venture, or contractual
alliance. A joint venture means the common ownership between two firms or partners which are
located domestically or located in the other host nation. With help of the joint venture firms can enjoy
strategic and organizationally flexibility in the target market and the foreign participant can save the
capital by using a host country partner’s infrastructure and maximum liability limitation. International
joint ventures are formed between firms belonging to different countries. As a result, they can
exchange knowledge about different markets which makes joint ventures a popular entry choice for
foreign companies. Along with this International joint venture is effective for a foreign firm to share
the risks that exist in the overseas market with the local partner.
4.3.1.2 Reason for joint venture Formation

There are many reasons for joint venture formation on the International level them some
important reasons which are influencing the company to form joint ventures are broadly classified as
Internal reason, External reason, and Strategic reason.
S.
Internal Reason External Reason Strategic reason
No
Building Company’s Influencing structural evolution of
1 Synergies
Strengths the industry
2 Spreading costs and risks Pre-empting competition Diversification.
Improving access to Defensive response to blurring Transfer of

3
financial resources. industry boundaries, technology/skills
Creation of stronger competitive
4 Economic scale Expansion
units,
5 Advantages of Size Speed to market,
6 Improved agility
The above-mentioned reasons are directly or Indirectly influence the firms to form a joint venture.
companies can enter in A joint Venture through various ways among those important ways are as
below.
a. Acquiring an interest in a local firm by foreign investors can enter the joint venture.
b. or else a local firm by acquiring an interest in an existing foreign firm it can go for the joint
venture.
c. or by both local firm and foreign firm by jointly forming a new enterprise enter into a joint
venture.
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4.3.1.3 Advantages
Major advantages of joint venture include:
Since the local partner also underwrites the equity capital of such a venture, the global firm
finds it financially less burdensome to expand internationally. Joint ventures make it possible to
perform large projects requiring huge capital expenditures and manpower.
• The foreign Market firm gets advantages from a local partner’s knowledge of the host countries
about the competitive circumstances, language, culture, political systems, and Market systems.
• In many cases entering into a foreign market is very risky and costly. This can be avoided by
allocation costs and/or risks with a local partner under joint venture agreements.
Disadvantages
Major Disadvantages of Joint Venture include
1. Foreign firms entering into joint ventures share the trade secrets, technology and with local firms
in overseas countries, thus always running the risks of such technology and secrets being revealed
to others.
2. The two-fold ownership arrangement may lead to battles, resulting in conflict for control between
the investing firms.
3. In a Joint venture strategy, the firm enters into a joint venture agreement giving control of its
technology to its partner.
4. A joint venture does not give a firm the constricted control over subsidiaries that it might
necessary to realize experience curve or location economies. Nor does it give a firm the tight
control over a foreign subsidiary that it might need for engaging in coordinated global attacks
against its rivals.
5. Allocated ownership arrangements can lead to battles and conflicts for control between the
investing firms in their objectives and goals change or if they take dissimilar views as to what the
strategy should be
4.3.2 STRATEGIC ALLIANCES:
If a firm needs to do an economic activity abroad but lacks the expertise and resource it's
not entering the international market or if the government of the other country does not allow for
business activities, in that case, a firm might enter into a strategic alliance with the international firm
or even with the government itself. A strategic alliance is an agreement between two firms or
company, to pool available resources to achieve business objectives to aliened parties. For example,
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one of the leading global media company Viacom has a strategic alliance with Beijing Television to
produce Chinese language music and entertainment programming. A Strategic alliance can serve
several purposes of both partners such as it enhances the market efforts, increasing sales and market
share, improving products, reducing production and distribution costs, and also helping to share
technology.
Strategic alliances are one of the important strategies to enter the International Market. To
reach objectives of common interest, it is a formal relationship among the parties to follow a set of
goals that are agreed upon earlier. Generally, a strategic alliance is an agreement between two or more
separate entities formed t achieve common objectives through collaboration. It takes serval forms,
including minority equity investments, contractual arrangements (such as marketing agreements,
license agreements, and development agreements), and joint ventures that are operated as separate
legal entities (such as limited liability companies, corporations, limited or partnerships). Irrespective
of the form, strategic alliances contribute common features such as Alliances are among the various
options, which firms can use to achieve their goals; they are based on co-operation between
companies. As we discussed above strategic alliances support the companies to get economic benefit
by agreeing. And it also enables a firm to compete in the international market by creating new sources
of competitive advantages. A strategic alliance supports a firm in gaining access to anticipated
strategic capabilities by connecting to a partner with harmonizing resources. Or by combining its
internal resource with a partner dealing out similar competence added that a firm can form a strategic
alliance with local firms, firms from its own country, or firms from another country. When a firm
forms alliance with another firm, they agree to share technology, resources, profits and supplement
each others’ needs for a long period. a strategic alliance can support applicants to decrease investment
risks, share technology, and improve competence, enhance international mobility, and strengthen
international competitiveness. They mentioned that the main rewards of forming a strategic alliance
with another firm are risk-sharing, asset protection, resource pooling, and the ability to react quickly
to market changes. There are some drawbacks of strategic alliances too. These are the high risk of
losing control over technology, disagreement in strategies to be approved, and inequality in sharing
different resources, etc. A strategic alliance is a contractual agreement between two or more firms
instructing that the agreed firms will cooperate in a certain way for a certain period to accomplish a
common purpose. To decide if the alliance method is appropriate for the firm, the firm should
determine what worth the partner could bring to the project in terms of both tangible and intangible
aspects. The benefit of collaborating with a local firm is that the local firm is expected to understand
the local market, culture, and method of doing economic activates better than an outside firm. Partners
are particularly worth it if they have familiarity, goodwill in the country, or have current relationships
with customers that the firm might want to access. For example, Cisco undertakes a strategic alliance
with Fujitsu to grow routers for Japan. In the alliance, Cisco decided to co-brand with the Fujitsu
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name so that it could influence Fujitsu’s reputation in Japan for IT equipment and solutions while still
retaining the Cisco name to benefit from Cisco’s global reputation for switches and routers. Similarly,
Xerox has also signed strategic alliances to develop sales in emerging markets such as Central and
Eastern Europe, India, and Brazil. Strategic alliances have become increasingly widespread in recent
years. They permit companies to allocate and resources required to enter global markets. And
although yields also may have to be shared, they allow a company a degree of elasticity not afforded
by going it alone through direct investment. There are many influences for firms to reflect a
partnership as they enlarge Internationally, it included (a) risk and reward sharing, (b) facilitating
market entry, (c) updated technology sharing, (d) combined product development, and (e) government
regulations conforming. Other advantages comprise political connections and distribution channel
access that may be subject to on relationships. Such strategics alliances often are useful when the
partners’ strategic objectives meet while their competitive objectives deviate and the partners’ market
power, size, and useful resources are minor compared to the firms’ leaders and it also useful when
partners are enthusiastic to learn from each other while restrictive access to their skills.
4.3.2.1 Advantages of Strategic Alliance

Joint ventures focused on the representation of companies in various geographic areas and
various countries. The spectacle of the joint venture for predefined business activities has become
more predominant. more An alliance can report to the company a relative advantage in size or a skill
to learn the field quicker or provide an accompaniment to areas in which it is deficient.
Many start-ups’ firms decide that the best method to quickly expand their economic activities is to
enter into strategic alliances with recognized companies that serve a different but same market. The
many advantages of strategic alliances are listed below:
1. Access to distribution channels,

2. Access to technology, expertise, or intellectual property, as a means to raise capital, New products
for your customers, Lower R&D costs, Economies of scale, and Raise brand awareness
4.3.2.2 Disadvantages of Strategic Alliance

Strategic Alliances are expensive, not only due to cash leaving the company’s hands but rather
due to returns from which it could be denied. The joint venture comprises the direct investment of
managerial time resources in starting the project, and managing the project, and solving possible
problems of interest among the partners over the operating activities of the project. When a set of
contracts, transfer price, and various incentive schemes price from the partners to the JV solve the
most conflicts, in the joint venture strategy managers entirely avoid battles among the respective
82
parties. However Strategic alliance can create Indirect costs by blocking the possibility of competing
companies, thus possibly even denying the firms different financing options.
Major Disadvantages of Strategic alliance are as follows:
1. Strategic alliance management is not involved strongly and it holds less equity stack.
2. The distress of market insulation due to the home-grown partner's existence
3. There is hardly less effective communication
4. Underprivileged resource allocation
5. There will be difficult to retain purposes on target over time
6. Loss of control over important issues such as operating costs, product quality, employees, etc.
4.3.3 Direct Investment
Joint venture and strategic alliance discussed so far allow companies to participate in international
markets without investing in foreign plants and facilities. As markets expand, however, a firm might
decide to enhance its competitive advantage by making a direct investment in operations conducted in
another country.
Direct investment is also one of the strategies to enter the international market as we discussed above
joint ventures and strategic alliance has some drawbacks. So many firms are adopted Direct
investment strategies to enter the international market. Direct investment refers to investing into
production in a domestic country by a company located abroad, either by acquiring a company in the
target country or by expanding the operation of an existing business in another country. It has been
done for many reasons such as taking advantage of cheaper wages in the target country, tax
exemptions offered by the target country, etc, Direct investment is in contrast to portfolio investment
which is a passive investment in the securities of other countries such as bonds and stocks.
Foreign Direct Investment refers to the net inflows of investment i.e. inflow minus outflow. It is
invested to acquire a long-term management interest (10 percent or more of voting stock) in a firm
working in an economy other than that of the investor. It is included equity capital, other long-term
capital, and short-term capital as shown in the BOP. It usually involves a joint venture, transfer of
technology and expertise, and participation in management. Foreign Direct Investment is classified
into 2 categories are Inward foreign direct investment and outward foreign direct investment, resulting
in a net FDI inflow (positive or negative) and stock of FDI, which is the cumulative number for a
given period. Foreign Direct investment excludes investment through acquiring of shares. Foreign
Direct investment is one example of movement of International factors. International firms need to
control the activities when foreign firms need to control the economical operations when it has
83
subsidiaries to achieve strategic synergies. And also, when the technology, manufacturing expertise,
intellectual property rights have potentialities and their full utilization needs planned exploitation.
Foreign Direct Investment is the most expensive strategy that firms can make to an international
market, and it is naturally driven by the attractiveness and size of the target market. For example,
Japanese and German automakers, such as Mercedes, BMW, Toyota, and Honda, have made
commitments to the United States market. Most of the trucks and cars that they build in plants in the
south and Midwest are intended for the sale of the united states.
One of the common forms of Foreign Direct Investment is the foreign subsidiary. Under this, an
independent company is owned by a foreign firm called the parent company. This method of going
international not only gives the parent company full access to the target countries market but also
exempts it from any laws or regulations that may create an adverse impact on the activities of foreign
firms. The parent company has total control over the all-economic operations of the subsidiary. For
example, International Business Machine (IBM) and Coca-Cola, have both had success in the
Japanese market through their subsidiaries. Foreign Direct goes in the other direction too, and several
companies operating in the U.S market are in fact subsidiaries of foreign firms. Gerber products, for
example, is a subsidiary of the Swiss company Novartis, while Stop & Shop and Giant Food Stores
belong to the Dutch company Royal Hold.
4.3.3.1 Advantages of FDI
The following are the advantage of FDI:
1. Typically, the customer in the host country desires the products produced in their country like buy
Indian, be Indian. In such cases, Direct Investment supports the company to gain market through
this method rather than other methods.
2. Purchase managers of most of the firms wish to purchase homegrown production to ensure the
inevitability of supply, quicker services, quality reliability, and better communication with the
dealers.
3. The company can manufacture based on the homegrown environment and changing favorite of
the customers.
4.3.3.2 Disadvantages of Direct Investment
The following are the disadvantages of Direct Investment:
84
1. Direct Investment exposes the firms to the host country’s economic and political risk.
2. Direct Investment exposes the firms to the exchange rate fluctuation.
3. Some countries discourage the entry of overseas firms through Direct Investment to defend the
domestic industry.
4. dynamic government policies of the host country may create ambiguity for the firms.
5. Government of the Host country sometimes bans the purchases of local firms by global firms;
levies restrictions on repatriation of capital and dividends.
4.4. CHECK YOUR PROGRESS

1. Which is the most appropriate mode of entry in the International market to an enterprise with little
experience in International Markets?
2. __________ in international trade is a good produced in one country that is sold into another

country or service provided.
3. ______________ allows foreign firms, either exclusively or non-exclusively to manufacture a

proprietor's product for a fixed term in a specific market.
4. _____________ is a business method that involves the licensing of trademarks and methods of
doing business.
5. A _____________is a manufacturer that contracts with a firm for components or products. It is a

form of outsourcing.
6. ___________is a type of project that is constructed so that it can be sold to any buyer as a
completed product.
7. ____________is an agreement between two or more parties to pursue a set of agreed-upon

objectives needed while remaining independent organizations.
85
8. ____________is an investment in the form of a controlling ownership in a business in one
country by an entity based in another country.
9. ___________are a way of earning economic returns from the asset and properties.
10. _________________is a systematic application of scientific knowledge to practical task is known

as technology.
1. Exporting
2. An Export
3. An International licensing agreement
4. Franchising
5. contract manufacturer
6. turnkey operation
7. A strategic alliance
8. A foreign direct investment
9. Turnkey projects
10. Technological Environment
4.5. SUMMARY
Market entry strategies allow companies to offer their products and services in international
markets. Since there are many methods companies can use to enter the global market to sell goods and
services, they can choose a suitable entry strategy based on their goals and target market.
Understanding the different market entry strategies can help marketers decide which one offers the
most benefits to the company. In this chapter, major entry modes are discussed along with the
advantages and disadvantages.
4.6. KEYWORDS
International marketing or global marketing is marketing done on an

 International Market international level. International marketing is based on the strategy
created in the home country of the company and distributed to its
other offices/affiliations.
86
An export in international trade is a good produced in one country that
 Exporting
is sold into another country or a service provided in one country for a
national or resident of another country.
An international licensing agreement allows foreign firms, either

 Licensing
exclusively or non-exclusively to manufacture a proprietor's product
for a fixed term in a specific market.
 Franchising Franchising is a business method that involves the licensing of

trademarks and methods of doing business.
 Contract A contract manufacturer is a manufacturer that contracts with a firm

Manufacturing for components or products. It is a form of outsourcing.
A turnkey, a turnkey project, or a turnkey operation is a type of

 Turnkey Projects
project that is constructed so that it can be sold to any buyer as a
completed product.
A joint venture is a business entity created by two or more parties,

 Joint Venture
generally characterized by shared ownership, shared returns and risks,
and shared governance.
A strategic alliance is an agreement between two or more parties to

 Strategic Alliances
pursue a set of agreed-upon objectives needed while remaining
independent organizations.
Foreign direct investment is an investment in the form of controlling

 Direct Investment
ownership in a business in one country by an entity based in another
country.
4.7. QUESTIONS FOR SELF-STUDY

1) Write a note on one Different Market Strategy.
2) Briefly explain the different modes to enter into the International Market.
3) What do you mean by Contract Manufacturing? Explain its demerits
4) Discuss the merits and demerits of the joint venture strategy to enter the international business.
5) What do you mean by Strategic alliance? Also, explain the various benefits of strategic alliance
6) What do you Understand the Direct Investment? How it helps to enter in the Foreign market.
7) The joint venture is one of the best strategies for entering the international market! Elaborate it.
8) What do you mean by franchising? how it helps developing countries to enter into a foreign
market.
87
1.8 REFERENCE
 Jhanji, Hitesh. International Business DMGT545. Panjab: Excel books private limited.
 P. Subba Rao, International Business –Text and Cases, Himalaya Publishing House.
 Warren Keegan, International Marketing, Pearson Education Asia Ltd and Tsinghua
University Press.
 Philip Kotler, International Marketing Management, Prentice-Hall International, Inc.
 Philip R Cateora and John L Graham Irwin, International Marketing, /McGraw-Hill, Boston.
 Cateora and Graham, International Marketing, McGraw Hill, 2007.
 Charles W.L. Hill, International Business Competing in the Global Marketplace, 4th
Edition, Tata McGraw-Hill Publishing Company Limited
 Chase Richard, Jacob Robert, Aquillano and Agarwal Nitin, Operations Management,
 Justin Paul, International Business, 3rd Edition, Prentice Hall of India Vasudeva, PK,
88

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UNIT-1: INTERNATIONAL MARKETING

After studying this unit, you will be able to:

 Define the term International Marketing

 Describe the Scope of International Marketing

 Distinguish between International and Domestic Marketing

 Outline the Principles of International Marketing

 Critically evaluate the challenges and opportunities of International Marketing

 Identify the benefits and problems of International Marketing

According to American Marketing Association (AMA), international marketing is the

1.2 CONCEPT OF INTERNATIONAL MARKETING

• Choosing the basic route for global marketing

• Market selection and product selection

• Selection of distribution channels

• Developing pricing strategy

• International marketing communication

• Mastering the procedural complexities

• Handling business ethics

1.4 SCOPE OF INTERNATIONAL MARKETING

Exports Contractual Agreements

Exporting is similar in terms of concept for a brand as it is for a country. Companies

6. Fully Owned Manufacturing

1.5 DIFFERENCE BETWEEN INTERNATIONAL MARKETING AND

International marketing means the

Area served Small Large

Business operation In a single country More than one country

Use of technology Limited Sharing and use of latest technology.

Risk factor Low Very high

Capital requirement Less Huge

Variation in customer tastes and

Deep research of the market is required

Product planning and According to the domestic

1.6 PRINCIPLES OF INTERNATIONAL MARKETING

1. Customer Value and the Value Equation

2. Competitive or Differential Advantage

1.7 REASONS TO ENTER THE INTERNATIONAL MARKET PLACE

10. Government Incentives

1.8 CHALLENGES AND OPPORTUNITIES IN INTERNATIONAL

Access to customers in new countries New competition for existing customers in

Access to new, cheaper sources of finance Global financial contagion

Government incentives to relocate Costs of meeting a multitude of

Access to regional trading Exchange rate fluctuations

Economies of scale Managing long supply chains

Knowledge and cultural progress between Cross-cultural communication e.g.

Country image improvement Corporate social responsibility issues

Reaping the benefits of competitive Capricious political environments/political

1.9 SOME PROBLEMS FACED BY INTERNATIONAL MARKETING

 Political Instability or Environment

 Place Constraints (Diverse Geography)

 Variations in Exchange Rates

 Norms and Ethics

 Terrorism and Racism

1.10 BENEFITS OF INTERNATIONAL MARKETING

2. Ensures rational & optimum utilization of resources

3. Rapid industrial growth

4. Benefits of comparative cost

5. International cooperation and world peace

6. Facilitates cultural exchange

7. Better utilization of surplus production

8. Availability of foreign exchange

9. Expansion of tertiary sector

10. Special benefits at times of emergency

Advantages to the consumer's point of view:

 Consumption of unpronounced goods