IBO 02
International Marketing Management
IGNOU IBO 02 Solved Free Assignment
IBO 02 Solved Free Assignment July 2023 & January 2024
Q. 1. (a) Why do firms go international? Explain with the help of examples from Indian context.
Ans. Firms go international due to following reasons:
- Domestic Market Constraints: Domestic market constraints motivate many companies to go international. Following are the main constraints in the domestic market:
(a) Small Size of Domestic Market: In many cases companies go global because of the small size of domestic market which does not allow them to have economies of scale.
(b) Recession in the Domestic Market: Recession in the domestic market often provokes companies to explore foreign markets. Recession in the domestic market does not allow the companies to utilise full production capacity.
For example Hindustan Machine Tools and automobile industry in the early 1990s explored foreign markets due to recession in Indian market.
(c) Technology: The technological advances have increased the size of the optimum scale of operation substantially in many industries making it necessary to have global market so that economies of scale may be availed.
(d) Growth in International Markets: Many Indian companies entered the international markets in response to growth in international markets.
The enormous growth potential of many foreign markets has been a very strong attraction for Indian software companies to go international.
Similarly, an Indian pharmaceutical company CIPLA entered Africa with its HIV treatment drugs as there exists a vast market.
(e) Competition: Competition may become a driving force behind international marketing. Competitors are an important factor which stimulates international marketing.
Tata Motors became international in response to other automobile companies becoming international.
Many companies also take an offensive international competitive strategy by way of counter competition.
Government Policies and Regulations: Government policies and regulations attract the manufacturers to internationalise. The governments of many countries including India give a number of incentives and other positive support to domestic firms to go international.
For example Indian government provides a number of concessions to the firms engaged in exports to and in manufacturing in foreign countries. Similarly, several countries encourage imports and foreign investment.
After the economic reforms launched in 1991, Indian government has given a lot of incentives to attract foreign investment.
Sometimes, as was the case in India, companies may be obliged to earn foreign exchange to finance their imports and to meet certain other foreign exchange requirements like payment of royalty, dividend etc.
Further, in India, companies were allowed to enter certain industries subject to specific export obligation. Some companies move to foreign countries because of environmental laws and other laws.
Government polices which limit the scope of business in the domestic market may drive companies to move to other countries.
Growth of Overseas Markets: The enormous growth potential of many overseas markets drive many companies to expand the market globally.
Economic growth of many developing countries has created market opportunities that provide a major incentive for companies to expand globally. In a number of developing countries, both the population and income are growing fast.
Growth rate of India has been good and economic reforms have accelerated the growth.
Further, economic growth has reduced resistance that might otherwise have developed in response to the entry of foreign firms into domestic economies.
It is convenient for a foreign company to enter a domestic economy without taking business away from local firms.
Even if the market for several goods in these countries is not very substantial at present, many companies are eager to establish a foothold there, considering their future potential.
Increased Productivity: Increased productivity is necessary for the ultimate survival of a firm. This itself may lead a company to increase production. Increase in production facilitates a company to seek export markets.
The pressure for global markets is intense when new products require major investments and long periods of development time.
The cost of research and development must be recovered in the global market place, as no single national market is likely to be large enough to support investments of this size.
Relative Profitability: One of the most important objectives of internationalization of business is the profit advantage.
International business may be more profitable than the domestic because of export price being higher than the domestic price. International business can increase the total profit even if it is less profitable than the domestic.
It could increase the total profit. In some cases, international business can help in increase the profitability of the domestic business. One of the important motivations for international business is to reduce costs.
Many international firms establish their production facilities in the countries where the manufacturing costs are cheaper.
Diversification to Reduce Business Risks: A diversified export business may reduce sharp fluctuations in the overall activity of a firm.
Decline of sales in one market may be counter-balanced by a rise in the sales in other markets. Foreign markets even cut fluctuations by providing outlets for excess production capacity.
Control Inflation and Price Rise: On several occasions, governments permit imports to increase the supply and control prices, thus, control the inflationary pressures on the economy.
When imported products are available at lower price, domestic producers have to reduce their prices. Thus, imports control inflation and price rise.
Counter Competition: Counter competition is a strategy to penetrate the home market of the potential foreign competitor so as to diminish its competitive strength and to protect the domestic market share from foreign penetration.
In the words of Craig Watson, “effective counter-competition has a destabilising impact on the foreign country’s cash flows, product related competitiveness and decision making about integration.
Direct market penetration can drain vital cash flows from the foreign company’s domestic operations.
This drain can result in lost opportunities, reduced income and limited production, impairing the competitor’s ability to make overseas thrusts.”
Strategic Vision: The systematic and growing internationalization of many countries is essentially a part of their business policy or strategic management.
The stimulus for internationalization comes from the urge to grow, the need to become more competitive, the need to diversify and to gain strategic advantages of industrialisation.
For example, many Indian pharmaceutical firms have realised that they have very good growth prospects in the foreign markets.
There are a number of corporations which are truely global. Their policies have been framed considering the entire world as its and a single market-a borderless world.
(b) In what manner do political system and economic factors influence international marketing? Answer with suitable examples.
Ans. Political conditions prevailing the host country is one of the most important factor affecting the foreign market selection.
Political conditions of the host country should be analysed to ascertain whether there is political instability in the host country or not.
Political instability may be defined as frequent changes in the government and government policies. Political instability is caused by one or more factors given as follows:
(i) Change in the type of government.
(ii) Shift in political parties forming the government.
(iii) Change in the government policies without change in the government.
(iv) Shifts in political parties.
The significance of political conditions in business success lies in the predictability of business activities under stable political conditions and conversely the uncertainty of business activities due to political unrest and threats to law and order.
Political stability, thus, builds up confidence among business people to invest in the long-term projects for the growth of the economy. Political instability, on the other hand, can shake that confidence.
For instance, the Ayodhya-Babri Masjid episode brought in its wake violent riots in different parts of the country and caused serious law and order problems during December 92 and January 93.
All this affected the business activity very seriously. Besides the apprehension of political instability, the events disrupted transport, slowed down growth of exports and industrial production as well as reduced Government revenues.
Many potential foreign investors, too, were reported to have deferred their decisions or revised their plans.
An international market will consider any country having high personal disposable income. Some products require information on the climatic conditions of the country.
Rain coats, umbrellas, woollen blankets, refrigerators, air-conditioners etc. are required only in the areas having specific climate.
Data relating to industrial development of the country indicates the potential for exports and imports. At the macro level, it is better to identify and give less priority to countries with deficits in balance of payments.
The macro indicators of market potential and growth are usually analyzed in the first stage of the screening process. Such indicators, do not indicate a perceived need for the product.
Q. 2. Under which mode of entry the international business firm can start international marketing without any investments abroad? Explain it along with its merits and limitations.
Ans. Where the international business firm can start international marketing without any investment abroad, following modes of entry are available:
(i) Licensing
(ii) Franchising.
(i) Licensing: When a Company is unwilling to take any risk for the sake of international business, it sometimes opts for licensing as the mode of entry.
Licensing is, simply put, nothing but entering into a contract to allow another firm to use an intellectual property, such as, patent or a trade mark.
This definition clearly brings out the fact that as an entry mode, this option is not available to all firms. Only those which have saleable technology, know-how, can use the licensing route.
The attraction of licensing lies in the fact that it involves no investment and very little up-front expenditures. And if successful, it can generate a fairly.
(ii) Franchising: A similar method of entry is franchising which is globally very common in the food, soft drinks and fast food business.
Franchising is a form of marketing, under which the parent company allows the franchisee to use its methods, symbols, trademarks and architecture.
The contract will specify the place of operation of the franchisee and the period for which the arrangement will remain valid.
Several forms of franchising are in operation. One form is hundred per cent franchisee ownership; the second form envisages a concept of area or master franchisee who in turn can appoint sub-franchisee(s).
The third is where the franchise is in fact owned by the parent firm itself. This happens essentially at the market-testing stage.
The principal wants initially to find out the market potential himself before deciding whether large scale franchising will be profitable.
The basic advantage of this entry method is akin to that of licensing. The upfront expenditure is minimal while the return can be substantial.
The disadvantage lies in the fact that unless strict monitoring is done, franchisees may default on quality and delivery, thus affecting the reputation of the principal.
Q. 3. Write short notes on the following:
(a) Telemarketing.
Ans. Telemarketing is a form of direct selling using modern telecommunications technology such as telephone, television or computer. Telemarketing provides convenience and savings in cost and time to the seller and buyer.
Telemarketing is a very convenient and cost-effective way of personal selling in many situations. For consumers, telemarkeing saves them the drudgery and time and cost of going to the shop.
This also facilitates easy information gathering for the purchase decision-making. For marketers, it saves the costs involved in storage and display. Thus, telemarketing has given global competition on a new dimension.
(b) GATS.
Ans. The Uruguay Round of International Trade Negotiations concluded the General Agreement on Trade in Services as a part of WTO.
GATS refers to a set of mutually agreed upon rules and disciplines applicable to international trade in services. The GATS has provided a general framework which spells out
(a) general concepts, principles and rules that apply to the measures affecting trade in services and
(b) the specific commitments made by the individual countries to liberalize trade in regard to various service sectors and sub-sectors included in GATS.
GATS provides for the following important general obligations on the member countries to provide for the conduct of trade in services:
(i) Extension of MFN treatment
(ii) Transparency of regulations
(iii) Mutual recognition of the qualifications required for the supply of service
(iv) Rules governing monopolies and exclusive service suppliers and other practices restraining competition
(v) Liberation.
MFN Treatment: Article II of GATS provides that each of the member countries of WTO shall apply Most Favoured Nation (MFN) treatment to the service products and the service suppliers from different countries.
This means that a country shall not discriminate against the service from different countries.
The GATS, however, has allowed the countries to continue with the preferential arrangements which they already have with other countries under the regional or bilateral co-operation agreements for a period of 10 years from the date of implementation of this agreement.
Transparency: Article III of GATS provides for transparency in the rules and regulations of the services which are every vital to the growth of the trade in services.
Lack of transparency of such rules poses very serious problems for the services suppliers.
Realising the need for transparency, the GATS provides that each member country shall establish one or more enquiry points so that the service suppliers from other countries can obtain the information as regards rules and regulations affecting the trade in service sector of their interest.
The Agreement also imposes an obligation on the developed countries to establish the contract points to promote the export of services from the developed countries.
The main functions of the contact points as provided under the Agreement are to provide information on request, to the service providers as regards:
(i) The availability of service technology;
(ii) Commercial and technical aspects of the supply of services;
(iii) Registering, recognizing and obtaining professional qualifications;
It was agreed under the Agreement that the member countries shall establish these enquiry and the contact points within two years from the date of implementation of the GATS, i.e., before 1.1.97.
Mutual Recognition of Qualifications: According to Article VII of GATS the service professionals from a country can provide services in another country only if they have the authorization from the government of the other country.
This authorization is based on the qualifications of the services professional who would be granted the authorizaion if his/her qualifications are recognized by the services importing country.
The Article VII of the General Agreement on Trade in Services (GATS) provides that the member countries should enter into bilateral or plurilateral arrangements for the mutual recognition of the c required for obtaining authorization.
Rules Governing Monopolies and Exclusive Service Suppliers: It has been provided under Article VI of GATS that member countries can request the other countries to eliminate the practices in respect of monopolies, exclusive service suppliers and business practices restricting competition.
(c) Personal selling.
Ans. Personal selling refers to a series of steps that sales person should take in order to create sales for the company’s products through customers satisfaction.
Personal selling as a promotional tool has a number of positive attributes because of which it is important to any marketer.
Personal selling provides individual attention for each consumer and is able to pass along a lot of information to persuade him to purchase the company’s products.
There is a dynamic, rather than passive, interaction between the buyer and the seller. This enables the firm to use the two-way flow of communication between both parties for establishing long-term relationship and creating permanent customers.
Personal selling can be flexible and adapted to the needs of specific consumers. For example, a real estate broker can make a different sales presentation to a couple looking for rental accommodation than to a couple wanting to make an outright purchase of property.
The salesperson can use as much persuasion as necessary and balance it against the need for information by the customer.
Personal selling involves less waste than advertising. Personal selling centers on a more defined and concentrated target market.
The customers who walk into a retail store or who are contacted by a salesperson are more likely to purchase a product than those watching an advertisement on television.
Personal selling closes sales and is often the last stage in the consumer’s decision process, taking place after an information search and exposure to advertisement.
It holds on to repeat customers and customers already convinced by advertising and resolves any doubts or concern of undecided consumers.
Personal selling answers any remaining questions about price, warranty, and other factors. It also settles service issues, such as delivery and installation.
(d) Packaging for international markets
Ans. In addition to the general considerations in packaging, there are some special considerations in international marketing which are listed below:
(i) Regulations in the Foreign Countries: Packaging and labelling may be subject to government regulations in the foreign countries. Some countries have specified packaging standards for certain commodities.
The trend toward requiring labelling in a country’s native language is growing. If such regulations are not strictly followed, the goods may be confiscated or may attract some other punitive action.
(ii) Buyer’s Specifications: In some cases, buyers, like the importers, may give packaging specifications.
While incorporating such specifications, it should also be ensured that packaging satisfied other requirements like the statutory requirements.
(iii) Socio-Cultural Factors: While designing the packaging for a product, socio-cultural factors relating to the importing country like customs, traditions, beliefs, etc., should also be considered.
(iv) Retailing Characteristics: The nature of retail outlets is a very important consideration in packaging decision.
For instance, as pointed out earlier, in some of the foreign markets, as a result of the spread of super-markets and discount houses, a large number of products are sold on a self-service basis.
The package has, therefore, to perform many of the sales tasks and, hence, it must attract attention, describe the product’s features, give the consumer confidence and make a favourable overall impression.
(v) Environmental Factors: Packaging decisions are also influenced by certain environmental factors like weather and climatic factors.
The impact of such factors in the place where the product originates, while the product is in transit and while in the market, etc., should be considered.
The package should be capable of withstanding the stresses and hazards of handling and transporting, stacking, storing, etc., under diverse conditions.
(vi) Disposability: Attention should also be paid to the aspects relating to the disposal of the packaging. One of the qualities required for good package is that it could be easily disposed of or recycled.
In some of the developing countries like India many packaging materials easily find some other use or are recycled.
But the situation is different in other countries. Indeed, the disposal of packaging materials is causing environmental problem in a number of countries. Reusable packages carry the risk of misusing it for selling bogus products.
Q. 4. Differentiate between the following:
(a) Direct and indirect selling channel.
Ans. Direct selling channel refers to the channel consisting of no domestic market channel members but consisting of foreign market channel chambers.
Indirect selling channel refers to the channel consisting of domestic market channel members. Thus, direct selling channel is short and direct while indirect selling channel is long and indirect.
The distinction between direct and indirect selling channel is on the basis of how the exporter carries out the transactions flow between himself and the foreign importer.
In indirect selling channel the exporter utilises the services of various types of independent international marketing middlemen and transfers the responsibility for the selling job to some other organization.
In direct selling channel, the responsibility for performing international selling activities rests on the producer.
(b) Domestic agents and domestic merchants.
Ans. Domestic agents handle the marketing of products produced by manufacturers. Domestic agents do not take title to the goods they sell and usually earn commission.
Domestic agents perform a number of marketing functions that facilitate international business. Following are domestic agents:
(i) Export Management Companies
(ii) Export Broker
(iii) Manufacturer’s Export Agent
(iv) Purchasing Agent
(v) Country Controlled Buying Agent
(vi) Resident Buyer.
Domestic merchants are the intermediaries who actually acquire and transfer the title to the products in their own right and who work for profit. Following are the domestic merchants:
(i) Export Merchant
(ii) Export Houses
(iii) Trading Companies
(iv) Piggy backings.
(c) Domestic and international marketing communications.
Ans. Domestic marketing communication is comparatively simple in comparison to international marketing communication. International marketing communication is a difficult task because of several complexities.
Following are the difficulties which make international marketing communication more complicated than domestic marketing communication:
(i) Differences in Regulations: Regulations governing promotion vary widely between countries.
An exporter has to understand these regulations thoroughly and ensure that the promotion programmes are in conformity with such regulations of each country concerned.
A communication strategy or approach that is permitted in one country could be illegal in another country.
(ii) Cultural Differences: Cultural factors have utmost consideration in designing the advertisement strategy, particularly the message design. The cultural factors, however, are very complex and difficult to understand.
What may appeal very well to people of one country may be distasteful or even offending to people of some other countries.
The differences in the beliefs or attitudes associated with colours, numbers, symbols, etc., are well-known.
The differences in the consumer behaviour and consumption habits are also very important factors to be considered in designing the communication strategy.
(iii) Media Factors: The effectiveness of media, the availability of media, the cost of media etc., differ between countries and this may call for different promotional media strategies in different countries.
(iv) Infrastructure: Besides the availability and efficiency of the promotional media, there are several other infrastructural factors which affect marketing communications like the availability and equality of advertising agencies, marketing research firms, etc.
(v) Cost Factors: The cost of promotion, particularly advertising, in advanced countries is often prohibitively costly for Indian exporters who, in general, are of small means.
The advertisement outlay should normally be very large if it should have any impact.
(vi) Language Factors: There are many instances of the language causing problems in international marketing communication.
Word by word translation of Ad slogans and the like into certain foreign languages sometimes give different or distorted meanings.
Similarly, as mentioned in an earlier section, the same word may have different connotations in different languages. Even some of the English words mean different things in different English speaking countries.
(vii) Home Country Regulations: There may also be home country regulations which affect promotion.
For example, Indian exporters are confronted with certain Government of India/Reserve Bank of India regulations regarding promotion abroad like the restrictions on expenditure abroad for promotion.
(d) Primary and Secondary Data.
Ans. Following are some salient points on the difference between primary and secondary data:
(1) Difference in Originality: Primary Data are original because these are collected by the investigator from the source of their origin. Against this secondary data are already in existence and, therefore, are not original.
(2) Difference in the Suitability of Objectives: Primary data are always related to a specific objective of the investigator. These data, therefore, do not need any adjustment for the concerned study.
On the other hand, secondary data have already been collected for some other purpose. Therefore, this data need to be adjusted to suit the objective of study in hand.
(3) Difference in Cost of Collection: Primary data are costlier in terms of time, money and efforts involved than the secondary data. This is because primary data are collected for the first time for their source of origin.
Secondary data are simply collected from the published or unpublished reports. Accordingly, these are much less expensive.
Q. 5. Comment on the following statement:
(a) International marketing research is full of complexities.
Ans. International marketing research is full of complexities due to following:
(1) Political and Economic Factors: Political environment including the characteristics and policies of the political parties, the nature of the constitution and government system are some of the important factors in the international marketing research.
But these factors vary considerably between different nations. Differences in economic factors also lead to complexities in terms of the assessment of demand for various products.
The nature and development of the economy, economic resources, size of the economy, economic policies, economic conditions, trends in the GNP growth rate and per capita income, domestic supply and demand conditions are all factors relevant to international marketing.
The differences in the economic factors pose a number of problems in international marketing research.
(2) Social and Political Factors: Despite increasing similarities in the tastes and consumption patterns of consumes throughout the world, there are substantial differences in the behaviour of consumers belonging to different parts of the world.
Social and cultural differences make the international marketing research complex. To a particular product, the responses of different societies may be different. Following table lists the level of acceptability of various products in different countries.
(b) Price is an important element of marketing mix.
Ans. Pricing decision is one of the basic marketing decisions. Most importers would decide to buy the product finally on the basis of comparison of price of competing products.
Pricing strategy is closely linked to the cost of the product and other factors influencing the cost.
In setting the export price, the business firm should consider additional costs that do not enter into pricing for the domestic market.
These include such items as international freight, insurance charges, product adaptation costs, import duties, commissions for import agents and foreign exchange risk coverage.
A company should decide whether it should charge the same net price for a particular product in all its markets or different prices in different markets.
Export pricing analysis should begin with these questions: What value does the target market segment place on the business firm’s product? How do differences in the product add to, or to detract from its market value? In practice, these are difficult questions to research but analysing the prices and product characteristics of existing competitive products may reveal critical information.
In practice, it is not the cost that determines the product’s price but the customer’s perception of that value.
A firm may not have much choice in export pricing beyond a point because it has to match competitor’s price. Extension of credit is part of the pricing strategy.
(c) Analysis of legal conditions is a very critical component in selecting foreign markets.
Ans. We agree that analysis of legal conditions are a very critical component in selecting foreign markets: In different countries, laws are different and laws are applied differently. International business is seriously hampered by the absence of an international court of legal system.
There is no international agency to enforce decisions across countries and hence exporters and importers must abide by local laws in each national market.
One of the key issues in international disputes is determining jurisdiction in the absence of international commercial law.
The following three bases are used in deciding which country’s laws have jurisdiction over the dispute:
(i) Jurisdictional clauses in business contracts
(ii) Country where the contract was negotiated
(iii) Country where the provisions of a contract were performed.
Unfortunately, these bases do not always lead to a clear decision about jurisdiction because the contract could have been negotiated in one country, but exonerated in another.
In fact, the clearest rule is when the original contract itself spells out jurisdiction.
While laws and legal systems are national in scope, there are some situations in which nations supply these laws to activities outside their borders. This concept is called the extraterritorial applications of law.
It holds, for example, that even if an American business is operating outside the territorial jurisdiction of the US courts, those courts still have jurisdiction if the operations produce effects within the United States.
Host governments find it difficult to treat a foreign film like a local one.
Another dilemma faced by international marketers is the extent of home government protection they want.
Antitrust laws are also applied extra-territorial. International firms are unduly hampered by the national scope of laws regarding their activities.
(d) Poor presentation will undo the entire market research exercise.
Ans. It is correct to say that poor presentation will undo the entire market research. A researcher presents a summary of findings and audience seeks clarifications, if needed, on certain aspects.
To make presentation effective, the researcher should make thorough preparation on the following lines.
- Before Presentation
(1) Check all equipment (e.g., lights, microphones, projectors, and other visual aid equipments) thoroughly before presentation.
(2) Have a contingency plan for equipment failure and failure of electricity etc.
(3) Analyse your audience. How will they react to the presentation? Will they be in agreement? Hostile? Indifferent? Or appreciate? Plan your opening statements accordingly.
It’s usually wise to begin a presentation with areas about which there is agreement/appreciation.
(4) Rehearse the presentation several times. Have someone to comment on how to improve its effectiveness. In short, hold some mock presentations before hand.
- During the Presentation
(1) Start the presentation with an overview-tell the audience in brief, about the project and what you are going to tell them
(2) Face the audience at all times
(3) Talk to the audience or decision maker, rather than read from a script or a projection screen.
Consult notes only to make sure you don’t miss out on any important point and to keep the presentation flowing in an organized manner.
(4) Use visual aids effectively-charts and tables should be simple and easy to read.
(5) Avoid distracting mannerisms while speaking. Constant or unnecessary motion is bothersome-make certain your movements have purpose. Also refrain from adding ‘fillers’ such as ‘uh’, ‘um’ ‘y’ ‘know’. ‘OK’ and so on between words or sentences.
(6) Remember to ask the audience whether they have questions during presentation and after presentation is concluded.
(7) Use simple language and short sentences
(8) Be matter of fact
(9) Try to concentrate on the strong areas of the research and get the audience involved in such areas.
- During the Question Period
(1) Concentrate on the question. Don’t think about the answer until the speaker has completed his or her question.
(2) Repeat the question. If it is complicated or unclear, rephrase it. This ensures that everyone in the audience has heard and understood the question, and also gives you time to formulate the answer.
(3) If you are not sure of the answer to any question, admit that you don’t know the answer, then tell the audience that you will try to find it.
After the presentation, find out where that person can be reached as and when you get the answer to the question. (Make sure you follow up on your promise).
(4) Answer questions briefly and support your answers with evidence whenever possible.
(5) Do not get into arguments with any member of the audience even if you are convinced that you are right and the concerned member of the audience is wrong.