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Q1. Discuss the different management orientations of a company. How does it affect international marketing?
Ans: - Management Orientation: - Company management can be classified in terms of its orientation towards the world: ethnocentric, polycentric, egocentric, and geocentric. The form and substance of a company’s response to global business opportunities depend greatly on management’s assumptions or beliefs – both conscious and unconscious – about the nature of the world. The worldview of a company’s personnel can be described as ethnocentric, polycentric, egocentric, and geocentric. Management at a company with a prevailing ethnocentric orientation may consciously make a decision to move in the direction of geocentricism. The orientations- collectively known as the EPRG framework – are summarized.
(Orientation of Management and Company)
Effect on international marketing
International marketing is the process of focusing the resources and objectives of a company on marketing opportunities at international level.
Companies are engaged in international marketing for two reasons: firstly, to take advantage of opportunities of 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 basic goals of marketing are to create customer value and competitive advantage by maintaining focus. Company management can be classified in terms of its orientation towards the world: ethnocentric, polycentric, egocentric, and geocentric.
An ethnocentric orientation characterizes domestic and international companies that pursue marketing opportunities outside the home market by extending various elements of the marketing mix. A polycentric world view predominates at a multinational company, where country managers operating autonomously adapt the marketing mix.
Managers at international and transnational companies are egocentric or geocentric in their orientation and pursue both extension and adaptation strategies in international markets.
International marketing importance today is shaped by the dynamic interplay of several driving and restraining forces. The former include market needs and wants, technology, transportation improvements, costs, quality, international peace, world economic growth, and recognition of opportunities to develop leverage by operating internationally. Restraining forces include market differences, management myopia, organizational culture and national controls.
Q2:- Discuss how culture plays an important role in international marketing. Give some examples of advertisements which failed due to lack of cultural understanding.
Ans: - Culture is defined simply as the learned distinctive way of life of a society
Elements of culture
There are too many human variables and different types of international business functions for an exhaustive discussion about culture. The main elements of culture are:
1. Attitudes and Beliefs: The set of attitudes and beliefs of a culture will influence nearly all aspects of human behavior, providing guidelines and organization to a society and its individuals.
2. Attitudes towards Time: Everywhere in the world people use time to communicate with each other. In international business, attitudes towards time are displayed in behavior regarding punctuality, responses to business communication, responses to deadlines, and the amount of time that is spent waiting in an outer office for an appointment.
3. Attitude towards Work and Leisure: People’s attitudes towards work and leisure are indicative of their views towards wealth and material
4. Attitude towards Achievement: In some cultures, particularly those with high stratified and hierarchical societies, there is a tendency to avoid personal responsibility and to work according to precise instructions received from supervisors that are followed by the latter.
5. Attitudes towards Change: The international manager must understand what aspects of a culture will resist change and how the areas of resistance differ among cultures, how the process of change takes place in different cultures and how long it will take to implement change.
6. Attitude towards Job: The type of job that is considered most desirable or prestigious varies greatly according to different cultures.
1. Lack of cultural or understanding may force the advertiser to withdraw his advertising campaign.
2. The choice of wrong media in the target market may fail the campaign because the message may not get through to target audience.
3. The advertising may not induce the target customer to act in a manner as desired by the sponsor. This may exist because of lack of knowledge about foreign cultural factors, which influence the consumers Attitude formation and consumer behavior.
Consider the following examples:
Coca Cola: • In India, the company had to change its marketing message when it was discovered that water was drunk at most meals and soft drinks were typically reserved for guests and special occasions • In Japan, ‗Diet Coke‘ was renamed ‗Coke Light‘ after the firm learned that the term ‗diet‘ carried an embarrassing connotation.
UPS: • In Spain, the brown trucks had to be repainted because they resembled the country‘s hearses
Q3:- Explain different types of cost based pricing. Types of cost based pricing.
Ans:-
The cost oriented export pricing methods are based on costs incurred in the production of goods. A reasonable profit will be added to the base cost to arrive at the export pricing. Thus, cost oriented export pricing method may be:-
1. Full cost method
2. Variable cost or marginal cost method
1. Full Cost Method or Cost-plus Method: The most frequently used pricing method in export is cost-plus method. This method is based on the full cost or total cost approach. In arriving at the export pricing under this method the total cost of production of the article (fixed or variable) is taken into account. Over and above the fixed and variable cost incurred in the production of exportable article all direct and indirect expenses incurred for the development of product such as R&D expenses and other expenses necessary for the export of article such as transportation cost, freight, custom duties, risk costs etc. are included. Then a reasonable profit allowance is added to the cost and the value of all assistance received from any authority is deducted. The net result is the total export price for the commodity produced. Price per unit may be calculated by dividing the total price thus arrived by the number of units manufactured.
The various elements of cost forming part of the total costs are:
(a) Direct cost this includes variable costs, direct labor, variable production overhead and variable administrative overheads,
(b) Other costs directly related to exports. These include selling costs – advertising, special packaging, commission to overseas agents, export credit insurance, bank charges, inland freight, power charges, inland insurance, port charges, export duties, warehousing, documentation and so on. Total direct cost will, therefore, be (a) + (b).
2. Fixed Cost or Common Cost: These include production overhead, administrative overheads, publicity and advertisement, travel abroad and so on.
3. Freight and Insurance: This includes cost of freight and marine insurance up to the importer’s destination. This is also known as Cost Insurance Freight (CIF). The main advantage of this approach is that the exporter realizes the full cost in marketing the product in a foreign market.
4. Marginal Cost Pricing: Another common method of pricing in international trade is to determine the price on the variable cost or direct cost. Thus it is a variable or direct or marginal costs that set the price after a certain level of output is achieved i.e. the output at breakeven point.
Q4 Tobacco companies are targeting China as Chinese are heavy smokers. Which segmentation is this and what are the other international market segmentations?
Ans: - Market segmentation is the process of subdividing a market into distinct subsets of customers that behave in the same way or have similar needs.
Each subset may conceivably be chosen as a market target to be reached with a distinctive marketing strategy
Behavioral segmentation
Behavioral segmentation focuses on whether people buy and use a product, as well as how often and how much they use it. Consumers can be categorized in terms of usage rates – for example, heavy, medium, light, and nonuser. Consumers can also be segmented according to user status: potential users, nonusers, ex-users, regulars, first-timers, and users of competitors‟ products. Although bottled water may be considered a luxury product in some high-income markets, Nestle is marketing bottled water in Pakistan where there is a huge market of nonusers who, despite their low
income, are willing to pay 18 rupees a bottle for clean water because of the widespread presence of arsenic poisoning in well water and the pollution of surface water. Tobacco companies are targeting China because the Chinese are heavy smokers
Geographic segmentation
Geographic segmentation is dividing the world into geographic subsets. The advantage of geography is proximity: Markets in geographic segments are closer to each other and easier to visit on the same trip or to call on during the same time window.
Demographic segmentation
Demographic segmentation is based on measurable characteristics of population such as age, gender, income, education, and occupation. A number of demographic trends, aging population, fewer children, and more women working outside the home, and higher incomes and living standards suggest the emergence of international segments.
Psychographic segmentation
Psychographic segmentation involves grouping people in terms of their attitudes, values, and lifestyles. Data are obtained from questionnaires that require respondents to indicate the extent to which they agree or disagree with a series of statements
Benefit segmentation
International benefit segmentation focuses on the numerator of the value equation. The B in V=B/P. This approach can achieve excellent results by virtue of marketer s superior understanding of the problem a product solves or the benefit it offers, regardless of geography.
Vertical versus horizontal segmentation
Vertical segmentation is based on product category or modality and price points. For example, in medical imaging there is X-ray, Computed Axial Tomography (CAT) scan, Magnetic Resonance Imaging (MRI), and so on.
Q5:- Write short notes on:
a) E Marketing
b) Spot and forward rates
Ans:-
E-marketing: - E-marketing involves the marketing of products or services on the internet. The primary purpose of marketing an online business is the promotion of a good or service. E-marketing approaches to accomplish their objectives, Internet marketers use many approaches, some of which include:
*Banners: A banner ad is a boxed-in promotional message that often appears at the top of the web page.. Other names given to banners include side panels, skyscrapers, or verticals.
* Sponsorships: This is another common advertising approach on websites. The advertiser is given a permanent place on hosts’ website and pays a sponsorship fee to the host.
*Pop-up and Pop-under: When a visitor accesses a web page, sometimes a window appears either in front or underneath the web page, the visitor is viewing.
*Portal Use: Some portals give a prominent place to a company’s offer for a fee. When a visitor follows directed search, the marketers name appears prominently at or near the top of the list.
*E-mail: Companies send e-mails to Internet users to visit the company web site. It can be effective only when the target customer is appropriate otherwise it becomes “junk mail.”
*Interstitials: These ads appear on the computer screen while a visitor is waiting for sties contents to download.
* Push Technologies: Some companies provide screen savers to its website visitors that allow the firms to directly “hook” the visitor to their websites.
* Sales Promotions: Many companies effectively use sales promotions such as contests and sweepstakes to generate consumer interest.
Meaning and role of spot and forward rates Spot rates:-
Spot rates can be used to calculate forward rates. In theory, the difference in spot and forward prices should be equal to the finance charges, plus any earnings due to the holder of the security, according to the cost of carry model.
In finance, a spot contract, spot transaction, or simply "spot," is a contract of buying or selling a commodity, security, or currency for settlement (payment and delivery) on the spot date, which is normally two business days after the trade date. The settlement price (or rate) is called a "spot price" or "spot rate. "
Forward Rates:-
A spot contract is in contrast with a forward contract where contract terms are agreed now but delivery and payment will occur at a future date. The settlement price of a forward contract is called a "forward price" or "forward rate.” Depending on the item being traded, spot prices can indicate market expectations of future price movements. In other words, spot rates can be used to calculate forward rates. In theory, the difference in spot and forward prices should be equal to the finance charges, plus any earnings due to the holder of the security, according to the cost of carry model. If the underlying asset is trad-able, the forward price is given by:
Where F is the forward price to be paid at time
Q6:- Discuss the role and activities of World Bank.
Ans:-
World Bank – IBRD
Origin: Conceived at the UN Monetary and Financial Conference at Bretton Woods (New Hampshire, USA) in July 1944, the IBRD, frequently called the World Bank, began operations in June 1946, its purpose being to provide funds, policy guidance and technical assistance to facilitate economic development in its poorer member countries. The Group comprises 4 other organizations.
Activities: The bank obtains its funds from the following sources: capital paid in by member countries; sales of its own securities; sales of parts of its loans; repayments; and net earnings. A resolution of the Board of Governors of 27 April 1988 provides that the paid in portion of the shares authorized to be subscribed under it will be 3%.
The Bank is self-supporting, raising most of its money on the world’s financial markets. In the fiscal year ending 30 June 1997 it achieved a net income of US$1, 285 m.; medium and long term borrowing equivalent of US$15,100 m. in 18 currencies; average medium to long term borrowing costs, after swaps, of 5.01%; financial returns on its investment folio of 5%; a reserves-to-loan ratio of 14%; and decline in its net administrative expenditure in real terms to a figure set at $1,177m.
The bank lends in the region of US$22,000m a year.
It acts as executing agency for a number of pre-investment surveys financed by the UN Development Program. Resident missions have been established in 64 developing member countries and there are regional offices for East and West Africa, the Baltic States and South-East Asia, which assist in the preparation and implementation of projects. The Bank maintains a staff college, the Economic Development Institute in Washington, D.C., for senior officials of member countries.
Role of World Bank
As a development institution, the World Bank supports two broad goals in South East Europe: (i) poverty reduction and (ii) economic and social development, the latter in support of the countries ambition to join the European Union. The central vehicle for supporting the national reform program of each country is the so-called Country Assistance Strategy (CAS). Based on an assessment of the country's priorities, past portfolio performance and creditworthiness, the CAS sets strategic priorities and determines the level and composition of financial and technical assistance that the Bank seeks to provide the country. The framework for poverty reduction and economic growth are the countries’ own Poverty Reduction Strategy Papers (PRSPs), developed by the government through a participatory consultation procedure.
[World Bank lending to South East Europe since 1999 (US $ million)]
[Lending commitments of the world bank’s active portfolio in South East Europe by sector as of June 2005 in US $ million]
Total US$ 3.2 billion
Ans:-
The cost oriented export pricing methods are based on costs incurred in the production of goods. A reasonable profit will be added to the base cost to arrive at the export pricing. Thus, cost oriented export pricing method may be:-
1. Full cost method
2. Variable cost or marginal cost method
1. Full Cost Method or Cost-plus Method: The most frequently used pricing method in export is cost-plus method. This method is based on the full cost or total cost approach. In arriving at the export pricing under this method the total cost of production of the article (fixed or variable) is taken into account. Over and above the fixed and variable cost incurred in the production of exportable article all direct and indirect expenses incurred for the development of product such as R&D expenses and other expenses necessary for the export of article such as transportation cost, freight, custom duties, risk costs etc. are included. Then a reasonable profit allowance is added to the cost and the value of all assistance received from any authority is deducted. The net result is the total export price for the commodity produced. Price per unit may be calculated by dividing the total price thus arrived by the number of units manufactured.
The various elements of cost forming part of the total costs are:
(a) Direct cost this includes variable costs, direct labor, variable production overhead and variable administrative overheads,
(b) Other costs directly related to exports. These include selling costs – advertising, special packaging, commission to overseas agents, export credit insurance, bank charges, inland freight, power charges, inland insurance, port charges, export duties, warehousing, documentation and so on. Total direct cost will, therefore, be (a) + (b).
2. Fixed Cost or Common Cost: These include production overhead, administrative overheads, publicity and advertisement, travel abroad and so on.
3. Freight and Insurance: This includes cost of freight and marine insurance up to the importer’s destination. This is also known as Cost Insurance Freight (CIF). The main advantage of this approach is that the exporter realizes the full cost in marketing the product in a foreign market.
4. Marginal Cost Pricing: Another common method of pricing in international trade is to determine the price on the variable cost or direct cost. Thus it is a variable or direct or marginal costs that set the price after a certain level of output is achieved i.e. the output at breakeven point.
Q4 Tobacco companies are targeting China as Chinese are heavy smokers. Which segmentation is this and what are the other international market segmentations?
Ans: - Market segmentation is the process of subdividing a market into distinct subsets of customers that behave in the same way or have similar needs.
Each subset may conceivably be chosen as a market target to be reached with a distinctive marketing strategy
Behavioral segmentation
Behavioral segmentation focuses on whether people buy and use a product, as well as how often and how much they use it. Consumers can be categorized in terms of usage rates – for example, heavy, medium, light, and nonuser. Consumers can also be segmented according to user status: potential users, nonusers, ex-users, regulars, first-timers, and users of competitors‟ products. Although bottled water may be considered a luxury product in some high-income markets, Nestle is marketing bottled water in Pakistan where there is a huge market of nonusers who, despite their low
income, are willing to pay 18 rupees a bottle for clean water because of the widespread presence of arsenic poisoning in well water and the pollution of surface water. Tobacco companies are targeting China because the Chinese are heavy smokers
Geographic segmentation
Geographic segmentation is dividing the world into geographic subsets. The advantage of geography is proximity: Markets in geographic segments are closer to each other and easier to visit on the same trip or to call on during the same time window.
Demographic segmentation
Demographic segmentation is based on measurable characteristics of population such as age, gender, income, education, and occupation. A number of demographic trends, aging population, fewer children, and more women working outside the home, and higher incomes and living standards suggest the emergence of international segments.
Psychographic segmentation
Psychographic segmentation involves grouping people in terms of their attitudes, values, and lifestyles. Data are obtained from questionnaires that require respondents to indicate the extent to which they agree or disagree with a series of statements
Benefit segmentation
International benefit segmentation focuses on the numerator of the value equation. The B in V=B/P. This approach can achieve excellent results by virtue of marketer s superior understanding of the problem a product solves or the benefit it offers, regardless of geography.
Vertical versus horizontal segmentation
Vertical segmentation is based on product category or modality and price points. For example, in medical imaging there is X-ray, Computed Axial Tomography (CAT) scan, Magnetic Resonance Imaging (MRI), and so on.
Q5:- Write short notes on:
a) E Marketing
b) Spot and forward rates
Ans:-
E-marketing: - E-marketing involves the marketing of products or services on the internet. The primary purpose of marketing an online business is the promotion of a good or service. E-marketing approaches to accomplish their objectives, Internet marketers use many approaches, some of which include:
*Banners: A banner ad is a boxed-in promotional message that often appears at the top of the web page.. Other names given to banners include side panels, skyscrapers, or verticals.
* Sponsorships: This is another common advertising approach on websites. The advertiser is given a permanent place on hosts’ website and pays a sponsorship fee to the host.
*Pop-up and Pop-under: When a visitor accesses a web page, sometimes a window appears either in front or underneath the web page, the visitor is viewing.
*Portal Use: Some portals give a prominent place to a company’s offer for a fee. When a visitor follows directed search, the marketers name appears prominently at or near the top of the list.
*E-mail: Companies send e-mails to Internet users to visit the company web site. It can be effective only when the target customer is appropriate otherwise it becomes “junk mail.”
*Interstitials: These ads appear on the computer screen while a visitor is waiting for sties contents to download.
* Push Technologies: Some companies provide screen savers to its website visitors that allow the firms to directly “hook” the visitor to their websites.
* Sales Promotions: Many companies effectively use sales promotions such as contests and sweepstakes to generate consumer interest.
Meaning and role of spot and forward rates Spot rates:-
Spot rates can be used to calculate forward rates. In theory, the difference in spot and forward prices should be equal to the finance charges, plus any earnings due to the holder of the security, according to the cost of carry model.
In finance, a spot contract, spot transaction, or simply "spot," is a contract of buying or selling a commodity, security, or currency for settlement (payment and delivery) on the spot date, which is normally two business days after the trade date. The settlement price (or rate) is called a "spot price" or "spot rate. "
Forward Rates:-
A spot contract is in contrast with a forward contract where contract terms are agreed now but delivery and payment will occur at a future date. The settlement price of a forward contract is called a "forward price" or "forward rate.” Depending on the item being traded, spot prices can indicate market expectations of future price movements. In other words, spot rates can be used to calculate forward rates. In theory, the difference in spot and forward prices should be equal to the finance charges, plus any earnings due to the holder of the security, according to the cost of carry model. If the underlying asset is trad-able, the forward price is given by:
Where F is the forward price to be paid at time
Q6:- Discuss the role and activities of World Bank.
Ans:-
World Bank – IBRD
Origin: Conceived at the UN Monetary and Financial Conference at Bretton Woods (New Hampshire, USA) in July 1944, the IBRD, frequently called the World Bank, began operations in June 1946, its purpose being to provide funds, policy guidance and technical assistance to facilitate economic development in its poorer member countries. The Group comprises 4 other organizations.
Activities: The bank obtains its funds from the following sources: capital paid in by member countries; sales of its own securities; sales of parts of its loans; repayments; and net earnings. A resolution of the Board of Governors of 27 April 1988 provides that the paid in portion of the shares authorized to be subscribed under it will be 3%.
The Bank is self-supporting, raising most of its money on the world’s financial markets. In the fiscal year ending 30 June 1997 it achieved a net income of US$1, 285 m.; medium and long term borrowing equivalent of US$15,100 m. in 18 currencies; average medium to long term borrowing costs, after swaps, of 5.01%; financial returns on its investment folio of 5%; a reserves-to-loan ratio of 14%; and decline in its net administrative expenditure in real terms to a figure set at $1,177m.
The bank lends in the region of US$22,000m a year.
It acts as executing agency for a number of pre-investment surveys financed by the UN Development Program. Resident missions have been established in 64 developing member countries and there are regional offices for East and West Africa, the Baltic States and South-East Asia, which assist in the preparation and implementation of projects. The Bank maintains a staff college, the Economic Development Institute in Washington, D.C., for senior officials of member countries.
Role of World Bank
As a development institution, the World Bank supports two broad goals in South East Europe: (i) poverty reduction and (ii) economic and social development, the latter in support of the countries ambition to join the European Union. The central vehicle for supporting the national reform program of each country is the so-called Country Assistance Strategy (CAS). Based on an assessment of the country's priorities, past portfolio performance and creditworthiness, the CAS sets strategic priorities and determines the level and composition of financial and technical assistance that the Bank seeks to provide the country. The framework for poverty reduction and economic growth are the countries’ own Poverty Reduction Strategy Papers (PRSPs), developed by the government through a participatory consultation procedure.
[World Bank lending to South East Europe since 1999 (US $ million)]
[Lending commitments of the world bank’s active portfolio in South East Europe by sector as of June 2005 in US $ million]
Total US$ 3.2 billion
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