Month: November 2021

Management Notes

European Union (EU) History, Objectives and Functions

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European Union (EU) is a political and economic union of 27 European countries that are located primarily in Europe. Established after World War II to foster economic cooperation and prevent future conflicts, the EU has evolved into a single market allowing goods, services, and people to move freely. It has its own currency, the euro, used by 19 of the member countries. The EU operates through a hybrid system of supranational institutions and intergovernmental decisions by the member states, covering policies ranging from climate, environment, and health to external relations and security, justice, and migration. Its aim is to promote peace, its values, and the well-being of its citizens.

History of EU:

  • European Coal and Steel Community (ECSC) – 1951:

The foundation of the EU can be traced back to the ECSC, established by the Treaty of Paris. France, West Germany, Italy, the Netherlands, Belgium, and Luxembourg agreed to pool their coal and steel resources, key components of military power, to make war between them unthinkable.

  • Treaty of Rome – 1957:

Building on the success of the ECSC, the same six countries signed the Treaty of Rome, creating the European Economic Community (EEC) and the European Atomic Energy Community (Euratom). The EEC aimed at establishing a common market and customs union among its members.

  • Expansion and Renaming – 1970s-1990s:

The EEC saw its first enlargement in 1973 with the addition of Denmark, Ireland, and the United Kingdom. Greece followed in 1981, and Spain and Portugal in 1986. The Single European Act of 1986 set the stage for completing the single market. The Treaty of Maastricht in 1992 officially established the European Union (EU) and laid the groundwork for economic and monetary union, including the introduction of the euro currency.

  • Further Enlargement and Deepening – 2000s:

The EU expanded to include Eastern European countries, Cyprus, and Malta in the early 21st century, bringing its membership to 28 by 2013. The Treaty of Amsterdam (1997), the Treaty of Nice (2001), and the Treaty of Lisbon (2007) further reformed the EU’s institutional structure and expanded its powers.

  • Recent Developments:

The most significant recent development in the EU’s history is the United Kingdom’s decision to leave, a process known as Brexit, which was completed on January 31, 2020. This marked the first time a member state left the Union, reducing its membership to 27 countries.

Objectives of EU:

  • Promote Peace and Stability:

One of the founding principles of the EU is to secure lasting peace among its members, a goal rooted in the aftermath of World War II.

  • Create an Internal Market:

The EU aims to establish an internal market where goods, services, capital, and people can move freely across member states, fostering economic cooperation and development.

  • Economic and Monetary Union:

A key objective is the establishment of an economic and monetary union, culminating in the adoption of the euro as a common currency among many of its member states to facilitate trade and economic stability.

  • Promote Inclusion and Combat Discrimination:

EU seeks to promote social inclusion, gender equality, and combat discrimination to ensure all citizens have equal opportunities.

  • Foster Sustainable Development:

EU is committed to sustainable development, balancing economic growth with environmental protection and social inclusion. It aims to lead on global environmental issues, including climate change.

  • Enhance Security and Justice:

EU works to enhance security within its borders, fight terrorism, and maintain a common policy on asylum, migration, and justice to ensure safety and uphold the rule of law.

  • Promote European Values:

The promotion of values such as human dignity, freedom, democracy, equality, the rule of law, and respect for human rights within its member states and beyond.

  • Strengthen the Global Role of the EU:

EU aims to strengthen its voice in international affairs, promote peace, security, and global development, and contribute to the effective multilateral system based on international law.

  • Encourage Scientific and Technological Progress:

EU supports research and innovation to maintain and enhance its competitiveness and address societal challenges.

  • Enhance Economic, Social, and Territorial Cohesion:

EU seeks to reduce disparities between various regions and ensure balanced development throughout the EU, fostering economic cohesion.

Functions of EU:

  • Legislation and Regulation:

EU develops and enacts legislation in areas that affect its member states, such as environmental protection, consumer rights, transport, and competition laws. This helps to ensure uniformity across the single market.

  • Economic Policy Coordination:

It coordinates economic policies among member states to ensure economic stability, promote growth, and avoid significant economic imbalances within the euro area and the wider EU.

  • Common Foreign and Security Policy (CFSP):

EU conducts a common foreign and security policy, allowing member states to speak and act together on matters of foreign policy and security, including crisis management and conflict prevention.

  • Justice and Home Affairs:

EU works to create an area of freedom, security, and justice, which includes cooperation in the fight against crime, terrorism, and managing migration and asylum policies.

  • Internal Market:

It ensures the free movement of goods, services, capital, and people within the EU, which is one of the central pillars of the EU’s integration process.

  • Trade Policy:

EU manages trade relations with non-EU countries and represents its member states in international trade negotiations, aiming to ensure fair and open trade.

  • Agriculture and Fisheries Policies:

EU implements policies to ensure a stable, safe, and sustainable supply of food and to manage the fisheries sector while ensuring the sustainability of fish stocks.

  • Regional and Cohesion Policy:

EU supports economic and social cohesion by reducing disparities between regions through funding infrastructure, business development, and job creation projects.

  • Environmental Policy:

It develops policies and legislation to protect the environment, combat climate change, and promote sustainable development across member states and globally.

  • Research and Innovation:

EU supports research and innovation through funding and programs like Horizon Europe, aiming to drive economic competitiveness and address societal challenges.

  • Consumer Protection:

It enacts legislation and policies to protect the health, safety, and economic interests of European consumers.

  • Monetary Policy (for Eurozone countries):

Through the European Central Bank (ECB), it manages monetary policy for the eurozone, including setting interest rates and controlling inflation.

  • Education, Culture, and Youth Policies:

EU supports programs and initiatives to promote education, training, cultural exchange, and youth engagement across member states.

University of Mumbai BMS Notes

Licensing

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Licensing is a business arrangement in which one company gives another company permission to manufacture its product for a specified payment.

Licensing generally involves allowing another company to use patents, trademarks, copyrights, designs, and other intellectual in exchange for a percentage of revenue or a fee. It’s a fast way to generate income and grow a business, as there is no manufacturing or sales involved. Instead, licensing usually means taking advantage of an existing company’s pipeline and infrastructure in exchange for a small percentage of revenue.

As in this mode of entry the transference of knowledge between the parental company and the licensee is strongly present, the decision of making an international license agreement depend on the respect the host government shows for intellectual property and on the ability of the licensor to choose the right partners and avoid having them compete in each other’s market. Licensing is a relatively flexible work agreement that can be customized to fit the needs and interests of both licensor and licensee. The following are the main advantages and reasons to use an international licensing for expanding internationally:

  • Reach new markets not accessible by export from existing facilities.
  • Quickly expand without much risk and large capital investment.
  • Obtain extra income for technical know-how and services.
  • Pave the way for future investments in the market.
  • Retain established markets closed by trade restrictions.
  • Political risk is minimized as the licensee is usually 100% locally owned.

Benefits and Limitations

In licensing, the licensor gets the advantage of entering the international market at little risk. However, the licensor has little to no control over the licensee, in terms of production, distribution and sales of the product. In addition to this, if the licensee gets success, the firm has given up profits, and whenever the licensing agreement expires, the firm might find that it has given birth to a competitor.

As a prevention measure, there are certain proprietary product components supplied by the licensor itself. Although, innovation is considered as the appropriate strategy so that the licensee will have to depend on the licensor.

On the other hand, the licensee acquires expertise in production or a renowned brand name. It expects that the arrangement will increase the overall sales, which might open the doors to the new market and help in achieving the business objectives. However, it requires a considerable capital investment, to start the operations, as well as the developmental cost is also borne by the licensee.

Reasons

There are many reasons for an intellectual property (IP) owner to grant a license. The most obvious one is to generate revenue from the guarantee and royalty payments. But licensing also can serve a number of other purposes. In some cases, those “other” reasons to license might actually be more important to the licensor than the sheer dollars (or euros, pounds, pesos, won, rupees) that are earned. Among them:

Marketing support for the core business. For a television show, movie, children’s book or sports franchise, the retail display and proliferation of licensed products doesn’t only generate product sales, but it also promotes the core property. An array of toys or apparel tied to a movie, sitting on a store shelf, also helps to promote the movie itself. A sports fan wears a sweatshirt with the logo of her favourite team expresses her enthusiasm about the team, but also subtly promotes the sports, the league and the team to anyone who passes her by on the street. The same goes for a beer brand. Seeing a store display of glassware carrying a well-known beer logo, or walking into a neighbor’s home and seeing the glasses on his bar reinforces the brand image, supporting the brands overall marketing efforts.

Extending a corporate brand into new categories, areas of a store, or into new stores overall. Licensing represents a way to move a brand into new businesses without making a major investment in new manufacturing processes, machinery or facilities. In a well-run licensing program, the property owner maintains control over the brand image and how it’s portrayed (via the approvals process and other contractual strictures), but eventually reaps the benefit in additional revenue (royalties), but also in exposure in new channels or store aisles.

Trying out potential new businesses or geographical markets with relatively small upfront risk. By licensing its brand to a third-party manufacturer, a property owner can try new businesses, or move itself into new countries with a smaller upfront investment than by building and staffing its own operations.

Maintaining control over an original creation. Licensing represents a way for artists and designers to profit from their creative efforts, while maintaining control over how they are used. For brand owners (particularly those doing business in the global marketplace), licensing and registering the brands in multiple markets is a way to protect the brand from being used by others without authorization.

University of Mumbai BMS Notes

Meaning, Features of International Marketing, Need and Drivers of International Marketing

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International marketing though it has certain distinct characteristics, is similar to domestic marketing in terms of certain technical attributes. Marketing can be concerned as an internal part of two processes, viz. technical and social. International marketing and Domestic marketing are identic.al, so far as technical process is concerned.

It includes non-human factors such as product, price, cost, brands etc. The basic principles regarding these variables are of universal applicability. But the social aspects of marketing are unique in any given stratum, because it involves human elements, namely, the behaviour pattern of customers and the given characteristics of a society, such as consumers attitude, values etc. It is obvious that marketing, to the extent it is visualized as a social process, will be different from domestic marketing.

Kotler has defined marketing as, “Marketing is the analysis, planning, implementation and control of programmes designed to bring about desired exchanges with target audiences for the purpose of mutual or personal gain. It relies heavily on the adoption and co­ordination of product, price, promotion and place for achieving effective response.”

There are two sets of variables in this definition. One is markets and other one is human needs and wants and a process or techniques to convert potential exchanges into realized exchanges. The techniques involved are more or less similar in both domestic and international marketing. But the variables involved are totally different in case of International Marketing.

Major dimensions to the spills of international marketing:

  1. Competence in marketing, with a sound grasp of marketing concepts, tools and techniques.
  2. Ability to perceive patterns of consumer behaviour in different countries and the ability to evaluate the essential differences and similarities between markets.
  3. Management skill to organise, plan, co-ordinate and control an operation of considerably greater complexity particularly in its human relationships than that involved in the home market.

Features of International Marketing

  1. Different Legal System:

Every Country has its own legal system. Some of the countries follow English Common Law while others follow the civil law. Some of the European countries are having their own legal system. This difference in the legal system among different countries increases the difficulties of businessmen.

It is not sure for the businessmen that which legal system will be applicable to their business transactions. There must be uniform legal system. However some of the agencies are trying to make it uniform for all countries. The United Nations Commission on International Trade Law is also supporting the opinion of uniformity and is doing, its efforts to bring uniformity in International trade Law.

  1. Market Characteristics:

The Market Characteristics of every Country is different due to the environmental factors, demand patterns, Government Controls etc. In some countries like India and USA the market characteristics are found different from state to state. It is because of all above factors responsible for the market characteristics.

  1. Monetary System:

The monetary system of each country is decided by the government of that country and the exchange value of country’s currency is being determined by the forces of supply and demand.

  1. Procedure and Documentation:

Every country has its own procedure of documentation requirements for the purpose of experts. Every business house has to comply with these rules and regulation for the purposes of export and imports.

Need and Drivers of International Marketing

  1. Survival:

Most of the countries in the world are lacking of market size, resources and opportunities. Therefore, it is their compulsion to trade with other countries for their survival. Since the European Countries are small in size therefore without overseas markets their firms would not have sufficient economies of scale to be competitive with U.S. based firms. It is pertinent to mention here that international competition may not be a matter of choice when the survival is at stake.

Will Mitchell, J. Myles Shaver and Yeung Bernard conducted a study on “Performance following changes in International Presence in Domestic and Transition Industries. In a study of five pharma-sector industries, he found that international expansion is necessary when overseas firms enter a domestic market. He revealed that the firms having substantial market share and international experience expanded their business activities successfully. And all those firms disappeared that retrenched after an international expansion.”

  1. Growth of International Market:

Despite having numerous problems like economic and marketing problems, the developing nations are considered be an excellent market to do business. The vast potential of international markets can never be ignored. According to one survey total world market is four time longer in comparison to U.S. Market.

A slow growth of U.S. population and changing life style viewed the growth of other markets with a critical eye. It is evident that Russian smokers show no concern about the health risks. And International giants Philip Moris Co, R.J. Reynolds, Tobacco International SA and British-American Tobacco Co. have entered the market very aggressively.

  1. Sales and Profits:

It is clear that there is a large potential to sell the products in the international market. The International Market constitutes a large amount of share of the total business of many firms. Further it is evident that many large U.S. based companies have performed very well in the overseas market. IBM and Compaq are the best examples in this regard.

Both of them have maximized their sales in abroad in comparison to their domestic market. In case of Cocacola it is important to mention here that 80 percent of the total operating profit is contributed by the international sales account of the company. Thus, market is on saturation level, where as there is still a great potential for its future growth in other countries. Thus, it can be concluded that international market provides huge potential to increase sales value and profits of the firms.

  1. Benefit from Diversification:

The investors can be benefited from global diversification. It is evident that the demand of certain products is affected by cyclical factors like recession and seasonal factors like climatic change. The sale of such products fluctuates adversely due to all these variables. It is the only solution for such kind of risks, to diversify a company’s risk and to consider foreign market as only solution to overcome with variable demand.

Such markets can provide outlets for excess production capacity and can easily counter such fluctuations. Seasonal factors, for instance, may affect consumption level of soft drinks. And keeping in mind such limitation, the soft drink industries are spreading their marketing activities throughout the global market. It has been observed that global selling has enabled the company to carry on with production throughout the year and help the companies to stabilize their business.

  1. Inflation and Price Modernization:

The benefits of international trade are readily self-evident. Exports are always considered beneficial to a country. On the other hand, imports can also be highly beneficial to a country. Because there is not any incentive for domestic firms to moderate these prices. The lack of alternatives in imported products may compel consumers to pay more for the products to local firms, resulting in inflation and excess profits for local firms.

It is evident that in Europe, when the prices of orange Juice were jumped up, their customers switched over to other alternative drinks. Finally, it took ten years for citrus industry to win back these consumers. The U.S. orange growers finally compromised to live with import as they found that alternative juice is able to keep consumers by minimizing the price increases.

  1. International Marketing and Standard of Living:

International marketing helps the countries and their citizens to increase their standard of living. On the other hand, without trade, there may be product shortage and which may force people to pay more or less. International trade makes easy for industries to get specialization and gain access to raw materials.

And at the same time, it fosters competition and efficiency. In overall it leads to the conclusion that international trade is helpful to provide their citizen higher standard of living.

Management Notes

Organization of the Petroleum Exporting Countries (OPEC)

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The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization or cartel of 13 countries. Founded on 14 September 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), it has since 1965 been headquartered in Vienna, Austria, although Austria is not an OPEC member state. As of September 2018, the 13 member countries accounted for an estimated 44 percent of global oil production and 81.5 percent of the world’s “proven” oil reserves, giving OPEC a major influence on global oil prices that were previously determined by the so-called “Seven Sisters” grouping of multinational oil companies.

The stated mission of the organization is to “Coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.” Economists often cite OPEC as a textbook example of a cartel that cooperates to reduce market competition, but one whose consultations are protected by the doctrine of state immunity under international law. The organization is also a significant provider of information about the international oil market.

The formation of OPEC marked a turning point toward national sovereignty over natural resources, and OPEC decisions have come to play a prominent role in the global oil market and international relations. The effect can be particularly strong when wars or civil disorders lead to extended interruptions in supply. In the 1970s, restrictions in oil production led to a dramatic rise in oil prices and in the revenue and wealth of OPEC, with long-lasting and far-reaching consequences for the global economy. In the 1980s, OPEC began setting production targets for its member nations; generally, when the targets are reduced, oil prices increase. This has occurred most recently from the organization’s 2008 and 2016 decisions to trim oversupply.

OPEC+ Members

In addition to formal OPEC members, 10 additional oil exporting countries, led by Russia, form the OPEC+ cartel, which since 2016 cooperate in fixing the global crude oil prices by agreeing to production quotas that keep global production below demand/consumption. OPEC+ countries are criticized as encouraging unnecessary excess capital investment in the global oil sector instead of promoting cheaper oil production at lower capital investment.

Observers

Since the 1980s, representatives from Egypt, Mexico, Norway, Oman, Russia, and other oil-exporting nations have attended many OPEC meetings as observers. This arrangement serves as an informal mechanism for coordinating policies.

Vienna Group

A number of non-OPEC member countries also participate in the organisation’s initiatives such as voluntary supply cuts in order to further bind policy objectives between OPEC and non-OPEC members. This loose grouping of countries includes: Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan and South Sudan.

Leadership and decision-making

The OPEC Conference is the supreme authority of the organization, and consists of delegations normally headed by the oil ministers of member countries. The chief executive of the organization is the OPEC Secretary General. The Conference ordinarily meets at the Vienna headquarters, at least twice a year and in additional extraordinary sessions when necessary. It generally operates on the principles of unanimity and “one member, one vote”, with each country paying an equal membership fee into the annual budget. However, since Saudi Arabia is by far the largest and most-profitable oil exporter in the world, with enough capacity to function as the traditional swing producer to balance the global market, it serves as “OPEC’s de facto leader”.

Conflicts

OPEC often has difficulty agreeing on policy decisions because its member countries differ widely in their oil export capacities, production costs, reserves, geological features, population, economic development, budgetary situations, and political circumstances. Indeed, over the course of market cycles, oil reserves can themselves become a source of serious conflict, instability and imbalances, in what economists call the “natural resource curse”. A further complication is that religion-linked conflicts in the Middle East are recurring features of the geopolitical landscape for this oil-rich region. Internationally important conflicts in OPEC’s history have included the Six-Day War (1967), Yom Kippur War (1973), a hostage siege directed by Palestinian militants (1975), the Iranian Revolution (1979), Iran–Iraq War (1980–1988), Iraqi occupation of Kuwait (1990–1991), September 11 attacks by mostly Saudi hijackers (2001), American occupation of Iraq (2003–2011), Conflict in the Niger Delta (2004–present), Arab Spring (2010–2012), Libyan Crisis (2011–present), and international Embargo against Iran (2012–2016). Although events such as these can temporarily disrupt oil supplies and elevate prices, the frequent disputes and instabilities tend to limit OPEC’s long-term cohesion and effectiveness.

OPEC’s Mission

According to the OPEC website, the group’s mission is “to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic, and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.”

The organization is committed to finding ways to ensure that oil prices are stabilized in the international market without any major fluctuations. Doing this helps keep the interests of member nations while ensuring they receive a regular stream of income from an uninterrupted supply of crude oil to other countries.

OPEC recognizes the founding nations as full members. Any country that wishes to join and whose application is accepted by the organization is also considered a full member. These countries must have significant crude petroleum exports. Membership to OPEC is only granted after receiving a vote from at least three-quarters of its full members. Associate memberships are also granted to countries under special conditions.

University of Mumbai BMS Notes

Process of International Marketing, Phases of International Marketing

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International marketing is the application of marketing principles by industries in one or more than one country. It is possible for companies to conduct business in almost any country around the world, thanks to the advances in international marketing.

Marketing your brand at a global level is a complicated thing to do since you have to take care of a lot of things. Every business firm wants to develop a successful international marketing process. However it is totally a different thing to do so as compared to local marketing where you understand the audience very well.

In simple words, international marketing is trading of goods and services among different countries. The procedure of planning and executing the rates, promotion and distribution of products and services is the same worldwide.

Process of International Marketing

  1. Motivation for International Marketing: For an organisation the motivation for entering international market can be any or all of the following:
  • Growth
  • Profitability
  • Economies of Scale
  • Risk Spread
  1. Research and Analysis: Market research is done to Analyse the organization’s strength and weakness, opportunities available in international markets, and threats in international markets.
  2. Decision to Enter International Markets: After identification of potential opportunities in international market decisions are taken to enter international market. Such decisions include identification of potential buyers in international markets, demand measurement and forecasting, market segmentation, market targeting and market positioning.
  3. International Marketing Mix: At this step international marketing mix is developed. Marketing mix identifies four key areas; Product, Price, Place, and Promotion for developing a well coordinated marketing strategy.
  4. Consolidate Marketing Efforts: Developing a good marketing program is not enough a marketing organisation need to manage the international marketing effort properly. Marketing organisations also need proper analysis, planning, implementation and control of their marketing efforts.

Phases of International Marketing

Deciding to Internationalize

The first decision is whether the firm should take up international marketing or not. This decision is based on number of important factors:

  • Present and future overseas opportunities
  • Present and future domestic opportunities
  • Resources of the company
  • Company objectives

International marketing offers a number of advantages. At the same time, international marketing is subject to a number of risks. The decision to internationalize requires the evaluation of international strengths, weaknesses, opportunities and threats. This is done by SWOT analysis. If the SWOT analysis is favourable to the firm, the firm should decide to venture into the foreign market.

Market Selection

Once it has been decided to internationalize, the next important step is the selection of most appropriate market i.e., identifying the target customers. For this purpose, a thorough analysis of the potentials of the various overseas markets and their respective marketing environments is essential. A careful exercise to shortlist overseas markets becomes necessary since all products cannot be sold by the firm to all countries at all times. It is considered better to exert maximum pressure on a minimum area to achieve the best results.

Important criteria which may be used in the market selection:

Geographical proximity: The first criterion of market selection is the geographical proximity. Geographical proximity facilitates a firm to reach the product fast to a nearby country and service the market quickly and more effectively. Besides, there will be low transportation cost leading to lesser price of the product.

Market potential of the country: A company may select its target markets on the basis of market potential of the country. Market potential of the country can be assessed by the prosperity of the country, the size and growth of its imports, etc.

Market Access: Another yardstick that a country may use in market selection relates to the market access. A country’s import policy is an important factor, because it may be biased in favour of some items and/or some countries. It is advisable for a company to select countries which do not discriminate against the country of the firm and whose import policy is not restrictive.

It would be highly beneficial for a company if it selects countries having good political and economic relationships with home country or having some preferential trading arrangement also or having least restrictions on imports.

Market characteristics: Another factor to be considered in the selection of the market is the market characteristics of the country. A company would like a market having similar cultural factors, trade practices and customs.

Product Selection

Once the market selection decision has been made, the next important task is to determine the products for export. Following are some important criteria which may be used in the product selection:

Elasticity of supply: A company would not face any supply constraint in exporting the products having elastic supply. Elastic supply is the result of natural resource endowment or acquired skills and assets. A company may also select a product because the product is unique i.e., it has developed it by research and development and it is likely to take some time before competitors come out with a suitable substitute. A company should not prefer exports of the products which are heavily dependent on imported inputs.

Demand of the Products: A company should identify the products that are in demand and likely to continue to be in demand in an overseas country. For this the company has to make the analysis of a country’s imports and production of various commodities including substitutes and the likely future policies and plans regarding such commodities.

Selection of Entry Mode

After the selection of market and product, the next important decision is to determine the appropriate mode of entering the foreign market. At one extreme a company may decide to produce the product domestically and export it to the foreign market. In this case, the company need not make any investment overseas.

On the other extreme, the company may establish manufacturing facilities in, the foreign country to sell the product there. This policy requires direct foreign investment by the company. In between these two extremes, there are several options each of which demand different levels of foreign investment.

Following are various entry modes in the foreign markets:

Exporting: Exporting means sale of domestically produced goods in other country without any marketing or production or organization overseas. Exporting may be of two types: Direct exporting and Indirect exporting. Direct exporting means sale of goods abroad without involving middlemen. In case of indirect exporting, a firm sells its products abroad through middlemen.

Licensing: Under licensing an international business firm (licensor) allows a foreign company (licensee) to manufacture its product for sale in the licensee’s country and sometimes in other specified markets.

Franchising: Franchising is a special form of licensing in which an international business company (franchiser) grants another independent company (franchisee) right to do its (franchiser’s) business in a prescribed manner. Franchiser makes a total marketing programme available to the franchisee.

Contract Manufacturing: Under contract manufacturing, an international marketing company enters into contract with a local enterprise abroad to manufacture its product and undertakes the marketing responsibility on its own.

Joint Venture: An international joint venture is an enterprise formed abroad by the international business company sharing ownership and control with a local company in that foreign country.

Strategic Alliance: Under strategic alliance, two or more competing firms pool their resources in a collaboration to leverage their critical capabilities for common gain. Although a new entity may be formed, it is not an essential requirement.

Assembly: Under assembly an international business firm produces most of the components or ingredients in one or more countries and carries out the labour-intensive assembling in the foreign country where labour is cheap and abundant.

Mergers and Acquisitions: Under merger an international business firm absorbs one or more enterprises abroad by purchasing the assets and taking over liabilities of those enterprises on payment of an agreed amount. Under acquisition, an international business enterprise takes over the management of an existing company abroad by taking the controlling stake in the equity of that company at a predetermined price.

Each of these strategies has certain advantages and disadvantages. Each of these strategies require different levels of investment ranging from no additional investment to full investment in manufacturing facilities abroad, and the risks also increase with increase in the investment level Similarly, control over the market may be higher if the company involves itself directly in manufacturing by investments in production facilities.

Various entry strategies must be analysed in following respects:

  • Expected sales
  • Costs of operations in a foreign country
  • Assets
  • Profitability
  • Risk factors

The selection of a company’s best method of entry into foreign markets depends on following factors:

  • Number of markets covered
  • Level of penetration within markets
  • Degree of feedback available
  • Possibility of sales volume over a period of time

Selection of Marketing Strategy or Marketing Mix Decision

The foreign market is characterized by a number of uncontrollable variable Marketing mix consists of internal factors which are controllable. The success of the international marketing therefore, depends to a large extent on the appropriateness of the marketing mix.

Following are the elements of the marketing mix:

Product strategy: In the present day competitive global market environment marketing begins with customer and ends with the customer. The importers will import only those items which are in demand from the customers.

The exporters have to, therefore, identify what the consumers in the overseas markets require. It is imperative that the product selected for exports should be unique, creative and innovative in comparison to the similar item being offered by the competitors. As the, consumer preferences, tastes and regulations governing product, quality, safety, health, environment protection, packaging and packing vary from one market to another, same item cannot be offered in all the markets.

An analysis should be made of any modifications required in the products, packaging changes needed, labelling requirements, brand name and after-sales services expected.

Many products must undergo significant modifications if they are to satisfy consumer and market requirements abroad. Other products require changes at the discretion of the producer only to enhance their appeal on export markets. Products may be modified in respect of quality, size, shape, colour, material etc. Product strategy includes packaging, branding and product service.

Pricing strategy: 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 analyzing 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.

Distribution strategy: A company should work out its distribution strategy very carefully so that its product reaches the consumer at the right place and right time with reasonable cost. The potential exporter should consider the following distribution on options:

  • Exporting through a domestic exporting firm that will take over full responsibility for finding sales outlets abroad.
  • Setting up its own export organization.
  • Selling through representatives abroad.
  • Using warehouses abroad.
  • Establishing a subsidiary.

The choice of distribution channel will depend on the firm’s export strategy and export market. A company should be very clear about the division of risks, responsibilities and privileges between it and the distributors and the cost of distribution. Part of the distribution strategy relates to agency arrangements in overseas countries.

When it is intended to create greater awareness of the product, it is better to appoint an agent who does not handle many products and can allocate the time needed to promote that product.

Promotion strategy: The company should decide on the optimum promotion mix i.e., advertisement, personal selling and sales promotion. The export marketing plan should provide details on the following aspects of the promotional strategy:

  • Publicity methods
  • Advertising (who will be responsible for it and how much the firm can allocate to it)
  • Trade missions
  • Buyer’s visits
  • Local export assistance

Promotion strategy to be adopted by the exporter should be in tune with the environmental rules and regulations of the host country. Further, promotion strategy should take into account the culture of the target segment in terms of its practices, beliefs, likes and dislikes, religion etc.

International Organization Decision

The last step involved in the international marketing process involves decision regarding the international organization. There are different organizational structures for doing international business.

The Structure is determined by the following factors:

  • Extent of commitment of the organization to the international business.
  • Nature of international orientation.
  • Size of international business and expansion plans.
  • Number and consistency of product lines
  • Characteristics of the foreign markets.

A firm may organize its international marketing operations in three ways:

  • Creation of export department
  • Setting up an international division
  • Development of a global organization

The export department is the simplest form of export organization and easiest to establish. A separate export department is established to take effective care of all the activities connected with the export business. The internal organizational structure of the export department may be based upon functions, territory, product or a combination of these. A separate export department may be located at the most suitable place which may not be the headquarters of the company.

Management Notes

Strategic Alliance Objectives, Types, Pros and Cons

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Strategic Alliance is a formal arrangement between two or more companies to pursue a set of agreed upon objectives while remaining independent organizations. This partnership is less involved and less binding than a joint venture or a merger and acquisition (M&A) deal. Strategic alliances often involve sharing resources, knowledge, capabilities, and market access with the aim of achieving mutual benefits. They can be used to enter new markets, develop and distribute new products, share technology and research and development (R&D) costs, or combine strengths to enhance competitive positioning. Unlike in mergers and acquisitions, the companies involved in a strategic alliance do not form a new entity; instead, they collaborate while continuing to operate as separate entities, maintaining their autonomy.

Objectives of Strategic Alliance:

  • Access to New Markets:

To enter new geographical markets or industry sectors more efficiently and effectively than would be possible individually.

  • Resource Sharing:

To pool resources, including technology, knowledge, and capital, to achieve common goals without the need for full merger or acquisition.

  • Cost Reduction:

To achieve economies of scale and share costs in areas such as research and development, production, and marketing.

  • Risk and Reward Sharing:

To distribute the risks and rewards associated with new ventures, projects, or investments among the partners.

  • Access to New Technologies:

To gain access to proprietary technologies or expertise that would be expensive or time-consuming to develop in-house.

  • Enhancing Competitive Position:

To strengthen the competitive position of the alliance partners against rivals, potentially altering the competitive dynamics of the industry.

  • Speed to Market:

To accelerate the development and deployment of new products or services through combined efforts.

  • Learning and Innovation:

To facilitate learning from each other and foster innovation through the exchange of ideas, knowledge, and best practices.

  • Regulatory Compliance:

To achieve compliance with regulatory requirements more efficiently, especially in industries with stringent regulations or in foreign markets with complex legal environments.

  • Strategic Flexibility:

To maintain strategic flexibility and adaptability in a rapidly changing business environment by leveraging the strengths and capabilities of alliance partners.

Types of Strategic Alliance:

  • Joint Venture:

This involves two or more companies creating a new, independent business entity together, sharing its ownership, operational responsibilities, and financial risks and rewards. Joint ventures are often formed to enter new markets or develop new products.

  • Equity Strategic Alliance:

In this type of alliance, one company purchases a certain equity stake in another company. This investment creates a formal partnership without merging the companies into a single entity. It’s a way to strengthen ties and commit to long-term collaboration.

  • Non–equity Strategic Alliance:

Companies agree to collaborate without equity exchanges. These alliances often involve contracts, agreements for sharing resources, distribution networks, or technology while remaining independently owned and operated.

  • Global Strategic Alliances:

Designed to allow partners to engage in worldwide operations more effectively than either could on its own. These alliances often involve large companies that collaborate to tackle global markets, share global supply chains, or co-develop products on an international scale.

  • Cross–Licensing Agreements:

In this arrangement, companies agree to license proprietary rights, such as patents or technologies, to each other. It’s a way for companies to access each other’s technology without transferring ownership.

  • Research and Development (R&D) Alliances:

Companies collaborate on research and development projects to innovate and develop new products or technologies, sharing the costs, risks, and rewards of the innovation process.

  • Marketing Alliance:

Firms agree to collaborate in marketing efforts to promote their products or services. This can include co-branding, joint promotions, or shared distribution channels.

  • Supply Chain Alliance:

Companies in a supply chain form an alliance to improve efficiency and effectiveness in the production and distribution of goods. This can involve suppliers, manufacturers, and distributors working closely to reduce costs and improve quality.

  • Operational Alliance:

This type involves sharing or co-managing resources and operations, such as manufacturing facilities or logistics, to achieve operational efficiencies.

  • Strategic Investment Alliances:

One company makes a strategic investment in another to support and enhance their mutual business interests, without acquiring it.

Pros of Strategic Alliance:

  • Access to New Markets:

Alliances can provide companies with quicker access to new geographical markets or customer segments through partners who already have a strong presence and understanding of these areas.

  • Cost and Risk Sharing:

Collaborating allows firms to share the financial burden and risks associated with new investments, research and development projects, or market entry strategies.

  • Resource and Capability Access:

Companies can access resources and capabilities that they do not possess in-house, such as specialized technology, expertise, or operational capabilities, thereby enhancing their competitive edge.

  • Economies of Scale:

Strategic alliances can lead to economies of scale in production, distribution, and purchasing, resulting in cost reductions and improved margins for all partners.

  • Speed to Market:

By pooling resources and capabilities, companies can accelerate the development and launch of new products and services, enabling them to capitalize on market opportunities more swiftly.

  • Flexibility:

Compared to mergers and acquisitions, strategic alliances offer greater flexibility, allowing companies to collaborate in specific areas while remaining independent and retaining the ability to exit the partnership more easily if objectives are not met or circumstances change.

  • Learning and Innovation:

Alliances provide opportunities for learning from partners, gaining new insights, and fostering innovation through the combination of different perspectives, knowledge, and expertise.

  • Strengthening Competitive Position:

By forming alliances, companies can strengthen their competitive position against rivals, either by combining forces to compete more effectively or by collaborating to reduce competitive pressures.

  • Overcoming Regulatory Barriers:

Partnerships, especially with local firms, can help companies navigate regulatory environments in foreign markets more effectively, facilitating market entry and operations.

  • Enhancing Brand Image and Credibility:

Associating with reputable partners can enhance a company’s brand image and credibility in the market, particularly if the partner is well-established and respected.

Cons of Strategic Alliance:

  • Misaligned Objectives:

Partners may have different objectives, priorities, or levels of commitment to the alliance, leading to conflicts and inefficiencies.

  • Cultural and Operational Differences:

Differences in corporate culture, management styles, and operational processes can hinder collaboration and integration efforts, affecting the smooth functioning of the alliance.

  • Resource Allocation Conflicts:

Disagreements over the allocation of resources, costs, and revenues can arise, particularly if partners perceive the distribution as unfair or not reflective of their contributions.

  • Risk of Intellectual Property Loss:

Sharing sensitive information and intellectual property with partners can lead to risks of leakage or misuse, especially if the alliance ends or if there is a breach of trust.

  • Dependency on Partners:

Over-reliance on an alliance partner for critical components, technology, or market access can lead to vulnerabilities if the partnership deteriorates or if the partner faces operational challenges.

  • Dilution of Brand:

Collaborating with another company can lead to dilution of a brand’s identity if the partnership confuses customers or if the partner’s actions tarnish the brand’s reputation.

  • Coordination and Management Challenges:

Effective coordination and management of an alliance require significant effort and resources, and disparities in expectations or execution can impede progress.

  • Flexibility Limitations:

While alliances offer flexibility, they can also impose constraints on a company’s strategic decisions and actions, especially if contractual obligations limit the ability to pursue other opportunities or partnerships.

  • Potential for Competition:

Partners in an alliance may become competitors in the future, particularly if the collaboration provides one partner with capabilities or market insights that they later use to compete against the other.

  • Difficulties in Measuring Success:

Assessing the performance and success of an alliance can be challenging, especially when benefits are intangible or indirect, leading to disagreements over the value each party is deriving from the partnership.

  • Exit Challenges:

Dissolving a strategic alliance can be complex and costly, particularly if there are disagreements over asset division, ongoing commitments, or if the dissolution impacts customers, employees, or other stakeholders.

University of Mumbai BMS Notes

Wholly Owned Subsidiaries

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A wholly owned subsidiary is a company whose common stock is 100% owned by another company, the parent company. Whereas a company can become a wholly owned subsidiary through an acquisition by the parent company or having been spun off from the parent company, a regular subsidiary is 51% to 99% owned by the parent company.

When lower costs and risks are desirable or when it is not possible to obtain complete or majority control the parent company might introduce an affiliate, associate, or associate company in which it would own a minority stake.

A wholly owned subsidiary is a business operation in a foreign country that a firm fully owns. A firm can develop a wholly owned subsidiary through a greenfield venture, meaning that the firm creates the entire operation itself. Another possibility is purchasing an existing operation from a local company or another foreign operator.

Regardless of whether a firm builds a wholly owned subsidiary “from scratch” or purchases an existing operation, having a wholly owned subsidiary can be attractive because the firm maintains complete control over the operation and gets to keep all of the profits (or losses) that the operation makes. A wholly owned subsidiary can be quite risky, however, because the firm must pay all of the expenses required to set it up and operate it.

Advantages

  • Easy to manage as the strategic decision-making lies with the parent company.
  • Due to 100% control, it is easier to follow the parent company policies and procedures thus helping the group to achieve synergies.
  • The subsidiary company gets a tag of the parent group since it is merged in the group fully due to the 100% acquisition.
  • Results are been grouped under the parent company at each balance sheet date.
  • It increases the valuation of the subsidiary company since now it is under the umbrella of the parent group which is a big brand in the market.
  • The subsidiary company gets a good brand name by getting acquired by the top brand thus increasing the valuation and the market share of the parent company by acquiring an established player in the market.
  • Building relations with customers and investors become easy if the parent has strong connections in the market.

Disadvantages

  • Identification of M&A opportunities in the industry is a tough task.
  • Establishing relationships among vendors, regulators, bankers, investors, lenders take a lot of time since they are unaware of the functioning of the subsidiary.
  • Acquiring a new company or an existing company requires a lot of time working on the diligence process and finally closing the transaction.
  • Company operations and cultural differences can be a major concern.
  • In the case of a cross border acquisition, there are many regulatory laws that affect the functioning of the subsidiary. eg: In the parent company, a particular project might be permissible however in the subsidiary company, the local laws in the country may not permit it.
University of Mumbai BMS Notes

Evaluating Television Media Buying: Dysfunctional Card Rate, Secondary and Effective Rate, Deal Composition, Cost Per Rating Point (CPRP), Reach Delivered by the Buy, Visibility Spots, Bonus Percentage, Upgrades and Spot Fixing, Sponsorships

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Dysfunctional Card Rate, Secondary and Effective Rate

A rate card is a document provided by a newspaper or other print publication featuring the organization’s rate for advertising. It may also detail any deadlines, demographics, policies, additional fees, and artwork requirements. The smaller the publication, the less information that may be available on the rate card.

Some larger newspapers may have a rate card for a particular kind of advertisement. They may have their rates broken down by classified ads, retail advertising, and even national ad rates.

Rate cards help the retailer understand what types of ad sizes, discounts, and other advertising the publication have to offer. When choosing a newspaper or print media, you can use rate cards to compare ad rates based on circulation before you buy advertising space.

Before placing an ad, be sure you understand the terms and conditions of advertising with the publication. In many cases where there may be a conflict between the insertion order and the rate card, the rate card will be the deciding factor. This does not mean the prices on the rate card are fixed. Most retailers will find the paper’s sales rep will offer special rates for first time advertisers or other discounts.

If you’re interested in advertising within a particular publication, check their website or call the office and ask for a copy of their current rate card. Many newspapers and magazines have their rate cards available online in a PDF format for quick reference. Of course, these rates are always negotiable.

Deal Composition

It is not just enough to evaluate effective rates but the structure of the deal or buy plays a very important role as well. Composition of a buy such as prime time second age deals for an Advertisers & Weekday vs Weekend split. Weekday primetime shows get highest TRP followed by weekends throughout the day, afternoons suitable for female TG, News channel morning slots work more efficiently than an afternoon on weekdays.

Cost Per Rating Point (CPRP)

Cost per rating point measures the price paid for GRP’s delivered. Eg: 2 media buys with the same total rates may have varying CPRP’s. One may have second age in all prime time shows, another may have second age in only shows. Technically afternoon slots deliver ratings even in male TGs. While some buyers deliver CPRPs regardless of the time slots, but an efficient planner decides not to take time slots on blind attempt but to consider CPRP on time slots.

Reach Delivered by the Buy

Reach and frequency buying is an alternative method for buying ads that lets you book campaigns in advance with predictable, optimised reach and controlled frequency.

A high-frequency strategy may be beneficial for brands that are new, have a low market share or are running shorter campaigns. Many factors influence the effective frequency level. Your market, message and media should be considered during the campaign planning process.

Reach and Frequency campaigns are fixed reservations, with set costs, dates and reach. The aim of this type of campaigns is to fulfil the prediction, but you will be unable to change these parameters under any circumstance. This is also true for bids. The only change allowed for this type of campaign is at the creatives level. Any other change will cause an alteration in the reservation.

Keep in mind that Reach and Frequency campaigns don’t ensure a final cost per results or CPM, but a determined cost and reach within set dates.

Visibility Spots

A plan often delivers the reach, but the spread of the message about their campaign is important. This is very true for low budget brands who need to maximize their on-air presence. For instance, a small FMCG brand to be able to follow a large FMCG brand’s 52-week advertisement scheduling strategy, it too will need to maximize its presence as much as possible. Hence it chooses a low-cost afternoon TV spot to maintain a constant presence along with bursts of mass channel activity to increase its potential reach.

Bonus Percentage

Also known as “value adds,” this term is relevant to sites that sell their display ad inventory directly to advertisers. Generally, bonus media is a consideration only for line items priced on a cost-per-thousand-impressions (CPM) basis.

It is relatively common for advertisers or agencies to request that publishers include bonus media wherever possible in order to make the most competitive proposal possible when being considered for a campaign. These are basically $0 CPM (i.e., free) ad impressions that a publisher includes with paid media in order to maximize the appeal of the overall proposal.

In some cases, a proposal template will have a column marked “Bonus Media” or “Value Add.” In this case, the appropriate value is either Yes or No, depending on whether or not there is a cost associated with the line item (this column is somewhat duplicative, since any line item with a CPM of $0 would be bonus media).

There are pros and cons to including bonus media on an ad proposal, regardless of whether the advertiser or agency explicitly asks for it to be included. Giving away something of value (ad impressions) at zero cost obviously results in a direct loss of revenue. But in some instances, the inclusion of bonus media may make the overall proposal including paid line items seem more appealing.

Some advertisers or agencies focus on the overall effective CPM of a campaign when evaluating the competitiveness of a publisher. If this is the case, a strategic use of bonus media can help to make your proposal seem like a great value to the advertiser.

Upgrades and Spot Fixing

Another brilliant way to sweeten a media deal is to fix ROS (Run of the site) spots for direct buying to ensure higher deliveries. Advertisers do not specify the position of Ad placement in return for low rates. Ads may be placed randomly in unsold, less valuable portions of the target. And spots in a particular category can be upgraded to a higher category time slots based on the Ads previous results. Upgrades and spot fixes are done as it adds value to a deal.

Sponsorships

Program sponsorships are added on to a deal in order to deliver added value. The value of sponsorships is benefitted when the brand name is used in the program content Eg: Honda Star Voice of India. These programs are promoted throughout the day and people remember the name of the show along with sponsor name. (Vivo IPL). A program on a TV can have multiple sponsors apart from the main sponsor who acts as an associate sponsor.

Management Notes

Evaluating Print Media Buying: Discount on Rate Card, Negotiated Rate, Cost Per Thousand (CPT), Market Share Incentives, Readership v/s Circulation Track, Growth Incentives, Combination Rate Incentives, Full Page Discounts and Size Upgrades, Discount for Colour Ads, Date Flexibility Incentives, Positioning, Innovations

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Discount on Rate Card

This is one of the primary parameters, the quantum by which the card rate is lowered or actual savings for the client. For print Ads, the market-leading publications offer lesser discounts when compared to the comparatively newer publications. Due to extreme competition, even the leading print publications have come up with attractive discounts nowadays.

Negotiated Rate

Discounts alone are not the deciding factor for buying the print plan, instead inflation in the costs are to be closely considered as well. Certain publishers price cards at a higher rate & offer large discounts, thus monitoring inflation & increasing costs are supremely important. A good print buy has lesser inflation in negotiation rates than the inflation in card rates.

Cost Per Thousand (CPT)

The best way to judge a print buy is to pivot on the delivery vs cost. The CPT reached in print is calculated by the number of print publications in which Ad communication is carried & not the actual number of people the Ad message has reached through those publications.

Market Share Incentives

Readership v/s Circulation Track

It gives an idea of total copies in circulation and the number of readers per copy. Fortnightly publications & magazines have more readers per copy than in daily newspapers.

Growth Incentives

If the print publication agency gains substantial growth after the Ad campaign in their publications, the publishers offer additional discounts to the brand and makes its relationship stronger. Growth incentives can come in the form of free ad space on the newspaper which the Advertiser can utilise within a specific time period.

Combination Rate Incentives

Most of the print buy deals are an effective combination of several chunks of discounts. From discount on card rates to differential discounts on colour, growth incentives and upgrades, the savings for the brand, therefore, is a factor of all these elements.

Full Page Discounts and Size Upgrades

Discount for Colour Ads

Color Ads carry a higher price tag than B&W ads. But in the last few years, some of the major publications have reduced the price gap between B&W ads and colour ads, some publications even offer all colour advertising patterns as well. Publications offer better discounts on the colour Ad space since it nets better realisations than the B&W ones for the publications.

Date Flexibility Incentives

Positioning

Position of the Ad placed in the print publication plays a stupendous role in noticeability of the Ad. Publishers charge premium rates based on which page advertisers need their Ad to be placed. Front page Solus ad can cost 3X more than an inside page Ad. A regular Ad can be upgraded to a special position to ensure higher noticeability as well.

Innovations

With increased competition in all forms of media including print, publishers are obligated to adapt to more innovative strategies for Ad placements. At the highest level of adding value, innovations help brands stand out in the cluttered environment. There are several innovations possible now such as layout based, format based, editorial supported, exclusives etc. Clients & agencies approach innovations from different angles to get most of their campaigning process.

Management Notes

Evaluating Other Media Buys: Radio Buys, Outdoor Buys, Cinema Buys, Internet Buys, and Mobile Buys

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Radio Buys

Radio offers both a massive audience and a complex and changing pricing system. Clients rely on Capitol Media Solutions because we help them access the former and navigate the latter.

  • Determine formats and top stations to target in each market.
  • Explore native advertising in news, traffic, and weather reports (live-read or recorded.)
  • Recommend spot lengths for promotional, branding, and informational messages.
  • Establish target rating point (TRP) ranges for different types of spots.

The first step in effective radio media buying is understanding a client and a client’s marketing, advertising and overall business goals. Why do they want to advertise on radio and is it the best fit for their business goals? A media buyer will walk them through the process, and may compare the benefits of different types of strategies so that clients have a better idea of what they are working with.

If a client is committed to doing radio to start, a media buyer will do research based on the client’s target audience and demographic. It’s essential to find out which types of listeners are most likely to convert on radio advertising. This process helps narrow the field of opportunities for clients so that buyers can focus on negotiating with certain channels and networks only.

There are many different metrics that can be used to measure a campaign’s effectiveness. An essential part of a radio media-planning process is understanding the metrics that will be used to determine success. What should be measured and how does it relate to overall business goals? Once this metric or metrics have been established, it will be used as a success determiner throughout the life of the campaign. It will be used during the testing process and eventually the roll out.

Messaging and Radio Media Buying

The web copy (or ad copy) is another part of the buying process. Messaging is everything to the effectiveness of a campaign, so copy review is a must. Media buyers can put an advertiser on all of the right shows and in front of the right markets but they won’t take action without strong copy. If the messaging is convoluted or ambiguous at all, it will fall on deaf ears.

The copy for the ad(s) and for the website needs to be tweaked, tested and refined so that the client can get the best level of success for the investment. There may also need to be several different versions of the same messaging. It’s important to remember that 15-second, 30-second and 60-second spots need their own unique spin so that the messaging gets through without any important pieces missing.

Outdoor Buys

Out-of-home (OOH) advertising, also called outdoor advertising, outdoor media, and out-of-home media, is advertising experienced outside of the home. This includes billboards, wallscapes, and posters seen while “on the go;” it also includes place-based media seen in places such as convenience stores, medical centers, salons, and other brick-and-mortar venues.

OOH advertising formats fall into four main categories: billboards, street furniture, transit, and alternative.

The OOH advertising industry in the United States includes more than 2,100 operators in 50 states representing the major out of home format categories. These OOH media companies range from public, multinational media corporations to small, independent, family owned businesses.

  • A lower cost per impression than other mass media.
  • Targeted geographic reach.
  • A constant broadcast of your message.
  • High-impact, low-competition advertising.

Cinema Buys

Cinema advertising shouldn’t be confused with movie trailers the “coming attractions” that immediately precede the main feature. Movie ads come before the trailers, and they have been a presence in theaters since the first one opened in 1902.

This means that your parents or grandparents probably have fond memories of movie ads, too, if only for their comedic value. In the early days, movie ad montages were put together somewhat haphazardly, sometimes with slides appearing upside down or with sketchy lines blocking an advertiser’s phone number.

If you haven’t had the pleasure of meeting with someone who sells cinema ads, you may want to prepare yourself for the distinct possibility of hearing how Americans love movies and, perhaps even more intensely, the movie going experience.

They have a point. Aside from newly released movies that you can see only in a theater, there is no doubt that watching a movie in a theater offers some distinct advantages over watching the same movie on even a jumbo screen at home. A theater offers:

There are several advantages:

  • Huge cinema screens give a ‘larger than life’ impact to the message.
  • The audience is a captive audience since they cannot switch channels/flip pages of a print advertisement and are unlikely to walk out during advertisements.
  • In-cinema advertising is viewed by an audience which is likely to be paying close attention to the screen or the cinema hall area.
  • In-cinema advertising guarantees better attention span for the message to be communicated convincingly.
  • Cinema, with its huge localized reach pan India, makes it suitable to reach out to a small geography as well as the entire country.

Internet Buys

Online advertising, also known as online marketing, Internet advertising, digital advertising or web advertising, is a form of marketing and advertising which uses the Internet to deliver promotional marketing messages to consumers. Many consumers find online advertising disruptive and have increasingly turned to ad blocking for a variety of reasons.

When software is used to do the purchasing, it is known as programmatic advertising.

Online advertising includes email marketing, search engine marketing (SEM), social media marketing, many types of display advertising (including web banner advertising), and mobile advertising. Like other advertising media, online advertising frequently involves a publisher, who integrates advertisements into its online content, and an advertiser, who provides the advertisements to be displayed on the publisher’s content. Other potential participants include advertising agencies who help generate and place the ad copy, an ad server which technologically delivers the ad and tracks statistics, and advertising affiliates who do independent promotional work for the advertiser.

Display advertising conveys its advertising message visually using text, logos, animations, videos, photographs, or other graphics. Display advertising is commonly used on social media, websites with slots for advertisements, and in real life. In real life, display advertising can be a sign in front of a building or a billboard alongside a highway. The goal of display advertising is to obtain more traffic, clicks, or popularity for the advertising brand or organization. Display advertisers frequently target users with particular traits to increase the ads’ effect. Online advertisers (typically through their ad servers) often use cookies, which are unique identifiers of specific computers, to decide which ads to serve to a particular consumer. Cookies can track whether a user left a page without buying anything, so the advertiser can later retarget the user with ads from the site the user visited.

As advertisers collect data across multiple external websites about a user’s online activity, they can create a detailed profile of the user’s interests to deliver even more targeted advertising. This aggregation of data is called behavioral targeting. Advertisers can also target their audience by using contextual to deliver display ads related to the content of the web page where the ads appear.  Retargeting, behavioral targeting, and contextual advertising all are designed to increase an advertiser’s return on investment, or ROI, over untargeted ads.

Impression Types:

CPM (cost per mille)

Cost per mille, often abbreviated to CPM, means that advertisers pay for every thousand displays of their message to potential customers (mille is the Latin word for thousand). In the online context, ad displays are usually called “impressions.” Definitions of an “impression” vary among publishers, and some impressions may not be charged because they don’t represent a new exposure to an actual customer. Advertisers can use technologies such as web bugs to verify if an impression is actually delivered.  Similarly, revenue generated can be measured in Revenue per mille (RPM).

Publishers use a variety of techniques to increase page views, such as dividing content across multiple pages, repurposing someone else’s content, using sensational titles, or publishing tabloid or sexual content.

CPM advertising is susceptible to “impression fraud,” and advertisers who want visitors to their sites may not find per-impression payments a good proxy for the results they desire.

CPC (cost per click)

CPC (Cost Per Click) or PPC (Pay per click) means advertisers pay each time a user clicks on the ad. CPC advertising works well when advertisers want visitors to their sites, but it’s a less accurate measurement for advertisers looking to build brand awareness. CPC’s market share has grown each year since its introduction, eclipsing CPM to dominate two-thirds of all online advertising compensation methods.

Like impressions, not all recorded clicks are valuable to advertisers. GoldSpot Media reported that up to 50% of clicks on static mobile banner ads are accidental and resulted in redirected visitors leaving the new site immediately.

CPE (cost per engagement)

Cost per engagement aims to track not just that an ad unit loaded on the page (i.e., an impression was served), but also that the viewer actually saw and/or interacted with the ad.

CPV (cost per view)

Cost per view video advertising. Both Google and TubeMogul endorsed this standardized CPV metric to the IAB’s (Interactive Advertising Bureau) Digital Video Committee, and it’s garnering a notable amount of industry support. CPV is the primary benchmark used in YouTube Advertising Campaigns, as part of Google’s AdWords platform.

CPI (cost per install)

The CPI compensation method is specific to mobile applications and mobile advertising. In CPI ad campaigns brands are charged a fixed of bid rate only when the application was installed.

CPL (cost per lead)

Cost per lead compensation method implies that the advertiser pays for an explicit sign-up from a consumer interested in the advertiser’s offer.

Mobile Buys

At a data first agency, the emphasis on mobile media buying deserves its own section on our site, despite being just one of the many media buying services we offer.  While consumer’s attention is grabbed by their mobile devices, it is our job to guide their attention to your mobile app or mobile services, all the while, understanding their cross-device interactions.

The audience available on the mobile Web is growing rapidly. Consequently, the interest in mobile advertising is growing rapidly. When an agency or advertiser asks about buying advertising on the mobile Web, they typically ask questions about media buying and questions about creative.

Advertising on the mobile Web is very similar to Web advertising. Many people try and make it complex, but it really isn’t. The primary ad units are very similar to the ad units you are used to buying on the Web: Graphical banner ads and text link ads.

The mobile industry varies from the add on subscription product services, to the free-to-download and hope we land a pod of whales making in-app purchases (while frantically trying to keep competitors off your in-app ads so you can still monetize without steering people elsewhere!).  We get it.  It’s fast-paced, and it’s important that you work with a fast-paced media agency.

Media Two offers just as wide a variety of media buying services to meet whatever need you might have.  We have campaigns that purely run on a cost per install basis.  We manage the self-serve Goliath’s of Facebook and Google’s Universal App.  But it’s how we approach the data that sets us apart.

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