Tag: Behviourial Science Bangalore University BBA Notes

The uniqueness of product in the marketing mix is that all the other elements of the marketing mix, viz., price promotion and place are designed to achieve successful exchange of the product for consumer satisfaction and income. If the product fails to satisfy the consumer, any amount of effort to boost the sales will not long-term success. It also turns that, however good a product may be, it may not succeed if the other ingredients of the marketing mix are not appropriate. There is, however, no denying the fact that the success of marketing depends amongst others on the success of the product in satisfying the consumers.

Although the terms product strategy, product planning and product management are often used interchangeably, they are not really one and the same.

The firm has to carry out preliminary screening, that is, identification of markets and products by conducting market research. A poorly conceived product often leads to marketing failures. It was not a smooth sailing in the Indian market for a number of transnational food companies after the initial short-lived euphoria among Indian consumers.

Product Strategy involves the managerial decisions about the product mix and the positioning and communication.

Product Planning, used in a broad sense, involves not only the product strategy described above but also the product development measures. Some people confine the use of the term product planning to the different aspects and functions of product development and exclude the product strategy.

Product management refers to the managerial decisions pertaining to product development and the product strategies through the different stages of the product life cycles.

As our discussion of the product is related to international marketing, it would be more appropriate to use the term product decisions which is more comprehensive to involve all the above.

Product Decisions:

Important product decisions in international marketing management are:

1. Market segment decision
2. Product mix decisions
3. Product specifications
4. Positioning and communication decisions.

Market Segment Decision:

The first product decision to be made is the market segment decision because all other decisions product mix decision, product specifications, and positioning and communications decisions depend upon the target market.

Product Mix Decision:

Product mix decision pertains to the type of products and product variants to be offered to the target market.

Product Specifications:

This involves specification of the details of each product items in the product mix. This includes factors like styling, shape, size and other attributes and factors like packaging and labelling.

Positioning and Communications Decisions:

Positioning is the image projected for the product. For example, toilet soap may be positioned as baby soap, beauty soap, a deodorant soap, freshness soap or skin care soap. Communication refers to the promotional message designed for the product. Obviously, both positioning and marketing communication are very much interrelated. For the same product, sometimes the positioning and communication strategies differ between markets. For example, Beefeater is a low priced gin in the UK (its home market); but when the company wanted to introduce it in the US it found that there was no room in the minds of the consumers for another low priced gin. So in the US the Beefeater was positioned as a high priced gin became very successful.

A product is defined as anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need includes physical objects, services, person, places organizations and ideas.

The above definition is very broad indeed. As our major concern is with goods, the following two definitions will be more suitable for our purpose

International product life cycle discusses the consumption pattern of the product in many countries. This concept explains that the products pass through several stages of the product life cycle. The, product is innovated in country, usually a developed country, to satisfy the needs of the consumers. The innovator country wants to exploit the technological breakthrough and start marketing the products in foreign country.

Gradually foreign country also starts production and becomes efficient in producing those commodities. As a result, the innovator country starts losing its export market and finds the import of that product advantageous. In this way, the innovator country becomes the importer of the products. Terpstra and Sarathy have identified four phases in. the international product life cycle.

Export strength is evident by innovator country: Products are normally innovated in the developed countries because they possess the resources to do so. The firms have the technological know-how and sufficient capital to invest on the research and development activities. The need of adaptation and modification also forces the production activities to be located near the market to respond quickly to the changes. The customers are affluent in the developed countries who may prefer to buy the new products. Thus, the manufactures are attracted to produce the goods in the developed country. The goods are marketed in the home country. After meeting the demand of the home country, the manufacturers start exploring foreign markets and exporting goods to them. This phase exhibits the introduction and growth stage of the product life cycle.

Foreign production starts: The importing firms in the middle-income country realise the demand potential of the product in the home market. The manufacturers also become familiar in producing the goods. The growing demand of the products attracts the attention of many firms. They are tempted to start production in their country and gradually start exporting to the low-income countries. The large production in the middle-income country reduces the export from the innovating country. This shows the maturity stage of product life cycle where the production activities’ start shifting from innovating country to other countries.

Foreign production becomes competitive in export market: The firms in low-income country also realise the demand potential in the domestic market. They start producing the products in their home country by exploiting cheap labour. They gain expertise in manufacturing the commodity. They become more efficient in producing the goods due to low cost of production. Gradually they start exporting the goods to other countries. The export from this country replaces the export base of innovating country, whose export has been already declining. This exhibits the, declining stage of product life cycle for the innovator country. In this stage, the product gets widely disseminated and other countries start imitating the product. This is the third phase of product life cycle where the products start becoming standardized.

Import Competition begins: The producers in the low-income importing country gain sufficient experience in producing and marketing the products. They attain the economies of scale and gradually become more efficient than the innovator country. At this stage, the innovator country finds the import from this country advantageous. Hence, the innovator country finally becomes the importer of that product. In this fourth stage of product life cycle the product becomes completely standardized.

In simple words, the theory of IPLC brings out that advanced (initiating) countries play the innovative role in new product development. Later for reasons of comparative advantage or factor endowments and costs, such a product moves over to other developed countries or middle. Income countries and ultimately gets produced and exported by less developed countries. Not surprisingly, therefore, that countries such as Taiwan, Hong Kong, Korea, Singapore and India have emerged as major exporters of growing range. of products to USA and Western Europe during the last decade and a half. The general pattern of a typical IPLC has been shown.

Innovative Country Stage	Other Developed Countries or Middle-income Countries	Less Developed Countries
Production	Early Imports	Late Imports
Exports	Production	Production
Imports	Exports (Large volume Declining to small volume)	Exports (Small volume rising to large volume)

The IPLC theory ‘presents the following implications for international product planner:

• The marketers whose products face declining sale in one foreign market may find another foreign market with encouraging demand for his product.
• Innovative products improve the staying power of the international firm.
• Innovative products carry significant export potential.

Over time, every company wants to expand its product range. Some companies try to develop new products to its portfolio, while others develop the extension or remake of the existing products. A group of related products constitutes a product line, and the combination of different product lines makes the product mix, which is owned by the parent brand.

For example, PepsiCo has hundreds of foods, snacks, and beverage brands. Its product category includes Pepsi, Diet Pepsi, Mountain Dew, Marinda, 7Up, Tropicana, Aquafina, Quaker, Lay’s, Ruffles, Fritos, Cheetos, and many more.

According to Philip Kotler, a product line can be defined as “a group of products that are closely related because they function in a similar manner, and sold to the same customer groups, are marketed through these same types of outlets, fall within given price range.”

In the above definition, Philip Kotler emphasizes a few points, which I want to discuss below:

Same Customer Groups. Every product category targets the same customer group. For instance, 7 UP, Pepsi, Marinda, Mountain Dew target young people, while Gatorade is a PepsiCo brand that targets athletes. Similarly, Quaker Oat is another Pepsi brand that focuses on health-conscious people.

Closely Related Products. In any product line, the products are closely related. For example, Pepsi has a Beverages product category which includes Pepsi, Dew, Aquafina, Brisk, and many more. These products are related and target a specific group of people and preferences.

Changes in Promotion

Before a company decides to become global, it must consider a multitude of factors unique to the international marketing environment. These factors are social, cultural, political, legal, competitive, economic, and even technological in nature. Ultimately, at the global marketing level, a company trying to speak with one voice is faced with many challenges when creating a worldwide marketing plan. Unless a company holds the same position against its competition in all markets (market leader, low cost, etc.), it is impossible to launch identical marketing plans worldwide. Thus, global companies must be nimble enough to adapt to changing local market trends, tastes, and needs.

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For global advertisers, there are four potentially competing business objectives that must be balanced when developing worldwide advertising: building a brand while speaking with one voice, developing economies of scale in the creative process, maximizing local effectiveness of advertisements, and increasing the company’s speed of implementation. Global marketers can use the following approaches when executing global promotional programs: exporting executions, producing local executions, and importing ideas that travel.

Factors in Global Promotion

To successfully implement these approaches, brands must ensure their promotional campaigns take into how consumer behavior is shaped by internal conditions (e.g., demographics, knowledge, attitude, beliefs) and external influences (e.g., culture, ethnicity, family, lifestyle) in local markets.

Language: The importance of language differences is extremely crucial in global marketing, as there are almost 3,000 languages in the world. Language differences have caused many problems for marketers in designing advertising campaigns and product labels. Language becomes even more significant if a country’s population speaks several languages.

Colours: Colors also have different meanings in different cultures. For example, in Egypt, the country’s national color of green is considered unacceptable for packaging because religious leaders once wore it. In Japan, black and white are colors of mourning and should not be used on a product’s package. Similarly, purple is unacceptable in Hispanic nations because it is associated with death.

Values: An individual’s values arise from his or her moral or religious beliefs and are learned through experiences. For example, Americans place a very high value on material well-being and are much more likely to purchase status symbols than people in India. In India, the Hindu religion forbids the consumption of beef.

Business norms: The norms of conducting business also vary from one country to the next. In France, wholesalers do not like to promote products. They are mainly interested in supplying retailers with the products they need.

Religious beliefs: A person’s religious beliefs can affect shopping patterns and products purchased in addition to his or her values. In the United States and other Christian nations, Christmas time is a major sales period. But for other religions, religious holidays do not serve as popular times for purchasing products.

There are many other factors, including a country’s political or legal environment, monetary circumstances, and technological environment that can impact a brand’s promotional mix. Companies have to be ready to quickly respond and adapt to these challenges as they evolve and fluctuate in the market of each country.

Changing the Global Promotional Mix

When launching global advertising, public relations or sales campaigns, global companies test promotional ideas using marketing research systems that provide results comparable across countries. The ability to identify the elements or moments of an advertisement that contribute to the success of a product launch or expansion is how economies of scale are maximized in marketing communications. Market research measures such as flow of attention, flow of emotion, and branding moments provide insight into what is working in an advertisement in one or many countries. These measures can be particularly helpful for marketers since they are based on visual, not verbal, elements of the promotion.

Considering these measures along with conducting extensive market research is essential to determining the success of promotional tactics in any country or region. Once brands discover what works (and what does not) in their promotional mix, those ideas can be imported by any other market. Likewise, companies can use this intelligence to modify various elements in their promotional mix that are receiving minimal or unfavourable response from global audiences.

Changes in Placement

Successfully positioning products on a global scale requires marketers to determine the target market’s preferred combination of attributes.

Changes in Placement

The global marketing mix comprises four main elements: product, price, placement and promotion. Although product development, promotional tactics and pricing mechanisms are the most visible during the marketing process, placement is just as important in determining how the product is distributed. Placement determines the various channels used to distribute a product across different countries, taking in factors such as competition and how similar brands are being offered to the target market.

Cases of products on the lower shelf in a grocery store.

Product Placement: Global brands attempt to place products in locations where consumers will be most receptive to the messaging.

Global marketing presents more challenges compared to domestic or local marketing. Consequently, brands competing in the global marketplace often conduct extensive research to accurately define the market, as well as the attributes that define the product’s potential environment. Successfully positioning products on a global scale also requires marketers to determine each product’s current location in the product space, as well as the target market’s preferred combination of attributes. These attributes span the range of the marketing mix, including price, promotion, distribution, packaging and competition.

Regardless of its size or visibility, a global brand must adjust its country strategies to take into account placement and distribution in the marketing mix. For example, not all cultures use or have access to vending machines. In the United States, beverages are sold by the pallet via warehouse stores. However, in India, this is not an option.

Moreover, placement decisions must also consider the product’s positioning in the marketplace. A global luxury brand would not want to be distributed via a “dollar store” in the United States. Conversely, low-end shoemakers would likely be ignored by shoppers browsing in an Italian boutique store.

Changes in Pricing

Price in global marketing strategies can be influenced by distribution channels, promotional tactics, and the quality of the product.

Pricing is the process of determining what a company will receive in exchange for its products. In the global marketing mix, pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. As one of the four “Ps” in the marketing mix, pricing is the only revenue generating element.

General Factors Affecting Price

Like national marketing, pricing in global marketing is affected by the other variables of the marketing mix. Price in global marketing strategies can be influenced by distribution channels, promotional tactics, and the quality of the product. For instance, if distribution is exclusive, then prices are likely to be higher. High prices will also be needed to cover high costs of manufacturing, or extensive advertising and promotional campaigns. If manufacturing costs go up due to the rise in price of some raw material, then prices will need to rise as well.

The Role of Price in Global Marketing

Price will always vary from market to market. However, global marketers must be prepared to deal with not only cultural expectations of pricing, but also external variables including trade tariffs, political and economic fluctuations, and the administrative or legal criteria of specific jurisdictions. Pricing can also be affected by the cost of production (locally or internationally), natural resources (product ingredients or components), and the cost of delivery (e.g., the availability of fuel). For instance, if a country imposes a minimum wage law that forces the company to pay more to its workers, the price of the product is likely to raise to cover some of that cost. Natural resources, such as oil, may also fluctuate in price, changing the price of the final good.

Most product decisions fall in between the spectrum of “Standardization” to “Adaptation” extremes. Changes in design are subject to cultural pressures. The more culture-bound the product is, for example food, the more adaptation is necessary.

They both represent a way of selling products overseas. As pointed out, adaptation involves modifying a product so as to meet the local requirements and customs.

In India for example the multinationals like PizzaHut and Mcdonalds catering to Indian tastebuds have launched Masala Tikka Burgers and Paneer Pizzas. Similarly, when Indian companies cater to the foreign markets, they launch foods which are bland. However, the advantages of economies of scale in production and marketing; savings on common costs of R&D, product and package design; consumer mobility; and universal image make a strong case for product standardization across different export markets. The reality of the export markets is, however, not so easy to harness. Factors such as the following and their implications influence the exporting firm’s decision in favour of product adaptations and in extreme cases even for new product development.

Establishing Product Adaptation

In order to drive a successful product adaptation, there are steps to be followed. The first and obvious one is for companies to research the new market and determine how different it is from the current market. This involves learning the needs, attitudes, cultural believes, and desires of the consumers in the new market. It is also of great need that a company determines the marketing strategies that would work on the new crowd as strategies don’t work the same for all markets.

A company is then faced with the task of determining the required type of product modification. There are a few that are available for such companies, and they include:

• Tangible adaptation: This involves changing a product’s physical aspects such as size and packaging
• Intangible adaptation: Here, a company will modify intangible elements such as positioning and brand name
• Promotional adaptation: This involves changing methods and types of advertising as well as the media of choice.
• Price adaptation: A company adopting this type of adaptation has to change size or quantity of their product so as to account for the changed This is because a new market may not be willing or able to spend as much money on a certain product as others.

The main differences between adaptation and standardisation of the marketing strategies are summarised in table below.

	Adaptation	Standardisation
Application in Marketing Means	It is supported by strong market variety especially by market individualism and market uniqueness.	Companies should apply the four basic marketing instruments (4P) in the same way world wide and ignore national specialties in individuals markets.
Reason for Application	Almost every international company takes into account (in higher or lower level), regional or local conditions which are typical to the differentiation.	MNC should think globally and apply integration access world wide.
Product Offered	Altering relevant feature of the product in significant ways for each and every individual geographical market in the product is sold.	Complete standardization would involve designing a product that is identical in every relevant way for geographical market in which the product will be sold.
Characteristics	A product is differential from competitor’s product and further the products produced by particular company.	A standard product does not need to have all the characteristics of the other products buyer requires.
Approach	Adaptation is an approach of detailing the differentiation that exists between products and services.	Standardization of product is the approach for increasing commonality of product in the supply chain management.
Economics of Scale	Unique aspects in product result in different in quality thus increasing cost of production and lower economies of scale.	Commonality in products results in higher productivity due to higher demand, having an impact on economies of scales which lowers the total cost.
Need	Satisfy a particular need of buyer.	Satisfy the heterogeneous needs of the buyer.
End Result	Show sense of value to the buyer but they have to pay more for such product.	Benefits buyer by lowering price.

Labelling

Like in the branding decision, the informational and promotional contents of the product label are influenced as well by the legal requirements as by the exporting firm’s product and promotion policy.

Labelling not only serves to express the contents of the product, but maybe promotional. For example, the EU is now putting very stringent regulations in force on labelling, even to the degree that the pesticides and insecticides used in horticultural produce have to be listed. This could be very demanding for producers, especially small-scale ones, where production techniques may not be standardised. Government labelling regulations vary from country to country. Labels may have to be multilingual, especially if the product is a world brand. Translation could be a problem with many words being translated with difficulty. Again, labelling is expensive, and in promotion terms non-standard labels are more expensive than standard ones.

While the aspects concerning name of manufacturer, date of manufacture, shelf-life, weight, contents, ingredients, price and handling instructions vary with the legal requirements and the international marketing policy of the firm, the languages) of the host country, and the level of literacy of its people determine the graphics and visuals to be used on the product label.

Importance of labelling in marketing

Marketers use labelling to their products to bring identification. This kind of labelling helps a viewer to differentiate the product from the rest in the shelves of the market. There are several used of the label for the products in the market.

Labelling is used for packaging the product. In marketing, a marketer can also use a sticker inedible product to impart knowledge of the ingredients of the food items. This helps to spread awareness among the customers about the item they are consuming and labelling also helps to mention ingredients.

A label needs to comply with the Competition and Consumer Act 2010 (CCA). This Act is required to give information to consumers, such as:

• The mandatory consumer product information standards under the CCA
• Industry specific regulations, such as the Food Standards Code
• Labels required by customs for some imported products under the Commerce (Trade Descriptions) Act.

Packaging

Packaging is an integral component of a product and it plays an important role in its salability. Packaging is no longer a mere outer covering of a product for its protection; it is very much a contributing factor for its increasing marketability. A vividly beautiful packaging of a product, to some extent, develops a positive image about it in the minds of the consumers. Thus packaging is not merely used as a means of product’s protection during transportation and storage but it is also used as a marketing and promotional tool.

Earlier the role of packaging was merely to protect the product from sun and dust and also from damage during handling. With advancement of the nations, new legislation has been incorporated for the merchandising of the goods. This has resulted into the importance as well as the necessity for an appropriate quality and type of packaging.

A package as simple as it may look, is influenced in its design, material, shape and weight by a large number of factors. Packaging serves many purposes. It protects the product from damage, which could be incurred in handling and transportation and also has a promotional aspect. It can be very expensive. ‘Size, unit type, weight and volume are very important in packaging. For aircraft cargo the; package needs to be light but strong, for sea cargo containers are often the best form. The customer may also decide the best form of packaging. Costs of packaging have always to be weighed against the advantage gained by it.

Increasingly, environmental aspects are coming into play. Packaging which is nondegradable; plastic, for example; is less in demand. Bio-degradable, recyclable, reusable packaging is now the order of the day. This can be both expensive and demanding for many developing countries.

The important factors of packaging are:

Safety and security of the product within the package in terms of temperature limits, barometric pressure, corrodibility, colour retention, vibrations, and even the ecological effect of the package in itself:

• Transportation hazards, weight and package construction in case of air shipment, and the handling and warehousing needs of the package.
• Customer perceptions in terms of shape, size, colour, storage life, reusability and aesthetics.
• Product promotion in terms of display value of the package, shelf-life, package attractiveness as a silent salesperson, brand and label information and sales promotion aids like coupons, stickers, etc.
• Compliance with legal requirements, and how much does the package cost in the light of the role it performs.

These factors force the exporting firm to keep in touch with innovative packaging materials and be on the look out to make their packaging cost effective.

Importance of Packaging

Depending on the products and the industry, the packaging can have different levels of importance. Sometimes packaging becomes the most important way of delivering the good, and its cost represents the largest part of the total cost of the product.

Packaging becomes the most important way of delivering the goods, and its cost represents the largest part of the total cost of the product”. Packaging serves a number of utilities which the marketer’s want to communicate to the consumer to attract him to purchase his brand. Through packaging the important information about the product, price, manufacturer and the consumption precautions etc. can be conveyed to the buyer.

Product packaging decisions are very important and the marketers need to be very careful about it, as packaging is sometimes the key factor of success or failure of a new launch.

Packaging, as a function, has two separate dimensions – the science and technology and the behavioural aspect related to the art of product design which enhances the value of the contents and passes on the impression to the consumer directly or subtly.

Overall, it can be concluded that packaging is an integral and an important component of the product. It not only helps in protecting the product from being damaged during its handling but also protects it as an attractive packaging works as a silent salesman.

Packaging Decisions

Packaging decisions are very important for the marketing because now-a- days the consumers pay a lot of attention and care for selecting a product. They usually prefer a product which is adequately packaged; the outer cover contains all the necessary information about the product and the manufacturer and also the method of using, consuming or operating the product. More so, packaging carries some aesthetic value also. So, in the modern days, the marketing managers pay a lot of care for making the packaging decisions of the products being marketed by them.

The marketers, in the present era of cut throat competition, are also turning to innovative packaging in order to establish a distinctive edge over the competitor’s brands. This is especially true in the case of marketing of consumer products, cosmetics, perfumes, toiletries and other personal care products. Marketers try to add value to their brands by way to packaging as a tool. Thus they want to pass on greater benefits to the customers and attempt to increase their brand’s value.

The marketers have to take the packaging decisions which should meet the twin tasks of keeping the packaging cost low and yet carry it safely enough up to the customer without any damage. It might not always be possible to merely reduce the cost of packaging without affecting the various components of the marketing mix because the packaging decisions affect all the four components of the marketing mix. Good and attractive packaging adds to product attraction but not without adding to its cost. It may also add to the convenience of handling and act as a tool of promotion. So, the marketing firms have to take such decisions which will be beneficial for all and the overall equation of cost benefit analysis is favourable for each.

Packaging designs are also of vital importance as they often help the consumer to recognize the product and literally sell it off the shelf, especially at the point of sale. The labelling used on the packaging also serves as a means of communication about the product contents, quality, quantity etc. e.g. eco-labelling on the packaging of a product is a proof that the product is environmentally friendly.

Since the last few years, the packaging material has become more and more an object of creativity of the marketing people rather than the domain of the production and technical engineers. From being functional initially and addressing the need for protection during the time in-between production and consumption of the products, packaging is becoming vehicle for communication, used to effectively influence the end consumer.

These days when we talk about innovation, we not only refer to product quality but include its packaging also. These days the consumer readily pays the price of the packaging if it helps in adding to its quality and hygiene, so therefore, the marketers should take decisions in favor of improving the acceptance level of their brand by adopting appropriate packaging designs made with appropriate materials.

Useful Features of Packaging

Packaging deals with the nature of the container/wrapper, its size, shape, color and the message printed on it. It represents the talents of the various specialists viz. researcher, designer, engineer, marketer and others.

The packaging of a product may also attract the attention of the consumers at the very first sight if its features appear to be attractive. The marketers need to take care of these marketing aspects also.

The usual features of packaging are the following:

a) The container should be strong so that it can stand the strain of transportation and handling. It should be strong also to ensure a long shelf-life.

b) While being strong, it should avoid being too heavy so that it remains easy to handle and inexpensive on freight.

Over and above the usual features, the packaging should also have certain features from the marketing angle, as a well-designed packaging is often described as the silent sales representative. These marketing features of packaging are as follows:

a) It must advertise the brand and the manufacturer.

b) It must be distinctive and capable of ‘differentiating’ the product.

c) It must be suitable for display.

d) It must be helpful in identifying the product.

e) It must carry the brand name, brand / trade mark and all the other required information.

f) It must be attractive.

g) It must be so designed as to add convenience for carrying and handling the product.

h) It should require the minimum shelf space.

i) The colours and the material used for outer packaging must not create any socially or psychologically bad image about the product.

j) Packaging must be capable of keeping intact the hygiene of the product for its shelf life.

An International Marketing Research Process is the systematic gathering, recording, and analyzing data to provide information useful to marketing decision-making. The information must be communicated across cultural boundaries and these research tools are then often applied in foreign markets. General information about the country, area, and/or market is necessary to forecast future marketing. These requirements are done by anticipating social, economic, consumer, and industry trends within specific markets or countries. Specific market information is then used to make the product, promotion, distribution, and price decisions and develop marketing plans. In domestic operations, most emphasis is placed on gathering specific market information because the other data are often available from secondary sources.

Types of Information:

• Economic and demographic: Data on growth in the economy, inflation, business cycle trends; profitability analysis for the division’s products, specific industry economic studies, analyses of overseas economies, key economic indicators for the US and overseas, and population trends (migration, aging, and immigration).
• Cultural, Sociological, and Political climate: A non-economic review of conditions affecting the division’s business. Covers ecology, safety, leisure time, and their impact on the business.
• Market conditions: Analysis of market conditions the division faces by market segment including international conditions.
• Technological environment: Summary of the state of the art technology as it relates to the division’s business. Needs to be broken down by product segment.
• Competitive situation: Review of competitor’s sales revenues, methods of market segmentation, products, and apparent strategies on an international scope.

Need for Conducting International Marketing Research

International marketing research plays an important role to understand the consumer behaviour. The main objective of international marketing research is to understand the consumer s demands and consumers behaviour and then translates their behaviours into the market’s strategies. In this modern century the international markets consumers have lots of choices due to growth of market research and internet communication development. In order to organization has been responsible to maintain their approaches to enhance the markets strategies in a way of targets markets. In the other hands if the company has no ability to seek the consumer’s behaviour on the international level so the company should be lost its consumer market. In this condition company also faces lots of challenges which have been appear due lack of international market research.

Generelly, market research intends to provide new ideas, comparisons, and control information for marketing deciders. These deciders are found not only in Marketing and Sales, Import and Export positions, but also in New Business Development, in a Strategy staff, in Corporate Planning departments and of course, within top management.

International Market Research provides an information base for strategic decisions. Here, competitive information needs to be available early, fastly, and with the right filter.

International Marketing Research Process

Step 1 Research Problem Definition

Problem definition is the most critical part of the research process. Research problem definition involves specifying the information needed by manage­ment. Unless the problem is properly defined, the information produced by the research process is unlikely to have any value.

Step 2. Information Value Estimation

Information has value only to the extent that it improves decisions. The value of information increases as:

• The cost of wrong de­cision increases,
• Our level of knowledge as to the correct decision de­creases, and
• The accuracy of the information the research will provide increases.

The principle involved in deciding whether to do more research is that research should be conducted only when the value of the information to be obtained is expected to be greater than the cost of obtaining it.

Step 3. Selection of the Data Collection Approach

There are three basic data collection approaches in international marketing research: (1) secondary data, (2) survey data, and (3) experimental data. Secondary data were collected for other purposes than helping to solve the current problem. Primary data are collected expressly to help solve the problem at hand. Survey and experimental data are therefore secondary data if they were collected earlier for another study; they are primary data if they were collected for the present one. Secondary data are virtually always collected first because of their time and cost advantages.

Step 4. Measurement Technique Selection

Four basic measurement techniques are used in marketing research: (1) questionnaires, (2) attitude scales, (3) observation, and (4) depth interviews and projec­ts techniques. As with selecting the data collection method, the selection of a measurement technique is influenced primarily by the nature of the information required and secondarily by the value of the information.

Step 5. Sample Selection

Most marketing studies involve a sample or subgroup of the total population relevant to the problem, rather than a census of the entire group. The popu­lation is generally specified as a part of the problem definition process.

Step 6. Selection of Methods of Analyses

Data are useful only after analysis. Data analysis involves converting a series of recorded observations into descriptive statements and/or inferences about relationships. The types of analyses, which can be conducted, depending on the nature of the sampling process, measurement instrument, and the data collection method.

Step 7. Evaluation of the Ethics of the Research

It is essential that marketing researchers restrict their research activities to practices that are ethically sound. Ethically sound research considers the interests of the general public, the respondents, the client, and the research profession as well as those of the researcher.

Step 8. Estimation of Time and Financial Requirements

Time refers to the time needed to complete the project. The financial requirement is the monetary representation of personnel time, computer time, and mate­rials requirements. The time and finance requirements are not independent.

Step 9. Preparation of Research Proposal

The research design process provides the researcher with a blueprint, or guide, for conducting and controlling the research project. This blueprint is written in the form of a research proposal. A written research proposal should precede any research project. The re­search proposal helps ensure that the decision-maker and the researcher are still in agreement on the basic management problem, the information re­quired, and the research approach.

Scope of International Marketing Research

The scope of international marketing research covers a wide range of marketing and environmental factors that can affect a product’s success in a foreign market. These factors can be broadly classified as:

Socio-economic and political profile of the country

Information under this category includes a wide variety of data on factors like size of the population, national income and principal sources, per capita income, standard of living, cultural attributes, geographic and climatic conditions, political system and policy etc.

It is also necessary to find out political and economic relations of the country with other countries, including the country of the exporting company, and the country’s political status among the international trading community.

Size and trend of the market

Several factors enter into the analysis of the size and growth trend of the market for specific product groups. These include: data on indigenous production and\ productmix; direction and sources of export and import, size and trend of foreign trade, proportion of national consumption of the product supplied by the domestic industry, price behaviour of the market, future growth prospects, etc.

Structure of competition

The study of competitive structure of the market is very important for an intending exporter. The strength of competition is a key factor that must be taken into account before an exporter decides to enter a foreign market. The competition may come from the domestic supplies as well as from other exporters into the same market.

Competition may come not only from similar products but also from substitute products. For example, for a coffee exporter, other coffee suppliers would be direct competitors and tea or cocoa suppliers would be indirect competitors.

In studying the strength and structure of competition, a number of specific factors are to be taken into consideration; such as:

• What are the competitors’ shares of the market?
• Is the market dominated by a small group of large-scale suppliers or a large number of small suppliers?
• What are the marketing strategies of the competitors, including product range, pricing strategy, distribution channels, promotional techniques and the like?
• What are infrastructural and institutional facilities available in the market and their cost; for instance, transportation, warehousing, finance, insurance etc.?
• What are the commercial and business practices, norms, ethical standards etc.

These and many more similar factors are required to be considered in order to chalk out a competitive profile of the market, highlighting the strengths and weaknesses of the competition.

Rules and regulations

Rules and regulations governing a foreign market are many and diverse. The rules could be broadly divided into two areas, namely:

(a) Rules governing entry conditions of foreign goods into the country

(b) Rules governing internal business practices.

All countries regulate import of foreign goods by various means such as, imposition of complete ban or of quantitative quotas on imports; tariff barriers; non-tariff barriers of a wide variety; currency and licensing restrictions; internal tax structure; product specifications and standards; health and safety regulations; promotional methods; branding, trademark and patent regulations; and various kinds of restrictions on business relationships and dealings between the exporting and importing organisations. It is important to examine the impact and implications of these factors on the conduct of export business.

IT in Marketing Research

Advanced Analytics

Analysing the data is as important as collecting the data. With increased avenues of data collection, it is crucial for agencies to be able to analyse data methodically. Technological advancements have made the analysis of data today real quick and easy. Agencies can now strengthen customer relationships and maintain communication with advanced analytics which can further result in customer retention. Companies on their part develop in-house modules to make sense of mountains of data to then convert it into meaningful reports.

Data Collection

New age software enables researchers to be more specific and focused in measuring data and feedback, making the process of interaction and operation effortless and uncomplicated. It is a substantial tool for any business to collate insights and to learn more about their consumers.

The best part of technology in market research is mobility. Whether in the office, out in the most remote areas or on-the-go, the advanced software can collect feedback and consumer insights and engage both the consumer and the researcher more effectively.

Social Media

Social media is transforming the interaction and communication between individuals throughout the world at the same time it is impacting business and communication tremendously. Market research is no exception and is witnessing an expansion of the landscape from the time social media has stepped in. LinkedIn, Twitter, Facebook, Google+ etc. are helping in transforming this sector big-time. Social media is extremely engaging for users and has evolved to become a genuine and transparent platform for data. Without compromising on the user privacy and other confidentiality requirements market research can collate valuable data that could go a long way in helping brands and companies in understanding their customers better.

Creation of New Research roles

Evolution of technology is resulting in the creation of new roles. These technological advances are a godsend for those who are unemployed and wish to build a career. For some departments to adapt to the changes is very difficult as they are used to working in a certain manner. Therefore, new roles to strategize as well as process the vast data from social media and mobile data and to further ensure that this data is translated efficiently is vital.

Political environment is an important ingredient in the international business. The political environment does not remain constant. The changing political environment is uncontrollable in nature. Therefore it is necessary to understand the political risks in the international business.

The multinational companies are to face different political environment and they are also to cope with the politics of different nations. The political environment of different nations may influence product, price, place and promotional factors in the international business.

“The economic interest of multinational companies differs widely from the economic interest of those nations where the MNCs do business. In the absence of mutual interests, political pressures can lead to political decisions, resulting in laws and proclamations that affect business.”

The above decisions lead to the conclusion that political environment of a country affects the international marketing activities. The political environment may have the following types;

(1) Foreign

(2) Domestic

(3) International political environment.

The most of the multinational companies do have little control over the changes in international politics.

It depends upon the positive relationships among the nations that how they are prepared to respond to the changes. The government policies play a vital role in this regard. In India, until 1991 there was closed economy and the foreign investments were discouraged. After 1991 the new Indian government started a reform programme in this context.

The foreign direct investments were encouraged and it transformed India into one of the most dynamic and highly potential economy in the world. This was possible only because of political will. If the government of such kind comes into power, which again discouraged the foreign participation, the whole of the world’s attention can divert once again to any other nation. It is because of the political risks.

Therefore the MNCs are always keen to study the political prospect of a particular nation, where they are willing to do business. To assess the potential of international marketing environment, the study of political risks is very important. The indicators which are responsible for the political risks should be identified and studied.

The following are some factors which are responsible for the political instability:

(a) Social unrest

(b) Attitude of the people

(c) Government policies.

(a) Social Unrest:

The social unrest is a major cause for the political unrest. It includes conflicts among different groups in the society, conflicts based upon different groups of different religious such as Hindu- Muslims and conflicts among trade unions and the government etc. A multinational company or domestic company may not be involved directly in such disputes, but the business of the companies is likely to be disputed severely by such types of the incidents.

In practice human nature is of two types. One type of human nature belongs to those who urge to stand alone and other type of human being urge to stand together. Both of these ways provide different ways for the utilizations of countries resources. The way of utilizing resources in a co-operative manner tends to be a closed economy as it was in the Soviet Union.

China still has a closed economy and the pattern of Chinese economy is still based on the co­operative sector. It is evident that China is having a rich economy but they have also started to shift their attention towards open economy. One group is still in the support of co-operative system, while other group is in favour of the open economy.

This type of situation may cause certain interest in the society. The multinational companies are to study both these situations before deciding about their marketing mix.

The social unrest may be caused by the following types of the conflicts:

(i) Domestic disputes: It is confined within the boundaries of the countries and can escalate into violence. The civil war may be a good example of it.

(ii) International disputes: International disputes can draw the attention of the third party into the conflict. The international problem of Sri Lanka and Nepal can be an example of such types of the disputes. Such types of disputes can also cause the social unrest in a country, which are important to be considered in the international business.

The above mentioned conflicts may lead to a direct confrontation between two countries. Iraq and USA were having deep rooted grievances with each other, which was converted into the direct confrontation. Such types of circumstances and social unrest always should be discouraged from international business point of view.

(b) Attitudes of the People:

An assessment of the government of the host country and analysis of the attitude of people of the host country is very important in the study of practical environment. The perception and attitudes of the citizens towards Multinational Corporation should be evaluated in the international marketing.

What they perceive about the foreign companies? Generally it is thought that foreign companies believe in the exploitation of the resources of the host country. Whether it is natural resources or human resources, such type of attitude of the people may cause unrest among different groups in the society, which is harmful for the international business.

(c) Government Policies:

The government policies play an important role in the formation political environment. The government policies tend to change either with passage of time or change in leadership or change in the government itself. The change in the attitude of the government leads to change in the government policies.

It may be either for betterment or for the worse. The government policies tend to change in the short run or in the long run period. The government policies can affect the business environment internally as well as externally. The internal effect of the government policies regulates the activities of a business firm within the home country, whereas when the business activities are regulated across the national business, it is said to be the external effect of the government policies.

It is pertinent to mention here that a company must pay its special attention towards election time. Some of the parties can negotiate with interest of companies for the vote politics. Such situation can create an unwelcome atmosphere for the multinational companies.

Therefore a company must evaluate whether early threats are just and it need not to take any drastic decision at this moment. The company must determine its future policies by evaluating the political environment deeply as the same situation may be instant and may not be real intention and attitude for the future.

Minimize Political Risks

It is impossible to eliminate the total political risks but these can be minimized up to certain extent. The multinational companies should take all these measures as to reduce the political risks in the international business.

The following are some of the measurers to reduce the political risks in the international business:

(1) To Encourage Local Economy:

A company can stimulate local economy in a number of ways. It may encourage local purchase for its raw material and other products used for its production and other operations. It can boost local partners, who can give opportunities by providing valuable political links.

Sometime local sourcing may be compulsory. The local contents boost the economy in two ways- (i) By encouraging demand for the domestic products (ii) By investing in local production facilities by the company can boost the local economy. Finally, the international company should make an attempt to artist the host country by being expert oriented.

(2) By Providing Employment Opportunities to the Nationals:

Sometime a big mistake of such kind is done by the multinational companies that the people of less developed nations are poor by their choice. They do not have any vision, they are lazy and are not intelligent. They are mostly illiterate and are not self-motivated towards their job. They generally believe that the local persons can be fit for the lower level jobs only and they would like to appoint their own persons on the higher level jobs.

“Therefore the multinational companies have to change their attitude in this regard and should weigh the impact of automation carefully in a cheap labour and highly unemployment area. The process of automation does not work well in the countries like India, where job creation on the national policy. An inability to automate production completely does not necessarily constitute a negative for multinational companies. Multinational companies may gain more in less developed companies by using international technology instead of the most advanced equipment. International technology accompanied by additional labour is less expensive and it promotes good will by increasing employment.”

(3) Sharing of Ownership:

It is always advisable that a company should try to share the ownership of the company with others. It may be by converting a Private Ltd. Company into Public Ltd. Company or by converting a foreign company into a local company. The ownership can also be shared by way of joint venture.

Sometime an international business the local firms may not be a partner of the foreign based firms. Instead of this the company from other country start joint venture with that company. It is helpful to reduce the political risks because the host country will not be willing to destroy its relations with more than one nation in a single time. By this way it makes difficult for the host country to take over business venture without offending a number of nations at once.

(4) Not to Involve in the Political and other Disputes:

It is always advisable to the company not to involve in any kind of disputes, whether they are local disputes or disputes within two or more countries. The company must state it clearly that it is none of their business. There only motive is economic in nature. If company’s involvement is there in all these matters, it is always harmful for the company.

(5) Sensitive to Changes in Political Mood:

A business firms should always be sensitive to the changes in political mood. The marketers must make a contingency plan in advance. As the changes take place in the political climate the marketer should also reduce the exposure in the market. A defensive approach is always advisable in case the political mood is serious in a country.

In addition to all these measures companies can also reduce their business risks by employing the strategy of risk shifting. The companies can get insurance coverage from number of sources.

Some of the sources can be explained as under:

(i) Insurance through Private Parties:

The business companies can transfer their political risks to the third parties by purchasing political insurance. The companies will be compensated in case of such losses which are caused due to political risks. The comprehensive policy is advised to be taken which should include coverage for kidnapping, terrorism and creeping expropriation etc.

(ii) Government Insurance:

The multinational corporations should not rely on the private insurance only. They should also search for other alternatives. There are so many non-profit organizations and public agencies which provides the same type of coverage. OPIC is United States based government agency and provide several types of assistances and having political risk insurance as its primary business.

It provides the protection to cover following types of risks (a) Inconvertibility of the currency (b) Expropriation which includes creeping expropriation and (c) Loss or damage caused by war, revolution or insurrection. A typical insurance contract runs up to twenty years at combined annual premium of 1.5 percent for all three coverage considering that private insurance companies issue a 3 year policy. Overseas Private Investment Corporation’s coverage is a positive feature.

(iii) Multinational Investment Guarantee Agency:

It was established in year 1988, with the objective to create an attractive investment climate to its member states. The main objective of the MIGA is to promote private sector investment in the developing nations through insuring investments against political risks.

It offers following types of coverage against political risks:

(a) Transfer of currency

(b) Wars

(c) Other domestic problems

(d) Expropriation

(e) Breach of contract: The annual premium for every coverage depends upon the type of the project coverages and other terms and conditions. Its rates are bit on the higher side in comparison to others.

Political Perspectives of a Nation:

A multinational company should evaluate the political environment of a country before operating its business activities there. The analysis of the political risk is very essential before going for international business. It is evident in the history that nationalistic approach of a nation is always damaging to the international business.

It is mostly prevailing in the third world countries. As for as the US economy is concerned, it cannot ignore the importance of third world countries for its economic, political and national interests. The world’s nation are the major suppliers of raw materials to the U.S. market.

The multinational company must emphasize on the following political perspectives before taking its entry into foreign business:

(1) The Form of Government:

The government of a nation plays a major role in the foreign business. The policies of the government depend upon the form of the government governing that particular nation.

The following are some forms of the governments:

(i) Democratic Governments:

These types of governments are formed through regular elections. The different party systems are prevailing in these nations. In some countries two party system is prevailing, i.e. USA and UK. In some countries it is multiparty system i.e. Italy and France and somewhere in the world multiparty system with one or two party dominance is prevailing. This system is prevailing in India.

The each party do have their own agenda and working system. With the change in government the programmes, agenda, and policies etc. also changes. It is also decided whether the private sector investments or foreign direct investments will be encouraged or discouraged. Whether the import of the goods will be restricted as to promote domestic industries or vice versa. It plays an important role in the international business.

(ii) Communist Government:

This type of system do have complete control over the business activities. They are very rigid towards regulations. Such types of governments are governing in the People Republic of China, North Korea, Vietnam and Yugoslavia etc. The working of these governments is concentrated around their national interests only. Therefore the multinational companies are to evaluate the system very carefully by keeping in mind its interests of doing business in that particular country.

(iii) Dictatorships:

These forms of governments are authoritarian regions. These are run either by the civilian dictator or by military dictators. These types of governments are prevailing in Pakistan and South Korea etc. These types of dictators also hold elections as to adopt a civilian posters.

(iv) Inherit Monarchy:

The government in this type of culture is run by the monarch as its head. The Sandi Arabia and Jordan do have its monarchies. A monarch may be having its inclination to either the leftists or the rightist.

A view of a country’s political system and its impact on foreign business must remain free of stereo typed nations. The political philosophy of a nation changes over a time and with a change in the political system. Therefore it is essential for the multinational companies to analyze, review and understand the current and emerging political perspectives, before taking any decision regarding the international business.

(2) Stability of the Government:

The stability of the government is considered very important in the international business. If the sitting government with whom the agreement was made is different from the government such changes in the government may create certain problems in implementing the agreements. It may be because of policies of the new government.

Therefore a multinational company must assess the stability of the present government and the political structure of the particular country. If the present government has not any scope to come in the power again, the policies of the probable government should be examined carefully.

The following are the reasons which are responsible for the instability of the government:

(a) Public unrests like riots, strikes etc.

(b) Crises in the government like majority and opposition by the rival group.

(c) Armed attack by another country.

(d) Other causalities at top levels etc.

(3) Changes in the Government Policies:

Sometimes the government policies tend to change frequently. In case such type of environment exists, it makes the things uncertain for the foreign business. The multinational companies always dislike such types of frequent changes in the government policies. Therefore it is important for the multinational companies to assess and evaluate carefully the various changes in the government policies and the frequency of these changes. They should take any kind of decision about foreign business only after reaching until certain concrete conclusions.

(4) The Attitude of the Government towards Foreign Direct Investment:

It is important to mention here that the attitude of the government towards foreign direct investment matters very much in the international business. Whether it is the case of developed nations or the case of developing nations. The developing nations may discourage foreign direct investments for its nationalistic approach.

In developed nations it is again difficult for the multinational companies to enter in the joint venture until they don’t win the faith of the concerned government. It is therefore the appropriate to analyze the regulations of the host country and to identify underlying attitudes and motivations.

(5) Administrative Setup of the Country:

Every nation does have its own administrative setup. It depends upon the experience, culture, availability of qualified and experienced administrators and style of functioning of the government. The business firms tend to complain about the bureaucracy of United States for its functioning. They are much efficient in comparison to the bureaucracy of some other countries.

The business firm is to study the administrative setup of a country in depth and then to decide its line of action. How to get work done in the different perspectives is the major challenge. In some countries they may find it easy to get their objectives fulfilled whereas in some countries it may be difficult. The administrative setup of a nation largely depends upon the ruling culture of government and experience to govern the state. Therefore the multinational companies are to cop up accordingly in that system.

(6) Political Model:

A country can be divided on the basis of one of the following political models.

(a) State Centric Political Model:

It is assumed in the state centric model of international politics that national government seek more power in the content of its international objectives. The national government tends to utilize its internal political resources for the fulfillment of its international objectives. Any action of the national government is assumed to be a desire for the international power.

(b) Bureaucratic Model of Politics:

In such type of model, the government functioning is carried out through bureaucratic setup. Thus, the government policies tend to change slowly.

(c) Transnational Political Model:

It emphasizes that dominant role in the international politics is played by the different organizational groups other than the national governments. Such organizational groups do have greater impact in the international politics. Thus the above model must be studied from critical point of view while taking any decision in the international business. How the business activities may be carried out in such political setup and what different risk factors may be there should be evaluated before taking any decision of such kind.

The government can impose following restrictions from time to time by changing its policies:

(1) Exchange Control:

When the countries do have a problem of balance of trade then it may impose restrictions on the free use of foreign exchange. It may be an effort by the government to change domestic industry. It is mostly used by the governments of the developing nations to regulate their hard currency balances. The governments can restrict the import of luxurious items from outside the countries.

(2) Import Restrictions:

The import restrictions are generally imposed as to protect domestic trade industries. By doing this the local supply of the product is encouraged. The firms can face two types of problems by this (i) The local supply of raw materials or other articles may be inferior in quality. (ii) The local supply may be short. It is the will and attitude of the government, which tends to change from time to time. If government want to encourage domestic industry it always make changes in its policy and impose impart restrictions on the products.

(3) Market Restrictions:

Sometimes the governments of the countries may impose certain restrictions to enter in the market. By this way it prevents the foreign companies to compete in the certain areas. An interesting example of this type of restriction is The Arab. “The Arab boycott of companies doing business with Israel is an interesting example of it. The Arabs were hoping the collapse of the state of Israel. But the U.S. government has adopted strict laws to prevent companies from becoming susceptible to the Arab blackmail.”

(4) Tax Restrictions:

The government may impose excessive taxes on the companies operating in the international business. Such taxes may be imposed for the following reasons (i) To discourage the operations or working of the foreign companies in the country. (ii) To generate more and more revenues and (iii) It may be retaliatory action by the government.

(5) Price Restrictions:

The government may impose price control restriction .as a measure to improve the economies of their countries. Such types of the restrictions are imposed on the finished product of the company. The raw material used to make that product is left on the market forces. This price control weapon is used for the public interest in the different economic items.

(6) Labour Restrictions:

The foreign firms have their own interest in doing business in a particular country. In many nations the labour unions are very Strong. The unions may be able to convince government into passing certain restrictive laws, which are supportive to the labour but putting heavy cost to the business.

These unions are working and forcing the government on the basis of their strength. In these kinds of circumstances foreign firms find it difficult to accommodate with these forced laws. If they don’t comply with it even if there is no labour laws, the company is to face big problems. Sometimes the problems become so difficult that the foreign firms are left with no option except to leave the business.

(7) Legal Incentives:

The legal incentives in terms of investment incentives are enforced to attract foreign investment in the country. This type of strategy is prevailing mostly in the developing countries. The investment incentives are rarely exclusive for the foreign companies. But in some countries the foreign private investment is the only beneficiary in getting such incentives.

It is because of inability of the local enterprises to undertake such types of incentives encouraged by the various incentives. In some countries the incentives are restricted to the local enterprises or with a minor foreign participation. The incentives to encourage foreign investments in the country are given generally the tax holiday of certain years.

Some other incentives can also be obtained generally in the developing countries such as waiving of import duties on raw materials and other industrial equipments necessary for the further production of the goods and other tax concessions can also be granted in that locality where the business enterprises has been located.

(8) Regulations Relating to Trading Restriction:

In some countries regulations relating to trading restrictions are enforced as to restrict import of the goods artificially stimulation of export.

The following are the measures in terms of non-tariff barriers to international trade:

(a) Participation of the government in the international trade – The government can enforce certain measures through subsidies, procurements and state trading.

(b) Duties on import and export procedure: It includes valuations, classification and documentations etc. for the above purpose.

(c) International standards: The government can enforce certain international standards in the foreign business. It includes product standards, packaging and product labeling etc.

(d) Legal Environment: A multinational company must cope up with different legal systems of different countries. They not only have to consider the legal aspects prevailing in their home country, but also must be responsive to the legal environment of the host country. The legal environment of different nations do have complexity and different dimensions.

In some nations legal system provides a broad guideline, whereas the interpretation is left to the courts. In international business an enterprises must ensure that it fully abides by the local laws and other regulations. Any multinational company primarily must consider the legal requirements pertaining to that competition, prices, place factor and product promotion.

Therefore, the legal system pertaining to the home country as well as the legal environment prevailing in the host country should be studied, understood and complied with certain international legal requirements and conventions that can affect international decision making process in the global perspectives. The marketer must understand the use of arbitration as an alternative of the legal requirements.

The International Finance Corporation (IFC) is an international financial institution that offers investment, advisory, and asset-management services to encourage private-sector development in less developed countries. The IFC is a member of the World Bank Group and is headquartered in Washington, D.C. in the United States.

It was established in 1956, as the private-sector arm of the World Bank Group, to advance economic development by investing in for-profit and commercial projects for poverty reduction and promoting development. The IFC’s stated aim is to create opportunities for people to escape poverty and achieve better living standards by mobilizing financial resources for private enterprise, promoting accessible and competitive markets, supporting businesses and other private-sector entities, and creating jobs and delivering necessary services to those who are poverty stricken or otherwise vulnerable.

Since 2009, the IFC has focused on a set of development goals that its projects are expected to target. Its goals are to increase sustainable agriculture opportunities, improve healthcare and education, increase access to financing for microfinance and business clients, advance infrastructure, help small businesses grow revenues, and invest in climate health.

The IFC is owned and governed by its member countries but has its own executive leadership and staff that conduct its normal business operations. It is a corporation whose shareholders are member governments that provide paid-in capital and have the right to vote on its matters. Originally, it was more financially integrated with the World Bank Group, but later, the IFC was established separately and eventually became authorized to operate as a financially autonomous entity and make independent investment decisions.

It offers an array of debt and equity financing services and helps companies face their risk exposures while refraining from participating in a management capacity. The corporation also offers advice to companies on making decisions, evaluating their impact on the environment and society, and being responsible. It advises governments on building infrastructure and partnerships to further support private sector development.

The corporation is assessed by an independent evaluator each year. In 2011, its evaluation report recognized that its investments performed well and reduced poverty, but recommended that the corporation define poverty and expected outcomes more explicitly to better-understand its effectiveness and approach poverty reduction more strategically. The corporation’s total investments in 2011 amounted to $18.66 billion. It committed $820 million to advisory services for 642 projects in 2011, and held $24.5 billion worth of liquid assets. The IFC is in good financial standing and received the highest ratings from two independent credit rating agencies in 2018.

IFC comes under frequent criticism from NGOs that it is not able to track its money because of its use of financial intermediaries. For example, a report by Oxfam International and other NGOs in 2015, “The Suffering of Others,” found the IFC was not performing enough due diligence and managing risk in many of its investments in third-party lenders.

Other criticism focuses on IFC working excessively with large companies or wealthy individuals already able to finance their investments without help from public institutions such as IFC, and such investments do not have an adequate positive development impact. An example often cited by NGOs and critical journalists is IFC granting financing to a Saudi prince for a five-star hotel in Ghana.

Governance

The IFC is governed by its Board of Governors which meets annually and consists of one governor per member country (most often the country’s finance minister or treasury secretary). Each member typically appoints one governor and also one alternate. Although corporate authority rests with the Board of Governors, the governors delegate most of their corporate powers and their authority over daily matters such as lending and business operations to the board of directors. The IFC’s Board of Directors consists of 25 executive directors who meet regularly and work at the IFC’s headquarters, and is chaired by the President of the World Bank Group. The executive directors collectively represent all 185 member countries. When the IFC’s Board of Directors votes on matters brought before it, each executive director’s vote is weighted according to the total share capital of the member countries represented by that director.

Leading the Way in Private Sector Development

• Investing in companies through loans, equity investments, debt securities and guarantees.
• Mobilizing capital from other lenders and investors through loan participations, parallel loans and other means.
• Advising businesses and governments to encourage private investment and improve the investment climate.

Sustainability

IFC Sustainability Framework articulates IFC’s commitment to sustainable development and is part of its approach to risk management. IFC’s Environmental and social policies, guidelines, and tools are widely adopted as market standards and embedded in operational policies by corporations, investors, financial intermediaries, stock exchanges, regulators, and countries. In particular, the EHS Guidelines contain the performance levels and measures that are normally acceptable to the World Bank Group, and that are generally considered to be achievable in new facilities at reasonable costs by existing technology.

Green buildings in less developed countries

The IFC has created a mass-market certification system for fast growing emerging markets called EDGE (“Excellence in Design for Greater Efficiencies”). IFC and the World Green Building Council have partnered to accelerate green building growth in less developed counties. The target is to scale up green buildings over a seven-year period until 20% of the property market is saturated. Certification occurs when the EDGE standard is met, which requires 20% less energy, water, and materials than conventional homes.

International Marketing environment refers to the controllable and uncontrollable forces that influence upon the marketing decision making of a firm globally. International Marketing environment is comprised of those components which shape policies, programmes and strategies of an international marketer. An international firm must resort to systematic study of international marketing environment to collect the inputs of marketing decision making.

To serve the international markets effectively, a firm is in need of understanding international marketing environment properly. The needs, preferences and expectations of buyers in different overseas markets are not necessarily similar. The environmental differences influence the international marketing decisions of a firm.

Such strategic decisions as whether a company should enter a given foreign market or not, what market entry strategy should it employ, what strategy it should adopt in respect of product, promotion, pricing and distribution, etc. are based on two sets of factors, viz., the company related factors and the foreign market related factors. The decision as to whether to go international or not is based, in addition to the above two, on yet another set of factors, viz., the domestic marketing environment.

The company related factors refer to such factors as the company objectives, resources, and international orientation. The domestic marketing environment consist of factors like growth prospects including the competition, government policies etc. The foreign market related factors which are relevant to the international business strategy formulation or which affect the international business are often described as the international business environment.

Two components of international marketing environment:

Internal Environment:

Internal environment refers to the firm related factors. The firm related factors are referred to as controllable variables because the firm has control over them and can (relatively easily) change them as may be thought appropriate as its personnel, physical facilities, organisation and functional means such as marketing mix, to suit the environment.

The internal environment of the company includes all departments, such as management, finance, research and development, purchasing, operations and accounting. Each of these departments has an impact on international marketing decisions. For example, research and development have input as to the features a product can perform and accounting approves the financial side of marketing plans.

The ability of a firm to do international business depends on a number of internal factors like the mission and objectives of the firm; the organisational and management structure and nature; internal relationship between employees, shareholders and Board of Directors, etc.; company image and brand equity; physical assets and facilities; R&D and technological capabilities; personnel factors like skill, quality, morale, commitment, attitude, etc.; marketing factors like the organisation for marketing, quality of the marketing men and distribution network; and financial factors like financial policies, financial position and capital structure.

Let’s look at an example of how the internal environment would impact a company such as Wal-Mart. In this case the immediate local influences which might include its marketing plans, how it implements customer relationship management, the influence of other functions such as strategy from its top management, research and development into new logistics solutions, how it makes sure that it purchases high-quality product at the lowest possible price, that accounting is undertaken efficiently and effectively, and of course its local supply chain management and logistics for which Wal-Mart is famous.

A useful tool for quickly auditing the internal environment is known as the Five Ms which are Men, Money, Machinery, Materials and Markets. Some might include a sixth M, which is minutes, since time is a valuable internal resource. All these factors are company related factors which are fully controllable. All these have to be considered while entering in the international market.

External Environment:

External environment refers to the factors outside the firm. These factors are uncontrollable or we can say that these are beyond the control of a company. The external environmental factors such as the economic factors, socio-cultural factors, government and legal factors, demographic factors, geographical factors etc. are generally regarded as uncontrollable factors.

1. Micro Environment:

The micro environment is made from individuals and organisations that are close to the company and directly impact the customer experience. They can be defined as the actors in the firm’s immediate environment which directly influence the firm’s decisions and operations. These include, suppliers, various market intermediaries and service organisations, competitors, customers, and publics. The micro environment is relatively controllable since the actions of the business may influence such stakeholders.

Wal-Mart’s micro environment would be very much focused on immediate local issues. It would consider how to recruit, retain and extend products and services to customers. It would pay close attention to the actions and reactions of direct competitors. Wal-Mart would build and nurture close relationships with key suppliers. The business would need to communicate and liaise with its publics such as neighbours which are close to its stores, or other road users. There will be other intermediaries as well including advertising agencies and trade unions amongst others.

Macro Economic Environment:

The macro environment of a country can be studied by taking a vast perspective. It includes the study of population, national income, economic advancement of a country and the study of consumption patterns etc. It is pertinent to mention here that a clear cut idea of the economic environment of a particular host country is always useful to form an appropriate marketing strategy in the international business.

Importance

The various components of the international marketing environment are the major determinants of marketing opportunities. As such, it is the responsibility of an international firm to have clear grasp of international marketing environment to formulate effective marketing decisions regarding Marketing Mix variables.

The following points highlight the importance of understanding international marketing environment:

1. International Marketing environment opportunities vary among the nations. Some economies have enormous potentials of growth while other has not. The knowledge of economic environment helps an international marketer to understand which market to select for reaping lasting benefits.
2. Culture is a basic determinant of human behaviour. The cultural norms and values may vary among the countries. That’s why knowledge of cultural environment is utmost important to the international marketer.
3. Political environment has a major influence on creating sound investment climate. The law-and-order situations influence business operations. International marketing operations can be smoothly conducted in a country having political stability and healthy political situation.
4. International marketing is affected by legal environment of a foreign country in which a firm intends to operate. International marketing transactions need compliance with legal provisions. So international marketer should be familiar with the legal environment of foreign countries where marketing efforts will be made.
5. The state of competition prevailing in an international market has great importance upon the strategic plan of the international marketer.
6. Technological changes have also great importance because of its direct impact on product obsolescence issue. Up-to-date knowledge about the state of technological environment is essential for the firms associated with international marketing.

Businesses are affected by legal environments of countries in many ways. Legal environments are not just based on different laws and regulations concerning businesses, these are also defined by the factors like rule of law, access to legal systems by foreigners, litigations systems etc. Variations in legal environments, rule of law, laws, and legal systems affect foreign business firms in a number or areas.

Key areas of business that are affected by legal environments are listed below:

(a) Laws concerning employment and labour affect managing of workforce in international markets.

(b) Different laws in foreign countries regulate financing of operations by foreigners. In some countries foreign firms are restricted access to local deposits/funds.

(c) Various countries around the world have different laws concerning marketing of products, especially food products, pharmaceuticals, hazardous materials and strategic products to a nation.

(d) Countries also control and regulate developing and utilising of technologies through various laws and regulations.

(e) Many countries also have different laws and regulations that affect ownership of businesses by foreigners.

(f) Countries also regulate /restrict remittances to foreign countries and repatriation of profits.

(g) Some countries regulate closing of operations and in some countries, businesses are not allowed to close shop especially when they have sold products that have guarantees and warranties from the foreign firms.

(h) Various countries around the world have implemented different trade and investment regulations.

(i) Countries also have their own taxation requirements, systems and laws.

(j) Countries also differ on the accounting reporting requirements from various categories of firms.

(k) Countries around the world have also actively implemented environmental regulations that affect businesses.

Legal Systems (Common Law, Civil Law, Theocratic Law)

Common Law

The basis for common law is tradition, past practices, and legal precedents set by the courts through interpretations of statutes, legal legislation, and past rulings. Common law seeks “interpretation through the past decisions of higher courts which interpret the same statutes or apply established and customary principles of law to a similar set of facts”.

Common law refers to law developed by judges through decisions of courts and similar tribunals (called case law), rather than through legislative statutes or executive action, and to corresponding legal systems that rely on precedential case law.

The body of precedent is called “common law” and it binds future decisions. In future cases, when parties disagree on what the law is, an idealized common law court looks to past precedential decisions of relevant courts. If a similar dispute has been resolved in the past, the court is bound to follow the reasoning used in the prior decision (this principle is known as stare decisis). If however, the court finds that the current dispute is fundamentally distinct from all previous cases (called a “matter of first impression”), judges have the authority and duty to make law by creating precedent. Thereafter, the new decision becomes precedent, and will bind future courts.

Civil Law

Civil law is based on an explicit written codification of what is permissible, and what is not. Laws are documented in criminal, civil and commercial codes which can be used to settle disputes. The precise wording of legal codes means the system is less adversarial than common law.

Theocratic Law

This system is based on religious teachings, as they are enshrined in the religious scriptures. Islamic law, Shari at, is the most widely practiced religious legal system in today’s world. It is based on morality rather than commercial requirement of human behaviour in all aspects of a person’s self and social life. Islamic law is based on the Holy book of Islam, the Quran and on interpretation of the practices and sayings of Prophet Mohammad.

It also follows the writings of scholars and teachers of Islamic scholarship, who derived rules by analogy from the principles established in the holy Quran. The basic foundations of Islamic law remain unaltered even after many centuries because they have been derived from the holy book and are acceptable to all devout Muslims.

Even though Islamic jurists and scholars constantly debate the application of Islamic law to the modern world, their debates are only scholastic deliberations. However, to keep pace with the advancement of life, many Muslim countries have a blend of Common law and Civil law system along with the Sharia law.

Legal Differences

• Local domestic laws. These are all different. The only way to find a route through the legal maze in overseas markets is to use experts on the separate legal systems and laws pertaining in each market targeted
• International law. There are a number of international laws that can affect the organisation’s activity. Some are international laws covering piracy and hijacking, others are more international conventions and agreements and cover items such as the International Monetary Fund (IMF) and World Trade Organisation (WTO) treaties, patents and trademarks legislation and harmonisation of legal systems within regional economic groupings, e.g. the European Union.
• Domestic laws in the home country. The organisation’s domestic (home market) legal system is important for two reasons. First, there are often export controls which limit the free export of certain goods and services to particular marketplaces, and second, there is the duty of the organisation to act and abide by its national laws in all its activities, whether domestic or international.

Anti-Dumping Law and Import License

Anti-dumping duty is a measure by the government to rectify the situation arising out of dumping. It is an instrument to restore fair competition. Despite being perceived as a protectionist measure, anti-dumping is essentially meant to provide relief to the domestic industries from the harm caused by dumping. These measures are meant to prevent foreign exporters from using predatory pricing to undermine domestic businesses. In furtherance of the same, the governments levy anti-dumping duties on the businesses not exceeding the margin of dumping in reference to any commodity.

It has been debated whether this practice is right or wrong over the years. The World Trade Centre does not take the high ground in declaring the validity of this practice but instead sets out the dos and don’ts of anti-dumping. Article VI of General Agreement on Tariffs and Trade, 1994 (hereinafter “GATT”) lays down the rules governing the practice of anti-dumping.

Anti-dumping duty is a measure by the government to rectify the situation arising out of dumping. It is an instrument to restore fair competition. Despite being perceived as a protectionist measure, anti-dumping is essentially meant to provide relief to the domestic industries from the harm caused by dumping. These measures are meant to prevent foreign exporters from using predatory pricing to undermine domestic businesses. In furtherance of the same, the governments levy anti-dumping duties on the businesses not exceeding the margin of dumping in reference to any commodity.

It has been debated whether this practice is right or wrong over the years. The World Trade Centre does not take the high ground in declaring the validity of this practice but instead sets out the dos and don’ts of anti-dumping. Article VI of General Agreement on Tariffs and Trade, 1994 (hereinafter “GATT”) lays down the rules governing the practice of anti-dumping.

Different Laws:

Customs Tariff Act, 1975- Sec 9A, 9B, 9C (as amended in 1995)

Customs Tariff (Identification, Assessment, and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995

Significance of Anti-Dumping Laws

The anti-dumping laws and regulations are meant to further the idea of fair trade between buyers and sellers in the international market. While the freedom of trade is essential, it is also important that the countries protect domestic industries from harm caused by discriminatory trade practices. Discriminatory means under the garb of free trade can lead to exploitation and can cause harm to develop economies.

The practice of dumping is not wrong per se depending upon the market conditions and the freedom of traders to fix the desired price. This is why WTO does not condemn dumping or anti-dumping. The practice of dumping might not harm the domestic industries in all cases and hence the domestic legislations allow the country to impose anti-dumping duties only when a causal link is established between the dumping practices and the injury caused.