CU-MBA-III-International Marketing Management(1)

MASTER OF BUSINESS SERVICE SEMESTER-III INTERNATIONAL MARKETING MANAGEMENT MBA532

CHANDIGARH UNIVERSITY Institute of Distance and Online Learning Course Development Committee Prof. (Dr.) R.S.Bawa Pro Chancellor, Chandigarh University, Gharuan, Punjab Advisors Prof. (Dr.) Bharat Bhushan, Director – IGNOU Prof. (Dr.) Majulika Srivastava, Director – CIQA, IGNOU Programme Coordinators & Editing Team Master of Business Administration (MBA) Bachelor of Business Administration (BBA) Coordinator – Dr. Rupali Arora Coordinator – Dr. Simran Jewandah Master of Computer Applications (MCA) Bachelor of Computer Applications (BCA) Coordinator – Dr. Raju Kumar Coordinator – Dr. Manisha Malhotra Master of Commerce (M.Com.) Bachelor of Commerce (B.Com.) Coordinator – Dr. Aman Jindal Coordinator – Dr. Minakshi Garg Master of Arts (Psychology) Bachelor of Science (Travel &Tourism Management) Coordinator – Dr. Samerjeet Kaur Coordinator – Dr. Shikha Sharma Master of Arts (English) Bachelor of Arts (General) Coordinator – Dr. Ashita Chadha Coordinator – Ms. Neeraj Gohlan Academic and Administrative Management Prof. (Dr.) R. M. Bhagat Prof. (Dr.) S.S. Sehgal Executive Director – Sciences Registrar Prof. (Dr.) Manaswini Acharya Prof. (Dr.) Gurpreet Singh Executive Director – Liberal Arts Director – IDOL © No part of this publication should be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the authors and the publisher. SLM SPECIALLY PREPARED FOR CU IDOL STUDENTS Printed and Published by: TeamLease Edtech Limited www.teamleaseedtech.com CONTACT NO:01133002345 For: CHANDIGARH UNIVERSITY 2 Institute of DistanCcUeIDanOdL SOEnLlFinLeELAReaNrINnGinMgATERIAL (SLM)

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CONTENT UNIT-1: Introduction to International Marketing .................................................................. 5 UNIT 2: International Marketing......................................................................................... 20 UNIT 3: International Trade Environment ........................................................................... 43 UNIT 4: Types of Agreements .......................................................................................... 721 UNIT 5: International Market Entry Strategies .................................................................... 89 UNIT 6: International Marketing Research........................................................................ 116 UNIT 7: Approach to Marketing Research ........................ Error! Bookmark not defined.30 UNIT 8: International Product Policy and Planning ........... Error! Bookmark not defined.47 UNIT 9: International Market Segmentation...................... Error! Bookmark not defined.60 UNIT 10: International Pricing Policy ............................... Error! Bookmark not defined.74 UNIT 11: International Distribution and Logistics......................................................... 19686 UNIT 12: Direct and Indirect Channels ............................................................................. 197 UNIT 13: International Promotional Strategies.................................................................. 213 UNIT 14: Legal and Ethical Issues in International Marketing ...................................... 23928 4 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT1: INTRODUCTION TO INTERNATIONAL MARKETING Structure 1.0 Learning Objectives 1.1 Introduction 1.2 International Marketing Management 1.2.1 Principles of International Marketing 1.2.2 Characteristics International Marketing 1.3 Scope of International Marketing 1.3.1 Major Types of Businesses 1.4 Domestic and International Marketing 1.5 Summary 1.6 Keywords 1.7 Learning Activity 1.8 Unit End Questions 1.9 References 1.0 LEARNING OBJECTIVES After studying this unit, student will be able to:  Explain importance of global and international marketing.  Discuss domestic and international marketing.  Explain types of businesses.  Explain principle and characteristics of international marketing. 5 CU IDOL SELF LEARNING MATERIAL (SLM)

1.1 INTRODUCTION International marketing is the application of marketing principles by industries in one or more than one country. It is possible for companies to conduct business in almost any country around the world, thanks to the advances in international marketing. In simple words, international marketing is trading of goods and services among different countries. The procedure of planning and executing the rates, promotion and distribution of products and services is the same worldwide. In recent times, companies are not restricted to their national borders, but are open for international marketing. With the increasing change in customers’ demands, choices, preferences and tastes, the economies are expanding and giving way to more competitive marketing. Thus, organizations need to respond rapidly to the demands of the customers with well-defined marketing strategies. The word ‘International Marketing’ is defined as the exchange of goods and services across national borders to meet the requirements of the customers. It includes customer analysis in foreign countries and identifying the target market. The major participants in international marketing are as follows − Multinational Corporations(MNCs) − A multinational corporation (MNC) is an organization that ensures the production of goods and services in one or more countries other than its home country. Such organizations have their offices, help desks or industrial set-up across nations and usually have a centralized head office where they co-ordinate global management. Exporters − They are the overseas sellers who sell products and provide services across their home country by following the necessary jurisdiction. Importers − They are the overseas buyers who buy products and services from exporters by complying with the jurisdiction. An import by one nation is an export from the other nation. Service Companies − A service company generates revenue by trading on services and not on physical commodities. A public accounting company is the best example of a service company. Revenue here is generated by preparing returns of income tax, performing audit services, and by maintaining financial records. Many companies believe that their targets are limited if they only concentrate on a single market like the U.S. market and global marketplace is competitive. Thus, to enrich their market presence such companies are always on a lookout for better opportunities worldwide. 6 CU IDOL SELF LEARNING MATERIAL (SLM)

1.2 INTERNATIONAL MARKETING MANAGEMENT Marketing deals with identifying and meeting human and social needs. One of the shortest definitions of marketing is ‘meeting needs profitably’. Another definition states that marketing is the process of creation, production, pricing, distribution, and promotion of customer value at a profit. Marketing management is the art and science of choosing target markets, and getting, keeping and increasing customers through creating, managing, communicating and delivering superior customer value. Peter Drucker describes the process of marketing this way: ‘the aim of marketing is to know and understand the customer so well that the product or service fits him/her and sells itself. Ideally marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or available services. International marketing is marketing at international markets. Understanding Markets The creation of value is the core purpose and central process of economic exchange. Marketing managers can market seven entities: services, products, events, experiences, people, places and ideas.  Services include such products as airlines, hotels, car hire, hairdressers and so on. Historically, businesses management theory focused on products rather than services but now there is a blurring of the boundaries between products and services. This text takes a service-dominant approach to marketing, meaning that rather than four P’s of the marketing mix, we focus on seven, including three service mix elements (process, physical evidence, and people).  The manufacture of physical products was the traditional cornerstone of economic activity in many countries.  Events like music shows, trade fairs, and football represent a form of product.  Experiences like theme parks can be created, staged and marketed.  Celebrity (people) marketing is a big business.  Places compete actively to attract tourists, factories, company headquarters and new residents.  Ideas are marketed using social marketing which uses tools and techniques of marketing to change people’s behaviour. Irrespective of which of these the manager markets, the creation of value and need satisfaction is the core purpose and central process of economic exchange. 7 CU IDOL SELF LEARNING MATERIAL (SLM)

1.2.1 Principles of International Marketing The essence of marketing can be summarized in three great principles. The first identifies the purpose and task of marketing, the second the completive reality of marketing, and the third the principal for achieving the first two.  Customer Value and The Value Equation The task of marketing to create customer value that is greater than the value created by competitors. Expanding or improving product and / or service benefits, by reducing the price, or by a combination of these elements, can increase value for the customer. Companies with a cost advantage can use price as a competitive weapon. Knowledge of the customer combined with innovation and creativity can lead to a total offering that offers superior customer value. If the benefits are strong enough and valued enough by customers, a company does not need to be the low-price competitor to win customer.  Competitive or Differential Advantage The second great principle of marketing is competitive advantage. A competitive advantage is a total offer, vis-à-vis relevant competition that is more attractive to customers. The advantage can exist in any element of the company’s offer, the product, the where V= value B= perceived benefits – perceived costs (for example, switching costs) P= price Price, the advertising and point of sale promotion, or the distribution of the product. One of the most powerful strategies for penetrating a new national market is to offer a superior product at a lower price. The price advantage will get immediate customer attention, and, of those customers who purchase the product, the superior quality will make an impression.  Focus The third marketing principle is focus, or the concentration of attention. Focus is required to succeed in the task of creating customer value at a competitive advantage. All great enterprise, large and small, is successful because they have understood and applied this great principle. IBM succeeded and became a great company because it was more clearly focused on customer needs and wants than any other company in the emerging data processing industry. One of the reasons IBM found itself in crisis in the early 1990s was that its competitors had become much more clearly focused on customer needs and wants. Dell and Compaq, for example, focused on giving customers computing power at low prices; IBM was offering the same computing power at higher prices. 8 CU IDOL SELF LEARNING MATERIAL (SLM)

A clear focus on customer needs and wants and on the competitive offer is required to mobilize the effort needed to maintain a differential advantage. This can be accomplished only by focusing or concentrating resources and efforts on customer needs and wants and on how to deliver a product that will meet those needs and wants 1.2.2 Characteristics of International Marketing International marketing can be described as the various activities designed in the planning process. Activities such as fixing pricing structures to suit local needs, formulating promotional offers and assuring that the products and services are available to customers residing in the home country as well as the foreign country. Identifying and satisfying the consumer needs globally are the major functions to be taken care of. Given below are some points that describe the basic characteristics of international marketing  Broader Market Is Available A wide platform is available for marketing and advertising products and services. The market is not limited to some precise local market or for people residing in a particular place, region or country but is free for all. People from different nations sharing different cultures and traditions can actively participate in it.  Involves At Least Two Set of Uncontrollable Variables By uncontrollable variables, we mean the geographical factors, political factors prevailing in different countries. At the global level, all the companies have to face uncontrollable variables from different countries. While establishing business globally, a company has to learn to deal with these variables.  Requires Broader Competence International market requires more expertise and special management skills and wider competence to deal with various circumstances and handle different situations like changes in the strategies of the government, the mindset of the people and many other such factors.  Competition Is Intense Competition is very tough in international market, as the organizations at the global level have to compete with both competitors in their home countries and also in the foreign lands. Competition is high because the clash is between developed & developing countries and both have different standards and are unequal partners.  Involves High Risk and Challenges International marketing with its own advantages is also prone to different and tangible risks and challenges. These challenges come in the form of political factors, regional and cultural differences, changing fashion trends, sudden war situation, revision in government rules and regulations and communication barriers 9 CU IDOL SELF LEARNING MATERIAL (SLM)

 Nature The nature of international marketing is dependent on various factors and conditions and above all, it is dependent on the policies framed by different countries which are active participants in international marketing. International marketing tends to ensure balanced import and export to all countries big or small, rich or poor, developed or developing.  Management Management of international market is tough and requires thorough market research. It is a predefined process which is directed towards designing and delivering products based on the demands from the overseas customers. Proper management also helps the company attain its objectives.  Large-Scale Operation Large-scale operations involve relative amount of labour and capital to cater to the needs such as transportation, and warehousing.  Domination of Multinationals and Developed Countries International marketing is highly dominated by multinational corporations due to their worldwide reach. These organizations apply efficient and effective business practices to all their business operations. They have a stable position and with their global approach find themselves fitting into the arena of international marketing.  International Restrictions The international market needs to abide by different tariff and non-tariff constraints. These constraints are regulated because different countries follow different regulations. All nations tend to rationally abide by tariff barriers. All the imports and exports between the nations participating in international marketing follow some restrictions in foreign exchange.  Sensitive Character International marketing is highly sensitive and flexible. The demand for a product in a market is highly influenced by political and economic factors. These factors can create as well as decrease the demand for a product. In fact, use of advanced technology by a competitor or the launch of a new product by another competitor may affect the sale of a particular firm’s product worldwide.  Importance of Advanced Technology International market is dominated by developed countries like the USA, Japan, and Germany as they use highly advanced technology in production, marketing, advertising and establishing a brand name. They provide admirable quality of products at reasonable prices. Presently, Japanese products have got substantial existence in markets around the world. The Japanese could achieve this only because of automation and effective use of advanced computer technology.  Need for Specialized Institutions 10 CU IDOL SELF LEARNING MATERIAL (SLM)

Marketing at global level is highly prone to risks & is very complex and knotty. It undergoes lengthy and time taking procedures & formalities. Competent expertise is required for handling various sections of international marketing.  Need for Long Term Planning International marketing calls for long term planning. Marketing practices differ from nation to nation influenced by social, economic & political factors.  Lengthy & Time Consuming The activities in international marketing are very time-consuming and knotty or complex. The main cause of these difficulties are the local laws and policies enforced on different nations, issues in payment as different countries use different currencies, distance between the participating nations and time taking formalities involved therein. The current trend of globalization does not limit companies to their national borders and invites them for marketing on a higher platform, i.e., international platform. Every nation is free to trade with any nation. New markets are indicating signs of growth and are marking signs of development in economies like China, Indonesia, India, Korea, Mexico, Chile, Brazil, Argentina, and many other economies all over the world. 1.3 SCOPE OF INTERNATIONAL MARKETING International Marketing Leads to Peace Among Nations All the activities associated with a business-like – development, production, and marketing, especially in the case of high-tech products, involves people from around the world to work together. Moreover, companies as a part of employee interactions enable people from all countries to meet face-to-face for both recreation and commerce. All this interaction leads to not just the mutual gain associated with business relationships but also personal relationships and mutual understanding. The latter is the foundation of global peace and prosperity and widens the scope of International Marketing. e.g., Mobile Phone Companies deploy different functions of their business in different parts of the world – say manufacturing in China, R & D in London and sales teams across the globe. In order to work as a team and drive a single agenda, the teams interact with each other frequently and occasionally meet for important agendas. Global Markets Reduce Risk and Open Opportunities Scope of International Marketing increases with global markets opening up for business. At times manufacturing a product in a country can be much cost-effective and the nation becomes the hub of all exports. For example, huge portion of all consumer products sold globally is manufactured in China. 11 CU IDOL SELF LEARNING MATERIAL (SLM)

Global brands rake in a significant portion of their revenues from outside their parent country. Below is the example of a few US-based companies and how they widened the Scope of International Marketing. Factors Affecting the Scope of International Marketing Of all the events and trends affecting global business today, four stand out as the most dynamic, the ones that will influence the shape of international business:  The rapid growth of the World Trade Organization and regional free trade areas such as the North American Free Trade Area and the European Union.  The trend toward the acceptance of the free market system among developing countries in Latin America, Asia, and Eastern Europe.  The burgeoning impact of the Internet, mobile phones, and other global media on the dissolution of national borders.  The mandate to manage the resources and global environment properly for the generations to come. 1.3.1 Major Types of Businesses  Imports This is the easiest form of International Marketing a company can get into – Importing from one country and selling in the domestic market. This is possible only in a scenario where there is demand in the domestic market for imported goods or services. Companies also localise the imported product depending on the needs of the market.  Exports Opposite of Importing and selling, companies export their finalized products to international markets or on to their other franchises in far off markets where they can sell the products to their localities for generating huge revenues.  Contractual Agreements Whenever business moves beyond their domestic boundaries, its scope of international marketing exposes it to greater chances of doing a lot more business. The market expands, the consumer base expands and even volumes and profits expand. Companies grow exponentially by getting into contractual agreements with several other partners overseas.  Joint Venturing Two brands can come together and enter a potential market. The investments, profit or losses are pre-decided in terms of both value and time period. At the time it is beneficial for companies to enter into a JV for raising the scope of international marketing as a result of a barrier to new entrants in foreign markets. A local partner can prove to be immensely useful for doing business not only operationally but also from a domestic understanding of the market dynamics. 12 CU IDOL SELF LEARNING MATERIAL (SLM)

 Fully Owned Manufacturing Relatively a higher level of engagement in the foreign soils, companies can own a fully owned manufacturing in a country. The company can use this facility to sell products within the country or export to nearby nations. Owning a fully owned manufacturing helps companies control quality. 1.4 DOMESTIC AND INTERNATIONAL MARKETING Domestic Marketing Domestic marketing comprises of the marketing strategies used by a company to attract customers and compel them to purchase a product or service within a local market. The marketing activities in domestic marketing are restricted to the local boundaries, and a limited number of customers are served. Domestic marketing has several advantages. It is more convenient to carry out as it has to deal with just a single form of competition and economic issues. No communication barriers are faced as the local customers can easily comprehend the message of the company. In addition, the company can easily acquire and understand data regarding the trends of the local market and the requirements, tastes and preferences of consumers. This allows companies to take decisions and formulate marketing strategies in a more effective manner. There are also lower risks in domestic marketing and limited investments are required. However, the scope of local markets is quite narrow, and growth is limited. Hence, many companies aim to expand their operations to the international market. International Marketing International marketing is the kind of marketing that focuses on a wider customer base, one that extends the national boundaries. Customers from all over the world are targeted in international marketing. This kind of marketing is quite complicated and requires significant financial investments. There are different laws and regulations pertaining to business in each country, and it is important for a country seeking to enter a foreign market to first become aware of these rules. The requirements and preference of customers may also be different; hence, the marketing strategies should be developed according to these different needs and requirements. Companies need to put in more time and effort to carry out international marketing. In addition, it is also much more risky than domestic marketing. The international market is quite uncertain, and companies should always be prepared to handle any changes that take place suddenly. Difference between Domestic and International marketing 13 CU IDOL SELF LEARNING MATERIAL (SLM)

The main difference between domestic marketing and international marketing has been explained below:  Meaning In domestic marketing, the company is involved in the production, promotion, distribution and sale of products and services within its own country. However, in international marketing, these activities extend beyond the boundaries of the company’s own country to offer goods and services to various countries across the globe.  Growth Opportunities Domestic marketing has a limited scope and offers little opportunities for growth, whereas the scope of international marketing is vast, offering numerous growth opportunities.  Area Covered Domestic marketing covers a limited area within a single country, whereas in international marketing, an extensive area is covered, spanning across several countries.  Government Intervention There is less intervention from the government in domestic marketing in comparison to international marketing. This is because in international marketing, the company has to consider the laws and regulations of various countries.  Risks Involved Lower risks are involved in domestic marketing, and fewer challenges are experienced because of the limited scope of this form of marketing. On the other hand, high risks and challenge are involved in international marketing because of issues like socio-cultural differences, exchange rates, uncertainty of entering a foreign market, and so on.  Technology Use In domestic marketing, there is limited use of technology. International marketing, in contrast, can take advantage of the latest technologies being used in different countries.  Research Required A company involved in domestic marketing does not have to carry out a lot of research because they cover a limited area. In addition, since they are catering to only the local market, they are already aware of conditions prevailing in the market. On the other hand, foreign markets need to be studied extensively because the company is not aware of the conditions prevailing in those markets.  Customer Characteristics 14 CU IDOL SELF LEARNING MATERIAL (SLM)

Domestic marketing deals with a single type of consumers that have similar characteristics. On the other hand, international marketing caters to different kinds of customers that have distinct characteristics, tastes and preferences.  Financial Resources Domestic marketing requires fewer financial resources and capital investment, whereas significant investments are needed to carry out international marketing.  Limitations Not many limitations are experienced in domestic marketing. However, international marketing faces several limitations, including language barriers, cross-cultural differences, differences in customs and norms of different societies, exchange rate fluctuations, and so on. 1.5 SUMMARY  International marketing is the performance, in more than one nation of business activities that direct the flow of a company's goods and services to consumers or users for a profit.  International marketing is the process of focusing the resources and objectives of a company on marketing opportunities at international level.  International marketing also involves marketing, advertising, and selling a company’s product or brand on a global scale. Many fashions of advertising use this marketing such as television, publications, Internet and so on.  Globalization has created just as many challenges as opportunities for brands that venture overseas.  The importance of international marketing is shaped by the dynamic interplay of several driving and restraining forces.  Forces that can add limits to efforts can be management myopia, market differences, management myopia, organizational culture and national controls.  In general business environments are marked by some level of uncertainty, which gets heightened when a company expands operations in a foreign country.  The new world order comprising of very impactful technological, political, industrial and demographic forces, is the foundation for the global market and economic systems.  In current times, a lot of the business activities are global in scope. Finance, technology, research, capital and investment flows, production facilities, purchasing and marketing and distribution networks all have global dimensions. 15 CU IDOL SELF LEARNING MATERIAL (SLM)

 All businesses and business leaders should be aware of the global economic environment that is becoming increasingly interdependent. And must accordingly create business strategies.  A successful business leader helps create an adaptable marketing strategy which can be flexible in accordance with the dynamic business environment.  Domestic and international companies are confronted with that ask of marketing products and services to diverse cultural groups.  International marketers must be aware of cultural differences when conducting international business must be able to adapt business strategies to cultural requirements of the country.  There are different product strategies that can be applied when marketing internationally. 1.6 KEYWORDS  Domestic Marketing: It is the form of marketing in which the firm faces only one set of competitive, economic and market issues.  Global Marketing: The performance of business activities that direct the flow of goods and services to consumers or users in more than one nation.  International Marketing: It is the performance of marketing across two different countries.  Marketing: It is the performance of business activity, directing the flow of products from producer to consumer.  Globalization: This term exemplifies the growing degree of interdependence between the cultures, economies and people of nations across the world. The key driver for this has been international trade that facilitates not even flow of goods/services but also of people, capital, information and technology. 1.7 LEARNING ACTIVITY One of the biggest restaurant chains in the world, McDonald’s is the 8th most valued brand globally according to Interbrand. The brands success is visible despite opposition from anti capitalists, proponents of health meals and animal rights activists. In this backdrop this brand is facing hurdles in synchronizing with the continuously evolving trends in the restaurant business and creating a positive image of is brand in the minds of the consumers. In addition, the company’s stock price also dipped to a seven-year low. Salomon Smith Barney in Sept 2002 forecasted under performance for McDonald’s stock price. ;To steer through these gloomy forecasts, McDonald’s has started experimenting with its menu to include healthy and local flavours, designs of its outlets and more reasonable pricing to enhance its brand 16 CU IDOL SELF LEARNING MATERIAL (SLM)

image , brand appeal and sales growth. Despite these efforts put in action by McDonald’s, experts Salomon Smith Barney and Mark Kalinowski argue that all these positive steps might not be able to counter the negative brand image that has resulted from the low quality of customer service and bad behaviour of McDonald’s employees. These opinions are also being voiced by the masses who are also questioning the role played by Ronald McDonald in creating a brand image that is relevant to the current generation. In recent times, the restaurant chain has taken a hit because of disparate marketing communication in the UK. To top this, issues like criticism of fat food, fear of mad cow disease, accusations by vegetarians of McDonald’s using beef-based cooking medium and hatred from teenage population accusing it of making them obese have been doing the rounds in popular publications. To counteract negative publicity, McDonald’s is participating and sponsoring community and charitable programs like UNICEF’s World Children’s Day. How impactful are these strategies to beat competition remains to be seen? Questions 1. In general, where do you think McDonald’s stands on the range from standardization to adaptation in terms of its global marketing? ………………………………………………………………………………………………….. ………………………………………………………………………………………………….. 2. What are some of the issues in having a mascot like Ronald McDonald in another culture besides the U.S.? How can it be effective in other national settings? ………………………………………………………………………………………………….. ………………………………………………………………………………………………….. 1.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. How is international marketing different from domestic marketing? 2. What is the background of formation and development of international marketing? 3. What is the essence, objectives and features of international marketing? 4. Explain major types of businesses. 5. Explain principles of international marketing. Long Questions 1. What are the developmental stages of international marketing? 17 CU IDOL SELF LEARNING MATERIAL (SLM)

2. What are ‘Do’s and don’ts’ for success in International marketing? How should the firm execute the dos and don’ts in the context of marketing? 3. What are the basic economic reasons which might influence a firm’s decision or motivate a firm to plunge into international marketing? 4. Can international marketing be understood as a business philosophy? 5. Can international marketing be understood as a form of management activities? B. Multiple Choice Questions 1. International marketing is dominated by ____ countries. a) poor b) developing c) developed d) rich 2. International marketing ensures ______ utilisation of resources. a) minimum b) maximum c) normal d) Proper 3. International economic environment is the result of economic factors operating at The _______ level. a) local b) national c) International d) Business 4. ____________ is the management process that identifies, anticipates and satisfies customer requirements profitably. a) Marketing b) Human Resource Management c) All of these d) None of these 5. _____ is the father of Modern Marketing. a) Peter Drucker b) Philip Kotler c) Lester Wunderman d) Abraham Maslow Answer: 1. (c) 2. (b) 3. (c) 4. (a) 5 (b) 18 CU IDOL SELF LEARNING MATERIAL (SLM)

1.9 REFERENCES Textbooks  Keegan, W. J. \"Global Marketing Management\" 4th Edition. Prentice Hall International Edition 1989.  Hakansson, H. (ed), \"International Marketing and Purchasing of Industrial Goods.\" IMP Project Group, John Wiley and Sons, 1982.  Kotler, P.\" Marketing Management, Analysis, Planning, Implementation and Control\", 6th Edition. Prentice Hall International Edition, 1988. Reference Books  Vernon, R. \"International Investment and International Trade in the Product Cycle.\" Quarterly Journal of Economics, May 1966, pp 190 -207.  Perlmutter, H.J. \"Social Architectural Problems of the Multinational Firm.\" Quarterly Journal of AISEC International. Vol. 3, No. 3, August 1967.  Cavusgil, S. T. \"Differences among Exporting Firms based on Degree of Internationalisation\". Journal of Business Research, Vol. 12,1984.  Firat A. F., Dholakia N., Venkatesh A., \"Marketing in a Postmodern World. European\" Journal of Marketing Vol 29 No. 1 1995 pp 40-56  Jaffee S. \"Exporting high value food commodities.\" World Bank Discussion Paper No. 198. The World Bank 1993.  Johanson, J and Mattison, L.G. \"Internationalisation in Industrial Systems - A Network Approach.\" Paper prepared for the Prince Bertil Symposium on Strategies in Global Competition. Stockholm School of Economies, 1984.  Wensley J.R.C. \"PIMS and BCG New Horizons\" or False Dawns Strategic Management Journal No. 3 April/June 1982. Websites  https://www.yourarticlelibrary.com/international-marketing/  https://www.businessmanagementideas.com/marketing/  https://www.economicsdiscussion.net/international-economics 19 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 2: INTERNATIONAL MARKETING Structure 2.0 Learning Objectives 2.1 Introduction 2.2 Customer Value and the Value Equation 2.3 Competitive or Differential Advantage 2.4 Management Orientations 2.4.1 MNCs and TNCs 2.4.2 Benefits of International Marketing 2.5 International Marketing Environment Analysis methods 2.6 Summary 2.7 Keywords 2.8 Learning Activity 2.9 Unit End Questions 2.10 References 2.0 LEARNING OBJECTIVES After studying this unit, student will be able to:  Explain what a value proposition is.  Learn why different value propositions for different target markets.  Explain MNC’s and TNC’s.  Discuss international marketing environment analysis methods. 2.1 INTRODUCTION Marketing is defined as an organizational function and a set process for creating, communicating, and delivering value to customers also managing customer relationship in a ways that benefit the organization and it stake holders and in doing this Product, Price, Promotion and Place need to be put into consideration. Our of these factors, ‘Place’ as a value-added element is gradually taking precedence. One key reason behind this might be the availability of many substitutes for any particular brand. This has led to a decline in the brand’s potential to maintain its competitive edge as consumers are accepting of substitutes. 20 CU IDOL SELF LEARNING MATERIAL (SLM)

The creation of value is key in marketing (Anderson 1982). Indeed, the role of marketing is to assist the firm to create value for its customers that are superior to competition (Tzokas & Saren, 1999). If this takes place the firm arguably delivers superior value to its shareholders (Doyle 2000). This is key because customers who are satisfied with a firm’s goods or services that offer them value remain loyal to that firm and place their future purchases with that firm (Bolton& Drew, 1991). According to Kotler, customers prefer to purchase the offering that gives them the highest value. Where value can be defined as the benefits realized by customers from using a product/service. He defines value in terms of the following aspects:  Total Customer Value: The set of benefits that customers expect when using a product/service.  Total Customer Cost: This is the overall cost that customers incur for assessing alternatives, obtaining the final choice, using the product/service and getting rid of the product/service.  Customer Delivered Value: This can be represented as the difference or ration between the total customer value and total customer cost. With the rising consumer expectations and competition in the product space, value added offerings are becoming all the more important. For a successful international marketing campaign, the following factors need to be incorporated suitable to avoid any failures: socio economic factors, culture, legal provisions, and consumer demographics, physical and political environment. 2.2 CUSTOMER VALUE AND THE VALUE EQUATION What is Value? In terms of popular understanding, sometimes value is equated to price, but for success of any business, it needs to encompass the customer expectations and needs. By addressing the dynamic nature of customer needs, businesses can continually increase the value added by them. Some factors that make customer value highly dynamic and hence an implementation channel are competitor offerings, customer perceptions and likes, value calculations referred to by businesses. Simply put, customer value can be illustrated as a trade-off between product benefits and product cost. When benefits trump the cost, a product/service is perceived as valuable by the customer. (See Figure 2.1 “Perceived Cost versus Perceived Benefits”). This concept can also be put across in the form of an equation that measures the difference between these two values: Customer value = perceived benefits − perceived cost. 21 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 2.1: Perceived Cost vs. Perceived Benefits Few of the researchers, represent customer value as a ratio of these factors rather than a difference. Christopher, “From Brand Value to Customer Value,” Journal of Marketing Practice: Applied Marketing Science 2, no. 1 (1996): 55. However, businesses need to understand that customers assess all these factors with respect to competitor offering and their own expectations rather that doing an isolated evaluation. Businesses offering customer value higher than that offered by competition prove to be more profitable and successful. In the study - Profit Impact through Marketing Strategy conducted by Bradley Gale and Robert Buzzell involving 2800 businesses, the main conclusion was that through superior customer service, firms can achieve high market share and high ROI. Robert D. Buzzell and Bradley T. Gale, the PIMS Principles—Linking Strategy to Performance (New York: Free Press, 1987), 106. Given this significance, it is basic to comprehend what makes up the apparent advantages and the apparent expenses according to the shopper. These basic issues have created an impressive assemblage of exploration. A portion of the significant topics in client esteem are advancing, and there is no general agreement or concession to all parts of characterizing these two segments. To start with, some approaches give luxuriously point by point and scholastically seasoned definitions; others give less complex and more functional definitions. These last definitions will in general be nearer to the previously mentioned condition approach, where clients assess the advantages, they acquire from the buy versus what it costs them to buy. Be that as it may, one is still left with the issue of recognizing the particular segments of these advantages and expenses. In taking a gander at the advantages bit of the worth condition, most scientists find that client needs to characterize the advantages part of significant worth. Yet there still is no agreement concerning what explicit requirements ought to be thought of. Park, Jaworski, and McGinnis (1986) indicated three expansive sorts of requirements of buyers that decide or sway value. C. When Park, Bernard J. Jaworski, and 22 CU IDOL SELF LEARNING MATERIAL (SLM)

Deborah J. MacInnis, \"Key Brand Concept-Image Management,\" Journal of Marketing 50 (1986): 135. Seth, Newman, and Gross (1991) Jagdish N. Seth, Bruce I. Newman, and Barbara L. Net, Consumption Values and Market Choice: Theory and Applications (Cincinnati, OH: Southwest Publishing, 1991), 77. If five sorts of significant worth, as did Woodall (2003), even though he didn't recognize a similar five values. To add to the disarray, heard (1993–94) Ed Heard, \"Strolling the Talk of Customers Value,\" National Productivity Review 11 (1993–94): 21. Distinguished three components, while Ulaga (2003) Wolfgang Ulaga, \"Catching Value Creation in Business Relationships: A Customer Perspective,\" Industrial Marketing Management 32, no. 8 (2003): 677. Determined eight classes of significant worth; and Gentile, Spiller, and Noci (2007) referenced six parts of value. Chiara Gentile, Nicola Spiller, and Giuliana Noci, \"How to Sustain the Customer Experience: An Overview of Experience Components That Co-Create Value with the Customer,\" European Management Journal 25, no. 5 (2007): 395. Smith and Colgate (2007) endeavoured to put the conversation of client esteem in a sober-minded setting that may help professionals. They distinguished four sorts of qualities and five wellsprings of significant worth. Their motivation was to give \"an establishment for estimating or evaluating esteem creation strategies.\" J. Brock Smith and Mark Colgate, \"Client Value Creation: A Practical Framework,\" Journal of Marketing Theory and Practice 15, no. 1 (2007): 7. In a portion of these works, the segments or measurements of significant worth uniquely consider the advantages side of the condition, while others join cost measurements as a feature of significant worth. In the context of small businesses, what needs to be clear is the set of elements that define product benefit and the product cost. Seth, Newman, and Gross’s five types of value provide a solid basis for considering perceived benefits (see Figure 2.2 “Five Types of Value”). As a prerequisite, it is important to highlight that businesses should work towards building a value mix rather than focusing on a standalone value type. Five Types of Value  Functional Value is created basis the ability of the product/service to perform its basic end use Woodruff (1997) identified that functional value can have several dimensions. The first dimension to realise this value is measuring the performance of the product/service in relation to consumer expectations such as evaluating the performance of an automobile. A second dimension is the availability to requisite features like appropriate technical specification of a laptop. The third dimension is a measure of the results produced by the usage of the product/service. For example, assessing a hospital by the number of successful operations. 23 CU IDOL SELF LEARNING MATERIAL (SLM)

 Social Value provides a group perception to the consumers of the goods/services. Some examples are, a clothing store might want to convey an image that its consumer group is chic, Rolex watches convey an Elitist image as their image, businesses also create positive images by associating with good causes.  Emotional Value is associated with the emotions that a brand evokes in consumers. It could range from fear/security as evoked by insurance and security system providers to excitement as evoked by theme parks and the feeling of home food comfort evoked by restaurants.  Epistemic Value is realised when a product/service piques the consumers’ curiosity. This can be achieved by using innovative store layouts or advanced technologies.  Conditional Value derives its essence by being associated with a social context like Turkey is synonymous with Thanksgiving in America. This can also be achieved by creating a shared identity among the consumers .This is successfully done by brands such as Harley Davidson and Apple. The above section highlights that all five types of value realization are not very different from each other and hence cannot be singled out by businesses to stay ahead of competition. Business including start-ups should create their value mix as per their understanding of the target market. As per an earlier discussed, we saw that perceived customer value comprises of both the value benefits and costs. The value cost is a multi-dimensional element (see Figure “Components of Customer Value”). 24 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 2.2: Five Types of Values Figure 2.3: Components of Customer Value Seen expenses can be viewed as being financial, time, and clairvoyant. The money-related part of apparent expenses ought to, thusly, be separated into its constituent components. The principal segment is the price tag of the item or the assistance. Many would erroneously feel that this is the solitary component to be considered as a feature of the expense segment. They neglect to consider a few other expense parts that are frequently of equivalent—if not more noteworthy—significance to clients. Numerous clients will consider the working expense of an item or assistance. A TV link organization may advance a starting proposal with an extremely low cost for the link box and its establishment. Most clients will consider the month-to-month charges for link service as opposed to simply taking a gander at the establishment cost. They regularly use service costs while assessing the incentive. Clients 25 CU IDOL SELF LEARNING MATERIAL (SLM)

have found that there are significant expenses related to adjusting an item. Assuming there are service costs, especially if they are covered up costs, clients will discover altogether less worth from that item or service. Two different expenses additionally should be thought of. Exchanging costs is related to moving to start with one supplier then onto the next. In certain pieces of the country, the expense of warming one's home with propane gas may be altogether not as much as utilizing home warming oil on an annualized premise. Be that as it may, this change from warming oil to propane would require the mortgage holder to introduce another sort of heater. That cost may prevent the property holder from moving to the less expensive type of energy. Opportunity cost includes choosing among elective buys. A client might be taking a gander at a costly piece of adornments that he wishes to purchase for his significant other. On the off chance that he purchases the adornments, he may need to renounce the acquisition of another TV. The gems would then be the chance expense for the TV; moreover, the TV would be the chance expense for the piece of gems. While thinking about the expense segment of the worth condition, money managers should see each cost as a component of a coordinated bundle to be gone ahead before clients. Increasingly more vehicle sales centres are attempting to win clients by bringing down the retail cost as well as offering minimal effort or free upkeep during a critical part of the lifetime of the vehicle. These financial parts are what we regularly consider when we examine the term cost, and they will impact the choice of clients; notwithstanding, the time segment is additionally imperative to the dynamic interaction. Clients may need to exhaust time getting data about the idea of the item or the assistance or make examinations between contending items and services. Time should be used to secure the item or the assistance. This idea of time would be related to realizing where the item or the help could be bought. It would incorporate time spent going to the area where the thing would be bought or the time it takes to have the thing conveyed to the client. One additionally should consider the time that may be needed to figure out how to utilize the item or the assistance. Any item or service with a precarious expectation to learn and adapt may dissuade clients from buying it. Firms can offer extra benefits by lessening the time segment. They could work on admittance to the item or the help. They may offer a wide number of areas. Straightforward directions or effortlessness in activities may diminish the measure of time that is needed to figure out how to appropriately utilize the item or the assistance. The mystic part of the cost can be related to those components that may actuate weight on the client. There can be pressure related to finding or assessing items and services. Furthermore, items or services that are hard to utilize or require quite a while to figure out how to utilize appropriately can cause weight on clients. Campbell's soup presented a dinner item called Souper Combos, which comprised of a sandwich and a cup of soup. At face esteem, one would feel that this would be an effective item. Sadly, there were issues with the requests that 26 CU IDOL SELF LEARNING MATERIAL (SLM)

this item positioned on the client regarding setting up the dinner. The frozen soup accepting twice as long to microwave as expected, and the shopper needed to over and again addition and eliminate both the soup and the sandwich from the microwave. Calvin L. Hodock, Why Smart Companies Do Dumb Things (Amherst, NY: Prometheus Books, 2007), 65. 2.3 COMPETITIVE OR DIFFERENTIAL ADVANTAGE What Is Competitive Advantage? Competitive Advantage alludes to factors that permit an organization to create products or services preferable or all the more economically over its adversaries. These variables permit the gainful substance to create more deals or better edges looked at than its market rivals. Competitive advantages are ascribed to an assortment of elements including cost structure, marking, the nature of item contributions, the dispersion organization, protected innovation, and client assistance. Understanding Competitive Advantage Competitive advantage produces a more prominent incentive for a firm and its investors in light of specific qualities or conditions. The more maintainable the upper hand, the more troublesome it is for contenders to kill the benefit. The two principle kinds of upper hands are relative benefit and differential benefit. Comparative Advantage A company's capacity to deliver a decent or service more proficiently than its rivals, which prompts more noteworthy net revenues, makes a similar benefit. Normal purchasers will pick the less expensive of any two wonderful substitutes advertised. For instance, a vehicle proprietor will purchase fuel from a corner store that is 5 pennies less expensive than different stations nearby. For defective substitutes, similar to Pepsi versus Coke, higher edges for the most minimal expense makers can in the end bring unrivalled returns. Economies of scale, proficient inside frameworks, and geographic area can likewise make a similar benefit. A similar benefit doesn't suggest a superior item or service, however. It just shows the firm can offer an item or service of a similar worth at a lower cost. For instance, a firm that makes an item in China may have lower work costs than an organization that makes in the U.S., so it can offer an equivalent item at a lower cost. With regards to worldwide exchange financial matters, opportunity cost decides relative benefits. Amazon (AMZN) is an illustration of an organization zeroed in on the building and keeping a near advantage. The internet business stage has a degree of scale and productivity that is hard for retail contenders to duplicate, permitting it to ascend to conspicuousness generally through value rivalry. 27 CU IDOL SELF LEARNING MATERIAL (SLM)

Differential Advantage A differential benefit is a point at which a company's items or services vary from its rivals' contributions and are viewed as predominant. Trendsetting innovation, patent-secured items or cycles, unrivalled staff, and solid brand character are large drivers of differential benefit. These components support wide edges and huge pieces of the pie. Apple is popular for making inventive items, like the iPhone, and supporting its market service with canny marketing efforts to fabricate a tip-top brand. Significant medication organizations can likewise showcase marked medications at exorbitant cost focuses because they are secured by licenses. 2.4 MANAGEMENT ORIENTATIONS Various mentalities towards an organization's contribution in international marketing measure are called worldwide promoting directions. EPRG system was presented by Wind, Douglas, and Perlmutter. This structure tends to how vital choices are made and how the connection among base camp and its auxiliaries is formed. Perlmutter's EPRG system comprises four phases in the advancement of global tasks. These stages are talked about beneath. Ethnocentric Orientation The practices and approaches of base camp and the working organization in the nation of origin become the default standard to which all auxiliaries need to agree. Such organizations don't adjust their items to the necessities and needs of different nations where they have activities. There are no adjustments in item particular, cost, and advancement measures between the local market and abroad business sectors. The overall mentality of an organization's senior supervisory crew is that nationals from the organization's local nation are more competent to drive global exercises forward when contrasted with non-local representatives working at its auxiliaries. The activities, exercises, and approaches of the working organization in the local nation turn into the default standard to which all auxiliaries need to maintain. The advantage of this mentality is that it conquers the lack of qualified chiefs in the securing countries by relocating them from home nations. This builds up an associated corporate culture and helps move centre capabilities all the more without any problem. The significant disadvantage of this mentality is that it brings about social foolishness and doesn't advance the best and most brilliant in a firm. 28 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 2.4: EPRG Framework Regiocentric Orientation In this methodology, an organization finds monetary, social, or political likenesses among locales to fulfil the comparable requirements of expected buyers. For instance, nations like Pakistan, India, and Bangladesh are practically the same. They have a solid provincial character. Geocentric Orientation Geocentric methodology empowers worldwide advertising. This doesn't compare predominance with ethnicity. Independent of the ethnicity, the organization attempts to look for the best men and the issues are tackled worldwide inside the legitimate and political cut off points. Accordingly, guaranteeing proficient utilization of HR by building solid culture and casual service channels. The fundamental hindrances are that public migration strategies may put cut off points to its execution and it winds up costly contrasted with polycentrism. At last, it attempts to adjust both the worldwide mix and domestic responsiveness. Polycentric Orientation In this methodology, an organization gives equivalent significance to each country's local market. Each taking an interest nation is dealt with exclusively and singular systems are done. This methodology is particularly appropriate for nations with certain monetary, political, and social imperatives. 29 CU IDOL SELF LEARNING MATERIAL (SLM)

This discernment mitigates the opportunity of social near-sightedness and is regularly more affordable to execute when contrasted with ethnocentricity. This is because it doesn't have to send gifted chiefs out to keep up unified approaches. The significant detriment of this nature is it can confine vocation portability for both nearby just as outside nationals, disregard base camp of foreign auxiliaries and it can likewise cut down the odds of accomplishing cooperative energy. 2.4.1 MNCs and TNCs What Is a Multinational Corporation (MNC)? MNCs or Multinational Corporations has offices and different resources, in any event, one country other than its nation of origin. A worldwide organization for the most part has workplaces and additionally industrial facilities in various nations and a concentrated administrative centre where they facilitate worldwide service. These organizations, otherwise called global, stateless, or transnational corporate associations will in general have spending plans that surpass those of numerous little nations. How a Multinational Corporation (MNC) Works A worldwide company, or global endeavour, is a global partnership that infers, in any event, a fourth of its incomes outside its nation of origin. Numerous global undertakings are situated in created countries. Worldwide backers say they make lucrative positions and innovatively progressed merchandise in nations that in any case would not approach such freedoms or products. Be that as it may, pundits of these ventures accept these companies have unnecessary political impact over governments, misuse agricultural countries, and make work misfortunes in their nations of origin. The historical backdrop worldwide is connected with the historical backdrop of imperialism. Large numbers of the first multinationals were authorized at the command of European rulers to direct campaigns. A large number of the states not held by Spain or Portugal were under the organization of a portion of the world's most punctual multinationals. One of the previously emerged in 1600: The East India Company, established by the British. It was settled in London, and partook in global exchange and investigation, with general stores in India. Different models incorporate the Swedish Africa Company, established in 1649, and the Hudson's Bay Company, which was fused in the seventeenth century. Types of Multinationals Following are the four categories of multinationals: There are four classifications of multinationals that exist. They include:  A decentralized organization with a solid presence in its nation of origin. 30 CU IDOL SELF LEARNING MATERIAL (SLM)

 A worldwide, unified partnership that secures cost advantage where modest assets are accessible.  A worldwide organization that expands on the parent company's R&D.  A transnational venture that utilizes every one of the three classifications. There are inconspicuous contrasts between the various types of worldwide organizations. For example, a transnational—which is one kind of worldwide—may have its home in any event two countries and spread out its activities in numerous nations for an undeniable degree of domestic reaction. Nestlé S.A. is an illustration of a transnational organization that executes business and operational choices in and outside of its headquarters. In the interim, a global undertaking controls and oversees plants in at any rate two nations. This kind of worldwide will partake in the foreign investment, as the organization puts straightforwardly in have country plants to stake a possession guarantee, consequently staying away from exchange costs. Apple Inc. is an incredible illustration of a worldwide investment, as it attempts to amplify cost benefits through foreign interests in global plants. As per the Fortune Global 500 List, the best five worldwide partnerships on the planet starting in 2019 dependent on solidified income were Walmart ($514 billion), Sinopec Group ($415 billion), Royal Dutch Shell ($397 billion), China National Petroleum ($393 billion), State Grid ($387 billion). Advantages and Disadvantages of Multinationals There are various benefits to building up global tasks. Having a presence in a foreign country, for example, India permits an organization to satisfy the Indian need for its item without the exchange costs related to significant distance delivery. Companies will in general set up activities in business sectors where their capital is generally productive, or compensation is least. By creating similar nature products at lower costs, multinationals decreases costs and increment the buying force of purchasers around the world. Building up tasks in a wide range of nations, a global can exploit charge varieties by placing in its business formally in a country where the duty rate is low—regardless of whether its activities are directed somewhere else. Different advantages incorporate prodding position development in the domestic economies, possible expansions in the organization's expense incomes, and an expanded assortment of products. A trade-off of globalization—the cost of lower costs, so to speak—is that local positions are vulnerable to moving abroad. This recommends that it's significant for an economy to have a portable or adaptable workforce so variances in monetary demeanor aren't the reason for long haul joblessness. In this regard, instruction and the development of new abilities that compare to arising innovations are necessary to keep an adaptable, versatile labour force. 31 CU IDOL SELF LEARNING MATERIAL (SLM)

Those who went against multinationals say they are ways for companies to build up a restraining infrastructure (for specific items), driving up costs for purchasers, smothering rivalry, and repressing development. They are likewise said to detrimentally affect the climate because their activities may energize land advancement and the exhaustion of nearby (regular) assets. The presentation of multinationals into a host country's economy may likewise prompt the ruin of more modest, nearby organizations. Activists have likewise guaranteed that multinationals penetrate moral guidelines, blaming them for avoiding moral laws and utilizing their business plan with capital. Transnational Corporations (TNCs) Transnational companies (TNCs) are motors of monetary development in agricultural nations. TNCs are the essential drivers of foreign direct investment inflow to non-industrial nations; TNCs are work makers and TNCs make spill-over impacts in agricultural nations through the acquisition of local merchandise and enterprises; notwithstanding, the connection among TNCs and non-industrial nations is principally manipulative because of the monetary and mechanical force of TNCs saw with regards to the destitution, inadequacy, and sick service of most non-industrial nations. Investment contracts among TNCs and agricultural nations are frequently disproportionate for TNCs. TNCs additionally take part in tax avoidance through untrustworthy strategic policies, for example, round-stumbling and move evaluating. Besides, TNCs are time complicit in the infringement of basic freedoms, ecological rights, and work rights in agricultural nations. Without a doubt, agricultural nations have authentic force under local and worldwide law to direct the exercises of TNCs inside their locale. The issue, in any case, is that most agricultural nations do not have the limit and mastery to control the profoundly refined exercises of TNC. 2.4.2 Benefits of International Marketing The accomplishment of business practices observing, coordinating, and controlling the channel of an organization's items and services to its clients at the worldwide level to acquire benefit and fulfil the requests globally is the witticism of global advertising. The principle benefits of worldwide marketing are examined underneath − Provides Higher Standard of Living Worldwide promoting guarantees exclusive requirement way of life and abundance to residents of countries taking part in global advertising. Merchandise that can't be delivered in-home nation because of certain topographical limitations winning in the nation is created by nations that have a bounty of crude material needed for the creation and have no limitations forced towards creation. 32 CU IDOL SELF LEARNING MATERIAL (SLM)

Ensures Rational & Optimum Utilization of Resources Coherent distribution of assets and guaranteeing their best use at the global level is one of the significant benefits of worldwide advertising. It welcomes every one of the countries to send out whatever is accessible as excess. For instance, crude material, unrefined petroleum, shopper products, and even apparatus and services. Rapid Industrial Growth Interest in new merchandise is made through the global market. This prompts development in the mechanical economy. The modern advancement of a country is guided by worldwide advertising. For instance, new position openings, complete use of common assets, and so on. Benefits of Comparative Cost Global promoting guarantees near money-saving advantages to every one of them taking an interest nation. These nations profit from the advantages of division of work and specialization at the worldwide level through international marketing. International Cooperation and World Peace Exchange relations set up through global promoting carries every one of the countries more like each other and allows them to figure out their disparities through the common arrangement. This additionally urges nations to work cooperatively with each other. This consequently plans a cycle wherein created nations help non-industrial nations in their formative exercises and this eliminates financial inconsistencies and an innovative hole between the nations. Facilitates Cultural Exchange Global promoting makes social and social trade conceivable between various nations of the world. Alongside the merchandise, the latest things and design continued in one country pass to another, consequently creating a social connection among countries. Consequently, social coordination is accomplished at a worldwide level. Better Utilization of Surplus Production Merchandise delivered in surplus in one nation is dispatched to different nations that have the requirement for the products in worldwide advertising. In this way, the foreign trade of items between sending out the country and bringing in nations addresses the issues of one another. This is just conceivable if every one of them taking part nations successfully utilizes surplus merchandise, service, crude material, and so on to put it plainly, the significant benefits of global advertising incorporate successful use of surplus local creation, presentation of new assortments of merchandise, improvement like creation and advancement of shared co- activity among nations. 33 CU IDOL SELF LEARNING MATERIAL (SLM)

Availability of Foreign Exchange International marketing facilitates the accessibility of foreign currency needed for bringing in capital merchandise, present-day innovation, and some more. Fundamental imports of things can be supported by the foreign trade procured because of fares. Expansion of Tertiary Sector International marketing advances fares of merchandise starting with one country then onto the next empowering modern turn of events. Foundation offices are extended through worldwide promotion. It by implication encourages the utilization of transport, banking, and protection in a nation guaranteeing extra advantages to the public economy. Special Benefits at Times of Emergency At whatever point a nation faces normal disasters like floods and starvations, it is upheld by different nations in the global market. The global market gives crisis supply of merchandise and enterprises to meet earnest prerequisites of the nation confronting the cataclysm. This appropriation must be encouraged by a country that has excess imports. An organization trading products to other far-off nations procure generous benefit through sending out the activity as local marketing is less beneficial than worldwide promoting. The misfortune an organization endures in local promoting can be remunerated from the benefit procured through sends out in worldwide marketing. Foreign trade can be acquired by sending out products to far-off nations. In this manner, the benefit procured can be utilized for the import of fundamental products, new apparatus, innovation, and so forth this would additionally encourage enormous scope trade in the future. 2.5 INTERNATIONAL MARKETING ENVIRONMENT ANALYSIS METHODS Worldwide Marketing climate alludes to the controllable and wild powers that impact the marketing dynamic of a firm globally. International Marketing climate has involved those parts which shape arrangements, projects, and procedures of a worldwide marketer. A global firm should turn to the orderly investigation of worldwide promoting climate to gather the contributions of advertising dynamic. To serve the global business sectors successfully, a firm needs to understand worldwide marketing climate properly. The needs, inclinations, and assumptions for purchasers in various abroad business sectors are not comparable. The natural contrasts impact the international marketing choices of a firm. The worldwide advertising climate encompasses and impacts the association. Advertisers expect to convey worth to fulfilled clients, so they need to survey and assess the inner climate and the outer climate which is partitioned into miniature and macro. International Marketing 34 CU IDOL SELF LEARNING MATERIAL (SLM)

climate openings fluctuate among the countries. A few economies have gigantic possibilities of development while others have not. The information on financial climate assists a global advertiser with understanding which market to choose for receiving enduring rewards. International Marketing Environment – Introduction and Meaning Worldwide Marketing climate alludes to the controllable and wild powers that impact the advertising dynamic of a firm universally. Global Marketing climate is included those segments which shape the approaches, projects, and procedures of a worldwide advertiser. A worldwide firm should fall back on the deliberate investigation of the global advertising climate to gather the contributions of promoting dynamic. To serve the global business sectors adequately, a firm needs to understand the worldwide advertising climate appropriately. The requirements, inclinations, and assumptions for purchasers in various abroad business sectors are not comparative. The ecological contrasts impact the worldwide advertising choices of a firm. Such essential choices as to whether an organization ought to enter a given foreign market or not, what market section methodology should it utilize, what system it ought to embrace concerning an item, advancement, estimating and dispersion, and so on depend on two arrangements of elements, viz., the organization related elements and the foreign market- related components. The choice concerning if to go worldwide is based, notwithstanding the over two, on one more arrangement of components, viz., the local marketing climate. The organization-related elements allude to such factors as the organization's goals, assets, and global direction. The local marketing climate comprises variables like development possibilities including the opposition, government approaches, and so forth the foreign market-related variables which apply to the global business technique plan or which influence the worldwide business are regularly depicted as the worldwide business climate. What makes a business procedure that is fruitful in one market a disappointment in another market is regularly the distinctions in the business environment at the end of the day, the distinctions in the business climate may call for changes in the business systems, i.e., there ought to be a variation of the business technique to suit the climate of the market. So, it is the distinctions in the marketing climate which may make the global business procedure unique about the local one. Main Components of International Marketing Environment 35 CU IDOL SELF LEARNING MATERIAL (SLM)

The global promoting climate encompasses and impacts upon the association. Advertisers mean to convey worth to fulfilled clients, so they need to survey and assess the inside climate and the outer climate which is partitioned into miniature and full scale. Along these lines, there are principally two segments of global promoting climate:  Internal Environment  External Environment Internal Environment Inside climate alludes to the firm-related components. The firm-related components are alluded to as controllable factors because the firm has command over them and can (moderately effectively) transform them as might be suspected proper as its faculty, actual offices, association, and useful methods like marketing blend, to suit the climate. The inside climate of the organization incorporates all offices, like service, money, innovative work, buying, activities, and bookkeeping. Every one of these offices affects international marketing choices. For instance, innovative work has a contribution concerning the highlights an item can perform and bookkeeping supports the monetary side of promoting plans. The capacity of a firm to do global business relies upon various inside factors like the mission and goals of the firm; the authoritative and the executives' construction and nature; an interior connection between representatives, investors and Board of Directors, and so on; organization picture and brand value; actual resources and offices; R&D and mechanical abilities; workforce factors like expertise, quality, assurance, responsibility, demeanor, and so forth; promoting factors like the association for advertising, nature of the marketing men and circulation organization; and monetary variables like monetary approaches, monetary position, and capital design. We should take a gander at an illustration of what the inward climate would mean for an organization like Wal-Mart. For this situation, the prompt domestic impacts which may incorporate its promoting plans, how it executes client relationship the executives, the impact of different capacities like system from its top service, innovative work into new coordination arrangements, how it ensures that it buys an excellent item at the most minimal conceivable value, that bookkeeping is attempted proficiently and viably, and obviously, its nearby inventory network the board and coordination for which Wal-Mart is well known. A valuable device for rapidly examining the interior climate is known as the Five Ms which are Men, Money, Machinery, Materials, and Markets. Some may incorporate a 6th M, which are minutes since time is an important inner asset. Every one of these components is an 36 CU IDOL SELF LEARNING MATERIAL (SLM)

organization-related element that is completely controllable. All these must be thought of while entering the worldwide market. External Environment Outer climate alludes to the elements outside the firm. These variables are wild, or we can say that these are outside the ability to control an organization. The outer ecological factors like the financial variables, socio-social elements, government and legitimate components, segment factors, topographical elements, and so on are by and large viewed as wild factors. The outside climate may additionally be partitioned into two sections: Microenvironment The miniature climate is produced using people and associations that are near the organization and straightforwardly sway the client experience. They can be characterized as the entertainers in the association's prompt climate which straightforwardly impacts the company's choices and tasks. These incorporate, providers, different market delegates and service associations, contenders, clients, and the public. The miniature climate is generally controllable since the activities of the business may impact such partners. Wal-Mart's miniature climate would be a lot of zeroed in on prompt nearby issues. It would think about how to enlist, hold and stretch out items and services to clients. It would consider the activities and responses of direct contenders. Wal-Mart would assemble and support cozy associations with key providers. The business would have to impart and liaise with its publics, for example, neighbours which are near its stores, or other street clients. There will be different mediators too including publicizing organizations and worker's guilds, among others. Suppliers Advertising directors should watch supply accessibility and different patterns managing providers to guarantee that items will be conveyed to clients in the period needed to keep a solid client relationship. Marketing Intermediaries Marketing mediators alludes to affiliates, actual dispersion firms, advertising services offices, and monetary delegates. These are individuals that assist the organization with advancing, sell, and disseminate its items to definite purchasers. Affiliates are those that hold and sell the organization's item. They match the dissemination to the clients and incorporate places like Wal-Mart, Target, and Best Buy. Actual dispersion firms are places, for example, stockrooms that store and transport the organization's item from its inception to its objective. Marketing services organizations are 37 CU IDOL SELF LEARNING MATERIAL (SLM)

organizations that offer services like leading promoting exploration, publicizing, and counselling. Monetary go-betweens are organizations like banks, credit organizations, and insurance agencies. Customers Another part of the microenvironment is the clients. There are various kinds of client markets including shopper markets, business markets, government markets, worldwide business sectors, and affiliate markets. The buyer market is comprised of people who purchase products and investments for their very own utilization or use in their family. Business markets incorporate those that purchase merchandise and investments for use in delivering their items to sell. This is not quite the same as the affiliate market which incorporates organizations that buy products to exchange as-is for a benefit. These are similar organizations referenced as market go-betweens. The public authority market comprises government organizations that purchase products to deliver public services or move merchandise to other people who need them. Worldwide business sectors remember purchasers for different nations and incorporate clients from the past classifications. Competitors Contenders are likewise a factor in the miniature climate and incorporate organizations with comparable contributions for merchandise and enterprises. To stay serious an organization should consider who its greatest rivals are while thinking about its size and position in the business. The organization ought to build up an essential benefit over its rivals. Publics The last part of the microenvironment is the public, which is any gathering that affects the association's capacity to meet its objectives. For instance, monetary publics can impede an organization's capacity to acquire reserves influencing the degree of credit an organization has. Media publics incorporate papers and magazines that can distribute articles of revenue concerning the organization and publications that may impact clients' sentiments. The government public can influence the organization by passing enactment and laws that put limitations on the organization's activities. Resident activity publics incorporate ecological gatherings and minority gatherings and can scrutinize the activities of an organization and put them in the public spotlight. Nearby publics are domestic and local area associations and will likewise scrutinize an organization's effect on the domestic the degree of duty of their activities. The overall population can significantly influence the organization as any adjustment in their disposition, regardless of whether positive or negative, can make deals go up or down 38 CU IDOL SELF LEARNING MATERIAL (SLM)

because the overall population is regularly the organization's client base lastly the individuals who are utilized inside the organization and manage the association and development of the organization's item. Macro Environment The full-scale climate is less controllable. The full-scale climate comprises of a lot bigger sweeping impacts (which sway the miniature climate) from the more extensive worldwide society. The large-scale climate incorporates culture, policy-driven issues, innovation, the common habitat, financial issues, and segment factors, among others. Again, for Walmart, the more extensive worldwide full-scale climate will unquestionably affect its business, and large numbers of these variables are wild. Wal-Mart exchanges chiefly in the United States yet also in global business sectors. For instance, in the United Kingdom Wal-Mart exchanges an ASDA. Wal-Mart would have to consider domestic customs and practices in the United Kingdom, for example, bank occasions and other nearby celebrations and so on Various components establish the global climate: social, social, political, legitimate, serious, monetary, and innovation. Each ought to be assessed before an organization settles on a choice to go worldwide. Social/Cultural Environment The social/social climate comprises the impact of strict, family, instructive, and social frameworks in the marketing framework. Advertisers who mean to showcase their items abroad might be exceptionally delicate to foreign societies. While the contrasts between the home country and those of foreign countries may appear to be little, advertisers who disregard these distinctions flirt with disappointment in executing marketing programs. The inability to consider social contrasts is one of the essential explanations behind promoting disappointments abroad. This assignment isn't just about as simple as it sounds as different highlights of a culture can make a figment of similitude. Indeed, even a typical language doesn't ensure a similitude of understanding. For instance, in the US clients buy \"jars\" of different staple items, yet the Britishers buy \"tins\". Various social contrasts can mess advertisers up in endeavouring to showcase their items abroad. These include: (a) Language (b) Colour (c) Customs and taboos 39 CU IDOL SELF LEARNING MATERIAL (SLM)

(d) Values (e) Aesthetics (f) Time (g) Business norms (h) Religion (i) Social structures 2.6 SUMMARY  Creating Customer Value increases customer satisfaction and the customer experience. A good customer experience will create value for a customer.  Value creation depends on both market culture as well as the business processes. The former is more difficult to influence.  With creation of customer value, the market share and profits rise since customers become more loyal to the brand.  Competitive Advantage, also seen as comparative and differential advantage, increases the desirability of a firm’s offering Vis a Vis competitor offerings.  Comparative advantage refers to a firm’s capacity to produce goods at a higher efficiency that the competition and thus the firm earn more profits.  A differential advantage is when a company's products are seen as both unique and higher quality, relative to those of a competitor.  Differential advantage can also be used as an analysis tool to identify target markets for a particular product or service based on the benefits a customer will enjoy by giving your company their business.  Marketing management orientations refer to concepts in marketing that explain techniques relating to production, creation and marketing of products.  Created as a framework in 1969 by Howard V Perlmuter and Wind and Douglas EPRG stand for Ethnocentric, Polycentric, Regiocentric, and Geocentric.  EPRG can be applied to help companies incorporate international management orientations and also for creating businesses that are international.  Businesses want to build profitable customer relationships by designing superior strategies.  Multinational corporations make a foreign direct investment in another country by establishing branches or foreign subsidiaries.  Mostly headquartered in Europe, Japan and US, Transnational Corporations operate across international borders. 40 CU IDOL SELF LEARNING MATERIAL (SLM)

 With abundant economic wealth, TNCs are even more powerful than some of the nations.  Consolidation of both controllable/internal and uncontrollable/external factors impacting international trade is called International marketing environment. 2.7 KEYWORDS Multinational Corporations: Organizations that manage production or offer services in more than on country. Ethnocentric Orientation: As per this, people consider their home country better than any other country. Geocentric Orientation: This orientation views entire world as one big potential market. Polycentric Orientation: This orientation believes that every country is unique. Regiocentric Orientation: This orientation believes that each region is unique. 2.8 LEARNING ACTIVITY Kellogg’s, the global giant when it comes to cereals, entered in India in 1994 and introduced their proprietary ‘original’ recipe which failed miserably in the Indian subcontinent. 1. Research the details on Kellogg’s case and discuss changes made by Kellogg’s to establish in Indian market. ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ 2. Compare the performance of Kellogg’s with competitor brand. …………………………………………………………………………………………..….. ……………………….…………………………………………………………………….. 2.9 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Explain MNC’s and TNC’s 2. Explain is economic environment of international marketing? 3. Describe political and legal dimensions of international marketing? 4. Explain demographic environment of international marketing? 5. Explain natural and geographical environment of international marketing? 41 CU IDOL SELF LEARNING MATERIAL (SLM)

Long Questions 1. How can creating value for customer and customer focus give competitive advantage to the companies? 2. Distinguish among (a) ethnocentricity (b) polycentricism and (c) geocentricity. 3. Explain competitive advantage. 4. How can creating value for customer and customer focus give competitive advantage to the companies? 5. Explain five types of value. B. Multiple Choice Questions 1. The seller who is at CPV disadvantage should _____________. a) Enhance total customer benefit b) Decrease total customer cost c) Either a or b d) None of these 2. The _______ comprises the whole pack of benefits the firm promises to deliver. a) Value proposition b) Value creation c) Value delivery d) None of these 3. The_________ includes all the experiences the customers get while buying and using the offering. a) Value exploration system b) Value delivery system c) Value creation system d) None of these 4. ______is not a part of marketing mix. a) Product b) Purpose c) Place d) Price 5. The most formal and best definition of marketing is ___________. a) An organizational function and a set of process for creating, communicating and delivering, value to customers and that benefit the organization. b) Improving the quality of life for consumers c) Meeting needs profitability d) Marketing is an organizational function includes the 4Ps Answers: 42 CU IDOL SELF LEARNING MATERIAL (SLM)

1. c) 2. a) 3. b) 4. b) 5. a) 2.10 REFERENCES Textbook  Burov A. S. International Marketing. - M.: CTI «Dashkov and Co», 2004.  Dugіna S.І. Marketing pricing policy. - K.: KNEU, 2005  Foreign economic activity of enterprises. Edited by Kozak Y. - K.: CSL2010.  Kanishchenko O.L. International Marketing: Theory and economic situation.2nd ed. KIBC \"Publisher\" Polytechnic \",\" 2004  Karpova S.V. International Marketing. М., 2005  Kotler P. Principles of Marketing / P. Kotler, G. Armstrong, J. Saunders,  Wong – Second European Edition. — Prentice Hall Inc., 1999. — 1036 р. Reference Books  Varshney R.L, Bhattacharya B - International Marketing Management (Sultan Chand & Sons, 9th Ed.)  Jain S. – International Marketing (Thomson) Websites  https://courses.lumenlearning.com/  https://www.thebalance.com/  http://www.legalserviceindia.com/ 43 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 3: INTERNATIONAL TRADE ENVIRONMENT Structure 3.0 Learning Objectives 3.1 Introduction 3.2Trade Theories 3.2.1 Classical Trade Theories 3.2.2 Modern Trade Theories 3.3 Trade Barriers 3.3.1 Type of Trade Barriers 3.3.2 Non-tariff Barriers 3.4 Quotas 3.5 Tariffs 3.5.1 Implications of Tariffs 3.6 Summary 3.7 Keywords 3.8 Learning Activity 3.9 Unit End Questions 3.10 References 3.0 LEARNING OBJECTIVES After studying this unit, student will be able to:  Explain trade theories- classical and modern theories  Explain trade barriers.  Explain quota and tariffs.  Discuss implications of tariffs. 3.1 INTRODUCTION Trade and climate are perhaps the most discussed points in service and financial aspects concentrate over the years as a result of the expanding worries on what worldwide exchange means for climate and the other way around (Copeland and Taylor 2004). All things 44 CU IDOL SELF LEARNING MATERIAL (SLM)

considered, the discussion on exchange and climate isn't new, and it arose in the mid-1970s with concerns like ecological assurance, natural strategies on an exchange, and the effect on the exchange on climate. The majority of the created economies communicated interests in natural debasement connected with the globalization interaction, for example, mechanical contamination. During the 1980s, natural concerns expanded as more perplexing ecological issues were raised, for example, the environmental change and the consumption of the ozone layer. Later during the 1990s, the supportable advancement idea was presented as exchange progression and the globalization cycle sped up (Dean 1992). A few hypotheses on the side of global exchange, for example, the monetary hypothesis has delivered the discussion perplexing as the defenders of the financial hypothesis contend that worldwide exchange is crucial to economies since it results in a hearty monetary development and creates more prominent prosperity of its residents. All things considered, ecological approaches and objectives have been hard to accomplish during these discussions (Levinson and Scott 2008). Various contentions exist about the worldwide exchange with a couple of scientists for ecological insurance as they contend that global exchange has come about into ecological consumption as the interest of world regular assets keep on expanding. Of the two viewpoints, there is a middle idea that has been proposed, the maintainable advancement which implies that as worldwide exchange results into financial development, this development should be joined by ecological approaches and exacting natural assurance rules. A portion of the protectors of maintainable advancement has upheld deregulation yet with the consideration of limitations in multilateral arrangements to control the corruption of regular assets (Copeland and Taylor 2004). Worldwide exchange includes the progression of merchandise and investments across the boundary ascribed with the development in the globalization cycle and rivalry. Exchange progression: just as the lifting of boundaries to exchange has prompted the misuse of characteristic assets into a more effectively utilize accordingly adding to the development of the majority of the economies on the planet (Dean 1992). The global exchange has monetary advantages like abuse of assets, work creation, foreign direct investments, industrialization, and yield development; however, as exchange progression proceeds, the ecological effects have become more unpredictable in this manner requiring natural approaches to guarantee that as economies develop, the climate isn't exhausted. By eliminating value contortions, exchange helps effective utilization of assets and creation methods fundamental for the development of economies, particularly in the creating economies. All things considered, the conversation on exchange and climate is, thusly, significant. 45 CU IDOL SELF LEARNING MATERIAL (SLM)

3.2 TRADE THEORIES Economists have established theories that explain global trade. These theories explain what exactly happens in International Trade. The classical theories are divided into three theories, as shown in Figure Figure 3.1: Classical Theories of Trade 3.2.1 Classical Trade Theories  Theory of Mercantilism Mercantilism is the term that was advocated by Adam Smith, Father of Economics, in his book, The Wealth of Nations. Western European financial approaches were enormously overwhelmed by this hypothesis. The hypothesis of mercantilism holds that nations ought to empower trade and debilitate imports. This hypothesis was famous in the sixteenth and eighteenth Centuries. During that time, the abundance of the country was just comprised of gold or different sorts of valuable metals so the scholars recommended that the nations should begin gathering gold and different sorts of metals to an ever-increasing extent. The European Nations began doing as such. Mercantilists, during this period, expressed that every one of these valuable stones signified the abundance of a country, they accepted that a nation would fortify just if the country imports less and sends out additional. They said that this is the great equilibrium of exchange and that this will assist a country with advancing more. Mercantilism flourished during the 1500s because there was an ascent in new country states and the leaders of these states needed to fortify their countries. The best way to do so was by expanding fares and exchange, given which these rulers had the option to gather more capital for their countries. These rulers energized sends out by putting constraints on imports. This methodology is classified as \"protectionism\" and today is as yet utilized. 46 CU IDOL SELF LEARNING MATERIAL (SLM)

However, Mercantilism is one the most antiquated hypothesis; it stays a piece of contemporary reasoning. Nations like China, Taiwan, Japan, and etcetera favour Protectionism. Pretty much every nation has executed a protectionist strategy somehow, to secure their economy. Nations that are sent out arranged lean toward protectionist approaches as it favours them. Import limitations lead to more exorbitant costs of goods and services. Streamlined commerce benefits everybody, though; mercantilism's protectionist approaches just benefit select investments.  Absolute Cost Advantage This hypothesis was created by Adam Smith; he was the dad of Modern Economics. This hypothesis came out as a solid response against the protectionist mercantilist sees on global exchange. Adam Smith upheld the need for deregulation as the solitary affirmation for the development of the exchange. He said that a nation should just create those items wherein they have an outright benefit. As indicated by Smith, deregulation advanced worldwide division of work. By specialization and division of work makers with various total benefits can generally acquire over-delivering in distance. He underlined on delivering what a nation spends significant time in so it can create more at a lower cost than different nations. This hypothesis says that a nation should trade an item wherein it has an expense advantage. Adam's hypothesis determined that a country's success ought not to be planned by how much gold and other valuable metals it has, yet rather by the expectations for everyday comforts of its residents.  Comparative Cost Advantage Theory The near-cost hypothesis was first given by David Ricardo. It was subsequently cleaned by J. S. Plant, Marshall, Taussig, and others. Ricardo said total benefit isn't required. He additionally said a nation will deliver where there is a near advantage. The hypothesis proposes that every nation should move in the creation of those items in which it has the most extreme benefit or the least disservice. Subsequently, a state will trade those provisions wherein it has the most advantage and import those provisions where it has the least disadvantage. A similar benefit emerges when a nation can't yield an item with more capability than another nation; notwithstanding, it has the assets to fabricate that ware more capably than it does different products. 47 CU IDOL SELF LEARNING MATERIAL (SLM)

3.2.2 Modern Trade Theories  Hecksher Ohlin Theory (H-0 Theory) Smith and Ricardo's investments didn't help the nations sort out which items would give better re-visitations of the country. In the 1900s, two financial specialists, Eli Hecksher and Bertil Ohlin focused on how a nation could benefit by making merchandise that used elements that were in plenitude in the country. They discovered that the variables that were in bounty corresponding to the interest would be less expensive and that the elements in extraordinary interest relative to its inventory would be more costly. The H-0 Theory is otherwise called the Modern Theory or the General Equilibrium Theory. This hypothesis zeroed in on factor gifts and factor costs as the main determinants of global exchange. The H - 0 is partitioned into two hypotheses: The H - 0 hypotheses, and the Factor Price Equalization Theorem. The H - 0 hypotheses predicts the example of exchange while the factor-value levelling hypothesis manages the impact of worldwide exchange on factor costs. H - 0 hypotheses are additionally separated into two sections: factor force and factor bounty. Factor Abundance can be clarified as far as actual units and relative factor costs. Actual units incorporate capital and work, though, relative factor cost incorporates the abutting costs like lease, work cost, etcetera. Then again, factor power implies capital, work or innovation, etcetera, any factor that a nation has.  National Competitive Theory or Porter's Diamond This concept given by Michael Porter mentions that success of a corporation highly depends on the qualities of the domestic country. This model can be represented as a diamond shape. Hence, the name. This model mentions six determinants for a corporation’s success. These determinants are: i. Factor Condition. ii. Demand Conditions. iii. Related and Supporting Industries. iv. Firm Strategy, Structure, and Rivalry. v. Chance. vi. Government. Product Life Cycle Theory Raymond Vernon, a professor at HBS (Harvard Business School) developed this theory on the life stages of a product. At the time of World War II in the 1960s, this theory proved to be very useful. 48 CU IDOL SELF LEARNING MATERIAL (SLM)

Stage I: New Product At this stage, the product is just launched and is in its nascent state. And initial sales are low .Thus, production happens locally in developed nations as Vernon assumes that these economies only had resources to create innovations. Once the product stabilizes and sales increase, these nations export the product to expand business. Stage II: Mature Product Stage This is the stage where the product stabilizes, and the demand continually increases in developed nations and may be in the developing nations also. Costs are kept in check by setting up local manufacturing units in the nations with high demand. This stage is also marked by rise in competition in domestic markets. Stage III: Standardized Product Stage This stage witnesses a downward spiral in terms of demand as new products get launched and capture the market. Eventually, demand in both domestic and foreign markets dies down. And this indicates the beginning of this cycle for a new product. Conclusion The above discussed theories form the basis for governments, economists and businesses to make better sense of international trade. In the 17th and 18th century, thee mercantilist view which did not support free trade, was dominant. Since this theory did not address many existing problems, Adam Smith proposed the merits of free trade in enhancing prosperity of a nation. Even this theory was argued against by Ricardio who stated that nations should only manufacture goods most advantageous to them. Heckscher Ohlin explained factors relating to trade and Vernon studied the impact that technological advancement has on international trade. The newer theories like the Product Life Cycle theory and Porter’s Diamond better elaborate on the patterns in international trade as these have more realistic assumptions. While the older theories like Cost Advantage, Comparative Advantage and Mercantilists theory base their conclusions on only two participants. 3.3 TRADE BARRIERS Trade Barriers are moves that are made by the government to expand the net fare by limiting imports of specific items or services, expanding local creation, local pay, and business. The exchange obstructions could be valuable to local firms by offering benefit to them while rivalry with imported products anyway it very well may be unsafe to local clients. While 49 CU IDOL SELF LEARNING MATERIAL (SLM)

domestics firms appreciate higher deals, not so much rivalry, but rather more benefits local purchasers may insight with higher local costs by confining imports of items. Duties, import portions, and non-tax hindrances are the most well-known exchange obstructions in the present economy. Duties are fundamental burdens added on imported items' costs. With taxes, the cost of the item will increment, and it is expected to diminish the interest of that item in the local market. Levies are utilized most usually as an exchange hindrance since it isn't just expanding the interest on nearby creates items; however, it is additionally carrying a duty income to the public authority depository. Taxes are normally forced if local makers can persuade government strategy creators to make up for foreign makers who outlandishly acquire an upper hand because of low foreign wages, unloading practices, or low creation costs. Notwithstanding, taxes are likewise forced as an overall method for restricting imports. That implies that not just the domestic makers will profit by this exchange boundary yet besides government will have extra assessment income. 3.3.1 Type of Trade Barriers Trade barriers are government-induced restrictions on international trade. Man-made trade barriers come in several forms, including:  Tariffs  Non-tariff barriers to trade  Import licenses  Export licenses  Import quotas  Subsidies  Voluntary Export Restraints  Local content requirements  Embargo  Currency devaluation  Trade restriction Most exchange hindrances work on a similar standard the burden of a type of cost on an exchange that raises the cost of the exchanged items. Assuming at least two countries over and overuse exchange boundaries against one another, an exchange war results. Financial experts by and large concur that exchange obstructions are unfavourable and decline generally monetary proficiency. This can be clarified by the hypothesis of near advantage. In principle, deregulation includes the expulsion of every single such boundary, aside from maybe that thought about fundamental for wellbeing or public safety. By and by, 50 CU IDOL SELF LEARNING MATERIAL (SLM)