The suitability of a particular channel depends greatly upon the country in which it is used. The particular type of intermediary that works well in our country may not work well elsewhere or may lose effectiveness over time. This does not necessarily mean that each country requires a unique channel but a company may find that a country classification system is useful, a system that can be used to determine how the distribution strategy should be set-up from one group of countries to another.
Litbak and Benting suggest the use of a countryÊs temperature gradient to classify countries. Their classification system is based on the following environmental characteristics:
1. Political stability 2. Market opportunity
3. Economic development and performance 4. Cultural unity
5. Legal barriers/restrictions 6. Physiographic barriers and 7. Geo-cultural distance.
Based on these characteristics, countries may be classified as hot, moderate or cold. A hot country is one that scores high on the first four characteristics and low on the last three. A cold country is exactly the opposite and a moderate one is medium on all seven characteristics.
The United States falls in the characteristics of a hot country. So does Canada even though its cultural unit and its physiographic barriers are moderate. Germany, likewise, is a hot country in spite of some slight interference in the sense that its legal barriers and geo-cultural distances are moderate. Brazil, in contrast, largely conforms to cold countriesÊ characteristics. India is a cold country though for the market opportunity it is hot. Its economic development and performance, cultural unity and legal barrier restrictions also fall in the hot category. It is only in the case of political stability that it is cold. However, with the ensuing next elections, this may also become hot.
Summary
This unit focused on the export-marketing task. The importance of this task was also highlighted. An exporter has to look for markets beyond his countryÊs geographical borders. An export company essentially has to find foreign buyers for its own products or has to produce/procure goods as per the requirements of the importer.
This means one has to deal with foreign nationals/companies to be in exports. Export marketing, thus, can be defined as identifying willing foreign buyers whose needs could best be met using our products and delivering satisfaction through supply of goods in their countries complying with formalities of international transactions of both countries.
There are six distinct steps in new product development. The first step is the generation of new product ideas. The second step involves the screening of ideas. The
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third step is business analysis, the fourth is product development. Fifth step involves test marketing to determine potential marketing problems and the optimal marketing mix. In the sixth step, assuming that things go well, the company is ready for full scale commercialisation by actually going through with full scale production and marketing. It may be pointed out here that not all the six steps in new product development will be applicable to all products and countries.
The product cannot be marketed in a big way without product segmentation. Starting at the low end of product spectrum, a Japanese firm establishes a reputation for product excellence and eventually gets customers to trade up over time.
Product positioning is a marketing strategy that attempts to occupy an appealing space in consumersÊ mind in relation to the spaces occupied by other competitive products. A product must be positioned carefully. For example, British firms emphasize traditional brand names while American firms emphasise product range and technology and are less likely to adapt to local market conditions. In the final analysis, consumer needs must determine how products are to be positioned.
Before breaking into the foreign market, marketers must consider factors that influence product adaptation. Wool coats are not needed in a hot country and products reducing static cling (cling free) are useless in a humid country. If a new product requires replacement of those other items that are still usable, product adoption becomes a costly preposition. Complexity of a product or difficulty in understanding the productÊs quality tends to slow its market acceptance.
Export pricing is crucial to the success of any exporter. Price needs to be understood with three reference points of Cost, Competition and Customer. An exporter can use the normal cost plus pricing, choosing between high, low or moderate pricing options. However, a more realistic basis would be the use of marginal costing.
Competition has a direct bearing on the prices and cannot be ignored. The most important and lasting influence on the price decisions is that of the customer acceptance. The exporter needs to work backwards on his costs to match the target price. Pricing has to meet the contradicting objectives of recovery of costs with a profit, beating your competition and above all customer satisfaction. The exporter therefore must work close to his buyer while setting prices, sharing all information on costs and competition, and using all inputs provided by the buyer.
The promotion mix consists of three distinct but interrelated activities: personal selling, publicity and sales promotion. The cost of personal selling is very high. and its effectiveness is also a function of product type. In general, personal selling works well with high unit value and frequently purchased products.
Advertising differs from personal selling in many aspects. Advertising relies on a non-personal means of contact and sales presentation. The differences between advertising and personal selling can also be contrasted in terms of the communication process. High unit value and low turnover products require a higher quality of personal selling than low-unit-value, high-turnover products. Japanese sales persons sell cars door to door. Inter-cultural negotiations are important for sales promotion.
Certain factors may affect sales performance in various countries. Some marketers feel that expatriate persons should be used as sales persons in foreign markets or those from the home country. Publicity offers several advantages. It should be used when a company advertises heavily since advertising increases the likelihood of the media to reciprocate by using the companyÊs news releases. Nike was able to overtake Adidas in the United States with effective publicity and sales promotion campaigns.
The exporting firms, through sales representatives and export distributors, use the export distribution channel. A foreign distributor is a foreign firm that has exclusive rights to carry out distribution for a manufacturer in a foreign country or specific area.
If foreign retailers are used, the product in question must be a consumer product
Export Market
& Export Marketing Process
Notes rather than an industrial product. A manufacturer may find it difficult, rather
impractical, to sell directly to various foreign parties (foreign distributors, foreign retailers, state controlled trading companies and end users) for a majority of products.
Other intermediaries have come between these foreign buyers and manufacturers. An agent represents the manufacturer whereas a merchant (distributor) represents the manufacturerÊs product. Some agent intermediaries represent the buyer; others represent the interests of the manufacturer. Those who work for the manufacturer include export brokers, manufacturerÊs export agents, export management companies, cooperative exporters, and Webb Pomerene Agents.
Keywords
Market Segmentation: The process of segregating a heterogeneous market into a set of homogeneous market into a set of homogeneous groups of customers.
Skimming Price: The firm decide to charge high initial price where the product is an innovation, unique in the market.
Marginal cost Pricing: Under this method, fixed costs are ignored and prices are determined on the basis of marginal cost.
Export Promotion: It consists of diverse set of incentives tools used for promotion of products and services in international market.
Distribution Channel: A distribution channel for a product is the route taken by the title to the goods as they move from the producer to the ultimate customer.
Market Targeting: The Process of segmentation, targeting and positioning an offer in the market.
Product Positioning: The act of developing a product offer and selecting an image to occupy a distinctive place in the minds of the target market.
Product: A product is anything which is offered to the market to satisfy consumer needs and wants.
Product Line: A set of individual products that are closely related.
New Product: A product that is new in any way for the company concerned.
Market Penetration Pricing: Deciding in favour of a lower price to penetrate deeper into the market and to stimulate market growth and capture a large market share.
Cost Plus Pricing: Under this method, the price is set to cover cost and pre-determined margin of Profit.
Middlemen: Anybody acting as an intermediary between the producter and the consumer.
Agent: Intermediaries with legal authority to market goods and services and to perform other functions on behalf of the producer.
Review Questions
1. How do you select the market for the exporting of goods?
2. Discuss the process of introducing new products in international market.
3. What are the factors that make it feasible to offer a standardized product?
Offer your comments for product adaptation.
4. How is export pricing different from domestic pricing? What special points should an exporter keep in mind while finalizing export prices?
5. Critically examine the various factors affecting export price decisions.
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6. What is Target Pricing? Explain with the help of an example.
7. What do you understand by promotion in relation to international trade?
What are the objectives and importance of sales promotion in foreign trade?
8. What are various factors that affect the promotion decisions in world markets? Discuss in detail.
9. Distinguish between direct and indirect selling channels. What are the advantages and disadvantages of each?
10. Explain direct channel intermediaries and indirect channel agents with the example from Indian contact.
Further Readings
Aseem Kumar, Export & Import Management, Excel Books, New Delhi, 2007 P.K . Vasudeva, International Marketing, Excel Books, New Delhi, 2006 Cateora and Graham, International Marketing, McGraw Hill, 2007
International Marketing Research
Notes
Unit 8 International Marketing
Research
Unit Structure
• Introduction
• The Scope of International Marketing Research
• Research of Industry, Market Characteristics and Market Trends
• The International Marketing Research Process
• Summary
• Keywords
• Review Questions
• Further Readings
Learning Objectives
At the conclusion of this unit you should be able to:
• Formulate research design for international marketing
• Explain the quantitative techniques for market research
• Distinguish between primary and secondary data
Introduction
International marketing research is the systematic design, collection, recording, analysis, interpretation, and reporting of information pertinent to a particular marketing decision facing a company operating internationally.
This definition of international marketing research contains a caveat also present in the general definition of marketing research: An acquired understanding of the market environment. In an international setting, the environment is particularly complex, and it displays obvious and important subtle differences in culture, religion, customs and business practices, and general market characteristics from the environment of the companyÊs home country.
Res earc h of Indus try , M ark et Charac teris tic s , and M ark et Trends
B uy er behavior res earc h
P roduc t res earc h
Dis tribution res earc h
P rom otion res earc h
P ric ing res earc h
Figure 8.1: The scope of international marketing research
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