International Marketing - Unit 1

International Marketing - Unit 1
Marketing is the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others -Prof.Philip Kotler
Marketing is essentially about marshalling the resources of an organization so that they meet the changing needs of the customer on whom the organization depends - Prof. Palmer
The right product, in the right place, at the right time, at the right price - Prof.Adcock
International Marketing
Marketing is not only much broader than selling, it is not a specialized activity at all It encompasses the entire business, it is the whole business seen from the point of view of the final result, that is, from the customer's point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise. - Peter Ferdinand Drucker
International Marketing can be precisely defined as the performance of business activities that direct the flow of a company's goods and services to consumers or users in more than one nation for a profit.
International Marketing over Domestic Marketing Challenges:
- Sovereign political entities - Difference in legal system - Difference in monetary system (International Monetary Fund) - Lower mobility of factors of production - Difference in market characteristics (difference in demand pattern, channels of distribution, methods of promotion) - Difference in procedure and documentation
Marketing Mix & Promotion Strategies on an International Front

- 4 Ps; 7 Cs, etc - Message - AIDA = Attention, Interest, Desire, Action - DAGMAR (Defining Advertising Goals for Measured Advertising Results) - Push & Pull - Public Relations - Direct Mail
Benefits / Opportunities of International Marketing:
- Endurance - Progress of overseas market - Sales promotion - Diversification - Inflation and wholesale price index - Employment opportunities - Lifestyle and standards of individuals and organization - Understanding international markets
Orientations of Management & Companies:

- Ethnocentric (Home country is superior; Similar fashion in other countries) - Polycentric (Each country is different; See differences in other countries) - Regiocentric (Ethno & Poly in each region of the world; Individualistic & Ideal) - Geocentric (Sees similarities and differences in home & host countries)
Modern Theories of International Trade A. Strategic Trade Theory: 1. Increasing returns to scale 2. Product differentiation 3. Imperfect competition 4. Externalities and spillover effects 5. Irreversible investments B. International Product Life cycle theory: 1. Stage 0 : Local innovation 2. Stage 1 : Overseas innovation 3. Stage 2 : Maturity 4. Stage 3 : Worldwide imitation 5. Stage 4 : Reversal
Cultural and political forces influence international marketing activity. Few factors that could effect as well as affect International Marketing are, 1. Language: Communication 2. Customs: Important in order to not offend while communicating your message. 3. Social factors: (Example : Role of women in the society) 4. Religion: (Religion Vs Behaviour) 5. Values: Values and attitudes of individuals within the market.
International Marketing-Unit 2
Global Marketing Environment: (i) Political * (ii) Legal and Statutory (iii) Social and Cultural (iv) Economic
Political environment: (i) Types of government: Two party; Multiple; Single; Dominated by one party. (ii) Economic systems (iii) Political risk analysis (iv) Indicators of political instability (v) Policies of the host government (vi) Management and measurement of political risks (GNP; Export & Import, etc) (vii) Privatisation (Ex: India - Increase in economy for employment , post recession) (viii) Insurance: Political, Private and Government (i) Currency inconvertibility (ii) Expropriation (iii) Loss on damage due to revolution; war; insurrection (ix) MNCs & SNOs
Multi-National Organisations & Super National Organisations :(MNCs & SNOs) International Monetary Fund (IMF) Major function: Efforts to coordinate the response to the financial world to debt crisis, managing international funds through norms and policies. Other Important function: Loans for structural adjustments in economies facing reverse macro economic instability and distortions. The World Bank: Four main agencies include, (i) International Bank for reconstruction and development (IBRD) (ii) International development association (IDA) (iii) International financial corporation (IFC) (iv) Multilateral investment guarantee agency (MIGA)
Five major categories of world bank loans: (i) Specific investment loans (Ex : Agri, rural & urban dvlpmnt, energy resources) (ii) Sector operational loans (Occupies one third of world banks lending. Focuses on financial development of sectors like Oil, energy, agri, for a countrys economy) (iii) Structural adjustments and programme loans (For countries to reform or remove imbalances in the external sector) (iv) Technical assistance loans (To strengthen a country that plans its development strategy, designs and implements projects that improves its technical capacity) (v) Emergency reconstruction loans (To a country that need immediate economic or mainly to amend the infrastructure that has experienced sudden and severe damage due to natural disasters such as earthquakes and floods.)
Legal and Statutory environment: (i) Bribery (Both unethical and illegal) Per Foreign Corrupt Practices Act (FCPA), it is an authorisation to give anything of value to influence an act of decision by a foreign government. Reasons for a business person to offer bribe are, (i) To fasten the required work or the process (ii) To secure a contract (iii) To avoid cancellation of a contract (iv) To prevent competitors from getting the contract
(ii) Intellectual Property (IP) They are patents that provide property rights to invention. The only products or processes which countries are permitted to exclude according to Trade Related Intellectual Property Rights (TRIPS agreement of WTO) are, (i) Diagnostic, therapeutic and surgical methods for treatment of humans and animals. (ii) Plants and animals other than micro-organisms. (iii) Essentially biological processes for production of plants and animals other than non-biological and micro-biological processes. (iii) Copyrights and related rights. (iv)Counterfeiting (v) Business & Government responses to counterfeit goods.
Grey Market: Legitimate goods entering a market through unauthorised channels. Case 1: US firm purchasing rights to register & use foreign firms trademark in US. Case 2A: Foreign firm manufactures overseas. US subsidiary of the firm registers the foreign trademark in the US. Case 2B: US corporation creating foreign subsidiary to manufacture and sell trademark goods. Case 2C: US corporation establishes a division to manufacture goods overseas. Case 3: US holder of US trademark authorises a foreign manufacturer to make goods and use trademark in foreign markets.
Money Laundering: Though certain anti-money laundering measures have been taken in many nations, money laundering is a issue ever to be resolved. With ever widening financial instruments to offer for several proposals, laundering possibilities are being opened up in a large extent. Foreign Exchange Management Act (1999): Foreign exchange means foreign currency and includes all deposits, credits and balances, payable in any foreign currency and any drafts, travellers cheques, letters of credits and bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency; any instrument payable, at the option of the drawee or holder thereof or any other party thereto, either in Indian currency or in foreign currency or in foreign currency or partly in one and partly in the other.
Social and Cultural Environment: Characteristics of culture: A set of traditional beliefs and values that are transmitted and shared in a given society. Culture prescribes the kinds of behaviour considered acceptable in the society. The prescriptive characteristic of culture simplifies a consumers decisionmaking process by limiting product choices to those which are socially acceptable. This characteristic also creates problems for those products that are not in tune with consumers cultural beliefs.
Culture is not inherited genetically but it must be learned and acquired. Socialisation occurs when a person absorbs or learns the culture in which he or she is raised. In contrast, is a person learns the culture of a society other than the one in which he or she was raised, the process of acculturation occurs.
Culture is based on hundreds or even thousands of years of accumulated circumstances. Each generation adds something of its own to the culture before passing the heritage to the next generation. Cultural pride and prejudice make many nations reject foreign ideas and important products. The reverse of which is the eagerness to accept things reflecting other cultures, in order to create a globalised understanding. Advertising and promotions require special attention because they play an important role in communicating product concepts and beliefs to the target segment. When some socio-cultural differences are obvious, others are relatively subtle, though equally important. It is often difficult for an international executive or a manager to catch on these subtle differences if he or she has not worked in cultures other then that of the home country.
Elements of culture: - Attitudes and beliefs - Attitude towards time - Attitude towards work and leisure - Attitude towards achievement - Attitude towards change - Attitude towards job
Six Categories of value orientations that underlie market behaviour: 1. Egalitarian or Elitist 2. Prone to lay stress on accomplishment or on inherited attributes 3. Expecting material or non-material rewards 4. Evaluating individual or products in terms of objective norms or of subjective standards 5. Focused on distinctiveness of the parts rather than on the general characteristics of the whole. 6. Oriented towards personal rather than group gain.
Influence of culture on communication process: Language differences often necessitate marketing strategy modifications. Citizens of two different countries may sometimes use the same words or phrase that mean different sets of ideology. For the American, it is apartment, subway and elevator whereas the British say flat, underground bridge and lift respectively. One reason why the Japanese still have difficulty in breaking the American market is because of the problem encountered in exporting software that is composed in Japanese. Indian software exports have earned above $4 billion in 1998-99 alone as the use of English which both Americans and Brits can easily understand. The style of written communication in Chinese (column-to-column), Urdu, Persian and Arabic (reverse writing), the slangs, idioms and unfamiliar phrases are also the reasons for influence in cultural differences.
Necessities of International Communication: - Over-punctuate when in doubt - One point at a time, keeping ideas separate - Write / speak / read figures the same style as the other person (adaptation) - Adjust your to the level of your foreign counterpart - Use visual aids whenever possible - Avoid technical, sports, management and business jargon
Communication using Non-Verbal Language: Non-Verbal communication enduring culture: - Language of time - Language of space - Language of agreement - Language of friendship - Language of negotiation - Language of religion - Language of superstition - Language of colours - Language of gifts
Economic environment Three types of economic systems, viz. 1. Capitalist 2. Socialist 3. Mixed The above classification is as per the dominant method of resource allocation that are, 1. Market allocation (rely on consumers to allocate resources. Ex:USA,Western EU) 2. Command allocation (The state has broad powers for serving public interest. Ex: China, USSR, India, and Cuba) 3. Mixed allocation (All market systems have a command sector and all command systems have a market sector, precisely, they are mixed)
Market Development : Stages 1. Low income countries- Known as pre-industrial countries - Less than $766 GNP per capita - Limited industrialization and high percentage of population engaged in agriculture and subsistence farming - High birth rates - Low literacy rates - Heavy reliance on foreign aid - Political instability and unrest - Ex: Africa & South of Sahara
2. Lower middle income countries - LDCs - Less Developed countries - GNP per capita rate of more than $766 and less than $3036 - Early stages of industrialization - Factories supply more domestic items like clothing, batteries, tires, building materials and packaged foods. - Clothing for such countries highly focus on export markets. - Expanding consumer markets - Represents increasing competitive threat due to cheaper price - Has competitive advantage over mature, standardized and labourintensive products
3. High income countries - Can be also called Advanced / Industrialized / Post Industrial / First world countries - GNP per capita rate of above $9386 - Has had a sustained economic growth - Importance of service sector (> 50% of the GNP) - Crucial importance of information processing and exchange - Ascendancy of knowledge, over capital, on intellectual technology over machine technology as key strategic resource - More scientists and professionals than engineers and semi-skilled workers - Importance of interpersonal relationships in functioning of society.
Stages of Economic Development The stages of market development based on GNP per capita correspond with the stages of economic development. Low and lower middle income countries are also referred to as less developed countries of LDCs. The upper middle income countries are also called industrializing countries, and high-income countries are referred to as advanced, industrialized and post-industrial. The shares of world GNP and the GNP per capita data are based on income in national currency translated into US dollars at year end exchange rates. They do not reflect the actual purchasing power and standard of living in the different countries.
Income and Purchasing Power Parity around the globe When a company charts a plan for global market expansion, it often finds that, for most products, income is the single most valuable economic variable. After all, a market can be defined as a group of people willing and able to buy a particular product. For few products, particularly those that have very low unit cost, for example, cigarettes, - population is a more valuable predictor of market potential than income. Nevertheless, for the vast range of industrial and consumer products in international markets today, the single most valuable and important indicator of potential is income.
Global Marketing Information System (GMIS) Every firm organizes and distributes a continuous flow of information to its marketing managers. The need and design of the managers is to meet the needs of this GMIS. A MIS consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely and accurate information to marketing decision makers.
Important need and design of the marketing managers to be known are, 1. Decisions often taken; 2. Information needed to take decisions; 3. Information that we regularly receive; 4. Special studies & data analysis programs frequently done and those needed; 5. Information that is needed but not received currently; 6. Daily, weekly, monthly, quarterly, half-yearly, yearly information needed; 7. Sources: Reports and magazines highly dependant on; 8. Top five needs to improve the current MIS system.
Other major requirements for GMIS: 1. Internal records system (check sheets on orders, sales, prices, cost, inventory levels, receivables, payables, profiles etc.) 2. Order-to-payment cycle 3. Sales information system 4. Data : Databases, warehouses and mining 5. Marketing intelligence system
International marketing research: Marketing research is a complete analysis of the market - information regarding the nature, size, organization, profitability of different markets, changes in the market and other factors such as economic, social and political issues, affecting these changes. The activities to be included in international market research, 1. Analysis per customers age, sex, income, profession, standard of living. 2. Estimating regional and territorial demand of different markets. 3. Collecting information on existing customers, prospective customers, and competitors share in the market. 4. Studying market changes and conditions affecting market changes such as customers preferences, shift in brand loyalty, etc. 5. Analyzing working pattern of different distribution channels and their role in creating market demand for the product. 6. Forecasting profitability of different markets and marketing segments.
Need for overseas market research: Market research is a basic methodology for management decision making. A decision to start manufacturing a product is at the very start, useless unless appropriate market research and analysis is made, as production is made in anticipation of demand or sale prospects of the product. The need for market research arises to provide a sound database which would help the management take decision during the below circumstances, - When a new product is to be introduced into the market - When the sale of the product is showing a downward trend and the top drivers for the fall is unknown - When facts and figures about the demand potential are not available - When consumer and market habits and preferences are known while creating an advertisement - When a product need to be reengineered as per customers needs - When the pattern of income, fashion, habits and preferences change fast - When the idea of competitors policies and strategies are vaguely known - When companys price is not conducive to competitor and needs change.
Approach to Market Research: 1. Screen potential markets (Obtain Export Statistic Profile (ESP), Examine historical data for fast growing markets for firms product, Identify opportunities, Consult foreign commercial services, district offic3es, business associates, freights, etc.) 2. Assess targeted markets (Find trends for companys products, Ascertain sources of competition, Analyze factors affecting marketing, Identify foreign barriers, i.e. tariffs, and Identify government incentives to promote exports) 3. Draw conclusions
Market research process: 1. Process formulation 2. Decision of fact gathering procedure 3. Data collection (survey and sampling techniques) 4. Marketing sample 5. Data evaluation 6. Interpreting the data 7. Report preparation (Executive report, Technical report, Data report)
International Market Research:
Research of Industry, Market characteristics, and market trends
Buyer behavior research
Product research
Distribution research
Promotion research
Pricing research
Developing the research plan: Research plan is a base, indicating all the decisions to be made with regard to information sources, research methods, data collection instruments, sampling procedures, data collection methods, data analysis, and based on all the above, the cost of the research is projected. Sources of Information: 1. Primary data 2. Secondary data : (i) Internal Secondary data (ii) External Secondary data
International Market Research Process
Role of International Trade Agencies: UNCTAD: (United Nations Conference on Trade and Development) Though GATT (General Agreement on Tariff and Trade), a.k.a the WTO in the present generation; and the IMF (International Monetary Fund) could not manage the subtle glitches with the import costs being high & the export costs being low, the UNCTAD was formed. It is the only body where the low income (least developed), LDCs (developing) and the High income (developed) countries are all members. GSP: (Generalized system of preferences) Conception and implementation of GSP is one of the principal achievements of UNCTAD, in the 1964 Geneva conference. It is a system of allowing preferential tariff rates, that is less or very much reduced tariff rates, in favour of certain products of developing countries, to be exported to developed nations.
Market Survey Techniques: A fact finding mission, to obtain all relevant information about the market. They can be, (i) Product oriented survey (ii) Market oriented survey Market survey steps: 1. Setting objectives 2. Adopting methodology 3. Survey conducting - Areas of investigation: Information on market profile, product profile, competition, distribution, pricing and financing, sales promotion, other information pertaining to type and stability of government, procedures of banks, import restrictions, tariff schedules and duties. 4. Survey techniques - (i) Personal interview, (ii) Telephone interview (iii) Mail questionnaire survey 5. Survey reporting - (i) Product, (ii) Market, (iii) Price and delivery (iv) Distribution and promotion
UNIT-III
Planning for International Marketing - Market Analysis & Foreign Market Entry Strategies
Market Analysis The goal of a market analysis is to determine the attractiveness of a market and to understand its evolving opportunities and threats as they relate to the strengths and weaknesses of the firm.
David A. Aaker outlined the following dimensions of a market analysis: - Market size (current and future) - Market growth rate - Market profitability - Industry cost structure - Distribution channels - Market trends - Key success factors Market Size: The size of the market can be evaluated based on present sales and on potential sales if the use of the product were expanded. The following are some information sources for determining market size: - government data - trade associations - financial data from major players - customer surveys
Market Growth Rate A simple means of forecasting the market growth rate is to extrapolate historical data into the future. While this method may provide a first-order estimate, it does not predict important turning points. A better method is to study growth drivers such as demographic information and sales growth in complementary products. Such drivers serve as leading indicators that are more accurate than simply extrapolating historical data.
Important inflection points in the market growth rate sometimes can be predicted by constructing a product diffusion curve. The shape of the curve can be estimated by studying the characteristics of the adoption rate of a similar product in the past.
Ultimately, the maturity and decline stages of the product life cycle will be reached. Some leading indicators of the decline phase include price pressure caused by competition, a decrease in brand loyalty, the emergence of substitute products, market saturation, and the lack of growth drivers.
Market Profitability While different firms in a market will have different levels of profitability, the average profit potential for a market can be used as a guideline for knowing how difficult it is to make money in the market. Michael Porter devised a useful framework for evaluating the attractiveness of an industry or market. This framework, known as Porter's five forces, identifies five factors that influence the market profitability: - Buyer power - Supplier power - Barriers to entry - Threat of substitute products - Rivalry among firms in the industry
Industry Cost Structure The cost structure is important for identifying key factors for success. To this end, Porter's value chain model is useful for determining where value is added and for isolating the costs. The cost structure also is helpful for formulating strategies to develop a competitive advantage. For example, in some environments the experience curve effect can be used to develop a cost advantage over competitors. Distribution Channels The following aspects of the distribution system are useful in a market analysis: 1. Existing distribution channels - can be described by how direct they are to the customer. 2. Trends and emerging channels - new channels can offer the opportunity to develop a competitive advantage. 3. Channel power structure - for example, in the case of a product having little brand equity, retailers have negotiating power over manufacturers and can capture more margin.
Market Trends Changes in the market are important because they often are the source of new opportunities and threats. The relevant trends are industry-dependent, but some examples include changes in price sensitivity, demand for variety, and level of emphasis on service and support. Regional trends also may be relevant. Key Success Factors The key success factors are those elements that are necessary in order for the firm to achieve its marketing objectives. A few examples of such factors include: - Access to essential unique resources - Ability to achieve economies of scale - Access to distribution channels - Technological progress It is important to consider that key success factors may change over time, especially as the product progresses through its life cycle.
Foreign Market Entry Strategies Choosing Mode of Operations in foreign market: There are four modes of operations, (i) Merchant Exporter (buying from market or manufacturer & selling to foreign buyers) (ii) Manufacturer exporters (Manufacturing by self for export, by manufacturer) (iii) Sales / Commission agent (On behalf of seller and charging commission) (iv) Buying agent (On behalf of buyer and charging commission) This is followed by the traditional steps, i.e. Naming the business; Selecting the company; Making effective business correspondence (product specifications time to time; distinct advantages such as prices, quality, after-sales service, delivery, brand name, etc.; Study of various market segments)
Selecting the markets Target markets are selected after careful consideration of various factors such as political influence, scope of exporters selected product, demand stability, preferential treatment to products from developing countries, market penetration by competitive countries and products, distance of potential market, transport problems, language problems, tariffs and non-tariff barriers, distribution infrastructure, size of demand in the market, expected life span of market and product requirements, sales and distribution channels. For the above all, collection of adequate market information from one or many of the below is needed. Export promotion councils (EPCs) / Commodity boards, Federation of Indian Export Organization (FIEO), Indian Institute of Foreign Trade(IIFT), Indian Trade Promotion Organization (ITPO), Indian embassies overseas, Foreign embassies in India, Import promotion institutions overseas, Overseas chambers of commerce and industries, directories, journals, market survey reports, etc.
Selecting prospective buyers The process is carried forward through conducting trade fairs, friends and relatives passing viral networking, export promotion councils, government agencies, information from international trade directories and journals, etc. Selecting Channels of Distribution The traditional methods followed to overcome distribution while exporting to overseas market are, 1. Exports through exports consortia 2. Exports through canalizing agencies 3. Through export houses or trading houses 4. Direct exports 5. Through overseas sales agencies
Negotiating deals with prospective buyers on the overall process and processing an export order are vital steps where needs like description of items, name of the company, full address, fax numbers, country and pin, exact price of the item, internal reference number are all to be given at most importance. Processing involves acknowledgement with respect to the items, specifications, preshipment inspection, payment conditions, special packaging, labeling and marketing requirements, shipment date and delivery date, marine insurance, documentation are all to be given importance. Export Contract Entering into an export contract is the best way to avoid any future disputes. The contract must be comprehensive and precise manner. Ambiguity should not prevail in case of exact specifications of goods and terms of sale including export price, mode of payment, storage and distribution methods, type of packaging, port of shipment, delivery schedule, etc.
The different aspects of an export contract are under, 1. Products, standards and specifications 2. Quantity 3. Inspection 4. Total value of the contract 5. Terms of delivery 6. Taxes, duties and contract 7. Period of delivery or shipment 8. Packing, labeling and marking 9. Terms of payment - amount and mode 10. Discounts and commission 11. Licenses and permits 12. Insurance 13. Documentary requirements 14. Guarantee 15. Actions for non performance of contract 16. Remedies & arbitration
Export pricing It is the most important tool for promoting sales and facing international competition. The price has to be realistically calculated taking all export benefits and expenses into consideration. International pricing of a product differs between exporters depending on the type of exporter, i.e. merchant exporter, manufacturer exporter or canalizing agency. Pricing is determined based on, -Range of products offered - Timely delivery and continuity in supply - After sales in certain products like machine tools and consumer durables - Product differentiation and brand image - Frequency of purchase - Presumed relationship between quality and price - Specialty value goods and gift items - Prompt acceptance and settlement of claims - Aggressive marketing and settlement - Unique value goods
Export costing can further be described as a cost accountants job. It consists of fixed cost and variable cost comprising various elements. Every export product needs an export-costing sheet. Certain internationally accepted terms for overseas buyers, - Ex-works (to make goods available to buyer at production) - Free on rail (FOR) / Free on truck (FOT) (Rail or road transport) - Free alongside ship (FAS) (Buyer to bear all shipment and risk costs) - Free on Board (FOB) (Buyer not to pay. Responsibility ends when shipped.) - Cost and freight (C&F) (Sale contract covering freight charges) - Cost insurance freight (adding insurance to C&F) - Freight or carriage paid (DCP) (land transport, rail or inland water transport) - EXS / Ex-Shi (Arrival contract - making available for buyer at port of destination) - EXQ / EX-Quay (Making available the goods at buyers quay / dock) - Delivered at frontier (DAF) (Rail/road. Made available at the customs border) - Delivery Duty Paid (DDP) (exclusive of VAT) - Free carrier (FRC) - Freight carriage and Insurance paid (CIP) (Contract with insurer & pay premium only) - FAQ / FOB airport (air carrier, without buyers approval, delivery not made)
Risks in International trade: 1. Credit risk 2. Currency risk 3. Carriage risk 4. Country risk Obtaining policies to prevent risks from institutes like Export Credit and Guarantee Corporation of India Ltd can be obtained for this purpose. Country risks are also Succumbed under ECGC. Currency risks, due to possible loss through fluctuation in currency rates can be prevented by banks dealing with foreign exchange. Obtaining export order in Indian rupee is mandatory in this case. Carriage risks can be prevented by taking marine insurance coverage through general insurance companies which prevents possible loss of cargo in transit.
UNIT - IV
Global pricing is more complex in nature than domestic pricing due to, - International currency fluctuations - Price escalations due to tarrifs - Difficulties to access credit risks - Price controls, anti-dumping law - Regulation on transfer pricing - Modes of payment Basic principles for traditional approach, 1. Costs (Profit : OP / IP = >1) 2. Experience curve pricing (Decrease d costs with more units produced) 3. Competition pricing (Discounts / premium pricing w.r.t competition) 4. Pricing w.r.t demand factor
Pricing factors: 1. Role of costs 2. Demand 3. Competition Anti-pricing factors: 1. Currency risk 2. Credit risk 3. Tariffs & price escalation 4. Dumping (imported product price lesser then domestic products) 5. Skimming & penetration 6. Polycentric / ethnocentric / geocentric pricing
Non-Pricing factors: 1. Confidence 2. Brand image 3. Frequency of purchase 4. Association of price and quality 5. Comprehensive knowledge of the product 6. Before and after sales service 7. Continuity of supply 8. Prompt delivery 9. Settlement of claims 10. Supply of complete range of products 11. Terms of credit
Methods of pricing: 1. Cost oriented pricing method
- Full cost method (production cost, logistics, custom duties, risk costs, etc) - Variable/marginal cost method (varies in proportion to volume of production)
2. Export pricing:
a. Relative to demand schedules (quantities to be bought) b. Relative to cost (total and incremental) c. Highest profit contributing price (= Sales revenue - all fixed costs)
3. Market pricing:
1. Less retail margin on selling price cost to retailer 2. Less wholesalers mark up to his cost (cost of wholesaler) 3. Less importers mark up to his cost (cost of importer) 4. Less import duty (landed price) 5. Less free on board (fob) or cost of freight and insurance (cif)
Strategies for pricing 1. Market penetration strategy 2. Probe pricing strategy 3. Follow the leader pricing strategy 4. Skimming pricing strategy 5. Differential trade margins strategy 6. Standard export pricing strategy 7. Cheaper price for original equipment and higher price for spares
Distribution Channels: Marketing channels exist to create utility for customers: (i) Place utility (ii) Time utility (iii) Form / condition utility (iv) Information utility
Home Country Foreign Country
The foreign marketer or producer sells to or through Foreign consumer
Domestic producer or marketer sells to or through
Open distribution via domestic wholesale middlemen
Exporter
Importer
Foreign agent or merchant wholesalers
Foreign retailers
Export management company or company sales force
Consumer Products
Industrial Products
Establishing Channels & Working with channel intermediaries: 1. Direct involvement company establishes its own sales force / operates its own retail stores 2. Indirect involvement company utilizes independent agents, distributors, and / or wholesalers The Channel strategy must fit companys competitive position and marketing objectives within each national market
Channel Intermediaries: 1. Select distributors - Company must select; not vice versa 2. Distributors must be capable of developing market, than those with few good customer contacts 3. Treat local distributors as long-term partners, not as temporary entry vehicles 4. Support market entry by committing money, managers & proven marketing ideas 5. From the start, maintain control over marketing strategy 6. Ensure distributors providing detailed market and financial performance data 7. Build links among national distributors at the earliest opportunity
Retailing: Global retailing includes, (i) Department stores (ii) Specialty retailers (iii) Supermarkets (iv) Convenience stores (v) Discount stores and warehouse clubs (vi) Hypermarkets (vii) Supercenters (viii) Category killers (ix) Outlet stores
Top 25 Global Retailers in 2002 & sales in Millions
Retailing strategies: Organic; Franchise; Chain acquisition; Joint venture
Physical Distribution: SCM & Logistics 1. Supply Chain: Includes all the firms that perform support activities by generating raw materials, converting them into components or finished products and making them available to customers. 2. Logistics: The management process that integrates the activities of all companies to ensure tan efficient flow of goods through the supply chain. 3.Order Processing: Includes order entry in which the order is actually entered into a companys information system; order handling, which involves locating, assembling, and moving products into distribution; and order delivery 4.Warehousing: Warehouses are used to store goods until they are sold. Distribution centers are designed to efficiently receive goods from suppliers and then fill orders for individual stores or customers
5.Inventory Management: Ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks of these items. 6.Transportation: The method or mode a company should utilize when moving products through domestic and global channels; the most common modes of transportation are rail, truck, air, and water
Logistics: Channel Strategy- Analyzing each shipping mode to determine a mode, or combination of modes, will be both effective and efficient in a given situation.
Currently there is a gap in the literature available on supply chain management studies: there is no theoretical support for explaining the existence and the boundaries of supply chain management.
A few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et.al. (2009) have tried to provide theoretical foundations for different areas related to supply chain by employing organizational theories. These theories include: Resource-Based View (RBV) Transaction Cost Analysis (TCA) Knowledge-Based View (KBV) Strategic Choice Theory (SCT) Agency Theory (AT) Institutional theory (InT) Systems Theory (ST) Network Perspective (NP) Materials Logistics Management (MLM) Just-in-Time (JIT) Materials Requirements Planning (MRP) Theory of Constraints (TOC) Total Quality Management (TQM) Agile Manufacturing Time Based Competition (TBC) Quick Response Manufacturing -QRM Customer Relationship Management (CRM) and many more
The management components of SCM The SCM components are the third element of the four-square circulation framework. The level of integration and management of a business process link is a function of the number and level, ranging from low to high, of components added to the link (Ellram and Cooper, 1990; Houlihan, 1985). Consequently, adding more management components or increasing the level of each component can increase the level of integration of the business process link. The literature on business process reengineering, buyer-supplier relationships, and SCM suggests various possible components that must receive managerial attention when managing supply relationships. Lambert and Cooper (2000) identified the following components: 1. Planning and control 2. Work structure 3. Organization structure 4. Product flow facility structure 5. Information flow facility structure 6. Management methods 7. Power and leadership structure 8. Risk and reward structure 9. Culture and attitude
Global supply chains pose challenges regarding both quantity and value: - Supply and value chain trends - Globalization - Increased cross border sourcing - Collaboration for parts of value chain with low-cost providers - Shared service centers for logistical and administrative functions - Increasingly global operations, which require increasingly global coordination and planning to achieve global optimums - Complex problems involve also midsized companies to an increasing degree, These trends have many benefits for manufacturers because they make possible larger lot sizes, lower taxes, and better environments (culture, infrastructure, special tax zones, sophisticated OEM) for their products. Meanwhile, on top of the problems recognized in supply chain management, there will be many more challenges when the scope of supply chains is global. This is because with a supply chain of a larger scope, the lead time is much longer.
Virtual Channels in International Marketing: A 4PL is a consultant, and cannot be an operator. This is to respect the principle of neutrality. A 3PL is an operator, which specializes in integrated operation, warehousing and transportation services. It may also own part of its operations, such as warehouses, vans, or trucks. It then is both a 3PL and a 2PL, but is usually still called a 3PL. It can also offer genuine supply chain consulting services outside of its usual range of services. It is then both a 3PL and a 4PL, but is usually still called a 3PL. Some 3PL currently go as far as giving a title of consultant to their sales people, who are only selling their classical 3PL services. These are clearly 3PL only. In the "PL" terminology, it is important to differentiate the 4PL from the: - 1PL, which are the shipper or the consignee, - 2PL, which are actual carriers, - 3PL, which are one stop shops for the 1PL, such as freight forwarders or courier companies.
The Technological Segment: The technological advancements in the 90s as well as in the 21st century has increased performance and productivity over various sectors and divisions including support for systems such as logistics. Usage of technological system has benefited through, (i) Speed (ii) Usage of internet (iii) Usage of modems & routers (iv) High speed digital stream (v) Satellite imaging, etc. This has advanced inventory management system with, (i) Faster response & accuracy (ii) Better customer service & handling (iii) Reduced grief as customers can visualize online
UNIT - V
Export Promotion: Definition Incentive programs that are designed to attract more firms into exporting by offering help in product and market identification and development, preshipment and post-shipment financing, training, payment guarantee schemes, trade fairs, trade visits, foreign representation, etc.
Export Promotion Capital Goods scheme (EPCG) The scheme allows import of capital goods for pre production, production and post production at 5% customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance of license. For agro units, import of capital goods at 5% customs duty is allowed subject to a fulfillment of an export obligation equivalent to 6 times the duty saved over a period of 12 years from the date of issue of license. For SSI units, import of capital goods at 5% customs duty is allowed subject to a fulfillment of an export obligation equivalent to 6 times the duty saved over a period of 8 years from the date of issue of license, provided the CIF (cost, insurance, freight) value of imported goods do not exceed its limit of twenty five lakhs for SSI units.
Export Incentives a. Duty Exemption / Remission schemesDuty exemption scheme enables import of inputs required for production and export production. For this purpose, an advance license is issued under this scheme, by the ALC (Advance Licensing Committee). Duty remission scheme enables post-export replenishment / remission of duty on inputs used in the export product. The remission scheme consists of (i) DFRC - Duty free replenishment certificate (for export products) (ii) DEPB - Duty entitlement pass book (draws back import charges) b. Advance License Advance license is issued to allow duty free import of inputs, which are physically Incorporated in the export product. Adding to which, fuel, oil, energy, catalysts and other resources consumed in the due course in order to obtain the export product may also be allowed under the scheme. Duty free import of mandatory spares up to 10% of the CIF Value are also allowed. This license is issued for other types of incentives under the Indian government that are, (i) Physical exports; (ii) Intermediate supplies; (iii) Deemed exports
An advance license holder has the option to become the owner of advance license for annual requirement and advance release orders. A DFRC holder is also eligible for advance release order facility. The application for grant of ARO shall be made to the original licensing authority concerned. However, these supplies are obtained against the license from EOU/EHTP/BTP/STP.
The application specifies (i) the name, description and quantity of items (ii) The individual value of items to be procured. Few other benefits & incentives that can be obtained by becoming a EOU/STP/EHTP /BTP unit are, (i)No license required for import / domestic procurement (ii) Exempted from anti-dumping duties
(iii) Domestic procurement free from variety of state levies including CST (iv) Entitles for duty free supply of furnace oil (v) Eligible for concessions in respect of payment of income tax (vi) Can utilize imported/domestic goods procured more than 3 years (vii) Exempted from state trading regime except in limited cases (viii) Can repatriate profits freely without dividend-balancing requirement (ix) Exempted from payment of service tax (x) Can import or procure from domestic sources, free of duty, all the requirements of capital goods, raw material, consumables, spares, packaging material, and office equipments. (xi) Can supply to other EOU/EHTP/STP/BTP unit without payment of duty and these are counted as NFE (Not Fully Equipped) c. EHTP (Electronic Hardware Technology park) / STP (Software Technology Park) d. FTZ (Free Trade Zones)
There are other International Financial institutions that are developed during 19461947 period, from where the developing and least developed countries can get loans and for other financial support in order to grow along with other developed countries. They are, (i) International Monetary Fund (IMF) (ii) International Bank for reconstruction&development(IBRD)-World Bank (iii) International Development Association (IDA) (iv) International Finance Corporation (IFC) (v) Multilateral Investment Guarantee Agency (MIGA) (vi) Organization for Economic Corporation and Development (OECD)
Documentation and Procedural complexities Basic document is Entry - Entry in relation to goods means entry made in Bill of Entry, Shipping Bill or Bill of Export. In case of import by post, label or declaration accompanying goods is entry Loading and unloading at specified places only - Imported goods can be unloaded only at specified places. Goods can be exported only from specified places. Computerisation of customs procedures - Customs procedures are largely computerised. Most of documents have to be e-filed. Amendment to documents - Documents submitted to customs can be amended with permission In case of bill of entry, shipping bill or bill of export, it can be amended after clearance only on the basis of documentary evidence which was in existence at the time the goods were cleared, warehoused or exported, and not on basis of any subsequent document. [proviso to section 149]. ICD and CFS - Imported and export goods are usually handled in containers. These can be stored in Inland Container Depot (ICD) or Container Freight Station (CFS). They function like dry port for handling and temporary storage of imported/export goods and empty containers. Boat Notes - Boat Notes are used for transferring small cargo from ship to shore, or from shore to ship, without berthing the ship. Transshipment of goods - Goods can be transshipped from one conveyance to other after following required procedure. Such transshipment may be to any major port or airport in India. The goods can be transshipped to any other customs station in India if Customs Officer is satisfied that the goods are bona fide intended for transshipment to any customs station. The facility is available at all customs ports and Inland Container Depots (ICDs). Coastal goods - Procedures have been prescribed for coastal goods, even if there is neither import nor export.
Import Procedures E-filing of documents - Goods should arrive at customs port/airport only. Most of customs procedures are computerised. E-filing of documents is required. Import manifest or Import Report - Person in charge of conveyance is required to submit Import Manifest or Import Report. Entry Inwards - Goods can be unloaded only after grant of Entry Inwards. Risk Management System - Self Assessment on basis of Risk Management System (RMS) has been introduced in respect of specified goods and importers. Bill of Entry for home consumption on payment of customs duty - Importer has to submit Bill of Entry giving details of goods being imported, along with required documents. Electronic submission of documents is done in major ports. White Bill of Entry is for home consumption. Imported goods are cleared on payment of customs duty. Bill of Entry for warehousing - Yellow Bill of Entry is for warehousing. It is also termed as into bond Bill of Entry as bond is executed. Duty is not paid and imported goods are transferred to warehouse where these are stored. Green Bill of Entry is for clearance from warehouse on payment of customs duty. It is for ex-bond clearance. Noting, examination and assessment - Bill of Entry is noted, Goods are assessed to duty, examined and pre-audit is carried out. Customs duty is paid after assessment. Bond - Bond is executed if required if assessment is provisional (PD bond) or concessional rate of customs duty is subject to certain post import conditions. Out of customs charge order - Goods can be cleared outside port after Out of Customs Charge order is issued by customs officer. After that, port dues, demurrage and other charges are paid and goods are cleared. Demurrage if clearance from port delayed - Demurrage is payable if goods are not cleared from port/airport within three days. Goods can be disposed of if not cleared from port within 30 days.
Export Procedures Entry Outward Loading in conveyance can start after Entry Outward is given by customs officer. Export manifest/Export report Person in charge of conveyance is required to submit Export Manifest or Export Report. Registration with DGFT and EPC Exporter has to be obtain IEC number from DGFT is advance. He should be registered with Export Promotion Council if he intends to claim export benefits. Third party exports Export can be by manufacturer himself or third party (i.e. by exporter on behalf of another). Merchant exporter means a person engaged in trading activity and exporting or intending to export goods Registration of documents under Export Promotion Scheme Advance authorisation, DEPB etc. should be registered if exports are under Export Promotion Scheme. Shipping Mill Export is required to submit Shipping Bill with required documents for obtaining permission to export. There are five forms : (a) Shipping Bill for export of goods under claim for duty drawback - these should be in Green colour (b) Shipping Bill for export of dutiable goods - this should be yellow colour (c) Shipping bill for export of duty free goods - it should be white colour (d) shipping bill for export of duty free goods ex-bond - i.e. from bonded store room - it should be pink colour (e) Shipping Bill for export under DEPB scheme - Blue colour.
FEMA formalities GR/SDF/Softex form (under FEMA) is required to be submitted. Noting, assessment, examination The shipping bill is noted, goods are assessed and examined. Export duty is paid, if applicable. Certification of documents for export incentives If export is under export incentives, relevant documents are checked and certified. Then proof of export is obtained on ARE-1. Let export order Conveyance can leave only after Let Export order is issued.
Custom Clearance procedures for export In India custom clearance is a complex and time taking procedure that every export face in his export business. Physical control is still the basis of custom clearance in India where each consignment is manually examined in order to impose various types of export duties. High import tariffs and multiplicity of exemptions and export promotion schemes also contribute in complicating the documentation and procedures. So, a proper knowledge of the custom rules and regulation becomes important for the exporter. For clearance of export goods, the exporter or export agent has to undertake the following formalities: Registration Any exporter who wants to export his good need to obtain PAN based Business Identification Number (BIN) from the Directorate General of Foreign Trade prior to filing of shipping bill for clearance of export goods. The exporters must also register themselves to the authorized foreign exchange dealer code and open a current account in the designated bank for credit of any drawback incentive. Registration in the case of export under export promotion schemes: All the exporters intending to export under the export promotion scheme need to get their licenses / DEEC book etc. Processing of Shipping Bill - Non-EDI: In case of Non-EDI, the shipping bills or bills of export are required to be filled in the format as prescribed in the Shipping Bill and Bill of Export (Form) regulations, 1991. An exporter need to apply different forms of shipping bill/ bill of export for export of duty free goods, export of dutiable goods and export under drawback etc. Processing of Shipping Bill - EDI: Under EDI System, declarations in prescribed format are to be filed through the Service Centers of Customs. A checklist is generated for verification of data by the exporter/CHA (Custom House Agent) . After verification, the data is submitted to the System by the Service Center operator and the System generates a Shipping Bill Number, which is endorsed on the printed checklist and returned to the exporter/CHA. For export items which are subject to export cess, the TR-6 challans for cess is printed and given by the Service Center to the exporter/CHA immediately after submission of shipping bill. The cess can be paid on the strength of the challan at the designated bank. No copy of shipping bill is made available to exporter/CHA at this stage.
Quota Allocation The quota allocation label is required to be pasted on the export invoice. The allocation number of AEPC (Apparel Export Promotion Council) is to be entered in the system at the time of shipping bill entry. The quota certification of export invoice needs to be submitted to Customs along-with other original documents at the time of examination of the export cargo. For determining the validity date of the quota, the relevant date needs to be the date on which the full consignment is presented to the Customs for examination and duly recorded in the Computer System. Arrival of Goods at Docks: On the basis of examination and inspection goods are allowed enter into the Dock. At this stage the port authorities check the quantity of the goods with the documents. System Appraisal of Shipping Bills: In most of the cases, a Shipping Bill is processed by the system on the basis of declarations made by the exporters without any human intervention. Sometimes the Shipping Bill is also processed on screen by the Customs Officer. Customs Examination of Export Cargo: Customs Officer may verify the quantity of the goods actually received and enter into the system and thereafter mark the Electronic Shipping Bill and also hand over all original documents to the Dock Appraiser of the Dock who many assign a Customs Officer for the examination and intimate the officers name and the packages to be examined, if any, on the check list and return it to the exporter or his agent. The Customs Officer may inspect/examine the shipment along with the Dock Appraiser. The Customs Officer enters the examination report in the system. He then marks the Electronic Bill along with all original documents and check list to the Dock Appraiser. If the Dock Appraiser is satisfied that the particulars entered in the system conform to the description given in the original documents and as seen in the physical examination, he may proceed to allow "let export" for the shipment and inform the exporter or his agent.
Stuffing / Loading of Goods in Containers The exporter or export agent hand over the exporters copy of the shipping bill signed by the Appraiser Let Export" to the steamer agent. The agent then approaches the proper officer for allowing the shipment. The Customs Preventive Officer supervising the loading of container and general cargo in to the vessel may give "Shipped on Board" approval on the exporters copy of the shipping bill. Drawal of Samples: Where the Appraiser Dock (export) orders for samples to be drawn and tested, the Customs Officer may proceed to draw two samples from the consignment and enter the particulars thereof along with details of the testing agency in the ICES/E system. There is no separate register for recording dates of samples drawn. Three copies of the test memo are prepared by the Customs Officer and are signed by the Customs Officer and Appraising Officer on behalf of Customs and the exporter or his agent. The disposal of the three copies of the test memo is as follows:Original to be sent along with the sample to the test agency. Duplicate Customs copy to be retained with the 2nd sample. Triplicate Exporters copy. The Assistant Commissioner/Deputy Commissioner if he considers necessary, may also order for sample to be drawn for purpose other than testing such as visual inspection and verification of description, market value inquiry, etc.
Amendments: Any correction/amendments in the check list generated after filing of declaration can be made at the service center, if the documents have not yet been submitted in the system and the shipping bill number has not been generated. In situations, where corrections are required to be made after the generation of the shipping bill number or after the goods have been brought into the Export Dock, amendments is carried out in the following manners. The goods have not yet been allowed "let export" amendments may be permitted by the Assistant Commissioner (Exports). Where the "Let Export" order has already been given, amendments may be permitted only by the Additional/Joint Commissioner, Custom House, in charge of export section. In both the cases, after the permission for amendments has been granted, the Assistant Commissioner / Deputy Commissioner (Export) may approve the amendments on the system on behalf of the Additional /Joint Commissioner. Where the print out of the Shipping Bill has already been generated, the exporter may first surrender all copies of the shipping bill to the Dock Appraiser for cancellation before amendment is approved on the system.
Export of Goods under Claim for Drawback: After actual export of the goods, the Drawback claim is processed through EDI system by the officers of Drawback Branch on first come first served basis without feeling any separate form. Generation of Shipping Bills: The Shipping Bill is generated by the system in two copies- one as Custom copy and one as exporter copy. Both the copies are then signed by the Custom officer and the Custom House Agent.
Registration with Export Agencies Prior to 1.1.1997 it was compulsory for every exporter to obtain an exporters' code number from the Reserve Bank of India before engaging in export. This has since been dispensed with and registration with the licensing authorities is sufficient before commencing export or import. Registration with Regional Licensing: Authorities (obtaining IEC Code Number) The Customs Authorities will not allow you to import or export goods into or from India unless you hold a valid IEC number. For obtaining IEC number you should apply to Regional Licensing Authority in duplicate in the prescribed form. Before applying for IEC number it is necessary to open a bank account in the name of your company / firm with any commercial bank authorized to deal in foreign exchange.
The duly signed application form should be supported by the following documents: (i) Bank Receipt (in duplicates) / Demand Draft for payment of the fee of Rs. 1,000/-. (ii) Certificate from the Banker of the applicant firm as per Annexure 1 to the form given in Appendix 1 of this Book. (iii) Two copies of Passport size photographs of the applicant duly attested by the banker to the applicants. (iv) A copy of Permanent Account Number issued by Income Tax Authorities. If PAN has not been allotted, a copy of application of PAN submitted to Income Tax Authorities.
(v) In case the application is signed by an authorized signatory, a copy of the letter of legal authority may be furnished.
(vi) If there is any non-resident interest in the firm and NRI investment is to be made with repatriation benefits, a simple declaration indicating whether it is held with the general/specific permission of the RBI on the letter head of the firm should be furnished. In case of specific approval, a copy may also be furnished. (vii) Declaration by the applicant that the proprietors/partners/directors of the applicant firm/company, as the case may be, are not associated as proprietor/partners/directors with any other firm/company which has been caution-listed by the RBI. Where the applicant is so associated with a caution-listed firm/company the IEC No. is allotted with a condition that he can export only with the prior approval of the RBI. (viii) Exporter's Profile. The Regional Licensing Authority concerned will on merits grant an IEC number to the applicant. The number should normally be given within 3 days provided the application is complete in all respects and is accompanied by the prescribed documents. An IEC number allotted to an applicant shall be valid for all its branches/divisions as indicated on the IEC number.
Documents required for quality control Quality control is an important aspect in order to export units with due regulations and authorizations. There are certain forms and documents that are necessary for quality control and pre-shipment inspection. The following documents need to be submitted along with the application: (i) Particulars of the consignment intended to be exported (ii) A crossed cheque/draft for the amount of requisite inspection fees or an Indian Postal Order. (iii) Copy of commercial invoice (iv) Copy of Letter of Credit (v) Details of packing specifications (vi) Copy of the export order/contract, indicating inter alia the buyers requirement that goods are strictly according to the prescribed specifications or as per samples
Quality control on exports An important aspect about the goods to be exported is compulsory quality control and preshipment inspection. Quality control and pre-shipment inspection are prerequisite for exporting goods. Under the Export (Quality Control and Inspection) Act, 1963, about 1000 commodities under the major group of: Food and Agriculture, Fishery, Minerals, Organic Chemicals, Rubber Products, Refractories, Ceramic Products, Pesticides, Light Engineering Steel Product, Jute Products, Coir and Coir Products, Footwear and Footwear Products/Components are subject to compulsory pre-shipment inspection.
Sometimes overseas buyers lay their own standards/specifications which may or may not be in consonance with the Indian standards. They may also insist upon inspection by their own nominated agencies. These issues should be sorted out before confirmation of order.
Specific provision have also been made for compulsory inspection of textile goods. Products having ISI Certification mark or Agmark are not required to be inspected by any agency. These products do not fall within the purview of the export inspection agencies network.
The Customs Authorities allow shipment of such goods without inspection certificate, provided they are otherwise satisfied that the goods carry ISI Certification Mark or the Agmark. For other goods inspection can be made in the following manner: Consignment to consignment inspection-under this scheme the application (in duplicate) for inspection for goods has to be submitted well in advance, in the new prescribed form intimation for inspection, before the expected date of shipment of the consignment. Inspection of the consignment is generally carried out either at the premises of the exporter, provided adequate facilities exist therein for inspection, or at the port of shipment. from official Indian inspection agencies. After satisfying itself that the consignment of exportable goods meets the requirements stipulated in the export contract/order, the inspection agency issues, generally within four days of receipt of intimation for inspection, the necessary certificate of inspection to the exporter in the prescribed proforma in five copies. The certificate is issued in the standardised form which is aligned pre-shipment export document. (Three copies for exporter, original copy for customs use, the second copy for the use of the foreign buyer and the third copy for the exporter's use, fourth copy for Data Bank, Export Inspection Council, New Delhi and the fifth copy is retained with the agency for their own office record).
EXPORT (QUALITY CONTROL & INSPECTION) ACT, 1963: The Export Inspection Council is responsible for the operation of this Act. Under the Act, a large number of exportable commodities have been notified for compulsory pre-shipment inspection. The quality control and inspection of various export products is administered through a network of more than fifty offices located around major production centres and ports of shipment. In addition, organizations may be recognized as agencies for inspection and /or quality control. Recently, the government has exempted agriculture and food products, fruit products and fish and fishery products from compulsory pre-shipment inspections, provided that the exporter has a firm letter from the overseas buyer stating that the overseas buyer does not require pre-shipment inspection.
In-process quality control and self-certification scheme IN-PROCESS QUALITY CONTROL:
Certain products like chemicals or engineering goods are subject to this control. The inspection is done at various stages of production. The exporter has to get his unit registered as "Export worthy" and keep record of processing and production. Under this system, export is allowed on the basis of adequacy of IPQC and inspection measures exercised by the manufacturing units themselves. Units approved under this system may themselves issue the certificate of inspection, but only for the products for which they have been granted IPQC facilities. However, these units have the option either to get the certificate from the export inspection agencies (EIAs) or issue the same themselves.
SELF-CERTIFICATION SCHEME:
Large manufacturing/exporters, export houses /trading houses are allowed the facility of selfcertification on the theory that the exporter himself is the best judge of the quality of his products.
The industrial units having proven reputation and adequate testing facilities have to apply to the Director (Inspection and Quality Control), Export Inspection Council of India, 11th floor, Pragati Tower, 26 Rajendra Place, New Delhi-110 008. It grants a certificate valid for a period of one year, to allow manufacturers of engineering products, chemical and allied products and marine products. The approval of an industrial unit under this scheme is notified in the Gazette of India and the exporter has to pay a lump sum fee to the export inspection agencies depending upon his export turnover. Discussion on Quality Control and preshipment inspection carries in itself a major subject , which is the ISO 9000. The International Organisation for Standardisation (ISO) is the specialised International Agency in formulating the norms of Standardisation, Presently 91 Countries including India are members of the national Standard Body Various Technical Committees were formed who looked into and considered the different areas of specialisation and formulated the International Standard.
Processing of an Export Order An export has to be processed to meet the requirements of materials required by the importers. The export order must be processed as expeditiously as possible so that the buyers can receive the materials on time, as per their delivery schedules and also conforming to the specifications stipulated by them. Parties Acts and Publications Involved: The most important Acts/publications which must be consulted by an exporter in connection with the processing of an export order are: Foreign Trade (Development and Regulations) Act, 1992; customs Act, 1962; Carriage of goods by Sea Act, 1924; Foreign Exchange Regulations Act, 1973 Schedule of Charges of Goods in respect of the Port of Shipment; Handbook of Export Promotion; and Export Import policy and handbook of Procedures (1997-2002). The main parties which are involved in this processing are: the exporter, the foreign buyer, the negotiating bank, the shipping company, the insurance company, the Reserve Bank of India, Director General of Foreign Trade the collector of customs, the Port Commissioners and the Clearing & Forwarding Agents. Important steps required to enable a businessman to undertake export business are: (1) Registration with Export Promotion Councils, and (2) Obtaining the Importer/Exporter Code number.
Registration: An exporter should get him self registered by making an application on the prescribed form with an Export Promotion Council (EPC) related to his main product line of export. If there is no EPC, registration may be done with the Regional Licensing Authority concerned. Some of the important registering authorities are Export Promotion Councils, Commodity Boards, the Marine Products and Agricultural and Processed Food Products Export Development Authorities, Jute Commissioner and village industries Commission, State Directors of Industries, Development Commissioners of Foreign Trade Zones /Export Processing Zones, and the Federation of Indian Export Organizations. Once an exporter has been registered, the registration shall remain valid for 5 years. Registered experts have to submit quarterly reports about exports made by them. Common defects during Documentation: The bank making payment on behalf of its foreign correspondent must verify that all documents and drafts confirm precisely to the terms and conditions of the letter of credit. The requirements of credit cannot be waived or altered by the paying bank without specific authority from the issuing bank. To avoid payment delays the beneficiary should prepare and examine all documents carefully before presenting them to the paying bank.
Paying banks find that the following discrepancies between the documents and the letter of credit occur most frequently: 1.Drafts are presented after letter of credit has expired or after time for shipment has expired; 2. Invoice value or draft exceeds amount available under letter of credit; 3. Charges included in the invoice are not authorized in the letter of credit; 4. Amount of insurance coverage is inadequate or coverage does not include risks required by letter of credit; 5. Insurance document is not endorsed and/or countersigned; 6. Date of insurance policy or certificates is later than the date on bill of lading; 7. Bills of lading are not clean that is, they bear notations that qualify good order and condition of merchandise or its packing; 8. Bills of lading are not marked on board when so required by letter of credit; 9. On Board endorsement or changes on bills of lading are not signed by carrier or its agent or initialed by party who signed bills of lading; 10. On board endorsement s not dated; 11. Bills of lading are not endorsed;
12. Bills of lading are made out to order (Shippers order, blank endorsed) where letter of credit stipulates straight (direct to consignee) bill of lading or vice versa. In fact, it is better for the exporter to prepare to order B/L as this will keep goods in the custody of the bank. In case of straight B/L, the title of the goods passes automatically to the named consignee. 13. Bills of lading do not indicate freight prepaid as stipulated in the letter of credit; 14. Bills of lading are not marked freight prepaid when freight charges are included in invoice; 15. Description marks and numbers of merchandise are not the same on all documents presented or are not as required by the letter of credit; 16. Not all documents required by letter of credit are presented. 17. Invoice states used second hand or rebuilt merchandise when such conditions is not authorized by the letter of credit; 18. Invoice does not specify shipment terms (C & F., C.I.F , F.O. B etc) as stated in the letter of credit, and 19. Invoice is not signed as the letter of credit requires.
GATT - General Agreement on Tariffs and Trade was a multilateral agreement regulating international trade. It focuses on reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis. It was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was signed in 1947 and lasted until 1994. In 1995, WTO replaced it. World Trade Organization: (WTO) Precise Definition: The World Trade Organization (WTO) deals with the rules of trade between nations at a global or near-global level. The WTO began life on 1 January 1995, but its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules for the system. (The second WTO ministerial meeting, held in Geneva in May 1998, included a celebration of the 50th anniversary of the system.)
It did not take long for the General Agreement to give birth to an unofficial, de facto international organization, also known informally as GATT. Over the years GATT evolved through several rounds of negotiations. The last and largest GATT round, was the Uruguay Round which lasted from 1986 to 1994 and led to the WTOs creation. Whereas GATT had mainly dealt with trade in goods, the WTO and its agreements now cover trade in services, and in traded inventions, creations and designs (intellectual property). Principles of the trading system: The WTO agreements are lengthy and complex because they are legal texts covering a wide range of activities. They deal with: agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards and product safety, food sanitation regulations, intellectual property, and much more. But a number of simple, fundamental principles run throughout all of these documents.
These principles are the foundation of the multilateral trading system. They are, 1. Trade without discrimination - Most - favoured - nation (MFN): treating other people equally - National treatment: Treating foreigners and locals equally 2. Freer trade: gradually, through negotiation 3. Predictability: through binding and transparency 4. Promoting fair competition 5. Encouraging development and economic reform 6. Comparative advantage over absolute advantage 7. GATT: provisional for almost half a century The WTO has 153 members, representing more than 97% of total world trade and 30 observers, most seeking membership. The WTO is governed by a ministerial conference, meeting every two years; a general council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the ministerial conference. The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.
Functions of WTO: Among other functions, those regarded by analysts as the most important: 1. It oversees the implementation, administration and operation of the covered agreements. 2. It provides a forum for negotiations and for settling disputes. Additionally, it is the WTO's duty to review and propagate the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making. Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training. The WTO is also a center of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization. Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank.
EFTA - The European Free Trade Association (EFTA) is a free trade organization between four European countries that operates in parallel with, and is linked to the European Union (EU). The EFTA was established on 3 May 1960 as a trade blocalternative for European states who were either unable or unwilling to join the thenEuropean Economic Community (EEC) which has now become the EU. The Stockholm Convention, establishing the EFTA, was signed on 4 January 1960 in the Swedish capital by seven countries (known as the outer seven). Today's EFTA members are Liechtenstein, Iceland, Norway and Switzerland, of which the latter two, Norway and Switzerland, were founding members. The initial Stockholm Convention was superseded by the Vaduz Convention, which enabled greater liberalization of trade among the member states.
LAFTA - The Latin American Free Trade Association (LAFTA) was created in the 1960 Treaty of Montevideo by Argentina, Brazil, Chile, Mexico, Paraguay, Peru, and Uruguay. The signatories hoped to create a common market in Latin America and offered tariff rebates among member nations. LAFTA came into effect on January 2, 1962. When the trade association began, it had seven members and its main goal was to eliminate all duties and restrictions on the majority of their trade within 12 years. By the late 1960s, the area of LAFTA had a population of 220 million and produced about $90 billion of goods and services annually. It also had an average per capita gross national product of $440.
EU - The European Union is an economic and political union of 27 member states which are located primarily in Europe. The EU operates through a system of supranational independent institutions and intergovernmental negotiated decisions by the member states. Important institutions of the EU include European Commission, Council of European Union, European Council, Court of Justice of the European Union, and the European Central Bank. The European Parliament is elected every five years by EU citizens. The EU's de facto capital is Brussels.
The South Asian Association for Regional Cooperation (SAARC) is an organization of South Asian nations, which was established on 8 December 1985 when the government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka formally adopted its charter providing for the promotion of economic and social progress, cultural development within the South Asia region and also for friendship and cooperation with other developing countries. It is dedicated to economic, technological, social, and cultural development emphasizing collective self-reliance. Its seven founding members are Sri Lanka, Bhutan, India, Maldives, Nepal, Pakistan, and Bangladesh. Afghanistan joined the organization in 2007. Meetings of heads of state are usually scheduled annually; meetings of foreign secretaries, twice annually. It is headquartered in Kathmandu, Nepal.
World Bank - The World Bank is an international financial institution that provides loans to developing countries for capital programs. The World Bank's official goal is the reduction of poverty. According to the World Bank's Articles of Agreement (as amended effective 16 February 1989), all of its decisions must be guided by a commitment to promote foreign investment, international trade, and facilitate capital investment. The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), whereas the latter incorporates these two in addition to three more: International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes (ICSID).

International Marketing - Unit 1

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

International Marketing - Unit 1

Caricato da

Copyright:

Formati disponibili

International Marketing - Unit 1

Marketing Mix & Promotion Strategies on an International Front

Orientations of Management & Companies:

Research of Industry, Market characteristics, and market trends

Buyer behavior research

International Market Research Process

Domestic producer or marketer sells to or through

Open distribution via domestic wholesale middlemen

Foreign agent or merchant wholesalers

Export management company or company sales force

Potrebbero piacerti anche