International

Marketing

SECOND EDITION

RAKESH MOHAN JOSHI

Professor (International Business and International Marketing)
Indian Institute of Foreign Trade
New Delhi

OXTORD
UNIVERSITY PRESS
 Detailed Contents

Preface to the Second Edition v

Acknowledgements ix
Preface to the First Edition x
Brief Contents xii
List of Exhibits and Case Studies xxiii

PART I DECISION TO INTERNATIONAUZE

1. The Concept of International Marketing 3 Theoretical Background of International

Introduction 3 Trade 26
Theory of Mercantilism 26
Globalization and Its Marketing Theory of Absolute Advantage 2 7
Implications 5 Theory of Comparative Advantage 28
Understanding Globalization 7 Factor Endowment Theory 29
Measuring Globalization 9 Country Similarity Theory 30
Impact of Globalization on Present-day New Trade Theory 30
Marketing 11 Theory of International Product Life Cycle 31
Concept of International Marketing 13 Theory of Competitive Advantage 31
Marketing Fundamentals 13 Reasons for Entering International Markets 32
International Marketing: Growth 32
The Concept 13 Profitability 33
Terms in International Marketing 14 Reverse Leaming 34
Domestic Marketing vs International Achieving Economies of Scale 34
Marketing 15 Risk Spread 34
Evolutionary Process of Global Marketing 18 Access to Imported Inputs 35
Domestic Marketing 19 Uniqueness of Product or Service 35
Export Marketing 19 Marketing Opportunities due to Life
International Marketing 20 Cycles 35
Multinational Marketing 21 Spreading R&D Costs 35
Global Marketing 21 International Marketing Framework 35
Towards GLOCAL Marketing 22 Decision to Internationalize 37
Adaptation: The Critical Success Factor in Setting Marketing Objectives 37
International Markets 23 Case Study. Essel Propack—World's Largest
EPRG Concept 25 Manufacturer of Laminated Tubes 40

PART II SCANNING INTERNATIONAL MARKETING ENVIRONMENT 49

Scanning the International United Nations Conference on Trade

Economic Environment 51 and Development 61
World Intellectual Property
Introduction 51
Organization 64
World Economic Outlook 52 United Nations Industrial Development
International Economic Institutions 53 Organization 65
World Bank Group 53 Asian Development Bank 65
 Detailed Contents

United Nations Economic and Social Security of Access to International Markets 92

Commission for Asia and the Pacific 66 Stability of Access to International
International Economic Integrations 67 Markets 92
Conceptual Framework of International Implications for Importers of
Economic Integration 67 Raw Materials and Other Inputs 92

Major Trade Croups 69 From GATT to WTO 92

The European Union 69 Functions of WTO 93
North American Free Trade Area 71 Structure of WTO 94
MERCOSUR 71
Gulf Cooperation Council 72 Principles of Multilateral Trading System
Asia-Pacific Economic Cooperation 72 under the WTO 94
Association of Southeast Asian Nations 72 Trade without Discrimination 96
Gradual Move towards Freer Markets
India's Participation in Preferential through Negotiations 96
Trade Agreements 73 Increased Predictability of International
SAARC Preferential Trading Agreement 74 Marketing Environment 96
Comprehensive Economic Cooperation Promoting Fair Competition in International
Agreement between India and Singapore 76 Markets 97
Framework Agreement on Comprehensive
Economic Cooperation between WTO Agreements: An Overview 97
ASEAN and India 77 Increasing Opportunities for
Bay of Bengal Initiative for Multi-sectoral Goods in International Markets 98
Technical and Economic Cooperation 77 Creating Fairer Markets in
Indo-Sri Lanka Free Trade Agreement 78 Agriculture Sector 99
Asia-Pacific Trade Agreement (Bangkok Opening up Marketing Opportunities in
Agreement) 79 Textiles 101
Framework Agreement for Establishing Free Standards and Safety Measures
Trade between India and Thailand 79 for International Markets 102
Bilateral Preferential Trading Agreement with Bringing International Trade in Services under
Afghanistan 80 Multilateral Framework 103
India-MERCOSUR PTA 80 Protection and Enforcement of Intellectual
India-Chile Framework Agreement on Property Rights 106
Economic Cooperation 80 Curbing Unfair Marketing Practices 109
Indo-Gulf Cooperation Council PTA 80 Emergency Protection from Imports 111
India-Malaysia Comprehensive Economic Attempts to Reduce Non-tariff Marketing
Cooperation Agreement 81 Barriers 112
India-Korea Comprehensive Economic Promoting Cross-border
Partnership Agreement 81 Investments 115
India-Japan CEPA 81 Plurilateral Agreements 115
India's Other Economic Cooperation Ensuring Transparency in Trade Policy 116
Agreements under Negotiation 81
Settlement of International
RTAs under the WTO: The Multilateral Trade Disputes 117
Trading System 81 Procedure of Dispute Settlement 118
Case Study. Emerging Marketing Opportunities WTO: Over the Years 121
and BRICS 84
Implications of WTO on International
World Trade Organization: International Marketing 122
Marketing Implications 91 Case Study: Darjeeling Tea—Global
Introduction 91 Infringement and WTO 126
 Detailed Contents XV

4. International Political and Legal 5. International Cultural Environment 151

Environment 130 Introduction 151
Introduction 130 The Concept of Culture 152
International Political Environment 132 Constituents of Culture 153
International Political Systems Cultural Globalization 161
and ldeologies 132
Comparison of Cross-cultural
Trade Embargoes and Sanctions 136
Behaviour 162
Bureaucracy 136
Hofstede's Cultural Classification 162
Terrorism, Crime, and Violence 137
Trompenaars' Cultural Classification 166
International Legal Environment 139 Other Cross-cultural Classification 169
Judicial Independence and
Cultural Orientation in International
Efficiency 140
Marketing 173
International Legal Systems 142
Parochialism vs Simplification 173
Principles of International
Law 144 Self-reference Criterion and Ethnocentrism:
United Nations Commission on Major Obstacles in International Marketing
International Trade Law 145 Decisions 173
Case Study. Homologation of 'Motor Vehicles' Case Study: Cross-cultural Misapprehensions
in International Markets 147 over the Swastika in the West / 76

PART III MARKET IDENTIFICATION, EVALUATION, iND SELECTION 179

6. International Marketing Research 181 India's Foreign Trade: An Overview 213

Introduction 181 Direction of India's Merchandise Trade 214
Composition of India's Merchandise
International Marketing Research 183 Trade 216
Process of Marketing Research 183
India's Services Trade 220
Major Challenges to Successful International
Marketing Research 192 India's Sluggish Export Performance:
Cross-cultural Marketing Behaviour An Evaluation 222
and Research 192 Balance of Payments 224
Equivalences in Cross-country Research / 93 Balance of Trade 226
Emic vs Etic Dilemma: Cultural Uniqueness vs Gains from International Trade 227
Pan-culturalism 197 Concept of Terms of Trade 227
The Emic Approach 197 Terms of Trade: Developed, Developing,
The Etic Approach 197 and Transition Economies 228
Operationalization of Emic and Etic 197 India's Terms of Trade 230
International Marketing Research and Strategie Measures to Promote India's
Human Judgement 198 Exports 231
1. Exploring International Trade Developing a Proactive Approach to
Opportunities 202 International Trade 232
Promoting Foreign Direct Investments 233
Introduction 202
Abolition of Indirect Taxes in Certain Sectors
Background of International Trade Pattems 203 for Export Production 233
World Trade: An Overview 203 Entrepreneurship Facilitation 234
World Merchandise Trade 204 Infrastructure Development 234
World Services Trade 210 Promoting Services' Exports 235
XVi Detailed Contents

Case Study: Emerging Opportunities in Preliminary Screening for Selection of

International Dairy Trade and India 237 International Markets 261
Market Size 261
8. Identification, Segmentation, and Accessibility to International Markets 264
Targeting of International Markets 248 Profitability 267
Introduction 248 Assessing Market Potential 267
Identificaton of International Markets 249 Tools for International Market Evaluation and
Institutes Facilitating Identification of Selection 270
International Markets 249 Trade Analysis Method 270
Segmentation of International Analogy Methods 270
Markets 251 Opportunity-risk Analysis 270
Geographie Segmentation 251 Growth-share (Boston Consulting Group)
Demographic Segmentation 251 Matrix 271
Psychographic Segmentation 256 Country Attractiveness-Company Strength
Segmentation on the Basis of Stages of Matrix 272
Development 258 Country Evaluation for Locating Services 274
Segmentation on the Basis of International Distance Model for Selection of International
Marketing Opportunity 258 Markets 276
Segmentation on the Basis of Market Case Study. Identifying International Marketing
Attractiveness 261 Opportunities in Medical Services 279

PART IV ENTRY MODE DECISIONS 283

9. Entering International Markets 285 Selection of International Market Entry

Introduction 285 Modes 309
Strategie Trade-ofifs in Selecting Entry
Concept of International Market Entry
Modes 310
Modes 286
Factors Affecting Selection of Entry
Modes of Entry in International Markets 287 Modes 310
Production in Home Country 287 Decision-making Model for Selecting
Production in a Foreign Country 293 International Market Entry Modes 314
Investment Entry Modes 302
Choosing the Right Entry Mode Mix for
Assembly or Mixing in Overseas
International Markets 316
Markets 302
International Joint Ventures 303 Case Study: Indian Oil Corporation's
Wholly Owned Foreign Subsidiaries 304 Internationalization Strategy 320

PARTY MARKETING MIX DECISIONS 323

10. Product Strategy for International Developing Products for International

Markets 325 Markets 327
Ethnocentric Approach 327
Introduction 325
Polycentric Approach 327
Identification of Products for Regiocentric Approach 327
International Markets 326 Geocentric Approach 328
 Detailed Contents XVÜ

Product Standardization vs Adaptation in Balance Brand Based on Tangible-Intangible

International Markets 329 Product Component 365
Product Standardization 329 Branding of Services 367
Product Adaptation 330
Trade-off Strategy between Product Strategy for Building Global Brands 367
Standardization and Adaptation 337 Selecting Brand Names for International
Markets 368
Product Quality Decisions for International
Markets 338 Key Concepts of Building Brands 369
Brand Image 370
Packaging and Labelling for International Brand Equity 371
Markets 339 Brand Identity 373
New Product Launch for International Markets 340 Brand Essence 376
Waterfall Approach 341 Brand Positioning 377
Sprinkler Approach 342 Brand Identity, Brand Image, and
New Product Diffusion in International Brand Positioning 377
Markets 343 Brand Revitalization 377
Brand Repositioning 377
Concept of International Product Brand Extension 378
Life Cycle Theory 343
Implications of Life Cycle Concept in
International Product Strategy 346 Brand Building 378
International Competitive Posture Life Cycle Concept and Product Categories 379
Matrix 346 Life Cycle Concept and Brand 380
Framework for Product-promotion
International Branding Strategy 381
Strategies for International Markets 347
Low CDI—Low BDI Markets 381
Straight Extension 348
Low CDI—High BDI Markets 381
Product Extension-Promotion Adaptation 349
High CDI-Low BDI Markets 382
Product Adaptation-Promotion Extension 349
High CDI—High BDI Markets 382
Dual Adaptation 349
Developing New Product 349 Case Study: Building Formidable Indian
Brands in Diamond Jewellery 384
Case Study: Barbie Faces Islamic Dolls 353

12. Pricing Decisions for International

11. Building Brands in International
Markets 393
Markets 358
Introduction 358 Introduction 393

Concept of Branding 359 Concept of Pricing in International Markets 394

Branding Alternatives for International Pricing Approaches for International
Markets 360 Markets 395
No Brand or Branding the Product 360 Cost-based Pricing 395
Manufacturer's Own Brand or Market-based Pricing 397
a Private Brand 361 Factors Influencing Pricing Decisions 398
Local, National, or Global Brand 361 Cost Jpg
Single or Multiple Brands 362 Competition 399
Strategies for Building Brands 363 Purchasing Power 400
Brand Based on Tangible Product Buyers' Behaviour 402
Component 363 Irregulär or Unaccounted Payments in
Brand Based on Intangible Product Export-Import 403
Component 364 Foreign Exchange Fluctuations 403
XVÜi Detailed Contents

Terms of Delivery (Incoterms) in International High Density ofMiddlemen 441

Transactions 405 Channel Control 442
INCOTERMS for Sea and Inland Business Culture 442
Waterways 406 Legal System 442
INCOTERMS for Any Mode or International Retailing 444
Modes of Transportation 407 Department Stores 444
Terms of Payment in International Supermarkts 444
Transactions 408 Convenience Stores 444
Advance Payment 408 Speciality Stores 444
Open Account 408 Discount Stores 444
Consignment Sales 409 Superstores 445
Documentary Credit 409 Hypermarkets 445
Counter Trade 409 Retailing in India 450
Simple Barter 410 Opening up of Indian Retail Sector
Clearing Arrangement 411 for Foreign Players 451
Switch Trading 411
International Retailing and Private Labels 456
Counter Purchase 412
Buy-back (Compensation) 412 Case Study: Channels of International
Offset 413 Distribution for Cut Flowers 459
Dumping 414 14. Communication Decisions for
Forms of Dumping 415 International Markets 467
Transfer Pricing 416 Introduction 467
Types of Transfer Pricing 417
Consumer Response Hierarchy Models 469
Legal Framework of Transfer Pricing 417
'AIDA' Model 469
Grey Marketing 418 Innovation-adoption Model 469
Types of Grey Marketing Channels 418
Marketing Communication Strategies 470
Case Study. Pricing Medicines: Profits, Push Strategy 470
Patents, and Poor Customers 422 Pull Strategy 471
13. International Distribution 428 Process of International Marketing
Communication 472
Introduction 428
Sender 472
Concept of International Distribution Encoding 472
Channels 429 Message 472
Types of International Distribution Channels 430 Medium 473
Indirect Channels 430 Decoding 473
Direct Channels 431 Receiver 473
Channel Intermediaries in International Noise 473
Markets 432 Feedback 473
Indirect Channels 432 Concept of International Marketing
Direct Channels 436 Communication Mix 474
International Franchising 440
E-channels 440 Tools for International Marketing
Communication 475
Selecting Channels of International Advertising 475
Distribution 441 Direct Marketing 481
Structure of Distribution Channels in Personal Selling 482
International Markets 441 Sales Promotion 484
 Detailed Contents xix

Public Relations 484 Language 494

Trade Missions 489 Education 496
International Trade Fairs and Media Infrastructure 496
Exhibitions 489 Government Regulations 496
Making Optimum Gains from Participation in Strategie Framework for International
International Trade Fairs 490 Product-promotion Decisions 497
ATA Gamet 491 Straight Adaptation 498
Factors Influencing International Communication Product Extension-Promotion Adaptation 498
Decisions 492 Product Adaptation-Promotion Extension 498
Culture 492 Dual Adaptation 498

PART VI EXPORT-IMPORT MANAGEMENT 501

15. Institutional Infrastructure for Export WTO and India's Export Promotion
Promotion 503 Measures 552
WTO's Trade Policy Review
Introduction 503
Mechanism 554
The Concept of Export Promotion 504
Organizations for International Trade 17. Export Procedures and Documentation 557
Promotion 505 Introduction 557
International Trade Centre 506 Export Documentation 560
Institutional Set-up for Export Promotion in Consequences of Poorly Completed
India 506 Documentation 561
Department of Commerce 508 Adaptation of Aligned Documentation System
Subordinate Offices 509 in India 562
Advisory Bodies 5/0 Commercial Documents 564
Commodity Organizations 511 Commercial Invoice 564
Service Institutions 515 Packing List 567
Indian Government's Trade Representatives Transport Documents 567
Abroad 519 Ocean (Marine) Bill ofLading 567
Government Participation in Foreign Airway Bill 569
Trade 519 Combined Transport Document 569
States' Involvement in Promoting Exports 520 Certificate of Origin 570
Export Promotion in India: Need for Strategie Inspection Certificate 571
Reorientation 522 Insurance Policy/Certificate 571
Mate's Receipt 571
16. Framework of International Bill of Exchange (Draft) 572
Trade Policy 524 Shipment Advice 572
Introduction 524 Regulatory Documents 572
Exchange Control Declaration Forms 572
Concept of International Trade Policy 525
Shipping Bill/Bill of Export 573
India's Foreign Trade Policy: An Overview 526 Bill of Entry 574
Export Prohibition; and Restrictions 528 Documents for Central Excise
Import Prohibitions and Restrictions 529 Clearance 574
Policy Measures for Export Promotion 530 Blacklist Certificate 575
Policy Initiatives and lncentives by State Health/Veterinary/Sanitary Certificate 575
Governments 552 Electronic Processing of Export Documents 5 75
XX Detailed. Contents

Procedure for Export-Import 576 Information and Communication

Compliance with Legal Framework 576 Technology 609
Obtaining Import-Export Code Number 578 Transportation 609
Registration with Export Promotion Third Party Logistics 610
Council 578
Maritime Transportation in International
Registration with Sales Tax and
Trade 611
Central Excise Authorities 578
Types of Ocean Cargo 612
Concluding an Export Deal 579
Types of Commercial Vessels 612
Arranging Export Finance 580
Alternates for Ocean Shipment 618
Procuring or Manufacturing of Goods 581
Charter Shipping 618
Packaging, Marking, and Labelling of
Liner Shipping 621
Goods 584
Appointment of Clearing and Forwarding Containerization and Multi-modal or
Agents 585 Inter-modal Transportation 623
Arranging Cargo Insurance 585 Types of Containers 624
Booking Shipping Space 585 FCL vs LCL Containers 626
Dispatch of Goods to the Port 586 International Organizations Associated with
Port Procedures and Customs Clearance 586 International Maritime Transportation 626
Dispatch of Documenta to the Exporter 588 International Maritime Organization 627
Sending Shipment Advice 588 United Nations Conference on Trade and
Presentation of Documents at the Negotiating Development 627
Bank 589 World Customs Organizations 627
Claiming Export Incentives 589 International Organization for
Electronic Processing of International Trade Standardization 628
Documents 590 International Labour Organization 628
Electronic Trade Documentation System 590 Institutional Framework for Maritime
Singapore's Electronic Trade Documentation Transport in India 628
System 591 Ministry of Shipping 629
TradeNet 591 National Shipping Board 629
TradeXchange 591 Directorate General of Shipping 629
Electronic Trade Documentation System in Shipping Corporation of India Ltd 629
India 594 Container Corporation of India 629
Using SMTP (Simple Mail Transfer Protocol) India's International Shipping Activities 630
Option 596
Using the File Upload Option 596 19. Modes of Payment and
International Trade Finance 635
Case Study: Examining a Letter of Credit 600
Introduction 635
18. Trade Logistics and International
Shipping 603 Modes of Payment in International Trade 636
Advance Payment 636
Introduction 603 Documentary Credit 636
Concept of International Logistics 604 Consignment Sales 642
Logistics and the Value Chain Open Account 642
Concept 606 International Trade Finance 643
Logistics Performance Index 606 Banker's Acceptance 643
Managing International Logistics 608 Rediscounting 643
Warehousing 608 Accounts Receivable Financing 644
Inventory Management 608 Factoring 644
Packing and Unitization 609 Forfaiting 645
 Detailed Contents XXi

Letters of Credit 647 Foreign Exchange Exposure 661

Counter-trade 647 Commercial Risk 662
Export Finance 647 Transit Risk 663
WTO Compatibility of Trade Finance Measuring Risks in International Markets 664
Scheines 651 Business Environment Risk Intelligence
Case Study: Exim Bank's Credit to Facilitate Index 665
Imports from India 653 Economist Intelligence Unit's Risk
Indices 666
20. Managing Risks in International Global Risk Index 666
Trade 658 Failed States Index 666
Introduction 658 Managing Risks in International Markets 669
Types of Risks in International Markets 659 Managing Political Risks 669
Political Risk 659 Managing Commercial Risks 670
Economic Risk 660 Managing Foreign Exchange Risks 676
Foreign Exchange Risks and Exposure 660 Managing Transit Risks: Marine Cargo
Foreign Exchange Risk 660 Insurance 678

PART VII CONTEMPORARYISSUES 687

21. Global E-marketing 689 Alternative E-marketing Strategies 708

Brick and Mortar 708
Introduction 689
Pure Click 708
Conceptual Framework of E-marketing 690 Brick and Click 708
E-commerce 693
E-enabled Marketing Process Transformations
E-business 694
and Challenges 709
M-marketing 695
Impact of ICT on New Products
E-marketing Technology and and Services 710
Environment 696
Electronic Data Interchange 697 Impact of ICT on Consumer Purchase Decision
Internet 697 Process 710
Extranet 699 Problem Recognition 710
Intranet 699 Information Search 710
Leveraging ICT to Enhance Evaluation of Alternatives 711
Competitiveness 700 Purchase Decision 711
Post-purchase Behaviour 711
Prerequisites for Effective E-marketing
Transactions 700 Emergence of Reverse Marketing 711

Global E-marketing 701 Policy Framework and ICT

E-marketing Communication 702 Laws for Global E-marketing 712
E-marketing Research 703 22. Emerging Issues 716
Global E-marketing of Services 703 Introduction 716
E-marketing Models 704 Emerging Issues in International
Business-to-business 704 Marketing 718
Business-to-consumer 706 Accelerated Growth of Global Markets 718
Consumer-to-business 707 Pervasiveness of Globalization 718
Consumer-to-consumer 707 Rapid Integration of Global Markets 718
 Detailed Contents

Breaking down of Marketing Piracy 727

Boundaries 719 Bribery 727
Emerging New Marketing Barners 720 Smuggling 729
Emergence of Global Customer Growing Awareness of Corporate Social
Segment 720 Responsibility 729
Growing Customer Expectation 720
Growing Significance of Emerging Economies
Product Proliferation and Shortening
International Marketing 730
Product Life Cycles 721
Emergence of Knowledge Economy 721 India: Emerges at the Global Stage 732
Emergence of Global E-marketing 722 Manufacturing 734
IGT Revolutionizes Marketing of Services 735
Services 722 Foreign Direct Investment 736
Growing Strength of Retailers 723 India and China: David and Goliath 736
Customer Relationship Marketing 724 Internationalization of Indian Firms 737
Ethical Issues in International Marketing 724 Reaping India's Demographic
Rising Concern for Unethical Marketing Dividend 737
Practices 724 India Posed to be the World's
Counterfeiting and Piracy 725 Biggest Consumer Market 738

Index 741
A baut the Author 753