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Edem export marketing

Definition of Export Marketing. Export marketing is the practice by which a company sells products or services to a foreign country. Products are produced or distributed from the company's home country to buyers in international locations. ... This where the importance of an export marketing

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Edem export marketing

  1. 1. | EXPORT MANAGEMENT 1 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 EXPORT MANAGEMENT CONTENTS LESSON-1 NATIONAL ECONOMIC SELF-RELIANCE  Introduction  Meaning of Self-Reliance  Importance of Self-Reliance  India’s Achievements towards Self-Reliance  Making our Nation Strong and Self-Reliant  Self Reliance Goal for Now Millennium LESSON – 2 (INTRODUCTION TO INTERNATIONAL MARKETING)  Introduction  Definition  Process  Features  Scope  Importance  Special Problems  Transition from Domestic to International Business  Question Bank. LESSON –3 MNC’S & GLOBALIZATION OF INDIAN ECONOMY Next Page >
  2. 2. | LESSON-1 NATIONAL ECONOMIC SELF-RELIANCE 2 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8  Multinational Corporations (MNCs).  Globalize Or Perish I. Meaning II. Globalization of the Indian Economy.  Distinguish between Export Marketing and Domestic Marketing.  Case Study  Questions Banks LESSON – 4 INTERNATIONAL MARKETING ENVIRONMENT AND TARIFF BARRIERS  International Marketing Environment I. Definition II. Components  Trade Barriers I. Definition II. Objectives III. Tariff Barriers  Question Bank LESSON -5 NON TARIFF BARRIERS  Non-tariff barriers < Previous Page Next Page >
  3. 3. | LESSON -6 WTO, GATT AND TRADING BLOCS 3 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8  Distinguish between I. Tariff Barriers and Non-tariff Barriers. II. Advalorem Duty and Specific Duty.  CASE STUDY  QUESTIONS BANK LESSON -6 WTO, GATT AND TRADING BLOCS  World Trade Organisation (WTO) I. GATT - Background. II. Objectives III. Functions IV. GATT Negotiation Rounds V. Uruguay Round VI. Most Favored Nations (MFN) Clause  United Nations Conference On Trade & Development (UNCTAD) I. Background II. Functions III. Generalized -System of Preference (GSP).  Trading Blocs I. Meaning II. Types.  Opportunities and Threats < Previous Page Next Page >
  4. 4. | Regulation and Management Foreign Exchange 4 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8  Question Bank LESSON-7 REGULATIONS FOR INTERNATIONAL TRADE  Introduction  Major Laws Governing India’s Export Import Trade  Foreign Trade (Development & Regulation) Act I. Objective of the act II. India‟s foreign trade Policy  Foreign Exchange Regulation Act (FERA) I. Introduction and Concept II. Definition III. Main Provision of the Act  Regulation and Management Foreign Exchange  Pre-shipment Inspection & Quality Control Act 963  Customs act, 1962.  International commercial practices I. Uniform Customs and Practice for Documentary Credits (UCP), 1993. II. Incoterms 2000  Question Bank. < Previous Page Next Page >
  5. 5. | LESSON – 1 5 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 LESSON -8 LABELLING, PACKAGING, PACKING AND MARKING OF EXPORT CONSIGNMENTS  Introduction  Labeling  Packing  International symbols for textile care  Export packaging and packing  Marking  New packaging rules in Germany LESSON – 1 NATIONAL ECONOMIC SELF-RELIANCE Introduction Meaning of Self-reliance Self-reliance and Indian Economy Importance Achievements “Self-reliance is the only road to true freedom, and being one's own person is its ultimate Reward." -- Patricia Sampson < Previous Page Next Page >
  6. 6. | Introduction 6 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 “Never wear your best trousers when you go out to fight for freedom and truth." --Henrik Ibsen (1828 - 1906) Introduction This is our first session with “National Economic Self-reliance. Let‟s be active and make this lecture interactive and interesting with the discussion of self reliance and self sufficient, first of all we will discuss what is self-reliance? My tomatoes need heat and sun and the weather is giving me grey and cool. We get a day of two of wonderful growing weather and then, balm, its fall. Fortunately, I am not yet counting on my garden to meet all my food needs, if I was I'd be concerned right now. See, I know what the weather can do and anticipate poor seasons by keeping a larder stocked with enough food so that if I have a bad growing year, we will not go hungry. I also start seeds indoors six to eight weeks in advance (tomatoes) so that they can handle the cool temperatures when they are transplanted. This knowledge of my local conditions comes from paying attention to the daily weather. This knowledge can enable me to plan my food production so that it suits the weather it encounters. Knowledge is the essence of being self-reliant. Self-reliance requires confidence and knowledge builds that confidence. You need to become, not an info-junky, but someone who has an active curiosity and constantly strives to enhance their knowledge base. You have to learn to value the little tidbits of data that float your way and to do so while swimming in an information stream. You may find it difficult to understand what it is you need to know and be tempted to try and collect everything. You may drown while doing so. You avoid drowning by having a clear vision of where you are going. If you live within a community you do not need to know how to do everything yourself, you merely need to know who can assist and have something to trade. Even where the required skills are < Previous Page Next Page >
  7. 7. | Introduction 7 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 beyond those possessed by the individual, a more direct involvement with the production process or service, can result in greater self-reliance, because the individual has enhanced his or her knowledge base and reduced his or her dependence upon someone else to achieve the desired goal. This increases confidence. Self-reliance paves the path towards self-sufficiency. A major goal of self-sufficiency is to enable the individual to directly produce. If you are a homesteader living far beyond the sidewalks then this may need to be your goal. Communities may be self-sufficient unto themselves as they can produce all they need. A community, even though self-sufficient, may still want to engage in social exchange with other communities, just as individuals, often seek the company of other like-minded people. Most of the newly independent countries, including India, adopted a policy of protectionism for bringing about all round development of their economies. However, this strategy not only failed to boost up the stagnant traditional economies of such countries but also kept them aloof from the latest developments in the technological and-scientific fields in most of the developed countries of the world. However, the attitude of such countries changed radically in recent past. Many developing countries adopted programmers of import liberalization and export promotion in the 1960‟s and achieved remarkable success. Such countries including Japan, Singapore, Hong Kong, South Korea and Taiwan. The success of these countries has prompted many economists and international agencies, such as the IMF and the World Bank, to advocate import liberalization and export promotion as a panacea for many economic ills, facing developing countries like India. Following the footsteps of such countries, the Government of India adopted the policy of the trade liberalization in 1991. The trade policy of 1991 introduced many reforms to open up the Indian economy to foreign trade and to integrate it < Previous Page Next Page >
  8. 8. | Introduction 8 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 with the global economy in the new international economic order that taking shape with the setting up the WTO (world trade Organization) in 1995. Meaning of Self-Reliance Self-reliance is being independent, which is being able to depend on you alone and to do things by yourself without assistance from others. Self-reliance is what you do using your mind, body and soul. I believe that self-reliance is just being your own person and not always following behind one person and not to be influenced by negative things from negative people. This is why you should be your own person. We accomplished self-reliance as a group because we were alone a lot doing things as a group without the counselors. We hiked, cooked, and found camp alone at times. That is an example of the Outlaws using self reliance. The term self-reliance is often confused with self-sufficiency though they are not one and the same. Self-sufficiency can be interpreted in both a general as well as a partial sense. In general sense, self-sufficiency implies that a country is in a position to fulfill all its requirements of goods and services from domestic sources and is not at all dependent on import. In such a situation the possibility as exports can also be ruled out as, if the country is not dependent on imports, foreign, exchange earned through exports has no relevance for such country. In fact, self-sufficiency in general sense is an unrealistic situation. However, self-sufficiency in partial sense implies that a country is in a position to fulfill all its requirements of goods and services either from domestic sources or has adequate foreign exchange to import goods and services it requires from abroad. < Previous Page Next Page >
  9. 9. | Introduction 9 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Self-reliance implies self-sufficiency in partial sense, i.e., a country is capable of meeting all its requirements either from domestic sources or has an ability to import them from abroad. Therefore, it can be said that to be self-reliant a country need not be self- sufficient. Importance of Self-Reliance India won independence after about two centuries of colonial exploitation. At this juncture, the world politics as whole was undergoing a revolutionary change but the developed countries, were not prepared to abandon their imperialistic pursuit. Hence, India, like many other newly liberated countries, could not risk its freedom again by opening up its economy to the western world. However, Indian economy at that time was afflicted by severe problems like shortage of food grains, underdevelopment of agricultural as well as industrial sector, scarcity of capital and technological obsolescence. We need to analyze these aspects of Indian economy in order to understand why economically backward country like India should become self reliant in these key areas of development. Shortage of Food grains At the time of independence, India was purely an agrarian economy and this character of Indian economy has not changed over the past five decades. At the time of independence, the production of food grains in India was much less than its demand. Shortage of food grains in the country often led to mass unrest and therefore India entered into the PL-480 agreement with the USA for the import of food grains. Though this benefited consumers in the short run but it had many adverse repercussions such as threat of political blackmailing from major food grains suppliers, bad impact on domestic producers, etc. However, with the withdrawal of PL-480 program by the US and subsequent launch of the < Previous Page Next Page >
  10. 10. | Introduction 10 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Green Revolution strategy by India has removed obstacles to the development of agricultural sector in India and today we are self sufficient in the production of food grains. Underdevelopment of Industrial Structure On the eve of independence, the industrial development in the India was confined to traditional indigenous industries producing handful of consumer goods such as cotton textile, sugar, paper and leather goods. Industries manufacturing intermediate good like iron and steel, cement, etc., had a capacity much below the requirements. Capital goods industries were almost non-existent. In short, industrial development in India after independence manifested all the signs of underdevelopment. The government, thus, accorded a top priority to the programs of industrial development as soon as planning process began in India. As a part of planned efforts, a number of industries were setup in public sector. The second Five Year Plan was referred to as industrial plan and number of basic and heavy industries, including iron and steel, non-ferrous metal, coal, cement, heavy chemicals and others were set up. Scarcity of Capital Accounting to the Central Statistical Organization (CSO) the Gross Domestic Saving (GDS) rate was just 8.95 in 1950-51. This rate was much below standard. The GDS rate did not show much increase during the planning period in the initial phase. As a result, India had to depend on external foreign aid for meeting its import requirements. The country, however, failed to raise adequate funds from foreign sources on account of certain political constraints. Besides the low rate of saving, the other factor, which compelled the government to seek foreign aid, was the persistent deficit in balance of payments. The problem with foreign aid is that while giving loans, donor countries taking advantage of the weak bargaining position of the capital recipient country impose highly objectionable conditions which can affect the autonomy of the decision making processes in the recipient < Previous Page Next Page >
  11. 11. | Introduction 11 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 country. Obsolete Technology India is an overpopulated country with ready availability of efficient and cheap labor at hand. Unemployment is the major problem, which country is facing even today, and as a result capital-intensive methods of production are not suitable for our economy Therefore, a very little attention was paid to the development of modern technology at home. At the same time, whatever technologies are being utilized presently are obsolete and outdated technologies, are being utilized presently are obsolete and outdated technologies, absorbed form foreign economies, which hardly contribute to the economic development of the country. As a result, in order to keep pace with world economy, India had to import technology from outside. Some of which are not at all suitable for Indian conditions. Taking this into consideration India needs to develop its own technology, which can fulfill the needs of providing job opportunities as well as help the economy in keeping with the modern world. India’s Achievements towards Self-Reliance So far India is not a completely self-reliant economy, though its progress towards self-reliance in food grains, capital equipment, science and technology and capital formation is quite significant. The balance of payments situation right now is not precarious, but the country‟s dependence on MNCS for setting up power projects and large oil imports raise serious doubts about India‟s capability to become completely self-reliant in near future. < Previous Page Next Page >
  12. 12. | Introduction 12 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 (a) Self Sufficiency in Food grains Self sufficiency in food grains has always been considered and essential condition for India‟s self reliance. Consequent to the Withdrawal of PL-480 program by the US and subsequent launch of the Green Revolution strategy by India, agricultural sector received a boost and due to assiduous efforts of more than a decade India achieved the dream of self- sufficiency in the production of food grains by 1977-78. During the 1980s the imports of food grins in India reduced considerably. The reason not being a sudden rise in production of food grains, but because the country had been able to build up large buffer stocks of food grains from which supplies could be released in the years of bad harvests to match the demand. In 1986-87 and 1987-88 the country experienced serious droughts. Yet the country successfully handled the food problem without recourse to large imports. In January 2002, buffer stocks of food grains were more than 50 million tones. This level of buffer stocks was much larger than that was required to sustain public distribution system and stabilize prices of food grains in the open markets. (b) Self-Reliance in Capital Equipment The second Five Year plan laid the foundation of industrial development in India. Since initially the private sector did not come forth due to high investment and long gestation period, majority of basic and heavy industries such as heavy engineering, machine tools, iron and steel and some other capital goods industries were set up in public sector. As a result of boost given by the public sector and active participation of private sector later on, India marched on the path of industrial development. Today, we are self- sufficient in the production machinery, plant and other capital equipments. Today, engineering goods constitute one of the biggest export items. This shows that India‟s capital base is reasonably strong. India is capable of setting up big industrial units with indigenous machines and technical know-how. This undoubtedly is a big achievement of economic < Previous Page Next Page >
  13. 13. | Introduction 13 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 planning. (c) Self-Reliance in Science and Technology Development of science and technology plays a crucial role in the economic development of a country. However, given the political environment at the international level, it is not always possible to acquire the necessary technology on commercial terms. Hence, there is a strong case for self-reliance in science and technology. In fact, the country realized this quite early and as a result, the country has made a considerable headway in various areas of science and technology. Over the years agricultural research has played a crucial role in raising the production of food grains and today we are self-sufficient in the production of food grains. India‟s competence in industrial technology has grown so much that it has now emerged as a leading Third World exporter of industrial know-how, technical consultancy and turnkey projects. Even n the atomic energy program, a high degree of self- reliance has been attained in terms of design, fabrication and commissioning of nuclear power reactors and all associated elements. In the space program, capabilities relating to design and fabrication of satellites and of satellite launch vehicles have been developed which should lead in a few years to the possibility of launching and utilizing operational satellite on an indigenous basis. (d) Self-Reliance in Capital Formation When India launched the program of planned economic development in 1951, the saving rate (Gross Domestic Saving as the percentage of Gross Domestic Product) was as low as 8.9% Since then it has risen to over 20% and was 24.4% in 2000-01. At this level of saving not much external assistance is required for realizing a modest rate of economic growth of around 5.5% per annum. Over the years, dependence on external assistance has < Previous Page Next Page >
  14. 14. | Introduction 14 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 declined. For the Seventh Plan 8.8% resources were mobilized through external assistance as against 26.3% for the Third Plan and 26.4% for the three Annual Plans of the latter half of the 1960s. This fact clearly shows that the country has make a significant advance towards self-reliance in the realm of capital formation. The planning Commission has hoped that the country‟s dependence on external assistance would decrease further during the Eight Plan period. However, these expectations were belied as 9.9% resources had to be mobilized through external assistance. This because necessary because of the presence of large black income in the economy, which is channeled to conspicuous consumption and thus play no role in the development of the economy. With appropriate fiscal measures if this black income is canalized for the development of the country, the economy would reach a still higher level of saving and its dependence on foreign aid would be reduced significantly. (e) Balance of Payments Deficit and Self-reliance Although India‟s balance of payment position has always remained unfavorable; there is no doubt that the conditions since 1993-94 have been distinctly favorable in comparison to the conditions prevailing in the period 1980-81 to 1992-93. In 1993-94 the current account deficit was only 0.4% of GDP. The foreign exchange reserves were equal to eight and a half month‟s imports. In this year while imports increased at a rate of 10.0%, exports rose at an impressive rate of 20.2%. In 1996-97, the current account deficit was 1.2% of GDP. Over the whole of the Eighth Plan period (1992-93 to 1996-97), the current account deficit declined to an annual average of 1.2% of GDP from 1.8% of GDP during the Seventh Plan. In addition of these significant developments, a noteworthy feature in India‟s balance of payments in recent years has been improvements in the invisible account due to mainly a spurt in tourism earnings and shift of private transfers from illegal channels to banking channels. In 2000-01 India‟s current account deficit declined to 0.5% of GDP as against 1.1% in 1999-2000. < Previous Page Next Page >
  15. 15. | Introduction 15 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 (f) Energy Crisis and Self Reliance At present India is facing a serious energy crisis and until it is solved the country cannot hope to become self-reliant. There is an acute shortage of power and energy resources in the country. At the same time, transmissions and distribution losses are high. The agricultural consumers are supplied power at very subsidized prices, which has led to inefficient use of electricity. The State Electricity Boards are grossly overstaffed and are plagued with rampant corruption. Under these circumstances India has to depend on foreign MNCs for setting up power projects. These MNCs' insist on exceptional rights and privileges for making investments in India. Domestic production of oil has stagnated for the last few years and our index of self- reliance in oil has come down from 70% in 1984-85 to 32.5% in 2000-01. As a result, imports of petroleum products in 2000-01 were as large as Rs. 71,497 cores. As far as the power sector is concerned the problem is far more serious. In this sector, until the State Electricity Boards are made autonomous, the pricing policy is rationalized, inefficiencies in the use of created capabilities are removed and rampant corruption is checked, energy sector units will not be financially viable and the power sector will remain starved of ingestible resources. Under these circumstances, the country has no choice but to depend on MNCs for expanding the capacity in the energy and power sector. To sum up, over the years the goal of overall self-reliance has proved to be elusive because of the balance of payments problems created largely by oil imports and the serious < Previous Page Next Page >
  16. 16. | Introduction 16 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 crisis in the power sector which has lately gripped the to attain this objective. Indications are that debt service on borrowings will increase in the years ahead. Recently export growth has accelerated, but imports have also increased. These trends are expected to persist for some time at least. Hence, India‟s advance towards the goal of self-reliance in the near future is somewhat doubtful. Making Our Nation Strong and Self-Reliant Individuals make the families; families constitute the societies; and societies together form the nations, an ensemble of which is seen as the world…. This relationship is not hierarchical in nature; rather, it naturally persists and expands like the mutually supportive motion of the waves in an ocean. Disturbance in the natural order of any component, though implicitly, affects the others in corresponding proportions…. Social anarchy accelerates the law and order problems at national level… Moral degradation and instability of the family institution is reflected in similar negative trends at the social levels too….Harmony of all musical nodes is necessary for the melody of a tune. Analogously, when we talk of all round peace, progress and prosperity of the nation, we will have to ensure harmonious endowment of these prospects in its constituent social, familial and personal domains too. The present scenario at global level depicts an arbitrary mélange of bright and gorgeous as well as dark and dull colors of positive and negative progress. The national picture – especially in the Indian context, is equally blurred. After 50 years of political independence, it is not clear where the nation is really headed? There certainly has been significant progress in some fields of science and technology. Self-reliance in agriculture, decrease in mortality rate, increase in literacy, are also counted as positive signs of < Previous Page Next Page >
  17. 17. | Introduction 17 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 progress. But, the explosive growth of population, rapidly declining cultural values, unequal economic progress, social disparity, rising corruption in almost every walk of national life, decreasing morality and reduced sense of responsibility in the personal, familial and social spheres of common man‟s life, ….etc, show the depressing sides. Excellent constitutional provisions have not been implemented to the extent as might have been planned by the architects of sovereign Indian democracy. Social status of women has not been ameliorated much as compared to that in the pre independence period. Similar is the case of the economic exploitation of the weaker and the poor ones. Wealth of the nation, its economic growth and industrialization, seem to have made the rich men richer… ; the poor ones continue to increase in number. The condition is more pathetic on other facets of social development. Castism, religious misconceptions, blind faith, superstitions, the curse of dowry and similar absurdities of the customs and convictions born out of the pernicious era of ignorance and slavery – continue to dominate the Indian mind. The political and economic systems too are infected by these social evils in one form or the other…. The large numbers of literacy campaigns, healthcare projects, social welfare schemes, etc, appear to have little effect in diverting the wrong trends. The egotistic and selfish attitudes of the learned and elite ones – including many of the journalists, writers, artists, scientists, philosophers, bureaucrats, industrialists, planners, policy makers and managers, etc, and, the ambitions and aspirations of the majority for luxuries and aplomb…, have added to the complications of the challenging problems associated with national development. It is surprising to note that even the awareness generated during the great movement of India‟s independence could not be channelized for similar revolution on the social front. Despite significant progress in agriculture, economy, science and technology, the social and < Previous Page Next Page >
  18. 18. | Introduction 18 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 religious systems have remained the areas of lesser attention. It is indeed unfortunate that after over 2500 years of slavery, when we finally got the opportunity to breath in free India, we, rather than resurrecting our original glory, chose to remain culturally enslaved and confused. We became the followers of single tracked materialistic development without bothering about what could be essential for elevating the status of a diversified and illiterate society like ours. We hardly cared about the inherent nature, culture, convictions, and attitudes of our masses, without whose compatible response, efficient cooperation and justified sharing in the national progress, our dreams of prosperous development were bound to be shattered in the long run….Our democracy and our constitution are indeed the best in the world, and we have the right to crown ourselves with the pride of the dignified values these stand for… But, have we ever thought, whether or how much, do we deserve them? How can a democracy be healthy and strong unless the voters, who design its political edifice, are made aware of their rights and responsibilities? How would we prevent biased voting influenced by caste, bribery, personal favors or threats and fears in a society, where, the majority of voters are uneducated, ignorant and deprived of even the basic necessities of human life? How could we expect efficient, honest and responsible representatives to be elected from a society, where, "might is right"; where, social injustice prevails in almost every family – depriving its female members of the fundament human rights; where, the impact of „religion‟ has been confined to emotional excitation, blind faith and backward traditions? Some of us might think that this is not our duty to answer the above or to search, our level best, for the solutions to accelerate righteous progress of our beloved nation. But then, we might be selfish, coward, irresponsible or cynical in some respect, or, might be unaware < Previous Page Next Page >
  19. 19. | Introduction 19 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 of our duties and ignorant about the facts of – where our true welfare and ultimate interest would lie? Many of us think that the best we could do is to improve ourselves, increase our own integrity and efficiency in order to fulfill our immediate duties…; because, after all we are not leaders, politicians or activists, who could initiate revolutionary movements. We don‟t even believe in the purpose and success of any such movement these days…. We might be correct, but that is neither the end of our duties, nor, do we get to try best use of the limitless potentials of our lives because of the above attitude. We may not generate movements, but we can certainly expand the peripheries of our immediate duties to inspire all others in our contact to educe greater faith in moral values, righteous thinking, self-confidence and sense of responsibilities in them too. Some of us do want to contribute in this direction; we do care for altruist service of the nation, but do not know how to proceed? This volume brings motivating guidance, detailed information and feasible and creative programs for each one of us to help ameliorate our personal, familial and social lives by means of thoughtful orientation and collective contribution of our own potentials and talents. The volume also elucidates what is necessary in terms of policy decisions and planned reformative activities at national level towards righteous implementation of our constitution and prestigious progress of our democracy. Guidelines for viable economic techniques for progress of agricultural sector and small-scale industries are also presented here along with details on creative programs of effective control of population growth, considering the psychological makeup of Indian public. Acharya Sharma was a dedicated freedom fighter, who had sincerely participated in the movement of India‟s independence. He was trained under the noble guidance of Pt. Madan Mohan Malviya, Mahatma Gandhi, Dr. S. Radhakrishnan, (Maharshi) Arvindo < Previous Page Next Page >
  20. 20. | Introduction 20 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Ghosh, and other revered national heroes of India. Right since he was a young volunteer in the non-violent freedom-struggle, this great patriot, saint, spiritual master, social reformer, and sagacious scholar had envisaged that – "an absolute revolution would be necessary on the cultural front too, if India were to be independent and progressive in the truest sense of the words…". The state of the nation today – after 50 years of political independence, evinces that his vision was indeed real. What Acharya Sharma had warned 50 years ago, has now become a reality. His trenchant views concerning the present state of the nation and its cultural and social system should open the eyes of the leaders, policy makers, planners and the intellectuals of today…. His guidance for the future development is realistic and takes into accounts the multifarious problems and impedance existing in the present system. After India‟s independence, he had, unlike many other freedom- fighters, chosen to dedicate his life for social and cultural reformation from the religious rather than political platform. He knew the psychology of Indian mind and the depth of its religious spirit….. His definition, philosophy, and realizations of religion (refer volume nos. 36, 53 of this series) are scientific and universal as they emanate from absolute understanding of human mind and realization of the inner self. His sagacious deliberations would convince us that it is religion, which separates animals from humans; which can eliminate the smog of animal instincts and unethical passions, and illuminate the intrinsic world by the nitid glow of pure intellect and divine piety. Religion is an integral and intimate component of human life. Then, how could it be separated from the social and national domains? In fact, cultural and moral rise of a nation becomes possible only when religion – ideal philosophy of life, is given due place in the < Previous Page Next Page >
  21. 21. | Introduction 21 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 lives of its people. Political anarchy, corruption and autocracy can be controlled by the righteous disciplines (ethics) of religion. Acharya Sharma therefore emphasizes the need of compatible conjugation of religion, culture and politics. He critically warns those who propagate communalism, superstitions and prejudiced principles and traditions in the name of religion. His deliberations on the role of religion in national development should be analyzed by all those who discard religion from the "prudent modes" of life and who are dead against the collaboration between the religious and political systems. His trenchant views should also be read by all those, who try to politicize the concept of religion, or who exploit people‟s faith for their vested political interests. Misconceptions and hypocrisy have no place in Acharya Sharma‟s perspicuous explanations. His thorough discussions encompass comprehensive reviews of other authentic experts of the concerned topics. With reference to the reformation of political system, he describes the qualities essential for a good leader. The leader should be some one who knows the enormous problems of the socioeconomic system of his nation; who has the will and experience of solving people‟s problems and also has vision to guide viable solutions. A leader has to be an efficient manager – of the national system, who is wise, innovative, creative and determined. Integrity of character, altruist attitude and stability of mind are fundamental requirements in public service. It is in the context of establishing such virtuous tendencies, that the linkage of religion with politics is advocated here. The author also reminds each voter of the latter‟s duties and rights, and, at the same time, inspires courage and motivation to enable the voters come forward and strengthens the democratic system. He has specially called the awaken talents to feel the pains of the nation and share the collective responsibility of national development. < Previous Page Next Page >
  22. 22. | Introduction 22 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Acharya Sharma‟s mission of cultural and religious revolution and social reformation and welfare is based on the fundamental elements and principles of the original Indian culture – the culture, which had bestowed divine glory on this nation. In his words – "the enlightened development of a nation progresses on the strong foundation of the prudence, piety of sentiments and strength of character of its citizens…." It is this class of ideal citizens, which has come forward to contribute in the constructive programs and reformative activities of his mission. Acharya Sharma‟s mission and its dedicated volunteers stand before us as guiding light and live evidences of how awaken talents would design the bright future of the nation. It is by our collective endeavors and confidence that, as assured by Acharya Sharma, this country will regain its lost prestige and set shining example before the world in the forthcoming century. Self reliance goal for now millennium In a couple of days from now we shall be in the Y2K – year two thousand. And within hours of entering the now millennium we would know whether or not the "bug" which worried the work, was real or imaginary will the computer fail or accept the change of the century. Several MPs repeatedly asked the government during the just-conclude winter session of parliament as to what steps had been taken to meet the situation if the computers stop. The issue is of as much worry to the armed forces as it is for others. Most of the latest, sophisticated military machines and weapon systems are computerized and for a common man. What would happen if the enemy attacks India on the now year‟s day? No cause of alarm at all. India has already made giant strides in the software < Previous Page Next Page >
  23. 23. | Introduction 23 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 technology, thanks to the Defense scientists, especially those in the Bharat Electronically Ltd. (BEL) at Bangalore. They are competent enough to meet the Y2K bug. The public sector enterprise was the brainchild of Krishna Menon who as the Defense minister in the 1960‟s has predicted the need for such an organization to design, develop and produce electronics systems for the future armament industry. This and allied enterprises have developed consistently over a period of time under the Defense Research and Development Organization (DRDO), and grown into an envy of the work. The organization had designed and developed for indigenous production most modern sophisticated machines and lethal weapon systems, like the missiles, raiders and pilot less aircraft, to name a very few. The indigenization of military machines is the need for the now millennium, keeping in view the present strategic compulsions. The efforts to do that have no so far not progressed satisfactorily for various reasons. Actually, the problem for the situation is not the DRDO. It is at the production level. How fast to produce equipment designed and developed by our scientists and considered the best in the worked even by those who are leaders of defense industry in military advanced countries. Such items are many which have been tried and produced by the DRDO, but have not gone into full production stream for either lack of funds or availability of foreign exchange to import some crucial components which are not produced indigenously. The most glaring example of such a situation is the production of gas turbine engines for warships, a field in which India‟s ship building industry has gone quite far. In this context, a question is relevantly raised about the civil industry cooperation in import substitution efforts in defense production. This rose following a feeling – and rightly too that the components which the defense-production units‟ import at high costs should be indigenously produced by the private sector industry in adjoining areas of the Defense production units. Thus, the production plans halted for want of funds or foreign exchange < Previous Page Next Page >
  24. 24. | Introduction 24 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 problems can continue and the state-of the-art machinery supplied to the forces fully indigenously produced. This is something, which cannot be achieved and is not done by any production unit anywhere in the work. No special facility for the production of a small component of machinery can be raised, particularly when its demand is limited to a barely few pieces in an ear. Suppose, for example, a few specially designed nuts and bolts are required for, say, a gas turbine engine. It will be totally unwise to produce them indigenously, whether in private or public sector, because it will evidently be not economically feasible to do that. The components have to be procured from wherever it is produced in bulk. Even if abroad. In case of Indian, incidentally, it is invariably abroad; with the result that production activist is halted for long spells, at times forever. This has happened with several projects. The low level radars which incorporate the latest and most sophisticated technology in electronics and communications, where not being produced, because the costs have escalated for the indigenous production of the components, as well as the imports which constitute between 25 and 30 per cent of the components used in its production. But the user have no funds to buy them and hence they cannot have the radar‟s, despite the fact that the country has a potential to produce them. The IAF is facing a similar situation on the jet trainer front. The Force has been asking for an advanced jet trainer since the mid-eighties. Their requirement should have been met at top priority basis, because in the absence of an advanced jet, the fighter pilots training are suffering. They must be trained on a fast machine of an advanced jet before going in for a "Conversation" for supersonic fitter planes like the Jaguars and Mirages. At the moment, we < Previous Page Next Page >
  25. 25. | Introduction 25 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 are denied that and the denial is considered as one of the main cause for the high rate of accidents in the IAF. It has been variously estimated at 3.8 and 2.4 per 1,000 flying hours. This compares poorly with 1.2 per 1,000 hours in Pakistan, 0.65 in the USA and 0.8 in the UK. There are several reasons for high rate of accidents in the IAF, like the fact that an IAF fighter pilot many , many times more has the flying, say, in the UK and the USA . However, most accidents are attributed to pilot error and of course, lack or training on there right type of aircraft. Remember. The chief of the Air Staff way back in 1991, Air Chief Marshal S.K.Mahara had asserted that if we did not commit ourselves to indigenization, "the IAF would cease to exist after the turn of the century". Few days earlier during a visit to Bangalore, he told me "if we do not indigenously produce our own jet trainer, we will have to import one". The light combat aircraft (LCA) project of the Hindustan Aeronautics Ltd., has been hanging fire for over a decade now, and there are no signs yet of its completion this is not due to HAL‟s failure to complete the project in time. It is only because of the Union Government‟s failure to give the project ht priority it needed. Instead efforts are on importantly, of their interest! The result? Till today the IAF‟s young fighter pilots do not have either an imported or an indigenously produced trainer. The delay in the implementation of the AJT project is just one example to show how indigenous production efforts of the public sector defense industry are halted and last minute rush takes place to purchase from abroad off-the-shelf machinery at high costs. This tendency is required t be changed and efforts made to put all the emphasis on self-reliance in defense production. This, as pointed out earlier, requires cooperation of the civil industry, which can e < Previous Page Next Page >
  26. 26. | LESSON – 2 26 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 achieved only if there is the political will to make self-reliance a goal for the next millennium. Question Bank Q.1 what do you mean by self-reliance? What role does it play in the development of the developing economy like India? Q2 what are the achievements of Indian economy in the field of self-reliance? LESSON – 2 (INTRODUCTION TO INTERNATIONAL MARKETING)  INTRODUCTION  DEFINITION  PROCESS  FEATURES  SCOPE  IMPORTANCE  SPECIAL PROBLEMS  TRANSITION FROM DOMESTIC TO INTERNATIONAL BUSINESS  QUESTION BANK. Introduction Dear students, < Previous Page Next Page >
  27. 27. | Introduction 27 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Today‟s topic is “Introduction of International Marketing”. Before Discussing the International Marketing We will discuss “What is marketing”? Marketing is the process by which the demand structure for products and services is anticipated or enlarged and satisfied. This process involves analyzing whether a marketing opportunity exist for the firm, developing suitable products and services to meet this opportunity, securing distribution of the product, designing promotional strategy to persuade potential consumer of the desirability of the offering and transferring control over the use of the product from vendor to user so that the user may enjoy the benefits. Introduction of International Marketing International marketing is a broader concept and includes export marketing. Export marketing is concerned with the production of goods in one country and marketing them in different countries of the world while international marketing is a broader concept and includes globalization, MNCs and TNCs joint ventures and foreign collaborations. Definitions of International Marketing “International marketing is a process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges between nations that satisfy individual and organizational objectives”. “The performance of business activities designed to plan, price, promote and direct the company‟s flow of goods and services to consumers or users in more than one nation for a profit” < Previous Page Next Page >
  28. 28. | Introduction 28 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Process of International Marketing A study of international marketing should begin with an understanding of what marketing is and how it operates in an international context. Because of the large number of marketing textbooks, a variety of definitions of marketing are currently in use. Yet most of these definitions are convergent in the sense that they all describe the basics of marketing in much the same way. Any definition is acceptable as long as it captures the essential idea and as long as the strengths and limitations associated with the definition is acknowledged. A definition adopted by the AMA (American Marketing Association) is used as a basis for the definition of international marketing given here: international marketing is the multinational process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. Only the word multinational has been added to the definition adopted by the AMA. That word implies that marketing activities are undertaken in several countries and those activities should somehow be coordinated across nations. This definition is not completely free of limitations. By placing individual objectives at one end of the definition and organizational objectives at the other, the definition stresses a relationship between a consumer and an organization.In effect, it excludes industrial marketing, which involves a transaction between‟ two organizations. In the world of international marketing, governments, quasi-government agencies, and profit-seeking and nonprofit entities are frequently buyers. Companies such as Boeing and Bechtel, for example, have nothing to do with consumer products. The definition thus fails to do justice to the significance of industrial purchases. < Previous Page Next Page >
  29. 29. | Introduction 29 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Nonetheless, the definition does offer several advantages. It closely resembles the AMA's widely accepted and easily understood definition. In several ways, it carefully describes the essential characteristics of international marketing. First, it makes it clear that what is to be' exchanged is not restricted to tangible products (goods) but can include concepts and services as well. - When the United Nations promotes such concepts as birth control and breast feeding, this should be viewed as international marketing. Religion is also a big business; through most people prefer not to view it that way. Religion has been marketed internationally for centuries. Billy Graham, in particular, is a well-known exporter of religion. His television programs have been shown in many countries. In 1995 he staged the most ambitious crusade of his fifty-year ministry by using thirty satellites to beam his evangelical message, translated into 102 languages, across twenty-nine time zones to ten million people in 195 countries. Third, the definition recognizes that it is improper for a firm to create a product first and then look for a place to sell it. Rather than seeking consumers for a firm's existing product, it is often more logical to determine consumer needs before creating a product. For overseas markets, the process may call for a modified product. In some cases, < Previous Page Next Page >
  30. 30. | Introduction 30 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 following this approach may result in foreign needs being satisfied in a new way (i.e., a brand new product is created specifically for overseas markets). Mazda, for example, understands that it is no longer adequate to simply adapt a Japanese car to the U.S. market, and its product strategy involves designing a car to meet U.S. buyers' desires. Mazda's widely acclaimed Mata was conceived and styled in Southern California and was engineered and built in Japan. Fourth, the definition acknowledges that "place" (distribution) is just part of the marketing mix, and that the distance between markets makes it neither more nor less important than the other parts of the mix. Thus, it is improper' for any firms to regard their international function as simply to export (i.e., move) available products from one country to another. Finally, the "multinational process" implies that the international marketing process is not a mere repetition of using identical strategies abroad. The four Ps of marketing (product, place, promotion, and price) must be integrated and coordinated across countries in order to bring about the most effective marketing mix. In some cases the mix may have to be adjusted for a particular market for better impact. PepsiCo Inc.'s Frito Lay Division, for chip for the British market, and the chip differs in both taste and texture from the American version. In other cases, however, a multinational marketer may find it more desirable to use a certain degree of standardization if the existing market differences are somewhat artificial and can be overcome. As in the case of washers, although Italian consumers once preferred front-loading machines while French consumers insisted on top-loading models, Whirlpool Corp. has been able to use the more standardized models to break down national traditions, < Previous Page Next Page >
  31. 31. | Introduction 31 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Features of International Marketing The features of international marketing are as under (a) Large Scale Operations: - Price is an important factor that determines the success of an exporter in the highly competitive international market large-scale operations, full utilization of installed capacity and transactions in bulk reduce overall cost of production and thereby price of the product. (b) Dominance of Mncs / Tncs From Developed Countries: - The international trade is dominated by MNCs and TNCs originating from developed countries especially form USA, Japan and European countries. These companies have huge financial and physical resources and operate throughout the world (c) Trade Barriers:- Trade barriers are the artificial restrictions on the free movement of good from one country to other. These barriers are of two types, viz., tariff and non- tariff. Tariff barriers are in the form of taxes and customs duties. Non-tariff barriers are in the form of quotas and licenses. (d) Trading Blocs: - Trading blocs are the associations of countries situated in a particular region whereby they come on to a common understanding regarding rules and regulations to be followed while exporting and importing goods among them. For example, European Union (EU). (e) International Marketing Research:- The needs and requirements of individuals differ from region to region. Therefore, an effective marketing research technique should be applied in order to understand the needs and requirements of consumers in < Previous Page Next Page >
  32. 32. | Introduction 32 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 different parts of the world. (f) Importance Of Advanced Technology:- Technology plays an important role in building competitive strength. MNCs originating from countries like USE, Japan and Germany dominate the world trade due to continuous research, innovations and inventions. (g) Foreign Exchange Regulations:- Different countries have different currencies and conversion rates, which are subjects to fluctuation. Therefore, each country has a separate set of rules for collection of export proceeds and payment for imports. For example, In India, all foreign Exchange Regulation Act, 1973 (FERA). (h) Three-Faced Competition: - International market is highly competitive. An exporter faces competition from three angles i. Exporters from his own country ii. Exporters from other countries iii. Local suppliers in importing country (i) International Organizations: - International trade is subject to the rules and regulations framed by the international organizations such as the World Trade Organization (WTO) and the United Nations Conference an Trade and Development (UNCTAD). These organizations have been formed in order to promote world trade by removing unnecessary trade barriers and help underdeveloped countries to develop their export potentials. Scope of International Marketing < Previous Page Next Page >
  33. 33. | Introduction 33 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Though internati6nal marketing is in essence export marketing, it has a broader connotation in marketing literature. It also means entry into international markets by: a) Opening a branch/subsidiary abroad for processing, packaging, assembly or even complete manufacturing through direct investment; b) Negotiating licensing/franchising arrangements whereby foreign enterprises are granted the right to use the exporting company's know-how, viz., patents, processes or trade marks, with or without financial investment; c) Establishing joint ventures in foreign countries for manufacturing and/or marketing; d) Offering consultancy services and undertaking turnkey projects abroad; e) Sub-contracting and counter trade; and f) Importing for export production Depending upon the degree of a firm's involvement, there may be several variations of these arrangements. Importance of International Marketing No country in the world is self-sufficient in all its domestic requirements. The slogan “Export or Perish” by Shri Jawaharlal Nehru is applicable to all the countries of the world, < Previous Page Next Page >
  34. 34. | Introduction 34 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 developed as well as developing. There are various factors which give rise to interdependence among countries. Therefore, international trade plays an important role in the economic development of a country. a) Division of Labour and Specialization: -Certain countries enjoy comparative cost advantage in the production of specific commodities due to favorable climatic conditions, technical know-how easy access produce commodities in excess of their requirements and exchange surplus production with other countries for the commodities they are deficient in. b) Increases National Income and Per-Capita Income: - Due to division of labour and specialization, each country produces commodities for which it is best suited and exports surplus production. Similarly, each country imports commodities for which it has comparative cost disadvantage. This generates additional income and saves real income by making available imported articles at competitive rates. c) Facilitates Transfer of Technology: - Some countries like Japan, USE, UK and Germany are highly developed in terms of technology while most of the Afro- Asian and South American countries are backward in technology. This directs the flow of technology from technically advanced countries to technically backward countries of the world. d) Resolves Balance of Payments Crisis:- Balance of payments may be defined as the difference between the monetary value of exports and imports of a country. When the outflow of foreign currency exceeds the inflow, a country suffers from an unfavorable balance of payments.In order to solve such imbalance a country < Previous Page Next Page >
  35. 35. | Introduction 35 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 of the world. e) Global Peace: - In the age of nuclear weapons, there is a greater need of promoting dialogue between various countries of the world. International trade may be a medium for promoting exchange of ideas and thoughts and thereby help promoting international peace and friendly relations among the countries of the world. f) Optimum Utilizations of Resources: - A country can make optimum utilization of its natural and human resource by promoting exports, if the resources remain unutilized or underutilized due to the want of demand in the domestic market; the same can be well utilized by promoting exports of surplus production. g) Employment Opportunities:- Development of exports brings about multiple increase in employment opportunities. It not only creates employment opportunities in the export sector but also in other related service sectors such as banking, insurance, advertising, transport, etc. This helps overpopulated countries in soling their unemployment problem. h) Research and Development: - International market is highly competitive. In order to survive cut-throat competition at international level, every firm operating at the global level needs to undertake continuous research and development. This leads to development of technology in backward and developing countries of the world. Special Problems of International Marketing International marketing is a very complex and time-consuming process as it is < Previous Page Next Page >
  36. 36. | Introduction 36 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 subject to rules and regulations of both exporting as well as importing county. At the same time, there are other problems such as long distance, currency fluctuations and high degree of competition. Some of the common problems of international marketing have been analyzed below:- (a) Long Distance:- International trade is spread over the world and therefore, goods are to be transported over a considerable distance. During transportation goods are exposed to risk and uncertainties of transportation and perils of sea. Again delay is coursed due to lengthy customs formalities. However, risk during transportation can be insured by taking suitable marine insurance policies. (b) High Risks and Uncertainties:- International trade is subject to political as well as commercial risks. Political risks arise due to the political actions of the government(s). For example, war and internal aggression. Commercial risks arise due to insolvency of buyer or buyer‟s failure to accept goods. However, there risks can be insured by taking suitable policies from the export Credit and Guarantee Corporation of India(ECGC). (c) Customs Formalities: - Customs formalities are different in different countries. Again, these formalities are very lengthy, time consuming and trade between countries of the world. In order to solve the difficulties created by customs formalities, an exporter can obtain assistance of the Clearing and Forwarding (C&F) agents. (d) Trade Barriers: - Trade barriers are the artificial restrictions on the free movement of goods from one country to other. These barriers are of two types, viz., tariff and non-tariff barriers are in the form of taxes and customs duties. Non- < Previous Page Next Page >
  37. 37. | Introduction 37 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 tariff barriers are in the form of taxes and customs duties. Non-tariff barriers are in the form of quotas and licenses. However, efforts are being made by the World Trade Organization(WTO) to eliminate and simplify trade barriers. (e) Three-faced Competition: - An exporter faces competition from three angles:- i. Exporters from his own country ii. Exporters from other countries iii. Local suppliers in importing country However, an exporter can sustain international competition by upgrading the quality of product, innovations and inventions and cost reduction. (f) Payment Difficulties: -Different countries have different currencies and conversion rates. These rates are subject of fluctuations. Thus, an exporter may suffer a loss if there is a change in the exchange rate after entering into a contract with a foreign buyer. Losses on account of fluctuations in the exchange rates can be eliminated by entering into forward contracts. (g) Documentation Formalities:- There are a number of documents to be filed with various authorities while exporting goods. For example in India, an exporter is required to prepare and file as many as 25 documents of which 16 are commercial and l9 are regulatory. (h) Diverse Languages, Customs and Traditions: - Languages, customs and traditions are very sensitive issues and must be taken into consideration while exporting goods to foreign countries. An exporter should try to get first hand information about such issues before exporting goods. < Previous Page Next Page >
  38. 38. | Introduction 38 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 (i) Hug foreign indebtedness: - Many countries of the world that would otherwise be attractive markets have accumulated such high foreign indebtedness that they cannot even pay the interest on their foreign debt. Among these countries are Mexico, Brazil, Poland and Romania. India's present balance of payment position was real bad, though now It is looking up. (j) Unstable governments:- High indebtedness, high inflation, and high unemployment in countries have resulted in highly unstable governments that expose foreign firms to the risks of expropriation, nationalization, limits to profit repatriation, and so on. (k) Exchange instability:- High indebtedness and political instability force a country's currency to depreciate, or at least add a lot of volatility to the currency's value. The result is that foreign I investors hesitate to hold much of the foreign currency, and this limits trade. (l) Foreign government entry requirements:- Governments are placing more regulations on foreign firms, such as requiring joint ownership with the majority share going to the domestic partner, a high level of nationals hired for management; technological transfer of trade secrets; and limits on profit repatriation. (m) Tariffs and other trade barriers:- Governments often impose unreasonably high tariffs against imports in order to "subsidies" or protect their own industries. They also resort to invisible trade barriers such as withholding or slowing down import approval and requiring adjustments in imported products to meet their < Previous Page Next Page >
  39. 39. | Introduction 39 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 standards. (n) Corruption:- Officials in several countries require bribes in order to co-operate. They often award business to the highest briber rather than the best bidder. Kickbacks received by parties in Indian governments‟ gun deal again are an example. (o) Technological pirating:- A company locating its plant abroad worries about foreign managers learning how to make its product and breaking away to compete openly. This has happened in such diverse areas as machinery, electronics, chemicals, pharmaceuticals. (p) High cost of product and communication adaptation:- A company going abroad must study each foreign market carefully, become sensitive to its economics, politics, and culture and make some adaptations in its products and communications to suit foreign tastes otherwise it might make some serious blunders. (q) International code of conduct for product, to be traded or marketed in a particular country by UNCTAD and World Trade Organization as per Dunkel proposals. A rapid increase in foreign exchange earnings through exports is vital for the success of our government's programs. To intensify the drive for export development, it is not sufficient to explore new markets for nontraditional products alone. Just as the export potential of primary commodities is limited, so is the growth potential of "non- traditional" items marketed in the traditional manner. A major breakthrough resulting in < Previous Page Next Page >
  40. 40. | Transition from Domestic To International Business 40 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 sizable additions to foreign exchange earnings is possible only if we: i. Identify new non-traditional products/services for export; ii. Develop new ways of marketing them in new markets; and: iii. Explore new marketing strategies for securing a fairly consistent and long term foothold in these areas. India has already started moving in" this direction. Construction contracts, turnkey contracts,' joint ventures in middle esteem Arab countries and African countries are indicators of this trend. The capital investment made by our country, especially during the last 40 years, in building a sophisticated industrial base and in training a very large number of people in the development and application of modern technology is likely to pay rich dividends in the near future. We should link our future efforts in this direction to a well defined international marketing program for export development. It, therefore, becomes necessary to focus attention, on some of the more important emerging opportunities for international marketing development in the non-traditional sector so that we may gain insights into the types of integrated action needed at the corporate and national levels to convert these opportunities into viable business propositions. International marketing is of growing importance to Indian business. It is the duty of an international marketer to support the economic development of our country. One should try to sell a portion of one's output abroad. Benefits are gained in the obtaining of quotas for imported materials in exchange of proof of the export of finished goods. Transition from Domestic To International Business < Previous Page Next Page >
  41. 41. | Transition from Domestic To International Business 41 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Export business is different in many ways from domestic business; especially the risks and complexities associated with exports tend to be higher. Therefore, the decision to enter foreign markets must be based on strong economic factors. Temperamental decision to export is transient in character and is totally unsuitable for export marketing. Success in exporting requires total involvement and determination, which can come only out of basic economic necessity as perceived by the corporate unit. 1. Pre-Export Behaviour Every firm at some point of time starts as a non-exporter.The point to be studied is what made some of these firms get involved in export business. This might give a clue to the question as to whether a present non-exporter will become an exporter and, if so, why and when. The factors which influence a non-exporting firm's decision to go in for export business can be classified under the following categories: 2. Firm Characteristics These characteristics include (a) Product characteristics (b) Size and growth of the domestic market (c) Optimal scale of production (d) Potential export markets. If the firm is manufacturing a product which is internationally marketable and the present and future market prospects in the domestic market are not encouraging, the motivation of the firm to get involved in export business will be considerable. 3. Perceived External Export Stimuli Under these falls the management's recognition of the external market conditions. < Previous Page Next Page >
  42. 42. | Transition from Domestic To International Business 42 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 This will include (a) Fortuitous order (b) Market opportunity (c) Government‟s stimulation/assistance. 4. Perceived Internal Export Stimuli These refer to the management's expectations about the effects of exports on the firm's business. This covers are: (a) The level of capacity utilization (b) The higher level of profits (c) The growth objectives of the firm. 5. Level of Organizational Commitment The decision-makers must agree on the level of export commitment. This is crucial because it will determine whether adequate resources will be made available for embarking on international marketing. Resources will be required for hiring new staff specialized in international marketing, hiring of consultants for carrying out overseas market potential studies, etc. 6. Motivation to Export There are some basic economic reasons, which might influence a company decision regarding export business. These are: (a) Bulk Sales. You have the advantage of selling in bulk. Export orders are larger than those from the domestic market. < Previous Page Next Page >
  43. 43. | Transition from Domestic To International Business 43 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 (b) Relative Profitability. The rate of profit to be earned from export business may be higher than the corresponding rate on the domestic sales.2 further, experience shows that there has been a progressive improvement in the unit value realization of certain export products. (c) Insufficiency of Domestic Demand. The level of domestic demand, either at a point of time or over time, may be insufficient for utilizing the installed capacity in full. Export business offers 'a suitable mechanism for utilizing the unused capacity. This will reduce costs and improve the overall profitability of the firm.' Recession in the domestic market often serves as a stimulus to export ventures. In fact, export of engineering goods from India picked up momentum at the time of recession in the Indian economy during 1967-69, when Indian manufacturing units faced with large inventories and eak order book position, turned to export markets. Developing diversified export markets thus provides a firm with a degree of protection against cynical domestic economic slowdown. But it must be emphasized that there is an inherent danger in looking at exports to merely supplement the domestic business at the time of crisis. Penetrating foreign markets is a difficult job but sustaining them is even more onerous. Therefore, once a decision is taken to enter international markets, every effort will have to be made to retain them. And this can be done only when export marketing operations are recognized as an integral part of the total corporate activity. In fact, what is needed is full involvement in and commitment to exports. (c) Reducing Business Risks. A diversified export business may help in mitigating sharp fluctuations in the overall activity of a company. When a firm is selling in a number of markets, the downward fluctuation in sales in one < Previous Page Next Page >
  44. 44. | Transition from Domestic To International Business 44 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 market, which may be the domestic market, may be fully or partly counterbalanced by a rise in the sales in other markets. Secondly, geographic diversification also provides the momentum to growth inasmuch as a single or a few markets will have only limited absorptive capacity. (d) Legal Restrictions. Governments may impose certain restrictions on further growth and capacity expansion of some firms within the domestic market in order to achieve certain social objectives. But there may not be any such restrictions on making investments overseas or the restrictions may be relaxed even in the domestic market, provided the additional capacity envisaged by the company is utilized for exports. In such situations, a firm may contemplate export operations, because it offers a way to achieve corporate growth which may otherwise not be possible. This was the position in India before industrial licensing was virtually removed. (e) Obtaining Imported Inputs. Nations have to export to pay for imports of materials, technology or processes not available within their national boundaries. Governments, therefore, may be compelled to impose export obligations on the firms, especially those in need of imported inputs. (f) Social Responsibility. In many cases, businessmen themselves feel a sense of responsibility and contribute towards the national exchequer by increasing their exports. Incidentally, by exporting at a time when it is difficult to export they build up their image in the domestic market. They also look at exporting to attain status and prestige. < Previous Page Next Page >
  45. 45. | Transition from Domestic To International Business 45 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 (g) Increased Productivity. Increased productivity is necessary for' ultimate survival of a firm. This it may lead a company to increase production and then seek export markets. Moreover, in these days of technological developments, bigger companies have to spend a lot on research and development. To meet the increased costs of research and development, larger markets become a necessity and exports become unavoidable. (i) Technological improvement. Entry into export markets may enable firm to i. Pick up new product ideas and to add to product line ii. Improve its product iii. Reduce costs iv. Discover new' applications for its product. As was pointed out by Telco Chairman at its 1980 Annual General Meeting, "Export exposes us to the fiercely competitive international market and compels us to update our products. This up gradation of our vehicles unmistakably benefits the Indian customer also." (j) A product can be near the end of its life cycle in the domestic market while beginning to generate growth abroad. There are hindrances as well in undertaking international business. A study conducted in the United States has identified a large number of factors, which inhibit firms from going international. The study also points out that for smaller firms with 100 or fewer employees, trade barriers, complications of exporting and lack of adequate export financing < Previous Page Next Page >
  46. 46. | Transition from Domestic To International Business 46 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 are the principal bottlenecks. Further, it is found that the negative influence of 'complications of exporting' as a factor gets reduced in importance as firms become experienced in export business. While 15.9 per cent of firms with experience of less than 10 years cite this as an impediment, corresponding figures for firms having 11-20, 21-40 and over 40 years of experience are 12.2 per cent, 9.3 per cent and 2.9 per cent, respectively. How Much Commitment Once a decision to enter the export market or "go international" is taken, the next question relates to the degree of commitment to be made towards international operations. There are four distinct but overlapping categories: a. No Involvement. The firm does not involve itself in export marketing. Yet the products manufactured by a firm may enter export markets due to (i) foreign buyers coming of their own accord and purchasing their requirements, and (ii) domestic intermediaries like export houses purchasing its goods and selling them to overseas customers. b. Temporary Involvement. The firm gets involved in foreign business to dispose of temporary surpluses or to utilize temporary excess capacity. c. Continued Involvement. Here the firm makes a serious commitment to export. It may demarcate a definite percentage of capacity for exports. 2 Visits to foreign countries are more frequent and overseas agents are appointed to look after the firm's interest. d. Global Involvement. In such a case, a firm becomes a truly international company involving itself in international operations by establishment of branches in a number of countries. < Previous Page Next Page >
  47. 47. | Transition from Domestic To International Business 47 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 However, before actually entering into the export markets, the firm should undertake a thorough analysis to find out whether or not it is ready to enter into international marketing. In fact, a very special and crucial job of resource audit is necessary to make this decision. The questions to be answered by the firm are: i. Do you have or can you acquire the management knowledge to operate in international markets? ii. Do you have or can you acquire the productive capacity to service new markets? iii. Do you have or can you acquire the financial resources necessary to service international markets? iv. Do you want to make the commitment necessary to approach international markets properly? Producing For Export The situations envisaged above take for granted that companies thinking of export ventures, enjoy good or at least substantial domestic sales. Existence of a sound domestic market provides a cushion. But this need not be the case always. A company may set up operations to cater solely to foreign demand. This wi11 be the case where the company is internationa11y competitive because of certain economic factors but cannot operate viably on the basis of domestic sales which are insignificant. For example, the units specializing in the export of diamonds in India import rough diamonds cut and polish them in India and re- export. This business is possible because Indian labour is highly skilled in this profession and the labour costs are much lower than in the competing developed countries. Similar situations may arise if the foreign demand is for items, which can be made but not sold substantia11y in the domestic market. Certain types of ready made garments being exported from India fa11 in this category. < Previous Page Next Page >
  48. 48. | Transition from Domestic To International Business 48 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Organic Effect Organic effect refers to the changes in the management decision process effected by changes evolving thin the management. One of the more perceptible changes in the social structure of management personnel in India is the emergence of a professional management class. In the major industrial economies like the U.S.A. or the U.K., pro1'essional managers are now in full control of the management, i.e., proprietorship has been separated from managerial power. Though the change is not yet so pronounced in India, professional managerial class has recently emerged as a. distinct identity. Necessarily ambitions and aspirations, values and attitudes to work of this class affect the decision-making process of the organizations where they are employed. According to Maslow,3 human needs can be tabulated in a hierarchical order, from physiological needs to needs for self-fulfillment. Five distinct levels have been identified. These are, as arranged 'from below: a. Physiological needs b. Safety or security needs c. Social needs d. Ego needs e. Self-fulfillment needs. Since the first three needs are probably satisfied in the case of the managerial cadre, only the last two are dealt with here. Ego needs are those, which are related to one's self- esteem and reputation. An export manager in a firm knows pretty we that his standing in the company is directly related to the success he may achieve in the job he has been assigned. < Previous Page Next Page >
  49. 49. | LESSON –3 49 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Namely, getting increasing volume of export business. Even if his job is secure, the urge to get acclaim from his superiors and colleagues will motivate him to give his best in his work. Organic effect can be traced to another change that is taking place in the hierarchy of business organizations. This is due to the process of co-optation. "Co-optation has been defined as the process of absorbing new elements into the leadership or policy-determining structure of an organisation as a means of averting threats to its stability or existence." The new elements which enter the policy-framing body through this process induct their own values and judgments which change the original system of values. The appointment of government representatives or nominees of public financial institutions thus helps in making the policy of the firm consistent with the social objective. Just as an idea motivates an individual, "it is the idea that shapes material institutions". A business organisation is a 'behavioral unit‟, which absorbs and assimilates the forces in the socio-economic environment and reacts accordingly. The traditional decision rule of profit maximization nonetheless remains important, but it need be supplemented by other factors, both economic and non-economic. Questions Bank Q. 1. Define international marketing. Enumerate its features. Q. 2. What are the benefits of international marketing? Q. 3. Briefly, explain the special problems of international marketing. LESSON –3 < Previous Page Next Page >
  50. 50. | MNC’s & Globalization of Indian Economy 50 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 MNC’s & Globalization of Indian Economy Multinational Corporations (MNCs) Globalize or perish:- Meaning Globalization of the Indian Economy. Distinguish between: - Export Marketing and Domestic Marketing. Case Study Questions Banks Multinational Corporations (MNCS) A multinational corporation is an enterprise whose ownership and activities are spread in more than one country and its various branches function independently. It is a giant firm with its headquarter located in one country but conducts a variety of business operations like manufacturing, marketing, servicing, etc, in several other countries. For some, the multinational companies are an invaluable dynamic force and instrument for wider distribution of capital, technology and employment; for other they are monsters which our present institutions, national or international, cannot adequately control. Characteristics Of Multinational Corporations (MNCs) Multinational corporations(MNCS) are major actors in the world of international business. As shown by the GE case, it is desirable for companies to become more internationally inclined. Therefore, it is appropriscuss what an MNC is and the role it plays. < Previous Page Next Page >
  51. 51. | MNC’s & Globalization of Indian Economy 51 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 The mention of MNCs usually elicits mixed reactions. On the one hand. MNCs are associated with exploitation and ruthlessness. They are often criticized for moving resources in and out of a country as they strive for profit without much regard for the country‟s social welfare. Varity Corp., a Canadian multinational firm, was criticized for its action in 1991 to relocate its headquarters from Toronto to the United States (Buffalo) in order to take advantage of the U.S –Canadian Free Trade Agreement. For a long time, Indian referred to MNCs as “agents of neocolonialism.” It was not until 1991 that socialist Indian began wooing multinational companies. Yet several years later, multinationals are still not so welcome. To many Indians, such MNCs as Pepsi Co, KFC. And Enron Corp. all are” foreign devils” In defense of MNCs, more and more of them have been trying to be responsible members of the society. According to a number of studies involving MNCs in Ivory Coast, Mexico, Morocco, and Venezuela, there is no evidence of MNCs being drawn to pollution havens, Furthermore, multinational enterprises have raised local wages. However only those joint ventures which receive foreign equity participation have benefited from technology transfer, while domestic competitors may be harmed by foreign entry. On the other hand, MNCs have power and prestige; additionally they create social benefit by facilitating economic balance. As explained by Miller, “with resources, capital, food, and technology unevenly distributed around the planet, and all in short supply, an efficient instrument of quick and effective production and distribution of a complex of goods and services is first essential. This instrument is, of course, the MNC. Regardless of whether MNCs are viewed positively or negatively, they are here to stay, and the important point is to understand when a company becomes a member of this < Previous Page Next Page >
  52. 52. | MNC’s & Globalization of Indian Economy 52 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 elite group. MNC is not a one-dimensional concept. Similarly, globalization does not have a single definition. There is no single criterion that proves satisfactory at all times in identifying an MNC. Varying explanations have been used to define a multinational corporation, but these definitions are not necessarily convergent. As a result, whether a company is classified as an MNC or not depends in part on what set of criteria is used. DEFINITIONS:- (a) By Size (b) By Structure:- (c) By Performance (d) By Behaviour Definition by Size The term MNC implies bigness. But bigness also has a number of dimensions. Such factors as market value, sales profits, and return on equity, when used to identify the largest multinationals, will yield varying results. As an example, although General Motors is number thirty-six in terms of market value, it is number one in terms of sales and number two based on profits. It is not unusual for corporate size in terms of sales to be used as a primary requirement for judging whether or not a company is multinational. As a matter of fact, according to the United Nations Department of Economic and Social Affairs, companies “with less than $100 million sales can safely be ignored. Based on this definition, some 300,000 small and midsize German companies do not qualify even though these firms (called the Mittelstand, or mid ranking) contribute mightily, to Germany‟s export success. < Previous Page Next Page >
  53. 53. | MNC’s & Globalization of Indian Economy 53 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 These midsize firms account for two-thirds of the country‟s gross national product and four- fifths of all workers. Many multinational corporations are indeed large. According to the World Investment Report of the United Conference on Trade and Development (UNC-TAD) there are some 40,000 transnational corporations (TNCs) with more than 250,000 foreign affiliates, altogether generating more than $5 trillion in annual sales. TNCs control one-third of the world‟s private sector productive assets. Ownership of foreign assets is highly concentrated since half of the total is owned by just 1 percent of TNCs Interestingly multinationals overseas investment has progressed to the point Definition by Structure According to Aharoni, an MNC has at least three significant dimensions: structural, performance, and behavioral. Structural requirements for definition as an MNC include the member of countries in which the firm does business and the citizenship of corporate owners and top managers. Singers Corporation, for instance, sells its sewing machines in 181 countries, thus satisfying the requirement with regard to the number of countries. Citicorp satisfies the requirement for multinationalism through the citizenship of members of its top management. The company has done as much as other major American MNCs to diversify its management. In Asia, a notice of Pakistan is in charge of the firm‟s $800 million finance business for all of Asia except Japan. His colleague, an Indian national, heads the consumer business. They are two of the eight non-Americans in the elite group of fifteen executive vice presidents. < Previous Page Next Page >
  54. 54. | MNC’s & Globalization of Indian Economy 54 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 Definition by Performance Definition by performance depends on such characteristics as earnings, sales, and assets. These performance characteristics indicate the extent of the commitment of corporate resources to foreign operations and the amount of rewards from that commitment. The greater the commitment and reward, the greater the degree of internationalization. Parker Pens, with 80 percent of its sales coming from overseas, is more multinational (at least on the basis of foreign sales) than A.T. Cross, whose overseas sales account for only about 20 percent of overall sales. Japanese multinationals have shown willingness to commit their corporate resources to overseas assets. NEC has twenty-five manufacturing and forty-four marketing and service subsidiaries overseas, which employ 22,000 people. Half of Ricoh's cameras are made outside Japan, whereas nearly 100 percent pf the firm's copiers sold in North America and Europe are made there as well. Hitachi, a worldwide giant, has forty-seven manufacturing subsidiaries and 130 sales and service companies worldwide. Hitachi makes TV s, automobile parts, PBXs, computer products, and large-capacity magnetic disks in the United States; TV tub‟s in Singapore; CD players and room air conditioners in Taiwan; refrigerators in Thailand; and parts for turbine generators in Canada.‟ Human resources or overseas employees are customarily considered as part of the performance requirements rather than as part of the structural requirements, though the desirability of separating lower-level employees from top management is questionable. A preferable analysis would be to treat the total extent of the employment of personnel in other countries as another indicator of the structure of the company. In any case, the willingness of a company to use overseas personnel satisfied a significant criterion for multinationalism. Avon, for example, employs 370,000 Japanese women to sell its products house to house across Japan. Siemens, well-known worldwide for its consumer and industrial products, has some 300,000 < Previous Page Next Page >
  55. 55. | MNC’s & Globalization of Indian Economy 55 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 employees in124 countries. By Behavior is somewhat more abstract as a measure of multinationalism than either structure or performance, though it is no less important. This requirement concerns the behavioral characteristics of top management. Thus, a company becomes more multinational as its management thinks more internationally. Such thinking, known as geo- centricity, must be distinguished from two other attitudes or orientations, known as ethnocentricity and poly-centricity. Ethnocentricity is a strong orientation toward the home country. Markets and consumers abroad are viewed as unfamiliar and even inferior in taste, sophistication, and opportunity. The usual practice is to use the home base for the production of standardized products for export in order to gain some marginal business. Centralization of decision making is thus a necessity. Caterpillar Inc.' s chairman recalled that, while making sales calls in Africa in his younger days, pricing decisions were often forced upon him from headquarters even though those decisions did not fit the local market. Poly-centricity, is opposite of ethnocentricity, is a strong orientation to the host country. The attitude places emphasis on differences between markets that are caused by variations within, such as in income, culture, laws, and politics. The assumption is that each market is unique and consequently difficult for outsiders to understand. Thus, managers from the host country should be employed and allowed to have a great deal of discretion in market decisions. A significant degree of decentralization is thus common across the overseas divisions. A drawback of poly-centricity is that it often results in duplication of effort among overseas subsidiaries. Similarities among countries might well permit the development of < Previous Page Next Page >
  56. 56. | MNC’s & Globalization of Indian Economy 56 1. Content Index 2. Chapter 1 3. Chapter 2 4. Chapter 3 5. Chapter 4 6. Chapter 5 7. Chapter 6 8. Chapter 7 9. Chapter 8 efficient and uniform strategies. Geo-centricity is a compromise between the two extremes of ethnocentricity and poly-centricity. It could be argued that this attitude is the most important of the three. Geo- centricity is an orientation that considers the whole world rather than any particular country as the target market. A geocentric company might be thought of as denationalized or supranational. As such, "international" or "foreign" departments or markets do not exist because the company does not designate anything international or foreign about a market. Corporate resources are allocated without regard to national frontiers, and there is no hesitation in making direct investment abroad when warranted. There is a high likelihood that a geocentric company does not identify itself with a particular country. Therefore, it is often difficult to determine the firm's home country except through the location of its headquarters and its corporate registration. According to Ohmae, business is "nationality less," and companies should attempt to lose their national identity. As such, a corporation should not mind moving its headquarters to a more hospitable environment. 19 The chairman of Japanese retail giant Yaohan International Group, for example, moved the firm's headquarters as well as his family and personal assets to Hong Kong to take advantage of Hong Kong's low taxes and hub location in Asia. To reward his faith in China, the Chinese government permitted Yaohan to build shopping malls in China.2o Geocentric firms takes the view that, even though countries may differ, differences can be understood and managed. In coordinating and controlling the global marketing effort, the company adapts its marketing program to meet local needs within the broader framework of its total strategy. The approach combines aspects of centralization and decentralization in a synthesis that allows some degree of flexibility. The firm may designate one country subsidiary as its research and development center while appointing another subsidiary in another country to specialize in manufacturing certain products. Although the < Previous Page Next Page >