IGNOU IBO-02 Free Solved Assignment 2012

TUTOR MARKED ASSIGNMENT

Course Code : IBO-02

Course Title : International Marketing Management

Assignment Code : IBO-02/TMA/2011-12

Assignment Coverage : All Blocks

Maximum Marks : 100

Attempt all the questions

1. An Indian company wants to enter into international markets. The company decided to involve another company in the foreign country. Explain the mode of entry where the involvement of foreign company is possible and state in which situations each of them is suitable. (20)

Solution: In an effort to sell their products and services to new customers, businesses will often attempt to enter new, foreign markets. Entry into a foreign country can be tricky, however, as the business must adapt to a new clientele, new legal regulations and new competition. To make for an easier transition, there are a number of common modes that businesses can use when starting up in a foreign market.

Joint Venture

One of the most popular modes of entry is the establishment of a joint venture, in which two businesses combine resources to sell products or services. Many countries with tightly controlled economies, such as China, often require foreign companies to partner with a local company if they wish to sell products to their residents. Although joint ventures provide foreign companies with a partner experienced in the foreign market, these partnerships can be difficult to manage and require a splitting of profits.

Licensing

In the licensing mode of entry, companies sign contracts with foreign businesses, called "licenses," that allow the foreign companies to legally manufacture and sell the company's products. The foreign companies will either purchase the license outright, pay a regular licensing fee or pay a percentage of their revenue over time in the form of royalties. Often used by manufacturing firms, licensing allows a company to enter a market quickly and inexpensively, but gives them little control over the products' foreign marketing and sales.

Exporting

Rather than attempt to partner with or provide a license to foreign companies, some companies will simply sell their products to distributors overseas, who will sell the products to consumers. This exporting prevents the company from having to invest the money in developing manufacturing facilities in the foreign market, but transportation costs and restrictive tariffs may make this mode uneconomical for certain products.

Internet

Many companies will attempt to enter foreign markets indirectly, by targeting foreign consumers on the Internet. Similar to exporting, companies retain their physical operations in their native countries, but ship products overseas. However, whereas in exporting, companies contract with local businesses, with the Internet they take orders directly from consumers. The advantages to this mode are that it is relatively cheap, entailing only the cost of a website and marketing. The downside is that it is often less effective than establishing a physical presence in the foreign market.

Purchasing Foreign Assets

Many companies, rather than launching an entirely new venture in a foreign market, will simply purchase or invest in a foreign company. While often more expensive, direct investment provides allows the investing company to reap the profits of a business that is already well integrated into the local market.

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2. Imagine that you are heading the marketing division of a company which has no international presence despite good business opportunities overseas. You are requested by the company CEO to make a note on opportunities available for the firm globally by scanning the major components of international marketing environment. (20)

Solution: As this procedure consists of identifying relevant factors and assessing their potential impact on the organization’s markets and marketing activities. This is simpler to say than do, because many of the potentially important environmental factors are interrelated and many of them change constantly. Skandia, the $7 billion Swedish financial services giant, used an interesting approach to identify future growth opportunities. The company established a new unit, Skandia Future Center, and selected 30 diverse people from around the world to form five Future Teams. Each Future Team consisted of a mix of three generations (20-somethings to 60-somethings), functional roles, organizational

experiences, and cultural backgrounds. The mission of each Future Team was to explore one of five major environmental forces (the European insurance market, demographics, technology, the world economy, and organizations and leadership) and develop a vision of the future for Skandia. The Future Teams presented their ideas to a group of 150 executives. The executives then formed 20 small groups to brainstorm responses to the ideas developed by the Future Teams.

The process produced several innovative ways for Skandia to grow in the future. One way to deal with a volatile marketing environment is to use the seven key

marketing perspectives. These perspectives are at the interface between the controllable marketing circle and the uncontrollable marketing environment. They thereby provide important orientations for viewing the marketing environment, assessing market opportunities and threats, and determining the best marketing responses to the changing environment. The perspectives work both ways: they guide both a marketer’s outward evaluation of the environment and inward response to the environment through marketing decisions.

The marketing environment creates opportunities or threats in two basic ways. First, changes in the marketing environment can directly affect specific markets. A market is a group of people or organizations with common needs to satisfy or problems to solve, with the money to spend to satisfy needs or solve problems, and with the authority to make expenditure decisions. Specific markets can be defined at many different levels. For example, Chrysler’s overall car market includes the new car, the sports car, the luxury car, and the minivan markets. Customers in each of these markets desire a specific type of car and have the money to spend to satisfy that need and the authority to make the purchase decision. Changes in the marketing environment can make markets larger or smaller or sometimes create new markets. Market opportunities typically arise when markets increase in size or new markets are created. For example, population growth, increases in income, and lower interest rates should present market opportunities for Chrysler by expanding the pool of people who need some type of car and have the money to purchase one. Social changes, such as more women in the workforce Chapter Three The Global Marketing Environment 49and as heads of households, can affect who makes the car buying decision, thus creating market opportunities. These and other trends also might produce new market opportunities because of developing needs for different types of cars. Conversely, slow population growth, reduced incomes, and higher interest rates would present threats to Chrysler in some car markets, because there would be

fewer people with the financial ability to purchase cars. The second way the marketing environment produces opportunities or threats is through direct influences on specific marketing activities. Legislation requiring automakers to improve gas mileage is an example. The law can be viewed as a threat, at least in the short run, because it limits the number of current models carmakers can sell and forces them to design new models with better gas mileage. This adds to the cost of making a car, which can either reduce sales, if car prices are raised to cover the additional costs, or reduce profits, if prices are not raised. The legislation, however, might also be viewed as an opportunity to create new markets for cars with extremely good gas mileage or those that use alternative fuels, such as the electric car. Changes in the technological environment similarly provide opportunities to produce these high-mileage or alternative-fuel cars.

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3. Distinguish between the following:

(a) Classification and Tabulation.

Solution: In any statistical investigation, the collection of the numerical data is the first and the most important matter to be attended. Often a person investigating, will have to collect the data from the actual field of inquiry. For this he may issue suitable questionnaires to get necessary information or he may take actual interviews; personal interviews are more effective than questionnaires, which may not evoke an adequate response. Another method of collecting data may be available in publications of Government bodies or other public or private organizations. Sometimes the data may be available in publications of Government bodies or other public or private organizations. Such data, however, is often so numerous that one’s mind can hardly comprehend its significance in the form that it is shown. Therefore it becomes, very necessary to tabulate and summarize the data to an easily manageable form. In doing so we may overlook its details. But this is not a serious loss because Statistics is not interested in an individual but in the properties of aggregates. For a layman, presentation of the raw data in the form of tables or diagrams is always more effective.

Tabulation

It is the process of condensation of the data for convenience, in statistical processing, presentation and interpretation of the information.

A good table is one which has the following requirements :

It should present the data clearly, highlighting important details.

It should save space but attractively designed.

The table number and title of the table should be given.+

Row and column headings must explain the figures therein.

Averages or percentages should be close to the data.

Units of the measurement should be clearly stated along the titles or headings.

Abbreviations and symbols should be avoided as far as possible.

Sources of the data should be given at the bottom of the data.

In case irregularities creep in table or any feature is not sufficiently explained, references and foot notes must be given.

The rounding of figures should be unbiased.

Classification

"Classified and arranged facts speak of themselves, and narrated they are as dead as mutton" This quote is given by J.R. Hicks.

The process of dividing the data into different groups ( viz. classes) which are homogeneous within but heterogeneous between themselves, is called a classification.

It helps in understanding the salient features of the data and also the comparison with similar data. For a final analysis it is the best friend of a statistician.

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(b) Warranty and Guarantee (2 × 10)

Solution: The necessity of a guarantee emerged as a means of protection to safeguard the right of the consumer. With the strength of the guarantee, a seller is liable to make the complete replacement of the purchased item, incase it was found to be below the prescribed standard. This is given by the seller or the manufacturer of a product to the customer and remains valid for a fixed period. The guarantee is a legal instrument irrespective of whether the customer paid for the article or not. Likewise, the warranty is also an instrument to safeguard the rights of a consumer. It requires payment on the part of the customer to make it legally viable as in the case of an insurance policy. With the strength of the warranty, the seller or the manufacturer is liable to face the judicial courts if the seller or the manufacturer fails to comply with the provisions of the warranty on their part. Warranty is only relevant to the repairing of articles.

A guarantee is generally given by manufacturers whereas the warranty is provided by most of the retail sellers or distributors. In a case of motorcycle purchase, there is the guarantee from the manufacturer and the seller has to provide the warranty on the vehicle from his part.

The main difference between guarantee and warranty lies in the dissimilarity of expectations in both the cases. Generally, it is believed that one can get his money back with the strength of a guarantee, if the product is defective or does not provide the assured standard. Warranty, on the other hand implies the provision of getting the article repaired if the product is defective. The most common in the recent period is the use of a limited warranty, which places conditions on the parts of an article, the quality of damage incurred and the time period of validity of the document. Naturally, the expectation in a warranty is reduced by the expression they use in the warranty document and hence the expectations are minimal. Therefore there is a vast difference in the essence and spirit of guarantee and warranty which the consumer must understand before expecting the benefit of such a document on the purchase he makes.

1. A guarantee is always free. A warranty attracts charges as the insurance policy.

2. The guarantee is a commitment to make good defects of a product or a service in a fixed period. A warranty looks after the repairing of a new article within the validity period.

3. A guarantee is a legal contract without any payment. A warranty received on payment is also a legal instrument with which the seller can be brought to books.

4. A guarantee is an addition to the legal consumer rights. A warranty does not affect the rights under the consumer act.

5. A guarantee is applicable irrespective of the provision of the warranty. A warranty is free to go together with a guarantee issued on the same article.

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4. Write short notes on the following:

(a) Essentials of effective market segmentation.

Solution: Market segmentation is one of the steps that goes into defining and targeting specific markets. It is the process of dividing a market into a distinct group of buyers that require different products or marketing mixes.

A key factor to success in today's market place is finding subtle differences to give a business the marketing edge. Businesses that target specialty markets will promote its products and services more effectively than a business aiming at the "average" customer.

Opportunities in marketing increase when segmented groups of clients and customers with varying needs and wants are recognized. Markets can be segmented or targeted using a variety of factor. The bases for segmenting consumer markets include:

*Demographic bases (age, family size, life cycle, occupation)

*Geographic bases (states, regions, countries)

*Behavior bases (product knowledge, usage, attitudes, responses)

*Psychographic bases (lifestyle, values, personality)

*A business must analyze the needs and wants of different market segments before determining their own niche. To be effective in market segmentation keep the following things in mind:

*Segments or target markets should be accessible to the business.

*Each segmented group must be large enough to provide a solid customer base.

*Each segmented group requires a separate marketing plan.

Large companies segment their markets by conducting extensive market research projects. This research is often too expensive for small businesses to invest in, but there are alternative ways for to a small business to segment their markets.

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(b) Export pricing procedure (2 × 10)

Solution: Pricing and costing are two different things and an exporter should not confuse between the two. Price is what an exporter offer to a customer on particular products while cost is what an exporter pay for manufacturing the same product.

Export pricing is the most important factor in for promoting export and facing international trade competition. It is important for the exporter to keep the prices down keeping in mind all export benefits and expenses. However, there is no fixed formula for successful export pricing and is differ from exporter to exporter depending upon whether the exporter is a merchant exporter or a manufacturer exporter or exporting through a canalising agency.

Determining Export Pricing

Export Pricing can be determine by the following factors:

Range of products offered.

Prompt deliveries and continuity in supply.

After-sales service in products like machine tools, consumer durables.

Product differentiation and brand image.

Frequency of purchase.

Presumed relationship between quality and price.

Specialty value goods and gift items.

Credit offered.

Preference or prejudice for products originating from a particular source.

Aggressive marketing and sales promotion.

Prompt acceptance and settlement of claims.

Unique value goods and gift items.

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5. Comment very briefly on the following statements:

(a) “Licensing is not different from franchising”

Solution: Licensing is totally different from franchising The line between franchising and licensing is not always a clear one. However, as you evidently know, offering a franchise subjects the offering party to FTC and state regulations, which require disclosure statements to accompany such an offering.

 Most state franchise regulations allow that if a franchisor, the party offering the franchise, has complied with the FTC regulations, then the party has also complied with the state regulations. Otherwise, the regulations for franchise offerings vary by state. If you currently have a license agreement where you license your trademark and give or exert control over the licensee's business model and get paid, generally speaking, you are probably operating a franchise and are subject to franchise regulations. These regulations do allow an exemption for a single license within certain parameters. If you state to your buyers that you are a "franchise," however, you definitely fall under the regulations.

The purpose of the franchise regulations is to be sure that full disclosure of all information is disclosed to someone purchasing a franchise. FTC Franchise Regulations require disclosure of a great deal of information regarding the advertising, offering, licensing, contracting, sale or other promotion of a franchise. These disclosures include:

The name of the franchisor

Any fictitious names of the franchisor

The trademarks of the franchisor

The last five years of business experience of the franchisor's directors and officers

Whether the franchisor's directors or officers have been convicted of or plead nolo contendere to any felony involving fraud during the past seven years

Whether the franchisor's directors or officers have been a party to, settled or convicted of a civil action involving fraud during the past seven years

Whether the franchisor's directors or officers have during the past seven years filed for bankruptcy, been adjudged bankrupt, been reorganized due to being insolvent and so on

All terms of the franchise agreement, including how to terminate, modify and sell it

Information on site selection, training programs, financial statements, other franchisees and so on

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(b) “Different segments of a market demand the same product”

Solution: Coming soon

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(c) “Tabulation is a technique of data analysis”

Solution: Tabulation is not a technique of data analysis. Data analysis is an important stage of the research process. This programme includes a summary of that process and explores specific areas of data analysis that might be applicable to learners studying at undergraduate and post graduate levels.

It aims to provide a definition of qualitative and quantitative data analysis and opportunities to explore photographic, video, textual and numerical data analysis through providing worked examples and further opportunities for learners to develop knowledge and skills in data analysis. The programme also aims to support the development of critical appraisal skills, thorough considering the critical review of research papers. The aims are achieved through captialising on the interactive opportunities of on-line learning.

In completing all components of the programme learners are enabled to develop the following learning outcomes:

An awareness of the situation of qualitative data analysis within the inductive paradigm

An awareness of the situation of quantitative data analysis within the deductive paradigm

Skills in critically appraising the data analysis component of research studies

An appreciation of the different approaches to qualitative data analysis

An appreciation of the different approaches to quantitative data analysis

Skills in undertaking basic qualitative and quantitative data analysis

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(d) “ Mergers and acquisitions are not a market entry strategy ”

Solution: Yes Mergers and acquisitions are not a market entry strategy. A merger refers to a process in which two companies become one by coming together. In such a case, no one company rules over the other. Usually the management of both companies shares the control of the resultant company and names of both companies are retained for the resulting companies. There are many high profile examples of mergers - AOL Time Warner, GlaxoSmithKline (the second largest pharmaceutical company in the world after Pfizer), Hero Honda (the leading motorcycle brand in India), Sony Ericsson (the third largest manufacturer of mobile phones in the world) and many others. In each of these cases, names of both companies were retained in order to leverage the equity of both brand names. Therefore simply put, mergers create a new organization out of two or more organizations of more or less equal stature, pooling all resources.

Acquisitions on the other hand refer to processes in which one company buys the other company. In such a situation the buying company absorbs the bought company into the existing company. Acquisitions can be carried out either to eliminate competition by absorbing the competing company or to expand the corporate portfolio by retaining the acquired company as an independent entity under the overall corporate management. This latter case is at the heart of many conglomerates. News Corp Inc acquired MySpace, the leading online networking site with an estimated 100 million registered users not in order to merge it with the other news businesses, but to expand the corporate portfolio. On the other hand Vodafone Group plc, the world’s largest mobile communications network company with a market capitalization of GBP 86 billion (US$169 billion or 1.16 trillion yuan) recently acquired a 67% stake in Essar Hutchison (one of India’s leading mobile phone network) for US$19 billion (130 billion yuan). The purpose of this acquisition was to enter the highly lucrative Indian mobile phone market. By this acquisition, India became Vodafone’s second largest market after the US. As is evident from the many examples mentioned before, mergers and acquisitions (M&A) serve three main purposes: M&A can serve as a market entry strategy, as a corporate portfolio expansion tool and as a competitive defense mechanism.

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(e) “There is no advantage in having an agent in the export market”. (5 × 4)

Solution: There are many Advantages in having an agent in the export market as an export agent is a firm (or individual) that undertakes most of the exporting activities on behalf of an exporter usually for a commission. A key feature of the traditional export agent is that they never really take ownership of the goods, which always remain under the control of the exporter. The agent thus will do most of the marketing of the principle (i.e. the export firm) and the firm’s products.

The agent may travel abroad, do research, prepare an export plan, advise the exporter on how to adapt their marketing mix, make contact with potential buyers, negotiate deals with the buyers, take care of all promotional activities, handle the logistics and documentation, and much more. All of these tasks, the export will do on the exporter’s behalf. The exporter normally pays the agent for the expenses they have incurred marketing the firm’s products and handling the export administration, and will generally earn a commission on any sales generated. In essence the export agent becomes the exporter’s export department. In some cases, the principle will want to keep tight control over the agent’s activities, while in other instances, the agent is given free reign. Some companies may employ an agent for very specific tasks such as undertaking marketing research or handling the export administration and logistics only.

Using an agent is a relatively easy and painless way for a local company to enter the export market, as they generally have to do very little – the agent does all (or at least some) of the export marketing on the firm’s behalf.