786. A Brief Overview Of International Marketing By:M.Iqbal Mehdi (Freelance Manager Marketing and Sourcing Consultant). What is a Market. Market is a place where buyers and sellers gather for transactions which involves the exchange of goods and services. What is Marketing?. A Philosophy
A Brief Overview
(Freelance Manager Marketing and Sourcing Consultant)
At its most complex level, it involves the firm in establishing manufacturing facilities overseas and coordinating marketing strategies across the globe.
Different Legal systems in different countries make the businessman task more difficult as they are not sure as to which particular system will apply to their transactions:
- Factors of productions are less mobile between nations than in the country itself.
on capital movements, capital has also become more mobile.
Each country is a separate market having its own
- Demand pattern
These difference are accentuated due to the existence of Government
control and regulations.
- Larger volumes of transactions and the higher
values of these transactions.
- Longer period involved in these transaction due
to longer time in transit and long credit period
- Comparatively less knowledge about the parties’
reputation and credibility, and
- Exchange fluctuation risks.
- Cross cultural environment - Makes marketing task more
- Culture though very commonly used term, is not, however, easy
The economic, political and social changes that have occurred over the
last decade have dramatically altered the landscape of global business.
Consider the present and future impact of the following:
These are not simply news. These changes affect the businesses world-
wide, and they mean that companies will have to constantly examine the
way they do business and remain flexible enough to react rapidly to
changing global trends to be competitive.
Economic – stage of development
Socio-Cultural – customs, tastes, preferences
Demographic – size, age, households, income
Political – parties, platforms, control
Government – nature, policies
Technological – breakthroughs, diffusion
Domestic Market Constraints
Government Policies and Regulations
- Increase Sales
- Reduce Costs – cheap labor, free trade agreements
- Increase Profit Margins
- Short-Term Growth – Developed market base in Foreign
Market – US, Singapore, EU, UK.
- Future Growth Potential – emerging markets
- Insufficient Economies of Scale – stable market share in
- Recession in Domestic Market – reduce economic risk,
- Economic Liberalization – reduction in domestic protection
and trade barriers.
- Counter International Competition – change in business
- Export Promotion Policies - incentives
- Foreign Direct Investment Policies – restrictions eliminated
- Environmental Regulations – may be less stringent
- Trade Agreements – EU, NAFTA, SAARC
- Technology Advantage
- High Market Share – few competitors
- Product Differentiation
- Raw Material Resources
-Branding – build identity and image
-Foreign Exchange – easier imports
-Government Incentives – export incentives
-Product Development – product improvements
-New Products/Technologies – foreign R&D
- Future Growth – long-range plan
- Retain Competitive Edge – survival
- To Diversify – acquire new businesses
- Reduce Economic Risk – build a business portfolio
- Global Corporation – become one Resource Globally – materials,
components, manufacturing, advertising, financing, management
- Changing Business Environment – stay ahead
- When the local market is saturated, exploring the international
market is the next choice.
-Income Tax Concession
-Cash Compensatory Support
-International Price Reimbursement Scheme
-Freight Subsidies, etc.
The international market is generally very competitive and sensitive, and the credit facilities made available to the buyers are one of the important determinants of export business.
The extent to which credit must be extended to the importer depends on the sale terms.
If the exporter gets cash in advance, there is no issue of financing; but this is not common.
It, therefore, becomes necessary to make institutional credit available to the export sector to meet pre-shipment and post-shipment financial requirements
Such credit facilities will enable the exporter to extend reasonable credit facilities to foreign buyers
1. Purchase of Raw Materials and Components
6. Transactions, Others
- The loan is advanced only on receipt of an export order.
- The exporter should deliver either a L/C or a confirmed
- Advances must be repaid from the proceeds of the relative
- Packing credits are eligible for interest subsidy.
- Available against incentives.
- Concessional rates of interest.
- Sub-supplier must submit documents from Export House or
-To cover period between the shipment of the goods and the
receipt of payment.
- Credit extended to Overseas Buyer to pay for goods imported
from Exporter. Generally, advanced for capital goods.
-Local and foreign commercial banks which are members of the
Foreign Exchange Dealers’ Association
- Provided by commercial banks under L/C, by purchasing D/P
and D/A bills, against export bills, export incentives, etc.
- By commercial banks.
- Industrial Development Banks
- Some of these institutions also provide suppliers’ credit,
including line of credit to promote exports.
- Export credits generally carry concessional interest rates.
- Participation in trade fairs and exhibitions.
- Foreign travel for export promotion.
- Advertising abroad.
- Market research.
- Procurement of samples and technical information
1. Cash in Advance
2. Open Account
3. Consignment Sale
4. Document Against Payment – D/P
5. Document on Acceptance – D/A
6. Letter of Credit
- Most Advantages for Seller. Required with Order or Before
Shipment in the form of Draft, Check, Electronic Transfer.
- Seldom Acceptable to Buyer.
- Generally used for Customized Manufacture, on specifications
of the buyers i.e. made to order.
- Necessary when Buyer is Unknown to Seller.
- Buyer’s Creditworthiness is Doubtful.
- Seller’s Monopoly Exists.
- Sellers Market Condition Exists.
Fortunately, the International Market is Inherently very
-Exporter Ships Goods with no Financial Documents, Only
-Seller Carries Financial Risk.
-Restricted to Intra-Company Transactions.
-Seller and Buyer have Established Relationship.
-Local exporters are allowed to sell on the Open Account
basis only with special permission from the State Bank.
-This permission is given only to foreign companies operating
in our country.
-Exporter consigns to Agent or Rep in the foreign market.
-Agent or Rep arranges Sale and Pays to the Exporter.
-Exporter retains the Title until the Sale.
-No Bill of Exchange is Involved.
-Seller is Exposed to Default Risk.
-Exchange Risk exists if Consignee is Inefficient or Dishonest.
-An exporter selling goods on consignment basis must furnish a
declaration regarding the full export value of the goods.
-Same as C.A.D.
-Exporter Ships Goods to Foreign Buyer.
-Documents giving Title is handed over through Bank only on
-Until Payment ownership of Goods remains with Seller.
-Exporter can obtain Finance from the Bank against the D/P Bill.
-If the bank is satisfied, it may finance the exporter by
purchasing the D/P Bill, usually on a ‘with recourse’ basis.
-In the event of non-payment by the buyer, the bank has
recourse to the drawer.
- Buyer Accepts the Bill of Exchange by Signing it.
- Documents and Title to the Goods are handed over by the
- Exporter extends 30, 60, 90 days credit to the Importer.
- Bank may extend finance to Exporter by purchasing the
D/A Bill ‘with recourse’.
- The exporter relies on the honesty and creditworthiness
of the buyer, and the D/A is extended only to parties
with integrity, financial stability, and reputation.
- Letter of Credit is used most often Globally.
- Importer arranges L/C with a Bank.
- Document gives Bank Guarantee.
- Draft is Drawn on Importer’s Bank.
- Bank will Honor the Draft when submitted by Exporter.
- L/C Eliminates Risk for Exporter.
- Exporter must fulfill obligation of Shipment.
- Immediately after shipment of the goods the exporter can
present the Bill of Exchange and other documents specified in
the L/C to obtain payment through exporters own Bank.
There are different terms of Letters of Credit:
1. Documentary L/c.
2. Transferable L/c.
3. Non-transferable L/c.
4. Cash L/c – payment in cash.
5. Acceptance L/c – bank merely ‘accepts’, exporter then
sells draft to bank.
6. Revocable L/c – can be cancelled.
7. Irrevocable L/c – cannot be revoked
8. Confirmed L/c – a bank in exporter’s country confirms the L/c.
9. Back-to-Back L/c – original L/C is used for secondary credit.
10. Revolving L/c – for similar transactions.
Irrevocable Letter of Credit
It is generally used in international transactions.
It cannot be revoked, amended, or modified by the issuing bank without express consent of all the parties.
Is a definite undertaking provided shipment terms and conditions are complied with.
Example Of Irrevocable Letter of Credit
US Buyer, Overseas Seller.
Overseas Exporter requests US Importer to arrange for an Irrevocable Letter of Credit.
US Importer applies to it’s own bank in the US to issue an L/C.
In the application the US Importer will indicate the terms of the sale and the documents to accompany.
If the US Bank is prepared to issue the L/C, the US Importer will sign the L/C Contract agreeing to reimburse the bank.
The US Bank will now notify the Overseas Exporter’s bank in his Country, mentioned in the L/C, and to confirm the L/C to the Overseas Exporter.
The notifying Sellers Bank will now confirm to the Exporter that an irrecoverable L/C has been arranged, and will describe the terms under which the shipment must be made before the Exporter’s payment draft will be honored.
Example Of Irrevocable Letter of Credit – cont’d
This makes the contract binding on both the issuing US Bank and the confirming Sellers Bank.
The Exporter will now ship the goods to the US Buyer, and draw a time draft on the issuing US Bank with documents, and present it to the confirming sellers Bank.
The Seller may sell the draft and documents to the confirming Seller’s Bank.
The confirming Sellers Bank will send the draft and documents to its own corresponding bank in the US, which will present it to the issuing or drawer US Bank, of the US Buyer, for acceptance.
The accepting/issuing US Bank will deliver the draft and documents to the US Importer/Buyer, with a Trust Receipt, an instrument under which the bank retains title to the merchandize.
The US Importer/Buyer is expected to make full payment when the draft matures.
The Export-Import Policy (Exim Policy) reflects the foreign trade policy of home country.
It is implemented under the framework of the Foreign Trade and Foreign Exchange Regulation Act.
Special Problems due to Differences:
1. Political and Legal – complex, regional within
2. Cultural – significant compared to domestic
3. Economic – free or freer market economy
4. Currency – exchange rate fluctuations, monetary policy
5. Language – can be managed easily.
6. Infrastructure – developed, developing
7. Marketing – advertising media
8. Trade Policies – restrictions, import controls
9. Logistics – transportation, insurance
10. Trade Practices – customs clearance, duty
-Surplus Supply of Commodities
-Counter Domestic Recession
-Earn Foreign Exchange
-Reduce Trade Deficits
-Compete in the Global Market
- Establish and Sponsor Organizations.
- Ministry of Commerce.
- Establish Autonomous Bodies:
1. Commodity Boards.
2. Export Inspection Council.
3. Institute of Foreign Trade.
4. Institute of Packaging.
5. Export Promotion Councils.
6. Federation of Export Organizations.
7. Council of Arbitration.
8. Marine Products Export Development Authority.
9. Agricultural and Processed Food Products Export
10. Trade Promotion Organization.
- Develop and promote exports, imports, and upgrade technology
through fairs locally and abroad.
- Compile and disseminate trade related information.
- Organize visits of foreign buyers and traders.
- Send and receive Foreign delegations.
- Assist local companies in trade development.
- Assist with Marketing Surveys and Research.
- Provide Marketing Information.
- Organise International Trade Fairs and Exhibitions.
- Help in arranging Credit and Insurance Facilities.
1. Current Account
2. Capital Account
3. Financial Account
See You Again