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Q)1)Define international marketing. Discuss the various challanges

and opportunities prevail in international marketing.

ANS-
International Marketing can be defined as exchange of goods and services between
different national markets involving buyers and sellers.
According to the American Marketing Association, “International Marketing is the multi-
national process of planning and executing the conception, prices, promotion and
distribution of ideal goods and services to create exchanges that satisfy the individual
and organizational objectives.

International Marketing Examples:

When McDonalds entered in India, they did an extensive research before

zeroing upon the menu on offer for the Indian consumers. The entire menu was
tailer made as per Indian consumer taste. The company stuck to 40% Pure
Vegetarian offering unlike any other overseas market. McDonald’s also made
sure to respect Indian culture by not serving beef or pork recipes which on the
other hand were popular ingredients in other markets

ways through which companies can globalize /scope

of international marketing:
1. Exports: The easiest way to enter the market is through exports that can be indirect or
direct. In Indirect Exports, the trading companies are involved that facilitates the buying
and selling of goods and services abroad, on the behalf of the companies.

Whereas in Direct exports, the company itself manages to sell the goods and services
abroad, by opting one of the following ways:

 By setting Domestic based Export Department, working as an independent entity

 Through Overseas sales branch, that carries out the promotional activities and
facilitates sales and distribution.
 The sales representatives traveling abroad
 The distributors or agents in abroad working exclusively on the behalf of the
company

2. Global web Strategy: Nowadays, companies need not go to the international trade
shows to show their products, they can very well create the awareness among the
customers worldwide through an electronic media i.e. internet.Through the company
website, customers can read the detailed information, generally written in different
languages, about the product and can order online.

3. Licensing and Franchising: One of the ways to globalize is through licensing, wherein
the domestic company issues the license to the foreign company to use the
manufacturing process trademark, patent, name of the domestic company while
facilitating the sales. In licensing, the domestic company has a less control over the
licensee.

But, in the case of franchising, the domestic company enjoys the higher control as it
allows the franchise to function on its behalf, and in line with the terms and conditions of
the domestic company. MC Donalds, Dominos are the examples of franchising.

4. Joint Ventures: The companies can go international by joining hands with other
country based companies with the intention to monetize their existing relationships with
the local customers.In India, TATA AIG, HDFC standard life insurance, TATA Sky are
the examples of joint ventures.

5. Direct Investment: Ultimately, the firms can establish their own business facilities or
own a part of the local company to facilitate the sale of goods and services.

The companies go international with the objective to have an increased sales along with
the huge market share. But certain things such as political, social, technological, cultural
situations should be kept in mind while designing the marketing principles since these
are different for the different nations
 Importance of International Marketing:

1. Important to expand target market – Target market of a marketing organisation will be

limited if it just concentrate on domestic market. When an organisation thinks globally, it
looks for overseas opportunities to increase its market share and customer base.

2. Important to boost brand reputation – International marketing may give boost to a

brand’s reputation. Brand that sold internationally is perceived to be better than the brand
that sold locally. People like to purchase products that are widely available. Hence,
international marketing is important to boost brand reputation.

3. Important to connect business with the world – Expanding business into an

international market gives a business an advantage to connect with new customers and
new business partners. Apple - the tech giant designs its iPhone in California; outsources its
manufacturing jobs to different countries like - Mongolia, China, Korea, and Taiwan; and
markets them across the world. Apple have not restricted its business to a nation, rather
expanded it to throughout the world. The opportunities for networking internationally are
limitless. The more "places" a business is, the more connections it can make with the world.

4. Important to open door for future opportunities – International marketing can also
open door for future business opportunities. International marketing not only increases
market share and customer base, it also helps the business to connect to new vendors, a
larger workforce and new technologies and ways of doing business. For example –
American organisations investing in Japan have found programs like – Six Sigma and
Theory Z which are helpful in shaping their business strategies.

Challenges with International Marketing

When compared to domestic Marketing, International Marketing has its own set
of challenges. Marketers are generally unaware of the foreign environment and
therefore have to deep dive into the market where they plan to venture.

The challenges can be:

1. Competition
2. Legal Restrains
 3. Government Controls
4. Varied Consumer Behaviour
5. Ecological factors – Weather etc-

Controlling all the above mentioned factors to create a favourable market is

next to impossible for the marketers as most of them are beyond their control.
Therefore, marketers need to focus more on what they can control instead of
things which is out of their purview. International Marketing Managers adapt to
the prevailing conditions and function in a way so that they can smoothen their
operation in the country with predictable results of their action.

What makes marketing interesting in the international arena is the fact that
marketers have to alter is their elements of marketing – product, price,
promotion, distribution, and research keeping in mind the uncontrollable
elements of the marketplace – competition, politics, laws, consumer behavior,
technology, in a way that marketing objectives are achieved.

The major participants in international marketing are

as follows –

 Multinational Corporations (MNCs) − A multinational corporation (MNC) is an organization

that ensures the production of goods and services in one or more countries other than its
home country. Such organizations have their offices, help desks or industrial set-up across
nations and usually have a centralized head office where they co-ordinate global
management.
 Exporters − They are the overseas sellers who sell products, and provide services across
their home country by following the necessary jurisdiction.
 Importers − They are the overseas buyers who buy products and services from exporters
by complying with the jurisdiction. An import by one nation is an export from the other
nation.
 Service companies − A service company generates revenue by trading on services and not
on physical commodities. A public accounting company is the best example of a service
company. Revenue here is generated by preparing returns of income tax,
performing audit services, and by maintaining financial records.
Many companies believe that their targets are limited if they only concentrate on a
single market like the U.S. Market and Global marketplace is competitive. Thus, to
enrich their market presence such companies are always on a lookout for better
opportunities worldwide.

Benefit or opportunities of international marketing:

Q)2)Describe the relevance of economic,social,legal and cultural
factors in the international marketing environment.

ANS-

 International marketing environment is a set of controllable (internal) and

uncontrollable (external) forces or factors that affect international marketing.

International marketing mix is prepared in light of this environment.

 International marketing environment consists of global forces, such as

economic, social, cultural, legal, and geographical and ecological forces, that
affect international marketing decisions.

 International marketing environment for any marketer consists of internal,

domestic, and global marketing forces affecting international marketing mix.

1. Social/cultural environment
The social and cultural influences on international marketing are immense.
Differences in social conditions, religion and material culture all affect
consumers’ perceptions and patterns of buying behaviour. It is this area
that determines the extent to which consumers across the globe are either
similar or different and so determines the potential for global branding and
standardisation. A failure to understand the social/cultural dimensions of a
market are complex to manage, as McDonald’s found in India. It had to
deal with a market that is 40 per cent vegetarian, had an aversion to either
beef or pork among meat-eaters and a hostility to frozen meat and fish, but
with the general Indian fondness for spice with everything. To satisfy such
tastes, McDonald’s discovered it needed to do more than provide the right
burgers. Customers buying vegetarian burgers wanted to be sure that
these were cooked in a separate area in the kitchen using separate utensils
and sauces like McMasala and McImli were developed to satisfy the Indian
taste for spice. Interestingly however, these are now innovations they have
introduced into other markets.

2. Legal environment:

Legal systems vary both in content and interpretation. A company is not

just bound by the laws of its home country but also by those of its host
country and by the growing body of international law. This can affect many
aspects of a marketing strategy – for instance advertising – in the form of
media restrictions and the acceptability of particular creative appeals. ).
Product acceptability in a country can be affected by minor regulations on
such things as packaging and by more major changes in legislation. It is
important, therefore, for the firm to know the legal environment in each of
its markets. These laws constitute the ‘rules of the game’ for business
activity. The legal environment in international marketing is more
complicated than in domestic markets since it has three dimensions:

(i) local domestic law;

(ii) international law;

(iii) domestic laws in the firm’s home base.

 Local domestic laws. These are all different! The only way to find a route
through the legal maze in overseas markets is to use experts on the separate
legal systems and laws pertaining in each market targeted
 International law. There are a number of international laws that can affect
the organisation’s activity. Some are international laws covering piracy and
hijacking, others are more international conventions and agreements and
cover items such as the International Monetary Fund (IMF) and World Trade
Organisation (WTO) treaties, patents and trademarks legislation and
harmonisation of legal systems within regional economic groupings, e.g. the
European Union.
  Domestic laws in the home country. The organisation’s domestic (home
market) legal system is important for two reasons. First, there are often
export controls which limit the free export of certain goods and services to
particular marketplaces, and second, there is the duty of the organisation to
act and abide by its national laws in all its activities, whether domestic or
international.
India is regarded by many firms as an attractive emerging market beset
with many legal difficulties, bureaucratic delay and lots of red tape. For
example, shoes cannot be imported in pairs but have to be imported one at
a time – which causes huge problems for shoe manufacturers who need to
import shoes as production samples. The way many of them overcome the
problem is by importing the left shoe via Madras and the right shoe via
Mumbai. Companies such as Mercedes Benz, Coca-Cola and Kellogg have
found the vast potential of India’s market somewhat hard to break into. Its
demanding consumers can be difficult to read and local rivals can be
surprisingly tough. Political squabbles, bureaucratic delays and
infrastructure headaches are also major obstacles.

3. Economic environment:

The purchasing power of people in a country is a crucial factor in

determining the demand for products. Marketers must pay close attention
to major trends in income and consumer spending patterns. In short, the
economic conditions of a country – the nature of the economy, the stage of
development of the economy, economic resources, the level and
distribution of income, etc. are all very important factors in marketing.
Further economic factors like inflation, productivity, shortages,
unemployment etc have a tremendous impact on prices and incomes.
Hence, marketers must incorporate these factors while preparing marketing
programmes. This understanding is important at a world level in terms of
the world trading infrastructure such as world institutions and trade
agreements developed to foster international trade, at a regional level in
terms of regional trade integration and at a country/ market level. Firms
need to be aware of the economic policies of countries and the direction in
which a particular market is developing economically in order to make an
assessment as to whether they can profitably satisfy market demand and
compete with firms already in the market.
 4. Political Environment:

The political environment of international marketing includes any national or

international political factor that can affect the organization’s operations or
its decision making. Politics has come to be recognized as the major factor
in many international business decisions, especially in terms of whether to
invest and how to develop markets. Politics is intrinsically linked to a
government’s attitude to business and the freedom within which it allows
firms to operate. Unstable political regimes expose foreign businesses to a
variety of risks that they would generally not face in the home market. This
often means that the political arena is the most volatile area of international
marketing. The tendencies of governments to change regulations can have
a profound effect on international strategy, providing both opportunities and
threats.

Political Factors include:

A. Laws

There are laws in some countries that will greatly affect your ability to do
business in them or prohibit it altogether. One such example is Thailand
which has specific laws stating no foreign person or company can
own more than 49% of business in Thailand, so you must be willing to take
on a Thai partner in order to do business there. You must be aware of laws
like this if part of your product marketing strategy includes manufacturing or
distributing your wares in a foreign target market country.

B. Licensing and Permits

There is a chance that the only way you can do business in a foreign
country is to give out an expensive permit or license of another business in
that country to manufacture and sell your product for you. Governments do
these things as a way of making sure a larger percentage of income from
sales stays in the home country. An example of this is Pepsi’s license to
Heineken to bottle and sell Pepsi products in the Netherlands.

C. Taxes

Taxes are another way that governments can cash in on foreign

businesses operating and selling products in their country, so their citizens’
spending does not allow much money to leave the country. Taxes can and
do impact your ability to make a profit selling goods and services in a
foreign country and will shape your international marketing strategy
because of that. High tax rates on goods sold, like those in the USA, can
make it hard for a business to stay on the right side of that fine line
between profit and loss.

D. Fees

When you market your products for sale in a foreign country, you may be
subject to pay certain fees for the right to do that. These fees can be a one-
time deal or recurring, and they can also be quite high in some
circumstances if they involve what might be considered luxury items.

G. Other Political Risks and Restrictions

 Investment restrictions:Many countries have strict requirements on who

can own businesses and do other business-related investments in their
country. Your marketing department needs to be aware of these things. For
instance in Malaysia, if you are an agricultural business and you want to buy
land to produce fruits and vegetables to sell there, any land purchase over
$163,000 is subject to approval by the government and may come with other
restrictions too.
 Operational restrictions:Just how much operational control you will have
over your overseas business remains to be seen, and that is a concern for
some. Because of some of the restrictions that have been discussed and other
requirements for doing business in a foreign country, chances are your
business will need an international management team. This will affect the
operational control of your business and has to be factored into any
marketing decisions that your company makes.
 Discriminatory restrictions:Discriminatory practices in a foreign country
may inhibit or prohibit marketing your goods and services to that country
too. The USA has imposed import quotas on Japan in protest at non-tariff
barriers which they view as being imposed unfairly on US exporters. They
have also imposed bans on imports from Libya and Iran in the past. Such
barriers tend to be such things as special taxes and tariffs, compulsory
subcontracting, or loss of financial freedom.
5. Technological environment:

Technology is a major driving force both in international marketing and in

the move towards a more global marketplace. The impact of technological
advances can be seen in all aspects of the marketing process. The ability
to gather data on markets, management control capabilities and the
practicalities of carrying out the business function internationally have been
revolutionised in recent years with the advances in electronic
communications. Satellite communications, the Internet and the World
Wide Web, client–server technologies, ISDN and cable as well as email,
faxes and advanced telephone networks have all led to dramatic
shrinkages in worldwide communications. Shrinking communications
means, increasingly, that in the international marketplace information is
power.

The technological changes result in changes in consumption pattern and

marketing systems. A new technology may improve our lives in one area
while creating environmental and social problem in another area. The
marketers should monitor the following trends in technology: the pace of
change, the opportunities for innovation, varying research and development
budgets, and increased regulation. He should watch the trends in
technology and adopt the latest technology so as to stay alive in the field.
Q)3)Explain the organizational characteristics of
multinational,global,international and transnational corporation.

ANS-
 Each term is distinct and has a specific meaning which define the scope and
degree of interaction with their operations outside of their “home” country.

 International companies are importers and exporters, they have no investment

outside of their home country.

 Multinational companies have investment in other countries, but do not have

coordinated product offerings in each country. More focused on adapting their
products and service to each individual local market.

 Global companies have invested and are present in many countries. They
market their products through the use of the same coordinated image/brand in
all markets. Generally one corporate office that is responsible for global
strategy. Emphasis on volume, cost management and efficiency.

 Transnational companies are much more complex organizations. They have

invested in foreign operations, have a central corporate facility but give
decision-making, R&D and marketing powers to each individual foreign market.

• Transnational corporations (TNCs) - their parent company owns a capital of the

country and has offices spread across many countries of the world

Multinational Corporation:
Characteristics of a Multinational Corporation:

1. Very high assets and turnover

To become a multinational corporation, the business must be large and must
own a huge amount of assets, both physical and financial. The company’s
targets are so high that they are also able to make substantial profits.
2. Network of branches
Multinational companies keep production and marketing operations in
different countries. In each country, the business oversees more than one
office that functions through several branches and subsidiaries.

3. Control
In relation to the previous point, the management of the offices in other
countries is controlled by one head office located in the home country.
Therefore, the source of command is found in the home country.

4. Continued growth
Multinational corporations keep growing. Even as they operate in other
countries, they strive to grow their economic size by constantly upgrading and
even doing mergers and acquisitions.

5. Sophisticated technology
When a company goes global, they need to make sure that their investment
will grow substantially. In order to achieve substantial growth, they need to
make use of capital-intensive technology, especially in their production and
marketing.

6. Right skills
Multinational companies employ only the best managers who are capable of
handling huge funds, using advanced technology, managing workers, and
running a huge business entity.
7. Forceful marketing and advertising
One of the most effective survival strategies of multinational corporations is
spending a huge amount of money on marketing and advertising. It is how
they are able to sell every product or brand they make.

8. Good quality products

Because they use capital-intensive technology, they are able to produce top-
of-the-line products.

Characteristics of Global corporation:

Huge Capital Resources

These enterprises have huge financial resources. They have the ability to raise funds from different
sources. Funds are raised by the issue of issuing equity shares, debentures, etc to the public. The
investors of the host countries are always willing to invest in them because of their high credibility
in the market.

Foreign Collaborations

With companies of the host countries, these enterprises enter into agreements. These agreements are
made in respect of the sale of technology, production of goods, patents, resources, etc.

Advanced Technologies

These enterprises use advanced technology for production, hence goods/services provided by the
MNCs conform the international standard and quality specifications.

Product Innovations

These enterprises have efficient teams doing research and development at their own R &D centres.
The main task is to develop new products and design existing products into new shapes in such a
manner as to make them looks and new and attractive and also creates satisfies the demands of the
customers.

Expansion of Market Territory

They expand their market territory when the network of operations of these enterprises extends
beyond their existing physical boundaries. They occupy dominant positions in various markets by
operating through their branches, subsidiaries in host countries.

Centralized Control

Despite the fact the branches of these branches of these enterprises are spread over in many
countries, they are managed and controlled by their Head Office (HO) in their home country only.
All these branches have to work within the broad policy framework of their parent company.

Characteristics of transnational corporation:

When a corporation plateaus in growth, especially where demand is concerned, they

often seek to expand in other countries for that additional growth. While this is what
often makes a corporation a transnational corporation, it isn't without controversies. The
following characteristics are often associated with a transnational corporation:
1. Transnational corporations may not be loyal to all of the countries they operate in,
and look to maintain their own interests. In other words, they're mainly concerned about
what's best for them even if it's at the expense of the other country's values or
standards.
2. Transnational corporations avoid high tariffs involved in importing when they set up in
foreign countries. This allows a corporation to cut costs, but it's not always in the most
honest way.
3. They reduce costs by using foreign labor at a cheaper price than they would in their
home country.
4. They block competition by acquiring businesses. If they purchase foreign companies,
they will not have as much competition.
5. They may have political influence over some governments. This means that they may
use their power to convince some governments to support their practices.
6. They can create a loss of jobs in their home country.
7. They can minimize taxes. The IRS has to study transnational companies very thoroughly to
make sure they are paying taxes correctly.
Q)4)Define licensing, franchising and acquisition as market as market
entry strategies.

ANS

LICENSING:
Licensing is a transfer-related market entry strategy. It involves a company
(known as the licensor) granting permission to a company in another country to use
its intellectual property for a defined time period. The intellectual property can
include patented manufacturing processes, trademarked products, copyrights and
technical assistance. In return for this permission, the licensor demands a fee from
the company it has granted permission to (the licensee) and periodic royalty
payments.
For example: Under licensing system, Coca-Cola and Pepsi are globally
produced and sold, by local bottlers in different countries.

In finer terms, it is the simplest form of business alliance, wherein a company

rents out its product based knowledge in exchange for entry to the market
 CAUSES OF Licensing:
The overseas company enters into a licensing agreement with another company
based in the domestic country, for a specified period of time. The two primary
reasons for entering in the licensing agreement are:

 International expansion of a brand franchise.

 Need for commercialisation of new technology.
Generally, a firm opts for license its products, when the firm holds that the
consumer’s acceptance of the product is high. It helps the licensee to
differentiate the product from other products offered by the competitors in the
market. Further, it also assists the licensing company in reaching new customers
at a low price.

Advantages :

 Licensing is a very attractive method for entering a target market if a

company has valuable intellectual property. It involves minimal initial costs
and provides companies with regular income from overseas.

 It enables a company to enter a market that has restrictions on foreign

companies.

 The licensor company benefits from the licensee company’s local market
knowledge. The licensor company gains a market stronghold very rapidly.
 The licensor company’s capital is not tied up in foreign operations

 The licensor company has the option to expand into the market further by
investing in the licensee company at a later date
 The licensor company can move into several markets at one time.
 Requires a low-commitment to international expansion.

 Governments in the foreign market might prefer licensing arrangements for

local companies.

Disadvantages:

 Entry into the target market is limited

  . The terms of the license must be monitored over the lifetime of the
agreement, and enforcement might become necessary

 The licensee company might use the intellectual property provided to

become a competitor company.

 Intensive research and planning is required to identify the best licensee and
develop a beneficial licensing agreement.
 Companies that engage in licensing should consider the possibility of
extending their market entry by moving into a joint venture with licensee
companies.

Franchising:
franchising is an arrangement, in which the manufacturer, permits another firm,
the right to use its diverse intellectual property rights such as trademark, brand
name, technical know-how, designs, etc., in addition to the proven name,
goodwill and marketing strategies, for a certain sum. E.g. Mc Donald’s,
Subway, & Eleven, Domino’s, Dunkin’ Donuts, etc

Characteristics of Franchising:
1. License: The franchisee gets the right to use, franchiser’s trademark under a
license.
2. Policies: The franchisee must follow the policies concerning the mode of
conducting business, as stated in the agreement.
3. Marketing support and technology: Franchisee is supplied with continuous
market support and technology, by the franchiser, to undertake business, in the
manner stated in the franchising agreement.
4. Training: Complete training and assistance are provided to the personnel
working in the franchisee’s enterprise.
5. Royalty: For making use of a well-known business model, the franchisee pays
the royalty to the franchiser.
 Importance of Franchising:
 It allows franchiser to augment his distribution chain in minimum time.
 It provides feedback to the franchiser regarding the product popularity, needs
and choices of customers, etc.
 It expands the network of franchiser which helps in increasing goodwill.
 As the business is already established, the franchisee need not make efforts in
promoting the product.
 Franchisee get sole rights in providing the product or service

Acquisition:
An acquisition is defined as a corporate transaction where one company
purchases a portion or all of another company’s shares or assets. Acquisitions
are typically made in order to take control of, and build on, the target
company’s strengths and capture synergies. There are several types of
business combinations: acquisitions (both companies survive), mergers (one
company survives), and amalgamations (neither company survives).

Benefits of Acquisitions

Acquisitions offer the following advantages for the acquiring party:

1. Reduced entry barriers

With M&A, a company is able to enter into new markets and product lines
instantaneously with a brand that is already recognized, with a good
reputation and an existing client base. An acquisition can help to overcome
market entry barriers that were previously challenging. Market entry can be a
costly scheme for small businesses due to expenses in market research,
development of a new product, and the time needed to build a substantial
client base.

2. Market power
An acquisition can help to increase the market share of your company quickly.
Even though competition can be challenging, growth through acquisition can
be helpful in gaining a competitive edge in the marketplace. The process helps
achieves market synergies.

3. New competencies and resources

A company can choose to take over other businesses to gain competencies
and resources it does not hold currently. Doing so can provide many benefits,
such as rapid growth in revenues or an improvement in the long-term
financial position of the company, which makes raising capital for growth
strategies easier. Expansion and diversity can also help a company to
withstand an economic slump.

4. Access to experts
When small businesses join with larger businesses, they are able to access
specialists such as financial, legal or human resource specialists.

5. Access to capital
After an acquisition, access to capital as a larger company is improved. Small
business owners are usually forced to invest their own money in business
growth, due to their inability to access large loan funds. However, with an
acquisition, there is an availability of a greater level of capital, enabling
business owners to acquire funds needed without the need to dip into their
own pockets.

6. Fresh ideas and perspective

M&A often helps put together a new team of experts with fresh perspectives
and ideas and who are passionate about helping the business reach its goals.

Challenges with Acquisitions

1 )Culture clashes:
A company usually has its own distinct culture that has been developing since
its inception. Acquiring a company that has a culture that conflicts with yours
can be problematic. Employees and managers from both companies, as well as
their activities, may not integrate as well as anticipated. Employees may also
dislike the move, which may breed antagonism and anxiety.
2. Duplication
Acquisitions may lead to employees duplicating each other’s duties. When two
similar businesses combine, there may be cases where two departments or
people do the same activity. This can cause excessive costs on wages. M&A
transactions, therefore, often lead to reorganization and job cuts to maximize
efficiencies. However, job cuts can reduce employee morale and lead to low
productivity.

3. Conflicting objectives
The two companies involved in the acquisition may have distinct objectives
since they have been operating individually before. For instance, the original
company may want to expand into new markets, but the acquired company
may be looking to cut costs. This can bring resistance within the acquisition
that can undermine efforts being made.

4. Poorly matched businesses

A business that doesn’t look for expert advice when trying to identify the most
suitable company to acquire may end up targeting a company that brings
more challenges to the equation than benefits. This can deny an otherwise
productive company the chance to grow.

5. Pressure on suppliers
Following an acquisition, the capacity of the suppliers of the company may not
be enough to provide the additional services, supplies, or materials that will be
needed. This may create production problems.

6. Brand damage
M&A may hurt the image of the new company or damage the existing brand.
An evaluation of whether the two different brands should be kept separate
must be done before the deal is made.
Q)5)What do you mean by product decision and pricing
decision in context of international marketing.
ANS:
Product decision:
A product is a physical good, service, idea, person or place that is capable
of offering tangible and intangible attributes that individuals or
organizations regard as so necessary, worthwhile, or satisfying that they’re
prepared to exchange money, patronage or some other unit of value in
order to acquire it. Product decision represents product chrematistics and
different stages of life cycle.

Product decision should be as per the expectations of customer and as per

their culture views. India is a more cultural market, where a anti culture
product will effects all of the goodwill of the company. So, we should care
about the ethical issues of India while taking product decision

The important product decisions needed to be taken in global

marketing management are as follows:

1) Identification of Products for International Market:

The firm has to carry out preliminary screening, that is, identification of
markets and products by conducting market research. A poorly conceived
product often leads to marketing failures. It was not a smooth sailing in the
Indian market for a number of transnational food companies after the
initial short-lived euphoria among Indian consumers

Kellogg’s, Pizza Hut, McDonald’s, and Domino’s Pizza have all run into
trouble in the experienced the troubled waters in Indian market at one
point of time or the other.

2) Developing Products for International Markets:

Various approaches followed for developing products for
international markets are as follows:
i) Ethnocentric Approach:
This approach is based on the assumption that consumer needs and market
conditions are more or less homogeneous in international markets as a
result of globalization. A firm markets its products developed for the home
market with little adaptation. Generally, an exporting firm in the initial
phases of internationalization relies too heavily on product expansion in
international markets.

ii) Polycentric Approach:

An international firm is aware of the fact that each country market is
significantly different from the other. It therefore adopts separate
approaches for different markets. In a polycentric approach products are
developed separately for different markets to suit local marketing
conditions.

iii) Regiocentric Approach:

Once an international firm establishes itself in various markets the world
over, it attempts to consolidate its gains and tries to ascertain product
similarity within market clusters. Generally, such market clusters are based
on geographical and psychic proximity.

iv) Geocentric Approach:

Instead of extending the domestic products into international markets, a
firm tries to identify similarities in consumption patterns that can be
targeted with a standard product around the world. Psychographic
segmentation is helpful in identifying consumer profiles beyond national
borders.

3) Market Segment Decision:

The first product decision to be made is the market segment decision
because all other decisions—product mix decision, product specifications,
and positioning and communications decisions—depend upon the target
market.

4) Product Mix Decision:

Product mix decision pertains to the type of products and product variants
to be offered to the target market.

5) Product Specifications:
This involves specification of the details of each product item in the product
mix. This includes factors like:

i) Product Attributes:
Some of the key characteristics and features of a product are its quality,
styling, and performance. These characteristics are affected by consumer
needs, conditions of product use, and ability to buy. The factors that affect
product attributes change from country to country.

ii) Packaging:
The main concerns in packaging a product are product protection and
promotion. For example, in a hot and humid climate product deteriorate
rapidly. Special packaging is necessary to minimize the deterioration of the
product. An international marketer has to pay attention to this aspect in
designing the packaging material for the product.
iii) Labelling:
The primary role of labelling is to provide information. Often the host
governments determine the information requirements. The information the
manufacturer may be asked to provide includes description of weight,
contents, ingredients, product dating, name of the manufacturer, and unit
price information. Language difference is a barrier for a firm operating in
international markets

Pricing decision:

Pricing, as part of the marketing mix, is essential and has been always one of the
most difficult decisions in marketing because of increased competition, counterfeit
activities, regional trading blocks and volatile exchange rates. Consumers have
different perception of the products depending on the price. Therefore, pricing
products for consumers is a difficult task, mainly because a high price may cause
negative feelings about products, and also a low price can be misleading on other
products features such as quality.

Political Factors

Pricing is influenced by laws and regulations which necessitate product

modifications, in compliance with health and safety standards, environmental
regulations, measures systems etc. Government policies influence the legislative and
economic frameworks. Perhaps the most sinister cloud from the political arena is the
threat of wars.

Economic Factors

The level of GDP is the main measure of economic attractiveness of foreign

markets. As GDP increases, the demand for goods and services increases too.
Furthermore, marketers consider the distribution of income within a country, in
order to identify niche and segment markets. Marketers always watch not only the
present economic prosperity of a country, but also its future development in terms
of population and density, inflation and economic growth, age and distribution of
income, level of urbanization as well as other economic activities that will affect
markets and pricing..

Social Factors

People from different cultures have different tastes, buy different products and
respond in different ways to the same service or product. Therefore, the
demographic structure of a foreign market should be considered. The aging of
population in major western markets, and the increase in population in several
countries such as India and China, is another continuing development that will affect
international marketing. As teens around the world are becoming a global market
segment today, pricing strategies will have to adapt to social factors, that is, when
pricing for international markets, one has to take into consideration of local material
culture, language, aesthetics, education and religion, as well as attitudes and values.
Firms/Markets need to examine carefully target market, country’s characteristics and
purchasing behaviors, required to select appropriate pricing strategy

Technological Factors

Firms/Organizations need to analyze the technological environment of foreign

markets. Well-developed communication infrastructure is an important factor to
respond rapidly to customer’s needs. International Firms/Organizations often rely
on existing local distribution infrastructure in order to transport and distribute their
products to consumers. This may have significant impact on costs, and in turn may
influence price, as well as profits. Technological change is another dynamic but
ongoing phenomenon. A perfect example is the internet

PRICING STRATEGIES:

Economy and Premium

Premium pricing is adopted when there is a substantial competitive advantage, and

the product or service is unique (Concord flights), and economy pricing strategy is
adopted when the cost of marketing and manufacture is kept at a minimum.

Penetration or Low Price

Low profit margin will penetrate the market. It is designed to grab market share
quickly. Penetrating the market with an exceptionally low-priced item creates a broad
customer base. It also provides high value-for-the-dollar to the customer. Penetration
is used when prices are set first low in order to attract new customers and to gain
market share, and then the price is increased after the market share has been
achieved. To penetrate the market and gain market share, international businesses
set a low price in comparison to other competitors. Note that also low price is
sometimes perceived as indication of low-quality product. It may also be difficult to
increase price in the future without incurring loss.

Skimming

This is appropriate for some product to be priced as high as the market will bear.
However, few buyers are attracted, and lower sales volumes can be achieved when
price is such high. This strategy is often used when a new product is introduced into
the market, and is in great demand. For this strategy, the product or service is
charged high because of a substantial competitive advantage. This high price tends to
attract new customers into the market, and then falls due to lower unit cost as
economies of scale are achieved. Skimming is the opposite of penetration.

Competitor’s Pricing

To attract the largest number of customers and generate consistent turnover, it may
be necessary to set price not too high, not too low, just in line with other
competitors. Prices are tagged to the competition and profits are acceptable. In the
long run, no single pricing strategy will always work best, and producers should be
prepared to adjust to any opportunities or threats that may arise in the ever-changing
market.

Marginal Costing

In highly competitive markets, some companies may want to consider turning to

marginal costing in order to ensure that their products are competitively priced.
Marginal costing ignores the fixed cost incurred by companies, on the assumption
that these costs will be incurred by domestic sales anyway and therefore, only
variable costs need to be considered in pricing. Ignoring fixed costs will naturally
reduce total costs, enabling lower prices to be set. Where possible, however,
companies should not resort to this method of pricing.
Q)6)Write down the scope of international marketing information
system.Explain the significance of e-business in international
marketing.

ANS-

Marketing decision Information/Intelligence needed

1. Degree of involvement/commitment in Assessment of global market demand
and firm’s international marketing potential share in view of local and
international competition and compared to domestic opportunities.

2. Market selection A ranking of potential markets based on e.g.market size and

growth, political, cultural and economic factors and extent of local competition.
3. Market entry method Size of market, trade barriers, transport costs, intermediary
availability, local competition, government requirements and political stability.
4. Marketing mix strategies For each market: buyer behaviour, competitive
practice, distributors and channels, promotional media and practice, economic
factors.

Information requirements for key international marketing

decisions:
 e-business in international market:

We can define e-commerce simply as doing business electronically. In this

world of new technology businesses need to accommodate to the new
types of consumer needs because it is very important for business
success. E-commerce enables organization to improve their
competiveness. It crosses geographic boundaries, save time and cost.
There are many positive impact of e-commerce on many areas and
disciplines of business management studies such as marketing, finance,
accounting, production and operation management. In our paper we have
explained about e-commerce and its different types. We have also
explained the future growth and limitations of e-commerce.

Significance of e-business;

Speedy and efficient: Time is of the essence in any commercial

transaction. It is, therefore, imperative that any mode of commercial transactions

is fast and efficient. In this regard, e-commerce is essential as it is both speedy

and convenient to subscribers. The buyer saves time and so does the seller.

Traditional modes of commercial transactions are tedious and strenuous. In e-

commerce, an order is made in a couple of minutes through the internet, and the

transaction is thereafter completed without much difficulty. Payment is also made

speedily with clear documentation of the paper trail.

Global market:

As mentioned earlier in this text, e-commerce is vital due to its ability to go

beyond borders and connect individuals in different parts of the world. If your

geographical location is deprived of certain commodities and services, then you

are able to seek them from elsewhere. Therefore, the number of potential

customers is elevated as the global market is handed to you in the online

platform.

Reduced Business Costs

One of the primary benefits of e-business is its ability to cut costs. This technology
eliminates the need to have a physical presence, such as a brick-and-mortar store or
an office. Companies no longer have to rent a space and pay for utilities unless they
want to.

For example, if you provide PR and marketing services, it's not necessary to rent an
office. You can run your business remotely and reach customers worldwide. Sure, you
can expand your operations, rent a space and hire staff but that's optional. You could
just as well hire a remote team and do everything online. The choice is up to you.

More Efficient Marketing

Over 93 percent of online experiences begin with a search engine. Today, most
customers look for information about products and services on the internet. By
implementing the best e-business practices, you can reach a wider audience and
increase customer engagement.
Modern technologies, such as programmatic marketing, use smart data for more
precise targeting which allows you to define your ideal buyer persona and display
relevant ads accurately. You'll no longer spend your marketing budget on banners and
digital ads that customers will either block or ignore altogether.

Centralized Data

The latest e-business functions enable companies to store massive amounts of data
and keep it secure. Cloud hosting, for example, allows you to take customer data,
videos, contracts, employee records and other information away from the office to a
virtual storage location which means you’ll no longer have to rely on USB drives or
paper documents.

Improved Inventory Control

In today's digital era, organizations can automate the inventory of goods, process
orders and accept payments without handwork. Modern e-business practices allow e-
commerce stores, logistics centers and other product-based companies to gather
information faster and have better control over their goods.

Automated inventory management tools can free up your time and eliminate human
error resulting in lower operational costs and improved efficiency. You can focus on
the core aspects of your business without having to worry about the small things.

Superior Customer Experience

Customer Relationship Management (CRM) software allows for more efficient

communication with your prospects and clients. With these e-business solutions,
companies can maximize upselling and cross-selling, get better insights into their
audience and improve customer experience.

Higher Revenue

The latest e-business strategies can translate into higher revenue for your business.
They can not only reduce costs but also enhance communication within your
organization. Data-driven marketing, CRM software, content management tools and
other technologies contribute to your business growth.
Q)7)Discuss the important procedure and documents required in
export of any goods from the country.

ANS-

Some of the documents needed in an export trade

are as follows:
a)Export invoice:

Export invoice is a seller’s bill for merchandise. It is a basic document

in export transaction. The invoice contains information about the
description of goods, value of goods, terms of shipment, marks and
numbers of packages, etc. It also contains date, name and address of
both buyer and seller, name of shipping vessel, port of destination,
terms of delivery and payments, etc. The exporter may design his own
form. Some countries ask for a particular type of form.

The contents of the invoice must correspond exactly to the description

in letter of credit. If no specific proforma is prescribed then it can be in
a generic form. Some importing countries insist on a particular type of
invoice.

(b) Packing List:

A packing list is a consolidated statement of the contents of a number
of cases or packs. It gives a detail of the nature of goods which are
being exported and the form in which these are sent. The description
is given in such a manner as to permit checks of the contents by the
customs on arrival at the port of destination as well as by the recipient.
(c) Certificate of Origin:
A certificate of origin, as the name indicates, is a certificate which
specifies the country of the production of goods. The customs law of a
country may require this certificate before clearance of goods and
assessment of duty. Some countries may offer preferential tariff to
Indian goods and the importing country would like to see that this
concession is allowed on those goods only. This certificate may also be
required when goods of a particular type are banned from certain
countries.

(d) Mate’s Receipt:

When the cargo is loaded on the ship, the Commanding Officer of the
ship issues a receipt known as mate’s receipt. The mate’s receipt
indicates name of the vessel, berth, date of shipment, description of
packages, marks and numbers, condition of the cargo at the time of its
receipt etc. The port of loading and discharge is also given in this
receipt.

The mate’s receipt is first handed over to port trust authorities for
payment of dues by the exporter. After paying the dues the exporter or
his agent will collect this receipt from port authorities. The shipping
agent prepares bill of lading on the basis of mate’s receipt.

(e) Bill of Lading:

A bill of lading is a document issued by the shipping company
acknowledging the receipt of goods mentioned therein and
undertaking to deliver them in the like order and condition, as
received, to the consignee or his order.
A bill of lading serves the following purposes:
(a) It is a document of title to the goods

(b) It is a receipt from the shipping company, receiving the goods.

(c) It is a contract for the transportation of goods.

(f) Shipping Bill:

It is a document on the basis of which customs permission for exports
is given. The shipping bill contains contents such as name and address
of the exporter and consignee, invoice number and date, import,
export code number, RBI code number, particulars of goods exported,
name of the vessel, port at which goods are to be discharged, number
and kind of packets, quantity and value of goods.

(g) Cart Ticket:

Cart ticket is prepared by the exporter giving details of the cargo to be
exported. It has the name of the ship, number of packages, shipping
bill number, port of destination and the number of vehicle carrying the
cargo. The cart ticket is handed over by the driver of the vehicle at the
entry of the port. The gate keeper will check the cargo as shown in the
ticket. If satisfied, the gate keeper will allow the vehicle to enter.

(h) Airway Bill:

It is a receipt issued by an airline for the carriage of goods. Every
airline issues its own bill for receiving the goods. Airway bill is non-
transferrable so it does not carry the same validity as a bill of lading in
sea transport.
Import and export procedure:
1.Establish company, open business bank account and apply for
export/import license.

2. Contact with buyers and make offers.

If your export company is set up, then real export procedures start. We assume, that you already
know, what it is what you are going to export. If not find best export import opportunities from
here.
You need to start contacting potential buyers from overseas. First, you should make sure where
you can find buy requests. To make sure the right marketing channels, it is important to
understand export-marketing. Then you should start directly approaching those potential buyers.
In this export procedure, your lesson is to validate serious buyers. With serious buyers, you
should start negotiations and discussions, with making sure buyers exact requirements for the
products.

3. Send samples to your overseas buyers

If you found a potential overseas buyer, then definitely, they will ask you to send them a sample
first. You need to pack the sample and ship it to your customer, so they can check and test your
product.
You need to use an airplane as a transport. We suggest using DHL, TNT or some other
international shipping company. Also, they will help you, to fill export documents and will tell
you, what you need to provide them. Even for sample sending, you need to fill the export
declaration, where you mark product, its HS code and, its value.

4. Confirm the order from buyer and receive money

If your buyer like the sample, the next import export procedure (step) is that they will make the
real export order for you. They will tell you the order quantity and terms. Now is time for final
negotiation after what you need to sign the agreement of sales and purchase.

This stage belongs to the most important import export procedure.

In contract, all important terms and conditions need to be stated and confirmed. At least
following terms need to be negotiated and settled into the contract.

 Price of the goods and total price,shipping date,Description of the goods with HS code
,Ordered quantity,Delivery term ( EXW; FOB; CIF),Payment terms ( TT, LC, DC)

5. Prepare order to your customer

Now, you should have received the advance payment from your customer, this means the order
is confirmed.

If you work 100% on LC, then, you should get a notice from the bank, that LC deposit is opened
for you.

Nextly you need to arrange the agreed order to the buyer. You need to send the order to the
shipping port. The exporter can use a freight forwarder to collect, pack and send the goods to the
shipping port.

6. Final inspection by the buyer before shipping and final

payment
This is very critical part of any export import business. Usually, the buyer is not going to make
the final payment or accepting the goods, if he hasn’t got the inspection and test report. Buyer
can come over and conclude the inspection by himself, or he can authorize some third party to do
it. I si internationally common to use SGS for such inspections.

Final inspection will be done at your warehouse or on the port, before sending it to the shipping
board.
This export and import procedure is critical. If inspection results are not what they should be,
then you are in trouble.

7. Receive balance payment against B/L and test report copy

Before the goods have been taken on the ship board, you need to arrange the export custom. You
need to provide needed details, docs to your country custom bureau. It is wise to use the service
of a custom broker, so they will arrange all for you.
Export procedures of customs are specific and formal. If you don’t have previous experiences,
then is it clever to let customs brokers and freight forwarders arrange everything for you.

If you send the goods to the ship, then you will get the Bill of lading (B/L) from a shipping
company.

Now you are done and now you need your balance payment from your buyer, against the copy of
the bill of lading and other docs if required.

You provide the copy of the bill of lading to the buyer and buyer need to arrange the payment to
you.
If you used LC payment, then you need to present all the docs to your bank where LC is opened
for you.

After you receive the balance payment or LC deposit, your export risk is over.
This import export procedure ( stage) is the riskiest for the exporter, after this, all risk will go
over to the buyer.

NB! In export-import business, LC is often the best payment way for both, exporter and
importer.
8. Send all the original docs to your customer and support him
Now, after you have received the total amount of your goods, you need to provide all the original
docs to your buyer. Buyer needs original docs for the import custom. Without required export-
import documentations he cant clear the importing customs in his country.

Even, the goods arrive at the buyers port, but the buyer doesn’t have the original docs of the
goods, then he cant import the goods into his country.

You can send the docs with express, I usually use DHL for this.

Also, maybe your customer need some further help from you. Maybe he need some extra docs
from you, so you should help him and provide all to him. It is important to support your buyer
because then he is often willing to make next order for you.

Previous 6 import export procedure(s) are most important. But we didn’t handle here, how to
find buyers and how to select right products or how to select right export markets. You can read
more article about those topics below:
Q)8)WRITE SHORT NOTE (a) IMF
ANS-
Organisation and Management of the IMF:

Like many international organisations, the IMF is run by a Board of

Governors, an Executive Board and an international staff. Every member
country delegates a representative (usually heads of central banks or
ministers of finance) to the Board of Governors—the top link of the chain of
command. It meets once a year and takes decision on fundamental matters
such as electing new members or changing quotas.

The Executive Board is entrusted to the management of day-to-day policy

decisions. The Board comprises 24 executive directors who supervise the
implementation of policies set by the member governments through the
Board of Governors.

The IMF is headed by the Managing Director who is elected by the

Executive Board for a 5 year term of office.

Financial Structure of the IMF:

The capital or the resources of the Fund come from two sources:
(i) Subscription or quota of the member nations, and

(ii) Borrowing

Special Drawing Rights (SDRs):

The Special Drawing Rights (SDRs) as an international reserve asset or
reserve money in the international monetary system was established in
1969 with the objective of alleviating the problem of international liquidity.
The IMF has two accounts of operation—the General Account and the
Special Drawing Account.

The former account uses national currencies to conduct all business of the
fund, while the second account is transacted by the SDRs.

Functions of International Monetary Fund are as follows:

1. Exchange Stability:
The first important function of IMF is to maintain exchange stability and
thereby to discourage any fluctuations in the rate of exchange. The Found
ensures such stability by making necessary arrangements like—enforcing
declaration of par value of currency of all members in terms of gold or US
dollar, enforcing devaluation criteria, up to 10 per cent or more by more
information or by taking permission from IMF respectively, forbidding
members to go in for multiple exchange rates and also to buy or sell gold at
prices other than declared par value.

2. Eliminating BOP Disequilibrium:

The Fund is helping the member countries in eliminating or minimizing the
short-period equilibrium of balance of payments either by selling or lending
foreign currencies to the members. The Fund also helps its members
towards removing the long period disequilibrium in their balance of
payments. In case of fundamental changes in the economies of its
members, the Fund can advise its members to change the par values of its
currencies.

3. Determination of Par Value:

IMF enforces the system of determination of par values of the currencies of
the members countries. As per the Original Articles of Agreement of the
IMF every member country must declare the par value of its currency in
terms of gold or US dollars. Under the revised Articles, the members are
given autonomy to float or change exchange rates as per demand supply
conditions in the exchange market and also at par with internal price levels.
As per this article, IMF is exercising surveillance to ensure proper working
and balance in the international monetary system, i.e., by avoiding
manipulation in the exchange rates and by adopting intervention policy to
counter short-term movements in the exchange value of the currency.

4. Stabilize Economies:
The IMF has an important function to advise the member countries on
various economic and monetary matters and thereby to help stabilize their
economies.

5. Credit Facilities:
IMF is maintaining various borrowing and credit facilities so as to help the
member countries in correcting disequilibrium in their balance of
payments.

6. Maintaining Balance Between Demand and Supply of

Currencies:
IMF is also entrusted with important function to maintain balance between
demand and supply of various currencies. Accordingly the fund can declare
a currency as scarce currency which is in great demand and can increase its
supply by borrowing it from the country concerned or by purchasing the
same currency in exchange of gold.

7. Maintenance of Liquidity:
To maintain liquidity of its resources is another important function of IMF.
Accordingly, there is provision for the member countries to borrow from
IMF by surrendering their own currencies in exchange
Q)8)Write short note(b) WTO

ANS-

World Trade Organization (WTO) establishes rules of trade among its

member nations. To this end, the WTO also handles trade disputes,
monitors trade policies, provides technical assistance for developing
countries and cooperates with other international trade organizations.

The WTO was created on January 1, 1995, and is headquartered in

Geneva, Switzerland. The WTO replaced the General Agreement on Tariffs
and Trade (GATT), which was created in 1948. GATT primarily regulated
the trade of goods; the WTO regulates the trade of services and intellectual
property as well. GATT still exists as the WTO's umbrella treaty for trade in
goods
 Activities of WTO in India:
 India is a member of WTO since its formation as well as a member of
GATT since 1948. Due to aligning with WTO India has gained more
power in terms of trade with other nations. Some of the recent
activities of India alongside WTO is,
 India decides to launch a safe investigation for unwrought aluminum
 India notified the committee of WTO on safeguard in April 2016
related to safety investigation done by WTO on unwrought aluminum
on April 19, 2016.
 WTO Agreements:
The WTO’s rule and the agreements are the result of negotiations between
the members. The current sets were the outcome to the 1986-93 Uruguay
Round negotiations which included a major revision of the original General
Agreement on Tariffs and Trade (GATI).

(a) Goods:
It all began with trade in goods. From 1947 to 1994, GATT was the forum
for negotiating lower customs duty rates and other trade barriers; the text
of the General Agreement spelt out important, rules, particularly non-
discriminations since 1995, the updated GATT has become the WTO s
umbrella agreement for trade in goods.

It has annexes dealing with specific sectors such as, agriculture and textiles
and with specific issues such as, state trading, product standards, subsidies
and action taken against dumping.

(b) Services:
Banks, insurance firms, telecommunication companies, tour operators,
hotel chains and transport companies looking to do business abroad can
now enjoy the same principles of free and fair that originally only applied to
trade in goods.

These principles appear in the new General Agreement on Trade in Services

(GATS). WTO members have also made individual commitments under
GATS stating which of their services sectors, they are willing to open for
foreign competition and how open those markets are.

(c) Intellectual Property:

The WTO’s intellectual property agreement amounts to rules for trade and
investment in ideas and creativity. The rules state how copyrights, patents,
trademarks, geographical names used to identify products, industrial
designs, integrated circuit layout designs and undisclosed information such
as trade secrets “intellectual property” should be protected when trade is
involved.

(d) Dispute Settlement:

The WTO’s procedure for resolving trade quarrels under the Dispute
Settlement Understanding is vital for enforcing the rules and therefore, for
ensuring that trade flows smoothly.

Countries bring disputes to the WTO if they think their rights under the
agreements are being infringed. Judgments by specially appointed
independent experts are based on interpretations of the agreements and
individual countries’ commitments.

(e) Policy Review:The Trade Policy Review Mechanism’s purpose is to

improve transparency, to create a greater understanding of the policies that
countries are adopting and to assess their impact.
Q)8)Write short note(c) balance of payment

ANS- Balance of Payment Account is a systematic record of all economic

transactions between residents of a country and the rest of the world
carried out in a specific period of time.

Briefly put, ‘Balance of Payment Account is a summary of international

transactions of a country for a given period’ (i.e., financial year). It records
a country’s transactions with the rest of the world involving inflow and
outflow of foreign exchange. In short BOP Account is a summary statement
of transactions in foreign exchange in a year.

Structure/forms of balance of payments:

Balance of payments has three forms:
1. Current account
2. Capital account
3. Overall balance of payments
1. Current Account
Balance of payments on current account includes the value of imports and
exports of both visible(goods) and invisible items(services). Current
account transactions are called account of actual transactions,because all
items included in it are actually transacted.These items have a direct effect
on the income,output and employment of a country’s economy.

Balance of payments on current account may be both balanced and

unbalanced.In case of balanced position of BOP,receipts and payment on
account of exports and imports are equal. In case of unbalanced balance of
payments,it can be in deficit or in surplus.Disequilibrium of the balance of
payments on current account is usually balanced with the help of
transactions in capital accounts.

2. Capital Account
Capital account refers to financial transactions.It mainly includes foreign
investment and external loans.All kinds of short term and long term
international capital transfers,movement of gold,foreign debts,foreign
investments,payments and receipts on account of interest and grants,etc.
are also included in capital account.All transactions under capital account
are concerned merely with financial transfers,between our country and
other foreign countries.

3. Overall Balance of Payments

Total of a country’s balance of payments on current account and capital
account is known as overall balance of payments.
 Components of Balance of Payment Account:
1. Export and import of goods (Merchandise):
The most straightforward way in which a country can acquire
foreign currency is by exporting goods. These are called visible
items because goods can be seen, touched and measured. This is
shown by Row (1) which indicates that the country has exported
goods to a value of Rs 550 crore. In an analogous (similar) way
Row (5) shows that the country has imported goods to a value of
Rs 800 crore. These two rows describe the country’s visible
trade. Movement of goods between countries is known as visible
trade because the movement is open and can be verified by
Customs officials.

2. Services rendered and received:

Shipping, banking, insurance, tourism, interest, dividend etc

3. Unilateral transfers:

(Gifts, remittances, indemnities, etc. from foreigners) The items in

Row (3) are called unrequited receipts because residents of a country
receive ‘for free. Nothing has to be paid in return at present or in
future for these receipts. These are like transfer payments. Examples
of this head are gifts received by residents from foreigners,
remittances sent by emigrants to relatives, war indemnities paid by a
defeated country, etc. Note: In India unrequited or unilateral transfers
are treated as a part of invisible trade.

4. Capital receipts and Payments: [Borrowings, capital

repayments, sale of assets, changes in foreign exchange
reserve):
It records international transactions which affect assets and liabilities
of domestic country with rest of the world. Items (4) and (8) of the
table indicate changes in stock magnitudes and refer to capital receipts
and payments .Government of a country may borrow (get loan) from
another government; a firm may issue stocks abroad or a bank may
float a loan in a foreign country.

Features of Balance of Payment Account:

1)It is a systematic record of all economic transactions between

residents of one country and rest of the world.

(ii) It includes all transactions in goods (visible items), services

(invisible) and assets (flow of capital) during a period of time.

(iii) It is constructed on double entry system of accounting. Thus,

every international transaction will result in credit entry and debit
entry of equal size.

(iv) All economic transactions that are carried out with the rest of
world are either credited or debited.

(v) In accounting sense total debit will always be equal to total credits,
i.e., balance of payments will always be in equilibrium. But in
economic sense, if receipts are larger than payments, there is surplus
in BOR Similarly, if payments are larger than receipts, there is deficit
in BOP.
Q)8)Write short note (d) Institutional infrastructure for export
ANS-India has a comprehensive institutional set up to promote
international trade. Exporting firms need to understand and appreciate the
institutions involved and the functions carried out by them. The
Department of Commerce is the prime agency of the country to promote
international trade.
Institutions engaged in export effort fall in six distinct tiers. At the top is the
Department of Commerce of the Ministry of Commerce and industry. This is the
main organization to formulate and guide India trade policy.

At the second tier, there are deliberative and consultative organizations to

ensure that export problems are comprehensively dealt with after mutual
discussions between the Government and the Industry.

At the third tier are the commodity specific organizations which deal with
problems relating to individual commodities and/or groups of commodities.

The fourth tier consists of service institutions which facilitate and assist the
exporters to expand their operations and reach out more effectively to the
World Markets.

The fifth tier consists of Government trading organizations specifically set up to

handle export/import of specified commodities and to supplement the efforts
of the private enterprise in the field of export promotion and import
management.

Agencies for export promotion at the State level constitute the Sixth tier.

The Department of Commerce is the primary government agency responsible

for evolving and directing foreign trade policy ad program, including commercial
relations with other countries, Various trade promotional measures and
development and regulation of certain export-oriented industries.

Apart from the Finance and Administrative Divisions, the principal functional
divisions of the Department of Commerce are Economic Divisions, Trade policy
Division, Export Products Division, Export Services Division and Export Industries
Division.

The main task of the Trade Policy Division is to keep abreast of the
developments in the international organizations like UNCTAD, WTO, the
Economic Commission for Europe, Africa, Latin America and Asia and Far East
(ESCAP). It is also responsible for India relations with the European Economic
Community, European Free trade Association Latin American Free Trade Area,
other regional groupings and the Commonwealth. It also looks after the
generalized system of preferences and non-tariffs barriers.