Syllabus for International Marketing

Unit I

Introduction :nature scope & challenges in international marketing, difference

between domestic and international marketing strategies for international
marketing global marketing.

Unit II

International Marketing Environment- Economic, Social, Cultural, Political &

Legal Environment, Technological Factors Affecting International Marketing
Environment.

Unit III

International Marketing Strategies-, Product Strategy, Pricing Strategy, Promotion

Strategy & Distribution Strategy. Methods to enter into I.Markets

Unit IV

Export Procedure & Documentation in detail, International

Institutions

Unit V

Export Risks Finance in I. M, Export Credit & Gurantee Corporation, Exim Bank
IMF, World Bank, World Trade Organization (WTO), EEC (European Economic
Community)

Economic

Suggested Readings:
1. Mishra M. N. -International Marketing Management, Oxford & IBH Publishing, 1993
2. Varshney R.L. & Bhattacharya B., International Marketing Management, Sultan
Chand & Sons, 1999
3. Cherunilam Francis, Global Economy and Business Environment, Himalaya
Publishing, 2001
4. Bennett Roger, "International Marketing", Kogan Page Ltd, 1995

International Marketing Management

UNIT I
Introduction
International marketing consists of certain special features, which make it quite distinctive to
domestic marketing. Marketing denotes the concept of marketing management whereby
prices, product, promotion, physical distribution and packaging are to be managed keeping in
view the international environment.
Meaning and Concepts
International marketing is the marketing carried on across national boundaries. Philip
Kotler has defined marketing as "human activity directed at satisfying needs and wants
through exchange process".' It is potential exchange for the purposes of satisfying human
needs and. wants. It is a technique used to the conversion of potential exchanges into
realised exchanges. International marketing is the marketing techniques involved between
countries. It is beyond the boundaries of the country. Marketing within the boundaries of a
national can be termed as domestic marketing and marketing activities beyond the
boundaries of the country are termed as international marketing.
Cateora and Hess have defined international marketing as "the performance of business
activities that direct the flow of a company's goods and services to consumers or users in
more than one nation".
He pointed out that the difference between domestic marketing and international marketing is
that the activities take place in more than one country. It involves complex and diverse
problems. The marketing principles are applicable to domestic as well as international
marketing. There is need of marketing as a separate subject for international activities because
of the environment within which international marketing has to operate. The markets and
consumers living beyond the frontiers have different needs, wants and behavioral attitude and
the international marketers may have to deal with them differently.
Business activities are directly and primarily concerned with the recognition of the demand
and potential demand, stimulation of demand through promotion and selling and satisfaction
of the demand by the product. Warren J. Keegan has pointed out" foreign marketing is
marketing in an environment different from that of the home or base environment". The
activities performed by business enterprise to promote, support and control the penetrations
and development of international market from a production base either inside the country or
outside the country. Product development, pricing, market intelligence, distribution and
promotion of marketing activities across the national boundaries are termed as international
marketing. International marketing covers those activities, which are performed at
international level.
INTERNATIONAL Vs. DOMESTIC MARKETING
The international and domestic marketing are similar in many cases. In both the markets,
success of marketing depends upon satisfying the basic requirements of the consumers. They
have to find out the buyers' needs. It is necessary to win over the consumers and develop
goodwill in both the markets-domestic as well as international markets. Research and
development is essential in both the markets. Although the same principles of marketing
apply to the domestic and international markets, the preparation of marketing strategy abroad
is somewhat very different. There is severe competition in international marketing. The goods
and services have to move across national boundaries in case of international marketing,
which have to face a number of restrictions viz., tariffs or customs duties, quantitative
restrictions, exchange control, and taxes. The differences between domestic marketing and
international marketing are also due to different legal systems, monetary systems, and lower
mobility of factors, differences in procedures and documentation and differences in market
characteristics.

The differences between domestic and international marketing are entirely because of the
differences in national environments, differences in the organisation and programme. The
international marketing is found in the diversity of problems and the variety of strategies.
International trade agreements may cause further distortions. The international marketing
involves different types of languages, culture and traditions. The domestic marketing works
within a few languages, culture and traditions. Patriotism does not help in international
marketing but it is, very helpful to domestic marketing. The domestic market is much more
homogeneous than that of international marketing. Domestic marketing deals with one
currency whereas international marketing deals with several currencies. Domestic marketing
has uniform economic climate while international marketing has varied economic climates.
Political factors and government interferences are least in domestic markets but they count
maximum in the international markets. Considerable financial and non-financial risks are
present in international markets. Transport cost influences marketing decision to a great
extent.
International marketing generally has been divided into foreign marketing and
multinational marketing. Foreign marketing is marketing in environment different from that
of the home or domestic environment. Multinational marketing is world oriented. It has two
or more national markets across the national boundaries. It arises because a company is
simultaneously marketing its products in more than one national environment.
INTERNATIONAL MARKETING VS. INTERNATIONAL TRADE
International marketing and international trade are interchangeable. But they are not the
same in real sense. The international trade is primarily related to exports and imports. It takes
place when buyers find foreign markets cheaper and sellers find them more profitable to
dispose them of. The comparative cost and natural resources have been the basis of
international trade.
The international marketing is a wider connotation. It is confined not only to sale and
purchase and depending on the international trade theories, but it is a new discipline and
strategy to export for survival and widening of the existing markets for growth. While
international trade is primarily concerned with balance of trade and payment problems, The
International marketing aims to expand the existing markets in foreign countries and
penetrating new markets by applying various strategies of marketing management.
International marketing is the means of achieving the profit by selling or persuading a
potential customer to buy the product. The needs, wants and preferences of the customers are
the determinants not only of product characteristics but also of pricing, distribution,
advertising, promotion and services. The total set of marketing activities known, as the
marketing mix is the components of international marketing. On the other hand, international
trade is least concerned with these individual activities.
International trade has been developed as a result of government's efforts. The country as a
whole bothers about the international trade whereas individual marketers devote their efforts
to achieve profits in the international market. The international trade views the profit as a
function of sales and the international marketing view the profit as a function of providing
customer benefits.
Barriers to International Marketing
International marketing as discussed above is not free from difficulties and barriers. The
marketer has to follow time-consuming procedures and meet the trade regulations. The tariffs
and taxes increase the prices of goods to be marketed. It creates tough competition with the
domestic goods. The trade restrictions also influence the volume of goods to be exported. It
indicates that there are several barriers to international marketing. Generally these barriers are
divided into two parts:
(i)

Tariff barriers and

(ii)

Non-tariff barriers.

(i) TARIFF BARRIERS

The tariff barriers are the barriers of taxes imposed on the export and import of goods.
During the period of laissez faire, such barriers were very nominal. Even today, countries
adopting bilateral or multilateral agreements lessen such barriers. Originally the tariffs were
imposed to meet the revenue requirements of the country. The government is in a comfortable
position to impose taxes to meet the expenses of security, defense and administration of
foreign trade. Gradually the tariffs became a successful instrument to protect indigenous
industries against the competition from the foreign products.
The tariff makes the imported product costlier and the product of indigenous industries
become cheaper. The import duties collected are used to subsidies the costs of production of
indigenous industries. The tariffs or duties may be levied as a fixed percentage of the value of
imported goods. Fixed sum of money may be charged upon the commodity. A modified value
added method is being used to buy taxes on import and export. Tariff barriers may be export
duties, import duties, transit duties, subsidies duties and anti-dumping duties.
(ii) NON-TARIFF BARRIERS
Non-tariff barriers create difficulties in exporting of goods. These non-tariff barriers are
generally rules, regulations and restrictions.
These are not the duties or levies. They may be quantitative restrictions, foreign exchange
regulations, technical and administrative regulations: health and safety regulations, prior
import duties, legal formalities, state trading and procurements.
UNIT II
International Marketing Environment
International marketers are facing a diversity of marketing environment in which they have to
operate their business. The international marketing decisions are constrained with the
environments. These factors influence the marketing system. The environment has been
varying from country to country making it difficult for the marketer to cope with different
situations of different nations. Realisation and understanding of different culture, tradition,
political Systems, and other factors of all countries. There are several factors influencing
marketing decisions. They may be termed as controllable and uncontrollable factors. The
controllable factors are product, price, promotion and distribution. These are also known as
internal factors or marketing mix. These are called controllable factors because the marketer
can exercise some sort of control over these factors. The factors which are uncontrollable are
known as environment or external factors which shape the market mix decisions of the
international marketer. The environment may be economic, social and cultural, political,
regional and legal. These are analysed in the present chapter.
Economic Environment
The economic differences of various countries influence the market significantly. The
economic capacity of a country has direct impact on the pattern of buying and selling by the
people. The differences in the standard of living have relevant bearings on the market
systems. The per capita income is the basis of a particular standard of living. The per capita
income has been used to classify the world economy into developed and developing economy
the developing countries, say countries having per capita income less than $2500 are having
simple market.
Income
The income of people is a more valuable economic variable to decide the pattern and structure
of international marketing. Population of the country cannot be ignored because it is
population after all which has to purchase particular goods or services. The per capita income
has been therefore used to decide the level of living standard and purchasing behaviour. One
should not be misguided by the gross national income. The disposable personal income per
population is a deciding factor to determine international marketing mix. The household
habits are simultaneously decided by the marketer to assess the pattern and trend of market.

Population
Population is an important factor to determine market potential. It was observed that about
60 per cent of the world market was accounted by 10 most populous countries. The world
trade and population increased simultaneously. During the second half of the century world
population increased at a higher rate. Consequently, the world market also increased
significantly. It is natural because the demand for food, clothing, shelter, education, etc.
increase as per number of consumers increases. However, the market does not increase at par
with increase in income. The developing countries with maximum population have different
market patterns. The developed countries have low population. The basic necessities are the
predominant needs of the developing countries whereas the developed countries require the
latest and sophisticated articles.
Age and Education
The number of inhabitants is the guiding factor to decide the market pattern. The
demographic features are similarly more important to decide the market potential and trend of
the market. Working force may need different types of commodities and services whereas the
dependents need basic articles for their growth and survival. Developing countries have a
larger number of dependent populations whereas developed countries have less number of
dependents. The market is wide and varied for educated population whereas the needs of noneducated population are very simple and do not require much of technical complexities.
Trade Pattern
The trade pattern also influences the marketing structure. The raw materials and other
resources are being exported by the developing countries to the developed countries whereas
the industrial products are being exported from the industrialised countries to the developing
countries. It has been observed from the data of International Trade published by GATT that
the industrialised countries have accounted more than 65 per cent of world trade whereas
developing countries accounted about 20 per cent of world trade of which 15 per cent was
shared by oil exporting developing countries. The eastern trading countries took about 10 per
cent of the world trade. A major portion of export of the industrialised countries was exported
to other industrialised countries. Thus the competitors of industrialised countries are also best
customers. Developing countries were also exporting a major share of their export to the
industrialised countries. Eastern trading countries have exported major share of their export
to eastern trading countries. The highest exporting countries have been the USA, Western
Europe, Japan and Canada which accounted for more than 70 per cent of the world trade. The
maximum importing countries have also been these countries.
Consumption Pattern
Income is the guiding factor to determine consumption pattern and the relationship
between income level and consumption pattern is known as per Engel's law. After knowing
the consumption pattern, the market structure can be decided. Therefore, income is used to
define market segmentation, Ernst Engel has pointed out that when income grew above a
certain level, expenditure on food as percentage to total income decreases although the
absolute amount of expenditure on food-articles may remain the same or may increase. It is
also revealed in term of developing and developed countries. There is inverse correlation
between GNP per capita and income elasticity of demand for food. The income and
consumption/pattern have important influence on the market. For example, the sale of air
conditioners will not be popular in less developed countries whatsoever may be the level of
hot climate. But, people of developed countries in north most regions may not require aircooler. The allied products' sale is also decided accordingly.
Social Environment
The social environment shapes the international marketing in different manner. Consumerbehaviour and purchasers' practices are greatly influenced by the system of society, social
attitude and behaviour, social institutions and other social environment of the customer
countries. The international marketing manager should adapt his business practices as per
social environment of the buying countries. The marketing mix is decided as per social
environment. The primitive social system has progressed into proliferation of organisation.
The government tries to serve the interests of society by controlling business system and the
marketing manager should understand clearly the marketing systems of various societies. The
education religion and family system are the important components of social system and these

sub-parts should be clearly understood by the manager. He should know how physical goods
enter in a particular society and more from one society to another society. He must have
knowledge how various components of social environment influence the marketing process.
The marketing implications in the different social components should be properly assessed
and evaluated to form proper marketing mix.
Human bahaviour in groups and social settings are guidelines to formulate laws and
generalisations about human nature, Social interaction and social organisation. The
individuals who compose each social class are not identical even though they are of equal
status. People of the same social class generally live in the similar kind of houses, have
similar food habits, dress the same kind of clothes, have similar tastes, literature and
interactions. The marketing manager having deeper knowledge of these things can succeed
and attain the objectives of sales and profit.
Cultural Environment
Culture environment is another important external factor, which mould the international
marketing culture, and is a part of human environment. It is a sub-total of mankind's
knowledge, beliefs, morals, customs and habits of the society. It has become a pertinent study
of international marketing. The marketing manager when designing the marketing mix e.g.
production, promotion, prices and physical distribution must consider the culture of the
customer countries. The marketing mix should be culturally acceptable. The' marketing
manager's efforts acceptable as per culture will decide the degree of success. He should be
culturally sensitive so that he can evaluate, appreciate and adjust his marketing decision as per
attune of the nuances of culture. The success of marketing operations abroad depends on an
awareness and understanding of the basic differences in culture of his country and of
customer countries.
ELEMENTS OF CULTURE
Culture includes all parts of life. Specifically they may include
the following elements:
a. Material Culture
i) Technology;
ii) Economy.
b. Social Institutions
i) Social Organisation and Family system;
ii) Education;
iii) Political Structures.
c. Belief of People
d. Aesthetics
i) Religion;
ii) Art; iii) Folklore; iv) Music.
e. Language.
a) Material Culture
The material culture is related to the economic and commercial attitude of the population;
they affect favourably to increase the marketing opportunities. The material culture has been
divided into technological and economic culture.
i)

Technological culture: The technological culture is related to the technical knowhow possessed by the people of society. It affects the means of production adopted for
the purpose of getting different types of production. In a poor country, high
technology is considered a waste and is undesirable. The national income can be used
in a better manner for construction of houses, clothing and food. The sophisticated
technology is, much prevalent in developed countries. The technological culture is

different in different countries and therefore the market has different dimensions
there. The electrical appliances are more popular in developed countries rather than in
developing countries.
ii) Economic culture: Economy is compositors of physical and financial behaviour of the
population. People employ their capabilities to satisfy their wants. The production is also
guided by the economic wellbeing of the population. The economic level of the people
influences the distribution, exchange and consumptions. The economic culture affects the
level of demand, the type and quality of products and functional features to direct the
production line. The marketing system and pattern are also influenced as per economic
culture. For example, the use of car is common feature in the U.S.A. whereas it has become a
status symbol in India. Only bureaucracy is often using the car in India. People in West are
materialistic in their approach whereas people in East have self-satisfaction approach.
Political Environment
The political environment includes laws, regulations, government action and reactionary
forces of opposite political parties. The role of political parties has greater influence on the
marketing system of the country. The government directs and controls the economy, which
shapes the marketing system and culture of the countries. The philosophies and principles of
various political parties and also of several organisations and associations have significant
bearings on the marketing structure. For example, international marketers have no easy entry
in the communist countries whereas they can enter in capitalists countries with competitive
spirits. The government's participation and intervention in economic and commercial
activities have become common phenomena in many countries although the degree of intervention may vary from country to country. The international marketer tries to find out
whether his product is politically acceptable. He has to adopt such policies, which may
encourage marketing in such countries. If the government decides to accept foreign
investment and joint venture, the foreign may get adequate market. The developing countries
have been accepting foreign collaboration for the development of basic and key industries as
well as for the expansion of infrastructure facilities. They may also attract foreign capital and
skills for rapid industrialisation.
The international marketer should assess the political environments-i) Political Party
Systems, ii) Stability of Government, iii) Nationalism, iv) Political Vulnerability, v) Political
Risks, vi) Other Risks, (vii Policies of Foreign Investment for achieving success in the foreign
business.
International Legal Environment
There are different legal systems in each country of the world. The international marketer
should know the relevant laws and regulations of the customer countries. There may be
several legal difficulties pertaining to patents and trade marks, price controls, warranty and
after-sale services, packaging laws, product quality laws and controls, resale price
maintenance, cancellation of agreements and so on. The international marketer should know
the rules of competition, restrictions, discrimination, promotion and pricing. He should be
aware of the legal environment and business issues related to the environment.
BUSINESS ISSUES
The business issues related to legal environment may be establishment, resource, patents
and trademarks, expropriation and domestication, taxes, antitrust and bribery.
The conditions relating to establishment of trade are governed by the international laws.
The businessman should ensure that he would be treated nicely in the host country. The right
of establishment is reciprocal. There may be nondiscriminatory treatment with the foreign
firms if the member countries are agreed to their mutual help. The host government may
impose the jurisdiction of its own laws on the foreign businesses in the country. The local as
well as international regulations have to be followed for the establishment and starting of the
business.

INTERNATIONAL LAWS
International laws are those rules and principles of states, which are binding upon themselves.
The laws may belong to one country or to more than one country pertaining to property, trade,
immigration etc. Laws not mutually agreed upon cannot be binding to the countries. If one
nation refuses to submit to arbitration or does not recognize unfavourable Judgement, the
other nation can do nothing. Thus, there is need of mutually agreed international laws.
Previously laws were decided on state-by-state basis. The common laws governing the British
Domain were applicable to all the colonies and allies of Great Britain. The Roman laws were
also used for the purpose of civil, commercial and criminal laws. The commercial laws have
their own administrative structure, property rights and other formal laws. The common laws
were based on previous rulings and traditions. The property laws were based on ownership.
International laws were used for preventing war or dealing with problems of war. They have
been related with the actions of sovereign states and were not related to individuals.
Factors Affecting International Marketing
International marketer has to face different challenges and problems. These challenges are
known as environments, which may be controllable as well as uncontrollable factors. They
affect the marketing decision.
INTERNAL CONTROLLABLE FACTORS
Controllable factors are those factors, which can be influenced by the marketing managers.
The internal controllable factors are product, price, promotion and distribution. The internal
factors can be managed by the marketing manager. These factors are also known as marketing
mix. It should be noticed that these factors are not perfectly controllable because the market
situation and behaviour are not within the decision limit of the firm. One individual firm can
modify and manage its product, price, promotion and distribution according to internal and
external environments.
INTERNAL UNCONTROLLABLE FACTORS
The environments of the country wherein the marketing activities are decided and governed
are not controllable. They may be socioeconomic climate, political forces and competitive
structure of the market within the country. The culture of the country shapes the size and
structure of the international marketing. Culture is the pattern of learned behaviour viz.,
language, habits, religious and moral beliefs, knowledge, attitudes, values and other
behaviours of the majority of the population. Psychological and sociological behaviours of the
population of the country influence the marketing decisions to enter in the international
market.

Fig. 1.1. Factors affecting international marketing

EXTERNAL UNCONTROLLABLE FACTORS

The marketing manager has to face external uncontrollable factors while taking his marketing
decision. These factors may be government regulations, political forces, social and cultural
forces, economic forces, competition, level of technology, geography, and distribution
patterns. The domestic base of international marketing tries to forecast the environmental
conditions and adjust the marketing mix accordingly. There may be severe difficulties in
adjusting the decisions as per extreme conditions of political environments, socio-economic
and cultural climates. These are the main challenges to which the international marketing has
to cope with in designing the programme. The assessing and forecasting of international
business climate are difficult tasks. The alien status makes the tasks of international marketing
more difficult. Political ramifications and other conditions make the problem complex to
confront. Change of governments in international markets becomes very critical, because it
may result in expropriation, expulsion and restrictions on the operations. The uncertainty of
consumers' behaviour in foreign market may require close study of operating environment.
Strategy of marketing in one country may not be successful in another country.
UNIT III
INTERNATIONAL MARKETING STRATEGIES
PRODUCT STRATEGY
Developing international marketing involves planning and development of markets. The
marketing program decides what products are to be sold, how to be sold and where to be
sold? The product planning is adapted as per changing desires and needs of customers. The
product planning is adapted based on domestically successful products. The developing
international marketing includes: (1) Developing Consumer Products for Foreign Markets, (2)
Marketing Industrial Products and Services and (3) International Promotion Strategies.
1. Developing Consumer Products
The consumers' desire and needs are constantly changing. The marketing plans and
organisation have to be aware of the changing pattern of consumers. The selling and
producing of consumers' goods basing on domestic pattern are not very desirable strategy of
marketing development. The differences between domestic market and international market
have to be observed to find out a successful way of international marketing. It is wrongly
assumed that the patterns of consumers desires and needs at the domestic market will also
remain the same in the foreign market. The Self-Reference Criterion (SRC) can be successful
only with certain modifications. The national, regional and international plans should be
developed to meet the requirements of different markets. There is need of deciding product
standardisation, product line product adaptation, product diffusion, product innovation and
consumerism for planning and developing consumer products for international markets.
PRODUCT STANDARDISATION
The uniformity of product or product standardisation offers a number of advantages.
Economies of scale or cost savings are significant advantages of standardisation because it
delimits a number of models and variant products. Henry Ford demonstrated these advantages
by adopting standardized products. The cost saving is achieved in production techniques,
Packaging, advertising and distribution. There is saving of cost in research development.
Standardized product provides more mobile consumption worldwide. Consumers can develop
standardized programme in their operations. The image making is possible with standardised
production. Image of a product may create psychological favour in the international markets.
The technological improvement tends to favour standardisation. The 'standardisation have
been proved very successful in international marketing; but it has certain limitations.
The standardisation may impose several obstacles in international marketing. The

culturally unique markets may require different types of products. Since the worldwide
markets have different cultural and economic patterns, only different types of products can
meet their respective requirements. Standardisation is less costly and more rigid to penetrate
in world-markets. The cost saving in standardisation and benefits of differentiated products
should be compared to decide the product specifications. It is well-settled policy that slight
modifications in the standardised products should be made to meet the varying requirements
of the consumers.
PRODUCT LINE
International marketing planners should consider the product line to meet the differing
requirements of consumers in different countries. The quality, quantity, prices and promotion
planning have to be adapted as per needs and desires of the varying consumers. The marketer
may decide either to sell the same product throughout the world without any distinction or
modification or adapt the product as per tastes and needs of the consumers. When the
adaptation in the existing product does not serve the purpose of the consumers, new product
can be developed to meet their requirements.
The same product but differing promotional media can meet the requirements of the people
having different cultures and tastes. The same product and the same promotional media can
be another strategy to meet the requirements of the consumers. For example Coco-cola have
the same product line and promotion policy worldwide and have proved successful in many
countries. The inspecting cars of developed countries may be used as taxi-vehicle in
developing countries, which requires different promotion policy for the same product. The
third strategy may be adopting new physical products with the same promotion policy as used
in the domestic markets. Fruit powder may be consumed by mixing with water or milk
depending upon the habits of the consumers of different countries. The new product with milk
is arrived at although the promotion strategy is the same. The fourth strategy of product line is
to change the product as well as the promotion-policy. It meets the different requirements of
the consumers at different culture. Changing the design and size of clothes with changed
promotional-message can meet the requirements of clothes of different consumers in several
countries. The fifth strategy of product line is to develop product altogether with the changed
promotion-policy. The tractor needs of farmers in developed countries are totally different
from the tractor-needs of the developing countries. The operation, the utilization and
maintenance require different advertising messages to educate people of these countries to use
the different size, shape and power of tractor. The sixth strategy of product line is
modification of product with the same strategy. Products are adapted for country to country
with the same promotional measure. The product is adapted as per culture and economic
levels of the consumers using the same promotion-policy.
PRODUCT ADAPTATION
A product may be suitable in one market but may not be suitable in another market. The
producer has to modify the product to meet the requirements of different markets. Functional
requirements vary from market to market. The products are used for different purposes and
the many facets of product have to be exposed to meet the diversified needs of the consumers.
It should be noted that the product is not the abstract commodity to satisfy wants but is the
virtue and tenets of the products to satisfy different wants of the consumers. Since there are
different needs and desires of several consumers, the product is modified to meet their
respective demands. Culture is woven to shape the demands besides the economic
characteristics. The product adaptation may take the form of physical adaptation and cultural
adaptation.
a) Physical Adaptation: Products are modified to meet the different needs of foreign markets.
The electrical appliance of 220 volts may not be suitable to Japanese markets as they use 110
volts electrical arty can interrupt the agreement. The barter system although full of
disadvantages has been used by many barter houses who help development of world market. .

PRICING STRATEGY
The marketing manager has to fix appropriate price for international marketing so that
pricing policy is fixed within the range of prices governed by competition, market situations,
government regulations and economic factors. The prices formulated are administered in
different manners in different countries. The pricing concepts, objectives, factors, strategies
and administration are discussed under international pricing 'policy.
Pricing Concept
Price is defined, as exchange value of goods and services and it is a measure of what one
can exchange in order to obtain a particular commodity. Demand, cost and competition are
the important factors to determine the price. The marketers are faced with government
regulations and taxes. The high transportation costs, middlemen's role, channels of
distribution and multinationals' role greatly influence the pricing policy. The pricing policy is
influenced by political, cultural and socio-economic conditions of the manufacturer's country
and of the customers' countries. The pricing strategies are decided on the complex market
situations. Some marketers may use the pricing as a tool to beat the competition. Different
marketing situation forces the manufacturer to use flexible pricing policies. Sometimes, prices
are fixed at lower level in one market and at higher level in another market. Price escalation,
price skimming etc. are used to administer the pricing policies. The international marketers
have to review the pricing policies form time to time to make more effective pricing in the
given situation, intracompany competition, national and international laws, international
'competitions, type of product etc.
Pricing Objectives
Pricing objectives are established considering various social obligations such as
consumers, employees, shareholders, and public interest apart from the marketing and
corporate considerations. The pricing objectives may be divided into three categories;
profitability objectives volume objectives and others.
The profitability objective is related to maximization of profit and profitability. The profit
maximisation is considered as business Objective. It aims to maximise the sale. The marketer
tries to maximise the market's share in the market abroad. This objective is used only for
those international marketers who have small business and do not believe in marketing mix as
instrument for increasing sale, and in that case price is not very useful instrument to maximise
sale. The volume objectives or the marketing objectives have been the main objectives of the
company whereby the prices are considered to be instrumental to increase volume of sale or
market share. The company can try to influence the prices at the final consumption level. The
prices are considered along with the important marketing mix for expansion of the market.
The total prices paid by the consumers minus distribution prices are considered the mill net
pricing which are received by the manufacturer. Marketing has considered pricing a<; very
important instrument for penetrating and preserving the market. The competition in each
country has major share in finalising the prices.
Other objectives have included intra company objectives and socioeconomic objective
which are related to minimisation of tax burdens duties, profit balancing, repatriation of
profit, continuing growth and proliferation of marketing activities. These factors are taken
into account to determine optimal prices.
The cost, market and competition situations are important factors to be considered for
aiming certain objectives. Sales at prices over and above fixed and variable costs are known
as bonus sale which add to net profit and can be used to recompensate the loss on account of
sale at price commensurate only with the variable cost The full pricing theory may not
achieve the market-objectives but variable cost pricing may be the case of dumping which
may attract ahtidumping laws. Therefore the manufacturer has to be very cautious to fix tbe
prices at appropriate level.
Pricing Strategies
The manufacturer employs several strategies to counteract the price-problems. He may
adopt lowere price to penetrate new markets and higher price to crack foreign markets. With

the given objectives of market and business, the pricing strategies may be price listing,
geographical pricing, psychological pricing, skimming pricing, penetration pricing, price
flexibility, line pricing, promotional prices transfer pricing and price escalation.
PRICE LISTING
Listing of prices on cost and other bases assures the customers about the reliability of the
price and the product. In absence of declared prices, the distributors may manoeuvre the
prices for their self benefits ignoring the interests of the manufacturer. This list prices are the
basis for determining the practical prices to be charged from the consumers. The list prices are
levelled on the products and circulated with booklet and leaflets. These prices are determined
on the basis of demand, cost, competition and distribution strategies. The market prices are
arrived at discounting the prices listed and this discount may be cash discount, quantity
discount and trade discounts. Cash discount is given for repayment of the credit within a
specific period or at the cash down purchase. The tradition cash discount Le. 2-10 net 30 is
very well known among the merchandise. It means if the cash is repaid within 10 days of the
purchase, 2 per cent discount is allowable on invoice price. The maximum period of credit is
30 days. The quantity discount is granted because of large purchases made by the middlemen
or consumers. The trade discount is paid because of some marketing functiol1s being
performed by the buyer or middlemen. It is also known as functional discount. The
manufacturer may grant certain percentage of invoice value to the wholesalers and retailers
for performing marketing functions, particularly distribution functions. Similarly, the
manufacturer may offer promotion allowances, brokerage allowances and other allowances
for enhancing the market share.
GEOGRAPHICAL PRICING
Geographical pricing is determined on the areas basis and logistics. The Free on Board
(EO.B.); Cost, Insurance and Freight (C.LF.), Basing Points and Zone pricing are the several
forms of geographical pricing. The EO.B. refers to the price whereby the buyers pay the
freight charges. The owner's title and responsibilities pass to the importers immediately after
loading the products on the ship or carrier. Cost, insurance and freight (C.LF) refer to the
price whereby the cost, insurance and freight charges are paid by the exporters. The basing
point pricing designates some place as base for charging the freight cost to the place of
consumers. Zone pricing is fixed as per zone. The geographical pricing is used to impress
customers.
PSYCHOLOGICAL PRICING
Psychological pricing is based upon the assumption that certain price-range is more
appealing to consumers. Prices ending with odd number are preferred by many consumers.
For example, they may prefer Rs. 15.95 to Rs. 16.00. Some consumers may prefer unit
pricing i.e. expressed in terms of some recognized unit of measurement. Pricing based on well
formulated policy is known as creative pricing which are recognised by many managers.
SKIMMING PRICING
Market skimming is a deliberate attempt to reach a segment of the market who are willing
to pay higher price because the product has high value to them. Many Western companies put
high price for getting the benefits of sophisticated people. The manufacturer is in a position to
recover sunk costs from the surplus of gain based on the skimming pricing. The loss in
dumping is recouped by the surplus of skimming pricing. One of the several purposes of
skimming pricing is to maximise the revenue received from the sale of new product before
getting any competition. At a later stage, the prices are reduced to get the benefits of lower
prices in competition.
PENETRATION PRICING
Penetration pricing believes in lower prices to enter in the market. Consumer goods are
generally demonstrated higher sale at penetration pricing. The new competition does not enter

in the market because of fear of loss at lower prices. Brand popularity is increased through
lower prices. The penetration pricing is used for innovative product hoping to with the desire
of a large number of consumers; prices may fall further as the scale of operation expands.
This strategy is used where the market is highly sensitive to prices and reduction in cost of
production is expected in future. It discourages present and potential competition.
PRICE FLEXIBILITY
Price flexibility assumes that the market can be attracted at different price-level and
variable pricing is more suitable where individual bargaining is involved and one price
strategy may suit the requirement of mass selling. The variable pricing has the advantages of
selling to different consumers. It has significant edge over the competitors' prices.
PRICE LIVING
Price living is the practice of marketing merchandise at a limited number of prices. Few
prices are determined and the consumers are free to select any price fix and not between the
two price-lines. The price lines are indicative of quality. Each product line has separate price.
PROMOTIONAL PRICING
The promotional prices are the ingredient of selling strategies. The manufacturer can offer
many prizes, additional products and other facilities. The prices may vary from place to place,
customer to customer. Competitive bidding may be involved for promotional purposes. The
seasonal prices and off-season discounts attract more customers. Cash rebates may also attract
more consumers to the product. Several other pricing methods have been employed to
promote the sale.
TRANSFER PRICING
Transfer pricing is the pricing pattern for sending goods from one branch of a company to
another branch of the company. The manufacturer performs the task of marketing on
decentralised basis in many cases. Raw materials work in progress and inventory may be
transferred from one branch or office of the manufacturer to other branches or offices of
manufacturer in other countries. The question lies how much pricing system should be taken
into account for transfer of these goods. The manufacturer may transfer the products and raw
materials at direct cost or at direct cost plus overhead expenses or at price prevailing in the
market depending upon the situations and requirements of the transfer or and transferee
offices.
PRICE ESCALATION
Price escalation is the remarkable increase of the imported products' price. The escalation
is done to set off the expenses incurred by the importer for transportation, duty taxes and
margins. The manufacturer can search the international manufacturing system to have low
cost based merchandise to avoid price escalation's adverse impact on the sale and the
distribution cost has to be mitigated to bring the total price at competitive level. The
manufacturer can start production in the customers' countries if the price escalation become
prohibitive. The manufacturer has to evaluate different alternatives of the price escalation to
adopt the best alternative.
PROMOTION STRATEGY
Planning for international promotion has important effect on the marketing mix.
Development of a suitable promotion-strategy depends on the appropriate planning. The
potential market can be exploited only at the effective planning and strategies of developing
promotional media. A promotion mix includes advertising, sales promotion, personal selling
and personnel of sales force. The development of promotional strategy for the success in
international marketing involves determining the promotional mix, standardisation,
developing effective massage, selecting appropriate media and developing worldwide
marketing objectives. The development of international promotion policy faces the cultural
variations which have direct impact on the markets. The international promotion strategy is
discussed under advertising, sales promotion, personal selling and managing sales-force.

ADVERTISING
The advertising has been considered an effective tool of sales promotion in national as well
as in international markets. Different media of advertising have been used in different
countries depending upon their acceptability by the potential consumers. The advertisement
expenditure have been increasing in all the countries. The advertisement educates people
about the uses of new commodities. It changes the existing patterns of culture and customs.
Every country tries to create demand through advertisement for expansion of market. The
advertising brings together the product already made or would be made with the present and
potential consumers. With the improvements of the communication system, the advertising is
getting more popularity amongst the marketers. The advertising can be analysed under
organisation challenges and media selection.
i) Organisation: The advertisement can be made by independent agencies or by the company
itself. The company can avail the services of independent agencies which may be either
domestic agency, foreign agency, multinationals and coordinating agencies. The domestic
agency provides local expertise. There may be several advertising agencies in a country. The
marketer has to select anyone or many of them. The international agencies have less cost
because of foreign approaches. Multinational agencies will be again cheaper because of their
worldwide network. The coordinating agencies have no wide-spread branches of their own
but have the facilities of coordinating activities of other agencies. Kickbacks are prevalent in
many developing countries for the agency commission. The self-advertisement is not very
effective system of advertisement because of lack of expertise in these areas. High level
talents in advertising many have to be employed by the company, which would prove costlier.
Concentration on advertisement will be not relief funds for other purposes. There are several
other problems of self-advertisement
The advertisement requires effective communication which may change from time to time,
product to product and country to country. The basic strategy of advertising is to use
international communication media, determine use of local marketing and creative talents,
encourage creative people, measure creativity and identify common-factors and differences. .
The costs and benefits analysis of the advertisement is done to decide its effectiveness. It
can be used only when it can contribute economically and effectively to the company. The
advertising budgets and sales thereon are compared to decide the role of advertising.
ii) Challenges: Advertising is a creative strategy. It has to face the creative challenges of law,
language, culture, media, production and company policy. All the advertisers have to resort
basic advertising policies of procedures, media and research. Every advertiser creates
different campaigns for each country. The basic purpose is to motivate people to purchase the
advertised products. The advertising has legal restrictions almost in all countries. There are
certain limitations on expenditures of advertisement, the media of advertisement, type of
product, price of advertised products and other aspects of advertisement. The advertisement
may be challenged in a court of law if other competitors consider the claims of the advertisers
as false or based on wrong notions. The advertisement expenditure may be taxed. The
Monopoly Restrictive Trade Practices Act imposes certain restrictions on expenditure on
advertisement. The legal and tax regulations are not uniform in all the countries and they vary
from country to country.
International policy of advertising faces another problem of language. Different languages
are used in different countries. The linguistic nuances and vernaculars are different in the
different markets of the world. The local dialect may have quite opposite meaning of the
statement. The illiteracy or low level of education may be another bloc of print media. The
use of verbal media is desirable there. In Indian conditions, the verbal mode of advertisement
will be more effective. The multiple languages in India have made advertisement more
difficult. The language translation will not be very effective because idiomatic and figure of
speeches. The advertising language requires some specific words and phrases which are
selected after a proper understanding of the language-culture. The communication involves
the cultural heritage and social inheritance. The advertiser of the local language can use the
word and writing very effectively reveal how far the advertisement be resisted if the
government or people are of the view that it has harmed the consumers' interest. The

advertisers have to consider these challenges in proper perspective.

iii) Media Selection: Selection of advertising media is another problem of advertising
planning. The advertisers are facing numerous problems in selecting media of
advertisement because of non-availability, higher cost and less-coverage of particular
media. The advertisers should be aware of the media-restrictions, media-convenience and
specialized media of advertisement. Many countries have very few media of
advertisement. Some of them are too costly to be availed by an average advertiser. Some
media do not commonly approach the people. Magazine, journals and newspaper media are
not very useful in India because of high illiteracy figure. Radio and television may be
effective media of advertisement in such countries. On the other hand, radio and television
are very costly. Government has restricted frequent uses of radio and television for
advertisement. Only permitted messages and visual designs can be broadcasted and
telecasted by these media.
The coverage of advertisement will reveal how far a particular media of advertisement
may work in a particular society. The media, massage and cost are important factors to
decide the acceptability of the advertisement. A large number of media should reach the
majority of the world population. The cost factor in broadening the coverage should be
taken into account to reach even to neglected areas. The lack of data may not substantiate
the advertising policy. It requires data on income, age, education and other market
potentials. The advertisers can vary their advertising policies and procedures as per needs
of advertisements.
SELECTION OF ADVERTISING MEDIA
Selection of advertising media is a difficult problem. There may be different
advertising media in particular countries having their respective scope and limitations. In
Indian conditions, several thousands, magazines and journals in different languages are
available. Innovative media may benefit the advertisers maximum while ignoring the
drawbacks of traditional media. The economy moves up gradually in every country and it
changes the needs of the people. Therefore, the marketing may require new media of
advertisement. Not only the media but the specific message and presentations of the media
are undergoing drastic changes as per economic development. Television has taken lead in
this direction. It has much more impact on the consumers. Other media of advertisement
are getting less share of advertising. The international marketers have to consider the
changing patterns of media of advertisement. The specific attributes of newspaper
magazine, radio, television and other media are discussed for the purpose of selection. .
a) Newspapers: Newspapers have been traditional medium of advertisement. It contributed
significantly in market expansion and had remained a prominent medium of advertisement.
There are lakhs of newspapers throughout the world. Selection of some specific newspapers
depends on various factors such as market potential, culture, language, economic status of the
consumers, rules and regulations of advertisement. The newspapers charge very high prices
sometimes, for advertising. The authentic and more popular newspapers charge very high
rates. The cost may vary from time to time and day to day. The advertisers have to be very
selective in such process. The scarcity of space may require pre-booking for advertisement.
The lack of newsprint has added to the problems. If the newspapers are very popular, the cost
of advertisement will be very high. The services of advertising agencies may be availed for
booking advertisement in good newspapers although there are very few advertising agencies
in India and Middle East. There are some advertising policies adopted by the newspapers to
delimit the space for advertisement. T)le international newspapers have been used for
advertising international products. All the principles of selecting newspapers for
advertisement are taken into consideration for international marketing.
b) Magazines: Magazines are selected after proper scrutiny because some magazines have
wide circulations, some have specific readers, some are totally unsuitable for the specific
messages. Technical magazines are used for industrial products whereas house magazines are
suitable for consumers goods. There are space and cost restrictions. The effectiveness of
advertisement in a particular magazine is studied and evaluated before its selection for the

purpose. International magazines may include advertisement of international markets. The

local magazines are also suitable for the international markets provided the messages are
carried in local languages. If technical magazines are not available for the technical products,
the advertisement in common journals may be done. In India, technical magazines are scarce;
the advertisers, therefore, adopt common magazines for the purpose. The advertisement in
magazines must mention the distribution channel to have effective impacts on marketing.
c) Radio: Radio has become very common medium of advertisement in almost all the
countries because of its popularity and cheaper cost per unit of audience. Even illiterate
people can get the message of advertisement through radio. In developing countries, the radio
has proved a very good media of advertisement. Some countries have specially earmarked
commercial radio stations for advertisement. There may be some restrictions on the radio
broadcasting of commercial nature. Government-owned radio has specific announcements.
The advertisement is not free and frank although advertisement by such radio stations have
much more effects on the population because it has become a rare and selective
advertisement. The non-government radio channels may permit free competition in
advertisement. Since the television telecasting is costlier in many countries, the radio
broadcasting has become popular in these countries. The contents and audiences of the radio
advertisements are suitably selected to give more fruitful results. The alcohol and drug
industries cannot avail the radio advertisement because of their impact on society in general
and children in particular. Some international broadcasting institutes are functioning in the
international markets although their time and cost are prohibitive to be adopted by advertisers.
The commercial radio stations are becoming selective in broadcasting because of competitive
attitudes developed after their broadcasting.
.
d) Television: Television has become a major media of advertising. Television in developed
countries is more popular. It reaches a larger number of populations. In developing countries,
it has not been so popular. Many audiences do not view television regularly. The television
advertisement has to be very selective to telecast the messages only when a larger population
view the television. In India, more than 80 per cent of the population viewed television on
Sunday to view the telecast of Ramayan and Mahabharat serials. It was considered very
appropriate time of advertisement. Therefore 15 minutes advertisement was permitted by the
Doordarshan Department. Sunday evening moveies have second place of attracting audience
for television advertising. Many governments have permitted use of television for commercial
advertisement whereas other countries such as India and China have restricted use of
television for commercial advertisement. The time of television advertisements is limited in
many countries. The audience
measurement is essential before restoring television advertisement because viewers of
television are limited in' many countries. They view television only at a specific time and the
serials. The costs and benefits of television advertisement should be compared to take a
decision for television advertisement.
e) Other Media: There are other media of advertisement which can be used for international
marketing. They may be cinema, direct mail, posters, exhibitions, fairs, etc. for advertising
the product, messages to local population. The international marketers can hire local
advertising agents or appoint international advertising agencies to convey the messages of
new products. Cinema hac; become powerful media of advertisement in developing countries
because a larger population view the movies in absence of adequate facilities of television and
videos. Direct mails are effectively used in developed countries. The cost of direct mailing
may be high but the addressee may feel it very much personal. The communication is made as
surprise and only to those who are related to the products. For example, many international
publishers directly mail the booklets mentioning the subject-matter of the books published to
the teachers concerned of the subject. University Directory provides the addresses of the
teachers employed in various universities. Similarly industrial products are also
communicated to the persons concerned.
Roadside posters are used to demonstrate the quality of the product, specially, transportproducts. Exhibitions and fairs have been used to popularise the goods and services. A large
number of exhibitions, fairs and demonstrations are made by Indian producers in England,
U.S.A., U.S.S.R., Japan, West Germany and other countries. These media of advertising are
selected after examining their effectiveness, cost and appropriateness to the concerned

products.
The communication principles should be taken into consideration for affecting an
advertising media. The information process involves seven steps: information source,
encoding, message channel, decoding, receiver and feedback and noise. The socio-cultural
influences are taken into consideration for devising the advertising media The process is
interrupted by noise at every step. The language, culture and social systems may disturb the
process. The international marketers, therefore, use the process with precautions and in
consistent with the marketing environment.
SALES PROMOTION
All activities which stimulate consumer purchases are known as sales promotion. In the
wider sense all functions such as advertising, personal selling and sales force management
may be termed as sales promotion; but in stricter sense, it relates to discounts, samples,
coupons, awards, prizes, free-distribution, public-competition, public entertainment and so
many other activities which directly motivate the buyers to purchase the products. Advertising
personal selling and sales force are not directly influencing the buyers to purchase the
products. The sales promotions are specific and short-term.
Sales promotions are directed towards consumers' satisfaction through product
introduction, product-trial, displays and personal efforts. The consumers are provided a
chance to examine the product attributes and be satisfied with the attributes. Such trials and
attempts help the customers to purchase the product. Group demonstration of use methods of
the new product helps incre.:'1se the sale of the product. The promotion-methods differ from
area to area. In rural areas different methods of sales promotion have been used. The vehicles
and other promotion-vans are carried to rural areas to demonstrate the utilities of the product.
Sales-depots in hill regions have facilitated the use of the product. In absence of distribution
channel, no promotion is possible in interior rural areas. The retailers are given some facilities
to distribute the goods.
The local facilities by international marketers may enhance the marketing opportunities. It
requires appointment of local people for the purpose. The distribution vans have increased the
market. Prag Milk distributors have purchased several milk vans to distribute the milk in
interior areas of cities. These vans procure milk from rural areas and process them in the
factory before distribution. It has increased supply of milk and milk-products. The Coca-Cola
and Pepsi Cola have several vans in the same manner, which distribute the bottles of soft
drink to retailers. The empty bottles are also collected by the vans. This has facilitated supply
of the soft drink even by multinationals into interior rural areas. These sales promotional
activities have increased markets faster than those of the advertising media. No one method
can be said the most effective tool of market-expansion. The international marketer should
use all the techniques of market expansion.
PERSONAL SELLING
The third method of international marketing promotion is selling of the products by
persons of the companies. The persons may be employees, representatives, agents and
deputed persons of the companies. They take responsibilities of selling the products. The
employees in foreign markets deal directly with the middlemen consumers there. The salesforce may be appointed from the domestic country as well as from foreign countries wherein
the marketing activities are being performed. It is advisable to appoint persons from the
foreign countries. The sales-force is divided into three categories; viz., expatriate salesperson,
foreign salesperson and cosmopolitan salesperson.
i) Expatriate Salesperson: The expatriate salespersons are those who are working in foreign
countries other than their own countries. These persons are moving in the country or in more
than one country to find potential consumers. They are experts in the selling methods and
have acquired adequate training, knowledge and expertise. They provide a platform for the
marketers to increase their businesses. Since the foreigners in other countries are considered a
symbol of high reputation, they get more business in foreign markets. They are technically
experts and have necessary calibre of business-promotion, they should be encouraged to
dispose of industrial products.
They can be appointed for foreign assignments for varying periods. They may be

temporarily appointed for a particular period depending upon the nature and requirements of
the companies. They return back to ponent company after the expiry of the period. The
expatriate may also be appointed for life in a particular country. This gives him permanent
understanding of the local culture, political situations and other environmental conditions of
the country. The marketing potential can be exploited in more effective manner by
expatriates. The only problem is of cost. They charge higher wages than the foreign nationals
because the local people are available at lower cost. They also suffer from legal barriers and
unwillingness of the sales force to live abroad. They cannot contribute significantly if they are
away from their families. Thus, the expatriate salespersons are being replaced by foreign
nationals for expansion of market.
ii) Foreign National: The services of foreign nationals are used for marketing purposes
because they are expert in local culture and tradition. They know better how to use the
marketing techniques to influence consumers because of intimate knowledge of the
consumer's behaviour. The cost of services of foreign nationals is lower than that of other
salespersons. Domestic knowledge provides them adequate platform for training. The foreign
nationals can acquire knowledge
DISTRIBUTION STRATEGY
1. Distribution Objectives
The international marketers decide the objectives in specific terms to achieve the mission
of international marketing. The broader objective or the corporate objective helps formulation
of long-term policies and plans whereas the targets are decided for the short-tern procedures
and programme. The targets and goals for each country should be specifically decided so that
the marketing personnel of the related countries can understand their respective
responsibilities. The task assigned to each and every marketing executive should be neither
too much nor too little. The targets and task mast be scientifically evaluated and properly
distributed to the concerned personnel. The objectives of the company must be properly
defined and mentioned for the benefits of the executives. The formulation of objectives
involves consideration of customer characteristics, product characteristics, environments and
middlemen.
i) Customer characteristics: The distribution objectives are decided on the basis of
customers' characteristics viz., income, habits, distribution pattern, and reaction to selling
methods. Different distribution channels are used for meeting varying characteristics of the
customers. The distribution channels are widened if the number of customers is large. The
manufacturer may contact the customers directly if they are very few. If they are large, the
distribution is made via wholesalers and if the number is larger enough, the producer may ask
the wholesaler to contact the retailer for prompt supply of the goods to the consumers.
ii) Product Characteristics: The product characteristics such as perish ability; service
requirements, unit price and designs are used for considering the distribution channels. The
distribution cost adds to the total price. If the production cost is high and the distribution cost
is also high; the total price will be excessively high. Therefore, the producers try to abolish or
lessen the distribution cost to bring the total price at competitive-level. The expensive,
complicated and sophisticated goods have special distribution objective. Experienced and
trained salesmen can deal with such products effectively. Ordinary retailer cannot be
successful middleman for the purpose. Perishable commodities require direct exporting so
that these articles can reach to the consumers in time and the consumers can get fresh articles.
If it is not sold directly, the producers have enough control on the sales force so that the
consumers may get fresh and qualitative articles within the limited time. All the product
characteristics are analysed, therefore, to formulate feasible and correct objectives.
iii) Environments: Environmental characteristics are properly evaluated for determining the
distribution-objectives. The environmental characteristics may be economic, social, politica!
and legal conditions in different countries. These environments influence the international
markets different!y in differnet countries. The economic states influence the markets
significantly at different time in a country. The sociocultural conditions influence the markets
in their respective patterns. Super market and multiple' stores have been used by higher-

income level consumers. They have capacity to store and income to purchase goods in bulk
and since they are busy with other activities, they like to purchase goods in sufficient quantity
to meet the requirements of a specific period. On the other hand, small income group
consumers purchase their consumption goods almost every day.
The economic and social environments have much influence on the marketing pattern.
Therefore, the objectives of the distribution system should be moulded to meet their
requirements. Low income and socially backward people have daily purchasing habits. In
Eastern Europe, India and African countries, such practices are more common. On the other
hand, high-income society owns storage facilities, refrigerators and other facilities. Therefore,
they purchase only once or twice in a month. The international marketers, therefore, adopt
strategies suitably to meet the requirements of different environments.
iv) Middlemen Characteristics: The middlemen desire to increase their respective
profitability and not that of manufacturer. If any new products are manufactured, they require
big push from the wholesalers and retailers. The manufacturer by providing a higher rate of
commission stimulates the middlemen to push up the sale of his product. The manufacturer
may sometimes arrange direct selling to avoid the costlier middlemen. When the
manufacturer has gained in the market, the middlemen can approach even at a liberal term of
sale. They may adopt more direct distribution system if such salesmen are not available. The
distribution objectives are decided considering these characteristics of the middlemen.
2. DISTRIBUTION STRATEGIES
The marketing manager confronts a variety of distribution strategies in the international
markets. The strategies are varied because of different patterns and alternatives of
distribution-channel in the host countries. Besides the variations in marketing channel, some
basic policies are formulated. They are broad and flexible to adopt the market situations in
different countries. The distribution strategies include basic policy, considerations of cost,
capital, control, coverage, and character and continuity of channels.
BASIC POLICY
The marketers decide the basic policy for distribution of goods and services on the basis of
terms of sale, channel-length, margins and control. The basic policy is established considering
the developing international distribution, rate of return on the distribution-pattern, specific
marketing goals and other marketing phenomena. The basic policies are divided into long-run
and short-run policies. The policies are fixed and confirmed so far as their basic foundations
are concerned, but are changeable as per local conditions and marketing requirements. The
flexibility and adaptability are the important considerations of the basic policy.
COST
The cost is important factor to decide the distribution channels. Cost involves channelcost, capital cost of evolving distribution channel and maintenance cost of the channel. The
costs may be in the form of commission to various middlemen, margin and markup. The
distribution cost should be minimised to the possible extent. It is the difference between the
total price payable by the consumers and the cost of manufacturing. Sometimes, it becomes
difficult to forecast the distribution cost because of changes in the channels or interruption of
the pipeline. The minimising of distribution cost is very essential to compete in the markets;
but, it does not mean that the middlemen and other persons mobilising the distribution should
be discarded because they have their important contribution to the international marketing.
Direct selling becomes more costly in many cases than involving of middlemen. The real test
of cost-strategies is to examine the cost involved in distribution and additional revenue
derived from the distribution channel.
CAPITAL
Capital requirements and cash flow are taken into account while deciding distribution
strategies. The direct exporting may involve huge money for establishment and distribution
channels. The capital for appointing middlemen may require money only for inventory, loan
and other facilities to middlemen. Agent middlemen may require less investment. On the
other hand, the direct selling may provide immediate cash flow. The middlemen may also

give immediate cash to the producers if they have such terms of sale; but, many distributors
sell the goods to the middlemen on credit-term. The well established companies have constant
cash inflow from the distribution-channel.
CONTROL
Control on distribution channel becomes essential to have effective result thereon. The
direct selling has more control on the distribution and compared to the middlemen. The
middlemen may not take deep interest in prompt selling of the goods. They are biased by
their attitude and margins. Each channel arrangement has different levels of susceptibility to
control. The manufacturer must exercise control over the price, quantity, methods and forms
of distribution channels. If the manufacturer does not have any control on these factors, the
middlemen may manoeuvre the distribution against the interests of the producer. The control
pattern is dependent upon the nature and character of the middlemen. A sound and reputed
middlemen may try to give more margins to the producer. They provide more market
familiarities and better understanding of the market. They have full commitment and major
contracts with other distributors. Appointment of such honest and sincere middlemen may
provide desired control on the distribution by the producer.
COVERAGE
The distribution strategies must aim to maximize the coverage. A broader distribution
channel would have wide coverage. Many companies may be interested to penetrate in the
major populated areas rather than wide coverage even in less populated areas. The
concentration of selling in a thickly populated area may be more useful than selling in widely
distributed population. The producer may like to concentrate on distribution at lucrative
markets and neglect nonprofit able markets. The purposes of coverage strategies are, gaining
the optimum volume of ~ale, securing a reasonable market share and attaining adequate
success in each market. The coverage is difficult in competitive markets. The producers have
to exercise ingenuity to penetrate into new markets for increasing the distribution-coverage.
CHARACTER
The character of the product and of markets decide the distribution strategies. The perish
ability, bulk, complexity, sales services and the value of product are considered for the
purpose. The evaluation of character is very difficult. The company's standards should be
taken into account for deciding the strategies. Distributors, wholesalers and retailers are the
points of distribution channels which decide the strategies.
CONTINUITY
The distribution channel should continue for a longer period. The middlemen and agents
often discontinue their contracts and so producers should appoint those distributors who
remain almost constant. The middlemen maintain loyalty with the producers. The channel
strategies should balance the cost, capital, control, coverage, character and continuity for
deciding the distribution strategies. The gravity, push and pull strategies are adopted for
channel strategies. The gravity strategies assume that the manufacturer depends mainly on
the middlemen whereas the push strategies believe in direct controlling and motivating the
consumers. The pull strategies require intensive advertisement and image building and such
strategies are adopted as per needs of the markets and environments.
UNIT IV
EXPORT PROCEDURE
The export procedure starts from the date of registration of the exporter. The export
procedure in India involves the following steps:
1. Export Officer and Receipt of Indent
2. Arranging the Goods
3. Shipping Arrangement
4. Preparations for Export
5. Customs and Exchange Formalities
6. Placing the goods on boards

7. Mate Receipt
8. Effecting Marine Insurance
9. Bill of lading
10. Other Shipping Documents
11. Securing Payment
12. Obtaining Export Incentives
There is no definite sequence of the procedure in some cases although the above sequences
are maintained in many cases.
EXPORT OFFER AND RECEIPT OF INDENT
The exporter offers sale to the foreign buyers which may be in the form of proforma
Invoice or Quotation. The Quotation contains the name and address of the buyer, description
of goods to be sold, prices, conditions of sale and other provisions viz., delivery schedule
payment terms, contingency clause, arbitration clause, escalation clause etc. The
responsibilities of the exporters are also described. Ex-factory price is quoted in domestic
currency. The importer may like the quoted prices up to his warehouse. It facilitates the
importer to import the goods easily. He can compare the price with local competitors. The
exporter has to quote this price known as frame price at competitive level. There are two other
forms of price q uotation, viz., Free on Board (EO.B.) and Cost, Insurance and Freight (eLF.).
Under Free on Board (EO.B.) quotation, all expenses upto delivery of goods on board the ship
are borne by the exporter. The importer takes the responsibilities of paying subsequent
expenses of freight, insurance and other expenses. Under Cost, Insurance and Freight (C.LF.),
the exporter pays all the expenses of freight, insurance, cost and transportation up to port. The
importer pays the expenses after arrival of the goods at his port. The quotation includes
quantity, quality, prices, terms of payment, discounts etc.
The exporter receives the order or indent from the importer or his agent which contains all
important particulars of the transactions e.g. price, packing, marketing, insurance, paymenttechnique. The foreign order is called indent; the importer prepares 4 copies ofthe order or
indent. Two copies of the indent are sent to the exporter. When the proforma invoice sent by
the exporter to importeris accepted by the importer, it becomes a confirmed order. The
duplicate copy of the proforma invoice is duly signed by the importer and the conditions
accepted by him are informed to the exporter. In some cases the importer sends the confirmed
proforma invoice and also a letter of order to the exporter. The order received by the exporter
is registered wi th an authorised dealer in foreign exchange. The government orders take the
form of contract and the exporter has to be very cautious about the terms and conditions of
sale.
ARRANGING THE GOODS
The exporter scrutinises the export order with reference to the terms and conditions of
proforma invoice and letter of order.The manufacturer exporter arranges the goods through
production or procurement. The exporter raises an internal indent on the production
department. He sends a delivery note to the Works Manager or the Factory Manager, which
contains the description of the goods as per export order, the date by which the goods are to
be manufactured and other formalities to be completed. Themerchant exporter obtains the
required goods from the market or from other manufactures. The export houses performs the
job of marking up, packing and marking ofgoods as per instructions of importer.
SHIPPING ARRANGEMENT
The quality control inspection is done before shipment. The exporter invites the inspector
to examine the goods being manufactured or procured for shipment. He has to arrange
advance booking of space in the ship and this job is done by the shipper or broker who
possesses full knowledge of the various shipping. The shipping company iss ues a shi pping
order to the exporter to carry the exporter's goods. The shipping order is a document
containing instructions to accept the goods on board the ship.
PREPARATIONS FOR EXPORT
The preparation of export requires appointment of forwarding agent who is a person or
firm concerned with collecting goods from a factory or warehouse and delivering them to a
port of shipment or airport for onward transmission of the goods to the destination. He is

specialised in procuring goods, attending to customs formalities booking, procuring effecting

marine insurance and other formalities. On the reverse the clearing agents are employed for
import purposes. The manufacturer-exporter gives instructions to the forwarding agent for
shipment to be consigned. He is specialised person to complete all the formalities of export
and advises his principal on specific points. When the forwarding agents are not appointed,
the exporter has to appoint his own specialist for export. However, it has been observed that
the forwarding agents are appointed in most cases. They perform several functions, viz.,
negotiating of shipping contracts, customs formalities, packing, marking, insurance, loading
of goods etc.
The packing is done by the manufacturer or may be entrusted to the packing agent. Packing
is a specialised work to protect the goods, to suit the requirements of the importer. The
forwarding agents are experienced in general routine of packaging. The packages are marked
with the name of importer, destination of port, gross weight and net weight.
The exporter issues instructions to the forwarding agents with the necessary documents of
export for finalising the export formalities. These documents may be A.R. 4NA.R.-4 in
original and duplicate, packing list one copy, excise gate pass in original, commercial invoice
in two copies, G.R.J. form in triplicate, customs invoice, original letter of credit, declaration
form in triplicate, purchase memo, railway receipt and ins pection certificate.
CUSTOMS AND EXCHANGE FORMALITIES
Customs and exchange formalities inclu,de shipping bills, export permission form, customs
house export licence and so on. The shipping bills or custom challan describes the goods,
quantity, quality, value, marks measurements, the port of destination and the name of the ship.
The export permission form is filled in duplicate. The exporter submits four copies of
shipping bill and two copies of application to export. The shipping office collects shipping
dues or chargeS and returns one copy of the application and three copies of shipping bills.
These documents are sent to the customs house. The duty differs from commodity to
commodity. The customs house will register details of export in its books. The original and
duplicate copy of the shipping bills are returned to the exporter. The customs house issues
pass in favour of the exporter. The forwarding agent or the exporter is required to procure
export licence from the controller of Exports, Under Foreign Exchange Regulation Act, the
exporter has to fill up four copies of G.R. forms. One copy of the G.R. is given to the
customs house at the time of shipment, three copies of G.R. and one copy of invoice and other
shipping documents are given to the exchange dealer who procures permission from the
Reserve Bank of India.
PLACING THE GOODS ON BOARD
The forwarding agent takes the delivery from the railway station and arranges their storage
in the warehouse. He arranges to get clearance from customs authorities, which is given on
the shipping bill by endorsement. The Port Trust copy of the shipping bill is presented to the
Shed Superintendent at the pon. The goods are brought for physical examination by the Dock
Supervsior who also examines the commercial invoice, packing list, AR-4A form and
Shipping Bill. The Dock supervisor records his report, endorses the words 'out of charge' on
the duplicate copy of the Shipping Bill. This certificate is given to the forwarding agent who
presents these documents to the Preventive Officer of the Customs Department. The
Preventive Officer makes an endorsement 'Let Ship' on the duplicate copy of the Shipping
Bill which is given to the forwarding agent for the loading of the goods on the ship. The
shipper makes arrangements to place the goods on board of the ship. While the goods are
handed over to the people at board, one copy of the Shipping Bill is handed over to the
captain of the Ship, who issues a receipt known as Mate Receipt.
MATE'S RECEIPT
The forwarding agent pays the port charges and obtains the Mate Reciept. The Mate is the
Assistant Captain who allows the loading of the goods only when the shipper presents a copy
of the Shipping Bill and Shipping Order. The Mate issues a receipt after examining the
packing and counting the packages. This receipt is known as the Mate's receipt. The receipt
without any adverse remark is a clean Mate's Receipt. When the Mate is not satisfied with the
documents and goods, he makes certain remarks. Then, it is known as foul receipt. If the
packing is properly done and the Mate is satisfied with the packages etc., he will issuse clean

receipt. The remarks of Mate ' s receipt are also made on the Bill of Lading which is issued by
Shipping Company on receiving the Mate's receipt. After receiving the Bill of Lading from
the Shipping Company, the forwarding agent sends the relevant documents to the exporter.
These documents are full set of "Clean on Board Bill of Lading" together with a few nonnegotiable copies, original letter of credit, copies of customs invoices, one copy of the
commercial invoice duly attested by the customs, export promotion copy of the Shipping Bill,
AR-4A/AR-4 forms in duplicate and G.R.-I form in triplicate.
MARINE INSURANCE
After receiving the Bill of Lading, the exporter makes arrangements with marine insurance
company to insure the goods against marine risks. The insurance covers the value of goods,
expenses and a reasonable per cent of profit. The perils are specified whereby the loss is
compensated as per insured perils.
BILL OF LADING
The Bill of Lading is issued by the Shipping Company on presentation of the Mate's
Receipt by the, exporter or his agent. The exporter fills in the details of the goods, destination,
name of ship etc. in the blank forms of the Bill of Lading. The shipping company checks and
signs the Bill of Lading of the exporter. Freight charges are paid by the exporter and the Bill
of Lading is returned to the exporter. The freight may be paid by the importer. In such a case,
the exporter gets the Bill of Lading, duly signed and stamped by the Shipping Company. The
Bill of Lading is marked with 'Freight Forward'. The goods are handed over to the importer
when he pays the freight and presents the Bill of Lading. The importer is handed over the Bill
of Lading by the exporter through postal sevices or agents. The BilI of Lading is the
document of title which is transferable by endorsement, and delivery. Generally two copies of
the BilI of Lading are sent to the importer by airmail so that at least one should reach him in
time.
OTHER SHIPPING DOCUMENTS
Other shipping documents are letter of indemnity, consular invoice, certificate of origin
and other documents attached to the bill of exchange. The letter of indemnity is furnished by
the claimants in absence of Bill of Lading for getting the goods from the shipping companies.
It is a promise by the claimants of the goods to indemnify the shipping companies of any
claim arising out of handling the goods. The consular invoice is signed and certified by the
Consular of the importer country that the goods mentioned in the invoice are in the package
of imported goods arrived at the port. The customs authorities believing on the invoice do not
open the package and let
the goods pass onto the importer. The certificate of origin certifies the name of the country in
which the goods are manufactured. This certificate is produced to get the benefits of
preferential treatment in duties under the GSP Scheme. The Certificate of Quality, AR-4
forms, customs invoice, packing list etc. are the other documents which are sent with the bill
of exchange to the importer.
SECURING PAYMENTS
The methods of receiving payment are determined as per contract. In normal situations,
there are four methods of receiving payments from the importer.
a) Documentary Bill of Exchange: The documentary bill of exchange refers to the
arrangements of payment through bank at the delivery of documents or at the expiry of the
due date ofthe bills of exchange. The bank will handover the documents to the importer either
at the acceptance of the bill of exchange which is known as Documents Against Acceptance
(D/A) or at the receipt of the bill of exchange which is known as Documents Against Payment
(DIP). The bills in the case of D/A are generally for 60 t090 days after acceptance. They are
also known as usance bill or time bill. The bank receives the payment on maturity of the bill.
b) Discounting Documentary Bill: The discounting documentary bill is discounted by the
bank and the exporter gets the payment on the accepted usance bill. The bank discounting the
D/ A bill gets the title 0 f the bill and charges a certain fee for discounting the bill. The letter

of hypothecation is also handed over to the bank which on dishonour of the D/A bill gets the
payment by disposing of the goods under his possession. The banks generally ask for
hypothecation for discounting of bill. The exporter dose not like to discount his D/A bills in
doubtful cases because it will result in loss in case the importer does not honour the bills.
c) Documentary Credit: The importer gets a letter of credit from a bank which promises to
pay the bill of exchange. The D/A and DIP bills can be drawn on the bank as per letter of
credit. The exporter on receipt ofthe letter of credit, despatches the documents to the bank
which accepts the bill of exchange if it is DIP bills. The bank issuing the letter of credit
guarantees the payment of D/ A when the maturity arises for payment. The banks are
considered more liable for payment than the individual importers. Therefore, the documentary
credit letters are more common in international marketing for receiving payment.
d) Other Payment Methods: The importer can pay off his dues by telegraphic transfer (T.T.)
of his cash to the exporter through his banks and the banks will immediately debit the account
of the importers and credit the exporter's account. This information may be sent by airmail to
payoff the dues. The bank draft maybe prepared by the importer to payoff the dues. The bank
draft may be. presented at the time of receiving the documents or after the expiry of the
period or at some later date. There may be payment by cheques and money-order too for
small amounts.
EXPORT INCENTIVFS
The exporter may apply for getting export incentives under export promotion policies of
Govemment. The incentives may be duty drawback, excise duty refund, import replenishment
licence, cash compensatory allowance etc. The Export Promotion Councils are approached for
the purpose.
EXPORT DOCUMENTATION
Export documentation includes a large number of documents to be filled in by the
exporter or export agent. The documents may be trade" "documents, regulatory documents,
export assistance documents and foreign documents. The trade documents are commercial
invoices, bills of exchange, bills of lading and marine insurance. Regulatory documents are
required for complying with the rules and regulations. They may be documents pertaining to
exchange regulations, customs formalities and so on. The export assistance documents
include import replenishment licences, drawback of exise duties etc. The foreign
documentation includes certificates of origin, consular invoice, quality control certificate etc.
COMMERCIAL INVOICE
The commercial invoice contains all the information required for export purposes viz.,
descriptions of goods, price, terms of payment, shipment charges, the name and address of
exporter and importer, shipping vessel. There is no prescribed form of commercial invoice.
The contents of letter of credit are recorded in the commercial invoices. Several copies are
prepared for the use of officials and export authorities. It may include certificate of origin,
value, consular invoice, customs invoice etc. The commercial invoice is prepared by the
exporter on the basis of proforma invoiceofimporter.
LETTER OF CREDIT
The letter of credit is a letter of payment issued by the banker of the foreign importer in
favour of the exporter wherein the banker undertakes to pay the specified amount mentioned
therein. It popularly known as Lie. It has become very important document in international
marketing. The promise to pay is substantiated by the promise made by his banker. The
exporters are assured by this letter of credit The terms and conditions of the letter of credit are
different in different cases. The exporter and importer must agree to the terms and conditions

mentioned in the letter of credit. The letters of credit may be clean letter of credit, revocable
and irrevocable letters of credit, confirmed and unconfirmed letters of credit, transferable and
nontransferable letters of credit and so on. It has better terms of trade whereby the importer
agrees to pay the dues within the specified period. The exporter can secure loans from his
bank on the security of the letter of credit. The utilities of the letter of credit have been
described in the chapter of export financing.
BILL OF EXCHANGE
The bill of exchange is a popular document in international marketing. It is a negotiable
instrument of credit. There are a large number of discounting and rediscounting houses in the
world. Reputed bilis of exchange are discounted by the Reserve Bank of India and
Commercial Banks. The Documents against Acceptance (D/A) and the Documents against
Payment (DIP) are the two important types of bills of exchange. The documents against acacceptance bills are discounted through banks. 'The bills of exchange are accompanied with
the several documents such as commercial invoice, bill of lading, customs bill etc.
G.R. FORM
Foreign Exchange Regulations Act, 1973 requires the exporter to ensure that the full value
of the goods exported by him is remitted to India. This declaration is made in the prescribed
form known as G.R. Form. The G.R. Form is prepared in duplicate to be submitted to the
customs aurhorities. The customs authorities verify the value declared by the exporter and
record the assessed value on the G.R . FornI. The original copy is retained by the Reserve
Bank of India and the duplicate copy is submitted to the commercial bank for realisation of
the foreign exchange. The exporter can retain the proceeds of his exports by submitting G.R.3 Form which is prepared in triplicate. The original copy is sent to the Reserve Bank of India
through customs authorities and the other two copies are dealt with as per instructions of the
RBI. The parcel post is declared onPPForm. The G.R. Form is different fordifferentpurposes.
GRI form is the popular form of dt:elaration of receipt of foreign exchange. The G.R.X. Form
is used for the receipt in advance. It is rare phenomenon because advance payment in expo-rt
is not received in India.
SHIPPING BILL
The shipping bill is a customs document which may be of three types, viz., shipping bill
for goods exempted from customs duties, shipping bill for dutiable goods and shipping bill
for the refund duties paid. The shipping bill is different from bill of lading. The shipping bill
is not title document; it is merely a custom document.
MARINE INSURANCE POLICY
Marine insurance policy is an evidence of agreement between the insurer and the assured
for getting compensation from the former in case the latter suffers loss on account of insured
perils. The insurance becomes essential in international marketing because of expose of
several risks. The insurance policy should be as per terms and conditions ofletter of credit and
trade transactions.
BILL OF LADING
Bill of Lading (BIL) is the document issued by the shipping company acknowledging
that the goods mentioned therein have been shipped on the board of the ship. It is undertaking
that the goods mentioned therein will be delivered to the consignee provided the freight is
paid. It is a title of goods, a receipt of goods received by the shipping company and an
evidence of the contract to carry the goods safely to the destination in exchange of the
specified freight. The bill oflading giv~s details of the goods, carrying vessel, port of
shipment, destination consignee and the exporter and the importer. The bill of lading may be
foul or clean. The foul bill of lading has certain conditions or preimposed clauses. The clean

bill of lading has no conditions orclauses. It demonstrates that the goods des patched are
properly packed under quality control certificate.
UNIT V
IMF
The IMF is an international organization of 184 member countries. It was established to
promote international monetary cooperation, exchange stability, and orderly exchange
arrangements; to foster economic growth and high levels of employment; and to provide
temporary financial assistance to countries to help ease balance of payments adjustment.
Since the IMF was established its purposes have remained unchanged but its operations
which involve surveillance, financial assistance, and technical assistance have developed
to meet the changing needs of its member countries in an evolving world economy.
Growth in IMF Membership, 1945 - 2003
(number of countries)

The purposes of the International Monetary Fund are:

(i) To promote international monetary cooperation through a permanent institution which provides the
machinery for consultation and collaboration on international monetary problems.
(ii) To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the
promotion and maintenance of high levels of employment and real income and to the development of
the productive resources of all members as primary objectives of economic policy.
(iii) To promote exchange stability, to maintain orderly exchange arrangements among members, and to
avoid competitive exchange depreciation.
(iv) To assist in the establishment of a multilateral system of payments in respect of current transactions
between members and in the elimination of foreign exchange restrictions which hamper the growth of
world trade.
(v) To give confidence to members by making the general resources of the Fund temporarily available to
them under adequate safeguards, thus providing them with opportunity to correct maladjustments in
their balance of payments without resorting to measures destructive of national or international
prosperity.
(vi) In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the
international balances of payments of members.
IMF at Work
The work of the IMF is of three main types. Surveillance involves the monitoring of
economic and financial developments, and the provision of policy advice, aimed especially at
crisis-prevention. The IMF also lends to countries with balance of payments difficulties, to
provide temporary financing and to support policies aimed at correcting the underlying

problems; loans to low-income countries are also aimed especially at poverty reduction.
Third, the IMF provides countries with technical assistance and training in its areas of
expertise. Supporting all three of these activities is IMF work in economic research and
statistics.
In recent years, as part of its efforts to strengthen the international financial system, and to
enhance its effectiveness at preventing and resolving crises, the IMF has applied both its
surveillance and technical assistance work to the development of standards and codes of good
practice in its areas of responsibility, and to the strengthening of financial sectors.

THE WORLD BANK

The World Bank Groups mission is to fight poverty and improve the living standards of
people in the developing world. It is a development Bank which provides loans, policy
advice, technical assistance and knowledge sharing services to low and middle income
countries to reduce poverty. The Bank promotes growth to create jobs and to empower poor
people to take advantage of these opportunities James D. Wolfensohn became the ninth
president of the World Bank Group on June 1, 1995. He has traveled to more than 100
countries to gain first hand knowledge of the challenges facing the World Bank's member
countries.
It is the worlds largest external source of funding for education and HIV/AIDS programs. It
strongly supports debt relief, is a leader in the international anti-corruption effort, helps bring
water, electricity and transport to the poor.
What is world bank
In 2003 the World Bank provided $18.5 billion and worked in more than 100 developing
countries, bringing finance and/or technical expertise toward helping them reduce poverty.
WTO
What is the WTO?
The World Trade Organization (WTO) is the only global international organization dealing
with the rules of trade between nations. At its heart are the WTO agreements, negotiated and
signed by the bulk of the worlds trading nations and ratified in their parliaments. The goal is
to help producers of goods and services, exporters, and importers conduct their business.
The multilateral trading systempast, present and future
The World Trade Organization came into being in 1995. One of the youngest of the
international organizations, the WTO is the successor to the General Agreement on Tariffs
and Trade (GATT) established in the wake of the Second World War.
The past 50 years have seen an exceptional growth in world trade. Merchandise exports grew
on average by 6% annually. Total trade in 2000 was 22-times the level of 1950. GATT and the
WTO have helped to create a strong and prosperous trading system contributing to
unprecedented growth.
The system was developed through a series of trade negotiations, or rounds, held under
GATT. The first rounds dealt mainly with tariff reductions but later negotiations included
other areas such as anti-dumping and non-tariff measures. The last round the 1986-94
Uruguay Round led to the WTOs creation. The negotiations did not end there. Some

continued after the end of the Uruguay Round. In February 1997 agreement was reached on
telecommunications services, with 69 governments agreeing to wide-ranging liberalization
measures that went beyond those agreed in the Uruguay Round.
In the same year 40 governments successfully concluded negotiations for tariff-free trade in
information technology products, and 70 members concluded a financial services deal
covering more than 95% of trade in banking, insurance, securities and financial information.
In 2000, new talks started on agriculture and services. These have now been incorporated into
a broader agenda launched at the fourth WTO Ministerial Conference in Doha, Qatar, in
November 2001. The work programme, the Doha Development Agenda (DDA), adds
negotiations and other work on non-agricultural tariffs, trade and environment, WTO rules
such as anti-dumping and subsidies, investment, competition policy, trade facilitation,
transparency in government procurement, intellectual property, and a range of issues raised by
developing countries as difficulties they face in implementing the present WTO agreements.
The deadline for the negotiations is 1 January 2005.

The organization
The WTOs overriding objective is to help trade flow smoothly, freely, fairly and predictably.
It does this by:
Administering trade agreements
Acting as a forum for trade negotiations
Settling trade disputes
Reviewing national trade policies
Assisting developing countries in trade policy issues, through technical assistance and
training programmes
Cooperating with other international organizations

Structure
The WTO has nearly 150 members, accounting for over 97% of
world trade. Around 30 others are negotiating membership.
Decisions are made by the entire membership. This is typically by
consensus. A majority vote is also possible but it has never been
used in the WTO, and was extremely rare under the WTOs
predecessor, GATT. The WTOs agreements have been ratified in all
members parliaments.
The WTOs top level decision-making body is the Ministerial Conference which meets at
least once every two years.
Below this is the General Council (normally ambassadors and heads of delegation in
Geneva, but sometimes officials sent from members capitals) which meets several times a
year in the Geneva headquarters. The General Council also meets as the Trade Policy Review
Body and the Dispute Settlement Body.
At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS)
Council report to the General Council.
Numerous specialized committees, working groups and working parties deal with the
individual agreements and other areas such as the environment, development, membership
applications and regional trade agreements.
The WTO agreements

How can you ensure that trade is as fair as possible, and as free as is
practical? By negotiating rules and abiding by them.
The WTOs rules the agreements are the result of negotiations
between the members. The current set were the outcome of the 198694
Uruguay Round negotiations which included a major revision of the original
General Agreement on Tariffs and Trade (GATT). GATT is now the WTOs
principal rule-book for trade in goods. The Uruguay Round also created
new rules for dealing with trade in services, relevant aspects of intellectual
property, dispute settlement, and trade policy reviews. The complete set
runs to some 30,000 pages consisting of about 30 agreements and
separate commitments (called schedules) made by individual members in
specific areas such as lower customs duty rates and services marketopening.Through these agreements, WTO members operate a nondiscriminatory trading system that spells out their rights and their
obligations. Each country receives guarantees that its exports will be
treated fairly and consistently in other countries markets. Each promises
to do the same for imports into its own market. The system also gives
developing countries some flexibility in implementing their commitments.
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-discrimination.Since 1995, the updated GATT has become the WTOs
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 actions taken
against dumping.

Services
Banks, insurance firms, telecommunications companies, tour operators,
hotel chains and transport companies looking to do business abroad can
now enjoy the same principles of freer and fairer trade 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
to foreign competition, and how open those markets are.ssues such as
state trading, product standards, subsidies and actions taken against
dumping.

Intellectual property :The WTOs 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.
Dispute settlement : The WTOs 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. Judgements by speciallyappointed independent experts are based on interpretations of the agreements and
individual countries commitments.
The system encourages countries to settle their differences through
consultation. Failing that, they can follow a carefully mapped out, stage-

by-stage procedure that includes the possibility of a ruling by a panel of

experts, and the chance to appeal the ruling on legal grounds. Confidence
in the system is borne out by the number of cases brought to the WTO
around 300 cases in eight years compared to the 300 disputes dealt with
during the entire life of GATT (194794).

Policy review : The Trade Policy Review Mechanisms purpose is to improve

transparency, to create a greater understanding of the policies that countries are
adopting, and to assess their impact. Many members also see the reviews as
constructive feedback on their policies.
All WTO members must undergo periodic scrutiny, each review containing
reports by the country concerned and the WTO Secretariat.

10 benefits of the WTO trading system: The ten benefits

1. The system helps promote peace
2. Disputes are handled constructively
3. Rules make life easier for all
4. Freer trade cuts the costs of living
5. It provides more choice of products and qualities
6. Trade raises incomes
7. Trade stimulates economic growth
8. The basic principles make life more efficient
9. Governments are shielded from lobbying
10. The system encourages good government