UNIT 1

INTRODUCTION TO INTERNATIONAL MARKETING & TRADE

MEANING OF INTERNATIONAL MARKETING • International marketing refers to the process of

promoting and selling products or services across national borders. • It involves planning, producing,
placing, and promoting goods or services in the global marketplace. • The goal of international
marketing is to enable businesses to expand their reach beyond their domestic market and cater to a
diverse and potentially larger customer base in different countries. • It refers to the strategy, process
and implementation of the marketing activities in the international market.

DEFINITION OF INTERNATIONAL MARKETING

1. By Kramer: “International Marketing involves business with individuals, firms, organisations and/or
government entities in other countries.”

2. By Subhash C Jain: “The term International Marketing refers to exchanges across national
boundaries for the satisfaction of human needs and wants.

FEATURES OF INTERNATIONAL MARKETING

1. Large Scale Operations: • International marketing is always conducted on a large scale. • It is

done on a wholesale basis and, not on a retail basis, to get the advantages of large scale
operations regarding transportation, handling and warehouse.
2. Global Perspective: • International marketing requires a global perspective, considering
cultural, economic, and political differences across various countries.
3. International Restrictions: • In International Marketing, there are various trade restrictions
(tariff and non-tariff), due to the policies followed by different countries.
4. Presence of Trading Blocs: • Trading Bloc is a group of countries which are geographically
close to each other and have similar trade policies, which, with their mutual trade
cooperation can ensure free flow of goods. • Eg. OPEC, SAARC
5. Three-faced Competition: • In International Marketing, suppliers have to face competition
from three angles. • They have to face competition from the other suppliers of the exporting
country, from the local producers of the importing country and from the exporters of
competing nations.
6. . International Market Research: • In International Marketing, it is required to know about
the customers, dealers and competitors. Thorough market research is essential to
understand the target audience, competition, and market trends in each country. This helps
in tailoring marketing strategies accordingly.
7. . Legal Compliance: • Different countries have varying legal and regulatory frameworks.
International marketers need to comply with local laws and regulations related to
productstandards, labeling, and advertising.
8. . Logistics & Supply Chain Management: • Efficient supply chain management is essential to
ensure timely delivery of products across borders. • This involves dealing with
customs,tariffs, and transportation logistics.
9. Risk Management: • International marketing involves exposure to various risks, including
currency fluctuations, political instability, and cultural misunderstandings. • Implementing
risk management strategies is crucial.
 10. Advanced Technology: • Leveraging technology is essential for efficient communication,
market research, and managing global operations. • E-commerce and digital marketing play a
significant role in reaching a global audience.

NEED & DRIVERS OF INTERNATIONAL MARKETING

NEED:

1. Market Expansion/Growth: • Saturation in Domestic Markets: Companies may explore

international markets when their domestic markets become saturated, and further growth
opportunities are limited. • Increased Revenue Potential: Entering new markets can provide
access to a larger customer base, leading to increased sales and revenue.
2. . Competitive Pressure: Global Competition: Businesses may need to enter international
markets to stay competitive as competitors expand globally and gain market share.
3. Government Policies: Trade Agreements: Favourable trade agreements and government
policies can encourage businesses to explore international markets by reducing trade
barriers and facilitating cross-border transactions
4. Economies of Scale: Expanding into international markets can lead to economies of scale,
reducing per-unit production costs and increasing overall profitability.
5. Competition: • Businesses may need to enter international markets to stay competitive as
competitors expand globally and gain market share

DRIVERS:

1. Consumer Demand: Global Consumer Demand: Some products or services may have global
appeal, and businesses seek to meet the demand of consumers in different parts of the world.
2. Cheap labour: • Organisations from developed countries take advantage of cheap labour in the
developing countries to reduce their cost of production.
3. Access to Talent: • Talent Pool: International expansion can provide access to a diverse and
skilled workforce, fostering innovation and competitiveness.
4. . Availability of Resources: • International markets may offer access to resources (both human
and natural) that are not readily available in the domestic market, allowing for cost-effective
production and operations.

PROCESS OF INTERNATIONAL MARKETING

1;Market Research: • Identify potential target markets by conducting thorough market

research. • Analyse the economic, cultural, legal, and political factors that may impact the
marketing strategy.
2. Market Selection: • Evaluate and prioritize target markets based on research findings. •
Consider factors such as market size, growth potential, competition, and regulatory
environment.
 3. Adaptation of the Marketing Mix (4 P’s): • Product: Modify products or create new ones to
meet the needs and preferences of the target market. • Price: Adjust pricing strategies to
reflect local economic conditions, customer expectations, and competitive pricing. • Place:
Develop distribution channels that suit the target market's infrastructure and logistics. •
Promotion: Design advertising and promotional activities to fit the cultural and social context
of the target market.
4. Legal and Regulatory Compliance: • Understand and comply with international trade
regulations, import/export laws, and other legal requirements. • Ensure that marketing
practices adhere to local regulations and standards.
5. Distribution& Logistics: • Establish efficient distribution channels that consider the
geographical and logistical challenges of the target market• Manage supply chain and
logistics to ensure timely delivery of products.
6. Promotion and Advertising: • Use appropriate communication channels and platforms for
advertising and promotions. • Translate marketing materials accurately to the local language
to ensure clear communication.
7. Relationship Building: • Build relationships with local partners, distributors, and
stakeholders. • Networking and collaboration with local businesses can enhance market
entry and sustainability.
8. Monitoring and Evaluation: • Regularly monitor the performance of marketing strategies
in the international markets. • Evaluate the effectiveness of marketing campaigns and adjust
strategies based on feedback and market changes.

PHASES OF INTERNATIONAL MARKETING

1. Domestic Marketing Orientation (perspective): • This is the starting point, where a

company focuses primarily on its domestic market. • The company may not be actively
seeking international opportunities at this stage.
2. Exporting: • Companies start by exporting their products or services to foreign markets.
This phase involves minimal commitment and risk, as the company relies on
intermediaries like agents or distributors in the target country.
3. Market Entry: • Companies may progress to establishing a more direct presence in
foreign markets, such as through licensing or franchising. • Joint ventures or strategic
alliances with local partners are also common in this phase.
4. Internationalization: • Companies become more involved in foreign markets and may
establish subsidiaries or branches in target countries. • The focus is on adapting
marketing strategies to the specific needs and characteristics of each international
market.
5. Globalisation: • In this phase, companies develop a truly global approach, treating the
world as a single, borderless market.. Standardization of products and marketing
strategies becomes more common to achieve economies of scale.
6. Network Development: • Companies focus on building and maintaining a network of
relationships with stakeholders, including customers, suppliers, and partners worldwide.
• This phase emphasizes the importance of global collaboration and partnerships.
7. Global Strategic Marketing: • At this advanced stage, companies develop and implement
comprehensive global marketing strategies that consider economic, political, cultural,
and technological factors on a worldwide scale
 BENEFITS OF INTERNATIONAL MARKETING
1. Increased Market Potential: • Access to a larger customer base: International
marketing allows businesses to tap into new markets and reach a more extensive and
diverse audience, potentially increasing sales and revenue.
2. Enhanced Profit Margins: • Improved profitability: By optimizing operations and
capitalizing on opportunities in different markets, businesses can achieve higher profit
margins than they might in a single domestic market.
3. Better Standard of Living: • International Marketing provides a better standard of
living to people in different countries and raises their welfare by providing them goods
that cannot be produced in their country.
4. Employment Opportunities: • International Marketing helps in large scale production
of goods and thus, generates employment opportunities in different countries.
5. Optimum Use of Resources: • International Marketing helps in optimum use of
resources .
6. Quick Industrial Development: • International Marketing helps in quick industrial
development of the developed and the developing countries. • The developed countries
give aids, capital goods (goods that are used in producing other goods) and technology
to the developing countries. • The developing countries supply raw materials and labour
to the developed countries.
7. Lowers Prices: • International Marketing decreases the price of goods and services, all
over the world.
8. Technological Development: • International Marketing helps in technological
advancement by coming up with the latest technologies to help in the large scale
production of goods and also saves time.
9. Research & Development: • Since International Marketing is extremely competitive, it
becomes essential for every organisation to undertake continuous research and
development in order to beat the competition in the market.
10. Foreign Exchange Earnings: • International Marketing helps the countries, especially
the developing countries to earn foreign exchange and thus, strengthen their economy.

CHALLENGES OF INTERNATIONAL MARKETING

1. Cultural Differences: • Understanding and adapting to different cultures is crucial. • Cultural

differences can significantly impact consumer behavior, preferences, and purchasing decisions. •
Language barriers may also pose challenges in communication, advertising, and branding.

2. Market Research Information: • Obtaining accurate and up-to-date market information can be
difficult in some regions. • Lack of reliable data may lead to inadequate market analysis and strategic
planning.

3. Political and Economic Instability: • Political instability, changes in government, and economic
fluctuations in foreign markets can pose risks to international businesses. • Exchange rate
fluctuations and economic crises may affect pricing strategies and profit margins.

4. Distribution Challenges: • Developing effective distribution channels can be challenging.

Infrastructure, logistics, and transportation issues may arise in different regions. • Customs and
import/export restrictions can impact the timely movement of goods.
5. Product Adaptation: • Products may need to be adapted to meet the specific needs and
preferences of different markets. This includes packaging, features, and sometimes the entire
product design.

6. Human Resources Management: • Managing a multicultural team and addressing human resource
issues across different countries can be complex. • Understanding and respecting cultural differences
is essential for effective team collaboration.

DIFFERENCE BETWEEN DOMESTIC & INTERNATIONAL MARKETING

1. Scope and Target Audience: • Domestic Marketing: Focuses on a single country or a specific
geographic region. The target audience is the local population with a shared culture,
language, and buying behavior.

• International Marketing: Involves marketing products or services across multiple countries or

regions. The target audience is diverse, with different cultures, languages, and preferences.

2. Cultural and Social Factors: • Domestic Marketing: Generally deals with a local cultural and
social environment. Marketers understand the local customs, traditions, and consumer
behaviors.

• International Marketing: Requires a deep understanding of various cultures, customs, and

social norms. Cultural differences may significantly impact marketing strategies and messaging.

3.Legal and Regulatory Environment: • Domestic Marketing: Operates within the legal and
regulatory framework of a single country. Marketers need to comply with local laws and
regulations.

• International Marketing: Involves navigating diverse legal systems, trade regulations, and
international agreements. Companies must be aware of and adhere to the laws of each country
in which they operate.

4.Economic Factors: • Domestic Marketing: Deals with a single currency and economic system,
making financial planning and pricing strategies simpler.

• International Marketing: Involves managing multiple currencies, exchange rates, and

economic conditions, which adds complexity to financial planning and pricing strategies.

5.Market Research and Data Collection: • Domestic Marketing: Market research is focused on a
single market, and data collection is generally more straightforward.

• International Marketing: Requires extensive market research across multiple countries to

understand diverse consumer preferences and market trends.

6. Distribution and Logistics: • Domestic Marketing: Logistics and distribution channels are usually
well-established within a single country.

• International Marketing: Involves dealing with complex supply chains, international shipping,
customs, and distribution channels, which may vary significantly from one country to another.
7. Communication and Promotion: • Domestic Marketing: Communication and promotional
strategies are as per the local language and culture.

• International Marketing: Requires adapting communication and promotional materials to multiple

languages and cultural differences.

STAGES OF PRODUCTION
• Designing.
• Planning.
• Procurement (the process of purchasing goods or services)
• Sourcing materials.
• Manufacturing.
• Quality Control.
• Packaging and Shipping
. • Distribution.

DIFFERENT ORIENTATIONS OF INTERNATIONAL MARKETING

1. Ethnocentric Orientation (different attitudes towards company’s involvement in the
international marketing process): • This approach involves considering the home country's
values, culture, and business practices as superior. • The ethnocentric orientation of a firm
considers that the products, marketing strategies and techniques applicable in the home
market are similar to that in the overseas market. • Companies using ethnocentric
orientation may rely on products and marketing strategies that are successful in their home
country when expanding globally. • For example, Walmart’s offerings remain the same
throughout.
2. PolycentricOrientation: • It is the opposite of EthnocentricOrientation. • When a firm
adopts to polycentric orientation to overseas markets, it tries to organize its international
marketing activities on a country to country basis. • This approach works better among
countries that have significant, economic, political and cultural differences. • For example,
McDonald’s tailoring its offerings to the country of operation such as Maharaja Mac in India,
McItaly in Italy, McLobsterin Canada.
3. Regio-centric Orientation: • In regio-centric approach, the firm accepts a regional marketing
policy covering a group of countries which have comparable market characteristics such as
economic, cultural or political similarities and formulates operational strategies based on
region instead of countries. • For example, countries like Pakistan, India and Bangladesh are
very similar. They possess a strong regional identity.
4. Geo-centric Orientation: • Geocentric orientation seeks a global perspective, considering the
entire world as a potential market. • Companies adopting this approach focus on similarities
rather than differences between countries. • In geocentric orientation, the firms accept a
worldwide approach to marketing and target “global consumers” with similar tastes. • For
example, Apple offers products to a similar kind of consumers worldwide.
EPRG FRAMEWORK
The EPRG framework was introduced by globalization expert Howard V. Perlmutter in 1969.
• The EPRG framework describes the various ways businesses decide to enter and operate in
global markets. • The EPRG framework categorizes four orientations or approaches to global
marketing and staffing: ethnocentric, regio-centric, polycentric, and geo-centric. • This
framework helps businesses decide how to enter and operate in global markets
• E stands for Ethnocentric
1. Ethnocentric Orientation: • Ethnocentric approach or home country orientation is the
approach where a company simply markets its product or services internationally in the
same manner as they do domestically. • Companies believe that consumer’s needs and
market conditions are more or less homogeneous (same or of similar kind) in international
markets. • Companies prefer an ethnocentric approach in order to avoid the expense of
developing new marketing techniques to serve foreign consumers. • All functions are
planned and carried out from home base only with little or almost no difference in product
formulation or specifications.
• P stands for Polycentric
. Polycentric Approach: • In Polycentric approach, companies go for customization for each
foreign market. • Polycentric orientation involves adapting products, services, and strategies
to the specific needs and preferences of individual foreign markets. • They will customize
the products according to each country depending upon the consumers taste or preferences
or cultural factors, depending upon their local marketing conditions and then enter into that
market. • Companies customize the marketing mix to meet the specific needs of each
foreign market.
• R stands for Regio-centric
Regio-centricApproach: • In a regio-centric approach, companies target a group of countries
having similar market characteristics, and then enterinto the market. • The regio-centric
orientation assumes that countries in the same geographic region share economic,social,
cultural, or politicalsimilarities. • Strategies developed for one country are applied
throughoutthe region.
• G stands for Geo-centric
Geo-centricApproach: • In geocentric approach, a company identifies the needs of
consumers worldwide and then enters into the market with standard products with
standardized marketing mix for all the markets it serves.

ENTERING INTERNATIONAL MARKETS

1. Exporting: • Exporting is a common international marketing strategy, and it refers to the
practice of shipping goods directly to a foreign country. • Manufacturers looking to expand
their business to other countries often consider exporting first. • It has the lowest risk. •
There are 2 types of exporting:
1. Direct Exporting: An organisation sells directly to a customer in another country.
2. Indirect Exporting: An organisation sells to a distributor in the home country, who further
exports to the customers in other countries.

Advantages of Exporting: • Relatively low-risk entry strategy. • Requires less investment

compared to other international expansion methods. • Allows businesses to test foreign
markets without significant commitment.
2. Licensing: • Licensing is a business arrangement in which a firm (licensor) allows another
company (licensee) in a foreign market to use its intellectual property, such as patents,
trademarks, or technology, in exchange for a fee or royalty.

Advantages: • Low financial risk for the licensor. • Quick market entry without significant
investment

3. Franchising: • Franchising is a form of licensing in which a franchisor grants the franchisee

the right to operate a business using the franchisor's brand, business model, and support
services in exchange for fees or royalties.

Advantages: • Allows for rapid expansion with lower capital investment by the franchisor. •
Franchisees bear the financial risk of individual outlets. • Uses local entrepreneurs'
knowledge of the market

4. MERGERS: • A merger is a business combination where two or more companies agree to

combine their operations and assets to form a new, single entity. • It is a strategic business
move typically aimed at achieving various objectives, such as increased market share,
enhanced operational efficiency, cost savings, and improved competitiveness. • Mergers can
take different forms.

Examples:

1. Vodafone India and Idea Cellular: o In 2018, Vodafone India and Idea Cellular merged to
form Vodafone Idea Limited. This merger created one of the largest telecom operators in
India.

2. Kotak Mahindra Bank and ING Vysya Bank: o In 2015, Kotak Mahindra Bank acquired ING
Vysya Bank, leading to the amalgamation of the two banks. This merger expanded Kotak
Mahindra Bank's presence and customer base.

3. HDFC Bank and Centurion Bank of Punjab: o In 2008, HDFC Bank acquired Centurion Bank
of Punjab in a deal that strengthened HDFC Bank's position in the Indian banking sector.

4. Sun Pharmaceutical Industries and Ranbaxy Laboratories: o In 2014, Sun Pharmaceutical

Industries acquired Ranbaxy Laboratories, leading to the amalgamation of two major
pharmaceutical companies in India.

TYPES OF MERGERS:

1. Vertical Merger: • A vertical merger is a union between two companies in the same
industry but at different stages of the production process. • In other words, a vertical
merger is the combination and integration of two or more companies that are involved in
different stages of the supply chain in the production of goods or services
Example: Company A is a computer manufacturer. Company B is the main supplier of
parts to Company A. Therefore, the two companies are operating at different stages of
the production process. Company A decides to merge with Company B to improve
operational efficiency. Through this merger, A-B Company can now buy supplies at cost
and, thus, increase the profit margin of its products
 Reasons for Vertical Merger:
1. Reduce operating costs
2. Realize higher profits
3. Ensure tighter quality control
4. Better flow and control of information along the supply chain

BACKWARD & FORWARD INTEGRATION:

A vertical merger integration can integrate backward or forward: Backward integration
involves merging with upstream companies (such as suppliers and producers). Consider
the diagram above with producers, suppliers, manufacturers, wholesalers, and retailers.
If Manufacturer A merges with Supplier A, it would be considered a backward merger –
Manufacturer A is integrating with an upstream company. Backward integration would
weaken supplier power.
• Forward integration involves merging with downstream companies (such as
distributors or retailers). • Consider the diagram above with producers, suppliers,
manufacturers, wholesalers, and retailers. • If Manufacturer A merges with Wholesaler
A, it would be considered a forward merger – Manufacturer A is integrating with a
downstream company. Forward integration would weaken buyer power

2. Horizontal Merger:
• A horizontal merger occurs when companies operating in the same or similar industry
combine together. • The purpose of a horizontal merger is to more efficiently utilize
economies of scale and increase market power. Synergy: It is a concept that the
combined value and performance of two companies will be greater than the sum of the
separate individual parts.
Example: Consider a famous horizontal merger: HP (Hewlett-Packard) and Compaq in
2011. The structure was a stock-for-stock merger with an exchange ratio of 0.63 HP share
per Compaq share, valued at approximately US$25 billion. The new company would be
held 64% by HP and 36% by Compaq shareholders.
Reasons for Horizontal Merger:
1. Increase market share and reduce competition in the industry
2. Further utilize economies of scale (thus reducing costs)
• Increase diversification • Reduce intense rivalry • Share skills and resources

Horizontal Merger vs. Vertical Merger

• Though one is often confused with the other, there is a distinct difference between the
two types of mergers. Vertical merger: Occurs between companies at different stages in
the production process (between companies where one buys or sells something from or
to the company). Horizontal merger: When companies that sell similar products merge
together.
3. Conglomerate Merger:
• A conglomerate merger is a merger of two firms that have completely unrelated
business activities. • These mergers typically occur between firms within different
industries or firms located in different geographical locations. • Two firms would enter
into a conglomerate merger to increase their market share, diversify their businesses and
cross-sell their products.
• There are two types of conglomerate mergers:
1. Pure Conglomerate: where the two firms continue to operate in their own markets,
and have nothing in common.
2. Mixed Conglomerate: involve firms that are looking for product extensions or market
extensions. • Their businesses do not overlap nor are they competitors of one another;
however, they do believe that there are benefits in joining their firms

4. Concentric Merger:
• A concentric merger is a merger in which two companies from the same industry come
together to offer an extended range of products or services to customers. • The
companies are completely unrelated. • These companies often share similar technology,
marketing, and distribution channels. • This type of transaction can also be called a
‘congeneric merger’.
Reasons: 1. Larger market share 2. Diversification of products/services 3. New customers
4. Financial gain

The Largest Concentric Merger in History • The 2015 merger of Heinz and Kraft valued at
around $100 billion, is thought to be the largest concentric merger in history. The deal
created Kraft-Heinz, a food industry behemoth whose 2019 revenues were $24.97
billion.
• At the time of the transaction, Kraft was a leading producer of mayonnaise, salad
dressing, cottage cheese, natural cheese and lunch meat. Heinz, meanwhile, was the
world leader in meat sauce, pasta sauce and frozen appetizers.

ACQUISITIONS:
• An acquisition is a transaction wherein one company purchases most or all of another
company's sharesto gain control of that company. • In a business context, acquisitions
are a common strategy for companies to achieve growth, expand their market presence,
gain access to new technologies or resources, and increase their overall competitiveness.
• Acquisitions can take various forms, including the purchase of a company's
assets,stock, or other ownership interests. • If a firm buys more than 50% of a target
company's shares, it effectively gains control of that company
• The acquiring company, often referred to as the "acquirer" or "parent company," takes
control of the acquired company, known as the "target" or "acquiree."

REASONS FOR ACQUISITION:

1. Strategic Expansion: Acquiring companies can expand their geographic reach, enter
new markets, or diversify their product or service offerings.
2. Market Share Growth: Acquisitions can help a company increase its market share by
gaining access to the customer base of the acquired company.
3. Technology Access: Acquiring companies may be interested in obtaining specific
technologies, intellectual property, or research and development capabilities.
4. Competitive Advantage: Acquiring key competitors can strengthen a company's
competitive position in the market.
Examples: • Walmart's Acquisition of Flipkart (2018): Walmart, the U.S. retail giant,
acquired a 77% stake in Flipkart, one of India's largest ecommerce companies, for $16
billion. This acquisition marked Walmart's significant entry into the Indian e-commerce
market.

TYPES OF ACQUISITIONS:

1. Asset Acquisition: • In an asset acquisition, the acquiring company purchases

specific assets of the target company. • A business asset is an item of value owned
by a company. • They can be physical, tangible goods, such as vehicles, real estate,
computers, office furniture, and other fixtures, or intangible items, such as
intellectual property.
2. StockAcquisition• In a stock acquisition (or share acquisition), the acquiring
company buys the majority of the target company's shares, gaining control of the
entire business. This often involves negotiating with the existing shareholders.
3. Merger: • A merger occurs when two companies agree to combine their operations
and become a single entity. • Mergers can be categorized into different types, such
as horizontal (between companies in the same industry), vertical (between
companies in different stages of the supply chain), or conglomerate (between
unrelated businesses).
4. . Horizontal Acquisition: • This type involves the acquisition of a competitor
operating in the same industry and at the same stage of production.
5. Vertical Acquisition: • In a vertical acquisition, a company acquires another company
in a different stage of the production or distribution chain. • This can involve
suppliers or distributors.
6. Conglomerate Acquisition: Conglomerate:a company that owns several smaller
businesses whose products o r services are usually very different: • Conglomerate
acquisitions involve the purchase of a company that operates in an entirely different
industry. The acquiring company may seek to diversify its portfolio or enter new
markets.
7. Friendly Acquisition: • A friendly acquisition occurs when the target company's
management and board of directors are in agreement with the acquisition. The
process is usually cooperative and involves negotiation.
8. Hostile Acquisition: • A type of acquisition where a company (the acquirer) takes
control of another company (the target company) without the approval or consent
of the target company's board of directors. • In other words, the target company's
management is not in favor of the takeover, hence the term "hostile".
JOINT VENTURES (JV):

• A joint venture (JV) refers to a business arrangement where two or more parties come together to
collaborate and pool their resources, expertise, and capital to achieve a specific business goal or
undertake a particular project. • A joint venture is a strategic partnership where two or more
companies develop a new entity in order to collaborate on a specific project or venture.

Examples: Sony Ericsson (Sony and Ericsson): In 2001, Sony and Ericsson formed a joint venture to
produce mobile phones. The partnership allowed both companies to combine their expertise in
electronics and telecommunications. • McDonald's (McDonald's Corporation and local partners): In
various countries, McDonald's operates as a joint venture with local partners. This allows McDonald's
to adapt its menu and business strategies to local preferences while leveraging the local partner's
knowledge of the market. • Starbucks (Starbucks Corporation and Tata Global Beverages): Starbucks
formed a joint venture with Tata Global Beverages to open Starbucks outlets in India. This
partnership combines Starbucks' coffee expertise with Tata's knowledge of the Indian market.

REASONS FOR JV:

1. To Reduce Costs: • By using economies of scale, both companies in the JV can leverage their
production at a lower per-unit costthan they would separately. • This is particularly
appropriate with technology advances that are costly to implement. • Other cost savings as a
result of a JV can include sharing advertising or labor costs. Meaning of Economies of Scale:
Cost reductions that occur when companiesincrease production.
2. 2. To Combine Expertise: • Two companies or parties forming a JV might have different
backgrounds, skill sets, or expertise. When these are combined through a JV, each company
can benefit from the other’s talent.
3. 3. To Enter Foreign Markets: • Another common use of JVs is to partner with a local business
to enter a foreign market. • A company that wants to expand its distribution network to new
countries can enter into a JV agreement to supply products to a local business,thus
benefiting from an already existing distribution network.
Meaning of Distribution Network:
• It is the flow of goods from a producer or supplier to an end consumer. • The network
consists of storage facilities, warehouses and transportation systems that support the
movement of goods until they reach the end consumer. • The process of ensuring the
consumer receives the product from the manufacturer is done through direct sales or by
following a retail network.

TYPES OF JV:
1. Project Based JV: • A project-based joint venture has two or more parties working on a
specific project. • This agreement is usually temporary, lasting until the project’s
completion. Project-based joint ventures can also include: • Construction companies
that form a venture to share the risks and costs of a large development. • Tech
companies that join forces to develop a new product, then go their separate ways once
the productis complete.
2. Functional Based JV: • A functional-based joint venture is a business relationship where
two or more parties share resources and expertise to support each other’s operations. •
The partnership is usually ongoing, lasting for as long as both parties find it beneficial. •
For example, say you own a small bakery. To help increase your reach and grow your
business, you might enter into a functional-based joint venture with a local coffee shop.
 They sell your baked goods in their cafe and while you hawk their coffee beans in your
bakery.
3. Vertical JV: • A vertical joint venture takes place between buyers and suppliers. • A
vertical joint venture creates economies of scale and reduces costs for both parties. •
For example, Honda and LG Energy Solutions partnered to build a $4.4B battery plant in
Ohio in early 2023.
4. Horizontal JV: • A horizontal joint venture occurs between two or more companies
operating in the same industry. • The goal is to pool resources to gain a competitive
edge. • In the type of JV, the parties that decide to come together are competitors,
selling similar products.

STRATEGIC ALLIANCE (SA):

• A strategic alliance refers to a formal agreement between two or more entities (such as companies
or organizations) to collaborate in a way that provides mutual benefits and achieves common
objectives. • These alliances are formed to gain a competitive advantage, share resources, reduce
risks, and enhance the overall performance of the involved parties. • Strategic alliances can take
various forms, including partnerships, joint ventures, collaborations, and other cooperative
arrangements.

Examples: • Apple and IBM (2014): Apple and IBM formed a strategic alliance to develop enterprise-
focused mobile applications for iOS devices. IBM provided its expertise in data analytics and
enterprise solutions, while Apple contributed its mobile hardware and user interface design. •
Starbucks and Spotify (2015): Starbucks and Spotify entered into a strategic partnership to integrate
the music streaming service into Starbucks stores and the Starbucks app. This alliance aimed to
enhance the overall customer experience and drive traffic to both brands.

CHARACTERISTICS OF SA:

1. Mutual Benefit: The parties involved in a strategic alliance seek to derive benefits that contribute
to their individual or collective success. These benefits may include access to new markets,
technology sharing, cost reduction, or improved efficiency.

2. Shared Risks and Rewards: Partners in a strategic alliance typically share both the risks and
rewards associated with the collaboration. This helps distribute the burden of challenges and ensures
that the parties are invested in the success of the alliance.

3.Common Goals and Objectives: Strategic alliances are formed with a clear set of goals and
objectives that the participating entities aim to achieve together. These goals could be related to
market expansion, product development, innovation, or other strategic initiatives.
SUBSIDIARY

• A company owned or controlled by another company, which is called the parent company or
holding company.

WHOLLY OWNED SUBSIDIARY: • A wholly owned subsidiary is a company whose entire stock or
shares are owned by another company, referred to as the parent company. • In other words, the
parent company has full control over the subsidiary, both in terms of ownership and management. •
A wholly-owned subsidiary is a corporation with 100% shares held by another corporation, the
parent company.

Examples: 1. WhatsApp (Facebook Inc.): Facebook acquired WhatsApp, making it a wholly-owned

subsidiary. 2. YouTube (Google/Alphabet Inc.): Google owns YouTube as a whollyowned subsidiary. 3.
Lexus (Toyota Motor Corporation): Lexus is a wholly-owned subsidiary of Toyota.

TYPES OF SUBSIDIARIES:

1. Horizontal Subsidiary: • A subsidiary that operates in the same industry and performs similar
functions as the parent company
2. Vertical Subsidiary: • A subsidiary that operates at a different stage of the production or
distribution chain compared to the parent company. • It could be either upstream (closer to raw
materials) or downstream (closer to consumers).
3. Direct Subsidiary: • A subsidiary that is wholly owned by the parent company without any
intermediate holding companies. • An intermediate holding is a firm that is both a holding
company of another entity and a subsidiary of a larger corporation.
4. Indirect Subsidiary: • A subsidiary that is owned by another subsidiary of the parent company,
creating a multi-tiered ownership structure.
5. . Operating Subsidiary: • A subsidiary that is actively involved in the day-to-day operations of the
business and contributes to the overall revenue and profitability of the parent company.
6. Non-operating Subsidiary: • A non-operating subsidiary, in contrast, is a subsidiary that exists on
paper, but does not have any assets or employees of its own and therefore cannot function
independently as a going business concern.

CONTRACT MANUFACTURING:
• Contract manufacturing refers to an arrangement in which a company or individual, known as the
"contract manufacturer," produces goods or provides services for another company, often referred to
as the "client" or "brand owner." • This outsourcing strategy allows the client to focus on other
aspects of its business, such as marketing, sales, and product development, while the contract
manufacturer handles the production process. • In the context of manufacturing, a contract
manufacturing agreement outlines the terms and conditions under which the contract manufacturer
will produce the goods or provide the services.

• This agreement typically covers aspects such as quality standards, production quantities, pricing,
intellectual property rights, delivery schedules, and confidentiality. • Contract manufacturing is
prevalent in various industries, including electronics, pharmaceuticals, food and beverage,
automotive, and more. • It offers several advantages, such as cost savings, access to specialized skills
and technologies, flexibility in production capacity, and the ability to focus on core competencies.
TURNKEY PROJECTS:

• A turnkey project is one which is designed, developed and equipped with all facilities by a
company under a contract. • It is handed over to a buyer when it becomesready to operate business.
• The term "turnkey" refers to the fact that the project is delivered to the client in a condition where
it can be used immediately, as if the client just needsto "turn the key" to start using it. • In a turnkey
project, the contractor or project team takes full responsibility for designing, building, and delivering
a fully operational and functionalfacility or system. • Example: a contractor building a road, a
contractor building houses.This includes not only the physical construction but also the procurement
of all necessary components, equipment, and systems. • Turnkey projects are common in various
industries, including construction, engineering, technology, and real estate development.

GLOBALISATION

• Globalization is a term used to describe how trade and technology have made the world into a
more connected and interdependent place. • Globalization is a process of increasing social and
economic integration among countries around the world. • Globalization refers to the increased
interconnectedness and interdependence of countries through the exchange of goods, services,
information, and ideas.

REASONS FOR GLOBALISATION:

1. Technological Advancements: • Advances in technology, particularly in transportation and

communication (such as the internet), have significantly reduced the cost and time
associated with moving goods, services, and information across borders. • This has facilitated
the rapid expansion of global trade and communication.
2. Trade Liberalization: • Many countries have pursued policies to bring ease of doing
trade/business. • Organizations like the World Trade Organization (WTO) work to promote
free trade agreements and reduce protectionist measures.
3. Market Access and Expansion: • Globalization provides businesses with access to larger
markets, allowing them to sell their products and servicesto a wider audience. • This access
to a larger consumer base can lead to increased sales and economic growth.
4. Resource Utilization: • Globalization allows countries to specialize in the production of goods
and servicesin which they have a comparative advantage. • This specialization enables more
efficient use of resources, as countries can focus on what they do best and trade for other
goods and services.
5. . Innovation and Knowledge Transfer: • Globalization promotes the flow of ideas, knowledge,
and technology across borders. • This transfer of innovation and expertise can lead to
advancements in various fields and contribute to the overall progress of societies
6. Reduced Poverty: • Increased economic activity resulting from globalization can contribute
to poverty reduction by creating job opportunities and improving living standards in
developing countries.
ADVANTAGES OF GLOBALISATION:
1. Increased Economic Growth: • Globalization can contribute to overall economic growth
by creating new markets, fostering competition, and facilitating the flow of goods,
services, and capital across borders.
2. Access to New Markets: • Businesses can expand their reach and access new markets
around the world, leading to increased opportunities for growth and profit.
3. Innovation and Technology Transfer: • Globalization allows for the exchange of ideas,
technologies, and innovations across borders. • This transfer of knowledge can
accelerate technological progress and lead to improvements in various industries.
4. Enhanced Productivity: • Increased competition resulting from globalization can drive
improvements in efficiency and productivity as companies strive to stay competitive in
the global marketplace.
5. Job Creation: • While there are concerns about job displacement, globalization can also
lead to job creation, particularly in sectors that benefit from expanded markets and
increased demand.
6. Reduced Prices for Consumers: Access to a global marketplace can lead to lower prices
for consumers as companies seek to remain competitive and take advantage of lower
production costs in different regions.
7. Access to Resources: Globalization enables countries to access resources that may be
scarce or unavailable domestically. This includes natural resources, raw materials, and
specialized skills.
8. .Political Cooperation: Economic interdependence can promote political cooperation and
stability among nations, as countries have a shared interest in maintaining peaceful
relations for the sake of economic prosperity.

DISADVANTAGES OF GLOBALISATION:
1. Inequality: • Income Inequality: Globalization can craete income inequality, both
within and between countries. Wealth tends to concentrate in certain regions and
among certain groups, leaving others marginalized. • Labor Exploitation: Companies
may take advantage of lower labour standards in some countries, leading to
exploitation of workers and poor working conditions.
2. . Job Displacement: • Outsourcing: Companies often seek cost savings by
outsourcing jobs to countries with lower labour costs. This can result in job losses in
highercost regions, contributing to unemployment and economic instability.
3. Environmental Degradation: • Resource Exploitation: The pursuit of economic
growth in a globalized world can lead to the overexploitation of natural resources,
deforestation, and environmentaldegradation.
4. Health Risks: • Spread of Diseases: Increased global connectivity facilitates the rapid
spread of diseases, as seen with the global transmission of infectious diseases like
COVID-19.
5. Loss of Local Industries: • Competition: Local industries may struggle to compete
with larger, more efficient multinational corporations, leading to the decline or
closure of smaller businesses.
6. Social Disruption: • Social Unrest: Economic disparities and cultural changes
associated with globalization can contribute to social unrest and political instability.
INTERNATIONAL TRADE

• International trade refers to the exchange of goods and services between countries. • There is an
exchange of goods for goods among nations. • It could be termed as the basic economic activity or
transaction among different countries of the world. • International Trade is made up of transactions
in goods or exchange of goods or purchase and sale of goods among nations collectively called
‘imports’ and ‘exports.’ • Imports are goods consumed in one country which have been bought from
another country.

• Exports are good produced in one country and sold to and consumed in another country. • The
sum total of imports and exports is called ‘total trade’ and the difference between exports and
imports is called ‘Balance of Trade.’

Balance of Trade for one country could be of 3 types:

In ‘Balanced Balance of Trade’ of a country, its total amount of exports will be just equal to its total
amount of imports. • This happens rarely for a country.

• In ‘Surplus Balance of Trade’ of a country, the total value of exports will exceed the total value of
imports. • It also called as ‘plus’, ‘positive or favourable balance of trade’ or ‘trade surplus.’

• In ‘Deficit Balance of Trade’ of a country, the total value of imports will exceed the total value of
exports. • This balance of trade is also known as ‘minus (-), adverse’ or ‘negative balance of trade

BARRIERS TO TRADE: TARIFF & NONTARIFF

Trade Barriers refer to the government policies and measures which obstruct the free flow of goods
and services across national borders. • Trade Barriers are imposed on imports and exports. • Trade
Barriers are restrictions imposed on trading activities in between different countries. • Trade Barriers
include Tariff barriers (fiscal controls) and Non-Tariff Barriers (quantitative restrictions).

Quantitative Restrictions: Specific numerical limits on the quantity or value of goods that can be
imported (or exported) during a specific period.

OBJECTIVES OF TRADE BARRIERS:

1. To protect home industries from foreign competition

2. To promote new industries and R & D activities

3. To conserve Foreign Exchange Reserves

4. To Maintain Favourable Balance Of Trade & Payments Position

5. To protect national economy from dumping by rich countries with surplus production

6. To curb conspicuous consumption (example drugs)

7. To encourage the use of domestic production

FORMS/TYPES OF TRADE BARRIERS: 1. Export Duties 8. Double-column Tariff

2. Import Duties 9. Triple-column Tariff

3. Transit Duties 10. Revenue Tariff

4. Specific Duties 11. Protective Tariff

5. Ad-Valorem Duties 12. Countervailing Duties

6. Compound Duties 13. Anti-Dumping Duties

7. Single-Column Tariff/Uni-lateral Tariff

FORMS/TYPES OF TRADE BARRIERS:

1. On the basis of the Origin and the Destination of the Goods crossing the National Boundary:

a. Export Duties: these are taxes imposed on a commodity/goods being sent out of a country.

b. Import Duties: are taxes charged by the customs authority on the importation of goods into a
country.

c. Transit Duties: are taxes levied on commodities/goods passing through a customs area enroute to
another country.

2.On the Basis of Quantification of the Tariff:

a. Specific Duties: It is a fixed amount of duty collected upon each unit of the commodity/goods
imported. (Example: per mobile phone).

b. Ad-Valorem Duties: They are collected as a fixed percentage of the total value of the
commodity/goods imported/exported.

c. Compound Duties: When both specific duties and ad-valorem duties are charged on a
commodity/goods, it is termed as Compound Duties.

3. On the Basis of Application betweenDifferent Countries: a

. Single-column Tariff/Uni-lateral Tariff: It provides a uniform rate of duty for all like (similar)
commodities without making any discrimination between countries.

b. Double-column Tariff: It discriminates between countries because there are two rates of duty on
some or all commodities.

c. Triple-column Tariff: The multiple column tariff consists of three different rates of tariff – a general
rate, an international rate and a preferential rate. The general and international tariff rates can be
considered equivalent to the maximum and minimum tariff rates discussed above. The preferential
tariff is generally applied by a subject country to the products originating from the colonial countries.

4. On the Basis of Purpose they Serve:

a. Revenue Tariff: The tariff, which is imposed primarily for generating more revenues for the
government is called as the revenue tariff.

b. Protective Tariff: The tariff may be imposed by the government to protect the home industries
from the cut-throat competition from the foreign produced goods. A perfect protective tariff is likely
to prohibit completely the import from abroad.

c. Countervailing Duties: It is a specific form of duty that the government imposes in order to protect
the domestic producers by countering the negative impact of import subsidies.

d. Anti-Dumping Duties: An anti-dumping duty is a protectionist tariff that a domestic government

imposes on foreign imports that it believes are priced below fair market value. • Dumping is a
process wherein a company exports a product at a price that is significantly lower than the price it
normally charges in its home (or its domestic) market.

ADVANTAGES OF TARFIFF BARRIERS:

1. Protection to home industries

2. Reduce foreign goods consumption

3. Encourage R & D activities

4. Avoid competition

5. Revenue to government

NON-TARIFF BARRIERS:

• Non-tariff barriers are trade barriers that restrict the import or export of goodsthrough means
other than tariffs. TYPES OF NON-TARIFF BARRIERS:

1. Quotas: Quantitative restrictions on the quantity of a specific product that can be imported or
exported.

b. Unilateral Quota: these are quotas set by a country on the import of a particular commodity
without previous consultation or negotiation.

c. Bilateral Quota: Negotiations are made between the importing country and the supplier country
and the quantity to be imported is decided.

d. Mixing Quota: It is a regulation that requires domestic producers to utilise a certain proportion of
domestically sourced raw materials along with the imported parts, to produce finished good
domestically. a. Tariff Quota: these are limited amounts of specific goods that can be imported during
a specified period at reduced or zero rates as against normal customs duties.

2. Import License:

A license system allows authorized companies to import specific commodities that are included in
the list of licensed goods. • Product licenses can either be a general license or a one-time license. •
The general license allows the importation and exportation of permitted goods for a specified period.
• The one-time license allows a specific product importer to import a specified quantity of the
product, and it specifies the cost, country of origin, and the customs point through which the
importation will be carried out.
3. Embargoes: are total bans of trade on specific commodities and may be imposed on imports or
exports of specific goods that are supplied to or from specific countries.

4. Customs Regulations: means laws and regulations concerning the. importation, exportation,
transit of goods, or any other customs procedures, whether. relating to customs duties, taxes or any
other charges collected by the Customs.

5. Foreign Exchange Regulations: The foreign exchange regulations facilitate the inflow and outflow
of funds to and from India.

TRADING BLOCS: SAARC, ASEAN, NAFTA, EU, OPEC

TRADING BLOC:

• It is a group of countries which are geographically close to each other and have similar trade
policies, which can with their mutual cooperation ensure free flow of goods among them. •
Countries which have something in common have formed economic union for mutual benefit. •
These unions/groups have liberal rules for member countries and a separate set of rules for non-
members. • These groups form an agreement that can give encouragement to trade among the
group.

OBJECTIVES OF TRADING BLOCS:

1. To create a favorable economic framework for promotion of cross border trade among the
member countries. 2. To reduce or remove trade barriers among the member countries. 3. To
promote free transfer of labour and capital. 4. To bargain effectively with the non-members. 5. To
enhance the welfare of the consumers. 6. To promote higher employment in the region.

SAARC

• Stands for South Asian Association for Regional Cooperation. • It has 8 members: India,
Bangladesh, Pakistan, Nepal, Bhutan, Sri Lanka, Maldives and Afghanistan. • It was formed in
December 1985. • It is headquartered in Kathmandu, Nepal.

OBJECTIVESOF SAARC:

1. To promote the welfare of the people of South Asia and improve their quality of life.

2. To accelerate the economic growth, social progress, and cultural development in the region by
providing all individuals the opportunity to live in dignity and realize their full potential.

3. To contribute to mutual trust, understanding and appreciation of one another’s problems.

4. To strengthen co-operation with other developing countries.

5. To cooperate with international and regional organizations with similar aims and purposes.’

PRINCIPLES OF SAARC: 1. Sovereign Equality 2. Territorial Integrity 3. Political Independence 4. Non-

interference in the internal affairs of the Member States 5. Mutual benefit
ASEAN

• Stands for the Association of South-East Asian Nations. • Was established on 8 August 1967 in
Bangkok. • Has 10 members: 1. Brunei 6. Myanmar (Burma) 2. Cambodia 7. Philippines 3. Indonesia
8. Singapore 4. Laos 9. Thailand 5. Malaysia 10. Vietnam

• Headquartered in Jakarta, Indonesia.

OBJECTIVES OF ASEAN:

1. To promote regional peace and stability. 2. To promote economic growth and development. 3. To
promote social and cultural development. 4. To protect the interests of South-east Asian Nations. 5.
To promote South-east Asian studies. 6. To promote regional integration and connectivity 7. To
promote environmental sustainability

NAFTA

• Stands for the North American Free Trade Agreement. • It was a trade agreement between Canada,
Mexico, and the United States that came into effect on January 1, 1994. • NAFTA aimed to eliminate
barriers to trade and investment between the three North American countries, fostering economic
integration and cooperation. • Headquartered in Mexico City (Mexico), Ottawa (Canada) and
Washington D.C (USA) • Has 3 members: Canada, Mexico and the USA.

OBJECTIVES OF NAFTA:

1. To eliminate tariffs and other trade barriers. 2. To promote fair competition. 3. To protect
intellectual property rights. 4. To facilitate investments

EU

• Stands for European Union. • It is a supranational political and economic union of 27 member
states that are located primarily in Europe. • It was established with the aim of fostering economic
cooperation and preventing another devastating war in Europe following World War II. • It has 27
member states:

1.Austria 10. France 19. Malta 2.Belgium 11. Germany 20. Netherlands 3.Bulgaria 12. Greece 21.
Poland 4.Croatia 13. Hungary 22. Portugal 5.Cyprus 14. Ireland 23. Romania 6.Czech Republic 15. Italy
24. Slovakia 7.Denmark 16. Latvia 25. Slovenia 8.Estonia 17. Lithuania 26. Spain 9.Finland 18.
Luxembourg 27. Sweden

OBJECTIVES OF EU:

1. To promote peace and stability 2. To promote environmental sustainability 3. To promote

economic development 4. To promote human rights and democracy 5. To promote security and
defence cooperation 6. To promote innovation and research 7. To promote consumer protection 8. To
promote health standards
OPEC

• Stands for The Organization of the PetroleumExporting Countries. • Is a permanent,

intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960, by
Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. • Is a cartel of oil-producing countries that aims to
manage the production and pricing of oil in the international market. • OPEC wasfounded in 1960
and is headquartered in Vienna, Austria. • OPEC member countries collectively possess significant
reserves of crude oil, and their production levels have a considerable impact on global oil prices.

• It has 12 member countries: 1. Algeria 9. Republic of the Congo 2. Angola 10. Saudi Arabia 3. Gabon
11. United Arab Emirates 4. Iran 12. Venezuela 5. Iraq 6. Kuwait 7. Libya 8. Nigeria

OBJECTIVES OF OPEC:

1. Stabilising oil prices 2. Ensuring a fair return on investment 3. Coordinating oil production policies
4. Protecting the interests of oil producing nations 5. Investing in oil industry infrastructure 6.
Promoting cooperation and dialogue 7. Supporting sustainable development