II MBA [2009-2011 Batch]

MBA 09 M06 INTERNATIONAL MARKETING

Staff In charge:

Mr.P.Rajaa., MBA., M.Phil.,(Ph.D).,

Asst Professor
Department of Business Administration
KSR College of Engineering, Tiruchengode -637 215
Namakkal (Dt), Tamilnadu.

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 MBA 09 M06 INTERNATIONAL MARKETING
TWO MARKS WITH ANSWER

Unit Topics

1 INTRODUCTION

ü International Marketing as a Global Concept.

ü International Marketing Environment
ü international Marketing Strategies
ü Analyzing International Marketing Opportunities
ü Organizational Transformation
ü Globalization of Business

2 STRATEGIES

ü Market Selection Process

ü Determinants of Market Selection
ü Market Segment Selection
ü Licensing and Franchising
ü Entry Strategies for Indian Firm

3 MARKET COVERAGE AND PRODUCT

ü Concentrated Marketing
ü Market Segmentation
ü Differentiated Marketing Strategy
ü Product Decisions
ü Product Mix, PLC, New Product Development
ü Branding and Product Communication Strategies

4 PRICING AND DISTRIBUTION

ü Pricing and Payment Methods
ü International Channel Systems
ü Types of Intermediaries
ü International Logistics & Documentation

5 PROMOTION
ü Communication Mix
ü Export Promotion
ü EOUs, EPZs and SEZs

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 Unit – I & II
1.Define Marketing.

“Marketing is the process of defining, anticipating and creating customer needs

and wants and of organising all the resources of the company to satisfy them at greater
total profit to the company and to the customer” -B.F Goodrich.

“Marketing is the process of discovering and translating consumer needs and

wants into product and services specifications, creating demand for these products and
services and then in turn expanding this demand” - Hansen

2. Define International Marketing

International Marketing is the performance of business activities designed to plan,
price, promote and direct the flow of a company goods and services to consumers or
users in more than one nation for a profit. The only difference in the definition of
domestic marketing and international marketing is that marketing activities take place in
more than one country.
Marketing Focus Differentiation in country markets by way
of developing or acquiring new brands
Orientation Polycentric
Marketing Mix Developing local product depending upon
country needs decisions by individual
subsidiaries

3.Define Multinational Marketing.

Once a company establishes its manufacturing and marketing operations in
multiple markets, it begins to consolidate its operations on regional basis so as to take
advantage of economic scale in manufacturing and marketing mix decisions. Various
markets are divided into regional sub segments on the basis of their similarity to respond
to marketing mix decision.
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Marketing Focus Consolidation of operations on regional
basis gains from economies of scale
Orientation Regiocentric
Marketing Mix Product standardization within regions but
not across them on regional basis

4.Define Global Marketing

The extreme view of global marketing refers to the use of a single marketing method
across the international markets with little adaptations. As promulgated by Levitt, the
globalization of market leads to:
ü Reduction of cost inefficiencies and duplication of efforts among national and
regional subsidiaries
ü Opportunities for the transfer of products, brands, and other ideas across
subsidiaries
ü Emergence of global customers and
ü Improved linkages among national marketing infrastructures leading to the
development of a global marketing infrastructure.

Marketing Focus Consolidating firms operations on global

basis
Orientation Geocentric
Marketing Mix Globalization of marketing mix decision
with local variations joint decision making
across firms global operations.

5. Define EPRC Concept.

The behavior attributes of a firms management in casual export to global markets
can be described under the EPRG (Ethnocentric, Polycentric, Regiocentric, Geocentric)

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Ethnocentric-Means that a firm or its managers are so obsessed with the belief that the
marketing strategy which has worked in the domestic market would also work in the
international markets. These companies generally indulge in domestic marketing.
Polycentric Orientation – highly market oriented, it is based on the belief that
substantial differences exist among various markets. Each market is considered unique in
terms of its market environment, such as political, cultural, legal, economic, consumer
behavior, market structure, etc.,
Regiocentric orientation – A firm treats a region as a uniform market segment and
adapts a similar marketing strategy within the region but not across the region.
Depending upon the convergence of market behavior on the basis of geographical
regions, a similar marketing strategy is used.
Geocentric orientation – geocentric approach considers the whole world as a single
market and attempts to formulate integrated marketing strategies. A geocentric
orientation identifies similarities between various markets and formulates a uniform
marketing strategy.

6.List out the reason for entering international markets

v Growth
v Profitability
v Achieving economics of scale
v Risk spread
v Access to imported inputs
v Uniqueness of product or services
v Marketing opportunities due to life cycle
v Spreading R&D costs

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7. Define Balance of Payment.
Balance of payments (BOP) sheet is an accounting record of all monetary
transactions between a country and the rest of the world. These transactions include
payments for the country's exports and imports of goods, services, and financial capital,
as well as financial transfers. The BOP summarizes international transactions for a
specific period, usually a year, and is prepared in a single currency, typically the
domestic currency for the country concerned. Sources of funds for a nation, such as
exports or the receipts of loans and investments, are recorded as positive or surplus items.
Uses of funds, such as for imports or to invest in foreign countries, are recorded as a
negative or deficit item

8. What are the reasons for the government to maintain restrictions (Protectionists)
towards foreign trade?
(1) Protection of an infant industry
(2) Protection of the home market
(3) Need to keep money at home
(4) Encouragement of capital accumulation
(5) Maintenance of the standard of living and real wages
(6) Conservation of natural resources
(7) Industrialization of a low wage nation

9. Define WTO and its role.

After world war II over 50 countries came together to create the International
Trade Organization(ITO) as a specialized agency of the United Nations to manage the
business aspect of international economic cooperation. The combined package of trade
rules and tariff concessions negotiated and agreed by 23 countries out of the 50
participating countries came to be known as the General Agreement on Tariffs and Trade.
It came into force in 1948, while the WTO charter was still being negotiated.
The basic functions of WTO are as follows:
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ü It facilitates the implementations, administration, and operation of the trade
agreements
ü It provides a forum for further negotiations among member countries on matters
covered by the agreements as well as on new issues falling within its mandate.
ü It is responsible for the settlement of differences and disputes among its member
countries.
ü It is responsible for carrying out periodic reviews of the trade policies of its
members countries
ü It assists developing countries in trade policy issues through technical assistance
and training programmes
ü It encourages co-operation within international organizations.

10. Define Cartel.

Cartel is an international business agreement to fix prices and divide markets, in
addition to other kinds of cooperation. Such an arrangement is illegal in the united
states, but it is permissible and even encouraged in many countries.

11. Explain various environment influences international marketing.

External environment
Uncontrollable
v Competition structure
v Consumer behavior
v Industry out look – policy, procedure
v Demographics – populations, density, etc.,
v Economy
v Political legal force
v Social environment
v Cultural forces
v Structure of distribution
v Level of technology

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Internal environment
Controllable factors
v Price
v Product
v Promotion
v Channel of distribution
v Technology
12. List out the opportunity in International Marketing?
v Survival
v Economic of scale in production
v Lower marketing costs
v Improve the brand image
v Growth in overseas market
v Diversification
v Improve the sales and profit
v Increase the employment
v Standards of living

13. What are the challenges in International Marketing?

ü Nationalism
ü Stability of govt and economic legislation
ü Exchange rate risk
ü Tax bracket
ü Transaction cost
ü Property right and piracy
ü Skills and competence gap knowledge about customer
ü Terrorism
ü Cultural and behavior

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ü Grey marketing- Smuggled goods

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 14. Explain the International Marketing Entry Mode / Strategy

Production in Home Country Production in foreign Country

Export Providing offshore Contractual Mode Investment Mode

International Licensing Overseas Assembly

Direct Indirect Piggyback Franchising (or) Mixing
Turnkey Project Joint Venture
Management Contract Merger &
Strategic Alliance acquisition
Contract Manufacturing Greenfield
Operation

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15. Define the term leverage in international marketing.
A global company can leverage its experience to expand its global operations. The
more the number of countries it operates in a business sector, the more could the scope
for leverage.

According to Keegan, “Leverage is simply some type of advantage that a company

enjoys by virtue of the fact that it conducts business in more than one country” and a
global company posses the following four important type of leverage.
1. Experience Transfers
2. Scale Economics
3.Resource utilization
4. Global strategy

16. Define International Licensing

A company that possesses a competitive manufacturing process, technical know-
how and design and marketing expertise may enter into international markets by way of
international licensing with minimum involvement of financial resources. In this mode of
entry, the domestic company allows the foreign company to use its intellectual property,
such as patents, trademarks, copyright, process technology, design, or specific business
skills. The overseas recipient firm pays compensation to the domestic firm in lieu of use
of the latter’s intellectual property which is termed royalty.
As a part of international licensing agreements, a licensee usually performs the
following functions.
(a) Production of the licenser’s products covered by rights
(b) Marketing these products in the assigned territory
(c) Paying royalty to the licenser for using the intellectual property

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17. Define International Franchising
Where the transfer of intellectual property and other assistance is required for an
extended period, international franchising is used as a preferred mode of entry. In
International franchising, the home company, known as the franchiser, provides an
overseas company (the franchisee) intellectual property and other assistance over an
extended period of time. Under the franchising agreement, the franchisee acquires the
right to market the producer’s products and services in a prescribed fashion using the
franchiser’s brand name, processing and production methods and marketing guidelines.

18. Differenciate between Licensing and Franchising

Licensing Franchising
The term “royalty” is normally used “Management fees” is regarded as the
appropriate term
Products are the major source of concern Covers all the aspects of business including
know-how, intellectual property rights,
goodwill, trademarks, and business
contacts.
Licenses are usually taken by well Tends to be a start up situation, certainly as
established businesses regards the franchisee.
Terms of 16-20 years are common, The franchise agreement is normally for 5
particularly when they are related to years, sometimes extending to 10 years.
technical know how, copyright and
trademarks
Licensees tend to be self- selecting. They The franhisee is selected by the franchiser,
are often established businesses and can and its eventual replacement is controlled b
demonstrate that they are in a strong the franchiser.
position to operate the license in question.
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There is no goodwill attached to the license Although the franchiser does retain the
as it is totally retained by the licenser main goodwill, the franchisee picks up an
element of localized goodwill
The licensee enjoys a substantial measure There is a standard fee structure and any
of free negotiation. variation within an individual franchise
system would cause confusion and mayhem

19. Discuss the international strategic alliances

International strategic alliance refer to the relationship between two or more firms
that cooperate with each other to achieve common strategic goals but do not form a
separate company, due to increased competitive pressures, most firms prefer to focus on
their core competencies rather than spreading themselves too thin.

20. Define Piggybacking or Complementary exporting

In piggybacking arrangements, the exporting company known as “rider” with
inadequate experience of operating marketing channels uses a foreign company, which
has an established distribution network in the foreign market, known as “carrier”. The
carrier either acts as an agent for a commission or as an independent distributor by
buying the products outright. Normally, the piggybacking arrangement is made for
products from unrelated companies that are complementary (allied) but non-competitive.

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21. Discuss the Process of International marketing Decision.
Market Identification and Targeting
Entry mode selection
Product Decisions
Distribution channels decisions
Market promotion decisions
Enter International Markets
Review Performance
Consolidate Marketing Efforts to Global Marketing

22. Define GATS

The General Agreement on Trade in Services (GATS) is the first and only set of
multilateral rules governing international trade in services. Negotiated in the Uruguay
round, It was developed in response to the strong growth of the services economy over
the past three decades and the greater potential for marketing services internationally
brought about by the communication revolution. The General Agreement on Trade in
Services has three elements:
1. the main text containing general obligations and disciplines;
2. dealing with rules for specific sectors
3. countries’ specific commitments to provide access to their markets and also
indicating sectors where countries are temporarily not applying the “most
favoured nation” principles of non discrimination.

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23. Define International Marketing Research.
International marketing research is a study conducted to assist decision making in
more than one country. Market research is the function that links an organization to its
markets through information collection and analysis. It involves the systematic gathering,
recording, and analyzing of data about problems related to marketing of goods and
services.

In other words, International Marketing Research can be defined as research that

crosses national borders and involves respondents and researchers from different
countries and cultures.
The major objectives of International Marketing Research are :
To carry out country screening and selection
To evaluate a country market potential
To identify aspects of country’s environment that needs further study
To facilitate in developing a strategy marketing plan.

24. Define the scope of marketing research.

The scope of marketing research is indeed very wide.
1. Product Research
2. Pricing research
3. Distribution research
4. Promotion research
5. Consumer research
6. Marketing environment research
7. Market trend research

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 8. Marketing efficiency research

25. Explain the process of International marketing research.

Problem Identification

Decided research methodology

Workout Information requirement

Identification source of Information

Prepare research design

Collecting the Information

Analysis the Information

Evaluation and Interpretation

26. List out the problems in international marketing research?

1. The cultural differences make foreign market research a difficult task.

2.It is often very expensive
3. The research methodology suitable for one market may not be suitable for another
market

27. Explain the market selection Process?

Determine Determine Preliminary Detailed Evaluation and

International Parameters for screening Investigation and selection
marketing objective market selection short listing

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28.List out the determinants(factors) for market Selection
Appropriate size of market
Economic Situation
Economic factors- like Economic stability, GDP, Per capita income, sectoral
distribution, income distribution
Business Regulation
Currency stability
Political stability
Ethnic factors
Infrastructure
Market Hub
Transport and communication
Social development
Nature of competition
Trends in import and export
Trade practices and customs
Cultural factors

29. Define Greenfield?

In many disciplines a green field is a project that lacks any constraints imposed by
prior work. The analogy is to that of construction on green field land where there is no
need to remodel or demolish an existing structure. Such projects are often coveted by
engineers.

30.Define Management Contract.

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 The firm providing the management know how many not have any equity stake in
the enterprise being managed. In short “In a management contract the supplier brings
together a package of skills that will provide an integrated service to the client without
incurring the risk and benefit of ownership”
31.Define Turnkey contracts
Turnkey contracts are common in international business in the supply, erection
and commissioning of plant, as in the case of oil refineries, steel mills, cement and
fertilizer plant.
“ A turnkey operation is an agreement by the seller to supply a buyer with a
facility fully equipped and ready to be operated by the buyer’s personnel, who will be
trained by the seller. The term is sometimes used in fast food franchising when a
franchiser agrees to select a store site, build the store, equip it, train the franchisee and
employees and sometimes arrange for the financing”

32.Define Strategic alliance.

Strategic alliance has been becoming more and more popular in
international business. Also known by such name as entente and coalition, this strategy
seeks to enhance the long term competitive advantage of the firm by forming alliance
with its competitors, existing or potential in critical areas, instead of competition with
each other. “ The goals are to leverage critical capabilities, increase the flow of
innovation and increase flexibility in responding to market and technological changes”

33.Define Foreign Trade Zones (FTZ)

An FTZ is a secured domestic area in international commerce, considered to be
legally outside a country’s customs territory. It is an area designated by a government for
the duty- free entry of goods. It is also a location where imports may be handled with few
regulations, and little or no customs duties and excise taxes are collected. As such, goods

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enter the area without any duty being payable. The duty would be paid only when goods
enter customs territory of the country where an FTZs is located.

34.What is Buffer stock Agreement?

International buffer stock agreement seeks to stabilize commodity prices by
maintaining the demand supply balance. Buffer stock agreements stabilize the price by
increasing the market supply by the sale of the commodity when the price tends to rise
and by absorbing the excess supply to prevent a fall in the price.

35.Discuss the future of International Marketing

1. Globalization of supply chain and operations management – The growing trend
towards globalization of supply chain and operations management will increase the
importance of international marketing.
2. International Investment – The continuing high level of international
investments and increasing international production tend to increase the importance of
international marketing
3. Information surge and consumer choice –Because of information surge
consumers are fairly well aware of the different categories of products available across
the world.
4. World growth- World economy would grow fairly fast.
5. Pervasiveness of free markets- The fall of communism and socialism and the
resultant ubiquitous market economy and globalization are stupendously expanding the
scope of international marketing.

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 Unit- III
1. Define Product?
A product is often considered in a narrow sense as something tangible that can be
described in terms of physical attributes, such as shape, dimension, components, form,
color, and so on., This is a misconception that has been extended to international
marketing as well, because many people believe that only tangible products can be
exported.

2.Define Concentrated Marketing or Target Marketing

“The concentrated marketing approach is based on a decision to achieve a
maximum penetration in one or more segments to the exclusion of the rest of the market.
Instead of spreading itself thinly in many parts of the world, it decides to concentrate its
forces on a few clearly defined areas”

In other words, as very few products can satisfy the needs of all consumers,
companies often develop different marketing strategies to satisfy different consumer
needs.

3. Discuss about the product decisions in international Marketing?

Product decisions in international marketing management are:

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1. Market segment decisions- product decision to be made is the market segment
decision because all other decisions- product mix decision, product specifications, and
positioning and communications decisions- depend upon the target market.
2. Product mix decisions – Product mix decision pertain to the type of products and
product variants to be offered to the target market.
3. Product Specification – This involves specification of the details of each product item
in the product mix
4. Positioning and Communication decision – Positioning is the image projected for the
product. Communication refers to the promotion message designed for the product,
obviously, both positioning and marketing communication are very much interrelated.

4. Define Product Mix?

The product mix is the full list of all the products offered for sale by a company.
The product mix may consist of one or more product lines. A product line is a group of
products that are closely related either because they satisfy a class of need, are used
together are sold to the same customer groups, are marketed through the same types of
outlets, or fall within given price ranges.

A specific version of a product that has a separate designation in the seller’s list is
known as a product item.
The product mix has certain width, depth and consistency
The width refers to the number of different product lines in the product mix
The depth refers to the average number of items offered by the company within
each product line.

5. Define Quotas.
These are the quantitative restrictions on exports intended to protect local industry
and to conserve foreign currencies. Various types of quotas include:

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 Absolute quota: These quotas are the most restrictive, limiting in absolute terms
the quantity imported during the quota period. Once the quantity of the import quota is
fulfilled no further imports are allowed.
Tariff quota: It allows import of a specified quantity of quota products at reduced
rate of duty. However excess quantities over the quota can be imported subject to a
higher rate of import duty.
Voluntary quota : Voluntary quota are unilaterally imposed in terms of a formal
arrangement between countries or between a country and an industry.
6. What are the Tariff and Non Tariff barrier in International marketing.
Tariff Barrier- These are official constraints on import of certain goods and
services in the form of customs duties or tax on products moving across the borders. The
tariff barriers may be classified as
Import and Export tariff- Tariff may be imposed on the basis of direction of
product movement.
Protective and Revenue tariff – The Tariff imposed to protect the home industry,
agriculture, and labor from foreign competitors is termed as protective tariff, which
discourages foreign goods. The government may impose tariffs to generate tax revenue
from imports, which are generally nominal.
Tariff surcharge and Countervailing duty – On the basis of duration of
imposition, tariff may be classified either as a surcharge or as a countervailing duty. Any
surcharge on tariff represents a short term action by the importing country, while
countervailing duties are more or less permanent in nature.
Specific, Ad valorem and Combined - Duties fixed as specific amount per unit
of weight or any other measure is known as specific duties.
Duties levied on the basis of value are termed ad valorem duties. Such duties are levied
as a fixed percentage of dutiable value of imported products.
A combination of specific and ad valorem duties on a single product is known as
combined or compound duty

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 Non Tariff marketing Barriers- Non tariff barriers are non transparent and inhibit
trade on a discriminatory basis. Non tariff barriers in innovative forms are emerging as
powerful tools to restrict imports on a discriminatory basis, The major non tariff barriers
are:
Government Participation in trade
Customs and Entry procedure
Product requirements
Quotes
Financial controls
7.Define Product Positioning.
Product positioning is the process of distinguishing a brand from its competitors so
that it becomes the preferred brand in defined segments of the market. Ries and Trout,
who developed the concept of positioning defined it as follows:
Positioning starts with a product. A piece of merchandise, a service, a company,
an institution, or even a person.. but positioning is not what you do to a product.
Positioning is what you do to the mind of the prospect. That is, position of the product in
the mind of the prospect.
“positioning is the act of designing the company offer and image so that it
occupies a distinct and valued place in the target customers’ mind. - Philip kotler.

8.List out the category of new product.

Booz, Allen and Hamilton identified six category of new products in terms of their
newness to the company and to the market place.
1. New to the world : New products that create an entirely new market.
2. New product lines : New products that allow a company to enter an established
market for the first time.
3.Additions to the existing product lines : New products that supplement
companies’ established product line.

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 4.Improvements or revision to existing products : New products that provide
improved performance or greater perceived value and replace existing products.
5. Repositioning : Existing products that are targeted to new markets or market
segments
6. Cost Reduction : New products that provide similar performance at lower cost.

9.Define Marketing segment?

Market segmentation breaks the larger heterogeneous market into small
homogeneous segments. The elements of each smaller segment are more similar in term
of wants, needs and behavior that the total market is. A separate marketing programme is
developed to best match each segment, individual needs and wants.
Segmentation aims at one or more homogeneous segments and try to develop a
different marketing mix for each segment. Segmentation may make more basic changes
in marketing mixes perhaps in the product itself- because they are aiming at smaller
target markets.

10.List out the limitations of market segmentation

1. Market segmentation can be an expensive proposition in both production and
marketing of products. From marketing point of view the marketer has to develop
different marketing mixes for different segments.
2. Other expenses like keeping adequate inventories of each style, color,
promotion expenses also go up because different promotional mixes have to the
formulated for different elements.

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 3. Administrative expenses also go up because marketer must plan and implement
several different marketing programmes.

11.List out the New product planning and development process.

Step 1: Idea generation – Ideas can come from any number of sources (e.g salespersons,
employees, competitors, governments, marketing research firms, customers, etc.,)
Step 2 : Product screening – Ideas must be acknowledged a and reviewed to determine
their feasibility.
Step 3: Concept testing – Ideas should match with other influencing factors
Step 4 : Marketing Strategy development – Market ideas and promotion activity should
be determined
Step 5: Business analysis – which is necessary to estimate product features, cost, demand,
and profit
Step 6 :Product development - Involves lab and technical tests as well as manufacturing
pilot models in small quantities.
Step 7:Test marketing- to determine potential marketing problems and the optimal
marketing mix
Step 8: Commercialization – The company is ready for full scale commercialization by
actually going through with full scale production and marketing.

12.What is global market segment?

Two countries exhibiting the lack of vertical homogeneity within their borders
may still be homogeneous horizontally when a particular segment of one country is
similar to an equivalent segment of another country. This is hassen and katsanis call
global market segment, and they derive it through “the process of identifying specific
segments, what they be country groups or individual consumer group, of potential
consumers with homogeneous attributes who are likely to exhibit similar buying

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behaviour”. They feel that the global elite and global teenager segments are particularly
amenable to global segmentation.

13.What is product positioning?

Product positioning is a marketing strategy that attempts to occupy an appealing
space in a consumer’s mind in relation to the space occupied by other competitive
product. The mind is like a computer in that it has slots or positions, and each bit of
information is placed and retained in the proper slot. The mind screens and accepts
information according to prior experience.

14.Discuss the stages and characteristics in International product life cycle.

Stage-0 local innovation – stage 0 depicted as time 0 on the left of the vertical
importing / exporting axis, represents a regular and highly familiar product life cycle in
operation within its original market. Innovations are most likely to occur in highly
developed countries because consumers in such countries are affluent and have relatively
unlimited wants. Firms in advanced nations have both the technical know how and
abundant capital to develop new product.

Stage -1 Overseas Innovation – As soon as the new product is well developed, its
original market well cultivated, and local demands adequately supplied, the innovating
firm will look to overseas markets in order to expand its sales and profit. Thus this stage
is known as a “pioneering” or “International introduction stage” . Countries with similar
cultures and economic conditions are often perceived by exporters as posing less risk and
thus are approached first before proceeding to less familiar territories.

Stage-2- Maturity- Growing demand in advance nations provides an impetus for

firms there to commit themselves to starting local production, often with the help of their

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governments protective measures to preserve infant industries. Thus, these firms can
survive and thrive in spite of relative inefficiency.

Stage-3- World wide Limitation This stage means tough times for the innovating
nation because of its continuous decline in exports. There is no more new demand
anywhere to cultivate. The decline will inevitably affect the US innovation firms’ scale of
economics and its production costs thus begin to rise again.

Stage 4- Reversal- the major functional characteristics of this stage are product
standardization and comparative disadvantage. The innovating country’s comparative
advantage has disappeared, and what is left is comparative disadvantage. This
disadvantage is brought about because the product is no longer capital intensive or
technology intensive but instead has become labor intensive- a strong advantage
possessed by LCDs.

Exporting Other Advance Nation

1 2 3 4 Time

Importing USA (Initiating Country)

15.Define Trademark.
According to the lenham trade- mark act of 1974, “Trademark in the united states
includes any word, name, symbol, or device or any combination thereof adopted and used

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by a manufacturer or merchant to identify his goods and distinguish them from those
manufacturer or merchant to identify his goods and distinguish them from those
manufactured or sold by other”

16.Define concentrated marketing.

The concentrated marketing approach is based on a decision to achieve a
maximum penetration in one or more segments to the exclusion of the rest of the market.
Instead of spreading itself thinly in many parts of the world, it decides to concentrate its
force on a few clearly defined areas. Companies with ethnocentric orientation may
sometimes adopt a concentrated marketing strategy in respect of the foreign markets by
the product extension strategy.

17. Discuss the types of marketing strategy.

There are three market coverage strategy.
(i) Concentrated marketing strategy- Concentrated on single market segment
(ii) Undifferentiated marketing strategy- Undifferentiated marketing is
characterized by market aggregation, I.e., treating a whole market as a single unit whose
parts are alike in all major respects. The entire market is sought to be tapped with a single
marketing mix.
(iii) Differentiated marketing strategy – essentially involves market segmentation,
the opposite of market aggregation. Differentiated marketing is based on the appreciation
of the heterogeneity of the market, I.e., income level, taste and preferences, usage
conditions, purpose of use and other consumer characteristics relevant to marketing differ
between different groups of consumers.

While market aggregation and undifferentiated marketing take a shotgun

approach, market segmentation and differentiated marketing is a rifle approach.

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18. List out the basis of segmentation?
Measurable- i.e., it should be possible to estimate the size of the segment
Substantial – i.e., the segment should be large enough to be profitable.
Differentiable – i.e., a segment should be different enough to justify a specific
marketing mix that is different from those for other segment
Accessible and actionable – i.e., it should be possible to clearly identify the
consumers of the segment and effectively reach them with a specific marketing mix.

19. Define Branding.

A brand is a name, term, sign, symbol, or design or a combination of them,
intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of others.
That part of the brand that is given legal protection for exclusive use by a seller is
known as the trade mark.
20.Discuss the branding decision.
Export marketing may involve several decision related to branding.
(i) To brand or not to brand – branding although provides several advantages is
costly and risky, but a company product would be devoid of an easy identity in the
absence of a brand.
(ii) Manufacturer brand or private brand – A manufacturer may use for his
products his own brand (also called national brand) or private brand, i.e., the distributors
brand. Many Indian firms are manufacturing products for private brands of the foreign
sellers.
(iii) Same brands or different brands – If the exporter decides to use his own brand
name, a major decision to be made is whether to use the same brands in the domestic and
foreign markets.

21. Explain the branding problems in international marketing.

There are a number of difficulties involved in branding in export marketing.

29
1. It is very difficult for a small firm to promote its brand in foreign market becaus of the
heavy cost of brand promotion.
2.Foreign importers and distributors discourage use of exporters brand becuase they
prefer to sell the products under their own brand name.
3. the cultural and other factors make branding decision complicated in international
marketing
4. some MNCs when they wanted to market their products in some countries was that
they found that their world renowned brands had been registered in these countires by
somebody else with the result that these firms had to pay a fee to the registered holders of
these brands in these countries for permission to use these brands.
5.In some countries, there are restrictions on use of foreign brands.

22.Define the term packing and factors affecting packaging decision.

Packing (also known as transport packing) refers to the protective covering used
for shipment of the goods, while packaging (also known as product packaging or
consumer packaging) refers to the package in which the product reaches the consumer.
Packaging in international marketing is a much more serious problem that in
domestic marketing because of the varying physical conditions and situations the cargo is
exposed to and subject to; difference in the taste, performance and practices, differences
and peculiarities in packing requirements and regulations etc.,
Factors such as physical characteristics, economy, convenience, regulatory,
consumer attitude

23.Discuss the importance and requirement of export packing.

Packaging to be satisfactory should satisfy the following conditions
1. It should be capable of withstanding the hazards of handling and transport

30
2. It should be easy to handle
3. It should be amenable to quick examination of contents
4. It should be easy to identify
5. It should be adequately marked
6. It is necessary, the contents shall not be disclosed
7. It should be easy to dispose
8. packing must conform to the buyers specifications.

24.Explain about the product communication strategy.

Communication strategies are usually considered together because the need
satisfaction, purpose of product use or usage occasion and the product communication are
rather inseparable. Keegan has identified the following five product communication
strategies in international marketing, they are:
Straight extension – Straight extension is one product, one message, to
worldwide. In other words, under this strategy, the firm markets the same product and
communicates the same message in all the markets. This strategy has been successfully
employed by pepsi.
Product extension, communications adaptation strategy – The firm markets the
same product but employs modified communication about the product in foreign markets.
Product adaptation, communication extension strategy – under this strategy,
essentially the same promotional message is used abroad as at home, but the product is
modified to suit the foreign market condition. This strategy assumes that the product will
serve the same function in foreign markets under different use conditions.
Dual adaptation – The dual adaptation strategy involves a modification of both
the product and communication to meet the foreign needs and considerations of the
foreign market. This strategy is called for when differences exist in the environmental
conditions of use and in the function which a product serves.

31
 Product Invention – Product invention strategy involves the development of new
product suitable for tapping a foreign market.

25.List out the merits and demerits of product communication strategies

Product Communication Merits Demerits

Straight extension
Product Extension
Communication Adoption
* Economic of scale in * Not suitable when the
production. relevant marketing
* No additional investment environment are different.
in R & D. * Not suitable when the
* No additional expenditure need satisfaction or purpose
on development of of use of the product is
commercial. different.
* Economic of scale in * Costs of communication
production modification
*No cost of product
modification
* The appropriate strategy
in certain situations

Product adaptation * Helps to increase product * R & D costs

Communication Extension acceptance * Costs of product
modification
* High costs of product if
level of demand does not
permit economic of scale in
product
Dual Adaption * Most suited strategy in * R & D costs
some cases * Costs of product
modification\
* Costs of communication

32

Production Invention
modification
* High costs of production
if level of demand does not
permit economic of scale in
production
* Advantages of a right * Costs of marketing
research
product for the market
* Costs of innovation and
product development
* Costs of new product
promotion and market
development

26. Define Brand equity.

Brand equity as a set of brand assets and liabilities linked to a brand, its name, and
symbol that add to or subtract from the value provided by a product or service to a firm
and or to that firms customers.
David concept of brand equity is based on five components- brand loyalty,
perceived quality, brand association, other prosperity brand assets, and name awareness.
These are also referred to as brand assets and liabilities.
27. Define Brand Identity.
It refers to the unique set of brand associations that a firm aspires to create or
maintain. Brand associations should represent what the brand stands for and imply its
promise to the customers. Aaker defines brand equity as the sum of the brand expressed
as a product, organization, person, and symbol. Jean Noel represents six interrelated
components of brand identity as physique, personality, culture, self image, reflection, and
relationship.

28. Explain the strategies for launching the products in the International markets.

33
 Waterfall Approach – the products trickle down in the international markets in a
cascading manner. In waterfall approach generally longer duration is available for a
product to customize in a foreign market before it is launched in another market.

Country A

Country B

Country C

Sprinkler Approach- A product is simultaneously launched in various countries.

The Sprinkler approach of simultaneous market entry is preferred under the following
circumstances:
If the competitive intensity of the market is very high with strong and fierce
competitors
If the life cycle of the product is relatively short
If the markets have high potential, such as large market size, rapid growth, cost of
entry
If a firm has large resources to manage simultaneous product launches in multiple
markets.
New Product

Country A Country B Country C

Unit –IV & V

1. Define Pricing.
Pricing is the only component of a marketing mix decision that is often adopted in
international markets with least commitment of firms resources. Price is the sum of
values received from the customer for the product or services. We generally refers to

34
price in terms of amount of money, but it may also include other tangible and intangible
items of utility.

2. Discuss the pricing decision in international marketing.

Pricing decisions in international markets are extremely significant for developing
and least developed countries primarily because of the following reasons.
ü The lower production and technology base often results in higher cost of
production
ü Market share of developing countries is relatively lower and these countries are
marginal suppliers in most product categories, they have little bargaining power to
negotiate. This compels them to sell their products in international markets often
below the total cost of production.
ü The majority of products from developing and least developed countries are sold
in international markets as commodities with marginal value addition, there is
limited scope for realizing optimal prices
ü In view of fiercely competitive markets and complex pricing strategies adopted by
multinational marketers, formulation of appropriate pricing strategies with
innovation because a pre condition for success in international markets.

3.Discuss the various pricing approaches (strategy) for international market.

Cost based pricing – Costs are widely used by firms to determine prices in
international markets especially in the initial stages, generally, new exporters determine
export prices on “ex-works” price level and add a certain percentage of profit and other
expenses depending upon the term of delivery.
Full cost pricing – most common pricing approach used by exporters in the initial
stages of their internationalization. It includes adding a mark up on the total cost to
determine price.

35
 Marginal cost pricing – marginal cost is the cost of producing and selling one
more unit. It sets the lower limit to which a firm can reduce this price without affecting
its overall profitability.
Market based pricing – as market leader fix the price, in developing countries are
marginal suppliers of goods in most markets, they rarely have market shares large
enough to influence price in international market.

4. List out the factors influencing the pricing decision in international market.
1. Cost
2. Competitions
3. Irregular or unaccounted payments in export
4. Purchasing power
5. Buyers behavior
6. Foreign Exchange Fluctuations
7. Product differentiation
8. Market characteristics Eg; Demand trends, Consumer income level, trade
characteristics like trade margins
9. Image of the company
10. Government factors like tax, subsidies, incentives, exemptions

5. Discuss the terms of pay method in International transaction.

The major terms of payment used in international markets are as follows.
Advance payment – Payment is remitted by the buyer in advance either by a draft
mail or TT (Telegraphic transfer). Generally, such payments are made on the basis of
sample receipt and its approval by the buyer.

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 Open account – The exporter and the importer agree upon the sales terms without
documents calling for payments. However, the exporter prepares the invoice, and the
importer can take delivery of goods without making the payment first. Subsequently the
exporting and importing firms settle their accounts through periodic remittances.
Consignment – the shipment of goods is made to the overseas consignee and the
title of goods is retained with the exporter until it is finally sold. As the title of goods lies
with the exporter, the funds are blocked and payment period is uncertain. Consignment
sales involves certain additional costs such as warehousing charges, insurance, interest,
and commission of the agents.
Documentary credit – Based upon the invoice transaction, the bank plays a
crucial role of an intermediary providing assurance to both the importer and the exporter
in an international transaction.
Documentary credit without letter of credit- Documents are routed through
banking channels that also act as sellers agents along with the bill of exchange.
Sight draft (Documents against payment) – An exporter sends the documents
along with the bill of exchange through his bank to the corresponding bank in the
importers country. The corresponding bank presents the documents to the importer, who
makes payments at sight before taking delivery of the documents.
Usance or Time draft (Documents against acceptance) –under the usance draft
the corresponding bank presents the bill of exchange to the importer who indicates his
acceptance of the payment obligation by signing the draft.
Documentary credit with letter of credit – A documentary credit represents the
commitment of a bank to pay the seller of goods or services a certain amount of money
provided the presents stipulated documents evidencing the shipment of goods or
performance of service within a specific time period.

6. Discuss the term Product extension and Product adaptation

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 There are three alternative product strategies between the domestic and foreign
markets, viz., product extension, product adaptation and product development
Product extension – product extension strategy the same product s marketed
domestically is extended to the foreign market without any significant modification. This
is possible when certain significant factors like consumer tastes, product use conditions
etc, are the same in both the home and foreign markets. This strategy is popular with
companies with ethnocentric and region centric / geocentric orientations.
Product adaptation – the product is properly modified to suit the environment of
the foreign market, important factors which necessitate such product modification for the
foreign market via-a via the domestic market are:
Difference in the consumer taste, consuming habit etc.,
Difference in the condition of use of the product
Difference in the use facility characteristics
Difference in the purpose of use or need satisfaction
Difference in the cultural environment
Difference in the regulatory environment
Difference in the income levels and standard of living
Difference in the competitive environment.

7. What is Dumping?
In International markets, dumping is a widely used strategy, dumping means
selling of a product or commodity below the cost of production or at a lower price in
overseas markets compared to domestic markets. Dumping is considered as “unfair” trade
practice by the WTO. Anti-dumping duties can be levied on imports of such products
under the agreement on anti- dumping practices.

8. What is counter trade?

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 Counter trade is a practice where price setting and trade financing are tied together
in one transaction. Various forms of counter trade wherein the transaction involves
reciprocal commitments other than cash payments. In situations wherein the importer is
not able to make payment in hard currencies, some other forms of counter trade takes
place. Various factors contributing to counter trade include:
• Importing country’s inability to pay in hard currency
• Importing country’s regulations to conserve hard currency
• Importing country’s concern about balance of trade
• Exploring opportunities in new markets.

9. Define the term barter.

Barter is the simplest and the most ancient form of counter trade in which direct
and simultaneous exchange of products of equal value takes place. Since one product is
exchanged for another in barter trade. The role of money as a medium of exchange is
eliminated. Barter makes international trade transactions possible between cash
constrained countries.

10. What is Grey marketing?

Grey marketing means import or export of goods and marketing them through
unauthorized channels. Thus, the marketing channels for grey markets involve
unauthorized market intermediaries. International brands with high price differentials and
low cost of arbitrage constitute typical grey market goods.

11. List out the objective of Pricing.

Market penetration
Market share
Market skimming
39
 Fighting competition
Preventing new entry
Shorten pay back period
Early cash recovery
Meeting export obligation
Disposal of surplus
Optimum capacity utilization
Return on Investment

12. What is Break even price?

Break even price is the price for a given level of output at which there is neither
any loss nor profit. In other words, if the total costs of production and selling a particular
quantity of the product is divided by that quantity. If the exporter sells below this price he
makes a loss and if he sells above this price he makes a profit.

13. List out the steps in Pricing or Pricing process.

Step 1 : Defining pricing objective – Identify basic objective for fixing the pricing
Step 2: Analysis market characteristics –Identify the various factors which
influencing the pricing in the market
Step 3: Calculating costs – To ascertain whether a given price is acceptable or not
Step 4: Value of Incentives – Identify several export incentives likes duty draw
back, cash compensatory support (CCS), Replenishment license/ Exim scrip, income tax
benefits
Step 5: Determining export price – Fix the target price based on the analysis of the
market characteristics and to ascertain whether it will be possible to export at the price.

14.List the export price quotations and incoterms?

40
 There are a number of common sale or trade used in International trade to express
the sale price and the corresponding rights and responsibility of the seller and the buyer.
EXW- Ex works – The sellers obligation to delivery the goods under this term is
complete when he places the goods at the disposal of the buyer at his own premises or
anther place.
FCA- Free carrier – Seller obligation to deliver the goods is complete when he delivers to
the carrier nominated by the buyer at the named place cleared for export.
FAS – Free Alongside ship – The term FAS has been modified in incomterms 2000.
Under the new terms the seller clears the goods for export which is reversal from the
previous incomterms version requiring the buyer to arrange for export clearance.
FOB – Free on Board – The seller fulfils his obligation of delivery when the goods pass
the the ships rail at the named port of shipment.
CFR- Obligation of delivery is fulfilled when the goods pass, just as in FOB, the ship’s
rail in the port of shipment.
CIF- Cost, Insurance and Freight- The delivery point is the goods passing the ship’s rail
in the port of shipment. The seller, however, pays the cost and freight necessary to the
named port of destination and contracts for insurance and pays the insurance premium
and the risk of loss or damage.
CPT- CPT denotes that the seller delivers the goods to the carrier nominated by him
CIP- Carriage and Insurance paid to – The seller also has to procure insurance against the
risk of loss of or damage to the goods during the carriage.
DDP- Delivery duty paid – The seller delivery the goods to the buyer cleared for import
but not unloaded from any arriving means of transport at the named place of desination.
15. Explain the term International distribution channel.
A distribution channel may be defined as “ the path traced in the direct or indirect
transfer of title to a product as it moves from a producer to ultimate consumers or
industrial Users”. A distribution channel, in other words, is “ the set of firms and

41
individuals that take title, or assist in transferring title, to the particular good or service as
it moves from the producer to the consumers.

16. List out the International marketing Middlemen.

Export Merchants – The domestic based export merchant buys the manufacturer’s
product and sell it abroad on his own.
Export / Trading Houses – There are a number of merchant exporters including
export houses and different categories to trading houses who export products procured
from many manufacturers.
Trading Companies – A trading company is active both in export and import
functions
Export Drop shipper- In some countries there is a special kind of merchant known
as such names as export drop shipper, desk jobber or cable merchant. “upon receipt of an
order from overseas, the export drop shipper in turn places an order with a manufacturer,
directing the manufacturer to deliver the product directly to the foreign buyer.
Agent / Brokers – The agents does not take the title to the goods, he simply seeks
overseas buyers for a commission. In this case, the manufacturer assumes all the financial
risks.

17. What are the types of Exporting?

There are broadly two ways of exporting, namely,direct exporting and indirect
exporting.
The indirect exporting involves home based independent middlemen who
constitute the domestic subsystem. No such independent middle man is involved in direct
export. When the export is direct, the producer makes direct sale to any one or more of
the foreign customers.

18.Discuss about the Intermediaries in International marketing.

42
 International Marketing Channel

Direct
Indirect

Agents Merchant

Broker/ Commission agent Merchent Exporter

Importers Buying agent International Trading companies
Country-Controlled buying agent Export / trading houses
E-Channel
Buying office
---------------------------------International Broder -------------------------------------------------

Agent Merchant

Broker/ Commission agent Merchant Importer

Manufacturer’s agent / sales representative Distributor
Buying agent Wholesaler
Retailer
19.Explain the types of international distribution channels
The international distribution channels may broadly be divided into two categories
namely direct and indirect channels,

Producer
43
 Home Market Middlemen
Merchant Agent

___________________________________________________________________

Importer Agent / Broker

Foreign market Middlemen

Wholesaler / Distributor

Retailer Retailer

Consumer / Institutional user

20.Define International Logistics

International logistics is defined as” the designing and managing of a system that
contracts the flow of material into, through, and out of the international corporation. It
encompasses the total movement concept by covering the entire range of operations
concerned with product movement”
It follows from the above definition that logistics comprises of:
(i) Management of movement of raw materials, parts and suppliers into and
through the firm; and
(ii) Management of movement of finished products to the consumer.

21.List out the components of Logistics management.

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 Logistics management comprises of five major interdependent areas.
ü Fixed facilities location
ü Transportation
ü Inventory management
ü Order processing
ü Material handling and warehousing

22.Define the term Communication.

“The word communication in marketing simply means the transmission of a
message, to the buyer or the consumer or the channel of distribution, in which the
supplying company aims to tell each one of these receiver why they should buy or handle
the product. In other words, In its least sophisticated form communication aims to induce
potential buyers(or Middleman) more favourably disposed towards the firms offering.
Communication performs one or more or all of the following functions:
Making the potential consumers aware of the product.
Persuading the consumer to buy the product
Motivating the consumer to buy the product by special incentive
Reassuring the consumer and helping to overcome the post purchase dissonance
Informing the channels about the product
Motivating the channels to handle the product
Promoting the image of the product
Promoting the image of the company
Promoting the image of the country
23. What is communication mix
The communication mix, also called promotion mix, has four major elements (or
tools or channels), Viz., advertising, sales promotion, personal selling and public
relations. Which communication tool or tools should be used or the nature of the mix is
determined by the marketing environment and the company’s objectives and resources.

45
Advertising – as any paid form of non personal presentation and promotion of ideas,
goods or services by an identified sponsor
Sales Promotion – as short term incentives to encourage purchase or sale of a product or
services.
Personal selling – Personal selling is defined as oral presentation in a conversation with
one or more prospective purchasers for the purpose of making sales.
Public Relations – include a variety of programmes designed to improve,maintain or
project a company or product image.

24.Discuss the role of export promotion organization

Export promotion organizations like export promotion councils (EPCs), Export
Developement Authorities, Commodity Boards, Indian trade Promotion Organization
(ITPO), Exim Bank etc., can play a very important role in promoting Indian products
abroad.
These organisation undertake export marketing Communication by:
(i) Advertising
(ii) Sales Promotion
(iii) Public Relations

25.List out the export documents.

Commerical documents- documents are required for effecting physical transfer of goods
and their title from the exporter
Principal Export documents – Invoice, packaging list, Bill of Lading, Combined
transport document, Certificate of Inspection, Insurance policy, certificate of origin, Bills
of exchange.
Auxiliary Documents – Proforma invoice, Intimation for inspection, Shipping
instruction, insurance declaration, Mate receipt, Application for certificate of origin

46
Regulatory Documents –Gate pass, AR4 form, Bill of export, Export application/ Dock
challan, Receipt for payment of port charges, vehicle ticket, exchange control declaration,
Freight payment certificate, Insurance premium payment certificate.
Documents related to Goods – Invoice, packing note and list, Certificate of origin
Documents related to shipment – Mate receipt, shipping bill, Cart ticket, certificate of
measurement, bill of lading, airway bill
Documents related to payment – Letter of credit, Bill of exchange, Trust receipt, Letter of
Hypothecation, bank certificate of payment,
Documents related to inspection – Certificate of inspection
Documents related to excisable goods – G.P Forms, Form C, Forms AR4/ AR4A

26. Explain about Export Oriented Units (EOUs)

The Export Oriented Units (EOUs) scheme, introduced in early 1981, is complementary
to the SEZ scheme. It adopts the same production regime but offers a wide option in
locations with reference to factors like source of raw materials, ports of export, hinterland
facilities, availability of technological skills, existence of an industrial base and the need
for a larger area of land for the project. As on 31st December 2005, 1924 units are in
operation under the EOU scheme.

Objective

The main objectives of the EOU scheme is to increase exports, earn foreign exchange
to the country, transfer of latest technologies stimulate direct foreign investment and to
generate additional employment.
47
 Exports from EOUs during 2004-2005 were of the order of Rs.36806.17 crores as
compared to the export of Rs.28827.58 crores achieved during 2003-2004, registering a
growth of 27.68

Major Sectors in EOUs:

• GRANITE
• TEXTILES / GARMENTS
• FOOD PROCESSING
• CHEMICALS
• COMPUTER SOFTWARE
• COFFEE
• PHARMACEUTICALS
• GEM & JEWELLERY
• ENGINEERING GOODS
• ELECTRICAL & ELECTRONICS
• AQUA & PEARL CULTURE

27. Discuss about the Special Economic Zones (SEZs)

A SEZ unit which has been set up for carrying on manufacturing, trading or
service activity has both advantages as well as disadvantages. SEZ advantages are quite
far more as compared to its disadvantages which are almost negligible.
A Special Economic Zone in short SEZ is a geographically bound zones where the
economic laws in matters related to export and import are more broadminded and liberal
as compared to rest parts of the country. SEZs are projected as duty free area for the
purpose of trade, operations, duty and tariffs. SEZ units are self-contained and integrated
having their own infrastructure and support services. Within SEZs, a units may be set-up
for the manufacture of goods and other activities including processing, assembling,
trading, repairing, reconditioning, making of gold/silver, platinum jewellery etc.

48
 As per law, SEZ units are deemed to be outside the customs territory of India.
Goods and services coming into SEZs from the domestic tariff area or DTA are treated as
exports from India and goods and services rendered from the SEZ to the DTA are treated
as imports into India.

28.Discuss the advantages and disadvantages of SEZs.

Advantage

• Allowed to carry forward losses.

• No licence required for import made under SEZ units.
• Duty free import or domestic procurement of goods for setting up of the SEZ
units.
• Goods imported/procured locally are duty free and could be utilized over the
approval period of 5 years.
• Exemption from customs duty on import of capital goods, raw materials,
consumables, spares, etc.
• Exemption from Central Excise duty on the procurement of capital goods, raw
materials, and consumable spares, etc. from the domestic market.
• Exemption from payment of Central Sales Tax on the sale or purchase of goods,
provided that, the goods are meant for undertaking authorized operations.
• Exemption from payment of Service Tax.
• The sale of goods or merchandise that is manufactured outside the SEZ (i.e, in
DTA) and which is purchased by the Unit (situated in the SEZ) is eligible for
deduction and such sale would be deemed to be exports.
• The SEZ unit is permitted to realize and repatriate to India the full export value of
goods or software within a period of twelve months from the date of export.
• “Write-off” of unrealized export bills is permitted up to an annual limit of 5% of
their average annual realization.
• No routine examination by Customs officials of export and import cargo.
• Setting up Off-shore Banking Units (OBU) allowed in SEZs.
• OBU's allowed 100% income tax exemption on profit earned for three years and
50 % for next two years.
• Exemption from requirement of domicile in India for 12 months prior to
appointment as Director.
• Since SEZ units are considered as ‘public utility services’, no strikes would be
allowed in such companies without giving the employer 6 weeks prior notice in
addition to the other conditions mentioned in the Industrial Disputes Act, 1947.
49
 • The Government has exempted SEZ Units from the payment of stamp duty and
registration fees on the lease/license of plots.
• External Commercial Borrowings up to $ 500 million a year allowed without any
maturity restrictions.
• Enhanced limit of Rs. 2.40 crores per annum allowed for managerial
remuneration.

Disadvantage

• Revenue losses because of the various tax exemptions and incentives.

• Many traders are interested in SEZ, so that they can acquire at cheap rates and
create a land bank for themselves.
• The number of units applying for setting up EOU's is not commensurate to the
number of applications for setting up SEZ's leading to a belief that this project
may not match up to expectations

29.Explain the Export Processing Zone (EPZs)

Free Trade Zones (FTZ)/ Export Processing Zones (EPZs) have emerged as an
effective instrument to boost export of manufactured products. The Zones, set up as
enclaves separated from the Domestic Tariff Area (DTA) by physical barriers, are
intended to provide an internationally competitive duty free environment for export
production at low costs. The basic objectives of EPZs are to enhance foreign exchange
earnings, develop export-oriented industries and to generate employment opportunities.
The first Zone was set up at Kandla (Gujarat) in 1965, followed by SEEPZ, Mumbai in
1972. Thereafter, four more Zones were set up at NOIDA (UP), FALTA (West Bengal),
Cochin (Kerala), Chennai (Tamil Nadu) in 1984 and at Vishakapatnam (Andhra
Pradesh) in 1989. In 1997, Surat Export Processing Zone came into existence. With the
announcement of Special Economic Zone Scheme in year 2000, the four Export
Processing Zones / FTZ, namely Kandla, SEEPZ, Cochin and Surat have been converted
into Special Economic Zones with effect from 1-11-2000.

Glossary:
The international Bank for Reconstruction and Development (IBRD)
50
The International Development Association (IDA)
The International Finance Corporation (IFC)
The Multilateral Investment Guarantee Agency (MIGA)
The International Centre for Settlement of Investment Disputes (ICSID)
South Asian Association for Regional Cooperation (SAARC)
Association of Sout h East Asian Nations (ASEAN)
Asia Pacific Economic Cooperation (APEC)
Gulf Cooperation Council (GCC)
North American Free Trade Area (NAFTA)
South Asian Free Trade Agreement (SAFTA)
Trade Related Investment Measures (TRIMs)
Trade Related Aspects of Intellectual Property Rights (TRIPS)
General Argeement on Trade in Services (GATS)
United Nations Industrial Development Organisation (UNIDO)

51