Wednesday, April 15, 2009

COUNTER TRADE

COUNTER TRADE

Countertrade occurs when a firm accepts something other than money as payment for its goods or
services. Thus, countertrade is essentially a barter trade.

TYPES OF COUNTER TRADE
(1) BARTER SYSTEM

Barter is the direct exchange of goods and/or services between two parties without a cash
transaction.
(2) COUNTER PUCHASE
This is a reciprocal buying agreement. It occurs when a firm agrees to purchase a
certain amount of materials back from a country to which a sale is made.
(3) OFFSET
An example for an offset deal is that Pepsi Co sells its cola syrup to Russia for roubles and agrees
to buy Russian vodka at a certain rate for sale in the US. Going by this example, offset resembles
counterpurchase agreement. But there is difference. The difference is that Pepsi can fulfill the obligation
with any firm in Russia. From an exporter's perspective, offset is more attractive than a straight
counterpurchase deal because it gives the exporter greater flexibility to choose the goods that it wished to
purchase.
(
(4) switch trading
it refers to use of the specialized third party trading house in a countertrade agreement. When a firm enters a counterpurchase or offset deal with a countryI It often ends
up with what are called counterpurchase credits, which can be used to purchase goods I llfll till" ountry.
Switch trading occurs when a third-party trading house buys the firm's counterpurchase credltH 111\(1 Ilells
them to another firm that can better use them.


(5) BUYBACK
A buyback also called compensation occurs when a firm builds a plant in a country-or supplies
technology, equipment, training, or other services to the country-and agrees to take a certain percentage
of the plant's output as partial payment for the deal. Countertrade is of particular importance to countries that lack convertible currency and, as stated earlier is often used as means of reducing the drain on scarce foreign currency holdings.

A relatively new form of countertrade involves swaps. Swaps are generally carried out in' relation to
developing countries where the government and private sector face large debt burdens. Given that these
debtors are unable to pay their debt in the immediate future, lenders have grown amenable to exchange the
debt for something else, as for example, debt-far-equity swaps in the private sector, and debt-for-nature
swaps in the public sector.

- MECHANISM OF ITERNATIONAL TRADE TRANSACTIONS

MECHANISM OF ITERNATIONAL TRADE TRANSACTIONS

Means of Payments in IB

(1) Open Account
(2) Cash in Advance
(3)Letter of Credit
(4) Draft
(5) Consignment


(1) Cash in advance
Cash in advance affords the exporter the greatest protection because payment is received either before shipment or upon arrival of the goods.

(2) Letter Of Credit

Letter of credit is a letter addressed to the seller, written and signed by a bank acting on behalf of the buyer. In the letter, the bank promises that it will honour drafts drawn on itself if the seller confirms to the specific conditions set forth in the letter of credit In exchange for the bank's agreement to honour the draft
for payment that results from the transaction, the importer promises to pay the bank the amount of transaction and an agreed fee. The letter of credit obviously becomes a fmancial contract between the issuing bank and a designated beneficiary that is separate from the commercial transaction.

Advantages to the exporter.
1. The letter of credit eliminates credit risk if the bank that opens it is of undoubted standing. Obviously, the exporter needs to check only on the reputation of the bank.

2 A letter of credit also reduces the danger that payment will be delayed or with held due' to exchange control or other political risks. Countries generally permit local banks to honor their letter of credit. Failure to honor them could severely damage the country's credit standing and credibility.

3. A letter of credit reduces uncertainty. The exporter knows all the requirements for payment because they are stipulated on the letter of credit.

4. The letter of credit can also guard against preshipment risks. The exporter who manufactures, under a contract, a specialised piece of equipment runs the risk of contract cancellation before shipment. Opening a letter of credit will provide protection during the manufacturing phase.

5. Letter of credit facilitates financing because it ensures the exporter a ready buyer for its product. It also becomes easy to create a banker's acceptance-a draft accepted by a bank.

Advantages to the importer:

1. The letter of credit ensures that the exporter delivers goods and produces certain documents which are carefully examined by the bank. If the exporter fails to deliver the goods, it will be much simpler for the importer to withdraw deposit from the bank. I

2 Because a letter of credit is as good as cash, the importer can usually command better credit terms and /or prices.

3. Letter of credit financing may be cheaper than the alternatives. There is no tie-up of cash if the letter of credit substitutes for cash in advance.

The letter of credit operations are quite simple.
Illustration:

To illustrate how it operates, consider the case of USA Importers Inc, of Los Angeles. The company is buying spare auto parts worth $38,000 from Japan Exporter Inc, of Tokyo, Japan. USA Importers applies for, and receives, letter of credit for $38,000 from its bank, Wells Fargo. The actual process is shown in Fig.




(3) The Drafts

The draft, also called the bill of exchange, is written by an exporter on the importer directing the latter to pay a certain sum on a specified date for having goods shipped to the importer. The exporter submits the bill to its banker who collects the stated amount from the importer's bank and remits the proceeds to the seller or to the bearer.
PARTIES:
The draft has three parties:
(a) The exporter-is the party who draws the bill and hence called the drawer,
(b) The importer on whom the bill is drawn and hence called the drawee, and
(c) the party who is entitled to receive payment is called the payee. Normally, the drawer and the payee are the same persons in which case thereare only two parties to a draft.
FUNCTION:
The draft serves three important functions and hence is widely used in foreign trade:
1. It provides written evidence of obligations in a comprehensive form.
2 It enables both parties to potentially reduce their costs of financing.
3. It is a negotiable and unconditional instrument.
CONDITIONS
To serve the three purposes, the draft needs to fulfill the following conditions:
• It must be in writing
• Signed by the drawer (exporter)
• An unconditional order to pay
• A certain sum of money
• Payable on demand or on a specified future date
• Payable to order of bearer

(4) CONSIGNMENT

Under the consignment the exporter sends goods, on consignment, to the importer who arranges for the sale of goods and makes payment to the exporter, after deducting a specified commission.
Goods on consignment are duly shipped to the importer, but they are not sold. The exporter (consignor) retains title to the goods until the importer (consignee) has sold them to a third party. This agreement is normally made only with a related company because of the high risks involved. There is little evidence of the buyer's obligation to pay, and should the buyer default, it becomes difficult to collect.

(5) OPEN ACCOUNT

Open account selling is shipping goods first and billing the importer later. The credit terms are arranged between the buyer and the seller but the seller has little evidence of the importer's obligation to pay a certain sum at a certain date.
Sales on open account, therefore, are made only to a foreign affiliate or to a customer with which the exporter has a long history of favorable business dealings.

Benefits
The benefits include greater flexibility (no specific payment dates are set) and involve lower costs, including fewer bank charges than with other modes of payment. As with shipping on consignment, the possibility of currency controls is an important factor because of the low priority in allocating foreign exchange normally accorded to this type of transaction.







DOCUMENTS OF IINTERNATIONAL TRADE

(b) Bill of lading,
(c) commercial invoice,
(d) insurance certificate, and
(e) consular invoice

(A) Bill of lading
The most important document used in financing of foreign trade is the bill of lading (B/L). A B/L is a shipping document issued to the exporter or its bank by a common carrier that ships the goods. It serves three important functions:
1. It is a receipt acknowledging that the goods have been received by the carrier.
2. It is a contract binding the carrier to deliver the goods to the importer.
3. The negotiable B/L, its most common form, is a document that establishes control over the goods.

(B) commercial invoice
A commercial invoice contains an authoritative description of the merchandise shipped, including full details on quality, grades, price per unit, and total value.
It also contains the names and addresses of the exporter and the importer, the number of packages, any distinguishing external marks, the payment terms, other expenses such as transportation and insurance charge, any fees collectible from the importer, the nanle of the vessel, the ports of departure and destination and any required export or import permit numbers.

(C) insurance certificate

All cargoes going abroad are insured. Most of the insurance contracts used today are under an open, or floating policy. This policy automatically covers all shipments made by the exporter, thereby elinlinating the need for arranging individual insurance for each shipment. To evidence insurance for a shipment under an open policy, the exporter makes out an insurance certificate on forms supplied by the insurance company.
This certificate contains information on the goods shipped. All entries must conform exactly with the information on the BIL, on the commercial invoice and where required, on the consular invoice.

(D) CONSUMER INVOICE
Exports to many countries require a special consular invoice. This invoice, which varies in its details and information requirements from nation to nation, is presented to the local consul in exchange for a visa. The form needs to be filled carefully, for even trivial inaccuracies can lead to substantial fines and delays in
customs clearance. The consular invoice does not convey any title to the goods being shipped and is not
negotiable.6









FINANCING TECHNIQES IN FORIGN TRADE

Besides direct bank financing, there are several other techniques available for trade financing:
• Bankers' acceptances,
• Factoring: Many firms resort to factoring in which the factoring company buys the exporter's foreign accounts receivable at a discount.
• Forfeiting: When the trade involves very large capital items like commercial aircraft and ships, forfaiting Is a technique of financing. Forfaiting is the discounting of medium-term export receivables denominared in fully convertible currencies

International Staffing Decision

Human resource planning having been done, the international human resource manager must proceed with the job of hiring the right number of people of the right type.
The international human resource manager must not only select people with skills, but also employees who can jell with the organisation's culture. ;so it wants to hire employees whose styles, beliefs, and value systems are consistent with those of the firm.

Approaches of Staffing

International businesses are said to adopt three approaches to staffing:
(1) Ethnocentric,
(2) Polycentric, and
(3) Geocentric.


Ethnocentric Approach In this approach, all key management positions are held by parent-country nationals. This strategy may be appropriate during the early phases of international business, because fums at that stage are concerned with transplanting a part of the business that has worked in their home country.

This practice was widespread at one time. Firms such as P & G, Philips NY, and Matsushita originally followed the ethnocentric approach.

Reasons :
• Perceived lack of qualified host country nationals;
• Understanding that a united corporate culture can be maintained; and
• Need to maintain good communication, coordination, and control links with headquarters.

Disadvantages:

• Denial of promotional opportunities to host-country nationals, leading to reduced productivity and increased turnover.
• The adaptation of expatriate managers to host countries takes a long time during which home-country nationals make poor decisions and commit mistakes.
• For many expatriates a key international posting means new status, authority, and increased standard of living. The changes may affect expatriates' sensitivity to the needs and expectations of their host country subordinates.

Polycentric Approach
The polycentric staffing policy requires host-country nationals to be hired to
manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters. Although top management positions are filled by home-country personnel, this is not always the case.
For example, many US MNCs use home-country managers to get the operations started, then hand it over to the host-country managers. Hindustan Lever Ltd, (HLL), the Indian subsidiary of Unilever, has locals as its chiefs.

The Geocentric Approach This staffing philosophy seeks the best people for key jobs throughout the organisation, regardless of nationality. Seeking the best person for the job, irrespective of nationally is most consistent with the underlying philosophy of a global corporation.
Colgate Palmolive is an example of a company that follows the geocentric approach. It has been operating internationally for more than 50 years, and its products are household names in more than 170 countries. 60 per cent of the company's expatriates are from countries other than the US. All the top executives speak atleast two languages, and important meetings routinely take place all over the globe.

Ethical dilemmas & social responsibility issues

Business Ethics

Ethics refers to a system of moral principles- a sense of right & wrong & goodness & badness of actions, & their motives & consequences.
Business ethics refers to the application of ethics to business.

To be more specific, business ethics is the study of good & bad, right & wrong, & just & unjust actions of business.

Sources of Business Ethics

(1) Religion
(2) Cultural Experience
(3) The legal system


Why Ethic is Important?

(1) Ethics corresponds to basic human needs
(2) Values create credibility with the public
(3) Values gives management credibility with employees
(4) Values help better Decision – making
(5) Ethics & profits
(6) Law can’t protect society, Ethics can



Corporate Social Responsibilities

Corporate Social Responsibilities (CSR) is understood as the obligation of decision-makers to take actions that protect & improve the welfare of the society as a whole along with their own interests. Every decision the business person makes & every action he or she contemplates has social implications. Whether the issue is significant or not, the manager should keep his or her social obligation in mind before contemplating any action.

The CSR Debate

Their are arguments for & against business’s social responsibilities.

Arguments For CSR

(1) Changed public Expectations of business
(2) Better environment for business
(3) Balance of responsibility with power
(4) Business has the resources
(5) Prevention is better than cure
(6) Moral responsibility
(7) Globalization
(8) Better employees

Arguments Against CSR

(1) Profit maximization
(2) Society has to pay the cost
(3) Lack of social skills
(4) Business has enough power
(5) Social overhead cost
(6) Lack of accountability
(7) Lack of broad support


Corporate Social Responsibilities & Ethics in International Business


Corporate Social Responsibilities & International Business

An international business faces several challenges while undertaking social actions. These are as follows:
(1) managing the type of the government obtaining in a host country where subsidiary of an MNC is located
(2) Relationship between home & host country
(3) Host government’s attitude towards Foreign investment
(4) Social problems of host country
(5) International laws is weak in addressing social effects on business


Business Ethics & International Business

Two ethical issues are important in international business.
(1) Bribery & Corruption
(2) Work practices & worker remuneration



Areas of Corporate Social Responsibilities & Business ethics concerns for the MNC




Stakeholders Affected Ethical/ Social Responsibilty Issues

Customers Product safety, fair price, proper disclosures & information

Stockholders Fair return on Investment

Employees Fair wages, safety of working conditions, child labour, Discrimination by sex, race colour, or creed

Host- country Impact on local economies, following local laws, impact on local social institutions

Society in General Environmental protection, raw material depletion




MNC’s code of conduct

The main points which should be concerned by MNC is as follows

(1) Respect basic human rights & freedoms
(2) Minimize any negative impact on local economies policies
(3) Maintain high Standards of local political involvement
(4) Transfer technology
(5) Protect the environment
(6) Consumer protection
(7) Employment practices

COMPENSATION & PERFORMANCE APPRAISAL OF EXPATRIATE STAFF

INTRODUCTION OF PERFORMANCE APPRAISAL

One of the most challenging tasks of llHRM is managing the performance of a ftrm's various international facilities. Performance management may be understood as a process that enables an international firm to evaluate
and continuously improve individuals, subsidiary unit, and corporate performance, against clearly defined, preset goals and targets.

An expatriate's performacne needs to be assessed to effect his or her promotions, assess training and development needs, and introduce pay rises.








INTRODUCTION OF COMPENSATION

Any expatriate remuneration package needs to be designed to
achieve the following major objectives:
1. Attract employees who are qualified and interested in international assignments;
2 Facilitate the movement of expatriates from one subsidiary to another, from home to subsidiaries, and from subsidiaries back home;
3. Provide a consistent and reasonable relationship between the pay levels of employees at headquarters, domestic affiliates, and foreign subsidiaries; and
4. Be cost effective by reducing unnecessary expenses
Problems:
Generally the following problems crop up while designing an international remuneration package:
• Discrepancies in pay between parent, host, and third-country nationals.
• The need to vary expatriate compensation, depending on the 'lifecycle' of the expatriate's family (e.g., young children, children in college, etc.).
• Remuneration issues related to re-entry into the parent country organsiation.
• Using remuneration programmes that had not changed sufficiently over time to deal adequately with the new international business environment.


Factors influencing international compensation: \






COMPONENTS

1. Base Salary
2. Incentives
3. Taxes


COMPENSATION DESIGNING APPROACHES

(1) Balance Sheet Approach

In designing an expat's remuneration, fIrms generally follow a number of approaches. The most common is the balance sheet approach, which involves ensuring that the expat is "made whole" and does not lose money by taking the assignment. The basic objective is to maintain home-country living standards, plus offer some fmancial inducement.



(3) Localisation

A second approach is called localisation and involves paying the expat a salary that is comparable to those of local citizens. Also called the going rate approach, in this method, the base salary for international transfer is linked to the salary structure in the host country. The international fIrm usually obtains information from local compensation surveys and decides whether local nationals (HCNs), expatriates of the same nationality, or expatriates of all nationalities will be the reference point in terms of benchmarking.

Cross- cultural challenges in IB

Cross National Difference
In recent years, with the increase in globalization and diversity in the workplace, cross cultural management has become an important element of organizational. Culture can be analyzed from a country, language, religion, value, ethical and/or many other areas of study as a frame of reference.The main cross national differences are-

· Social & cultural Environment
Social structure of the society
Values and belief of people
· Political environment
· Legal system
· Education system and standard
· Quality of quantity knowledge work force
· Level of available technology


Global HR issues

Global human resource strategy is the framework built around managing a global workforce; including recruiting, hiring, setting compensation levels and benefits, and retaining workers in a global organization. Global companies must make decisions about hiring locally, recruiting expatriates, or utilizing emerging new worker groups to fill the needs of a particular region.
Additionally, global HR strategy must consider the complexities of regional government interaction with the business, as well as social programs that may compensate for benefits offered by the employer in other regions. Other global HR issues that impact the development of a cohesive strategy include cost of living, local pay scales, retention issues, pension issues, organized labor, and regional leave policies.

A)-Standardization and adaptation of HR practices

1 .Host country culture and work place environment

2. Firm’s size, maturity and level of international experience

3. Mode of operation

B).Retaining, developing and retaining local Staff

C). HR implication of Language Standardization

D). Monitoring HR practices of host Country

Managing Multiculturalism Cultural diversity
Cultural diversity is the variety of human societies or cultures in a specific region, or in the world as a whole. Human have spread throughout the world, successfully adapting to widely differing conditions and to periodic cataclysmic changes in local and global climate. The many separate societies that emerged around the globe differed markedly from each other.
Cultural differences that exist between people, such as language, dress and traditions, there are also significant variations in the way societies organize themselves, in their shared conception of morality, and in the ways they interact with their environment.
Most people would agree that cultural diversity in the workplace utilizes country’s skills to its fullest, and contributes to overall growth and prosperity.
Diversity at its core is about people and the behavioral characteristics that guide how we interact, i.e. “culture.” To better understand this notion, let’s examine the impact of culture within our workplace organizations. Several aspects of culture shape today’s workplace. For example, employees’ communication style, time consciousness, and work practices all stem from their cultural programming. The dominant cultural norm here in the United States dictates that business communication be specific and explicit. Meaning is found in the actual content of words with very little left to interpretation. However, in many ethnic and international cultures, communication is more implicit and indirect: meaning is found in and around the words themselves.
By better understanding the cultural norms and values within their organization, leaders and their units benefit. When this enhanced comprehension becomes a way to guide efforts, hiring practices, and employee relations strategies, diversity initiatives move away from lip service and become actualized. An honest cultural audit of an organization not only helps drive diverse policies and procedures, but goes far in the creation of welcoming workplace communities in which genuine cross-cultural interaction and respect for diversity are naturally occurring. And as an organization’s culture is identified and shared, diverse employees are more likely to express their cultural uniqueness within the context of stated organizational norms and values. When organizational culture and individual human values work together, there can be synergy: the interaction or cooperation of two or more entities to produce a combined effect greater than the sum of their separate effects. That is a definition of diversity in which we can all find meaning.


Reasons for Expatriate Failure

• Inability of spouse to adjust
• Manager's inability to adjust
• Other family reasons
• Inability to cope with larger international responsibility
• Difficulties with new environment
• Personal or emotional problems
• Lack of technical competence


Factors of Expatriate Selection

(a)Technical ability
(b)Cross- cultural Suitability
(c)Family Requirements
(d)language
(e)Cross- cultural Requirements



Training for Expatriates:


An expatriate needs following trainings to cope with cross cultural challenges:
(1) cultural training,
(2) language training, and
(3) practical training.


Cultural Adjustment of expatriate



An expatriate's cultural adjustment typically comprises three stages .
1st Stage : Tourist Stage
the expatriate enjoys a great deal of excitement as he or she discovers the new culture. This stage is called the tourist stage.

2nd Stage Disillusionment:
In this stage, the curve hits the bottom and is characterised by what is called culture shock.

3rd Stage : adapting or adjustment phase.
If culture shock is handled successfully, the expatriate enters the third stage, which may be called the adapting or adjustment phase.

Tuesday, March 24, 2009

- international promotion mix & pricing decision

PROMOTION
Promotion plays a vital role in providing information of the product to the foreign customers. It also creates the desirability of the product among foreign potential buyers. Foreign companies desire to communicate with their marketing intermediaries and potential buyers to ensure favourable sentiment toward themselves and their products. Promotion is more culture bound than other Ps.
Hence, the foreign companies must take special care in promoting the product in the host country.

The promotion mix include:
1. Advertising
3. Sales Promotion, and
2. Personal Selling
4. Public Relations

1. ADVERTISING
Though advertising is not given due importance in developing countries, it plays crucial role in international marketing and particularly for consumer goods and consumer durables. The international firm while formulating advertising strategy should consider -
(a) Message
(b) Medium
© Extent of global advertising efforts.

SALES PROMOTION
Sales promotion includes specialised marketing efforts like coupons, in-store promotions, sampling, direct mail campaigns, co-operative advertising and trade fair attendance. International companies attend trade shows like Paris Air Show, Tokyo Auto Mart etc. Most of the Airlines companies use sales promotion to lure customers.

PUBLIC RELATIONS
Public relations include efforts aimed at enhancing a firm's reputation and image with the general public. The consequence of public relations is that the firm is a 'good corporate citizen.' This image in its turn enhances company sales.









Pricing Decision



PRICING DECISIONS
Though the pricing is significant among the 4 Ps, it receives the least attention in the international marketing. Pricing decisions can be studied from the following approaches:
•• Supply and Demand
•• Cost
•• Elasticity or Cross Elasticity of Demand
•• Exchange Rates
•• Market Share
•• Tariffs and Distribution Costs
•• Culture
•• Purchasing Power

PRICING POLICIES
The pricing policies of international companies include:
•• Standard price policy
•• Two-tiered pricing
•• Market pricing.

Standard price policy: Under the standard price policy, the international company sells the product at the same price for the customers of any country or nationality. Crude oil producers like Kuwait Oil, Aramco and Pemex sell their products to all customers at price determined by supply of and demand for crude oil in the world crude oil market. .

Two-tiered pricing policy: International company under this policy sells its product at two prices, viz., one price for domestic sales and another price for the foreign sales. This policy is adopted due to the involvment of shipping costs, tariffs and foreign distribution costs.

Marketing pricing policy: International companies following this policy customise their pricing on a market-by-market basis in order to maximise their profits in each market. Japanese automobiles follow this policy in pricing their cars.

Alternative pricing strategies: There are a number of alternative pricing strategies in addition to the above-mentioned strategies. These include:
Discounts (cash, quantity, functional etc.)
Financing or credit terms
Bundle or unbundle.





Factors affecting international pricing

Pricing factors of international business vary from those domestic business. A number of factors affect the international pricing. The important among them are:
(a) Cost
(b) Competition
(c) Product Differentiation
(d) Exchange Rate
(e) Economic Conditions of the Importing Country:
(f) Government Factors:
(g) Other incentives like supply of finance, inputs etc. at lower prices in order to encourage the domestic exports.



The normal ex-price structure is as follows:
(i) Cost of production
(ii) Producer's profit
(i) + (ii) = Ex-factory gate price
(iii) Packing and Marking
(iv) Loading charges at the factory
(v) Transportation charges to docks, railway station or airport
(vi) Handling charges and fee at port, railway station, airport
(vii) Cost of documents (like cost of lading and airway bill)
(viii) Consular invoice, certificate of origin
(ix) Export duty (if any)
(x) (i) to (ix) = C and F Price
(xi) Cost of insurance
(xii) Sea or air freight charges
(i) to (xii) = CIF Price
(xiii) Unloading charges at destination
(xiv} Import duties and taxes
(xv) Fee paid to the Clearing Agent
(i) to (xv) = Landed Price
(xvi) Transportation charges to Importer's Warehouse
(xvii) Importer's Margin/Mark-up
(xviii) Mark-up/Margin of all other market intermediaries in the importing country
(i) to (xviii) = Price to the consumer









DUMPING

Dumping is a form of price discrimination. Under dumping the international company charges different prices for the same product in different markets. Dumping means selling the products at below the cost of production or at below the on going price in the market. Consequently, the imported goods are sold at prices so low as to be detrimental to local producers of the same kind of merchandise. I I For example, China dumped its steel, USA and Malaysia dumped cooking oil in India. Consequently, Indian Government imposed
antidumping measures to protect domestic industry.

Types of Dumping
(1) Sporadic dumping : Sporadic dumping occurs when an international company sells its unsold inventories in a foreign country to get rid of them.
(2) Predatory dumping: Predatory dumping is selling the product in a foreign market at a loss as a strategy of entering the market. Zenith uses this strategy for selling televisions and computers.
(3) Persistent dumping: Persistent dumping involves consistently selling the product at lower prices in one market than in other markets. Japan sells its electronic products at high prices in Japan and sells the same products consistently at lower prices in USA and India.
(4) Reverse Dumping: Under reverse dumping the product is sold at high price in international markets and at a low price in the domestic market.

Antidumping Terms
Dumping adversely affects the domestic manufacturers, suppliers of raw materials, components, labour and other stakeholders of the domestic companies. Further, it affects the economic activity in the domestic country and also the government revenue. Hence, the domestic governments 'importing' impose antidumping terms/measures.

managing distribution channel

Managing distribution channels

International companies either sell directly or indirectly.
Indirect selling takes place through domestic agent/domestic merchants. This is a long channel involving a number of marketing intermediaries.

International Market Intermediaries


place/distribution channels could be studies under:
(1) Direct Selling (2) Indirect Selling

1. Direct selling: Foreign company develops its own overseas marketing department or foreign marketing intermediaries and sells the product in the foreign market.
2. Indirect selling: Indirect selling is through market intermediaries.


Types of Market Intermediaries

(1) Foreign Distributor: It is a foreign company having exclusive rights to distribute the company's product in a foreign country.
(2) Foreign Retailer: It is a retailing company firm in a foreign country engaged by the distributor of the foreign country concerned to deal in and sell the products.
(3) State-Controlled Trading Company : It is a government company authorised to deal in and sell the products/services of foreign companies. For example, State Trading Corporation in India.
(3) Export Broker: It is a domestic company engaged in arranging for export of goods of domestic companies by charging a fee.
(4) Manufacturer's Export Agent /Sales Representatives: It is a firm exclusively engaged to take up all export activities of a domestic manufacturer. This agent works for a commission .
(5) Export Management Company: This company manages the entire export activities of a domestic company on contract.
(6) Co-operative Exporter : Manufacturers of a particular product in the domestic country form into a co-operative union to manage their export activities. This co-operative union manages the export activities of its members. Examples include GE, Singer and Borg-Warner.
(7) Web-Pomerence Association: It is an association jointly formed by two or more domestic manufacturers to export their products. It is basically an export cartel.
(8) PurchasinglBuying Agent: It is an agency firm of a foreign buyer/importer. Foreign buying/ importing company appoints agents to arrange for buying products from other countries .
(9) Country-controlled Buying Agent: It is a foreign government's agency or a quasi-governmental firm engaged in buying/importing products from other countries. This firm buys products on behalf of the government of the importing country .
(10) Resident Buyer: It is an agency engaged in buying the products on behalf of the importer. This agent locates his firm near the manufacturers in the exporting country .
(11) Export Merchant: It is a firm engaged in buying the products in the domestic country in order to export to foreign countries on its own.
(12) Export Drop Shipper: Export drop shipper is also known as a desk jobber or cable merchant. He arranges a link between the exporter and importer. He informs the requirements of the customers in a foreign country to the exporter. Exporter, in his turn sends the products directly to the importer.
(13) Export Distributor: Export distributor is granted exclusive right to represent the manufacturer in selling the product in foreign countries. He operates either in his own name or manufacturer's name .
(14) Trading Company: Trading companies act as a link between exporting companies and importing companies.

- PRODUCT & BRANDING DECISION

International Marketing

International Marketing mix

The international marketing mix consists of 4 Ps viz.,
- Product
- Price
- Place
- Promotion


Product & Branding Decision

A product is something both tangible and intangible. The tangible products can be described in terms of physical attributes like shape, dimension, components, form, colour etc.
The intangible
products include various services like merchant banking, mutual funds, insurance, consultancy, air travel etc. However, sometimes both tangiable and intangible are combined to give a total product.

. The global markets must see the total product which includes tangible and intangible.
The study of product in the international market includes:
1. Product Development
2. Product Life-cycle
3. Branding Decisions
4. Packaging Decisions


Market Segmentation: The main purpose of the market segmentation is to satisfy the customer needs more precisely. Market segmentation helps to enter the foreign markets in a phased manner

Product Positioning: Product positioning attempts to occupy an appealing space in a consumer's mind in relation to the space occupied by other competitive products.


Product Adoption : Product to be adopted in a foreign market must demonstrate Five factors.
They are:
(1) Relative advantage over existing alternatives.
(2) Products cleanliness and sanitation are accepted in rich countries.
(3) Compatible with local customs and habits:
(4) Observism : If the product is used publicly the others can observe the product..
(5)Complexity: If the product's qualities are difficult to understand then other product has slow market acceptance.

2. PRODUCT LIFE CYCLE



INTERNATIONAL PRODUCT LIFE CYCLE
International product life cycle model is based on empirical actual pattern of trade. I I This model explains the relationship among the product life cycle trade and investment.

International product life cycle model explains:
(1) High-income, mass-consumption countries initially export, and later import the product as they lose their export markets.
(2) Later, the other advanced countries shift from an importing country to an exporting country.
(3) After some time, even the less developed countries shift from the status of importing country.



(1) New products are initially introduced in high-income countries/markets as the latter offer high potential demand
(2) . Initially products are produced where they are sold .
(3) Mostly product inventions take place in high-income countries .
(4) Entrepreneurs in middle-income countries take the advantage of low cost of labour and otherfactors of production in the production of the new products .
(5) Market stabilises when the product reaches maturity, the design, technology and markets stabilise.
(6) Production from low income countries displaces the production of the high income countries due to the cost advantage .
(7) Companies of high-income countries shift to low-income countries to take the advantage of low cost factors of production .
(8) These companies gain the ownership and control over the production of low-income countries .
(9) The producers of low-income countries produce and sell higher volumes due to the low cost of production and price. Further, these producers also export in higher volumes due to heavy demand, consequent upon low cost of factors .
(10) Low-income countries export to high-income countries and compete with the industries of highincome countries who enjoyed monopoly at the initial stage of the cycle .
(11) With this stage, cycle completes its turn. Textiles is an example of this cycle. This product has gone through the complete cycle for the investing country (UK), other developed countries and finally the developing countries. Similarly, electronics industry passed through all the stages. This product shifted from USA to Japan to Korea to India.

Stages of International Product Life Cycle

Stages of international product life cycle include:
(1) Stage Zero: Local Innovation: The product in this stage is a familiar product in the local market. Product innovations take place mostly due to the changing wants of the local people .
(2) Stage 1: Overseas Innovation: After a product is successful in the domestic market, the producer desires exporting it to the foreign markets due to excess production compared to its demand in the domestic country.
(3) Stage 2: Maturity : The development of the product reaches the peak stage even in foreign markets. The producer modifies it and develops it based on taste and preference of the customers in foreign markets. The producer exports the products even to less developed countries in this stage .
(4) Stage 3: Worldwide Imitation: The local manufacturers in various foreign countries start to imitate the popular foreign products. They modify those products slightly based on the local needs and produce the same at less cost and sell them at cheaper prices .
(5) Stage 4: Reversal: Competitive advantage of innovative or original manufacturer disappearsat this1stage as producers in many foreign countries imitate the product, develop it further and produce it at less cost. This stage also results in product standardisation and competitive
disadvantage. The product at this stage does not have to be either capital intensive or technology intensive, but it becomes labour intensive - a strong competitive advantage possessed by developing countries.


International Branding Decision

A trademark in USA according to the Lauham Trademark Act, 1947, "includes
any word, name, symbol or device or any combination thereof adopted and used by manufacturer or merchant to identify his goods, and distinguish them from those manufactured or sold by others."

BRANDING DECISION


Generic or No Brand: The first decision regarding branding is whether to brand or not. The trend towards non-branding products is increasing world-wide. In fact, the scales of non-branded products is increasing particularly in retail stores. The increase in demand for non-brand products is due to the availability of these products at less price. In addition, non-brand products are available - In a number of sizes and models.
Branded Products: Most of the global companies go for branding. The customers of different countries find it easy to identify the branded products and they are aware of the ingredients and utility of the branded products. For example" the customers throughout the world are aware of the products of Colgate-Palmolive, Pepsi or Coke etc. The global company can get better price and profits through branded products.
Private Brand: Most of the exporting companies go for dealer's brand or private brand. The advantages of private branding include: easy in giving dealer's acceptance, possibility of getting larger market share, less promotional expenses etc. Private branding is more appropriate for the small companies who export to various foreign countries.
Manufacturer's Brand: The manufacturer sells the products in his own brand. The advantages of manufacturer's brand include: better control of products and features, better price due to more price inelectricity, retention of brand loyalty and better bargaining power.
•Single Brand: The global company go for a single brand for all its exports to the same country (or Single Brand): The advantages of single brand in single market include: better impact on marketing ,permittmg more focussed marketing, brand receives full attention, reduction in cost of promotion etc.
Multiple Brands: The marketing conditions and the features of the customers vary wIdely from one region to the other, in the same country. Therefore, the exporter uses multiple branding decisions in such cases. Multiple branding enables the exporter to meet the needs of all segments. Theother advantages of multiple branding include: creation of excitement among employees, gaining
of more shelf space, avoidance of negative connotation of existing brand etc.
Local Brands: Global companies have started widely using the local brands in order to give the impression of cultural compatibility of the local market. The advantages of local branding include: elimination of difficulty in pronunciation, elimination of negative connotations, avoidance of taxation on international brand etc.
World Wide Brand/Global Brand: Exporters normally go for global brand. The advantages of global brand include: reduction of advertising costs, elimination of brand confusion, better marketing impact and focus, status for prestigious brands and for well-known designs etc.


Strategies for Branding Decisions
(1) If the product has production consistency and salient attributes which can be differentiated, then it would be better for the manufacturer to go for branding otherwise better to sell the product without any brand .
(2) If the manufacturer is least dependent person, it would be feasible to go for the manufacturer's own brand otherwise, it would be feasible to go for a private brand .
(3) If there are intermarket differences like demographic and psychological, it would be feasible for having a local brand. Otherwise, it would be better to go for global brand .
(4) If there are intermarket differences like demographic and psychological, it would be feasible for multibrands. Otherwise it would be feasible to go for single brand.

COMPENSATION & PERFORMANCE APPRAISAL OF EXPATRIATE STAFF

COMPENSATION & PERFORMANCE APPRAISAL OF EXPATRIATE STAFF


INTRODUCTION OF PERFORMANCE APPRAISAL

One of the most challenging tasks of llHRM is managing the performance of a ftrm's various international facilities. Performance management may be understood as a process that enables an international firm to evaluate
and continuously improve individuals, subsidiary unit, and corporate performance, against clearly defined, preset goals and targets.

An expatriate's performacne needs to be assessed to effect his or her promotions, assess training and development needs, and introduce pay rises.


INTRODUCTION OF COMPENSATION

Any expatriate remuneration package needs to be designed to
achieve the following major objectives:
1. Attract employees who are qualified and interested in international assignments;
2 Facilitate the movement of expatriates from one subsidiary to another, from home to subsidiaries, and from subsidiaries back home;
3. Provide a consistent and reasonable relationship between the pay levels of employees at headquarters, domestic affiliates, and foreign subsidiaries; and
4. Be cost effective by reducing unnecessary expenses
Problems:
Generally the following problems crop up while designing an international remuneration package:
• Discrepancies in pay between parent, host, and third-country nationals.
• The need to vary expatriate compensation, depending on the 'lifecycle' of the expatriate's family (e.g., young children, children in college, etc.).
• Remuneration issues related to re-entry into the parent country organsiation.
• Using remuneration programmes that had not changed sufficiently over time to deal adequately with the new international business environment.



COMPONENTS

1. Base Salary
2. Incentives
3. Taxes


COMPENSATION DESIGNING APPROACHES

(1) Balance Sheet Approach

In designing an expat's remuneration, fIrms generally follow a number of approaches. The most common is the balance sheet approach, which involves ensuring that the expat is "made whole" and does not lose money by taking the assignment. The basic objective is to maintain home-country living standards, plus offer some fmancial inducement.


(3) Localisation

A second approach is called localisation and involves paying the expat a salary that is comparable to those of local citizens. Also called the going rate approach, in this method, the base salary for international transfer is linked to the salary structure in the host country. The international fIrm usually obtains information from local compensation surveys and decides whether local nationals (HCNs), expatriates of the same nationality, or expatriates of all nationalities will be the reference point in terms of benchmarking.

Cross Cultural Challenges In IB

Cross Cultural Challenges In IB

Reasons for Expatriate Failure

• Inability of spouse to adjust
• Manager's inability to adjust
• Other family reasons
• Inability to cope with larger international responsibility
• Difficulties with new environment
• Personal or emotional problems
• Lack of technical competence


Training for Expatriates:


An expatriate needs following trainings to cope with cross cultural challenges:
(1) cultural training,
(2) language training, and
(3) practical training.


An expatriate's cultural adjustment typically comprises three stages .
1st Stage : Tourist Stage
the expatriate enjoys a great deal of excitement as he or she discovers the new culture. This stage is called the tourist stage.

2nd Stage Disillusionment:
In this stage, the curve hits the bottom and is characterized by what is called culture shock.

3rd Stage : adapting or adjustment phase.
If culture shock is handled successfully, the expatriate enters the third stage, which may be called the adapting or adjustment phase

International Staffing Decision

International Staffing Decision








Human resource planning having been done, the international human resource manager must proceed with the job of hiring the right number of people of the right type.
The international human resource manager must not only select people with skills, but also employees who can jell with the organisation's culture. ;so it wants to hire employees whose styles, beliefs, and value systems are consistent with those of the firm.

Approaches of Staffing

International businesses are said to adopt three approaches to staffing:
(1) Ethnocentric,
(2) Polycentric, and
(3) Geocentric.


Ethnocentric Approach In this approach, all key management positions are held by parent-country nationals. This strategy may be appropriate during the early phases of international business, because fums at that stage are concerned with transplanting a part of the business that has worked in their home country.

This practice was widespread at one time. Firms such as P & G, Philips NY, and Matsushita originally followed the ethnocentric approach.

Reasons :
• Perceived lack of qualified host country nationals;
• Understanding that a united corporate culture can be maintained; and
• Need to maintain good communication, coordination, and control links with headquarters.

Disadvantages:

• Denial of promotional opportunities to host-country nationals, leading to reduced productivity and increased turnover.
• The adaptation of expatriate managers to host countries takes a long time during which home-country nationals make poor decisions and commit mistakes.
• For many expatriates a key international posting means new status, authority, and increased standard of living. The changes may affect expatriates' sensitivity to the needs and expectations of their host country subordinates.

Polycentric Approach
The polycentric staffing policy requires host-country nationals to be hired to
manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters. Although top management positions are filled by home-country personnel, this is not always the case.
For example, many US MNCs use home-country managers to get the operations started, then hand it over to the host-country managers. Hindustan Lever Ltd, (HLL), the Indian subsidiary of Unilever, has locals as its chiefs.

The Geocentric Approach This staffing philosophy seeks the best people for key jobs throughout the organisation, regardless of nationality. Seeking the best person for the job, irrespective of nationally is most consistent with the underlying philosophy of a global corporation.
Colgate Palmolive is an example of a company that follows the geocentric approach. It has been operating internationally for more than 50 years, and its products are household names in more than 170 countries. 60 per cent of the company's expatriates are from countries other than the US. All the top executives speak atleast two languages, and important meetings routinely take place all over the globe.

COUNTER TRADE

COUNTER TRADE

Countertrade occurs when a firm accepts something other than money as payment for its goods or
services. Thus, countertrade is essentially a barter trade.

TYPES OF COUNTER TRADE
(1) BARTER SYSTEM

Barter is the direct exchange of goods and/or services between two parties without a cash
transaction.
(2) COUNTER PUCHASE
This is a reciprocal buying agreement. It occurs when a firm agrees to purchase a
certain amount of materials back from a country to which a sale is made.
(3) OFFSET
An example for an offset deal is that Pepsi Co sells its cola syrup to Russia for roubles and agrees
to buy Russian vodka at a certain rate for sale in the US. Going by this example, offset resembles
counterpurchase agreement. But there is difference. The difference is that Pepsi can fulfill the obligation
with any firm in Russia. From an exporter's perspective, offset is more attractive than a straight
counterpurchase deal because it gives the exporter greater flexibility to choose the goods that it wished to
purchase.
(
(4) switch trading
it refers to use of the specialized third party trading house in a countertrade agreement. When a firm enters a counterpurchase or offset deal with a countryI It often ends
up with what are called counterpurchase credits, which can be used to purchase goods I llfll till" ountry.
Switch trading occurs when a third-party trading house buys the firm's counterpurchase credltH 111\(1 Ilells
them to another firm that can better use them.


(5) BUYBACK
A buyback also called compensation occurs when a firm builds a plant in a country-or supplies
technology, equipment, training, or other services to the country-and agrees to take a certain percentage
of the plant's output as partial payment for the deal. Countertrade is of particular importance to countries that lack convertible currency and, as stated earlier is often used as means of reducing the drain on scarce foreign currency holdings.

A relatively new form of countertrade involves swaps. Swaps are generally carried out in' relation to
developing countries where the government and private sector face large debt burdens. Given that these
debtors are unable to pay their debt in the immediate future, lenders have grown amenable to exchange the
debt for something else, as for example, debt-far-equity swaps in the private sector, and debt-for-nature
swaps in the public sector.

MECHANISM OF ITERNATIONAL TRADE TRANSACTIONS

MECHANISM OF ITERNATIONAL TRADE TRANSACTIONS

Means of Payments in IB

(1) Open Account
(2) Cash in Advance
(3)Letter of Credit
(4) Draft
(5) Consignment

(1) Cash in advance
Cash in advance affords the exporter the greatest protection because payment is received either before shipment or upon arrival of the goods.

(2) Letter Of Credit

Letter of credit is a letter addressed to the seller, written and signed by a bank acting on behalf of the buyer. In the letter, the bank promises that it will honour drafts drawn on itself if the seller confirms to the specific conditions set forth in the letter of credit In exchange for the bank's agreement to honour the draft
for payment that results from the transaction, the importer promises to pay the bank the amount of transaction and an agreed fee. The letter of credit obviously becomes a fmancial contract between the issuing bank and a designated beneficiary that is separate from the commercial transaction.

Advantages to the exporter.
1. The letter of credit eliminates credit risk if the bank that opens it is of undoubted standing. Obviously, the exporter needs to check only on the reputation of the bank.

2 A letter of credit also reduces the danger that payment will be delayed or with held due' to exchange control or other political risks. Countries generally permit local banks to honor their letter of credit. Failure to honor them could severely damage the country's credit standing and credibility.

3. A letter of credit reduces uncertainty. The exporter knows all the requirements for payment because they are stipulated on the letter of credit.

4. The letter of credit can also guard against preshipment risks. The exporter who manufactures, under a contract, a specialised piece of equipment runs the risk of contract cancellation before shipment. Opening a letter of credit will provide protection during the manufacturing phase.

5. Letter of credit facilitates financing because it ensures the exporter a ready buyer for its product. It also becomes easy to create a banker's acceptance-a draft accepted by a bank.

Advantages to the importer:

1. The letter of credit ensures that the exporter delivers goods and produces certain documents which are carefully examined by the bank. If the exporter fails to deliver the goods, it will be much simpler for the importer to withdraw deposit from the bank. I

2 Because a letter of credit is as good as cash, the importer can usually command better credit terms and /or prices.

3. Letter of credit financing may be cheaper than the alternatives. There is no tie-up of cash if the letter of credit substitutes for cash in advance.

The letter of credit operations are quite simple.

(3) The Drafts

The draft, also called the bill of exchange, is written by an exporter on the importer directing the latter to pay a certain sum on a specified date for having goods shipped to the importer. The exporter submits the bill to its banker who collects the stated amount from the importer's bank and remits the proceeds to the seller or to the bearer.
PARTIES:
The draft has three parties:
(a) The exporter-is the party who draws the bill and hence called the drawer,
(b) The importer on whom the bill is drawn and hence called the drawee, and
(c) the party who is entitled to receive payment is called the payee. Normally, the drawer and the payee are the same persons in which case thereare only two parties to a draft.
FUNCTION:
The draft serves three important functions and hence is widely used in foreign trade:
1. It provides written evidence of obligations in a comprehensive form.
2 It enables both parties to potentially reduce their costs of financing.
3. It is a negotiable and unconditional instrument.
CONDITIONS
To serve the three purposes, the draft needs to fulfill the following conditions:
• It must be in writing
• Signed by the drawer (exporter)
• An unconditional order to pay
• A certain sum of money
• Payable on demand or on a specified future date
• Payable to order of bearer

(4) CONSIGNMENT

Under the consignment the exporter sends goods, on consignment, to the importer who arranges for the sale of goods and makes payment to the exporter, after deducting a specified commission.
Goods on consignment are duly shipped to the importer, but they are not sold. The exporter (consignor) retains title to the goods until the importer (consignee) has sold them to a third party. This agreement is normally made only with a related company because of the high risks involved. There is little evidence of the buyer's obligation to pay, and should the buyer default, it becomes difficult to collect.

(5) OPEN ACCOUNT

Open account selling is shipping goods first and billing the importer later. The credit terms are arranged between the buyer and the seller but the seller has little evidence of the importer's obligation to pay a certain sum at a certain date.
Sales on open account, therefore, are made only to a foreign affiliate or to a customer with which the exporter has a long history of favorable business dealings.

Benefits
The benefits include greater flexibility (no specific payment dates are set) and involve lower costs, including fewer bank charges than with other modes of payment. As with shipping on consignment, the possibility of currency controls is an important factor because of the low priority in allocating foreign exchange normally accorded to this type of transaction.


DOCUMENTS OF IINTERNATIONAL TRADE

(a) Bill of lading,
(b) commercial invoice,
(c) insurance certificate, and
(d) consular invoice

(A) Bill of lading
The most important document used in financing of foreign trade is the bill of lading (B/L). A B/L is a shipping document issued to the exporter or its bank by a common carrier that ships the goods. It serves three important functions:
1. It is a receipt acknowledging that the goods have been received by the carrier.
2. It is a contract binding the carrier to deliver the goods to the importer.
3. The negotiable B/L, its most common form, is a document that establishes control over the goods.

(B) commercial invoice
A commercial invoice contains an authoritative description of the merchandise shipped, including full details on quality, grades, price per unit, and total value.
It also contains the names and addresses of the exporter and the importer, the number of packages, any distinguishing external marks, the payment terms, other expenses such as transportation and insurance charge, any fees collectible from the importer, the nanle of the vessel, the ports of departure and destination and any required export or import permit numbers.

(C) insurance certificate

All cargoes going abroad are insured. Most of the insurance contracts used today are under an open, or floating policy. This policy automatically covers all shipments made by the exporter, thereby elinlinating the need for arranging individual insurance for each shipment. To evidence insurance for a shipment under an open policy, the exporter makes out an insurance certificate on forms supplied by the insurance company.
This certificate contains information on the goods shipped. All entries must conform exactly with the information on the BIL, on the commercial invoice and where required, on the consular invoice.

(D) CONSUMER INVOICE
Exports to many countries require a special consular invoice. This invoice, which varies in its details and information requirements from nation to nation, is presented to the local consul in exchange for a visa. The form needs to be filled carefully, for even trivial inaccuracies can lead to substantial fines and delays in
customs clearance. The consular invoice does not convey any title to the goods being shipped and is not
negotiable.









FINANCING TECHNIQES IN FORIGN TRADE

Besides direct bank financing, there are several other techniques available for trade financing:
• Bankers' acceptances,
• Factoring: Many firms resort to factoring in which the factoring company buys the exporter's foreign accounts receivable at a discount.
• Forfeiting: When the trade involves very large capital items like commercial aircraft and ships, forfaiting Is a technique of financing. Forfaiting is the discounting of medium-term export receivables denominared in fully convertible currencies

OUTSOURCING

outsourcing : When an international business decides to buy a service or process, it is resorting to what is known as an outsourcing strategy. Outsourcing is the act of moving some of the firm's internal activities and decision responsibility to external service providers. e.g.
If a A-Institute, for example, assigns house-keeping of the institute to an external contractor, it is outsourcing the work of house-keeping. Complete responsibility for house-keeping--equipment for scrubbing, mowing, washing, dusting, staff-is taken over by the service provider.
Reasons & Risks for Outsourcing

Factors Affecting Foreign investment Decision

Types of Foreign Investment
(1)Foriegn Direct Investment: which involves
(a)Whooly owned subsidiary
(b)Joint venture
(c)Acquisition


(2)Foriegn Portfolio Investment
(a)Investment by FIIs
(b)Investment in GDRs, FDRs, FCCBs etc.



Factors Affecting Foreign investment Decision

(1) Stable, predictable macro economic policy.
(2) An effective and honest government.
(3) A large and growing market.
(4) Freedom of activity in the market.
(5) Minimal government regulation.
(6) Property rights at1d protection.
(7) Reliable 'infrastructure:
(8) Availability of high-quality factors of production.
(9) A strong local currency.
(10) The ability to remit profits, dividends and interest.
(11) A fayourable tax climate.
(12) Freedom to operate between markets

Thursday, March 5, 2009

international material management

international material management is a part of international logistics.
we first should know what is logistics?

Logistics is new unique, it never stops! Logistics is happening around the globe
24 hours a days Seven days a week during fifty-two weeks a year. Few areas of business
involve the complexity or span the geography typical of logistics. Logistics is concerned
with getting products and services where they are needed whenever they are desired.
Most consumers take a high level of logistical competency for granted. When they go to
store, they expect products to be available and fresh.
It is rather difficult to visualize any marketing or manufacturing without logistical
support
Modern logistics is also a paradox. Logistics has been performed since the beginning of
civilization: it’s hardly new. However implementing best practice of logistics has become
one of the most exciting and challenging operational areas of business and public sector
management
According to Council of logistics management:
“Logistics is the process of planning, implementing and controlling the
efficient, effective flow and storage of goods, services and related
information from point of origin to point of consumption for the purpose of
conforming the customer requirement”.
Logistical management includes the design and administration of systems to controls the
flow of material, work- in – process, and finished inventory to support business unit
strategy.
Logistics is the designing and managing of a system in order to control the flow of
material throughout a corporation. This is a very important part of an international
company because of geographical barriers. Logistics of an international company
includes movement of raw materials, coordinating flows into and out of different
countries, choices of transportation, cost of the transportation, packaging the product for
shipment, storing the product, and managing the entire process.

Functions of Logistics
(A)Material Handling
Demand forecasting
Purchasing
Requirement Planning Materials
Production Planning Management
Manufacturing Inventory


(2)Physical Distribution
Finished goods Inventory
Distribution Planning
Order Processing
Transportation
Customer Service
(3) Warehousing
(4) Industrial Packaging
(5) Material Handling

CONCEPT OF LOGISTICS
The concept of logistics is fairly new in the business world. The theoretical development
was not used until 1966. Since then, many business practices have evolved and logistics
currently costs between 10 and 25 percent of the total cost of an international purchase.
There are two main phases that are important in the movement of materials: material
management and physical distribution;
Materials management is the timely movement of raw materials, parts, and
supplies.
The physical distribution is the movement of the firm's finished products to the
customers.
Both phases involve every stage of the process including storage. The ultimate goal of
logistics is:
"To coordinate all efforts of the company to maintain a cost effective flow of goods."
Word, ’Logistics’ is derived from French word ‘loger’, which means art of war pertaining
to movement and supply of armies.
o A military concept
o Fighting a war requires:
a. Setting of an objective
b. Meticulous planning to achieve the objective
c. Troops properly deployed
d. Supply line consisting weaponry, food, medical assistance, etc. maintained
o Plan should be such that there is minimum loss to men & material
Like fighting a war in the battlefield, the marketing managers also need a suitable
logistics plan that is capable of satisfying the company objective of meeting
profitably the demand of targeted customers.
Inbound logistics + Material Management + Physical Distribution =Logistics
Now we will discuss each and every term in this above summation
Inbound logistics covers the movement of materials received from
suppliers
Material management describes the movements of material &
components within a firm
Physical distribution refers to movement of goods outward from the end
of the assembly line to the costumer.
Supply- chain management is somewhat larger than logistics and it links
logistics more directly within the user’s total communication network &
with the firm engineering staff. It includes manufacturer and suppliers but
also transporters, warehouses, retailers and customers themselves.Logistics Management
Raw Material
In-Process Inventory
Finished Goods
These are the systems through which products goes from suppliers to customers.
Logistics activities
Customers Service
Demand forecasting
Distribution communication
Inventory Control
Material Handling
Order Processing
Part & Service Support
Plant and Warehouse side selection
Procurement
Packaging
Return goods handling
Salvage & scrap disposal
Traffic & transportation
Warehousing & Storage
Outputs of Logistics
Marketing Orientation
Time & Place Utility
Efficient Movement to Customer
Proprietary asset
Logistics has gained importance due to 8 trends
Transportation cost rose rapidly due to the rise in fuel prices
Production efficiency was reaching a peak
Fundamental change in inventory philosophy
Product line proliferated
Computer technology
Increased use or computers
Increased public concern of products Growth of several new, large retail chains or
mass merchandise with large demands & very sophisticated logistics services, by
pass traditional channel & distribution.
Reduction in economic regulation
Growing power of retailers
Globalization

INTERNATIONAL OPERATIONS MANAGEMENT

BUSINESS MANAGEMENT
Lesson Objectives
· To understand the process of Global Supply Chain
Management
· To understand how to distinguish make or buy decision
· To understand the process of Global Sourcing
· To clearly distinguish between the concepts of
“Partnering” and “Relationship Marketing”
· To have a clear cut understanding on Buyer-Supplier
Relationships
· To understand the various components of International
Logistics
· To understand the various Global Manufacturing
Strategies
· To decide about the Location Strategies
· To have an understanding on Country evaluation and
Selection Criterion
Interaction
The term international operations management is used in this
chapter in a very broad sense to include all functional aspects
related to the conduct of international business.
Operations management is becoming more and more international
in its scope. Even a firm, which markets the products
only within the domestic market, may be conducting its
business operations internationally like sourcing the inputs or
finished products internationally or manufacturing the product
abroad. A dynamic company will take advantage of the
favorable conditions that exist anywhere in the world.
Conceptual Discussion
The business system involves the integration and management
of diverse activities. On the one extreme, a firm may undertake
all of these different activities, carrying on the whole production
process and doing all the other operations encompassing the
business system. On the other extreme, a firm can outsource
most of these. Many firms now concentrate on its core
competence/business and outsource the rest. The multinational
Nike, for example, concentrates itself on the two strategic ends
of the business - R&D and marketing - and gets its products
manufactured by independent subcontractors located in
different countries as per the design and other’s specifications
given b1 the company, with the result that while Nike directly
employs about 9,000 people it indirectl1 employs about 7,5000
people. In fact, many products put to the market by a number
of companies embody substantial outsourced parts/components.
Global Supply Chain Management
Operations management, in fact, is, to a very large extent,
supply chain management. As Scary and Larsen observe,
“managing the supply chain is vital for international business.
The alternate objective is to deliver products to market with
variety, responsiveness, timeliness and efficiency. Corporate
strategy must include organizing; coordinating and executing
the processor product flow as a competitive necessity and as a
source of potential competitive advantage. The strategic
requirements of international business determine the extent,
characteristics and strategic direction of the supply chain. Some
businesses are only involved with international operations to
secure a supply of materials and components; marketing is
domestic. Other businesses manufacture and export from a
home base an~ procure materials overseas. Some corporations
serving global markets rationalize production using international
factory networks for supply.
A company’s supply chain encompasses the coordination of
materials, information, and funds from the initial raw material
supplier to the ultimate.2 It is the management of the valueadded
process from the suppliers’ supplier to the customers’
customer.3 The scope of supply chain, thus, encompasses
almost the entire system of business process.
According to Houlihan, the underlying concept of the supply
chain embraces the following points:4
· The supply chain identifies the complete process of
providing goods and services to the final user.
· It includes all parties and logistics operations from supplier
to customer within a single system.
· The scope of the supply chain includes procurement,
production and distribution operations.
· The supply chain extends across organizational boundaries.
· It is coordinated through an information system accessible
to all members.
· The primary objective of the supply chain is service to
customers. This must be balanced against costs and assets.
· Objectives of individual supply chain members are achieved
through the performance of the chain as a whole.
The above exposition of the scope of the supply chain
connotes that operations management is, by and large, supply
chain management (note, particularly, the third point). As the
supply chain becomes more complex, there is an increasing need
to integrate each stage as part of a larger system.

Make or Buy

One of the critical considerations in the supply chain management
is make or buy. Globalization, having increased the scope
of sourcing, has made the make or buy question more relevant.
Table 9.1 gives a summary of the advantages and disadvantages
of both the make and buys options.
The make or buy decision is influenced by a number of factors.
The organizational technological environment may affect the
buying decision. Some of the firms that outsource components

design or redesign the component parts in-house and select
suppliers who can offer the best combination of quality, price,
service and delivery. In other words, in such cases, called make to
print, the buying company provides the product technology to the
supplier who has the required process technology. Some firms want
the product technology also to be developed by the supplier. In
some cases both the supplier and buyer work in collaboration
to develop proper solution to the problem.
Global Sourcing
Buy strategy is greatly benefited by the opportunities for global
sourcing. The major factors determining the input-output ratio,
output volume, cost and quality are the appropriateness and
cost of technology and the quality and cost of other inputs. A
great advantage of globalization is the opportunity to source
them from the best source anywhere in the world.
The trend of global sourcing and production sharing has been
growing.
According to a survey by Purchasing, the reasons for offshore
purchases are the following, listed in the order of importance.5
1. Lower price.
2. Better quality
3. Only source available
4. More advanced technology
5. More consistent attitude
6. More co-operative delivery
7. Counter trade requirements
It may be noted that besides the above, outsourcing has certain
other advantages. It reduces the capital and manpower requirements.
It may also impart more flexibility to adjust to certain
conditions like a recession.
International sourcing accounts for an estimated one-third of
the world trade. Many developing countries have taken a lot of
advantage of this trend. Although India did not benefit
significantly in the past, India is emerging as a major sourcing
destination for a variety of products.
Partnering / Relationship Marketing
Buyer-supplier relationship is emerging as a very important
strategic element in industrial marketing. The conventional winlose
approach is giving way to a dynamic and enduring win- -win
mind set. It is pointed out that “never before in the history of
man’s industrial endeavor has the value of building effective
and responsive relationships between suppliers and customers
been more crucial to the survival of free-market enterprise than
today.”6
The collaborating relationship between the supplier and
customer is known by different names such as company
marketing, partnering partnership-sourcing relationships
marketing and co-petition.
As Nalebuff and Branden burger point out, “one strategy that
co-opetition emphasizes is working with what we term
‘complementary.’ A complement or is the opposite of a
competitor. It’s someone who makes your products and
services more, rather than less, valuable. Not surprisingly, the
complement or concept is especially relevant to the builders of
the Information Economy. Hardware needs software, and the
Internet needs high-speed phone lines. No one, alone, can ‘;”
build the infrastructure for the new economy. It’s a whole new
system made up of many complimentary parts.”7 As they
further exemplify, “in fact, most businesses succeed only if
others also succeed. The demand for Intel chips increases when
Microsoft creates more powerful software. ‘-8[ Microsoft
becomes more valuable when Intel produces faster chips. It’s
mutual success rather (;’Z than mutual destruction. It’s winwin.
The cold war is over and along with it the old assumptions
about competition.”8
The benefits reaped by the Japanese industry by the collaborative
relationship have encouraged industry in other parts of the
world, particularly North America and Western Europe, to
rethink and restrategise the supplier-customer relationship. For
example, Philips has laid down supplier partnership as one of
the five principles of its quality philosophy and the
multination31 cultivates supplier relationships based on trust
and cooperation, sharing experience and expertise to benefit not
only the buyer and the supplier but also the end customer.
Philips and its suppliers jointly develop technology, solve
problems, learn from experience and try to avoid errors and
misunderstandings.
A look at the three categories of suppliers of Philips has would
indicate the emerging pattern Of buyer supplier relationships.
1. Supplier-Partners: These are the most important suppliers,
albeit might be the smallest group among the three. Philips
builds intense, involved relationships with them and the
important focus of the cooperation is innovation, the
development of new expertise and new opportunities. These
suppliers might well have essential knowledge and/or
expertise that Philips could not otherwise access or develop
for itself. This makes these suppliers extremely significant
strategically as their loss could seriously undermine Philip’s
current business and future direction.
2. Preferred suppliers: This category is less important than the
first and there is not the same degree of mutual dependence
as in the first category. The company works closely with them
on issues such as quality, logistics and price to gain mutual
benefit. The suppliers may also adopt themselves, to some
extent, to suit Philip’s requirements.
3. Commercial Suppliers: These are the least important
suppliers and although the company will encourage better
performance in terms of quality ete. it is unlikely to get
involved in helping the supplier to achieve it.
According to Anderson and Narus, partnering “is a process
where a customer firm and supplier firm form strong and
extensive social, economic, service, and technical ties over
time, with the intent of lowering total costs and/or
increasing value, thereby achieving mutual benefit.”9
International Logistics
An important dimension of the supply chain is logistics, also
sometimes called materials management. to According to the
Council of Logistics Management, USA, logistics management
is the “process of planning, implementing and controlling the
efficient, cost effective flow and storage of raw materials, in-
process inventory, finished goods, and related information
from point of origin to point of consumption for the purpose
of conforming to customer requirements.”
The difference between supply chain management and materials
management is on degree. Materials management, or logistics,
focuses much more on the transport and storage of materials
and final goods, whereas supply chain management extends
beyond that to include the management of supplier and
customer relations.
Logistics, also known by such other names as marketing
logistics, industrial logistics/ business logistics/ distribution/
channels of distribution logistics/ distribution engineering
materials logistics management supply chain management is a
very important component of operations management.
Components of Logistics
Logistics encompasses the total movement concept, covering
the entire range of operations concerned with the movement of
materials and products to, through, and out of the firm to the
consumer. It includes a variety of activities such as inventory
management, warehousing and storage, transportation,
materials handling, order processing, distribution, communications,
packaging, salvage and scrap disposal, returned goods
handling, customer service etc.
Some of the major components of logistics are the following:
Fixed Facilities Location:
The major consideration is the location of fixed facilities like
production and warehousing in such a way as to maximize the
total efficiency of the logistics system. Factors like future
potential of the markets, future plans of the company,
competitive factors, political stability, etc. are also important
considerations.
Inventory Management:
The main objective of inventory management is to minimize
the cost of the inventory while ensuring smooth supplies.
Developments in inventory management by the customers
order processing and in the total logistics system have made
inventory management both challenging and efficient.
Order Processing:
The efficiency of order processing by the client as well as the
company have important implications for inventory levels and
other aspects of the logistics. Rapid order processing shortens
the order cycle and allows for lower safety stocks on the part of
the client. Exporters from developing countries like India face
the challenge of coping up with such situations.
Material Handling and Transportation: Material handling and
transportation are also an important part of the logistics
management. The technologies in use in material handling and
transportation affect the efficiency of logistics.
Global Manufacturing Strategies.
Location of the manufacturing facilities is one of the most
important of the global operations management decisions.
4 Cs of Global Manufacturing
The success of a global manufacturing strategy depends on four
key factors:
compatibility, configuration, coordination, and control.
Compatibility in this context is the degree of consistency
between the foreign investment decision and the company’s
competitive strategy. Company strategies that managers must
consider are:
Efficiency/cost - reduction of manufacturing costs.
Dependability - degree of trust in a company’s products and its
delivery and price promises.
· Quality - performance reliability, service quality, speed of
delivery, and maintenance quality of the product(s).
· Flexibility - ability of the production process to make
different kinds of products and to adjust the volume of
output.
· Innovation - ability to develop new products and ideas.
Cost minimization strategies often prompt companies to opt
for offshore manufacturing locations like developing countries
and for outsourcing. Factors like characteristics of supplier.
Firms in respect of, dependability flexibility, quality and
innovation influence the make or buy decision, choice of
vendors etc. in case of the make situations, the choice of
production location will be based on evaluation of the location
with its environment vis-a-vis the above critical factors.
Manufacturing Configuration refers to the strategy of centralization
or dispersion of manufacturing facilities. There are broadly
three broad categories of manufacturing configuration, viz.,
centralized facility, regional facilities, and multi-domestic
facilities. The choice of the configuration strategy is influenced
by several factors such as scale economies, nature of technology
and skill requirements, firm strategies such as internalization or
externalization, international orientation and the organisational
mode of the company, foreign market prospects and other
characteristics ete.
Coordination and Control which are two sides of the same
coin, refer to the integration, monitoring and taking of required
actions to ensure that the implementation of he plans progress
as envisaged.
Location Strategy
The location of production facilities of a global corporation
may be influenced by a number of factors.
Nature of Organization
The organizational model is a major determinant of the
location. For example, in a Multinational Company, the
subsidiaries do most of the production for their respective
markets. In an International Company and Global Company,
there is tendency to centralize core production activities in the
home country. The transnational corporation is characterised by
globally integrated networks of production facilities and other
factors.(See the chapter on Multinational Enterprises for a
description of the important characteristics of the different
organizational models.}

Cost
Given other factors (like political factors, organizational model
and strategic orientation etc.), the overall cost of operations is
often the most important consideration in the location
decision-making. Important factors, which determine the cost,
include the following:
1. Scale Economies: Where there are large-scale economies in
production, production tends to concentrate in one or very
limited number of locations. Such concentration may be in
the home country or foreign countries.
2. Nature of Assembly Operations: If there is large economies
of scale in production of components and if the assembly
operations are labour-intensive, the locations of
components manufacture and assembly operations could be
different. The assembly operations may be carried out in
countries where the labour is very cheap.
3. Taxes and Transport Costs: The import duty structure also
influences the location of production phases. If the import
duty is very high on finished product and comparatively low
on components it would encourage assembling of the
product in the foreign market, coterie~ paribus. If the cost
of transporting the finished product is significantly higher
than for the components, export in the CKD form would be
preferred and the assembling of the product would be done
in the foreign market. This will be particularly attractive if the
labour is cheap in the foreign market. Sometimes the import
duty and transport cost will favour the complete or most of
the manufacturing activity in the foreign market.
Exchange Rate Variation
Exchange rate fluctuations may also influence the import vs.
manufacturing decision. A depreciation of the foreign currency
vis-à-vis the home currency will make imports into the foreign
country costly and this may encourage production within the
foreign market.
Availability and Cost of Inputs
Availability and cost of inputs (including land and infrastructure),
obviously, are critical factors influencing the location
decision. The infrastructure and other facilities and incentives are
the attraction of export processing/special economic zones.
Logistical Factors
Certain locations are preferred because of logistical reasons - the
cost and ease of moving products to various markets. Some
locations (Singapore, for example) are indeed regarded as the
hub of international operations.
Product Life Cycle and Pattern of
Demand
The stage in the product life cycle may influence the location of
production base. As explained in the International Product .Life
Cycle Theory, when the product is in the declining stage of the
life cycle or when the technology/product becomes standardized,
the production base tends to shift to the developing
countries.
Nature of Product
Nature of the product, like Perish ability, weight-losing or
weight-adding characteristic during production process ete. also
influence the location decision.
Government Policies and Regulations
Government regulations like foreign investment policy,
environmental regulations, local content stipulations, labour
laws, taxation, assistances and incentives, dividend policies ete.,
influence the location.
Social and Political Factors
Social and political factors such as attitude towards foreign
business, domestic harmony and peace ete also influence the
location decision.
Country Evaluation and Select
The global market, made up of well over 200 independent
nations with their own distinctive characteristics is too vast
indeed. It would be very difficult for a company to operate in all
these markets. There are barriers, which make entry to a number
of markets impossible or very difficult. There may be markets,
which are not profitable or are not worth the trouble. Further,
there may be markets, which are very risky due to political or
other reasons. Moreover, the company resources may not
permit the operation in a large number of countries. There are,
of course, companies, which operate in majority of the
countries of the world. These companies have not achieved
such a massive expansion overnight. It has been a gradual
expansion achieved over a long period. Further, all types of
business do not lend themselves for such substantial international
expansion. It is, therefore, necessary to make an
evaluation of the prospective markets and make rank list of
them for the company to operate in.
Market Selection Process
The important steps involved in the market selection process
are depicted in figure 9.1.
International Business Objectives
The first step in any management decision making process is to
determine/ascertain the objectives. The market selected to serve
a particular international business objective need not necessarily
be the best suited to achieve some other international marketing
objective. Various markets may have different degrees of
attractiveness from the point of view of different objectives.
More about this is stated under the subtitle firm related factors
little later in this chapter.
Parameters for Selection
For proper evaluation and selection of the markets, it is
essential to clearly lay down the parameters and criteria for
evaluation. Important parameters often used for market
selection are shown in the evaluation matrix described elsewhere
in this chapter.

Preliminary Screening
After determining the criteria for market selection, the next
important step in market selection process is to conduct a
preliminary screening of the markets. The objective of the
preliminary screening process is to eliminate the markets which
are obviously not potential enough as revealed by a cursory
look.
The parameters used for the preliminary screening may vary
from product to product. However, parameters like the size of
population, per capita income, structure of the economy,
infrastructural factors, political conditions ete. are commonly
used. Information about some of the factors would enable a
company to eliminate certain markets from its consideration.
For example, in a country where there is no telecasting, there is
obviously no market for T.Y. sets. Similarly if the rural areas are
not electrified, there may be no demand for electrical agricultural
pump sets. If the household income of the majority of a
country with a small population is very low, the demand for
costly consumer durables will be limited. Further, there may be
countries which should be omitted due to political reasons,
including government polices.
A lot of information required for the preliminary screening is
available from such publications as the Statistical Year Book of
the United Nations and the World Bank’s World Development
Report.
Short-listing of Markets
Preliminary screening enables to eliminate markets, which
obviously do not merit consideration at the very outset. There
would be a large number of markets left even after the preliminary
screening. They are further screened with the help of more
information than was used at the preliminary screening stage.
The objective is to distill out a small number of markets, which
are likely to satisfy the company’s criteria for market selection for
a detailed analysis for ranking them and final selection.
Evaluation and Selection
A thorough evaluation of the short-listed markets is done with
reference to the specific parameters and criteria and the markets
are ranked on the basis of their overall attractiveness. One or
more market(s) is/are selected from the rank list. For further
details, see the section evaluation matrix.
Determinants of Market Selection
The market selection is normally based on two sets of factors,
viz., the firm-related factors and the market related factors.
Firm Related Factors
A firm whose export objective is only to sell out a marginal
surplus will select a foreign market suited to serve this purpose.
Another firm with the same product, which wants to export a
very large quantity, forming a very significant share of its total
output, may have different considerations than he fir firm in
market selection. In the case of the second firm, as the total
quantity involved is large and 0" It forms a significant share of
its total output, market diversification would be important to
minimize the risk. If we think of a third firms which also
wants to export the same product as the first two firms but
which wants to export several other products also, the market(s)
which it selects may perhaps be different from what the first
two firms have chosen; it would give more importance to the
total exports of all its products than that of any single product.
Further, the market selection may be influenced by other
objectives like growth. When business growth is an important
objective, growth potential of the market will be an important
criterion for selection.
The planned business strategy may also influence the market
selection. For example, a market considered the most important
from the point of view of exporting need not necessarily be the
one that would be selected for locating production base or a
sales office. A company that has plans for large expansion of
foreign business may choose a market, to start with, which can
serve as a hub of international business.
· The market selection is also influenced by the international
orientation (refer chapter 1 for details) of the company.
· Another very important determinant is the company
resources comprising financial, human, technological and
managerial factors.
· The dynamism and philosophy of the top management and
the internal power relations may also influence the market
selection decision.
Market-Related Factors
There are a number of market related factors which need to be
carefully evaluated for market selection. The market related
factors may be broadly grouped into general factors and specific
factors. General factors are factors general to the market as a
whole where as the specific factors are factors which are specific
to the industry concerned.
General Factors
1. Economic Factors: Include factors like economic stability,
CDP growth trends, income distribution, per capita income,
sectoral distribution of CDP and trends, nature of and
trends in foreign trade and Bop, indebtedness, etc.
2. Economic Policy: Includes industrial policy, foreign
investment policy, commercial policy, monetary policy, fiscal
policy and other economic policies.
3. Business Regulations: Regulations of business like industrial
licensing; restrictions on growth, takeovers, mergers etc.,
restrictions on foreign remittances, repatriations etc; tax laws;
import restrictions and local content stipulations; export
obligations and so on.
4. Currency Stability: Stability of the national currency is another
very important Consideration in the market selection.
5. Political Factors: Character of the political system including
the nature and behavior of the ruling party/parties and
opposition party/parties, the government system etc. and
political stability are among the most important
determinants of market selection.
6. Ethnic Factors: Ethnic factors like ethnic characteristics,
including ethnic differences, and their implications for
the business, ethnic harmony etc. should also be analyzed.
7. Infrastructure: Infrastructure facilities seriously affect
business. For example, power shortage could cause
considerable production losses. Shipping and other
communication bottlenecks could cause lot of delays and
loss of business, in addition to high costs.
8. Bureaucracy and Procedures: The nature and behavior of the
bureaucracy and the procedural system or styles are also
important factors to be considered.
9. Market Hub: The ability of a market to act as a hub, a base
from where the company can operate in a contiguous region
or countries, is a very important factor in the market selection
of a company with plans for expansion of international
business. South Africa, for example, could be such a hub for
the entire sub-Saharan Africa.
A large number of Indian companies have opened offices in
Singapore to use it as a hub to trade with the booming markets
of South-East Asia and the Pacific. Singapore is attractive for
Indian companies because of its infrastructure, tax incentives
and the large Indian population. A company, which sets up, an
operational headquarters (OHQ) in Singapore has to pay only
10 per cent corporate tax against the normal 30 per cent.
Indian industrialists feel that Sweden could be used as a base for
exporting to third countries, especially the Baltic states. They
also feel that the Swedish industrialists could use India as a
sourcing ground to manufacture goods for export to the Asia-
Pacific.
Specific Factors
Besides the general factors, there are a number of factors specific
to the industry which need to be analysed for evaluating the
market. Important specific factors are:
1. Trends in domestic production and consumption and
estimates for the future of the product(s) concerned
2. Trends in imports and exports and estimates for the future
3. Nature of competition
4. Government policy and regulations pertaining to the industry
5. Infrastructure relevant to the industry
6. Supply conditions of raw materials and other inputs
7. Trade practices and customs
8. Cultural factors and consumer characteristics
9. Market characteristics including the number and nature of
market segments, price trends etc.

Evaluation Matrix
An evaluation matrix is often used for ranking the markets with
reference to their attractive less for the company.
The evaluation matrix will include the relevant general and
specific factors. These factors will be expressed in such specific
terms so that they lend themselves for clear measurement and
evolution.
The countries to be evaluated may be listed on the horizontal
axis and the factors on the vertical ax; Each factor is assigned a
raw score and a weightage. The weighted score is obtained by
multiplying the raw score with the respective weightage.
Comparing the total weighted scores ranks markets.