Global Marketing Strategies for Indian Firms

With rare exceptions, products just don’t emerge in foreign markets overnight—a firm has to build up a market over time. Several strategies, which differ in aggressiveness, risk, and the amount of control that the firm is able to maintain, are available which most of the Indian firms adopt while entering in global marketing. These are:

Exporting is a relatively low risk strategy in which few investments are made in the new country. A drawback is that, because the firm makes few if any marketing investments in the new country, market share may be below potential. Further, the firm, by not operating in the country, learns less about the market (What do consumers really want? Which kinds of advertising campaigns are most successful? What are the most effective methods of distribution?) If an importer is willing to do a good job of marketing, this arrangement may represent a "win-win" situation, but it may be more difficult for the firm to enter on its own later if it decides that larger profits can be made within the country.

Licensing and franchising are also low exposure methods of entry—you allow someone else to use your trademarks and accumulated expertise. Your partner puts up the money and assumes the risk. Problems here involve the fact that you are training a potential competitor and that you have little control over how the business is operated. For example, American fast food restaurants have found that foreign franchisers often fail to maintain American standards of cleanliness. Similarly, a foreign manufacturer may use lower quality ingredients in manufacturing a brand based on premium contents in the home country.

Joint venture. Here, a firm partners up with a firm already in the country. Each partner contributes. Usually, the host country partner contributes expertise about the country and possibly some manufacturing facilities. The “guest” partner usually contributes technology and/or financial resources. This reduces risk and investment to some extent, but also reduces the control since agreements must now be made to satisfy the partner.

Direct entry strategies, where the firm either acquires a firm or builds operations "from scratch" involve the highest exposure, but also the greatest opportunities for profits. The firm gains more knowledge about the local market and maintains greater control, but now has a huge investment. In some countries, the government may expropriate assets without compensation, so direct investment entails an additional risk. A variation involves a joint venture, where a local firm puts up some of the money and knowledge about the local market. 

Hamel and Prahalad (1996) suggest the firms operating globally that succeed are those that perceive the changes in the international environment and are able to develop strategies which enable them to respond accordingly. The firms that will do well will base their success largely on the early identification of the changes in the boundaries of markets and industries in their analysis of their international marketing environment. Management foresight and  organisational learning are therefore the basis of a sustainable competitive advantage in global markets 

The increasing globalisation of business, particularly because it is being driven by information technology, has led many firms to reexamine what contributes to their global competitive advantage. They have recognised the fact that it is the pool of personal knowledge, skills and competencies of the firm’s staff that provides its development potential and they have redefined themselves as ‘knowledge-based’ organisations. Moreover, these firms have acknowledged that they must retain, nurture and apply the knowledge and skills across their business if they wish to be effective in global markets. The growth potential of international markets can only be exploited if the firm becomes a learning organisation in which the good practice learned by individual members of staff in one market can be leveraged and built upon throughout its global activity.

However, firms are increasingly vulnerable to losing these valuable personal assets, because of the greater mobility of staff, prevalence of industrial espionage and the security risks and abuse associated with the Internet. Moreover, with the increase in communications it is becoming more difficult to store, access and apply the valuable knowledge that exists amongst the huge volume of relatively worthless data that the company deals with. Consequently, effective knowledge management is now critical for success. This means having Web-enabled database systems that facilitate effective data collection, storage in data warehouses and data mining (the identification of opportunities from patterns that emerge from detailed analysis of the data held). 

Successful global operators use the knowledge gained to assess their strengths and weaknesses in light of their organisational learning and ensure they have the company capability and resources to respond to their learning in order to sustain their competitive advantage. This is particularly important in international markets as, for example, customer and brand loyalty may be much stronger in certain markets than others, and products that may be at the end of their life in the domestic market may be ideal for less sophisticated markets. In the dynamic international markets, therefore, if a firm is to succeed it must develop the ability to think, analyse and develop strategic and innovative responses on an international, if not global scale.

It is apparent, therefore, that firms and organisations planning to compete effectively in world markets need a clear and well-focused international marketing strategy that is based on a thorough understanding of the markets which the company is targeting or operating in. International markets are dynamic entities that require constant monitoring and evaluation. As we have discussed, as markets change so must marketing techniques. Innovation is an important competitive variable, not only in terms of the product or service but throughout the marketing process. Counter-trading, financial innovations, networking and value-based marketing are all becoming increasingly important concepts in the implementation of a successful international strategy. The challenge, then, of international marketing is to ensure that any international strategy has the discipline of thorough research and an understanding and accurate evaluation of what is required to achieve the competitive advantage. Doole (2000) identified three major components to the strategies of firms successfully competing in international markets: 

• A clear international competitive focus achieved through a thorough knowledge of the international markets, a strong competitive positioning and a strategic perspective which was truly international.
• An effective relationship strategy achieved through strong customer relations, a commitment to quality products and service and a dedication to customer service throughout international markets.
• Well-managed organisations with a culture of learning. Firms were innovative and willing to learn, showed high levels of energy and commitment to international markets and had effective monitoring and control procedures for all their international markets.

Some of the terms that are used in export marketing in the Indian context are explained below:

Goods moving at buyer’s risk and cost

• Ex-works (EXW): The seller makes the goods available at his premises. The buyer bears the full cost and risk of transportation of the goods.
• Free carrier (FCR): The seller delivers the goods to the custody of the carrier (or the first carrier in multi-modal transport). The risk of the goods passes to the buyer at that moment and the buyer pays the transport costs.
• Free on rail, free on truck (FOR/FOT): This term is used for rail transport only. The seller delivers the goods to the railway and the buyer bears the risk of loss of damage from that moment and pays the transportation costs.
• Free on airport (FOA): The seller delivers the goods to the air carrier at the airport of departure. The buyer bears the risk of goods from that moment and pays the transport costs. The seller normally arranges the contract of carriage on the buyer’s behalf.
• Free alongside ship (FAS): The seller delivers the goods alongside the ship in the port of shipment. The risk of the goods in transferred to the buyer from that moment
• Free on board (FOB): The seller clears the goods for transport and delivers them on board the ship. The risk passes form Chapter-2: International Marketing Strategies of Indian Firms 86 seller to buyer when the goods cross the ship’s rail at the port of departure. 
• Goods moving at buyer’s risk and seller’s cost and freight (C&F): The seller clears the goods for export, pays the freight charges, and delivers the goods on board the ship. The risk passes form seller to buyer when the goods cross the ship’s rail at the port of departure. The seller undertakes to provide the buyer with a negotiable bill of lading that can be endorsed to transfer ownership of the goods or pledge them in a bank.
• Cost, insurance and freight (CIF): This is identical to C&F except that, in addition, the seller insures the goods against loss and damage at his own cost. The insurance covers the buyers not the seller, since the goods are travelling at buyer’s risk.
• Freight, carriage paid to (FCP): The seller pays the transport costs. Risk passes to buyer when the seller delivers the goods into the custody of the first carrier.
• Freight, carriage, insurance paid to (CIP): This is identical to FCP, except that in addition, the seller insures the goods at his own cost, for the benefit of the buyer

Goods moving at seller’s risk and cost:

• Ex-ship (EXS): The seller makes the goods available to the buyer, on board the ship at the port of destination. He pays the transport costs and bears the risk of the goods until they are made available this way.
• Ex-quay (EXQ): The seller makes the goods available to the buyer on the quay or wharf at the port of destination. The seller bears the risk of the goods upto that point and pays the transport cost. The seller pays the import duties (“ex-quay duty paid”) unless the contract provides for the contrary (“ex-quay, duties on buyer’s account”). 
• Delivered at the frontier (DAF): The seller delivers the goods at the agreed frontier and bears all the costs and risks upto the point, including transportation costs. The buyer is responsible for the import duties and formalities.
• Delivered Duty Paid (DDP): The seller delivers the goods at an agreed point in the buyer’s country. The seller bears all the costs and the risks of the goods upto the point of delivery including the transport costs. The seller is responsible for import duties and formalities.  

Learn The Truth About GATT AND WTO In The Next 60 Seconds.

The General Agreement on Tariffs and Trade (GATT) was established in 1945 as a provisional agreement pending the creation of an International Trade Organization (ITO).

The ITO draft charter, which was the result of trade negotiations at the Havana Conference of 1948, never came into being due to the failure of the U.S. Congress to approve it.

Other countries also declined to proceed with the ITO without the participation of the United States.

Thus, the GATT continued to fill the vacuum as a de facto trade organization, with codes of conduct for international trade but with almost no basic constitution designed to regulate its international activities and procedures.

The GATT, in theory, was not an “organization,” and participating nations were called “contracting parties” and not members (Jackson, 1992; Hoekman and Kostecki, 1995).

Since its inception, the GATT has used certain policies to reduce trade barriers between contracting parties (CPs):

Nondiscrimination :

All CPs must be treated in the same way with respect to import-export duties and charges. According to the most favored nation treatment, each CP must grant to every other CP the most-favorable tariff treatment that it grants to any country with respect to imports and exports of products. Certain exceptions, however, are allowed, such as free trade areas, customs unions, or other preferential arrangements in favor of developing nations. Once imports have cleared customs, a CP is required to treat foreign imports the same way as it treats similar domestic products (the national treatment standard).

Trade liberalization:

The GATT has been an important forum for trade negotiations. It has sponsored periodic conferences among CPs to reduce trade barriers (see International Perspective 2.1). The Uruguay Round (1986-1993) gave rise to the establishment of a permanent trade organization (World Trade Organization or WTO). The most recent round (the Doha Round) hopes to reach agreement on other trade distortions, such as agricultural subsidies and trade barriers imposed by developing countries on imports of manufactured goods.

Settlement of trade disputes:

The GATT/WTO has played an important role in resolving trade disputes between CPs. In certain cases where a party did not follow GATT’s recommendations, it ruled for trade retaliation that is proportional to the loss or damage sustained. It is fair to state that the existence of the GATT/WTO has been a deterrent to damaging trade wars between nations.

Trade in goods:

The GATT rules apply to all products both imported and exported, although most of the rules are relevant to imports. It was designed primarily to regulate tariffs and related barriers to imports such as quotas, internal taxes, discriminatory regulations, subsidies, dumping, discriminatory customs procedures, and other nontariff barriers. The Uruguay Round (1994) resulted in a new general agreement on trade in services, trade-related aspects of intellectual property (TRIPs) and traderelated investment measures (TRIMs). Thus, CPs have moved beyond the original purpose of the GATT to achieve unrestricted trade in goods, to reduce barriers to trade in services, investment, and to protect intellectual property (Collins and Bosworth, 1995).

Now Is The Time For You To Know The Truth About History Of International Trade

ANCIENT PERIOD

International trade based on the free exchange of goods started as early as 2500 BC. 

Archaeological discoveries indicate that the Sumerians of Northern Mesopotamia enjoyed great prosperity based on trade by sea in textiles and metals. 

The Greeks profited by the exchange of olive oil and wine for grain and metal somewhere before 2000 BC.

By around 340 BC, many devices of modern commerce had made their appearance in Greece and its distant settlements: banking and credit, insurance, trade treaties, and special diplomatic and other privileges.

With the decline of Greece, Rome became powerful and began to expand to the East. 

In the first century AD, the Romans traded with the Chinese along the Silk Road and developed many trade routes and complex trading patterns by sea.

However, the absence of peace made traveling unsafe and discouraged the movement of goods, resulting in the loss of distant markets.

By the time of the breakup of the Roman Empire in the fifth century, the papacy (papal supremacy) had emerged as a strong institution in a new and unstable world. 

The church’s support (sponsorship) for the crusades in the eleventh century revived international trade in the West through the latter’s discovery and introduction of new ideas, customs, and products from the East. 

New products such as carpets, furniture, sugar, and spices brought from Egypt, Syria, India, and China stimulated the markets and the growing commercial life of the West. 

This helped Italian cities such as Venice and Genoa to prosper and to replace Constantinople as the leading center of international commerce. 

Letters of credit, bills of exchange, and insurance of goods in transit were extensively used to accommodate the growing commercial and financial needs of merchants and travelers

By the end of the fifteenth century, the center of international commerce had moved from the Mediterranean to Western Europe. 

Spain, Portugal, and later Holland became the focal points of international commercial activity. 

The more developed areas of Europe were changing from a subsistence economy to one relying heavily on imports paid by money or letters of credit

COLONIAL PERIOD (1500-1900)

With the discovery of America in 1492, and sea routes to India in 1498, trade flourished and luxury goods and food products such as sugar, tobacco, and coffee became readily available in the markets of Europe.

The principal motivations behind global expansion (colonization) in the fifteenth century had been to enhance national economic power (mercantilist policy) by exploiting the colonies for the exclusive benefit of the mother country. 

Colonies were regarded as outposts of the home economy that would reduce trade dependence on rival nations and augment national treasure through exports as well as discoveries of precious metals. 

This first phase of colonization, which lasted until the advent of the Industrial Revolution in England in 1750, was characterized by the following general elements with respect to commerce:

1. All commerce between the colonies and the mother country was a national monopoly, meaning all merchandise exports/imports had to be carried by ships of the mother country and pass through specified ports.
2. Little encouragement was provided toward the development or diversification of indigenous exports. For example, in 1600, precious metals constituted 90 percent of colonial exports to Spain. In the mid-1650s, British imports from its colonies were mainly concentrated in three primary products: sugar, tobacco, and furs. To protect domestic producers, competing colonial exports were restricted or subject to special duties. The patterns of economic relations were fashioned on the basis of dissimilarity, that is, noncompetitiveness of colonial and metropolitan production.
3. Certain enumerated products could be exported only to the mother country or another colony. The policy ensured a supply of strategic foodstuffs and raw materials.
4. Private companies in the metropolis received a charter from the government that granted them (i.e., the companies) a monopoly of trade in the colonies. In most cases, the charter also granted complete local administrative authority, ranging from the making of laws and administration of justice to imposition of taxes. Examples of this include the British East India Company (1600), the Dutch West India Company (1621), and Hudson’s Bay Company (1670).

The second historical phase of overseas expansion (1765-1900) was dictated more by commercial considerations than by mere territorial gains.

Britain emerged as the dominant colonial power, and by 1815 it had transformed its empire into a worldwide business concern. 

By the 1860s, the Industrial Revolution had transformed the social and economic structure of England, and mass production dictated an expansion of the market for goods on an international scale. 

The political economy of mercantilism that had proliferated over the preceding century was gradually replaced by that of free trade. By 1860, Britain had unilaterally repealed the Corn Laws, abolished the Navigation Act restrictions (foreign ships were permitted to take colonial goods anywhere) and the commercial monopolies given to particular companies. 

Preferential duties on empire goods were gradually abolished. 

In trade, as in foreign policy, Britain led the free trade ideology based on nondiscrimination. 

At the time, Britain was most likely to benefit from free trade because of its industrial and commercial lead over other nations.

1900 TO THE PRESENT

The major characteristics of economic relations from 1900 until the outbreak of World War I were the further development of trade and the emergence of a world economy. 

These were also the result of the international migration of people and capital from Europe, particularly Britain, since the 1850s, to other countries such as the United States, Australia, Argentina, Brazil, and Canada. 

This pattern of world economy provided the industrial economies with new sources of food and raw materials and new markets for exports of manufactures. 

For example, by 1913, Brazil was the source of twothirds of German coffee imports, whereas North Africa supplied over half of French imports of wine. 

However, much of the import trade in Europe was subject to trade restrictions, such as tariffs, to secure home markets for local producers. 

Even within Britain there were mounting pressures for the abolition of free trade.

The post–World War I recovery was further delayed by the disruption of trading links, as new nations were created and borders were redrawn. 

State intervention and restrictive economic policies had been consolidated in Europe and other countries by the end of the war. 

The U.S. government introduced the Fordney-McCumber Tariff in 1922, which imposed high tariffs on agricultural imports, and later the Smoot-Hawley Tariff in 1930, which provoked widespread retaliation. 

Britain imposed high duties on various industrial products, such as precision instruments and synthetic organic Introduction 3 chemicals, to encourage domestic production under the Safeguarding of Industries Act, 1921. The volume of world trade in manufactures fell by 35 percent between 1929 and 1932, and prices also fell by a similar amount. 

The volume of trade in primary products fell by 15 percent, but prices fell by about 50 percent. 

To alleviate the worst effects of the Depression, countries resorted to more protectionism. This wave of protectionism produced a massive contraction of international trade and further aggravated the Depression. 

Many of the barriers placed on trade included tariffs and quotas, a variety of price maintenance schemes, as well as arbitrary currency manipulation and foreign exchange controls and management. 

To avoid a repetition of the economic situation of the previous two decades, Allied countries met even before the war to discuss the international financial arrangements that should govern trade and capital movements in the postwar world. 

In 1944, they established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). 

The IMF was to be concerned with facilitating the growth and expansion of global trade through the system of fixed exchange rates, while IBRD was established to promote long-term investment. 

This was followed by an agreement (the General Agreement on Tariffs and Trade, or the GATT) in 1948 to permit the free flow of goods among nations.

What You Know About Exporting And International Marketing And What You Don't Know About Exporting And International Marketing.

Exporting is often considered as the first step in the process of internationalization of a business. 

In general, the firms engaged in export operations have to concentrate on managing the 4 p’s of marketing mix i.e. 

• Product

• Price

• Place 

• Promotion. 

Exporting is primarily a transactional approach to marketing wherein goods are exchanged for value on deal to deal basis. 

International Marketing on the other hand extends from identifying the customer needs to achieving customer satisfaction.

Internationals marketing requires greater commitment of the executives’ time and resources than exporting

Exporting is usually a short-term solution to an immediate problem of under-capacity of production or over-capacity of the stocks. 

However, International Marketing is a long-term approach to sustained business from a market. 

It helps to bridge the information gap between a company and the final consumer of its product. 

While, exporting may involve agents or intermediaries, the market and marketers are more close in marketing. 

The differences in exporting and International Marketing  can be shown in the form of the following table


Table 1: Differences in Export Sale and International Marketing

---

Export Sales	International Marketing
To realise Short run To realize long-run goals(e.g. (e.g. immediate sales)	long- term goals (e.g.development of long term market)
No systematic selection of markets	Systematic selection of markets
Minimum resources commitment to gain immediate sales	Sufficient resource commitment get permanent market position
No systematic choice for mode of entry	Systematic choice of most appropriate mode of entry of entry
Development of products home market	Development of products for both home and foreign markets
Minor product adaptation necessary mandatory legal obligations	Major product adaptation to suit to satisfy foreign buyers
No effort to control channels objectives/goals	Effort to control channels to support of market
Prices based on domestic full cost with some ad hoc adjustments to specific sales situations	Prices fixed in terms of demand conditions, competition and cost.
Promotion mix mainly confined to foreign tours or left to middlemen	Promotion mix includes advertising,  sales promotion and foreign tours

Adverse effects of foreign trade on the National Economies

It has often been argued that international trade has a strong backwash effect as less developed countries i.e. its operations are fundamentally biased in favour of the richer and progressive regions and is in disfavour of less developed countries. It has also been pointed out by the economists that international trade leads to international transfer of income from poor to rich countries. The UN report (1998) on human resource indicators shows a widened gap in the living standards of the people of rich and poor nations. This widening of gap has increased in the last decade ever since globalization of the world economies started. Also, international trade can adversely affect the process of capital formation in underdeveloped countries.

However, there is still a lack of empirical evidence to prove that the development of export sector has been at the cost of domestic sector. Foreign trade has not always stood in the way of domestic investment. The adverse effects seem to have been exaggerated. It may be mentioned that in today’s environment, globalization is a reality and it is important to accept it in the right perspective instead of nurturing the old protectionist beliefs.

Importance of International Marketing Part - 2

Part 2 Part 1

Microlevel effects of International Business :

An individual firm can reap several benefits by resorting to international marketing and international business.

1. Growth : By all standards, domestic markets have a limitation of growth potential. After a particular level, it is very difficult for a firm to achieve growth. So, it is left with the option of either product innovation or extending operations to other markets.The latter option is a better way of sustaining growth as the product life can increase significantly when it is sold into the world markets.
2. Fighting Competition : As the protectionist measures by nations are being reduced, firms operating in domestic market only are facing increased levels of competition. Instead of utilizing their resources in fighting competitions, firms continue to look at markets in other countries to cope up with domestic competition. Hence, international business operations provide avenues for both survival and growth.
3. Increased efficiency : By operating on global scale, a firm can select for its expansion lucrative opportunities. Also, it can reduce its product costs through global sourcing and utilise world level technology and talent for business operations. All this makes the business operations more efficient and as a result it can realise higher return per unit investment. This boosts up shareholder’s value and the company image.
4. Scale economics : Higher level operations on account of international operations produce benefits of scale and thus enhance the profitability of firm.
5. Innovation : By operating in large markets, companies can afford to invest in research and technology development. It is established that compared to traditional and mind set firms, innovation driven firms can compete effectively.
6. Risk Cover : By operating on global scale, the fluctuations of demand levels in an individual country does not make much difference on the aggregate sales. Consequently, the uncertainties arising out of risk factors on the operations localized to a country are reduced. Even the financial risks, physical risks, politico-legal risks etc. can be managed more effectively by virtue of global operations.

Part 1

Importance of International Marketing Part - 1

Part 1 Part 2

Macro level benefits in national perspective: International trade results in macro-economic effects for each economy. The imports and exports influence the employment, national income and technology. The direct and indirect benefits emanating from international business are listed below:

1. Increase in national Income : A country’s export activity promotes industrial and trade activity that generates employment and income for various sections of society. The multiplier effect of income increases the level of output and growth rate of economy. Especially the export of wage-goods can help a developing country to break the vicious circle of poverty and raise the real income of the country. 
2. Efficiency : While exporting, the countries try to attain specialization in production of goods. In this process, there is optimum and efficient utilization of the resources. The limited domestic market may act as a deterrent to the growth of industry and a resultant under-utilization of resources. The international trade can help industry grow and achieve scale and experience economies
3. Employment generation : Exports constitute a significant portion of different nations and breed opportunities for more and gainful employment. In addition to reducing direct unemployment, foreign trade reduces underemployment, e.g. exports of Swiss watches engages the farmers in the watch industry during their free time resulting into gainful utilisation of their skills.
4. Increased linkages : The staple theory of economic growth recognizes that foreign trade results into increased backward and forward linkages with other sectors of the economy. The industrial and trade linkages cause the development of new industries and enhance efficiency of existing indutries.
5. Optimal utilization of resources : International business makes possible the utilisation of agricultural resources as the farmers get a greater access to the overseas markets. This transforms even the subsistence sector into monetized sector raising the standards of living of rural populations. The strengths of Indian (12) agriculture are likely to open new vistas of business opportunities in the days to come as the world trade is likely to become more liberalised as a result of WTO provisions.
6. Promotes Foreign Direct Investment : The level of international business of a country often becomes a basis for the flow of foreign direct investment in a country. In today’s economic environment, it is difficult to grow in absence of FDI. Several economies have grown following the heavy investments from other parts of the world
7. Stimulates Competition : International business fosters healthy competition and helps in checking inefficient monopolies. It is established that growth of competitive economies is higher than the growth rate of protective economies. In recent times, the nations have realized the benefits of healthy competition. Several developing and erstwhile communist countries are promoting the same. Switching over to market-led growth which invokes substantially international operations in business, services and technology
8. Technology Sourcing : In today’s rapidly changing world, it is important to keep pace with the changing technology. This is possible only when there exist linkages with other national economies through international trade and business. The technologydriven industries such as information technology telecommunications, automobiles derive immense synergy by their participation in trade across the world.

Importance of International Marketing Part - 1

Approaches to International Marketing/ International Business

The differences in international orientation and approach can be used to categorize the international marketing into different forms. A domestic company may initially start with ethnically close markets and extend its operations across the world in its final stage.

• Domestic marketing extension (Ethno-centric) concept
• Multi domestic market (Poly-centric) concept
• Global marketing (Regio-centric) concept

Domestic Marketing Extension (Ethnocentric) concept :

The companies guided by this are casual players in overseas markets. For them the overseas markets serve as conduits for directing surplus production. They use overseas markets as a buffer for checking the demand fluctuations in the domestic market. The main focus of the company remains domestic markets. This concept is usually preferred by small companies, or even by large companies operating in a competitive industry. The overseas operations of such companies are usually restricted to exports in certain niches such as approach is also known as ethnocentric in the EPRG schema.

Multi domestic marketing (polycentric) concept : 

 As the overseas operations of the companies grow, they recognize the need for a different approach to international marketing. The operations (10) of companies can acquire forms of overseas joint ventures, licensing agreements, overseas manufacturing and marketing. The subsidiaries operating in overseas markets are recognized as independent business units with autonomy to operate in their markets. Within their respective markets, the subsidiaries behave as domestic companies, deriving only strategic guidelines from their head offices. The companies usually become multinational corporations at this stage. The controls are decentralized to facilitate local operations under the EPRG schema, such firms are classified as polycentric.

Global Marketing (Regiocentric) Concept :

As the companies direct their approach to become a global company, they acquire a global perspective in their operations. Such companies look for lucrative business and investment opportunities on global basis. They derive synergy by sourcing the resources from across the globe by selecting those markets which can provide the inputs to business in most cost-effective manner. Such companies do not treat the SBUs operating in different markets as totally independent entities, but as the SBUs which are contributing towards the growth of the company as a whole. Certain degree of the controls and policy matters may extend to all the SBUs, although allowances may be made to accommodate regional diversities. Under the EPRG schema, global companies are often classified as regiocentric or geocentric companies.

Multinational Corporation

Historically, international trade simply involved export or import of goods across national boundaries. The production took (8) place in the country of exporter. The advent of multinational corporations has led to structural changes in the way business operations take place. The MNCs set up their own production facilities in other countries and cater the domestic markets.

Some of the characteristics of a multinational company are:

1. An MNC operates in a number of countries.
2. An MNC has global orientation in investment and profit making
3. An MNC essentially thrives on managerial, technical and financial resources from more than one country
4. The top management of an MNC may have a multicultural composition.
5. The MNCs derive synergies from global sourcing of inputs.
6. The MNCs may create oligopolistic competition in particular industries and thus operate as a predominant seller in selected markets.
7. The MNCs have originated in developed and free market economies though a few companies from developing countries have also assumed the MNC status.
8. Historically, MNCs have been engaged in extractive industries involving exploitation of the natural resources and consumer goods. Recently, MNCs are making a dent in tertiary sector also..
9. Instead of being factor driven, the MNCs are predominantly innovation and investment driven enterprises.
10. The MNCs exercise market power by virtue of their enormous size and resources.
11. The MNCs have predominantly concentrated on building strengths around their core businesses. Even where diversification has been practiced, it has been done into the areas where the existing resources can be used
12. The MNCs have been actively instrumental in the process of liberalization and globalization of world economy, that has relegated the concept of centrally planned economy to a great extent.

Comparing domestic and international business

Though, fundamentally international business operations look like domestic business operations, yet some important distinctions can be perceived following an indepth insight. The firms having an experience of domestic business can probably have an edge while diversifying into international operations. Keeping this in mind, a (7) leading management guru, Micheal E. Porter has observed that firms aspiring to be successful globally must attempt at being successful in the domestic market first. Most firms like IBM, Coca Cola, Unilever, Proctor and Gamble, Suzuki, Sony operating globally infact started initially as domestic companies. As the magnitude of their operations grew, they found it profitable to venture abroad by setting up manufacturing and distribution centres in other countries. Some of the points of difference between international and domestic marketing are:

1. Process of marketing : The marketing is deemed to involve two processes viz., technical and social. The technical process essentially comprises of non human factors such as product, price, cost, brand. But, the social process takes care of human behaviour, customs, attitudes, values etc. The latter is unique to a national market. Hence, this shows that international marketing is different from domestic marketing. Accordingly, sociological & cultural factors predominate the decision making with regard to marketing mix
2. Marketing environment : The environmental and operational variables also assume a different structure in international business. The environmental factors such as economic, politico legal, geographic, cultural and competition are much more dynamic and uncontrollable in foreign markets as compared to domestic markets. Different countries have different currencies, accounting practices, legislation, interest rates, inflation etc. So, the controllable factors of a firm (marketing mix) have to be redesigned according to the needs of individual countries. The very complexity of exchange transactions across nations makes it significantly different from domestic business operations.

International Trade vs International Business

International trade is a term that basically deals with the movement of goods and services between countries distinct from normal corporate transactions involving buyers and sellers in different countries. The international trade primarily reflects macro or aggregate supplies and demand in different countries. The global trade, thus, involves major policy decisions by governments of nations with regards to imports and exports as also national economic development. These days, the trend is towards globalization of trade. This has resulted in regional as well multilateral global agreements. A predominant role has been accorded to WTO while determining trade policy by each nation

International business may be defined as those business transactions among individuals, firms or corporate entities in private or public sector that result in movement of goods or services across national boundaries. The business activity can take any of the form: import, export of different goods services, the investment of capital; and transactions in intangible assets (e.g. trademarks, patents are the licensing of manufacturing technology).

The field of international business is a broad area of study that covers a wide range of activities. The execution of business activities between sovereign nations takes place within specific environments, and pose challenges with which a firm in international business must deal. Dealing with these problems requires an understanding of the environmental variables that affect international business. These variables are economic, political, legal, sociocultural, technological and geographic. Although such environmental variables are often beyond control of an individual firm, the consideration and recognition of such factors enables the managers to work more effectively within the constraints posed by these variables. In order to incorporate the probable effects of external environment, a working knowledge of relevant descriptions such as economics, political science, history, geography, law, and anthropology is desirable.

The scope of international business can be divided into two categories-real and financial.

1.  The real or non financial side of the theory of international business studies trade theories, theory of the multinational enterprises including the reasons for choice of entry mode.
2. The financial side of the theory covers study of environmental factors affecting the multinational enterprises such as foreign exchange rates, the balance of payments and international marketing systems. It also involves the study of internal decisions affecting the MNE, such as its appropriate cost of capital and the opportunities of international diversification.

Since international business deals across nations , the role of governments and their relationships with MNEs also comes under the scope of study of international business