International Business Environment 1

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Assignment – A

Question 1. What factors should Indian Exporters consider in assessing demand for a product in foreign markets? How are they different from assessing domestic demand?

Question 2. a. What are the specific advantages that a firm can derive by going “international”?

Question 2. b. Why is the task of the international marketer more difficult that of the domestic marketer?

Question 3. Describe the impact of foreign trade on the economic development of a country. Illustrate your answer with examples from India.

Question 4. How would you proceed to shortlist possible markets for your products? Explain in detail. Also explain the various methods through which you can export your products.

Question 5. What are the sources of commercial intelligence available to exporters in India? How far can a firm arrange for its own sources of commercial intelligence?

Assignment – B

Question 1. Critically examine the Japanese style of management and distinguish it from Indian style of Management. Also explain how their importance in International Negotiations by giving relevant examples.

Question 2. Is international marketing research generally more complex task than Domestic marketing research? Discuss with reference to problems regarding collection, analysis and interpretation of data from foreign markets.

Question 3. By giving the appropriate examples explain how Chinese, American and Turkish Markets are different from each other.

Case Study

CARREFOUR

The hypermarket concept is usually defined as an outlet retailing both food and non-food products from a sales area of at least 2,500 sq. Meters with extensive car parking. It was Maicel Fournier and Louis Deffrorey who opened the first European hypermarket just outside Paris. It was an instant success and largely as a result Carrefour has grown into one of the largest grocery retailers in Europe with sales exceeding from 117 billion in 1992.

The basic strategy of Carrefour, which has remained largely unaltered over the past 30 years, was summed up in the Annual Report: “Carrefour, a single objective; offer quality products and services to consumers at lowest prices and convenience of choice in large well stocked, well managed stores.” There are three elements to this objective.

1. Discounting Carrefour has been nominated as the leading discounter, not only in France, but also in Brazil.

2. Multi specialization. Carrefour is a specialist in every product line whether it is in butchery, bakery or delicatessen.

3. Empowerment of staff. It is at the store level at which decisions are made.

Not only has the hypermarket concept-changed little over the past 30 years, the basic approach has been adapted very little for the international market. Each hypermarket operates as a profit centre with the Store Manger responsible for performance.

International Expansion

Almost from the outset Carrefour adopted a strategy which took account of internationalization. After the first hypermarket was opened in France, the group ventured into Belgium in a joint venture, followed by a similar arrangement with another company in Switzerland. As far as the UK was concerned, Carrefour took a minority shareholding in the hypermarket holdings with Wheat sheaf distribution which itself became part of the Dee Corporation. Carrefour went on to expand with joint venture operations in Italy, Spain, Brazil, Austria and Germany. Following this strategy of market spreading, the group rationalized its overseas operations to focus on a limited number of markets. The number of joint ventures operation to focus on a limited number of markets. The numbers of joint ventures have been discontinued. Attempts were made to build up the Italian subsidiary but with little success and divestment followed in the early 80s. More recently, two stores in Switzerland were sold.

While divestment was occurring in some areas, in other Carrefour invested heavily. Spain, Brazil, Argentina, the USA and Taiwan saw heavy investment. Stores continued to be opened via a number of separate operating subsidiaries, but since the mid 1980s a policy of organizational consolidation ensures. In Latin, America, investment has continued despite the difficulties of operating in markets experiencing hyper Inflation in Brazil, annual inflation rates soared to levels of 200% in the mid 1980s and 1700% in 1989, while in Argentina a figure of 5,000% is recorded in the annual report for 1989 and 800% in 1990. Such figures have rendered a marketing strategy based in low prices almost impossible to promote as prices are virtually obsolete from the moment they are set. The hypermarket has been an innovation in these markets, reinforced by the development of focused shopping centre to support the stores. In south America much of the development is self-financing.

The American experiment was a different story. The Carrefour store opened in February 1988 in Philadelphia but failed to live up to expectations. Carrefour responded to this by increasing the range of food which did result in some improvement in performance but many still felt that the hypermarket was not suited to the American market. In early 1993 the American operation was to be discontinued.

Carrefour’s expansion into Taiwan has met with the much greater degree of success. By 1993 there were five stores trading successfully, although certain adaptations have been made to the retail format to include an outdoor market and only 200 parking spaces. Carrefour intends to continue its expansion plans into Malaysia.

Carrefour was at the forefront of innovation with the development of hypermarkets. In the last three decades they have attempted to maintain this leadership in retail innovation. They have done this by the introduction of retailer brands, the launching of financial services and investment in innovative retail concepts. This innovative approach has been demonstrated by involvement in DIY stores, shareholdings in CostCo, the large American club stores, and involvement in restaurants and freezer centres.

Most of the development has taken place under the same families of original founders, Marcel Fournier and Louis Defforey. Since 1984 however Michael Bond has occupied a post of either Deputy or Chief Executives whilst in 1990 he became Chairman of the group, the first non-family member to hold this post. Bond was replaced under dramatic circumstances by Danniel Bernard to sort out a short term balance sheet problem. The group announced that it would sell non-essential investments, an unusual approach for a company which has in the past been noted for showing patience and taking a long term view of investments.

Question: Consider Carrefour’s competitive strategy in relation to alternatives, some of which may be adopted by rival companies. While their strategy would appear to have been successful for thirty years, is it likely to continue to be for the next 30 years?

Case Study

“Export Promotion”

India’s tea exports rose to 46.74 million kg. during the first quarter of the current financial year from 35.47 million kg. in the previous comparable period. Export earnings from this item aggregated Rs. 81.61 crore during April – June, 1981 against Rs. 68.03 crore in the corresponding period last year. Thus, although in terms of quantity our tea exports have looked up this year, the unit value realization dropped from Rs. 19.8 per kg. to Rs. 17.46 per kg.

The drop in unit value realization is attributed to the slackness in the international tea market due to the global over-supply in the commodity. Since 1975, world tea production has gone up by 41 percent whereas increase in consumption by the tea-improving countries has been only of the order of 9 percent. Naturally, the prospects of a revival in international tea prices are dim, at least in the immediate future. The recommendations made by the recent national tea meet to ‘revitalise’ the tea industry in the country have to be viewed in this context.

The national meet on tea, organized by the Union Commerce Ministry, was held in the first week of August to take a close look at the various problems confronting the tea industry. The meeting which was attended by the representatives of Central Government, tea producing States, Planters’ associations and small growers, has recommended a package of fiscal reliefs—both at the Central and State levels.

The package includes, among other things, a substantial reduction in excise duty on tea, refund of indirect taxes paid on tea exports, simplification of drawback procedures, substantial reduction or removal of the excise duty on packet tea until further review, suspension of sales tax on auction tens concessional scredit and a significant cut in the agricultural income-tax and other local taxes by the respective State Governments. It was also recommended that the State Government should consider grant of exemption from rural employment cess to all export sales of tea and teas used for packeting by the producers themselves. According to the available information these recommendations are being considered by the Centre and States concerned for implementation.

The basic problem that confronts the tea industry in the international sphere is one of depressed prices. More and more black tea is coming into the international markets from several new producing-exporting countries leading to over-supply and lower price realisation. And the tea producing nations are realizing that without demand and supply, the cannot get a better price for their produce.

Viewed against this background, it is doubtful that the massive relief’s being sought on tea exports will really be helpful. Excise duty drawback on export, if granted, may compound the declinein unit values. This may temporarily improve our competitive position and increase the quantum of exports. But at the same time this may firm up domestic price to some extent and lead to further slackening of internal consumption, which has already been affected by the high prices of sugar and mild.

Yet another factor needs consideration before attempting to step up the quantum of exports by making tea cheaper through concessions. This is the discouraging trend in production so far this year. During January – June 1981, estimated tea production at 173.7 million kg is down by as much as 27.4 million kg over the same period of last year. If this trend continues in the remaining months of the year, the resultant lower output itself may push up internal tea prices to some extent.

Moreover, most of the tea growers, who do not export directly and who deserve government help the most, are unlikely to benefit from excise rebate or fiscal concessions to tea exports. Instead, these would benefit substantially the FERA companies who export their produce for sale in the London auctions and export under forward contract and private sale. The other likely beneficiaries would be exporters of blended tea and foreign buyer purchasing tea from public auctions in India.

What is needed, therefore, is a selective and judicious approach towards the whole issue of fiscal incentives for tea exports. Because of lower production cost some of our competitors have an edge over us in export markets and incentives may be necessary to an extent for offsetting this price disadvantage. Similarly, assistance for exports of non-traditional items such as tea bags and packet teas would be advantageous for establishing markets for these high value-added items whose share in our overall tea exports is small at present.

Question 1. Analyse the arguments for and against granting additional assistance to tea exports.

Question 2. What in you opinion should be the ideal package of assistance for the tea industry against the give perspective?