International Marketing

International marketing research. International marketing research is the systematic design, collection, recording, analysis and reporting of data and findings relevant to marketing decisions in more than one country, in order to reduce uncertainty in international marketing decisions. It is more complex than domestic research because of differences in language, culture, availability of data, literacy and infrastructure, and because of the need for comparability of data between countries.

Process of international marketing research

1. Defining the problem and research objectives. Define the decision problem clearly (e.g. which country to enter, whether to adapt the product) and state specific objectives. Avoid the self-reference criterion.
2. Developing the research plan (research design). Decide on the type of research (exploratory, descriptive, causal), the data sources, the methods of collection, sampling plan, the instruments and the budget and time.
3. Collecting data.
   • Secondary data: from the UN, World Bank, WTO, IMF, trade promotion centres, embassies, chambers of commerce, published reports. It is cheaper and quicker but may be outdated, unreliable or non-comparable.
   • Primary data: by surveys (personal, mail, telephone, online), observation, experiments and focus groups, taking into account language translation (back-translation), literacy, and cultural response biases.
4. Analysing and interpreting data. Edit, code and tabulate the data, apply statistical tools, and make sure the results are comparable between countries and interpreted in the cultural context.
5. Presenting the findings and recommendations. Prepare the report for the management, with conclusions and recommendations.
6. Follow-up and use. Management uses the results in decisions, and the outcome is monitored, to feed back into future research.

Using local research agencies and coordinating multi-country studies is helpful for quality and cost.

International marketing research

International marketing research is the systematic design, collection, recording, analysis and reporting of data and findings relevant to marketing decisions in international markets, in order to reduce uncertainty. It deals with research across more than one country, and is complicated by differences in language, culture, literacy, infrastructure, availability and reliability of data, and the comparability of results between countries.

Process of research

1. Define the problem and the research objectives. State the decision to be made (e.g. whether to enter Country X) and what information is needed.
2. Develop the research plan. Decide on the research design (exploratory, descriptive or causal), sources of data, research approaches (survey, observation, experiment), the sampling plan, the contact method, the questionnaire and the budget and time frame.
3. Collect the data.
   • Secondary data from the UN, World Bank, IMF, WTO, ITC, embassies, trade centres, published statistics and the internet; it is cheap and fast but may be old, inaccurate and inconsistent between countries.
   • Primary data through surveys (personal, mail, phone, online), interviews, focus groups, observation and experiments, which must handle translation (using back-translation), local interviewers, sampling frames and response bias.
4. Analyse and interpret the data. Edit, code, tabulate, apply statistical analysis, and check comparability between countries, interpreting it in the local cultural context.
5. Present the findings. Prepare the report with conclusions and recommendations to management.
6. Follow up and apply the findings. Management uses it in decisions, and the results are monitored and fed back into later research.

Using local agencies and coordinating research across countries improves quality.

Definition. International marketing is the performance of business activities, including pricing, promotion, product and distribution, that direct the flow of a company's goods and services to consumers or users in more than one nation for a profit. The only difference from domestic marketing is that marketing activities are carried out across national boundaries, in different political, legal, cultural and economic environments.

Growth and development of international marketing

International marketing has developed through the following stages, each representing a deeper level of involvement.

1. No direct foreign marketing. The firm sells only at home. Foreign goods may reach abroad through foreign buyers or indirect exporters, but the firm itself does no international marketing.
2. Infrequent (casual) foreign marketing. Temporary surplus production, or occasional unsolicited foreign orders, lead to irregular exports. Production capacity is not committed to foreign markets.
3. Regular foreign marketing. The firm has permanent productive capacity for foreign markets and uses intermediaries or its own export staff. It begins to adapt products to foreign needs.
4. International marketing. The firm is fully committed to foreign markets, seeks markets all over the world, manufactures abroad and may set up foreign subsidiaries. International operations become a major part of the business.
5. Multinational marketing. The firm treats the markets of several countries as separate markets with a separate marketing programme for each, adapting to local conditions.
6. Global marketing. The firm treats the whole world as a single market, standardising the marketing mix where possible and coordinating strategies across countries.

Factors behind the growth: the creation of the GATT/WTO and reduction of tariffs, regional trading blocs (EU, NAFTA, SAARC/SAFTA), advances in transport and communication and the internet, saturation of domestic markets, economies of scale, rise of multinational firms, convergence of consumer tastes, and the liberalisation and privatisation of economies.

International marketing has therefore grown from occasional exports into a worldwide, integrated activity which is essential for the survival and growth of modern firms.

Cultural environment. Culture is the complex whole of knowledge, beliefs, values, morals, customs, language, religion, art, laws and habits acquired by people as members of a society. The cultural environment of international marketing consists of these shared learned patterns of behaviour which influence how people in a country buy, consume and respond to marketing. Its main elements are language, religion, values and attitudes, education, social organisation, aesthetics, customs and manners, material culture and technology.

Importance of cultural knowledge in international marketing

1. Product decisions. Culture determines which products are accepted, and what adaptation is required in design, colour, size, packaging and brand name. For example, white signifies mourning in some Asian countries, and a name may have an offensive meaning in another language.
2. Promotion and communication. Language, symbols, humour and religious sensitivities affect advertising messages. Mistranslation or an inappropriate image can cause rejection and embarrassment.
3. Consumer behaviour. Values, attitudes to time, family roles and religion (food and dress restrictions) affect what, when and how people buy.
4. Pricing and negotiation. Customs about bargaining, gifts and relationships affect how deals are negotiated and prices accepted.
5. Distribution. Retail structures, shopping habits and the role of intermediaries are shaped by culture.
6. Management and human resources. Understanding differences in attitudes to authority, work and decision making (individualism vs. collectivism) helps in managing foreign employees, partners and customers.
7. Avoiding mistakes and the self-reference criterion. Cultural knowledge helps a marketer avoid judging others by their own cultural norms and so avoids costly errors.
8. Decisions on standardisation or adaptation. It tells the firm which elements of the marketing mix can be standardised across markets and which must be adapted, and helps to identify market opportunities and competitive advantage.

In short, cultural knowledge reduces risk and increases acceptance and profitability in foreign markets.

Structural dynamism in Nepal's foreign trade

Nepal's foreign trade has changed structurally in the following ways.

1. Commodity composition. Exports were once mainly primary products (jute, raw hides, food grains, ghee, timber). Over time they have shifted to manufactured items such as readymade garments, carpets, pashmina, handicrafts, and more recently vegetable oils, tea, cardamom, ginger, zinc sheet, and similar products. Imports have shifted towards petroleum products, machinery, vehicles, electronics, gold, iron and steel, and medicines.
2. Direction of trade. Trade used to be concentrated with India, and after the 1980s exports to overseas markets (USA, Germany, UK) grew, mainly carpets and garments. Trade with India again became dominant after the 1990s, and imports from China have grown sharply.
3. Trade deficit. Imports far exceed exports, and the gap is financed by remittances, aid and tourism.
4. Policy shift. From a protected, import-substituting economy to a liberalised one: membership of the WTO (2004), SAFTA and BIMSTEC, reduction in tariffs, and export promotion measures.
5. Concentration. Both the range of products and the number of markets are limited, so export earnings are unstable.

Import and export procedures and documentation

Export procedure:

1. Registration of the firm (company/industry registration, PAN/VAT registration, and an import-export code where required).
2. Obtain the order or letter of credit (L/C) from the foreign buyer and examine its terms.
3. Obtain licences or recommendations where required (e.g. for controlled goods, plant quarantine certificate for agricultural goods, Department of Cottage and Small Industry certificate for handicrafts).
4. Production or procurement, packing, marking and labelling of goods; arrange insurance and transport with a freight forwarder.
5. Customs clearance at the customs office, with documents examined and goods inspected.
6. Present shipping documents to the bank to receive payment (negotiation of L/C), and claim any duty drawback or export incentive.

Import procedure:

1. Registration of the importer and obtaining PAN; get licence or permission for restricted goods.
2. Place the order with a pro-forma invoice and open a letter of credit through a commercial bank (or other payment arrangements).
3. Shipment from the exporter; goods arrive at the border or via Kolkata/Visakhapatnam port and transit through India under the Nepal-India Transit Treaty.
4. Submit the import declaration to customs; pay customs duty, excise and VAT; customs inspection and clearance.
5. Take delivery of the goods and make payment through the bank.

Main documents: commercial invoice, packing list, bill of lading/airway bill/truck receipt, letter of credit, bill of exchange (draft), certificate of origin (e.g. SAFTA or GSP), insurance policy or certificate, customs declaration form, pro-forma invoice, export/import licence, quality or quarantine certificates, and bank documents.

International marketing tasks

International marketing tasks are the major activities which a firm has to perform to compete in foreign markets. They are divided into uncontrollable and controllable elements.

1. Uncontrollable elements (environment). The marketer must understand and adapt to these, as they cannot be changed.

• Domestic environment: home country's political and legal forces, economic climate and competition.
• Foreign environment: economic forces, competitive forces, level of technology, political and legal forces, geography and infrastructure, and the sociocultural forces of the host country. The firm must avoid the self-reference criterion (using one's own cultural values as the basis for decisions).

2. Controllable elements (the marketing mix). The marketer decides on these.

• Product: what to sell abroad, whether to standardise or adapt, branding, packaging and after-sales service.
• Price: pricing policy for each country, export price escalation, currency risk, dumping rules, transfer pricing and payment terms.
• Promotion (communication): advertising, personal selling, sales promotion and public relations, adjusted to language and culture.
• Place (distribution): choice of channels, intermediaries, physical distribution, logistics and market-entry mode (exporting, licensing, joint venture, direct investment).

3. Other tasks. Selecting target markets through international marketing research and a global marketing information system; deciding on the mode of entry; planning, organising and controlling international operations; and coordinating global strategy with the local needs.

The task of the international marketer is to match the controllable marketing mix with the uncontrollable environment in each country, so that the company attains its objectives profitably.

Regional trading blocks

A regional trading block (regional economic integration) is a group of countries in a geographical region that agree to reduce or eliminate trade barriers among themselves, such as tariffs and quotas, in order to promote trade and economic cooperation. They are permitted by the WTO (GATT Article XXIV) if they cover substantially all trade and do not raise barriers to non-members.

Levels (forms) of integration

1. Preferential trading area: members give lower tariffs to each other on selected goods (e.g. SAPTA).
2. Free trade area: no tariffs between members, but each member keeps its own tariffs against outsiders (e.g. NAFTA, SAFTA, ASEAN's AFTA).
3. Customs union: free trade among members plus a common external tariff (e.g. Mercosur).
4. Common market: a customs union plus free movement of labour and capital.
5. Economic union: a common market plus harmonised economic policies and, perhaps, a single currency (e.g. the European Union).
6. Political union: a common government.

Examples: European Union (EU), NAFTA (now USMCA), ASEAN, SAARC (SAFTA), MERCOSUR, APEC, BIMSTEC, African Union and ECOWAS.

Effects: the blocks create trade among members and expand markets, giving economies of scale, but they may divert trade from efficient outsiders. For international marketers they create opportunity within the block and make entry harder for outsiders, so they may need to set up production inside the block.

Political risks of international business

Political risk is the possibility that political decisions, events or conditions in a country will adversely affect the profitability or continuity of a firm's operations there. The five major political risks are as follows.

1. Confiscation, expropriation and nationalisation. Confiscation is the seizure of a firm's assets by the government without compensation. Expropriation is a seizure with some compensation, often below the market value. Nationalisation is the transfer of private firms to government ownership, usually for a whole industry. These are the most serious risks, since the firm loses its investment. Domestication is a milder form, in which the government forces the foreign firm to transfer ownership and control gradually to local people (local equity, local managers).

2. Economic risks: exchange controls and import restrictions. Governments may restrict the conversion of local currency into foreign currency or the repatriation of profit, because of foreign exchange shortage. They may also impose import quotas, tariffs, local-content rules, price controls and taxes that hurt the foreign firm.

3. Political instability, war and violence. Civil unrest, strikes, riots, terrorism, insurgency, coups and war disrupt production and distribution, damage property and endanger employees. Frequent changes of government and policy also make planning difficult.

4. Boycott, embargo and sanctions. Consumers or governments may boycott the products of a country or firm for political reasons; governments may embargo trade or impose sanctions on specific countries, which may prevent a firm from doing business there.

5. Legal and regulatory risk (changes in laws and policy). Sudden changes in laws on taxation, ownership, labour, environment or repatriation, favouritism towards local firms, corruption, bureaucratic delays and breach of contract by the government.

Managing political risk: thorough assessment before investing, joint ventures with local partners, local sourcing and employment, political risk insurance (e.g. MIGA, OPIC), good relationships with the government, and flexible, gradual commitment.

Global marketing information system (GMIS)

A global marketing information system is a continuing, organised set of procedures and methods designed to generate, analyse, disseminate, store and retrieve information from inside and outside the company worldwide, for use by management in international marketing decisions. It provides timely, accurate and relevant information on markets, competitors, customers and the environment of many countries, and it supports planning, implementation and control.

Components (subsystems)

1. Internal records system: company data on orders, sales, prices, inventories, costs and receivables in each market.
2. Marketing intelligence system: everyday information about developments in the global marketing environment, collected from trade journals, the press, the internet, employees, distributors, trade fairs and embassies, to detect threats and opportunities.
3. Marketing research system: specific studies of particular problems, such as market size in a country or consumer attitudes.
4. Decision support (analysis) system: statistical and modelling tools and software to analyse data and support decisions.

Features and importance: it is computer-based and often networked across subsidiaries; it integrates information from many countries into a common format; reduces uncertainty and risk; helps in market selection, entry, product and price decisions; allows early warning of changes; and helps coordination and control of global operations.

Sources: the UN, WTO, World Bank, IMF, trade centres, chambers of commerce, embassies, commercial databases, and the internet.

Problems: differing data quality and definitions between countries, language barriers, cost, and the need to organise the flow of information between headquarters and subsidiaries.

Distribution patterns in international markets

The distribution pattern is the structure of channels and intermediaries through which goods flow from the producer to the final consumer in a foreign country. Patterns differ widely among countries because of differences in the level of economic development, culture, geography, competition, and the number and size of retailers.

Features of the patterns

1. Number of channel levels. Developed countries have shorter channels with large, efficient retailers, and developing countries have longer channels with many middlemen (importers, wholesalers, sub-wholesalers, retailers) between producer and consumer. Japan is a classic example of long, multi-layered channels.
2. Size and type of retailers. In developed markets, supermarkets, hypermarkets, chain stores, and online retail dominate. In developing countries small, family-owned, independent stores, street vendors, open markets and bazaars dominate (often small shops serving a few customers), and customers buy in small quantities with frequent purchases.
3. Channel length and the total channel cost. Long channels add margins, so the price rises (price escalation).
4. Intermediary types: export management companies, trading companies, agents and brokers, importers/distributors, wholesalers, retailers, franchise and direct marketing.
5. Channel power and loyalty. In some countries the wholesaler is powerful and loyal to a few suppliers, in others the retailer or the manufacturer is.
6. Infrastructure and logistics. Poor transport, storage and cold chain, and communication in some countries limit distribution.
7. Legal and cultural constraints. Government rules on retail licensing, foreign ownership, exclusive dealing, as well as shopping habits and social relationships.

Implications: the firm should study the structure in each market, and decide whether to use its own sales force, domestic middlemen (indirect export) or foreign middlemen (direct), and may adapt the channels to local conditions, or may build new ones; alliances with local distributors are common.

Major challenges of managing brands globally

A global brand is one which is marketed under the same name and positioning in many countries. Managing it raises the following challenges.

1. Standardisation versus adaptation. Deciding how much of the brand's name, image, positioning, packaging and communication should be the same worldwide, and how much should be adapted to local tastes, to preserve consistency while remaining relevant locally.
2. Cultural and language differences. A brand name, slogan, colour or symbol may have a different, negative or offensive meaning in another language or culture.
3. Legal and trademark issues. Protecting the brand from piracy, counterfeiting and trademark squatting; trademark laws differ by country (first-to-file rather than first-to-use), and some brand names may already be registered locally.
4. Differences in consumer behaviour and perception. The same brand may be seen as premium in one country and ordinary in another, because of income levels, competition and brand awareness.
5. Local competition and the strength of local brands. Consumers may prefer local brands and the global brand has to compete with entrenched ones; the country-of-origin image and anti-globalisation or nationalistic sentiment can hurt.
6. Managing the brand portfolio. Decisions on whether to retain acquired local brands, merge them into global ones, or use different brands in different markets, and brand extension to new products.
7. Coordination and control. Maintaining consistent quality, identity and message through many subsidiaries, agencies and distributors, and deciding how much authority headquarters should keep.
8. Cost and media differences. Brand building is expensive; the media availability, regulations on advertising and the cost vary between countries.
9. Grey markets and parallel imports which undermine price consistency and distributor relationships.
10. Maintaining brand equity over time and responding to risks such as scandals, which spread worldwide quickly through the internet and social media.

Main objectives of the WTO

The World Trade Organization (WTO) was established on 1 January 1995, replacing GATT, with its headquarters in Geneva. Nepal became its 147th member in April 2004. Its main objectives are:

1. To liberalise and promote free trade by reducing tariffs and removing non-tariff barriers (quotas, subsidies) through negotiations between members.
2. To provide a forum for multilateral trade negotiations and to develop a rules-based multilateral trading system.
3. To administer the WTO agreements (trade in goods, GATS for services, and TRIPS for intellectual property) and to ensure their implementation.
4. To settle trade disputes between member countries through an impartial and binding dispute settlement mechanism.
5. To ensure non-discrimination, via most-favoured-nation treatment and national treatment, so that all members are treated equally.
6. To raise standards of living, ensure full employment and a large and steadily growing volume of real income and effective demand, and expand the production of and trade in goods and services.
7. To optimise the use of the world's resources in accordance with the objective of sustainable development, and protect the environment.
8. To help developing and least-developed countries to secure a better share of growth in international trade, through special and differential treatment and technical assistance.
9. To increase transparency through the review of members' trade policies (Trade Policy Review Mechanism) and cooperate with the IMF and the World Bank for greater coherence in global economic policy making.

Movement against trade restrictions

Trade restrictions (tariffs, quotas, embargoes, subsidies and other non-tariff barriers) reduce the efficiency of world trade. The movement against them has gone through the following main steps.

1. Free-trade thinking. The classical economists (Adam Smith's absolute advantage, David Ricardo's comparative advantage) showed that free trade benefits all countries by specialisation. This idea underlay the movement against mercantilism and protection.
2. The post-war system: Bretton Woods and GATT. After the world wars and the depression of the 1930s, in which protectionism such as the US Smoot-Hawley tariff of 1930 deepened the crisis, the General Agreement on Tariffs and Trade (GATT) was signed in 1947 by 23 countries, and began operating in 1948. It reduced tariffs through eight rounds of negotiation: Geneva, Annecy, Torquay, Geneva, Dillon, Kennedy, Tokyo and Uruguay (1986-94). The Kennedy Round tackled anti-dumping, and the Tokyo Round tackled non-tariff barriers.
3. The WTO. The Uruguay Round created the World Trade Organization in 1995, with a wider scope covering services (GATS), intellectual property (TRIPS) and agriculture, and with a binding dispute settlement system. The Doha Development Round (2001) aimed at further liberalisation but has stalled.
4. Regional integration. Free trade areas, customs unions and common markets such as the EU, NAFTA, ASEAN and SAFTA remove restrictions among members.
5. Other bodies and agreements. UNCTAD, the IMF and World Bank, GSP (generalised system of preferences) for developing countries, and bilateral free trade agreements.
6. Principles used against restrictions: most-favoured-nation, national treatment, binding of tariffs, replacement of quotas with tariffs, transparency and prohibition of dumping and unfair subsidies.

Green marketing

Green marketing (environmental or ecological marketing) is the marketing of products and services that are presumed to be environmentally safe. It includes all activities designed to generate and facilitate exchanges intended to satisfy human needs and wants, with minimal detrimental impact on the natural environment. It covers product modification, changes in the production process, sustainable packaging, and modified advertising.

Features and practices

• Developing environment-friendly products (recyclable, biodegradable, energy-efficient, organic, non-toxic).
• Eco-friendly packaging that reduces waste, with reusable or recyclable materials.
• Environmentally responsible production, with less pollution and waste, lower energy use, and the use of renewable resources.
• Honest environmental claims and eco-labels (such as ISO 14000 certification, Energy Star, Fair Trade labels), avoiding "greenwashing", where a firm falsely claims to be green.
• Promotion that educates consumers on environmental benefits.
• Pricing that may be higher for green products, justified by savings or long-term value.

Importance in international marketing: growing environmental awareness and strict regulations in developed countries (EU, USA, Japan), pressure from consumers, NGOs and governments, access to markets with green requirements, cost savings from efficiency, a better corporate image and competitive advantage. Exporters from Nepal use it for organic tea, herbs, handicrafts, and pashmina.

Problems: higher cost, consumer scepticism, lack of standards and awareness, and differing regulations between countries.

Institutional mechanism for international trade

Institutional mechanisms are the organisations and bodies, at the international, regional and national levels, which regulate, facilitate and promote international trade.

1. Multilateral (international) institutions

• WTO: administers trade agreements, provides a forum for negotiations and settles disputes. Its predecessor was GATT.
• UNCTAD: the UN body that deals with trade and development problems of developing countries, and promotes the GSP.
• IMF: maintains international monetary stability, exchange rates and balance-of-payments support.
• World Bank (IBRD, IDA): long-term finance for development projects, which indirectly supports trade.
• International Trade Centre (ITC) (UNCTAD/WTO): export promotion and training for developing countries.
• International Chamber of Commerce (ICC): sets rules such as Incoterms and UCP for letters of credit.

2. Regional institutions and arrangements: EU, ASEAN, NAFTA, SAARC/SAFTA, BIMSTEC, and development banks such as the Asian Development Bank.

3. National institutions in Nepal

• Ministry of Industry, Commerce and Supplies: policy-making and trade negotiations.
• Trade and Export Promotion Centre (TEPC): promotes exports, provides market information, and organises trade fairs.
• Department of Customs: customs clearance and revenue collection.
• Nepal Rastra Bank and commercial banks: foreign exchange regulation, letters of credit and trade finance.
• Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and other trade associations: private sector representation and certificates of origin.
• Department of Food Technology and Quality Control, Plant Quarantine, Nepal Bureau of Standards and Metrology: quality and standard certification.
• Nepal Trade Integration Strategy and the Trade Policy guide the sector.
• Transit and Warehouse Management bodies (Nepal Transit and Warehousing Company) for third-country trade.

These institutions together provide rules, finance, information, promotion and dispute resolution that make international trade orderly.

Main features of SAFTA

The South Asian Free Trade Area (SAFTA) is a free trade agreement among the SAARC member states (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka). It was signed at the 12th SAARC Summit in Islamabad in January 2004 and came into force on 1 January 2006, replacing SAPTA.

Main features

1. Objective: to promote and enhance mutual trade and economic cooperation among members by eliminating barriers to trade, promoting fair competition, and ensuring equitable benefits.
2. Tariff reduction programme: phased reduction of customs duties in two phases of two years each (extendable to three years for Least Developed Countries). The Non-LDCs (India, Pakistan, Sri Lanka) were to reduce tariffs to 20 per cent in the first phase, and the LDCs (Nepal, Bangladesh, Bhutan, Afghanistan) to 30 per cent, and then to 0-5 per cent by the end of the period (by 2016 for non-LDCs and by 2018 for LDCs).
3. Special and differential treatment for LDCs: longer time to reduce tariffs, and the non-LDC members give them deeper concessions; the LDCs also receive technical assistance.
4. Sensitive list: each member can keep a list of products excluded from tariff cuts, which is a major limit on the benefit of SAFTA.
5. Rules of origin: only products which satisfy the rule (a change of tariff heading and at least 40 per cent value addition in the exporting country, with 30 per cent for LDCs) get the preference.
6. Non-tariff and para-tariff barriers: members agree to remove them, and harmonise standards, customs procedures and licensing.
7. Safeguard measures and a compensation mechanism for revenue losses of LDCs.
8. Dispute settlement through consultation and a committee of experts, and an institutional framework (the SAFTA Ministerial Council and the Committee of Experts).
9. Other provisions: trade facilitation, transit, and cooperation on infrastructure and investment.

SAFTA has had limited effect because of long sensitive lists, political tension and non-tariff barriers.

Political system or environment

The political environment of a country is the set of political institutions, ideologies, policies, laws and conditions which govern the activities of its government and affect businesses operating there. It includes the form of government (democracy, monarchy, dictatorship, communism), the party system and political stability, government attitudes towards foreign business and nationalism, the relations with other countries, and the legal and regulatory system (taxation, trade laws, ownership). Political systems may be classified as totalitarian vs. democratic, and by the economic ideology as capitalism, socialism or mixed. A stable, democratic and pro-business environment attracts foreign trade and investment, while an unstable, hostile one raises risk. A foreign firm must consider both the home country, host country and the international political environment.

Political risks of international business

Political risk is the chance that political decisions or events will damage a firm's operations or profits.

1. Confiscation, expropriation and nationalisation. Seizure of the foreign firm's assets, with no compensation (confiscation), with partial compensation (expropriation), or transfer of a whole industry to the state (nationalisation). Domestication is the forced transfer of ownership and management to local people.
2. Exchange controls and import restrictions. Limits on the conversion of local currency, repatriation of profits and royalties, and import quotas, high tariffs, or licensing which cut off supplies.
3. Political instability, war and terrorism. Riots, civil war, coups, terrorism and strikes damage property, disrupt production and endanger staff.
4. Boycotts, embargoes and sanctions. Trade prohibitions imposed by governments, or consumer boycotts against a country or firm.
5. Changes in laws, taxes and regulations; local-content and price controls. Sudden increases in tax, changes in ownership rules, discrimination against foreigners, corruption and delays.
6. Labour problems and bureaucratic interference.

Managing the risk: assessment before entry, joint ventures with local firms, local sourcing and employment, political risk insurance (MIGA), maintaining good relations with the government, and diversifying operations across countries.

International marketing channels

An international marketing channel is the set of organisations and individuals, in the home and foreign country, through which goods move from the producer to the final consumer or industrial user in foreign markets. It links the producer with the market and creates time, place and possession utility.

Structure. A typical channel has three links: (1) the seller's headquarters organisation in the home country, (2) channels between nations (the transport and intermediaries that move goods across borders), and (3) channels within foreign nations that deliver goods to the final consumer.

Types of intermediaries

• Home country: export merchants, export management companies, trading companies, buying offices, export agents and brokers, and the company's own export department.
• Foreign country: importers, distributors, agents, wholesalers, retailers, franchisees, and the company's own subsidiary or sales office.
• Direct channels (the company sells directly) or indirect channels (via independent middlemen).

Channel decisions: length of the channel, selection of intermediaries, exclusive vs. intensive distribution, control and motivation of members, and the cost of the channel.

Distribution patterns in international markets

Channel structure differs between countries, depending on economic development, culture, geography and competition.

1. Number of levels: short channels in developed countries (the large retailer buys directly), and long channels with many wholesalers and sub-wholesalers in developing countries and Japan.
2. Retailer size and type: large supermarkets, chains and online retail in developed countries vs. small family shops, street vendors and open bazaars in developing countries. Buyers purchase small amounts frequently.
3. Price escalation: each extra level adds a margin, so the price to the consumer rises.
4. Power and loyalty: the wholesalers in some countries are powerful and tied to suppliers, in others the retailers dominate.
5. Infrastructure and logistics: transport, storage and communication limit the possible choices.
6. Legal and cultural factors: licensing rules, restrictions on foreign ownership, shopping habits and business relationships.

The marketer should study the pattern in each country and select or build channels that fit it, often through local distributors or joint ventures.

Key problems in Nepal's international trade

Nepal's trade is small, unbalanced and highly dependent on a few commodities and one trading partner. The key problems are as follows.

1. Persistent and growing trade deficit. Imports are many times the value of exports (exports are only about one-eighth or less of imports). The deficit is financed by remittances, aid and borrowing, which is not sustainable.
2. Narrow export base and commodity concentration. A few products (readymade garments, carpets, pashmina, handicrafts, tea, cardamom, vegetable oil, and zinc) account for most exports, so earnings are unstable and vulnerable to changes in demand.
3. Over-dependence on India. A large share of trade is with India, and the exports are subject to Indian tariffs, para-tariff and non-tariff barriers, and changes in Indian policy and exchange rate (the peg of NRs to INR).
4. Landlocked position and transit problems. Nepal depends on India's ports (Kolkata, Visakhapatnam) and roads, causing high transport costs, delays, and trade disruption through blockades and strikes.
5. Weak supply capacity and low productivity. Small-scale industry, low technology, shortage of electricity and raw materials, and poor quality and standards reduce competitiveness.
6. Poor infrastructure. Inadequate roads, dry ports, warehouses, testing laboratories and communication.
7. Non-tariff barriers and standards. Difficulty in meeting sanitary and phytosanitary standards, certification, rules of origin and technical requirements in foreign markets (e.g. rejection of tea, honey and cardamom consignments).
8. Weak institutional and policy support. Lengthy customs and export-import procedures, bureaucracy, high documentation costs, corruption, limited export finance, and weak promotion and marketing, branding and market information.
9. Political instability, strikes and labour problems.
10. Limited benefit from trade agreements (WTO, SAFTA, BIMSTEC) because of weak capacity to use preferences.
11. Loss of preferential access as Nepal graduates from LDC status.

Remedies: diversify products and markets, add value to products, improve infrastructure and trade facilitation (single window, electronic customs), promote quality standards and branding, improve transit arrangements, and strengthen export promotion and finance.

Tariffs and quotas are the two most common government tools for restricting imports and protecting domestic industries.

(a) Tariff

A tariff is a tax or duty levied by a government on goods when they cross its border, usually on imports. It raises the landed price of foreign goods, so domestic products become more competitive, and it also earns revenue for the government.

Main types:

• Ad valorem tariff: charged as a percentage of the value of the goods (for example 15% of the customs value).
• Specific tariff: a fixed amount per unit, weight or volume (for example Rs 50 per kg).
• Compound (mixed) tariff: a combination of ad valorem and specific duty.
• Revenue tariff: imposed mainly to raise government income.
• Protective tariff: imposed to shield local producers from foreign competition.
• Anti-dumping and countervailing duty: imposed to offset dumped or subsidised imports.

(b) Quota

A quota is a quantitative limit on the amount (or value) of a product that may be imported or exported in a given period. Once the quota is filled, no further imports are allowed, or they face a very high duty.

Main types:

• Absolute quota: a hard limit on quantity with no exceptions.
• Tariff-rate quota: a lower duty applies up to a set quantity, and a higher duty beyond it.
• Voluntary export restraint: the exporting country limits its own exports, usually under pressure from the importing country.
• Import licensing: quota is enforced by granting licences to importers.

(c) Difference

Both tools raise domestic prices and reduce consumer choice, which is why the WTO encourages members to reduce them.

The World Trade Organization (WTO), established on 1 January 1995 as the successor to GATT (1947), works to reduce and remove trade restrictions and to make international trade freer, fairer and more predictable. Its head office is in Geneva.

Movements of the WTO against trade restrictions

1. Tariff reduction through negotiation rounds. Successive GATT/WTO rounds (Geneva, Kennedy, Tokyo, Uruguay, and the Doha Round) have lowered average tariffs on industrial goods from about 40% in the late 1940s to a few percent today. Members agree on "bound" tariff ceilings that cannot be raised freely.

2. Most Favoured Nation (MFN) principle. A concession given to one member must be given to all members, which prevents discriminatory trade barriers.

3. National treatment. Imported goods, once they have entered the market, must be treated no less favourably than locally produced goods in taxes and regulations.

4. Elimination of quantitative restrictions. Quotas and import bans are generally prohibited, and members are encouraged to convert them into tariffs, which are more transparent.

5. Agreement on Agriculture. Reduces export subsidies, domestic support and market-access barriers in farm trade.

6. Agreement on Textiles and Clothing. Phased out the Multi-Fibre Arrangement quotas by 2005.

7. Agreements on subsidies, anti-dumping and safeguards. Allow only limited and rule-based responses (anti-dumping duties, countervailing duties, temporary safeguards) so these cannot be misused as disguised protection.

8. Agreements on technical barriers (TBT) and sanitary and phytosanitary measures (SPS). Prevent standards and health rules from being used as hidden barriers.

9. TRIPS, TRIMS and GATS. Extend rules to intellectual property, investment measures and services.

10. Trade Facilitation Agreement (2017). Simplifies customs procedures and reduces border delays and costs.

11. Transparency and trade policy review. Members must notify their trade measures and are reviewed periodically.

12. Dispute settlement. The Dispute Settlement Body lets a member challenge another member's restrictive measures; rulings can be backed by authorised retaliation.

13. Special and differential treatment. Gives least-developed countries such as Nepal (WTO member since 2004) longer transition periods and technical help.

Overall, the WTO's approach is non-discrimination, gradual liberalisation through negotiation, transparency, and enforceable dispute resolution.

A regional trading bloc is a group of countries in a geographic region that agree to reduce or remove trade barriers among themselves, and sometimes to adopt common external policies, in order to promote trade and economic cooperation.

Levels of regional economic integration

1. Preferential trade area: members give each other lower tariffs on selected goods.
2. Free trade area: tariffs and quotas are removed among members, but each keeps its own tariffs against outsiders (for example NAFTA/USMCA, SAFTA, ASEAN's AFTA).
3. Customs union: a free trade area plus a common external tariff (for example Mercosur, the EU's early stage).
4. Common market: a customs union plus free movement of labour and capital (for example the EU single market).
5. Economic union: a common market plus harmonised economic policies, often a common currency (for example the Eurozone).
6. Political union: a common government and policy; the highest stage.

Major regional trading blocs

• European Union (EU): 27 members, single market, euro currency in most.
• USMCA (formerly NAFTA): United States, Mexico, Canada.
• ASEAN: ten Southeast Asian nations, with the ASEAN Free Trade Area.
• SAARC / SAFTA: South Asian countries including Nepal; SAFTA came into force in 2006.
• BIMSTEC: Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal, Bhutan.
• Mercosur: Argentina, Brazil, Paraguay, Uruguay.
• African Union / AfCFTA, COMESA, ECOWAS: African blocs.
• RCEP: large Asia-Pacific agreement including China, Japan, Korea and ASEAN.

Marketing significance

Blocs enlarge markets, allow economies of scale and cheaper access for members, and encourage foreign investment. For outsiders they can raise barriers (trade diversion), so firms may need to produce or partner inside the bloc, and they must adapt to common standards and rules of origin.

International cultural knowledge means understanding the values, beliefs, language, customs, religion, aesthetics, manners and social institutions of the foreign markets in which a firm operates. It is essential because culture shapes how people think, buy and respond to marketing.

Importance

1. Understanding consumer behaviour. Culture influences what people need, how they decide and who influences purchases (family, caste, community). For example, food habits and festivals decide demand for products.

2. Product adaptation. Products must fit local tastes, religion and usage customs. Beef products in India or pork in Muslim countries would be rejected; colour, size, packaging and taste may need changes.

3. Effective communication and promotion. Language, symbols, humour, colours and gestures carry different meanings. Poor translation or an inappropriate symbol can offend (white signifies mourning in several Asian cultures; a thumbs-up gesture is rude in some countries).

4. Pricing and distribution decisions. Attitudes to bargaining, credit, retail formats and middlemen differ by culture, and these affect pricing and channel choice.

5. Better negotiation and relationships. Attitudes toward time, hierarchy, gift giving, contracts and trust differ. Cultural knowledge helps in building long-term business relationships and avoiding misunderstandings.

6. Avoiding costly mistakes. Many firms have failed through cultural blunders, for example brand names that sound offensive in another language.

7. Deciding standardisation versus adaptation. Knowing which cultural elements are universal and which are specific helps decide how much of the marketing mix to localise.

8. Competitive advantage. A firm that respects and uses local culture gains acceptance, goodwill and loyalty faster than competitors.

9. Managing the workforce. In foreign subsidiaries, cultural knowledge improves staffing, motivation and management style.

10. Social responsibility and image. Respect for local culture improves corporate image and reduces social and political resistance.

Hence cultural awareness, and avoiding the self-reference criterion (judging by one's own cultural values), is a basic requirement of successful international marketing.

International legal disputes

An international legal dispute is a disagreement between parties from different countries, usually over a commercial agreement. Because there is no single international commercial court or code, disputes are complicated by different laws, languages and courts.

Common causes:

• Non-payment or late payment
• Delivery of defective or non-conforming goods, or late delivery
• Breach or termination of agency/distributor contracts
• Disagreement about contract interpretation
• Intellectual property infringement (patents, trademarks, copyright)
• Differences in applicable law or jurisdiction

Ways to reduce disputes in advance: include in the contract a jurisdiction clause (which court decides), a governing law clause (whose law applies), an arbitration clause, and the language of the contract.

Dispute resolution methods

1. Negotiation. The parties talk directly and settle by mutual agreement. It is quick, cheap and keeps the relationship intact.

2. Conciliation (mediation). A neutral third person helps the parties reach a settlement but cannot impose a decision. The result is non-binding unless a settlement agreement is signed.

3. Arbitration. Parties submit the dispute to one or more neutral arbitrators whose award is binding. It is private, faster than courts, and awards are widely enforceable under the New York Convention (1958), to which Nepal is a party. Institutions include the International Chamber of Commerce (ICC) Court of Arbitration, London Court of International Arbitration (LCIA), Singapore International Arbitration Centre, and in Nepal the Nepal Council of Arbitration.

4. Litigation. The case is filed in a national court as per the jurisdiction clause. It is slow, expensive, public, and a foreign judgement may be hard to enforce abroad.

5. Government-to-government and WTO procedures. Trade disputes between states are taken to the WTO Dispute Settlement Body, and investment disputes to the ICSID.

For commercial parties, arbitration is generally preferred because of its neutrality, confidentiality and enforceability.

Global marketing information is the data needed to understand foreign markets and decide marketing strategy. It comes from secondary and primary sources.

1. Secondary sources (already collected data)

Internal sources

• Company sales records, invoices, customer databases, previous research reports and cost data.

External sources

• International organisations: United Nations (UN trade statistics), World Bank, IMF, WTO, International Trade Centre (ITC), UNCTAD, OECD, which publish trade, income and demographic statistics.
• Government sources: the country's trade promotion agencies, ministries of commerce, embassies and commercial attachés, customs departments, central banks and statistics offices (in Nepal: Trade and Export Promotion Centre, Department of Customs, Nepal Rastra Bank, Central Bureau of Statistics).
• Trade associations and chambers of commerce: Federation of Nepalese Chambers of Commerce and Industry (FNCCI), foreign chambers.
• Commercial publications and databases: market research firms, trade directories, journals, newspapers, business magazines and online databases.
• Banks and service organisations: banks, freight forwarders, advertising agencies and consulting firms that follow foreign markets.
• Internet: company websites, online databases, social media and search tools.

2. Primary sources (collected fresh for the purpose)

• Surveys of consumers, importers or distributors using questionnaires or interviews.
• Observation of retail outlets and competitors.
• Focus groups and in-depth interviews.
• Experiments and test marketing.
• Trade fairs, exhibitions and trade missions, where firms meet buyers and see competitors.
• Visits and inquiries to foreign agents, distributors and customers.

Choosing sources

Secondary data is cheaper and faster and is used first, but may be outdated, inconsistent between countries or not exactly suited to the purpose. Primary data is more specific and current, but is costly and time-consuming. Most firms use both.

Green marketing (also called environmental or ecological marketing) is the marketing of products and services that are environmentally safe, together with marketing practices that reduce harm to the environment. It involves designing, promoting, pricing and distributing products in a way that satisfies customers while protecting nature.

Features

• Products are made from recycled, renewable or biodegradable materials.
• Energy-efficient and low-pollution production processes.
• Eco-friendly packaging that is reusable, recyclable or minimal.
• Honest environmental claims and labels (eco-labels, energy rating).
• Promotion that educates customers about sustainability.

Green marketing mix

• Product: non-toxic, durable, recyclable and energy-saving goods.
• Price: often a premium, justified by long-term savings and environmental value.
• Place: efficient, low-emission distribution and logistics.
• Promotion: green advertising, eco-labels, public relations on environmental efforts.

Importance

• Growing consumer concern for the environment.
• Strict environmental laws and international standards (such as ISO 14001).
• Competitive advantage and better brand image.
• Cost saving through lower energy and waste.
• Access to foreign markets that demand eco-friendly goods, for example the EU.

Problems

• Higher costs and prices
• Lack of customer awareness
• "Greenwashing", meaning false or exaggerated green claims, which damages trust.

Examples include solar-powered products, organic food, paper bags instead of plastic and electric vehicles.

Price escalation

Price escalation is the increase in the final consumer price of a product in a foreign market, compared with its domestic price, caused by the extra costs of getting it there. These extra costs are added at each step of the export channel and often multiply because later charges are calculated on a higher base.

Causes (cost elements)

• Transport, insurance, freight and handling over a long distance
• Customs duties, tariffs and import taxes (often charged on the CIF value)
• Value added tax or other local taxes
• Margins of importers, wholesalers, distributors and retailers (each on a rising cost base, a "cascading" effect)
• Packaging, labelling and documentation costs
• Exchange rate fluctuation and cost of financing/credit
• Higher promotion and market-adaptation costs
• Additional costs of longer channels

Illustration

Suppose the ex-factory price is Rs 1,000. Freight and insurance add Rs 200, so CIF is Rs 1,200. A 20% import duty is Rs 240, so the cost is Rs 1,440. The importer adds a 25% margin (Rs 360), giving Rs 1,800. The wholesaler adds 20% (Rs 360), giving Rs 2,160, and the retailer adds 30% (Rs 648), giving Rs 2,808. The product that cost Rs 1,000 at home sells for Rs 2,808 abroad, an escalation of 180.8%.

Effects

• Higher consumer price, which lowers demand and sales volume
• Loss of price competitiveness against local and other imported products
• Product may be pushed toward a niche or high-income segment
• Pressure on the exporter to cut its margin or costs
• Possible need to change the product, packaging or channel

Ways to reduce escalation

• Shorten the channel and cut middlemen
• Modify the product to fit a lower tariff category
• Use local assembly or manufacture, or a free trade zone
• Lower the ex-factory price through cost cutting
• Ship in bulk and unassembled
• Use trade agreements that give preferential tariffs

Import and export sources are the places and channels from which a firm obtains information, products and buyers or suppliers in foreign trade.

Sources for export (finding foreign buyers and market information)

• Trade promotion agencies, for example the Trade and Export Promotion Centre (TEPC) of Nepal
• Embassies, consulates and commercial attachés abroad
• Chambers of commerce and trade associations such as FNCCI, and export associations
• Trade fairs, exhibitions and trade missions
• Export trading companies, export agents and export management companies
• Overseas distributors, importers and agents
• Trade directories, journals and online B2B portals
• International organisations such as ITC, UNCTAD and WTO
• Banks and freight forwarders

Sources for import (finding foreign suppliers)

• Direct contact with foreign manufacturers
• Import agents, brokers and commission agents
• Trading companies and wholesalers abroad
• Overseas offices and branches of the importing firm
• Trade fairs, catalogues and trade directories
• Online marketplaces and supplier databases
• Embassies and trade promotion offices that give supplier lists

Additional supporting sources

• Government departments of commerce and customs for regulations, licences and tariffs
• Banks for letters of credit, foreign exchange and payment guarantee
• Insurance companies and shipping lines

A firm uses these sources to identify buyers or suppliers, check their reliability, and understand rules on tariffs, licensing and documentation.

SAFTA (South Asian Free Trade Area)

SAFTA is a regional free trade agreement among the member states of SAARC. It was signed at the 12th SAARC Summit in Islamabad in January 2004 and came into force on 1 January 2006, replacing the earlier SAPTA (South Asian Preferential Trading Arrangement).

Members: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.

Objectives

• Promote and enhance mutual trade and economic cooperation among members
• Remove barriers to trade and facilitate cross-border movement of goods
• Promote fair competition in the free trade area and equitable benefits to members
• Create an effective framework for regional cooperation

Main provisions

• Tariff reduction programme: Non-least developed contracting states (India, Pakistan, Sri Lanka) were to reduce tariffs to 0-5% within a fixed time (originally by 2013 for India and Pakistan), while least developed states (Nepal, Bangladesh, Bhutan, Afghanistan, Maldives) get a longer time.
• Special and differential treatment for least developed countries (LDCs): they take smaller and slower tariff cuts, and developing members give them preferential access.
• Sensitive list: each member can exclude certain products from tariff cuts.
• Rules of origin: goods must meet value addition and change of tariff heading requirements (for example 40% value addition, lower for LDCs) to get benefits.
• Safeguard measures and dispute settlement mechanism, and compensation for revenue loss to LDCs.
• Trade facilitation, customs cooperation and removal of non-tariff barriers.

Significance and problems for Nepal

Benefits include wider market access for Nepalese products and cheaper imports. However, the large sensitive lists, non-tariff barriers, poor infrastructure, limited export capacity and mutual political mistrust have limited intra-regional trade, which remains low (about 5% of total trade). Nepal's trade with India dominates and trade deficit remains high.

Non-governmental organisations, mostly private sector bodies, support trade and export promotion in Nepal by representing business interests, giving information and training, organising trade fairs, and lobbying the government.

Main non-governmental agencies

1. Federation of Nepalese Chambers of Commerce and Industry (FNCCI): the apex private-sector organisation. It lobbies the government on trade policy, provides business information, organises trade missions and fairs, and certifies certain trade documents.

2. Nepal Chamber of Commerce (NCC): one of the oldest chambers, supporting trade and giving services to members.

3. Confederation of Nepalese Industries (CNI): represents industrial enterprises and advocates for industrial and export policy.

4. Federation of Handicraft Associations of Nepal (FHAN): promotes handicraft exports through fairs, product development and training.

5. Trade-specific associations: Nepal Tea Producers Association, Garment Association of Nepal, Nepal Carpet Exporters' Association, Herbs Producers and Processors Association of Nepal (HPPCL), Nepal Trans-Himalayan Trade Association, Nepal Pashmina Industries Association, Nepal Cardamom Association and others, which promote and protect each product sector.

6. Nepal Association of Tour and Travel Agents (NATTA) and similar service bodies for service exports.

7. Logistics and service associations, such as freight forwarders' and transporters' associations, which support export logistics.

8. International non-governmental and donor-supported bodies: for example Swisscontact, Helvetas, and the Nepal Business Forum, which assist with export capacity, quality and market linkage.

Roles

• Provide market information and contacts with foreign buyers
• Organise or participate in trade fairs and exhibitions
• Train and build skills, and help with quality and design
• Advocate for favourable policy and reduce procedural barriers
• Help with certification and standards compliance

(a) International marketing

International marketing is the performance of business activities that direct the flow of a company's goods and services to consumers or users in more than one nation for a profit. It means identifying needs in foreign markets and planning, pricing, promoting and distributing products across national borders, adapting the marketing mix to different environments. It differs from domestic marketing mainly in the greater variety of uncontrollable environments (legal, cultural, political, economic) the firm faces.

(b) Legal systems affecting international marketing

Laws differ across countries, so marketers must know the legal system of each market. The four major systems are:

1. Common law

   • Based on tradition, past court decisions (precedent) and usage rather than only written codes.
   • Judges interpret law and decisions of earlier cases bind later ones.
   • Used in the United Kingdom, the United States (except Louisiana), India, Australia, Canada and others.
   • Property rights are established by use (for example a trademark belongs to the first user).

2. Civil (code) law

   • Based on a comprehensive written code that sets out rules in detail; judges apply the code rather than create law.
   • Used in France, Germany, Japan, Latin America and most of continental Europe.
   • Trademark rights are generally given to the first to register.

3. Islamic (theocratic) law

   • Derived from the Quran and the Sunnah (the Shari'a); religion and law are joined.
   • Used in Saudi Arabia, Iran and some other Muslim countries.
   • Impacts include a ban on interest (riba), restrictions on products such as alcohol and pork, and rules on advertising, women's roles and contracts.

4. Marxist-socialist (communist) law

   • Based on state ownership and central planning, with the state controlling economic activity.
   • Found in some socialist states; foreign trade is tightly controlled by the state and private contracts are limited.

Areas of law that affect a marketer

• Home country laws: export controls, anti-corruption (such as US FCPA), embargoes, anti-trust.
• Host country laws: import duties, product standards, labelling, advertising restrictions, pricing controls, licensing, local ownership rules, taxation.
• International law: treaties, WTO rules, UN Convention on Contracts for the International Sale of Goods (CISG), and intellectual property treaties (Paris Convention, TRIPS).

Implications

Firms should study local laws, include jurisdiction and arbitration clauses in contracts, protect trademarks and patents by registering in each country, and seek local legal advice.

(a) Marketing information system (MKIS)

A marketing information system is a structured, continuing set of people, equipment and procedures for gathering, sorting, analysing, evaluating and distributing timely and accurate information to marketing decision makers. In international marketing it provides information on foreign markets, competitors, customers and the environment so that managers can plan, implement and control marketing activities.

(b) Components of MKIS

1. Internal records system

   • Information from inside the company: orders, sales, prices, inventories, receivables, costs and payables.
   • It is quick and cheap and shows current performance, for example sales by country or product.

2. Marketing intelligence system

   • Everyday information about developments in the external marketing environment, such as competitors' moves, new regulations, exchange rates and trends.
   • Collected from reading newspapers, trade publications, employees, agents, distributors, trade fairs and the internet.

3. Marketing research system

   • Systematic design, collection, analysis and reporting of data for a specific marketing problem, for example a survey of consumer preference in a new country.
   • Uses primary and secondary data.

4. Marketing decision support system (analytical system)

   • Statistical tools, models and software that help managers analyse data and test decisions, for example forecasting, simulation, market-share and sales-response models.

Operation

Managers state their information needs. The MKIS collects data from the four subsystems, processes and analyses it, and supplies information back to managers, who make decisions and monitor results. The system should be updated continually, be cost effective, and produce reliable, timely information.

(a) International trade

International trade is the exchange of goods, services and capital between people or firms of different countries. It occurs because countries differ in resources, technology, labour skills and costs, so each gains by specialising in what it produces relatively efficiently (the theory of comparative advantage) and trading for the rest. Trade is carried out as exports and imports and is recorded in a country's balance of trade and balance of payments.

Importance: wider choice for consumers, larger markets and economies of scale, foreign exchange earning, employment, technology transfer and competition that improves efficiency.

(b) Barriers to international trade

Trade barriers are government-imposed restrictions that make it harder or costlier to trade across borders. They fall into two groups.

1. Tariff barriers

• Customs duties on imports (ad valorem, specific or compound).
• They raise the price of imports and protect domestic producers while earning revenue.

2. Non-tariff barriers (NTBs)

• Quotas: a limit on the quantity or value of imports.
• Embargoes and bans: complete prohibition of trade with a country or on a product.
• Import licensing: requirement of permission to import.
• Subsidies: government support to local producers or exporters that makes foreign goods uncompetitive.
• Standards and technical regulations: product, health, safety and labelling requirements, sometimes used as disguised protection.
• Customs procedures: complex documentation, valuation methods and delays.
• Local content requirements: requiring a share of local inputs.
• Foreign exchange controls: limiting access to foreign currency for imports.
• Voluntary export restraints: exporter limits its own exports at the importer's request.
• Anti-dumping and countervailing duties: extra duties on dumped or subsidised goods.
• Buy-national policies: government procurement preferring domestic suppliers.
• Boycotts: organised refusal to buy certain goods.

Other barriers: political instability, cultural and language differences, poor transport infrastructure and weak payment systems.

Effects

Barriers raise prices, reduce choice and efficiency, and provoke retaliation. The WTO and regional agreements work to reduce them.

A channel of distribution is the path through which goods move from the producer in one country to the final consumer or user in another. In international marketing, the channel has several levels that span two or more countries.

Channel structure

Producer's country (home market)

• The firm's export department, or an intermediary in the home country.

Foreign country

• Importer / distributor, wholesaler, retailer and consumer.

Main channel types

1. Direct (selling directly to the foreign customer or importer)

   • The manufacturer sells through its own export department, overseas sales branch or subsidiary, or traveling sales representatives, or online.
   • Gives the greatest control and profit, but needs resources and market knowledge.

2. Indirect (through home-country middlemen)

   • Export merchants / export trading companies: buy goods and resell abroad on their own account.
   • Export management companies (EMC): act as the manufacturer's export department on commission.
   • Export agents / brokers / commission agents: bring buyers and sellers together for a commission.
   • Piggyback exporting: use another firm's established overseas distribution.
   • Lower risk and cost, but less control.

3. Through foreign-country middlemen

   • Agents: represent the exporter, do not take title to goods.
   • Distributors: buy goods and resell them, often with exclusive territory.
   • Importers and wholesalers: purchase in quantity and sell to retailers.
   • Retailers: sell to final consumers; includes department stores, supermarkets, specialty stores, and e-commerce.

Common channel patterns

• Manufacturer to consumer (direct)
• Manufacturer to retailer to consumer
• Manufacturer to wholesaler/importer to retailer to consumer
• Manufacturer to export agent to importer to wholesaler to retailer to consumer

Other options

Franchising, licensing, joint ventures, contract manufacturing and wholly owned subsidiaries are also used as channel and entry modes.

Factors affecting channel choice

Market size, customer location, product type, company resources, control desired, competitors' practices, local laws, cost, and the availability and quality of middlemen.

The World Trade Organization (WTO) is the international organisation that deals with the rules of trade between nations. It was established on 1 January 1995 as the result of the Uruguay Round (1986-1994), replacing the General Agreement on Tariffs and Trade (GATT, 1947). It is headquartered in Geneva, Switzerland, and has about 164 members; Nepal became a member in April 2004 as the first least developed country to join by accession.

Objectives

• Reduce tariffs and other barriers and promote freer trade
• Ensure trade flows smoothly, predictably and freely
• Settle trade disputes between members
• Raise living standards, ensure full employment and encourage sustainable development
• Help developing and least developed countries gain from trade

Functions

1. Administering WTO trade agreements
2. Forum for trade negotiations
3. Handling trade disputes through the Dispute Settlement Body
4. Monitoring national trade policies (Trade Policy Review Mechanism)
5. Technical assistance and training for developing countries
6. Cooperation with the IMF and World Bank

Basic principles

• Non-discrimination: Most Favoured Nation and National Treatment
• Freer trade through negotiation
• Predictability through binding commitments
• Promotion of fair competition
• Special treatment for development

Structure

Ministerial Conference (highest body, meets every two years), General Council, specialised councils (goods, services, TRIPS), committees, the Secretariat headed by the Director-General.

Agreements: GATT (goods), GATS (services), TRIPS (intellectual property), Agriculture, TBT, SPS, Anti-dumping, Subsidies, Safeguards, Trade Facilitation.

Culture is the complex whole of knowledge, belief, art, morals, law, custom and other habits acquired by people as members of a society. The cultural environment strongly influences how consumers behave in a foreign market.

Elements of cultural environment

1. Language

   • The most visible element, covering spoken and written language and non-verbal communication (gestures, silence, eye contact).
   • Mistranslation of brand names or slogans can be costly; local language labelling is often required.

2. Religion

   • Shapes values, diet, dress, holidays, work habits and consumption.
   • Examples: no beef among Hindus, no pork or alcohol among Muslims; festivals like Dashain and Eid create seasonal demand.

3. Values and attitudes

   • Basic beliefs about what is good, such as attitudes to time, wealth, risk, change, achievement and foreign products.
   • These decide acceptance of new products and advertising appeals.

4. Customs, manners and social institutions

   • Family structure, caste or class, education, role of women, and etiquette in greeting, gift giving and dining.
   • Decide who makes buying decisions and how business is conducted.

5. Material culture

   • Technology, tools, infrastructure and the products a society uses; it shows the level of economic development and the need for products.

6. Aesthetics

   • Concepts of beauty and taste in art, music, colour, design and symbols.
   • Colours and symbols carry different meanings (for instance white for purity or for mourning).

7. Education

   • Literacy and education levels affect media choice, labelling, and the sophistication of consumers.

8. Social organisation and political values

   • Class, kinship, group loyalty, and the relation between individuals and groups (individualism versus collectivism).

9. Diet and food habits, and dress are often listed as separate elements.

Marketing implications

Marketers must research culture, avoid the self-reference criterion, adapt products, packaging, pricing, promotion and negotiations, and train staff in cross-cultural skills.

When disputes arise between parties in international business, they can be settled by the following methods, usually from the least to the most formal.

1. Negotiation (amicable settlement): the parties discuss directly to reach a mutually acceptable solution. It is fast, cheap, private and preserves the business relationship.

2. Mediation / conciliation: a neutral third party helps the disputing parties to reach their own agreement. The mediator suggests solutions but cannot impose a decision, so the result is non-binding unless the parties sign a settlement.

3. Arbitration: the dispute is submitted to one or more neutral arbitrators chosen by the parties, whose award is final and binding.

   • It is private, quicker than courts and flexible in procedure.
   • Awards are enforceable internationally under the New York Convention (1958).
   • Bodies include the ICC International Court of Arbitration, the LCIA, the Singapore International Arbitration Centre and ICSID (investor-state disputes), and the Nepal Council of Arbitration.

4. Litigation (court proceedings): a case filed in a national court determined by the contract's jurisdiction clause. It is slow, costly, public and enforcement of foreign judgements may be difficult.

5. Government or WTO action: trade disputes between states are taken through consultations, panels and the Appellate process of the WTO Dispute Settlement Body.

Prevention: the contract should clearly state the governing law, jurisdiction, place and language of arbitration, and rules to be applied.

International marketing is the marketing of goods and services across national boundaries. Its main features are as follows.

1. Operations in more than one country. Marketing activities are directed to customers in two or more nations.

2. Wider and more varied environment. The firm faces different political, legal, economic, cultural, technological and competitive conditions in each country, many of which it cannot control.

3. Greater risk and uncertainty. Exchange rate changes, political instability, tariffs, nationalisation, and payment risk are higher than in domestic marketing.

4. Need for adaptation. Products, price, promotion and distribution often need to be adapted to local tastes, laws and conditions, though standardisation is used where possible.

5. Complex and longer channels. Distribution passes through more intermediaries, longer distances, customs procedures, and extra documentation.

6. Use of foreign currency and international payment. Transactions are in foreign exchange and use instruments such as letters of credit.

7. Government intervention. Governments of both countries regulate trade through tariffs, quotas, licensing, and standards.

8. Intense competition. The firm competes with local firms and with global competitors.

9. Larger market and scale. It offers access to bigger markets, economies of scale, and more profit opportunities.

10. Need for market research and information. More careful research is needed because of unfamiliar markets and cultural differences.

11. Multiple entry modes. Exporting, licensing, franchising, joint ventures and subsidiaries.

12. Higher costs. Transport, insurance, duties, communication and promotion costs are higher.

13. Profit orientation with wider social role. It aims at profit while contributing to foreign exchange earnings and economic development.

Marketing research is the systematic design, collection, analysis and reporting of data relevant to a specific marketing situation. International marketing research follows the same steps as domestic research but with added complexity from differences in language, culture, data availability and reliability.

Steps in the marketing research process

1. Define the problem and the research objectives. State clearly what decision needs information, for example "What is the demand for our product in India and which price is acceptable?" A well-defined problem prevents wasted effort.

2. Develop the research plan (research design). Decide the type of research (exploratory, descriptive or causal), the data sources, the methods, the sampling plan, the instruments and the budget and time.

3. Collect the data.

   • Secondary data: published reports, government and international agency statistics, trade journals, internet. It is cheap and fast, and is examined first.
   • Primary data: collected fresh through surveys, interviews, observation, focus groups, experiments or test marketing. Questionnaires must be translated and back-translated carefully.

4. Analyse the data. Edit, code, tabulate and apply statistical analysis to find patterns and relations.

5. Interpret and present the findings. Prepare a clear report with conclusions and recommendations for managers.

6. Follow up and use the results. Management applies the findings in decisions and later checks the outcome, which gives feedback for future research.

Special problems in international research: unreliable or unavailable data, different definitions across countries, language and translation, low literacy, respondents' unwillingness to answer, cost and time.

Green marketing, also called environmental or ecological marketing, is the marketing of products and services on the basis of their environmental benefits. It includes making products that are safe for the environment, using eco-friendly production and packaging, and promoting these characteristics to customers, while still meeting customer needs and earning a profit.

Key points

• It involves product modification, changes in the production process, sustainable packaging and green advertising.
• The green marketing mix: green product (recyclable, biodegradable, energy-saving), price (often a premium justified by lower life-cycle cost), place (low-carbon distribution), promotion (eco-labels, honest environmental claims).

Reasons for its growth

• Rising consumer concern about pollution and climate change
• Government regulations and international standards (such as ISO 14001, EU rules)
• Competitive advantage and brand image
• Cost savings from using less energy and material

Benefits: better image, customer loyalty, access to environment-conscious markets, long-term savings.

Problems: higher costs, consumer scepticism, limited awareness, and greenwashing (false claims).

Examples: solar lamps, organic food, bamboo and paper products, electric vehicles and recycled packaging.

Transfer pricing is the price charged for goods, services or technology that are transferred between units of the same company, for example from a parent company to its foreign subsidiary or between two subsidiaries in different countries. Because the buyer and seller belong to the same firm, the price is set by management and not by the market.

Transfer pricing strategies

1. Market-based pricing (arm's length pricing). The transfer price is set equal to the price that independent firms would charge in the open market for the same item. This is the method preferred by tax authorities and by the OECD guidelines, as it avoids profit shifting. It makes the subsidiary's performance comparable with outside firms.

2. Cost-based pricing.

   • Cost-plus: full cost (or variable cost) plus a mark-up is charged.
   • Simple to apply but may not reflect market conditions and can pass on inefficiency.

3. Negotiated pricing. The selling and buying units bargain to agree on a price. Reflects local conditions and keeps managers motivated, but takes time and may cause conflict.

4. Non-arm's-length (manipulated) pricing. Prices deliberately set above or below market value to achieve corporate goals:

   • Reduce taxes: shift profit from a high-tax country to a low-tax country by charging a high price to the subsidiary in the high-tax country and a low price in the low-tax country.
   • Reduce customs duties: set a low transfer price on imports when duty is ad valorem.
   • Move funds out of a country with exchange controls or from a country with an unstable currency (to avoid blocked profits and exchange risk).
   • Strengthen a subsidiary in a new market by charging a low price, or hide profits from local partners and labour unions.

Constraints

Tax authorities strictly monitor transfer pricing and may impose penalties and adjustments; governments, host-country partners, customs and exchange controls, and morale of managers also limit its use. Documentation and advance pricing agreements are commonly used.

Objectives: minimise overall tax and duty, manage exchange risk, maximise global profit, and measure subsidiary performance fairly.

Trade barriers are government measures that restrict or discourage the free flow of goods and services across borders. They are of two broad types.

1. Tariff barriers

• Customs duties levied on imports (ad valorem, specific or compound).
• They raise the price of imported goods to protect domestic industries and to raise revenue.

2. Non-tariff barriers

• Quotas: physical limits on the quantity or value of imports.
• Embargo: complete ban on trade with a country or in a product.
• Import licensing: government permission needed to import.
• Subsidies: financial help to domestic producers or exporters.
• Technical, health and safety standards: labelling, packaging and quality rules.
• Customs and administrative procedures: excessive paperwork, valuation and delays.
• Local content requirements: minimum domestic input.
• Exchange controls: restrictions on foreign currency.
• Voluntary export restraints.
• Anti-dumping and countervailing duties.
• Government procurement preference for domestic suppliers.
• Boycotts.

3. Other barriers

• Political risk and instability, cultural and language differences, poor infrastructure and the lack of reliable payment and legal systems.

These barriers raise costs and limit choices, and so exporters try to overcome them by local production, joint ventures, or by using trade agreements through the WTO and regional blocs.

Import and export sources are the places or channels from which a firm obtains information about foreign buyers and sellers and through which it carries out its trade.

Export sources (to find buyers and market information)

• Government trade promotion agencies such as Nepal's Trade and Export Promotion Centre (TEPC), and the Ministry of Industry, Commerce and Supplies
• Embassies, consulates and commercial attachés
• Chambers of commerce and trade associations (FNCCI, product associations)
• Trade fairs, exhibitions and trade missions
• Export trading companies, export management companies and export agents
• Foreign importers, distributors and agents
• Trade directories, journals, and online B2B platforms
• International agencies: ITC, UNCTAD, WTO, World Bank
• Banks, freight forwarders and insurance companies

Import sources (to find foreign suppliers)

• Direct contact with manufacturers abroad
• Import agents, brokers and commission agents
• Foreign trading companies and wholesalers
• The firm's own overseas buying offices
• Trade fairs, catalogues and directories
• Online marketplaces and supplier databases
• Embassies and trade offices that provide supplier lists

Support sources: customs department for tariff and documentation rules, banks for letters of credit and foreign exchange, and shipping and insurance companies.

These sources help identify and evaluate reliable partners and learn rules and procedures for trade.

The private sector plays a vital supporting role in promoting trade and exports, working along with government agencies. In Nepal it is represented mainly by chambers, federations and product associations such as FNCCI, CNI, Nepal Chamber of Commerce, FHAN, and the tea, carpet, garment and herbs associations.

Roles of private sector in trade promotion

1. Representation and advocacy. Speaks for business in policy talks with the government, pushing for favourable trade policy, tax and tariff measures, and simpler procedures.

2. Market information and research. Collects and shares information on foreign markets, buyers, prices, standards and trade opportunities with members.

3. Organising and participating in trade fairs, exhibitions and trade missions. Helps firms display products, meet foreign buyers and sign orders.

4. Training and capacity building. Provides training on export procedures, quality, design, packaging and management.

5. Product development and quality improvement. Promotes standards, certification and branding to meet international requirements.

6. Investment and employment. Private firms produce goods and services for export, invest in processing and create jobs.

7. Export finance and logistics support. Banks, freight forwarders, insurers and transporters provide credit, shipping and insurance.

8. Networking and partnership. Connects local firms with foreign partners, joint ventures and international business associations, and signs business agreements.

9. Public-private dialogue. Takes part in forums such as the Nepal Business Forum to resolve obstacles in trade.

10. Certification services. Certain chambers help issue certificates of origin and other documents.

11. Promoting national image and branding of Nepali products abroad.

A strong, organised private sector is essential for diversifying exports and increasing Nepal's competitiveness.

Nepal's international trade is characterised by a large and persistently widening trade deficit, a narrow export base and heavy dependence on a single neighbour. The major problems can be grouped as follows.

1. Structural problems

• Persistent trade deficit. Imports are several times larger than exports (exports cover only a small fraction of imports). The gap is financed mainly by remittances and aid, which makes the external sector vulnerable.
• Narrow export base. Exports are concentrated on a few items such as readymade garments, carpets, pashmina, tea, cardamom, ginger, jute goods and handicrafts. A fall in demand for one product hits export earnings sharply.
• Low value addition. Many exports are raw or semi-processed (e.g. raw herbs, ginger, hides), so Nepal earns little compared with processed goods.
• Geographical concentration. A very high share of trade is with India, and the rest mostly with China and a few other countries. Policy changes or disruptions at the border therefore have large effects.

2. Geographical and infrastructural problems

• Nepal is landlocked and depends on Indian ports (Kolkata, Visakhapatnam) for third-country trade, with high transit costs, delays and documentation.
• Rugged terrain, poor roads, few dry ports, weak railway and air cargo facilities raise transport cost and time.
• Energy shortages (in the past) and weak storage, cold-chain and warehousing facilities reduce competitiveness.

3. Production and competitiveness problems

• Small-scale industries, low productivity, outdated technology and high cost of production.
• Shortage of raw materials, skilled labour and capital; high interest rates and difficult access to finance.
• Weak quality control, standardisation, packaging and branding, so goods fail to meet the standards of foreign buyers (e.g. SPS and TBT requirements).

4. Institutional and policy problems

• Complex customs procedures, delay at borders, corruption and bureaucratic red tape.
• Non-tariff barriers imposed by trading partners (quality standards, quarantine, quotas, para-tariff measures).
• Frequent changes in policy, political instability, labour strikes (bandhs) and weak implementation of the trade policy and export promotion schemes.
• Limited trade information, weak market research and few trained export-marketing personnel.

5. Other problems

• Dependence on imported fuel, fertiliser, machinery and consumer goods, making the economy sensitive to price changes abroad.
• Weak bargaining power in WTO and regional forums such as SAFTA and BIMSTEC; limited use of the trade preferences available to a least developed country.
• Exchange rate pegging with the Indian rupee transfers India's monetary shocks to Nepal.

Measures to solve them. Diversify products and markets, promote value-added and niche products (organic, herbal), improve transit and dry port facilities, simplify customs through ASYCUDA and a national single window, improve quality certification, give incentives and finance for exporters, and strengthen trade diplomacy and market promotion.