1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION   – MARCH/ APRIL 2013

B.COM /BBM – VI Semester

International Marketing (Marketing elective – paper III)

Duration: 3 Hours                                                                                       Max. Marks: 100

Section- A

 

1. I) Answer the following questions of 2 marks each      (10×2=20)

 

1. How does an exporter derive at ex factory gate pricing?
2. What is Dual adaptation?
3. Mention any two pull factors leading a company to go international.
4. Transit disasters are an ever present hazard for those engaged in export/ import

business. What are the various risks that a cargo runs into?

5. Give example of a city or country being market hub for other countries to facilitate

international trade.

6. Why and where is Embargo used in international trade?
7. What is Tariffication?
8. What do you mean by cross licensing?
9. What do you mean by protectionism?
10. Why and how does government of weaker economies put exchange controls?

Section-B

 

1. II) Answer any FOUR of the following questions of 5 marks each (4×5=20)

 

11. Is Product Life Cycle of a domestic and global product same? How would be the

marketing mix for a global product in International Product Life cycle?

12. Give top five reasons why are Tariffs and Trade Barriers Used in international trade?
13. It is a complicated procedure to trade international, but firms can take lot of help

from the third parties like intermediaries. Mention the different types of foreign

intermediaries available to help in international trade.

14. Explain the merits and demerits of different product- communication strategies used

in international marketing of goods and services.

15. A firm which is entirely domestic in its activities normally passes through different

stages before it becomes a truly global one. What are the important stages in

evolutionary process of Internationalization?

P.T.O…………..

16. Once a policy decision on pricing has been made, the next step is to establish

individual prices; this must be done before fixed quotations are prepared for the

importer. The most important tool at this stage of pricing is the price structure.

Explain elements involved in the export price structure.

 

Section-C

III) Answer any THREE of the following questions of 15 marks each.             (3×15=45)

 

17. “After four years of scouting around, Nike international Ltd., the worlds largest sports shoe and apparel company, finally decided in 1995 to enter the Indian market by licensing”. What are the different avenues of entry into foreign markets? Which one do you consider is best for India in the context of western countries?

 

18. The Experienced businessmen are aware of the risks involved in business and by instinct; they try to minimize their risks. Every businessman prefers to safer countries rather than unsafe ones. In this respect, developed countries are considered to be less risky than developing countries. Explain the various types of risk that an international marketer can face ?

 

19. How far is foreign trade an engine of economic, social and technological growth? Illustrate your answer.
20. Rica Pvt. ltd. is planning for the first time to export its products to the countries abroad. What market and firm related factors have to be considered before selection of a market to sell their products?
21. There are wide varieties of restrictions to trade by different .countries Explain briefly some of the popular non-tariff barriers.

 

 

 

Section-D

Compulsory question carrying 15 marks                                             (1×15=15 mks)

22. Case study.

Who dares wins – Success through intelligent risk
A Coca-Cola Great Britain case study-A story of global success

No study of business success in the twentieth century would be complete without mentioning Coca-Cola. Coca-Cola is the product which perhaps best exemplifies global marketing. The Coca-Cola trademark is recognised by 94 per cent of the earth’s population and Coca-Cola is the second most universally understood phrase after OK. It is not only instantly recognisable but it can be found almost anywhere from petrol stations and shops in Central Africa, to small villages in mountainous areas on all five continents.

The first Coca-Cola was developed according to legend, by Dr. John Styth Pemberton in a three-legged brass pot in his backyard.. Coca-Cola is ‘delicious and refreshing’. This theme has been a key feature of advertising for the drink ever since and more recently the message was that ‘Coke is the real thing’ i.e. anything else which purports to be similar, is at best, simply a pale imitation.The Coca-Cola Company has a number of important soft drinks products the most well known of which are:

• Coca-Cola
• Diet Coke
• Sprite
• Fanta

Key aspects of Coca-Cola´s business

The Coca-Cola Company’s business policy provides an object lesson in many important principles of business. For example:

1. Focus on the best lines- Coca-Cola concentrates on its most profitable lines. In 1984 77of Coca-Cola’s operating income came from soft drinks. Today the figure is 97 By selling off businesses not sharing the same attractive financial fundamentals as the soft drink business Coca-Cola now operates only in the area of high-return business.
2. Reinvestment- Re-investing profits is the key to ongoing business development. If profits are made today it is important to make sure of a base from which profits may be made tomorrow. In the 199Os Coca-Cola has concentrated its profits on re-investment. In 1983 the company’s dividend payout ratio was 65i.e. most of its profits were paid out as dividends to shareholders. Since then Coca-Cola has been increasing dividends at a slower rate than earnings growth, so that today, 6Oof profits ($66O million in 1994) was available for reinvestment.
3. Focus on the consumer – All successful businesses today are based on focusing on the consumer. If a company meets the requirements of its consumers (and indeed exceeds these requirements), then you have a sure-fire recipe for success.
   An important measure of success is the volume and value of sales that you make.
   Coca-Cola has set out to become the world’s number one consumer marketing company by taking clear actions to differentiate their products.
4. Differentiation with customers- The direct customers of Coca-Cola are outlets such as service stations, newsagents, leisure centres, cinemas, clubs, supermarkets and many other retailers selling soft drinks. In this area the emphasis in marketing has therefore been on providing superior delivery, promotional services and sales support. All of these elements clearly differentiate Coca-Cola as being the beverage supplier most likely to generate profits for retailers.
5. Differentiation with consumers- The end consumers of Coke are the millions of people who consume soft drinks world-wide. Over many years Coca-Cola has expanded its markets horizontally in country after country, until there is virtually no place on earth where people do not drink Coca-Cola. Today this horizontal growth is almost total, with fewer than 20 countries not taking the product. Coca-Cola is therefore now trying to develop the brands vertically.

This simply means creating a deeper consumer desire for that brand than existed the day before. It involves giving people additional reasons to buy Coca-Cola brands instead of reasons to buy competing ones. That is the essence of differentiation. It is not an easy task, because already 5.6 billion people have a well established understanding of what Coca-Cola means to them. However, there are considerable strengths which support Coca-Cola in this task namely:

• The trademark which is so widely known and part of the public imagination.
• Coca-Cola is continually building on its existing expertise in marketing and consumer understanding, and is supported by access to a wealth of financial and creative resources.
• Coca-Cola has an ‘action orientation’. Instead of waiting for change to happen it is at the leading edge, driving action forward.

 

6. Win the largest market share -Being the major player in a business market is the key to business success. A company only becomes the major player in a market by being the best, and being the best means having a detailed understanding of its consumers’ requirements and then exceeding these requirements.

Once a company is a major player then it has considerable advantages to draw upon. These advantages are based on having a higher return on capital than its rivals and the opportunity to plough this return into fresh investment. Such areas for investment are marketing, product research and development, and other aspects of sound business growth.

Strategic change in the 1980s

The 198Os heralded an era of change for Coca-Cola. On the 8th of July 1982 diet Coke was launched in the United States, starting a new period in which Coca-Cola was prepared to take risks by bringing in new products in the soft drinks sector. Within a year it had become the largest selling low-calorie soft drink in America.

In April 1985 the Company took the ultimate risk. It removed market-leading Coca-Cola from the US market and introduced New Coke. The decision was made after extensive marketing – for example by canvassing 190,000 consumer opinions and taste-tests of various Coke formulations. The launch was spectacular in that within 24 hours more Americans were aware of the birth of New Coke than had known about man’s first steps on the moon in 1969. However, the market reaction did not match the research. Within days, several opinion poll showed that consumers overwelmingly preferred the original taste Coca-Cola to the new Coke. There were floods of complaints across America.

So what went wrong?

In this case, blind testing did not tell the full story. Coca-Cola had minimised the ‘product’ risk, but completely under-estimated the brand risk. Consumers told the company that they were going to buy the new Cola, but they were thinking more hypothetically. As a result, the company overread the research.

Consumers wanted to remind the company that their favourite soft drink belonged to them. It was more than a drink, it was a brand that was an integral and an inseparable part of their lives! Chairman CEO Roberto C. Goizueta can laugh about it today, he might even make the same decision again based on the research that was used. But few executives would have taken the risk that he and his company took.

The Coca-Cola Company listened and then dared to replace its winning formula. It was now daring enough to admit it had been wrong to do so. They meant to change the dynamics of sugar colas in the US, and they did exactly that albeit not in the way they had planned. In the end, the company learned that in order to maintain the interest and the respect of its consumers, it would have to continually differentiate its brands in ways that offered highly relevant value.

The original Coca-Cola reappeared as Coca-Cola Classic to regain the top slot as the USA’s leading soft drink, while the new formula, today known as Coke II, remained on the market bringing in additional sales and gaining extra market share. By 1994 Coca-Cola USA core sugar colas volume had grown 29 per cent since 1985. The company’s share of U.S. soft drink sales, which had been declining, climbed from 39 per cent to 41per cent. Today, The Coca-Cola Company stands at more than $75 billion – better than eight times what it was on April 23, 1985.

Core business

Since the 198Os the company has focused on its core business. In particular it recognises that it needs to face its past mistakes with honesty, and that the culture of the organisation needs to be based on openness. and intelligent risk- taking. The evnts of 1985 changed forever the dynamics of the soft drinks industry and the success of The Coca-Cola Company. Goizueta characterised the new Coke decision-then and now as a prime example of taking intelligent risks.

Mr Goizueta emphasized that every single one of the best people at the Company has taken some significant risks in moving the business forward. And every one of them has endured risks that failed. With the benefit of hindsight, you start to learn that the perception of risk is often based on faulty assumptions. Sometimes if you look at the decision in a different way, what appears dangerous at first is not really such a risk after all. But it is important to remember that intelligent risks are based on honesty, careful calculations and anticipated results. They are not gambles made on a whim or determind by a toss of a coin.

The Coca-Cola Company is committed to re-inventing itself for successive generations of consumers. In product terms this means offering a range of new drinks to provide a wide repertoire of refreshment – choice, variety, excitement, and fun. The company has recently launched a variety of new drinks in the United States and, of course, Fruitopia in the United Kingdom. The launch of Fruitopia and OK Soda (in the United States) in 1994 were based on ‘pre-search’ – not selling what you can make, but making what you can sell. Fruitopia is a line of all natural fruit juice drinks which offers variety, taste and refreshment, with a range of flavours including Passion Fruit Lemon Affinity and Blackcurrant Babylon. Fruitopia and OK Soda reflect The Coca-Cola Company’s emphasis on creating value by actively meeting consumer needs with new products. These new products will support existing brands and help to generate growth for the organisation.

At the same time Coca-Cola has up-dated its advertising approach. Instead of focusing on classic commercials such as the seventies ‘I’d like to teach the world to sing.’ – there are now a variety of commercials under the umbrella theme ‘Always Coca-Cola.’ The adverts are different and designed to meet the mood of programmes that people are watching and hence target different audiences. The organisation has also been prepared to take risks in other areas related to the promotion and distribution of its soft drinks. For example, Coca Cola has become the number one sponsor associated with football, music, T.V shows and films in the UK. The ITV diet Coke Movie Premieres constituted ITV’s first ever programming- strand sponsorship.

Daring to risk success

The culture at Coca-Cola has shifted from the conservatism of the 1960s and 1970s to one of ‘daring to risk success’. Risk can involve failure, but if corporate value systems place too much emphasis on penalising failure rather than on rewarding success, people will not take risks – neither the people or the business will flourish.

Coca-Cola was able to turn their experience of launching New Coke into a success by recognising its mistakes. The emphasis today is on being bold enough to face new challenges and being able to seize market opportunities.

Ploughing back profits into investment has enabled the company to provide the impetus to take fresh risks. And the emphasis on consumer orientation has meant that products have continued to be successful, providing the impetus and cash-flow for new growth. Through ‘pre-search’ Coca-Cola is able to produce the products that consumers want, and if they do not prove to be successful they are bold enough to listen and to make changes. The secret of success is to be flexible in your response to ongoing change in the market.

Taking intelligent risks will often mean taking bold decisions rather than ‘making do’ with working arrangements. For example, in 1987 the company caused an upheaval in its own distribution system in the UK. It replaced the services of two well-established bottlers and set up a single, new, British operating partner. It achieved this by establishing a jointly-owned company with the then bottler of Coke’s biggest competitor. Sales doubled within the first five years of the new venture!

Today Coca-Cola is not only Britain’s most popular soft drink, but is the biggest selling of all grocery brands across all categories. The number two is diet Coke! Elsewhere in the world, The Coca-Cola Company has proved itself ready to do business in novel and inventive ways. The day the Berlin Wall came down in 1989, Coca-Cola representatives were handing out cans of Coke to the East Germans as they walked into West Berlin. Within three months the company was distributing Coca-Cola to the Eastern States.

By 1990, 21 million cases of Coca-Cola were sold there and $450 million was being invested in land, buildings and equipment. By 1993, per capita consumption in the former East Germany had matched that of the western states at the time of reunification.

Questions

1. What factors lead coke to be a global success?
2. What challenges the company had to face due to the intelligent risk the company undertook?
3. What remedies are available to the various types of risks that global products face?

 

 

 

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