International Marketing. BY RAJA. MAZHAR HAMEED. 0. Chapter 1 The Global Marketing Imperative. The World – 1. About 220 countries in all; out of which:
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International Marketing BY RAJA. MAZHAR HAMEED
0 Chapter 1 The Global Marketing Imperative
The World – 1. • About 220 countries in all; out of which: • Thirty countries are classified as Developed Countries – Also called OECD (Organization for Economic Cooperation and Development) countries. Include U.S., Canada, most of Europe, Japan, Australia, New Zealand, Singapore, Turkey, etc. • About 30 are Middle Income Countries: Korea, Taiwan, Malaysia, Mexico, South Africa, Brazil, Israel, Chile, several Eastern/Southern European countries, Russia, etc. • Another 15 or so are Major Oil Exporters : 11 OPEC members like Saudi Arabia, Kuwait, Iran, Iraq, Indonesia, Nigeria, Venezuela, etc. Plus non-members like Mexico, Russia, U.K., and Norway.
The World – 2. • Developing Countries: Most Asian and African countries (A majority of the world’s countries belong here). • Rapidly Developing Very Large Countries: China, India, Brazil, Russia (BRICs) • Poor Countries: Countries stagnant at very low levels of development, e.g., Burma, Bangladesh, Afghanistan, Haiti, Nepal, most sub-Saharan African countries.
The World – 3. • Big Emerging Markets (BEMs): In the next 10-20 years, BEMs such as the Chinese Economic Area (CEA: China + HK+ Taiwan), India, South Korea, Mexico, Brazil, Argentina, South Africa, Poland, Turkey, Russia, and the Association of Southeast Asian Nations (ASEAN: including Indonesia, Brunei, Malaysia, Thailand, the Philippines, and Vietnam) will provide major/dominant opportunities in global business.
Global Marketing Imperative • Saturation of domestic markets: especially, First World markets. • Global competition intensifying. • Need for global cooperation(Global competition brings global cooperation). • Internet: The Internet and electronic commerce (e-commerce) revolution • Expanding market opportunities.
0 The Importance of World Trade • World trade in merchandise: from $6.2 trillion in 2000 to over $15.1 trillion in 2008. • World trade in services: from $1.5 trillion to $3.3 trillion. • Global growth of trade has outperformed the growth of domestic economies in the past few decades. • Provides new marketing opportunities such as investment on a global scale, international specialization and cross-sourcing, increased quality and variety of goods, access to otherwise unavailable goods, access to talent, new management knowhow, use of technology to enhance business functioning, etc.
Advantages of International Trade for Consumers. - More quantity • Better quality • Greater variety within product categories • More customized products/Services • Lower prices • Choice of products not available without international trade (silk, diamonds, coffee, bananas, mica, chromium, and much more.)
Advantages of International Trade for Firms. Access to: • Bigger markets • Foreign resources • New management knowledge • New technologies Experience with selling to diverse markets Chance to deal with different forms of governments Chance to work in different competitive environments Enhanced ability to compete in home market
Arguments Against Free Trade. • Infant industry • Strategic industry • Protection of world species (CITES: Convention on International Trade in Endangered Species) • Protection of local species, crops, etc • Domestic environment & culture protection • Domestic politics, jobs etc. • Health & safety of domestic residents
Evolution of Global Marketing. Five stages in the evolution of global marketing • Domestic Marketing • Export Marketing • International Marketing (markets in many countries; polycentric orientation). • Multinational Marketing (many markets; consolidation on regional basis). • Global Marketing (global perspective; global products with local variations - Standardized efforts, Coordination across markets, Global integration).
Comparative/Absolute Advantage. U.S. vs. China Both have 1,000lh resources US: 1lh corn, 5lh microwave China: 5lh corn, 2lh microwave Without Trade: • U.S. – 500 corn + 100 microwave • China – 100 corn + 250 microwave Total = 600 corn + 350 microwave With trade: • U.S. – 1,000 corn, China – 500 microwave Total = 1,000 corn + 500 microwave ovens
Sources of Comparative Advantage (Resource Endowment). (A) Natural Resources (climate, size, location, topography, flora & Fauna, minerals, etc.). Man-made Resources (technology, infrastructure, Education & Training, etc.) Human Resources (number, age distribution, health, size, etc.) Managerial Know-how Traditions
0 Chapter 2 Trade Institutions and Trade Policy BY RAJA. MAZHAR HAMEED
0 The Historical Dimension • The rise and fall of the Roman Empire and the emergence of feudalism can be attributed to trade. • The Romans placed primary emphasis on encouraging international business activities. • They implemented this through Pax Romana, or the “Roman Peace,” and the common coinage. • Silk Road, African caravans • Etc.
0 More Recent History • The Smoot-Hawley Act (1930) raised import duties on 20,000 products to reduce the volume of imports into the United States to help restore domestic employment → • in raising of duties and imposition of imports barriers by other nations → • worldwide depression and the collapse of the world financial system.
0 More Recent History • Post WW II: • The world was split into Eastern bloc led by the Soviet Union as the Western world led by the United States. • Soviet block focused on developing strong linkages among the members. Emphasis on centrally planned economies and heavy industry • United States created the Pax Americana and fostered international trade as a key to worldwide prosperity. Emphasis on market economies and balanced consumer/industrial goods sectors
Transnational Institutions Affecting World Trade ITO(International Trade Organization): Proposed at Bretton Woods Conference (1944) but was never ratified by the US Congress. GATT (General Agreement on Tariffs and Trade): A set of rules for non discrimination, transparent procedures and settlement of disputes in international trade. Agreed upon in Geneva and adopted by 23 countries in1947. Purpose: provide an international forum to encourage free trade among member states Means: 1. regulation and reduction of tariffs on traded goods, 2. provision of a common mechanism for resolving trade disputes Name changed to World Trade Organization (WTO) on January 1, 1995 (by Uruguay Round)
Transnational Institutions Affecting World Trade WTO is the new legal and institutional foundation for a multilateral trading system. Itcurrently it has 153 member countries. Functions:• Administering WTO trade agreements • Forum for trade negotiations• Handling trade disputes (empowered with ability to enforce rulings) • Monitoring national trade policies (countries found in violation of WTO rules are expected to change policies or else face sanctions) • Also responsible for General Agreement on Trade in Services (GATS), Trade related aspects of intellectual property rights (TRIPS), and Trade related investment measures (TRIMS). • Its 9th round of negotiations (Doha Round) was launched in 2001 in Doha, Qatar. It facilitated the way for China and Taiwan to get full membership in the WTO. • As of now, the Doha Round is completely stalled because of unresolved subsidy issues
0 World Banking Group, 1944 Five major components: - International Bank for Reconstruction and Development (IBRD) - WB - International Development Association (IDA) - WB - International Finance Corporation (IFC) - WBG - Multilateral Investment Guarantee Agency (MIGA) - WBG - International Center for Settlement of Investment Disputes (ICSID) - WPG
0 World Bank: Current areas of focus • Sustainable growth and development. • Clean technologies. - Addressing higher commodity prices. - Agricultural assistance for combating inflation in food. - Liberalization of world trade. - Greater participation of rising economic powers and developing nations in the bank’s governance. • Reconstruction of war-torn countries. • Assists fledging economies to participate in modern economic trade. • Resolving debt problems of developing nations. • Bringing market economy to former Eastern bloc nations.
0 Trade Positions • International trade positions have changed substantially when measured in terms of world market share. • The U. S share of total world export has declined precipitously since 1950s. • Another important development is the rise of China, India and Brazil’s trade positions. • The impact of international trade and marketing on individuals is highlighted when trade is scrutinized from a per-capita perspective.
0 Trade Positions (contd.) • Factors behind the decline in U.S. international competitiveness: • Attitude of the American policy makers. • Ignoring domestic firms in an attempt to boost the development of foreign economies (OK during Marshall Plan but disastrous when facing strong foreign competitors) • Perception amongst US manufacturers about international marketing being risky and complicated. • Lack of global interest (Technological arrogance, NIH syndrome, etc). • Inadequacy of information. • Unfamiliarity with international market conditions. • Complicated trade regulations.
0 The Impact of Trade and Investment • The effect of trade – Importance of Exports: • Create a trade balance by reducing trade deficits. • Affect the currency values and fiscal and monetary policies of the government. • Shape public perception about competitiveness. • Determine the affordable levels of imports for a country. • Help achieve economies of scale.
0 The Impact of Trade and Investment • The effect of trade – Importance of imports: • Firms are exposed to new competition. • Gives rise to new marketing approaches, better processes or better products and services. • Competitive pressures keep quality high and price low.
0 The Impact of Trade and Investment • The effect of international investment • Almost one in seven U.S. manufacturing employees works for a foreign affiliate. • To some extent, foreign direct investments substitute for trade activities. • Even though theory suggests open investment policy, some uneasiness exists about the rapid growth of such investment. • Restriction on investments may • Permit more domestic control over industries. • Deny access to foreign capital and often innovation. • Tightening up credit markets → higher interest rates, and a decrease in willingness to adapt to changing world market conditions
0 Chapter 3 The Cultural Environment BY RAJA. MAZHAR HAMEED
0 Culture Defined • Culture - An integrated system of learned behavior patterns that are distinguishing characteristics of the members of any given society. • It encompasses a wide variety of elements, from materialistic to the spiritual. • Enculturation – Absorbing one’s own culture Acculturation - Adjusting and adapting to a specific culture other than one’s own. • Adjusting to cultures is one of the keys to success in international operations.
Elements of Culture • Language • Religion • Values & Attitudes • Manners & Customs • Material Elements • Aesthetics • Education • Social Institutions • Cultural universals- Manifestations of the total way of life that are common to all cultures (elements such as body adornments, courtship, etiquette, family, gestures, joking, mealtimes, music, personal names, status differentiation, and trade etc.)
Elements of Culture Language • Written/Spoken/Body Language • Forms of Address • Direct/Contextual (high vs. low context) • Hierarchy • Diversity • Etc.
0 Elements of Culture • Religion provides the basis for transcultural similarities under shared beliefs and behavior. • The major religions include: • Christianity - Lays stress on frugality and accumulation of wealth from hard work; consists of two significant groups Catholicism and Protestantism. • Islam - Plays a pervasive role in the life of its followers; it supports entrepreneurship and discourages exploitation.
0 Elements of Culture • The major religions • Hinduism - Family is an important element in Hindu society; the extended family structure has an impact on the purchasing power and consumption of Hindu families. • Buddhism - Views life as an existence of suffering; emphasizes on spiritual achievement rather than worldly goods. • Confucianism - Is characterized by a code of conduct; stresses on loyalty and relationships.
0 Elements of Culture • Values and attitudes • Values are shared beliefs or group norms that have been internalized by individuals. • Attitudes are evaluations of alternatives based on values. • Attitudes towards change is positive in industrialized countries, while in tradition bound societies change is viewed with suspicion.
0 Elements of Culture • Manners and customs • Understanding manners and customs is especially important in negotiations. • Potential problem areas for marketers arise from insufficient: • Understanding of different ways of thinking. • Attention to the necessity of saving face. • Recognition of the differences in decision-making process and the role of personal relations. • Allocation of time for negotiations.
0 Elements of Culture • Manners and customs • Concept of Time: • Linear vs. cyclical • Times of day • Appointments, meetings • Industrial discipline • Differences in the ways products are purchased and used. • Package sizes and labels must be adapted in many countries to suit the needs of the particular culture.
0 Elements of Culture • Material culture results from technology and is manifested in the availability and adequacy of the following basic infrastructures. • Economic - Consists of transportation, energy, and communications systems. • Social - Refers to housing, health, and educational systems. • Financial and marketing - Provide the facilitating agencies for the international firm’s operation in a given market; for example, banks and research firms. • Technological advancement also brings about cultural convergence.
0 Elements of Culture • Aesthetics • Each culture makes a clear statement concerning good taste, as expressed in the arts and in the particular symbolism of colors, form, music, etc. • Color is often used as a mechanism for brand identification, feature reinforcement, and differentiation.
Elements of Culture Education: • Levels of Participation • Technical, Professional • Administrative • Vocational • Literacy • etc.
0 Elements of Culture • Social institutions • Social organization - determines the way people relate to one another including the roles of managers and subordinates. • Kinship or blood relationships - family relations and family obligations. • Reference groups - Provide the values and attitudes that become influential in shaping behavior; can be primary or secondary. • Social stratification – Differences in the division of a particular population into classes (higher strata control most of the buying power and decision-making positions).
0 Cultural Analysis • Hofstede’s dimensions of culture: • Individualism • Power distance • Uncertainty avoidance • Masculinity • Long-term versus short-term orientation
0 Cultural Analysis • Self-reference criterion – The unconscious reference to one’s own cultural values. • Recommendations to reduce the influence of one’s own cultural values: • Define the problem in terms of domestic and foreign cultural traits, habits, or norms. • Isolate the self-reference criterion influence in the problem and examine it to see how it complicates the problem. • Redefine the problem without the self-reference criterion influence and solve for the optimal situation.
0 Cultural Analysis • Ethnocentricism- The belief that one’s own culture is superior to others. • It can be controlled only by acknowledging it and properly adjusting to its possible effects in managerial decision making.
0 The Training Challenge • The objective of training: foster preparedness, sensitivity, patience, and flexibility in managers and other personnel. • Internal cultural sensitivity training programs : • Culture specific information • Culture general information • Self-specific information
0 Cultural Training • Area studies - Provide factual preparation for a manager to operate in, or work with people from, a particular country. • Cultural assimilator - A program in which trainees must respond to scenarios of specific situations in a particular country. • Sensitivity training - Focuses on enhancing a manager’s flexibility in situations that are quite different from those at home. • Field experience - Exposes a manager to a different cultural environment for a limited amount of time.
0 Exhibit 3.9 - Cross-Cultural Training Methods
Making Culture Work for Marketing Success Embrace local culture. Build relationships. Employ locals to gain cultural knowledge. Help employees understand you. Adapt products and processes to local markets. Coordinate by region. 0
0 Exhibit 4.1 - The Global Economy
0 Market Characteristics • Population • Figures classified to show specific characteristics of their respective markets. • Age distribution and life expectancy correlate heavily with the level of development of the market. • A household describes all the persons, both related and unrelated, who occupy a housing unit. • The degree of urbanization dictates the nature of the marketing task the company faces in terms of distribution, market potential, and buying habits.