Global Marketing Management, 4e

Chapter 1Globalization Imperative

Chapter 1 1

Historical Perspective of U.S. Business Overseas. • U.S. was the dominant supplier of worldwide demand for

technology and industrial goods during 1950’s, 60’s and early 70’s.

• This resulted in technological & cultural arrogance complacency (US: manufacturing nation, trading was for inferior nations like Japan) - unprepared for competition first from Europe, then Japan, then Korea, Taiwan, Singapore etc. & now from China and India.

• Lost large shares of US markets for textiles, garments, shoes, toys, steel, electronics, small appliances, autos, and much more during the 1970’s, 80’s, and 90’s. Now: worries about “outsourcing”.

IK

Chapter 1 2

The State of Business

• US accounts for 5% & 18% of the world population & economy respectively• A great majority of world business is conducted outside the US• Business conducted internationally entails considering far more variables &

decisions than business conducted in the home country

Chapter 1 3

The State of Business

• Most firms die young• Avg. corporate life expectancy in Europe & Japan is roughly 13 years• Avg. life expectancy of a global 500 MNC is 40 to 50 yrs.• Few of the firms in the 1970 Fortune 500 are around today

Chapter 1 4

The World – 1.• About 210 countries in all; out of which:

• About 30 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.

• Another 30 or so 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.

IK

Chapter 1 5

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 Triad Region (North America, Western Europe,and Japan) collectively produced over 78% of worldGDP in 2004.

Source: World Trade Organization (WTO)

IK

Chapter 1 6

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.

Chapter 1 7

World’s Largest Countries(by population)

World 6.72 billion1. China 1.3billion2. India 1.1b3. U.S. 305million4. Indonesia 232m5. Brazil 188m6. Pakistan 164m7. Bangladesh 159m8. Nigeria 148m9. Russia 142m10. Japan 128

Chapter 1 8

World’s Biggest Economies PPP 2007 estimates.

World $65.6 trillion EU $14.4 trillion 1 US $13.8 trillion 2 China $7.0 trillion 3 Japan $4.3 trillion 4 India $3.0 trillion 5 Germany $2.8 trillion 6 UK $2.1 trillion 7 Russia $2.09 trillion 8 France $2.05 trillion

9 Brazil $1.84 trillion 10 Italy $1.79 trillion 11 Spain $1.352 trillion 12 Mexico $1.346 trillion 13 Canada $1.266 trillion 14 South Korea $1.2 trillion 15 Turkey $888 billion16 Indonesia $838 billion17 Australia $761 billion18 Iran $753 billion

Source: CIA World Fact Book

Chapter 1 9

Nationalities of World’s Largest Companies (2008).

1. U.S. - 1532. Japan - 643. France - 394. Germany - 375. Britain - 346. China - 297. South Korea -158. Canada - 148. Switzerland - 14

10. Netherlands - 1311. Spain - 1112. Italy - 1013. Australia - 814. India - 7 15. Sweden - 615. Taiwan - 617. Mexico - 5

Source: Forbes

Also see Exhibit 1-1 in the text

Chapter 1 10

International Trade.• Products have been traded across borders throughout

recorded civilization, extending back beyond the Silk Road that once connected East with West from Xian (China) to Rome (Italy). The North-South extension of the silk Road connected India to this route. Also important were the North-South trade caravans in Africa.

• Total world trade volume in goods and services grew from $7.6 trillion in 2000 to nearly $14 trillion in 2007.

Chapter 1 11

World’s Largest Exporters/Importers

World Exports $14+ trillion1 Germany $1.334 trillion2 China $ 1.217 tr.3 United States $1.149 tr.4 Japan $677 billion5 France $548 billion

Source: CIA World Fact Book, 2007

World ImportsWorld Imports – 14+ trillion1. United States $1.97trillion 2. Germany $ 1.09tr3. China $ 901million4. United Kingdom $ 617b 5. France $ 600b

Chapter 1 12

Why Global Marketing is Imperative• Domestic Market Saturation, especially First World markets• Intensifying Global/Domestic competition.• Expanding market opportunities.• Higher margins overseas• Spreading the risk• Customers moving abroad • Need for global cooperation (Global competition brings global

cooperation).• The Internet and e-commerce revolution• Etc.

Chapter 1 13

Globalization of Markets: Convergence and Divergence

• Per capita income determines buying behavior.

• In lower per-capita-incomes countries much of the income is spent on food and other necessities. Very little discretionary spending.

• In higher per-capita-income countries discretionary portion of income increases dramatically → increased convergent pressures on consumer buying behavior.

Chapter 1 14

Globalization of Markets: Convergence and Divergence

• People with higher incomes tend to enjoy similar educational levels, desire for material positions, leisure time pursuits, and aspirations for the future.

• Globalization liberates local cultures from ethnocentricity so consumers become more receptive to new things and choose from a wider, more divergent “choice set” of goods and services.

• Divergence of consumer needs is taking place at the same time.

Chapter 1 15

Globalization of Markets: Convergence and Divergence

International trade: exports and imports.International business: international trade and

foreign production.Global reach: extensive international penetration of

companies.International trade and foreign production activities

are managed on a global basis.Growth of Multinational Corporations (MNCs) and

intra-firm trade is a major aspect of global markets.

Chapter 1 16

Appendix: Theories of International Trade & the Multinational Enterprise

─ Absolute Advantage

• Comparative Advantage• Commodity Terms of Trade• Factor Endowment Theory• International Product Cycle Theory• Economies of Scale• Supply Industry Position

Chapter 1 17

Absolute & Comparative Advantage.• Absolute advantage Suppose country A is better than country B at making

automobiles, and country B is better than country A at making bread, then both would benefit if A specialized in automobiles, B specialized in bread and they traded their excess production.

• But what if a country A is better than B at making everything? They would still benefit from trade because of the principle of comparative advantage which says that if A is much more superior at making automobiles and only slightly superior at making bread, then A should still invest resources in what it does best — producing automobiles — and export the product to B. B should still invest in what it does best — making bread — and export that product to A even if it is not as efficient as A. Both would still benefit from the trade. A country does not have to be best at anything to gain from trade.

Chapter 1 18

Sources of Comparative Advantage (Resource Endowment).

(A)(A) Natural Resources (climate, size, location, topography, flora & Fauna, minerals, etc.).

(B) Man-made Resources (Science, technology, engineering, infrastructure, capital, etc.)

(C) Human Resources (number, age distribution, health, size, etc.)

(D) Managerial know-how, education & training

(E) Traditions IK

TM 16 Factors of Comparative Advantage

Comparative Advantage – Example.

U.S. vs. ChinaBoth have 1,000lh (labor hour) resources

US: 1lh corn, 5lh microwaveChina: 5lh corn, 2lh microwave

Without Trade:- U.S. – 500 corn + 100 microwave- China – 100 corn + 250 microwaveTotal = 600 corn + 350 microwave

With trade:- U.S. – 1,000 corn, China – 500 microwaveTotal = 1,000 corn + 500 microwave ovens

Chapter 1 20

International Product Life Cycle Theory

Chapter 1 21

Global Marketing Management, 4e

Chapter 1 22

Chapter 2

Global Economic Environment

1. Intertwined World Economy

• Foreign direct investment (FDI): investment in manufacturing and service facilities in a foreign country.

• In recent decades, companies from many countries have expanded into new markets around the world, thereby adding to the stock of foreign direct investment.

• The increase in foreign direct investment has also been promoted by the efforts of many national governments to woo multinationals.

• Portfolio investment or indirect investment refers to investments in foreign countries that are withdrawable at short notice, such as foreign stocks and bonds.

Chapter 1 23

1. Intertwined World Economy• Examples of severe currency fluctuations:

• Current US mortgage and credit meltdown → severe worldwide consequences.

• 1995 Mexican meltdown• Asian financial crisis (1997-1999) Asian financial crisis (caused by China’s

devaluation the yuan) →Thai baht lost almost 60% of its purchasing power in dollar terms, Malaysian ringgit 40%, Korean won 50%.

• Argentina and Brazil financial crises (2001, 2002) Argentina defaulted and lost 40%of its currency value. It also effected Brazil.

The influence of these short-term money flows are nowadays far more powerful for exchange rates than an investment by a Japanese or German automaker.

Chapter 1 24

Forces Affecting Global Integration and Global Marketing.

• Driving Forces• Regional economic agreements• Market needs and wants• Technology• Transportation and communication

improvements• Product development costs• Quality• World economic trends• Leverage

• Restraining Forces• Management myopia• Organizational culture• National controls

Chapter 1 25

Trade Barriers.

Chapter 1 26

- Tariffs

- Non-tariff Barriers (port charges, import deposits, consular fees, stamp taxes, etc.).

- Customs processing/administrative barriers (tariff calculation, customs formalities, administrative obstacles, certification, etc.).

- Quantitative restrictions (embargos, quotas, import licenses, bilateral agreements, etc.).

- State participation in trade (subsidies, government procurements, government monopolies, etc.).

- Technical norms/ standards/consumer protection (regulations: health/safety, product design, sizes/weights & measures, packaging, labeling, trademarks, etc.).

- Flag protectionism -IK

TM 20 Trade Barriers

2. Country Competitiveness

• Country competitiveness refers to the productiveness of a country, which is represented by its firms’ domestic and international productive capacity.

• Country competitiveness is not a fixed thing.• The role of human skill resources has become

increasingly important as a primary determinant of industry and country competitiveness

Chapter 1 27

2. Country Competitiveness (2007 Report).Twenty Most Competitive1. United States 5.672. Switzerland 5.62 3. Denmark 5.55 4. Sweden 5.545. Germany 5.51 6. Finland 5.49 7. Singapore 5.45 8. Japan 5.43 9. United Kingdom 5.41 10. Netherlands 5.40 11. Korea 5.40 12. Hong Kong 5.37 13. Canada 5.34 14. Taiwan 5.25 15. Austria 5.23 16. Norway 5.2017. Israel 5.20 18. France 5.1819. Australia 5.1720. Belgium 5.10

Twenty Least Competitive112. Burkina Faso 3.43113. Suriname 3.40 114. Nepal 3.38 115. Mali 3.37 116. Cameroon 3.37117. Tajikistan 3.37 118. Madagascar 3.36119. Kyrgyz Republic 3.34120. Uganda 3.33 121. Paraguay 3.30122. Zambia 3.29 123. Ethiopia 3.28124. Lesotho 3.27125. Mauritania 3.26126. Guyana 3.25 127. East Timor 3.20128. Mozambique 3.02129. Zimbabwe 2.88 131. Burundi 2.84 132. Chad 2.78

Source: World Economic Forum, Global Competitiveness Report

Chapter 1 28

Evolution of Cooperative Global Trade Agreements

International Trade Organization (ITO): Agreed upon Bretton Woods (1944) but never ratified by the U.S.

GATT (General Agreement on Tariffs and Trade): agreed upon in Geneva and adopted by 23 countries in1947Purpose: provide an international forum to encourage free trade among member statesMeans: 1. regulation and reduction of tariffs on traded goods, 2. provision of a common mechanism for resolving trade disputesName: Changed to World Trade Organization (WTO) on January 1, 1995 (based in old GATT offices in Geneva)

Chapter 1 29

Evolution of Cooperative Global TradeAgreements

WTO continues to supervise & liberalize trade betweennations (153 members as of 12/9/2008). It deals with the rulesof trade between nations; negotiates and implements newtrade agreements, and is in charge of policing membercountries‘ adherence to all the WTO agreements Functions:• Administers WTO trade agreements • Forum for trade negotiations• Handles trade disputes (has the power to to enforce rulings)• Monitors national trade policies (countries found in violation of WTO rules are expected to change policies or else face sanctions)

Chapter 1 30

4. Evolution of Cooperative Global Trade Agreements

• WTO’s ninth round---called the “Doha Development Agenda” (Doha Round) was launched in Doha, Qatar in November 2001. It facilitated the way for China and Taiwan to get full membership in the WTO.

• Interim deal in December 2005 to end farm export subsidies by 2013 seemed to prevent the collapse of the this round of talks, but didn’t.

• The Doha Round negotiations are considered to have failed as of August, 2008.

Chapter 1 31

Information Technology and the Changing Nature of Competition

• Over the Internet, any piece of electronically represented intellectual property can be copied.

• The Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement was concluded as part of the GATT Uruguay Round. Update to accord ensuring patent protection does not block developing countries’ access to affordable medicines is at the top of the agenda.

Chapter 1 32

Information Technology and the Changing Nature of Competition• Proliferation of E-Commerce and Regulations:

Countries’ regulators have not kept pace with the rapid proliferation of international e-commerce and Internet-related activities.

• In many countries, rules and regulations are vague regarding e-commerce transactions.

• The United Nations Commission on International Trade Law (UNCITRAL) has formed a Working Group on Electronic Commerce to reexamine these treaties.

Chapter 1 33

Levels of Economic Integration

Removal of Common Free Flow Harmonize CoordinateInternal External Of Capital Single Economic Political

Level of Integration Tariffs Tariffs and Labor Currency Policies Syatems

Free Trade Area

Customs Union

Common Market

Monetary Union

Economic Union

Political Union

Chapter 1 34

European Union.

Chapter 1 35

EU Membership History1952: Belgium, Netherlands Luxemburg, Germany, France & Italy1973: Denmark, Ireland, UK1981: Greece1986: Portugal, Spain1995: Austria, Finland, Sweden2004: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia2007: Romania, Bulgaria (27 countries)IK

Chapter 1 36

EU’s Governing Bodies.

Council of European Union - Main decision-making body. One minister from each member country.

European Parliament (Legislative body)

European Commission (Bureaucracy)

Court of Justice - Ensures that Community laws are uniformly interpreted and applied

Court of Auditors - Checks EU’s receipts and expenses and manages the budget.

IK

Chapter 1 37

Other Agreements.• North America: NAFTA • Europe: EFTA (European Free Trade Association): Iceland,

Norway, Switzerland and Liechtenstein.• Africa: Different agreements. Recent example: ECOWAS

(Economic Community of West African States)• Latin America: MERCOSUR (Southern Common Market),

LAIA (Latin American Integration Association); CENCOM (Central American Common Market); ANCOM (Andean Common Market); CARICOM (Caribbean Community and Common Market)

• Asia: ASEAN (Association of South East Asian Nations); SAARC (South Asian Association for Regional Cooperation)

Chapter 1 38

Mercosur.

Chapter 1 39

Global Marketing Management, 4e

Chapter 1 40

Chapter 3

Financial Environment

Chapter 1 41

2. Development of Today’s International Monetary System

• The 1944 Bretton Woods (New Hampshire) conference also established the

• IMF (International Monetary Fund) to:• promote international monetary cooperation• expansion and balanced growth of international trade• promote orderly exchange arrangements• assist in the establishment of a multilateral system of

payments in respect to current transactions between member nations; to eliminate foreign exchange restrictions

Chapter 1 42

2. Development of Today’s International Monetary SystemThe IMF makes temporarily loans fund’s resources to

members under adequate safeguards, to help them correct balance of payment problems, and

To shorten the duration and lessen the degree of disequilibrium in the international balance of payments to members

IMF resources are in SDRs whose value is determined by a weighted average of the U.S. dollar, the yen, the euro, and the British pound.

Chapter 1 43

2. The World Bank Group.

IBRD (1945) International Bank for Reconstructionand DevelopmentIFC (1956) International Finance CorporationIDA (1960) International Development Association MIGA (1988) Multilateral Investment GuaranteeAgency, and ICSID (1966) International Centre for Settlement ofInvestment Disputes

4. Foreign Exchange and Exchange Rates• Spot versus forward exchange rates• Fixed exchange rates• Floating exchange rates

• Free (no government intervention)• Managed (some government intervention)

• To avoid the risk of currency fluctuations, companies use hedging.

• Target exchange rate• Exchange rate pass through

Chapter 1 44

Hedging ExampleHedging involves engaging in 2 equal but opposite transactions in the Spot and

Forward markets simultaneously

Spot Market Forward Market

2/1/09 2/1/09Bought 10mm £ @ £10/$ Sold 10mm 5/31/09 £ @ £9/$

4/20/09 4/20/09Sold 10mm £ @ £11/$ Bought 10mm £ @ £10/$

Result: 1 £/$ loss Result: 1 £/$ profit Net result= +/- 0 (perfect hedge)

Hedging is made possible because prices in the spot and the forward markets almost always move in the same direction by the same amount and there are speculators on both sides of expected future price movements.

Foreign Exchange and Exchange Rates• Factors influencing Foreign Exchange Rates

• Macroeconomic Factors: Relative inflation, balance of payments, foreign exchange reserves, economic growth, government spending, money supply growth, and interest rate policy.

• Political Factors: Exchange rate control, election year or leadership change.

• Random Factors: Unexpected and/or unpredicted events, fear of uncertainty, etc.

• Many countries attempt to maintain a lower value for their currency in order to encourage exports.

Chapter 1 46

Big Mac Earn Time.

Ten fastest earnedTokyo - 10 min Los Angeles - 11 min Chicago - 12 min Miami - 12 min New York City - 13 minAuckland - 14 minSydney - 14 minToronto - 14 minZürich - 15 minDublin - 15 min

Ten slowest earnedSofia - 69 minBucharest - 69 minBombay - 70 minManila - 81 minMexico City - 82 minCaracas - 85 minJakarta - 86 minLima - 86 minNairobi - 91 minBogotá - 97 min

Chapter 1 47

Balance of Payments

• The balance of payment (BOP): summary of all transactions between a country & its residents and other countries (& their residents) over a specified time period (a month, quarter, or year).

• The BOP transactions contain three categories• Current account• Capital account• Official reserves

Chapter 1 48

Balance of Payments Categories

Current account = Balance of trade + Net factor income (fees, interest, dividends etc.) + net unilateral transfers from abroad

Financial account (IMF)/Capital account (economics)) == Increase in foreign ownership of domestic assets - Increase in domestic ownership of foreign assets (= FDI) + Portfolio investment + Other investment

Official reserves = Stock of reserve assets at a country’s monetary authority (official gold reserves + foreign exchange reserves + (IMF) SDRs + any foreign property held by such central banks)

Net errors and omissions: any necessary corrections in the above three accountsSource: Wikipedia

Chapter 1 49

Responses to the Regional Financial Crises

Consumer response to the recession (see Exhibit 3-7 in your text)• Corporate response to the recession

• Pull-out• Emphasize a product’s value• Change the product mix• Repackage the goods• Maintain stricter inventory• Look outside the region for expansion opportunities• Increase advertising in the region• Increase local procurement

Chapter 1 50

Global Marketing Management, 4e

Chapter 1 51

Chapter 4Chapter 4

Global Cultural Global Cultural Environment and Environment and Buying BehaviorBuying Behavior

Introduction

• Culture drives buyer behavior & consumer needs• A culture influences consumption processes:

1. Access (economic, physical)2. Buying behavior (brand/country perceptions, loyalty,

attitudes about marketing & consumption, etc.)3. Consumption characteristics (products vs. service, cultural

orientation - traditional vs. modern, social influences, urban vs. rural, etc.)

4. Disposal (resale, recycle, repair, social responsibility, environmental orientation, etc.) (see Exhibit 4-1 in your text).

• Global business means dealing with consumers, strategic partners, distributors, and competitors with different cultural mindsets.

Chapter 1 52

1. Definition of Culture

• Numerous definitions of culture. Your text: culture (in a business setting) is defined as being a learned, shared, compelling, interrelated set of symbols whose meanings provide a set of orientations for members of society.

• Cultures are often defined by national borders, especially when countries are isolated by natural barriers.

• Cultures contain subcultures that may have little in common with one another but a lot in common with the mainstream culture

Chapter 1 53

Chapter 1 54

2. Elements of Culture

• Material life (technologies that are used to produce, distribute, and consume goods and services)

• Language (language has two parts: the spoken and the silent language)• Social Interaction (social interactions among people; nuclear family, extended

family; reference groups), proxemics (differences in personal and public space), eye contact, body contact etc.

Language

• Written/Spoken/Body Language• Forms of Address• Direct/Contextual• Hierarchy• Diversity• Etc.

Chapter 1 55

Chapter 1 56

2. Elements of Culture

• Aesthetics (ideas and perceptions that a culture upholds in terms of beauty and good taste)

• Religion (community’s set of beliefs that relate to a reality that cannot be verified empirically)

• Education (One of the major vehicles to channel from one generation to the next)• Value System (values shape people’s norms and standards)

Religion

Religious Philosophies: Christian, Muslim, Hindu, Buddhist, Confucian, Shinto, Jewish, others

Superstitions and other supernatural beliefs

Chapter 1 57

Education

• Levels of Participation• Literacy • Secondary• Vocational• Tertiary• Technical, Professional• Etc.

Chapter 1 58

Chapter 1 59

3. Cross-Cultural ComparisonsHofstede’s Cultural Classification Scheme

(see Exhibits 4-7A & 4-7B):

Power distance: The degree of inequality among people in a culture

Uncertainty avoidance: cultural preference for structured situations with clear rules over unstructured ones

Individualism: preference for individual vs. group actions.Masculinity: The importance of “male” vs. “female” valuesLong-term vs. short-term orientation: Future versus past

and present orientations

Japan vs. The US.Variable Japan USPersonal Emphasis Group IndividualAttitude Self-denial, Dependence Self-expressive,

Independence Social EmphasisObligations RightsStyle Cooperation CompetitionAssumptions Interdependence IndependenceView of Self Organization Man Individual with SkillCultural Attitude 1 We are unique Everybody is like usCultural Attitude 2 Willing to borrow/adopt/ NIH syndrome

adaptOrganizational goal 1 Share of the market Profitability, Financial

successOrganizational goal 2 World markets National marketsOrganizational goal 3 Quality, Customer value Production, Financial

return

Chapter 1 60

4. Adaptation to Cultures

• Self-reference criterion (SRC): people’s unconscious tendency to resort to their own cultural experience and value systems to interpret a given business situation.

• Ethnocentrism: the feeling of or belief in one’s own cultural superiority.

Chapter 1 61

5. Culture and the Marketing Mix

Product Policy: some products are more culture-bound thanothers. Food, beverages, and clothing products tend to bevery culture bound.Pricing:: Pricing policies are driven by four Cs: Customers,Company (costs, objectives, strategy), Competition andCollaborators (e.g., distributors)Distribution: Cultural variables may also dictate distributionstrategies.Promotion: Culture typically has a major influence on this afirm’s communication strategy most visible marketing mixcomponent..

Chapter 1 62

Global Marketing Management, 4e

Chapter 5

Political and Legal Political and Legal EnvironmentsEnvironments

Political Environment - Individual Governments• Structure of Government:

Ideology • Communism• Socialism• Capitalism• Political Parties

• Single-party-dominant countries• Dual-party systems• Multi-party systems

• Government Policies and Regulations: Designed to promote a country’s interests in the international arena regarding national security, developing new industries, protecting declining industries. creating employment, etc.

Chapter 1 64

Consequences Of Political Actions – 1.

• Indigenization/Domestication• Nationalization (Acceptable according to international law if:

satisfies public purpose & includes compensation)• Expropriation (prompt, effective, fair compensation)• Confiscation (no compensation)• Local content/local buying/local hiring laws• Discriminatory taxes• Discriminatory pricing of resources

Chapter 1 65

Consequences Of Political Actions – 2.

• Threat of equity dilution• Joint-venture pressure• Import/Export restrictions• Profit repatriation restrictions• Selective boycotts• Price controls• Terrorism• Etc….

Chapter 1 66

POLITICAL-RISK INDICATORS. ECONOMIC

- GDP, Inflation, Capital flight- Foreign debt, Food output- Commodity dependence...

POLITICAL- Wars or involvement in foreign conflicts...- Relations with neighbors- Degree of authoritarianism (use of coercion to retain power)- Legitimacy of government/Mechanisms for transfer of power

- Military or political control- Politically motivated violence

SOCIETAL- Urbanization,,- Corruption, nepotism…- Social Unrest (ethnic, language, religious… fundamentalism)- Xenophobia, Extreme nationalism

Chapter 1 67

Political Risk Assessment.

Risk Assessment Techniques

- Grand Tour (include AmCham)- Old Hand- Delphi Technique- Quantitative Methods- Commercial services

Chapter 1 68

Risk Reduction Strategies.• Local Partners• Invaluable Status• Critical Technologies• Frequent Tech. transfers• Critical Parts from Home Country• Vertical Integration• Local Borrowing• Minimizing Fixed Investments• Political Risk Insurance• Etc.

Chapter 1 69

3. Terrorism and the World 3. Terrorism and the World EconomyEconomy

• According to an IMF study, the September 11, 2001 terrorist attacks resulted in short-term lost economic output worth an estimated as $47billion, the stock market lost $1.7 trillion. In addition, 125,000 workers were laid off for 30 days.

• Terrorist activities disrupt international movement of supplies and merchandise and financial flows.

• Terrorists are active in many countries and often target large firms to get money for profit, weapons, payrolls, bribes, expenses, etc. Piracy has historically been practiced in most of the world’s seas. During 2008, Somali pirates captured 42 ships and received $30million in ransom. Have already captured about 40 ships in 2009.

Chapter 1 70

International Legal Environment - 1

Types of Legal Systems:Common LawCode (written) LawCivil LawCommercial LawIslamic Law

International Law (the law of nations) comes from three main sources: Customs, International treaties, Court decisions

Chapter 1 71

International Legal Environment - 2

U. S. Laws- The Sherman Antitrust Act (1890)- The Clayton Act (1914)- Foreign Corrupt Practices Act (FCPA), 1977: prohibits the

payment of any money or anything of value to a foreign official, political party, or any candidate for political office for purposes of obtaining, retaining, or directing business.

• FCPA does not prohibit so called facilitating or grease payments. It also does not prohibit bribery payments to nongovernmental personnel.

Local laws governing business practices ─ Competition, fraud, consumer protection, labor rights, routine business practices, etc.

Chapter 1 72

Global Marketing Management, 4eGlobal Marketing Management, 4e

Chapter 6

Global Marketing Research

IntroductionMajor challenges faced by global marketingresearchers:1. Complexity of research design due to environmental

differences2. Lack and inaccuracy of secondary data3. More variables are involved4. Communication across cultural barriers5. Time and cost requirements to collect primary data6. Coordination of multicountry research efforts7. Difficulty in establishing comparability across multi-country

studies

Chapter 1 74

Information Needs.

For market selection: Information about the country, area, and/or market

In-country marketing: Specific market information used to make product, promotion, distribution, and price decisions and to develop marketing plans

In-country requirements: Information necessary to forecast future marketing requirements by anticipating social, economic, consumer, and industry trends within specific markets or countries

Chapter 1 75

Selecting the Target Country

• Initial screening process:1. Select indicators and collect data2. Determine importance of country indicators3. Rate the countries in the pool on each

indicator4. Compute overall score for each country

Chapter 1 76

Secondary Global Marketing Research

Problems with Secondary Data Research:• Accuracy• Age • Reliability over time

• Comparability (functional or conceptual equivalence)

• Lumping of data

Chapter 1 77

Sources of Secondary DataSome Secondary Data Sources:

National governments, Regional organizations, UNagenciesBanks – international, development, regional, localBusiness/Trade publicationsUS and foreign consulting/research firmsUniversitiesOther Internet sources and databasesetc.

Chapter 1 78

Problems of Gathering Primary Data.• Language barrier (questionnaires must have functional and

scalar equivalency)• Inability/unwillingness of respondents to state their opinions• Cultural response bias• Situational response bias• Respondent unfamiliarity with research products, brands, services, usage

etc.• Inappropriate interviewers

Chapter 1 79

(1) Back Translation: the questionnaire is translated from one language to another, and then a second party translates it back into the original.(2) Parallel Translation: more than two translators are used for the back translation; the results are compared, differences discussed, and the most appropriate translation selected.

Chapter 1 80

Fixing Translation Errors.

Chapter 1 81

New Research Technologies.

Several different uses for the Internet ininternational research: (1) Online surveys and buyer panels (CATI - CATI -

Computer-Assisted Telephone Interviewing, CAPI - Computer-Assisted Telephone Interviewing, CAPI - Computer-Assisted Personal Interviewing)Computer-Assisted Personal Interviewing)

(2) Online focus groups(3) Web visitor tracking(4) Advertising measurement(5) Customer identification systems(6) E-mail marketing lists

Rules for Market Size Estimates• Use several different methods.• Don’t be misled by numbers.• Don’t be misled by fancy methods.• Do a sensitivity analysis by asking what-if questions.• Look for interval estimates with a lower and upper limit rather than for point

estimates.

Chapter 1 82

Estimating Market Demand.

Some more useful methods of forecastingdemand are:

(1) Expert Opinion: (2) Analogy: assumes that demand for a

product develops in similar ways in all countries as comparable economic development occurs in each country

(3) Chain Ratio Method(4) Trade Audit

Chapter 1 83

Management of Global Marketing Research• Selecting a Research Agency:

Consider:• Level of expertise• Qualifications• Track record• Credibility and experience• International/regional coverage• Client record

• Coordination of Multi-Country Research:

Chapter 1 84

End of Ch. 6

Chapter 1 85