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NEED OF STUDY

There are several good reasons for studying marketing.

First of all, marketing issues are important in all areas of the

organization—customers are the reasons why businesses exist!

In fact, marketing efforts (including such services as promotion

and distribution) often account for more than half of the price of

a product. As an added benefit, studying marketing often helps

us become more savvy consumers. We will learn, for instance,

that the per unit price of a bigger package is frequently higher

than that of a smaller one, and that more expensive products are

frequently not better in quality.

Criteria that must be met for marketing to occur:

Several criteria must be met for marketing to occur:

There must be two parties, each with unsatisfied needs or

wants. This want, of course, could be money for the seller.

Each must have something to offer. Marketing involves

voluntary “exchange” relationships where both sides must

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be willing parties. Thus, a consumer who buys a soft drink

in a vending machine for 60¢ must value the soft drink,

available at that time and place, more than the money.

Conversely, the vendor must value the money more. (It is

interesting to note that money is, strictly speaking, not

necessary for this exchange to take place. It is possible,

albeit a bit cumbersome, to exchange two ducks for a pair

of shoes.)

The parties must be able to communicate. This could be

through a display in a store, an infomercial, or a posting on

eBay.

The marketing vs. the selling concept: Two approaches to

marketing exist. The traditional selling concept emphasizes

selling existing products. The philosophy here is that if a

product is not selling, more aggressive measures must be taken

to sell it—e.g., cutting price, advertising more, or hiring more

aggressive (and obnoxious) sales-people. When the railroads

started to lose business due to the advent of more effective

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trucks that could deliver goods right to the customer’s door, the

railroads cut prices instead of recognizing that the customers

ultimately wanted transportation of goods, not necessarily

railroad transportation. Smith Corona, a manufacturer of

typewriters, was too slow to realize that consumers wanted the

ability to process documents and not typewriters per se. The

marketing concept, in contrast, focuses on getting consumers

what they seek, regardless of whether this entails coming up

with entirely new products.

The 4 Ps—product, place (distribution), promotion, and

price—represent the variables that are within the control of the

firm (at least in the medium to long run). In contrast, the firm is

faced with uncertainty from the environment.

The suggested framework of international marketing includes

motivation for internationalization, SWOT analysis, a mix of

international marketing decisions and consolidation of

marketing efforts on the basis of reviewing markets

performance.

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KEY TERM

Re-geocentric orientation: the approach that considers a region

as a uniform market segment and a firm following this approach

adopts a similar marketing strategy within the region but not

across the region.

Geocentric orientation: the approach that treats the whole

world as a single market and attempt to formulate integrated

marketing strategies.

Self reference criterion: an unconscious reference to one’s own

cultural value, experience and knowledge as a basis for decision

making.

Theory of mercantilism: attributes wealth of a nation by the

size of its accumulated treasures, usually measured in terms of

gold. A theory that holds that national should accumulate

financial wealth in the form of gold by encouraging exports and

discouraging imports.

Theory of international product life cycle: the cyclical pattern

followed by the international markets over a time due to a

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variety of factors which explains the shift in the markets as well

as manufacturing bases of the firms.

Domestic marketing: marketing practice within the domestic

markets.

Foreign marketing: methods and practices used in the home

markets and also applied in overseas markets with little

adaptation.

Comparative marketing: Comparative study of two or more

marketing system to find out the differences and similarities.

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REVIEW OF SUBJECT

What is marketing?

Almost every marketing textbook has a different definition

of the term “marketing.” The American Marketing Association

(AMA) uses the following: “The process of planning and

executing the conception, pricing, promotion, and distribution of

ideas, goods, and services to create exchanges that satisfy

individual and organizational objectives.” From this definition,

we see that:

Marketing involves an ongoing process. The environment

is “dynamic.” This means that the market tends to change

—what customers want today is not necessarily what they

want tomorrow. For example, sales of beef are declining in

the United States because consumers have become health

oriented. Similarly, Tupperware parties are less popular

today than they once were because there are fewer

housewives who do not work outside the home.

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This process involves both planning and implementing

(executing) the plan.

Some of the main issues involved include:

o Marketers help design products, finding out what

customers want and what can practically be made

available given technology and price constraints.

o Marketers distribute products—there must be some

efficient way to get the products from the factory to

the end-consumer.

o Marketers also promote products, and this is perhaps

what we tend to think of first when we think of

marketing. Promotion involves advertising—and

much more. Other tools to promote products include

trade promotion (store sales, coupons, and rebates),

obtaining favorable and visible shelf-space, and

obtaining favorable press coverage.

o Marketers also price products to “move” them. We

know from economics that, in most cases, sales

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correlate negatively with price—the higher the price,

the lower the quantity demanded. In some cases,

however, price may provide the customer with a

“signal” of quality. Thus, the marketer needs to price

the product to (1) maximize profit and (2)

communicate a desired image of the product.

o Marketing is applicable to services and ideas as well

as to tangible products. For example, accountants

may need to market their tax preparation services to

consumers.

THE MARKETING ENVIRONMENT

ELEMENTS OF THE ENVIRONMENT:

The marketing environment involves factors that, for the

most part, are beyond the control of the company. Thus, the

company must adapt to these factors. It is important to observe

how the environment changes so that a firm can adapt its

strategies appropriately. Consider these environmental forces:

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Competition:

Competitors often “creep” in and threaten to take

away markets from firms. For example, Japanese auto

manufacturers became a serious threat to American car

makers in the late 1970s and early 1980s. Similarly, the

Lotus Corporation, maker of one of the first commercially

successful spreadsheets, soon faced competition from

other software firms. Note that while competition may be

frustrating for the firm, it is good for consumers. (In fact,

we will come back to this point when we consider the legal

environment). Note that competition today is increasingly

global in scope.

Economics:

Some firms in particular are extremely vulnerable to

changes in the economy. Consumers tend to put off buying

a new car, going out to eat, or building new homes in bad

times. In contrast, in good times, firms serving those needs

may have difficulty keeping up with demand.

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Political:

Businesses are very vulnerable to changes in the

political situation. For example, because consumer groups

lobbied Congress, more stringent rules were made on the

terms of car leases. The tobacco industry is currently the

target of much negative attention from government and

public interest groups. Currently, the desire to avoid aiding

the enemy may result in laws that make it more difficult

for American firms to export goods to other countries.

Legal:

Firms are very vulnerable to changing laws and

changing interpretations by the courts. Firms in the U.S.

are very vulnerable to lawsuits. McDonald’s, for example,

is currently being sued by people who claim that eating the

chain’s hamburgers caused them to get fat. Some impacts

of the legal environment.

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Firms are significantly limited in what they can do by

various laws—some laws, for example, require that

disclosures be made to consumers on the effective interest

rates they pay on products bought on installment. A

particularly interesting group of laws relate to antitrust.

These laws basically exist to promote fair competition

among firms. Some principles involved here include:

o Collusion: Firms may not “conspire” to fix prices

(agree that they will not sell below an agreed upon

price) or reduce services.

o Predation: Firms may not sell their products below

their cost of production for the purpose of driving

competitors out of business so that they, themselves,

can raise prices when competition is reduced.

o Market share: Firms which have an unacceptably

large market share may be “broken” up by court

order so that many smaller firms will be around to

compete. (This is what happened to AT&T, and at

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times, IBM has been worried about this prospect). •

Tying: A firm that controls a valuable product may

not require the consumer to buy a more

commonplace one to get the scarce product. For

example, Intel controls many of the newest

microprocessors (e.g., Pentium IV). Intel also makes

motherboards for computers; however, motherboards

are made by a lot of firms. Intel would be thought to

abuse its effective monopoly power if it required

consumers to buy a motherboard in order to get its

newest chips.

Technological:

Changes in technology may significantly influence

the demand for a product. For example, the advent of the

fax machine was bad news for Federal Express. The

Internet is a major threat to travel agents.

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Social:

Changes in customs or demographics greatly

influence firms. Fewer babies today are being born,

resulting in a decreased demand for baby foods. More

women work outside the home today, so there is a greater

demand for prepared foods. There are more unmarried

singles today. This provides opportunities for some firms

(e.g., fast food restaurants) but creates problems for others

(e.g., manufacturers of high quality furniture that many

people put off buying until marriage). Today, there are

more “blended” families that result as parents remarry

after divorce. These families are often strapped for money

but may require “duplicate” items for children at each

parent’s residence.

Environmental scanning:

Its helps the firm understand developments in the market.

Such developments may involve changes in the market place

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due to social trends (e.g., Gerber, a manufacturer of baby

products, faces a serious challenge with declining U.S. birth

rates), technology (e.g., VCR makers are threatened by DVD

players), or new or potential competitors (e.g., Internet service

providers are being threatened by increasing marketing efforts

from MSN). Note that environmental scanning must be

performed continuously, since environmental change does not

cease.

Economic cycles:

The economy goes through cycles. In the late 1990s, the

U.S. economy was quite strong, and many luxury goods were

sold. Currently, the economy is somewhat weak, and many

firms are facing the results. Car makers, for example, have seen

declining profit margins (and even losses) as they have had to

cut prices and offer low interest rates on financing. Generally, in

good economic times, there is a great deal of demand, but this

introduces a fear of possible inflation. In the U.S., the Federal

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Reserve will then try to prevent the economy from

“overheating.” This is usually done by raising interest rates.

This makes businesses less willing to invest, and as a result,

people tend to make less money. During a recession,

unemployment tends to rise, causing consumers to spend less.

This may result in a “bad circle,” with more people losing their

jobs due to lowered demands. Some businesses, however, may

take this opportunity to invest in growth now that things can be

bought more cheaply.

STRATEGIC PLANNING AND THE MARKETING

PROCESS

Plans and planning:

Plans are needed to clarify what kinds of strategic

objectives an organization would like to achieve and how this is

to be done. Such plans must consider the amount of resources

available. One critical resource is capital. Microsoft keeps a

great deal of cash on hand to be able to “jump” on opportunities

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that come about. Small startup software firms, on the other

hand, may have limited cash on hand. This means that they may

have to forego what would have been a good investment

because they do not have the cash to invest and cannot find a

way to raise the capital. Other resources that affect what a firm

may be able to achieve include Trademarks/brand names: It

would be very difficult to competefactors such as: Patents: It

would be difficult toagainst Coke and Pepsi in the cola

market. Compete against Intel and AMD in the microprocessor

market since both these People: firms have a number of

patents that it is difficult to get around. Even with all of

Microsoft’s money available, it could not immediately hire the

Distribution: Stores have spacepeople needed to manufacture

computer chips. For only a fraction of the products they are

offered, so they must turn many away. A firm that does not have

an established relationship with stores will be at a disadvantage

in trying to introduce a new product.

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Plans are subject to the choices and policies that the

organization has made. Some firms have goals of social

responsibility, for example. Some firms are willing to take a

greater risk, which may result in a very large payoff but also

involve the risk of a large loss, than others.

Strategic marketing is best seen as an ongoing and never-

ending process. Typically:

The organization will identify the objectives it wishes to

achieve. This could involve profitability directly, but often

profitability is a long term goal that may require some

intermediate steps. The firm may seek to increase market

share, achieve distribution in more outlets, have sales grow

by a certain percentage, or have consumers evaluate the

product more favorably. Some organizations have

objectives that are not focused on monetary profit—e.g.,

promoting literacy or preventing breast cancer.

An analysis is made, taking into consideration issues such

as organizational resources, competitors, the competitors’

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strengths, different types of customers, changes in the

market, or the impact of new technology.

Based on this analysis, a plan is made based on tradeoffs

between the advantages and disadvantages of different

options available.

This strategy is then carried out. The firm may design new

products, revamp its advertising strategy, invest in getting

more stores to carry the product, or decide to focus on a

new customer segment.

After implementation, the results or outcome are

evaluated. If results are not as desired, a change may have

to be made to the strategy. Even if results are satisfactory,

the firm still needs to monitor the environment for

changes.

Levels of planning and strategies:

Plans for a firm can be made at several different levels. At

the corporate level, the management considers the objectives of

the firm as a whole. For example, Microsoft may want seek to

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grow by providing high quality software, hardware, and services

to consumers. To achieve this goal, the firm may be willing to

invest aggressively.

Plans can also be made at the business unit level. For

example, although Microsoft is best known for its operating

systems and applications software, the firm also provides

Internet access and makes video games. Different managers will

have responsibilities for different areas, and goals may best be

made by those closest to the business area being considered. It is

also more practical to hold managers accountable for

performance if the plan is being made at a more specific level.

Boeing has both commercial aircraft and defense divisions.

Each is run by different managers, although there is some

overlap in technology between the two. Therefore, plans are

needed both at the corporate and at the business levels.

Occasionally, plans will be made at the functional level, to

allow managers to specialize and to increase managerial

accountability. Marketing, for example, may be charged with

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increasing awareness of Microsoft game consoles to 55% of the

U.S. population or to increase the number of units of Microsoft

Office sold. Finance may be charged with raising a given

amount of capital at a given cost. Manufacturing may be

charged with decreasing production costs by 5%.

The firm needs to identify the business it is in. Here, a

balance must be made so that the firm’s scope is not defined too

narrowly or too broadly. A firm may define its goal very

narrowly and then miss opportunities in the market place. For

example, if Dell were to define itself only as a computer

company, it might miss an opportunity to branch into PDAs or

Internet service. Thus, they might instead define themselves as a

provider of “information solutions.” A company should not

define itself too broadly, however, since this may result in loss

of focus. For example, a manufacturer of baking soda should

probably not see itself as a manufacturer of all types of

chemicals. Sometimes, companies can define themselves in

terms of a customer need. For example, 3M sees itself as being

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in the business of making products whose surfaces are bonded

together. This accounts for both Post-It notes and computer

disks.

A firm’s mission should generally include a discussion of

the customers served (e.g., Wal-Mart and Nordstrom’s serve

different groups), the kind of technology involved, and the

markets served.

Several issues are involved in selecting target customers.

We will consider these in more detail within the context of

segmentation, but for now, the firm needs to consider issues

such as:

The size of various market segments;

How well these segments are being served by existing

firms;

Changes in the market—e.g., growth of segments or

change in technology;

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How the firm should be positioned, or seen by customers.

For example, Wal-Mart positions itself as providing value

in retailing, while Nordstrom’s defines itself more in terms

of high levels of customer service.

The Boston Consulting Group (BCG) matrix provides a firm

an opportunity to assess how well its business units work

together. Each business unit is evaluated in terms of two factors:

market share and the growth prospects in the market. Generally,

the larger a firm’s share, the stronger its position, and the greater

the growth in a market, the better future possibilities. Four

combinations emerge:

A star represents a business unit that has a high share in a

growing market. For example, Motorola has a large share

in the rapidly growing market for cellular phones.

A question mark results when a unit has a small share in a

rapidly growing market. The firm’s position, then, is not as

strong as it would have been had its market share been

greater, but there is an opportunity to grow. For example,

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Hewlett-Packard has a small share of the digital camera

market, but this is a very rapidly growing market.

A cash cow results when a firm has a large share in a

market that is not growing, and may even be shrinking.

Brother has a large share of the typewriter market.

A dog results when a business unit has a small share in a

market that is not growing. This is generally a somewhat

unattractive situation, although dogs can still be profitable

in the short run. For example, Smith Corona how has a

small share of the typewriter market.

Firms are usually best of with a portfolio that has a balance

of firms in each category. The cash cows tend to generate cash

but require little future investment. On the other hand, stars

generate some cash, but even more cash is needed to invest in

the future—for research and development, marketing

campaigns, and building new manufacturing facilities.

Therefore, a firm may take excess cash from the cash cow and

divert it to the star. For example, Brother could “harvest” its

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profits from typewriters and invest this in the unit making color

laser printers, which will need the cash to grow. If a firm has

cash cows that generate a lot of cash, this may be used to try to

improve the market share of a question mark. A firm that has a

number of promising stars in its portfolio may be in serious

trouble if it does not have any cash cows to support it. If it is

about to run out of cash—regardless of how profitable it is—is

becomes vulnerable as a takeover target from a firm that has the

cash to continue running it.

A SWOT (“Strengths, Opportunities, Weaknesses, and

Threats”) analysis is used to help the firm identify effective

strategies. Successful firms such as Microsoft have certain

strengths. Microsoft, for example, has a great deal of

technology, a huge staff of very talented engineers, a great deal

of experience in designing software, a very large market share, a

well respected brand name, and a great deal of cash. Microsoft

also has some weaknesses, however: The game console and

MSN units are currently running at a loss, and MSN has been

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unable to achieve desired levels of growth. Firms may face

opportunities in the current market. Microsoft, for example, may

have the opportunity to take advantage of its brand name to

enter into the hardware market. Microsoft may also become a

trusted source of consumer services. Microsoft currently faces

several threats, including the weak economy. Because fewer

new computers are bough during a recession, fewer operating

systems and software packages.

Rather than merely listing strengths, weaknesses,

opportunities, and threats, a SWOT analysis should suggest how

the firm may use its strengths and opportunities to overcome

weaknesses and threats. Decisions should also be made as to

how resources should be allocated. For example, Microsoft

could either decide to put more resources into MSN or to

abandon this unit entirely. Microsoft has a great deal of cash

ready to spend, so the option to put resources toward MSN is

available. Microsoft will also need to see how threats can be

addressed. The firm can earn political good will by engaging in

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charitable acts, which it has money available to fund. For

example, Microsoft has donated software and computers to

schools. It can forego temporary profits by reducing prices

temporarily to increase demand, or can “hold out” by

maintaining current prices while not selling as many units.

Criteria for effective marketing plans:

Marketing plans should meet several criteria:

The plan must be specific enough so that it can be

implemented and communicated to people in the firm.

“Improving profitability” is usually too vague, but

increasing net profits by 5%, increasing market share by

10%, gaining distribution in 2,000 more stores, and

reducing manufacturing costs by 2% are all specific.

The plan must be measurable so that one can see if it has

been achieved. The above plans involve specific numbers.

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The goal must be achievable or realistic. Plans that are

unrealistic may result in poor use of resources or lowered

morale within the firm.

The goals must be consistent. For example, a firm cannot

ordinarily simultaneously plan improve product features,

increase profits, and reduce prices.

Consumer Behavior:

Consumer behavior involves the psychological processes

that consumers go through in recognizing needs, finding ways to

solve these needs, making purchase decisions (e.g., whether or

not to purchase a product and, if so, which brand and where),

interpret information, make plans, and implement these plans

(e.g., by engaging in comparison shopping or actually

purchasing a product).

Sources of influence on the consumer:

The consumer faces numerous sources of influence. Often,

we take cultural influences for granted, but they are significant.

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An American will usually not bargain with a store owner. This,

however, is a common practice in much of the World. Physical

factors also influence our behavior. We are more likely to buy a

soft drink when we are thirsty, for example, and food

manufacturers have found that it is more effective to advertise

their products on the radio in the late afternoon when people are

getting hungry.

THE GLOBAL MARKETPLACE

Globalization of Markets and Competition:

Trade is increasingly global in scope today. There are

several reasons for this. One significant reason is technological

—because of improved transportation and communication

opportunities today, trade is now more practical. Thus,

consumers and businesses now have access to the very best

products from many different countries. Increasingly rapid

technology lifecycles also increases the competition among

countries as to who can produce the newest in technology. In

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part to accommodate these realities, countries in the last several

decades have taken increasing steps to promote global trade

through agreements such as the General Treaty on Trade and

Tariffs, and trade organizations such as the World Trade

Organization (WTO), North American Free Trade Agreement

(NAFTA), and the European Union (EU).

Stages in the International Involvement of a Firm:

We discussed several stages through which a firm may go

as it becomes increasingly involved across borders. A purely

domestic firm focuses only on its home market, has no current

ambitions of expanding abroad, and does not perceive any

significant competitive threat from abroad. Such a firm may

eventually get some orders from abroad, which are seen either

as an irritation (for small orders, there may be a great deal of

effort and cost involved in obtaining relatively modest revenue)

or as "icing on the cake." As the firm begins to export more, it

enters the export stage, where little effort is made to market the

product abroad, although an increasing number of foreign orders

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are filled. In the international stage, as certain country markets

begin to appear especially attractive with more foreign orders

originating there, the firm may go into countries on an ad hoc

basis—that is, each country may be entered sequentially, but

with relatively little learning and marketing efforts being shared

across countries. In the multi-national stage, some efficiencies

are pursued by standardizing across a region (e.g., Central

America, West Africa, or Northern Europe). Finally, in the

global stage, the focus centers on the entire World market, with

decisions made optimize the product’s position across markets

—the home country is no longer the center of the product. An

example of a truly global company is Coca Cola.

Note that these stages represent points on a continuum

from a purely domestic orientation to a truly global one;

companies may fall in between these discrete stages, and

different parts of the firm may have characteristics of various

stages—for example, the pickup truck division of an auto-

manufacturer may be largely domestically focused, while the

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passenger car division is globally focused. Although a global

focus is generally appropriate for most large firms, note that it

may not be ideal for all companies to pursue the global stage.

For example, manufacturers of ice cubes may do well as

domestic, or even locally centered, firms.

Some forces in international trade:

The text contains a rather long-winded appendix

discussing some relatively simple ideas. Comparative

advantage, discussed in more detail in the economics notes,

suggests trade between countries is beneficial because these

countries differ in their relative economic strengths—some have

more advanced technology and some have lower costs. The

International Product Life Cycle suggests that countries will

differ in their timing of the demand for various products.

Products tend to be adopted more quickly in the United States

and Japan, for example, so once the demand for a product (say,

VCRs) is in the decline in these markets, an increasing market

potential might exist in other countries (e.g., Europe and the rest

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of Asia). Internalization/transaction costs refers to the fact that

developing certain very large scale projects, such as an

automobile intended for the World market, may entail such large

costs that these must be spread over several countries.

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MARKETING RESEARCH

Primary vs. secondary research:

There are two kinds of market research: Primary research

refers to the research that a firm conducts for its own needs

(e.g., focus groups, surveys, interviews, or observation) while

secondary research involves finding information compiled by

someone else. In general, secondary research is less expensive

and is faster to conduct, but it may not answer the specific

questions the firm seeks to have answered (e.g., how do

consumers perceive our product?), and its reliability may be in

question.

Secondary sources:

A number of secondary sources of country information are

available. One of the most convenient sources is an almanac,

containing a great deal of country information. Almanacs can

typically be bought for $10.00 or less. The U.S. government also

publishes a guide to each country, and the handbook

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International Business Information: How to Find It, How to Use

It.

Several experts may be available. Anthropologists and

economists in universities may have built up a great deal of

knowledge and may be available for consulting. Consultants

specializing in various regions or industries are typically

considerably more expensive. One should be careful about

relying on the opinions of expatriates (whose views may be

biased or outdated) or one’s own experience (which may relate

to only part of a country or a certain sub segment) and may also

suffer from the limitation of being a sample of size 1.

Hard vs. soft data:

"Hard" data refers to relatively quantifiable measures such

as a country’s GDP, number of telephones per thousand

residents, and birth rates (although even these supposedly

"objective" factors may be subject to some controversy due to

differing definitions and measurement approaches across

countries). In contrast, "soft" data refers to more subjective

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issues such as country history or culture. It should be noted that

while the "hard" data is often more convenient and seemingly

objective, the "soft" data is frequently as important, if not more

so, in understanding a market.

Data reliability:

The accuracy and objectivity of data depend on several

factors. One significant one is the motivation of the entity that

releases it. For example, some countries may want to exaggerate

their citizens’ literacy rates owing to national pride, and an

organization promoting economic development may paint an

overly rosy picture in order to attract investment. Some data

may be dated (e.g., a census may be conducted rarely in some

regions), and some countries may lack the ability to collect data

(it is difficult to reach people in the interior regions of Latin

America, for example). Differences in how constructs are

defined in different countries (e.g., is military personnel counted

in people who are employed?) may make figures of different

jurisdictions non-comparable.

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Cost of data:

Much government data, or data released by organizations

such as the World Bank or the United Nations, is free or

inexpensive, while consultants may charge very high rates.

Issues in primary research:

Cultural factors often influence how people respond to

research. While Americans are used to market research and tend

to find this relatively un-threatening, consumers in other

countries may fear that the data will be reported to the

government, and may thus not give accurate responses. In some

cultures, criticism or confrontation are considered rude, so

consumers may not respond honestly when they dislike a

product. Technology such as scanner data is not as widely

available outside the United States. Local customs and

geography may make it difficult to interview desired

respondents; for example, in some countries, women may not be

allowed to talk to strangers.

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ELECTRONIC COMMERCE

Prospects for electronic commerce:

Electronic commerce—usually in the form of sales,

promotion, or support through the Internet—is a hot topic at the

moment, evidenced by the high market capitalization of firms

involved in this kind of business. Growth rates have been

considerable over the last two years and are expected to persist,

at least to some extent, for at least the next several years. Yet, it

should be recognized that so far, sales over the Internet account

for only a small portion of sales—especially outside the U.S.

Obstacles to diffusion:

Obstacles to the diffusion of Internet trade come both

from enduring sources and temporary roadblocks which may be

overcome as consumer attitudes change and technology is

improved. Currently, Internet connections are slower than

desired so that downloading pictures and other information may

take longer than consumers are willing to wait. "Glitches" in

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online ordering systems may also frustrate consumers, who are

unable to place their orders at a given time or have difficulty

navigating through a malfunctioning site. The lack of non-

English language sites in some areas may also be off-putting to

consumers, and registering domain names in some countries is

difficult. Further, shipping small packages across countries may

be inefficient due to high local postage rates and inefficiencies

in customs processing. Most of these obstacles may be

overcome within next few years.

Other obstacles may, however, have considerably greater

staying power. First, there are legal problems, as several

different countries may seek to impose their jurisdiction on

advertising and laws of product assortment and business

practices. Further, the maintenance of databases, which are

essential to delivering on the promises of e-commerce, may

conflict with the privacy rules of some countries—this is

currently a hot issue of contention between the United States

and the European Union. Finally, there are issues of taxation and

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collection. While the Clinton Administration has sought to get

the WTO to go along with a three year tax "moratorium" on

Internet purchases much like the one observed in the U.S.,

strong opposition is expected. A great attraction of e-commerce

in Europe is that people may order from other countries and thus

evade local sales taxes, which can be prohibitive (e.g., 25% in

Denmark and 16% in Germany). Some firms will ship to

customers in neighboring countries without collecting sales

taxes or duties, with the responsibility of paying falling on the

consumer. Although most consumers who order and do not

arrange to pay for these taxes get away with it, fines for those

caught through random checks can be severe.

Locus of the site:

Some firms have chosen to maintain a global site, with

reference only to local sales or support offices; others, in

contrast, have unique sites for each country. In some cases, a

global site wills hyperlink surfers to a country or region relevant

site. Note that some confusion exists since many sites outside

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the U.S. maintain the ".com" designation rather than their

countries’ respective suffix (e.g., ".de" for Germany, ".se" for

Sweden, and ".au" for Australia). Some firms have experienced

problems getting their banks to accept credit card charges in

more than one currency, and thus it may be difficult to indicate

precise prices in more than one denomination (one site based in

Britain offered its American customers to be as accurate as

possible, based on current exchange rates, although the charge

could be off "by a few pennies.")

Lifecycle stages across the World:

It has been suggested that Europe runs some five years

behind the U.S. in electronic commerce, but some sources

dispute this, suggesting that lack of success among American

retailers may have other origins, such as inadequate adaptation

(for example, some British users are put off by American

English). There are, however, some factors which cause most

countries run behind. Even in Europe, Internet access

penetration rates are lower than they are in the U.S., and the

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slower speed associated with downloading Asian characters is

discouraging. In some countries, credit card penetration is

lower, and even in European countries with high penetration

rates, consumers are reluctant to use them. Further, the fact that

consumers in most countries have to pay a per minute phone

charge discourages the essential casual and relaxed browsing

common in the U.S. so long as unlimited cable or hardwired

access is not offered.

ECONOMICS

Historical Basis for Trade:

Throughout history, countries have tended to trade with

each other, but usually to a much lesser extent than they do

today. There are several reasons:

Difficulties in transportation and communication made it

difficult to transport manufactured goods which would, in

any event, arrive with long delays after manufacturing;

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Border disputes, a history of invasions, and other tensions

between countries discouraged trade with historical or

potential enemies; and

Paper money was less readily available, so it was more

difficult to match products for barter between the same

buyer and sellers.

Nevertheless, countries did have to trade with each other to

a more limited extent since:

Certain natural resources (e.g., iron, gold) were not readily

available in some countries;

Some countries did not have the technology to produce

certain goods (e.g., when steel was introduced, it could be

made only in some countries);

In some countries, there was a demand for certain

specialized goods, but not enough of a market to justify

local production within reasonable economies of scale.

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Today, trade is necessitated by several factors:

Technological advances are so fast that, at any point, a

different country may have the latest and most effective

technology in compelling areas (e.g., computers, medical);

Certain product lines (e.g., automobiles) require

tremendous economies of scale to be cost effective, so

these costs must be spread over several different markets;

With advances in transportation, it becomes essential to

take advantage of relative strengths that different countries

have (e.g., technological leadership, low labor costs).

Absolute advantage is typically measured in terms of labor

input and refers to the number of units that one worker can

produce in one unit of time. For example, suppose that a

Japanese worker can produce fifteen shirts in one hour, while a

Malaysian worker can produce only five. Thus, the Japanese

worker has the absolute advantage. However, suppose that the

Japanese worker can produce two cars a week, while the

Malaysian worker can produce only one tenth of a car in that

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amount of time. It can be shown that, assuming that these are the

only two countries that can trade with each other; it would be to

the advantage of both countries to trade Japanese cars for

Malaysian shirts. This is known as relative advantage. In

practice, it is often more useful to think of relative technological

sophistication vs. lower labor costs.

Protectionism:

Although trade generally benefits a country as a whole,

powerful interests within countries frequently put obstacles—

i.e., they seek to inhibit free trade. There are several ways this

can be done:

Tariff barriers: A duty, or tax or fee, is put on products

imported. This is usually a percentage of the cost of the

good.

Quotas: A country can export only a certain number of

goods to the importing country. For example, Mexico can

export only a certain quantity of tomatoes to the United

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States, and Asian countries can send only a certain quota

of textiles here.

"Voluntary" export restraints: These are not official

quotas, but involve agreements made by countries to limit

the amount of goods they export to an importing country.

Such restraints are typically motivated by the desire to

avoid more stringent restrictions if the exporters do not

agree to limit themselves. For example, Japanese car

manufacturers have agreed to limit the number of

automobiles they export to the United States.

Subsidies to domestic products: If the government

supports domestic producers of a product, these may end

up with a cost advantage relative to foreign producers who

do not get this subsidy. U.S. honey manufacturers receive

such subsidies.

Non-tariff barriers, such as differential standards in

testing foreign and domestic products for safety, disclosure

of less information to foreign manufacturers needed to get

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products approved, slow processing of imports at ports of

entry, or arbitrary laws which favor domestic

manufacturers.

Justifications for protectionism: Several justifications have

been made for the practice of protectionism. Some appear to

hold more merit than others:

Protection of an "infant" industry: Costs are often

higher, and quality lower, when an industry first gets

started in a country, and it thus be very difficult for that

country to compete. However, as the industry in the

country matures, it may be better able to compute. Thus,

for example, some countries have attempted to protect

their domestic computer markets while they gained

strength. The U.S. attempted to protect its market for small

autos American manufacturers were caught unprepared for

the switch in demand away from the larger cars caught

U.S. auto makers unprepared. This is generally an

accepted reason in trade agreements, but the duration of

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this protection must be limited (e.g., a maximum of five to

ten years).

Resistance to unfair foreign competition: The U.S. sugar

industry contends that most foreign manufacturers

subsidize their sugar production, so the U.S. must follow

to remain competitive. This argument will hold little merit

with the dispute resolution mechanism available through

the World Trade Organization.

Preservation of a vital domestic industry: The U.S.

wants to be able to produce its own defense products, even

if foreign imports would be cheaper, since the U.S. does

not want to be dependent on foreign manufacturers with

whose countries conflicts may arise. Similarly, Japan

would prefer to be able to produce its own food supply

despite its exorbitant costs. For an industry essential to

national security, this may be a compelling argument, but

it is often used for less compelling ones (e.g.,

manufactures of funeral caskets or honey).

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Intervention into a temporary trade balance: A country

may want to try to reverse a temporary decline in trade

balances by limiting imports. In practice, this does not

work since such moves are typically met by retaliation.

Maintenance of domestic living standards and

preservation of jobs: Import restrictions can temporarily

protect domestic jobs, and can in the long run protect

specific jobs (e.g., those of auto makers, farmers, or steel

workers). This is less of an accepted argument—these

workers should instead by retrain to work in jobs where

their country has a relative advantage.

Retaliation: The proper way to address trade disputes is

now through the World Trade Organization. In the past,

where enforcement was less available, this might have

been a reasonable argument.

Note that while protectionism generally hurts a country

overall, it may be beneficial to specific industries or other

interest groups. Thus, while sugar price supports are bad for

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consumers in general, producers are an organized group that can

exert a great deal of influence. In contrast, the individual

consumer does not have much of an incentive to take action to

save about $5.00 a year.

Effects of protectionism:

Protectionism tends to lead to additional tariffs or other

protectionist measures by other countries in retaliation, reduced

competition (which results in inflation and less choice for

consumers), a weakening of the trade balance (due in part to

diminished export abilities resulting from foreign retaliations

and in part because of the domestic currency loses power as

there is less demand for it). An overall effect may be a vicious

cycle of trade wars as each country responds to the other with a

"tit for tat."

EFFORTS TO ENCOURAGE TRADE:

The General Agreement on Trade and Tariffs (GATT), which

was negotiated at the Bretton Woods Conference in 1947,

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sought to encourage international trade following World War II,

when many countries were in bad shape after the war.

There were several objectives:

To encourage trade in general;

To replace non-tariff barriers with tariff barriers—i.e., it is

acceptable but not encourage able to impose some burden

on foreign products, but this must be in the form of a

readily identifiable duty rather than a more vague

restriction which is less transparent;

Reciprocity: Countries should respond in kind when other

countries reduce tariffs or barriers;

Providing the most favorable trade terms offered to anyone

to all members of the agreement.

Note that the above represent general principles, which in

practice are implemented with numerous exceptions. For

example, the Uruguay Roundtable Agreement, which set up the

World Trade Organization, literally runs several thousand pages.

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The EU and NAFTA are accepted, but go against the provision

of offering the best terms available to everyone.

The 1994 Uruguay Round Table Agreement resulted in the

establishment of the World Trade Organization (WTO). The

main thrust of this organization is to expand the scope of trade

affected (e.g., services are now covered), the protection of

intellectual property (e.g., patents, copyrights, and trademarks)

and, most importantly, to provide binding decisions on disputes

which member countries must meet.

Stages in International Trade Agreements:

Trade between countries is generally started gradually—it

takes a long time before barriers are eliminated entirely or even

reduced dramatically. The stages on slide 11 are points on a

continuum. Starting with heavy barriers to trade, countries may

decide to move toward a "free trade area," where two countries

agree on one or more trade liberalizations—e.g., two countries

agree that bananas and steel can now be traded between the two

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countries with only a three percent duty (in contrast, say, to a

fifteen percent duty that existed earlier). Water melons and

charcoal may then be added later, along with products that may

follow over time.

A customs union involves a more systematic trade

agreement with reductions in duties and quotas covering a large

spectrum of goods and services. For example, NAFTA

systematically reduced tariffs and improved access of Canada,

the U.S., and Mexico, to each others’ markets. Significant

barriers still exist, however.

In a common market, goods can be moved freely from one

member country to another. Although the EU has been calling

itself a common market since the 1970s, it has not quite reached

that reality yet. To understand what is going on here, we need to

understand the distinction between duties (taxes imposed on

goods which are imported, but not on goods produced in the

home country) and excise taxes (such as the American sales tax,

which is imposed on all goods, whether they are produced at

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home or abroad). Currently, individuals can bring almost

anything they want in from other member countries, although

businesses are somewhat less free. For example, one firm

offered to deliver a pallet of two thousand five-hundred beers

from Germany, where "sin" taxes are lower, to Denmark. The

authorities intervened and it was decided that the consumers

would have to go and pick up the beers abroad themselves to

benefit from the lower rates. One can now no longer take in duty

free goods moving from one EU country to another, but one can

buy whatever one wants in another EU country, paying a

possibly lower sales tax there, and bring it back to one’s home

country. It used to be that many Danish consumers would take a

ferry to Germany and buy a limited quantity of duty free alcohol

and tobacco which could be taken into Denmark with no

additional duties or excise taxes. This is no longer possible,

since both countries are part of the EU, but now it is possible to

take the ferry and not even go aboard in Germany, buying all

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desired goods in German territorial waters at the lower German

sales tax.

A monetary union involves countries abandoning their

own currencies and monetary policies. The European Union will

soon replace the currencies of some member countries with the

Euro (not all countries are eligible to join, since some have too

high a national debt or too large a government budget deficit,

and others have chosen not to join at this time). A monetary

union removes the ability of each country to control its own

currency—it can no longer devalue its currency to improve

export opportunities—but also introduces greater stability in

exchange rates so that trade will not be interrupted by actual

exchange rate fluctuations or avoided due to fears or exchange

rate instability. Note that actually implementing a monetary

union is difficult. The EU monetary union will be implemented

over time—although contracts can now be specified in terms of

Euros, actual currency will not be introduced until next year,

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and even when it is introduced, there will be a period of overlap

where the Euro and the original currencies will coexist.

A political union involves countries actually merging,

which laws of the union superseding national laws. At the

present time, no such unions exist, although many trade related

decisions in the EU are now handled through the European

Parliament. (The states of the United States and various other

countries such as Mexico, Brazil, and Germany are not

genuinely sovereign.) The bottom line here is to recognize that

trade liberalization is a gradual process and that not all countries

will move all the way toward completely free trade.

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ECONOMIC ISSUES:

"Open" vs. "closed" currencies: Not all currencies can

be freely traded—some countries prohibit their currencies

from leaving their borders, although this is mostly

confined to developing countries that want to encourage

tourists to spend their remaining currency rather than

converting it back to their own currencies and spending it

in their home countries. There are, however, some

currencies for which international markets are not readily

available, because the demand for those currencies is

limited.

Exchange rates come in two forms:

"Floating"—here, currencies are set on the open market

based on the supply of and demand for each currency. For

example, all other things being equal, if the U.S. imports

more from Japan than it exports there, there will be less

demand for U.S. dollars (they are not desired for

purchasing goods) and more demand for Japanese yen—

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thus, the price of the yen, in dollars, will increase, so you

will get fewer yen for a dollar.

"Fixed"—currencies may be "pegged" to another

currency (e.g., the Argentinean currency is guaranteed in

terms of a dollar value), to a composite of currencies (i.e.,

to avoid making the currency dependent entirely on the

U.S. dollar, the value might be 0.25*U.S.

dollar+4*Mexican peso+50*Japanese yen+0.2*German

mark+0.1*British pound), or to some other valuable such

as gold. Note that it is very difficult to maintain these fixed

exchange rates—governments must buy or sell currency

on the open market when currencies go outside the

accepted ranges. Fixed exchange rates, although they

produce stability and predictability, tend to get in the way

of market forces—if a currency is kept artificially low, a

country will tend to export too much and import too little.

Trade balances and exchange rates: When exchange

rates are allowed to fluctuate, the currency of a country

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that tends to run a trade deficit will tend to decline over

time, since there will be less demand for that currency.

This reduced exchange rate will then tend to make exports

more attractive in other countries and imports less

attractive at home.

Measuring country wealth:

There are two ways to measure the wealth of a country.

The nominal per capita gross domestic product (GDP) refers to

the value of goods and services produced per person in a

country if this value in local currency were to be exchanged into

dollars. Suppose, for example, that the per capita GDP of Japan

is 3,500,000 yen and the dollar exchanges for 100 yen, so that

the per capita GDP is (3,500,000/100)=$35,000. However, that

$35,000 will not buy as much in Japan—food and housing are

much more expensive there. Therefore, we introduce the idea of

purchase parity adjusted per capita GDP, which reflects what

this money can buy in the country. This is typically based on the

relative costs of a weighted "basket" of goods in a country (e.g.,

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35% of the cost of housing, 40% the cost of food, 10% the cost

of clothing, and 15% cost of other items). If it turns out that this

measure of cost of living is 30% higher in Japan, the purchase

parity adjusted GPD in Japan would then be ($35,000/(130%) =

$26,923.

In general, the nominal per capita GPD is more useful for

determining local consumers’ ability to buy imported goods, the

cost of which are determined in large measure by the costs in the

home market, while the purchase parity adjusted measure is

more useful when products are produced, at local costs, in the

country of purchase. For example, the ability of Argentineans to

purchase micro computer chips, which are produced mostly in

the U.S. and Japan, is better predicted by nominal income, while

the ability to purchase toothpaste made by a U.S. firm in a

factory in Argentina is better predicted by purchase parity

adjusted income.

It should be noted that, in some countries, income is quite

unevenly distributed so that these average measures may not be

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very meaningful. In Brazil, for example, there is a very large

underclass making significantly less than the national average,

and thus, the national figure is not a good indicator of the

purchase power of the mass market. Similarly, great regional

differences exist within some countries—income is much higher

in northern Germany than it is in the former East Germany, and

income in southern Italy is much lower than in northern Italy.

Economic trends:

Certain countries have high levels of inflation; this figure,

for example, has run at several hundred percent at various times

in Brazil. In that case, then, it becomes important to adjust

figures for inflation. Suppose that, as an illustration that the

Brazilian economy grew from 1997 to 1998 from 200 trillion

cruzeiros to 410 trillion while there was an inflation of 100%.

The economy, then, did not really double. Therefore, the "real"

growth, adjusted for inflation, is (410-200)/(100%+100%)-1 =

(210/200)-1=5%. (You will not have to do such calculations on

the exam, but you should understand the principle of real

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[inflation adjusted] vs. nominal growth.) Please note that even in

countries that have inflation rates as moderate as 1-5%,

adjustment for inflation is still essential.

When one looks at an entire country, note that overall

GDP may increase as population increases while its per capita

GDP increases less or even decreases. Suppose, for example,

that the GDP of India from 1997 to 1998 increases from $1

trillion to $1.02 trillion and that there is no inflation but the

population increases by 3%. The population adjusted economic

growth would be ((1.02-1.00)/1.03)- 100%=98.5%-100%=-

1.5%. Again, you will not be asked to make actual calculations

on the exam.

Some countries run trade deficits over long periods of

time, and when this happens, their currency is expected to

weaken over time. In principle, this weakening ought to increase

exports and decrease exports, but since countries may be able to

borrow from foreign lenders, this may not always happen in

practice. The U.S., for example, has been able to finance deficit

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spending by foreign borrowing. While the U.S. dollar declined

sharply against the yen in the 1980s and early 1990s, it has

remained much more stable in recent years at 100-130 yen per

dollar.

CULTURE

Dealing with culture: Culture is a problematic issue for many

marketers since it is inherently nebulous and often difficult to

understand. One may violate the cultural norms of another

country without being informed of this, and people from

different cultures may feel uncomfortable in each other’s

presence without knowing exactly why (for example, two

speakers may unconsciously continue to attempt to adjust to

reach an incompatible preferred interpersonal distance).

Warning about stereotyping:

When observing a culture, one must be careful not to over-

generalize about traits that one sees. Research in social

psychology has suggested a strong tendency for people to

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perceive an "out-group" as more homogenous than an "in-

group," even when they knew what members had been assigned

to each group purely by chance. When there is often a "grain of

truth" to some of the perceived differences, the temptation to

over-generalize is often strong. Note that there are often

significant individual differences within cultures.

Definition:

The text defines culture as "A learned, shared, compelling,

interrelated set of orientations for members of society." While

memorizing definitions is not essential, note the following parts

of the definition:

Learned: Culture is not genetically based—if that were

the case cultures across the World would have been much

more similar to each other. We learn what is considered

appropriate in our culture through trial and error. If a child

engages in competitive behavior, this might be rewarded in

the United States with the expression of parental approval,

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while in Japan it might result in subtle shows of

disapproval, such as lack of attention.

Shared: The beliefs, interpretations, and behaviors are

shared by all or most of the people within the culture, so

that it becomes a truly society-wide phenomenon.

Compelling: Culture must have implications (such as

social disapproval if contradicted) in order to be

considered important.

Interrelated: Although there may be conflicts between

elements of culture (e.g., respect for seniority may come

into conflict with a growing value of achievement in

Singapore), for the most part, elements of culture

constitute a coherent and relatively consistent whole. For

example, the tendency for Japanese business people to

bow when meeting each other and the tendency of lower

level Japanese employees to show great deference to their

superiors are both manifestations of a strong emphasis on

respect.

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Cultural lessons:

We considered several cultural lessons in class; the

important thing here is the big picture. For example, within the

Muslim tradition, the dog is considered a "dirty" animal, so

portraying it as "man’s best friend" in an advertisement is

counter-productive. Packaging, seen as a reflection of the

quality of the "real" product, is considerably more important in

Asia than in the U.S., where there is a tendency to focus on the

contents which "really count." Many cultures observe

significantly greater levels of formality than that typical in the

U.S., and Japanese negotiator tend to observe long silent pauses

as a speaker’s point is considered.

Elements of culture:

The text considers several elements of culture, such as the

material culture, education, and religion. Another way to look at

cultural contents involves the areas of:

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Beliefs: While Americans may attribute success to hard

work or skill, it may be attributed to luck or connections in

other cultures.

Attitudes: Beliefs, feelings, and behavioral intentions may

differ. While the American may appreciate getting a

bargain in a sale, this may conjure up images of not being

able to afford the full price in other cultures.

Goals: While "progress" (having new and improved

products, for example) is considered a good thing in the

U.S., many Japanese parents are concerned that the "wa-

pro" leaves their children unable to write the traditional

Japanese pictographs.

Values: In the U.S., individual uniqueness is generally

considered a good thing while in some cultures fitting in

with the group is a higher priority. Thus, for example, an

American may enjoy wearing relatively innovative

clothing, which may be frowned upon in a more

collectivistic society.

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Cultural characteristics as a continuum:

There is a tendency to stereotype cultures as being one

way or another (e.g., individualistic rather than collectivistic).

Note, however, countries fall on a continuum of cultural traits.

Hofstede’s research demonstrates a wide range between the

most individualistic and collectivistic countries, for example—

some fall in the middle.

Hofstede’s Dimensions. Gert Hofstede, a Dutch researcher, was

able to interview a large number of IBM executives in various

countries, and found that cultural differences tended to center

around four key dimensions:

Individualism vs. collectivism: To what extent do people

believe in individual responsibility and reward rather than

having these measures aimed at the larger group? Contrary

to the stereotype, Japan actually ranks in the middle of this

dimension, while Indonesia and West Africa rank toward

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the collectivistic side. The U.S., Britain, and the

Netherlands rate toward individualism.

Power distance: To what extent is there a strong

separation of individuals based on rank? Power distance

tends to be particularly high in Arab countries and some

Latin American ones, while it is more modest in Northern

Europe and the U.S.

Masculinity vs. femininity involves a somewhat more

nebulous concept. "Masculine" values involve competition

and "conquering" nature by means such as large

construction projects, while "feminine" values involve

harmony and environmental protection. Japan is one of the

more masculine countries, while the Netherlands rank

relatively low. The U.S. is close to the middle, slightly

toward the masculine side.

Uncertainty avoidance involves the extent to which a

"structured" situation with clear rules is preferred to a

more ambiguous one; in general, countries with lower

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uncertainty avoidance tend to be more tolerant of risk.

Japan ranks very high. Few countries are very low in any

absolute sense, but relatively speaking, Britain and Hong

Kong are lower, and the U.S. is in the lower range of the

distribution.

Although Hofstede’s original work did not address this, a

fifth dimension of long term vs. short term orientation has been

proposed. In the U.S., managers like to see quick results, while

Japanese managers are known for take a long term view, often

accepting long periods before profitability is obtained.

High vs. low context cultures:

In some cultures, "what you see is what you get"—the

speaker is expected to make his or her points clear and limit

ambiguity. This is the case in the U.S.—if you have something

on your mind, you are expected to say it directly, subject to

some reasonable standards of diplomacy. In Japan, in contrast,

facial expressions and what is not said may be an important clue

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to understanding a speaker’s meaning. Thus, it may be very

difficult for Japanese speakers to understand another’s written

communication. The nature of languages may exacerbate this

phenomenon—while the German language is very precise,

Chinese lacks many grammatical features, and the meaning of

words may be somewhat less precise. English ranks somewhere

in the middle of this continuum.

Ethnocentrism and the self-reference criterion:

The self-reference criterion refers to the tendency of

individuals, often unconsciously, to use the standards of one’s

own culture to evaluate others. For example, Americans may

perceive more traditional societies to be "backward" and

"unmotivated" because they fail to adopt new technologies or

social customs, seeking instead to preserve traditional values. In

the 1960s, a supposedly well read American psychology

professor referred to India’s culture of "sick" because, despite

severe food shortages, the Hindu religion did not allow the

eating of cows. The psychologist expressed disgust that the

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cows were allowed to roam free in villages, although it turns out

that they provided valuable functions by offering milk and

fertilizing fields. Ethnocentrism is the tendency to view one’s

culture to be superior to others. The important thing here is to

consider how these biases may come in the way in dealing with

members of other cultures.

POLITICAL AND LEGAL INFLUENCES

The political situation:

The political relations between a firm’s country of

headquarters (or other significant operations) and another one

may, through no fault of the firm’s, become a major issue. For

example, oil companies which invested in Iraq or Libya became

victims of these countries’ misconduct that led to bans on trade.

Similarly, American firms may be disliked in parts of Latin

America or Iran where the U.S. either had a colonial history or

supported unpopular leaders such as the former shah.

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Certain issues in the political environment are particularly

significant. Some countries, such as Russia, have relatively

unstable governments, whose policies may change dramatically

if new leaders come to power by democratic or other means.

Some countries have little tradition of democracy, and thus it

may be difficult to implement. For example, even though Russia

is supposed to become a democratic country, the history of

dictatorships by the communists and the czars has left country of

corruption and strong influence of criminal elements.

Laws across borders:

When laws of two countries differ, it may be possible in a

contract to specify in advance which laws will apply, although

this agreement may not be consistently enforceable.

Alternatively, jurisdiction may be settled by treaties, and some

governments, such as that of the U.S., often apply their laws to

actions, such as anti-competitive behavior, perpetrated outside

their borders (extra-territorial application). By the doctrine

known as compulsion, a firm that violates U.S. law abroad may

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be able to claim as a defense that it was forced to do so by the

local government; such violations must, however, be compelled

—that they are merely legal or accepted in the host country is

not sufficient.

The reality of legal systems:

Some legal systems, such as that of the U.S., are relatively

"transparent"—that is, the law tends to be what its plain

meaning would suggest. In some countries, however, there are

laws on the books which are not enforced (e.g., although Japan

has antitrust laws similar to those of the U.S., collusion is

openly tolerated). Further, the amount of discretion left to

government officials tends to vary. In Japan, through the

doctrine of administrative guidance, great latitude is left to

government officials, who effectively make up the laws.

One serious problem in some countries is a limited access

to the legal systems as a means to redress grievances against

other parties. While the U.S. may rely excessively on lawsuits,

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the inability to effectively hold contractual partners to their

agreement tends to inhibit business deals. In many jurisdictions,

pre-trial discovery is limited, making it difficult to make a case

against a firm whose internal documents would reveal guilt.

This is one reason why personal relationships in some cultures

are considered more significant than in the U.S.—since

enforcing contracts may be difficult, you must be sure in

advance that you can trust the other party.

Legal systems of the World:

There are four main approaches to law across the World, with

some differences within each:

Common law, the system in effect in the U.S., is based on

a legal tradition of precedent. Each case that raises new

issues is considered on its own merits, and then becomes a

precedent for future decisions on that same issue.

Although the legislature can override judicial decisions by

changing the law or passing specific standards through

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legislation, reasonable court decisions tend to stand by

default.

Code law, which is common in Europe, gives considerably

shorter leeway to judges, who are charged with "matching"

specific laws to situations—they cannot come up with

innovative solutions when new issues such as patentability

of biotechnology come up. There are also certain

differences in standards. For example, in the U.S. a

supplier whose factory is hit with a strike is expected to

deliver on provisions of a contract, while in code law this

responsibility may be nullified by such an "act of God."

Islamic law is based on the teachings of the Koran, which

puts forward mandates such as a prohibition of usury, or

excessive interest rates. This has led some Islamic

countries to ban interest entirely; in others, it may be

tolerated within reason. Islamic law is ultimately based on

the need to please God, so "getting around" the law is

generally not acceptable. Attorneys may be consulted

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about what might please God rather than what is an

explicit requirements of the government.

Socialist law is based on the premise that "the government

is always right" and typically has not developed a sophisticated

framework of contracts (you do what the governments tells you

to do) or intellectual property protection (royalties are

unwarranted since the government ultimately owns everything).

Former communist countries such as those of Eastern Europe

and Russia are trying to advance their legal systems to

accommodate issues in a free market.

U.S. laws of particular interest to firms doing business

abroad:

Anti-trust. U.S. antitrust laws are generally enforced in

U.S. courts even if the alleged transgression occurred

outside U.S. jurisdiction. For example, if two Japanese

firms collude to limit the World supply of VCRs, they may

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be sued by the U.S. government (or injured third parties)

in U.S. courts, and may have their U.S. assets seized.

The Foreign Corrupt Influences Act came about as

Congress was upset with U.S. firms’ bribery of foreign

officials. Although most if not all countries ban the

payment of bribes, such laws are widely flaunted in many

countries, and it is often useful to pay a bribe to get foreign

government officials to act favorably. Firms engaging in

this behavior, even if it takes place entirely outside the

U.S., can be prosecuted in U.S. courts, and many

executives have served long prison sentences for giving in

to temptation. In contrast, in the past some European firms

could actually deduct the cost of foreign bribes from their

taxes! There are some gray areas here—it may be legal to

pay certain "tips" –known as "facilitating payments"—to

low level government workers in some countries who rely

on such payments as part of their salary so long as these

payments are intended only to speed up actions that would

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be taken anyway. For example, it may be acceptable to

give a reasonable (not large) facilitating payment to get

customs workers to process a shipment faster, but it would

not be legal to pay these individuals to change the

classification of a product into one that carries a lower

tariff.

Anti-boycott laws. Many Arab countries maintain a

boycott of Israel, and foreigners that want to do business

with them may be asked to join in this boycott by stopping

any deals they do with Israel and certifying that they do

not trade with that country. It is illegal for U.S. firms to

make this certification even if they have not dropped any

actual deals with Israel to get a deal with boycotters.

Trading With the Enemy. It is illegal for U.S. firms to

trade with certain countries that are viewed to be hostile to

the U.S.—e.g., Libya and Iraq.

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SEGMENTATION, TARGETING, AND

POSITIONING

The importance of STP:

Segmentation is the cornerstone of marketing—almost all

marketing efforts in some way relate to decisions on who to

serve or how to implement positioning through the different

parts of the marketing mix. For example, one’s distribution

strategy should consider where one’s target market is most

likely to buy the product, and a promotional strategy should

consider the target’s media habits and which kinds of messages

will be most persuasive. Although it is often tempting, when

observing large markets, to try to be "all things to all people,"

this is a dangerous strategy because the firm may lose its

distinctive appeal to its chosen segments.

In terms of the "big picture," members of a segment should

generally be as similar as possible to each other on a relevant

dimension (e.g., preference for quality vs. low price) and as

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different as possible from members of other segments. That is,

members should respond in similar ways to various treatments

(such as discounts or high service) so that common campaigns

can be aimed at segment members, but in order to justify a

different treatment of other segments, their members should

have their own unique response behavior.

Approaches to global segmentation:

There are two main approaches to global segmentation. At

the macro level, countries are seen as segments, given that

country aggregate characteristics and statistics tend to differ

significantly. For example, there will only be a large market for

expensive pharmaceuticals in countries with certain income

levels, and entry opportunities into infant clothing will be

significantly greater in countries with large and growing

birthrates (in countries with smaller birthrates or stable to

declining birthrates, entrenched competitors will fight hard to

keep the market share).

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There are, however, significant differences within

countries. For example, although it was thought that the Italian

market would demand "no frills" inexpensive washing machines

while German consumers would insist on high quality, very

reliable ones, it was found that more units of the inexpensive

kind were sold in Germany than in Italy—although many

German consumers fit the predicted profile, there were large

segment differences within that country. At the micro level,

where one looks at segments within countries. Two approaches

exist, and their use often parallels the firm’s stage of

international involvement. Intra-market segmentation involves

segmenting each country’s markets from scratch—i.e., an

American firm going into the Brazilian market would do

research to segment Brazilian consumers without incorporating

knowledge of U.S. buyers. In contrast, inter-market

segmentation involves the detection of segments that exist

across borders. Note that not all segments that exist in one

country will exist in another and that the sizes of the segments

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may differ significantly. For example, there is a huge small car

segment in Europe, while it is considerably smaller in the U.S.

Inter-market segmentation entails several benefits. The

fact that products and promotional campaigns may be used

across markets introduces economies of scale, and learning that

has been acquired in one market may be used in another—e.g., a

firm that has been serving a segment of premium quality cellular

phone buyers in one country can put its experience to use in

another country that features that same segment. (Even though

segments may be similar across the cultures, it should be noted

that it is still necessary to learn about the local market. For

example, although a segment common across two countries may

seek the same benefits, the cultures of each country may cause

people to respond differently to the "hard sell" advertising that

has been successful in one).

The international product life cycle suggests that product

adoption and spread in some markets may lag significantly

behind those of others. Often, then, a segment that has existed

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for some time in an "early adopter" country such as the U.S. or

Japan will emerge after several years (or even decades) in a "late

adopter" country such as Britain or most developing countries.

(We will discuss this issue in more detail when we cover the

product mix in the second half of the term).

Positioning across markets:

Firms often have to make a tradeoff between adapting their

products to the unique demands of a country market or gaining

benefits of standardization such as cost savings and the

maintenance of a consistent global brand image. There are no

easy answers here. On the one hand, McDonald’s has spent a

great deal of resources to promote its global image; on the other

hand, significant accommodations are made to local tastes and

preferences—for example, while serving alcohol in U.S.

restaurants would go against the family image of the restaurant

carefully nurtured over several decades, McDonald’s has

accommodated this demand of European patrons.

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ENTRY STRATEGIES

Methods of entry:

With rare exceptions, products just don’t emerge in foreign

markets overnight—a firm has to build up a market over time.

Several strategies, which differ in aggressiveness, risk, and the

amount of control that the firm is able to maintain, are available:

Exporting is a relatively low risk strategy in which few

investments are made in the new country. A drawback is

that, because the firm makes few if any marketing

investments in the new country, market share may be

below potential. Further, the firm, by not operating in the

country, learns less about the market (What do consumers

really want? Which kinds of advertising campaigns are

most successful? What are the most effective methods of

distribution?) If an importer is willing to do a good job of

marketing, this arrangement may represent a "win-win"

situation, but it may be more difficult for the firm to enter

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on its own later if it decides that larger profits can be made

within the country.

Licensing and franchising are also low exposure methods

of entry—you allow someone else to use your trademarks

and accumulated expertise. Your partner puts up the

money and assumes the risk. Problems here involve the

fact that you are training a potential competitor and that

you have little control over how the business is operated.

For example, American fast food restaurants have found

that foreign franchisers often fail to maintain American

standards of cleanliness. Similarly, a foreign manufacturer

may use lower quality ingredients in manufacturing a

brand based on premium contents in the home country.

Contract manufacturing involves having someone else

manufacture products while you take on some of the

marketing efforts yourself. This saves investment, but

again you may be training a competitor.

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Direct entry strategies, where the firm either acquires a

firm or builds operations "from scratch" involve the

highest exposure, but also the greatest opportunities for

profits. The firm gains more knowledge about the local

market and maintains greater control, but now has a huge

investment. In some countries, the government may

expropriate assets without compensation, so direct

investment entails an additional risk. A variation involves

a joint venture, where a local firm puts up some of the

money and knowledge about the local market.

MARKET ANALYSIS TOOLS:

Country Map - (Country Map is free to all users worldwide

and does not require a login or password.)

Benchmarking national and sectoral trade performance and

competitiveness. Profiles of 184 countries and territories, freely

available.  Country Map provides a wide range of analytical

tools, including the Trade Performance Index on export

competitiveness, National Export Performance and Import

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Profile, the econometric trade simulation model Trade Sim on

bilateral trade potential and an assessment of the reliability and

characteristics of national trade statistics.  Country Map also

includes links to Trade Information Sources, Trade Support

Institutions and current ITC projects for the country concerned.

Trade Map:

Trade statistics for international business development.

An online database of global trade flows in goods and

services and tariff measures for international business

development and trade promotion, providing detailed export and

import profiles and trends for over 5,300 products in over 200

countries and territories.  Based on the world’s largest database

COMTRADE, Trade Map presents import/export values and

quantities, growth rates, market shares and market access

information.  It allows users to analyze markets, select priority

countries for export diversification, review the performance of

competing countries and assess opportunities for product

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diversification by identifying existing and potential trade

between countries.

Product Map

Business information for going global a Web portal

presenting business information and intelligence in a product

context for 72 product clusters.  The product clusters range from

agricultural machinery to wood products.  Product Map includes

market studies, price indicators, links to product information,

trade data and links to over 20,000 companies and

organizations. Companies can also create their own basic web

site, which is hosted on the portal.

Market Access Map:

Making market access barriers transparent Market Access

Map is an interactive database of tariffs and market access

barriers.  It contains the market access conditions applied at the

bilateral level by over 170 importing countries to the products

exported by over 200 countries and territories.  Market Access

Map’s strength lies in its wide geographical coverage; its taking

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into account of almost all multilateral, regional and bilateral

trade agreements; the integration of ad valorem equivalents of

specific tariffs; as well as certificates and rules of origin.

Market Access Map allows users to analyze the protection of

any geographic grouping and sectoral aggregation.  It also offers

the possibility of simulating tariff reductions using various

negotiation formulae.  Developed by ITC in collaboration with

CEPII, UNCTAD and WTO, Market Access Map aims to

enhance market transparency, support international trade

promotion, and to facilitate the analysis of related trade policy

issues.

Investment Map:

Identifying foreign investment opportunities

Investment Map is an interactive web-based tool that

combines statistics on foreign direct investment (FDI),

international trade and market access into a single portal.  It

allows analyses by country, partner and industry.  It also

includes information on the location, sales, employment and

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parent company for over 70,000 foreign affiliates located in

developing countries and economies in transition.  Investment

Map, the foreign direct investment with foreign companies,

international trade and tariffs is available online free to Sub-

Saharan Africa users.

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OPINION OF RESPONDENT

It is a process of executing, planning, effective marketing

mix for the purpose of achieving objects for all those

whose involve in the process.

International marketing will helps to improve to banking

facilities and advantages.

International marketing helps to improve to the import &

export goods & services.

The informal interviewing gives valuable indication as to

how use.

International marketing is helps to develop good relations

between two countries and at international level we get

best quality product.

The concept of International marketing is necessary to

developing countries & it improves economic

development of country.

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International marketing will improve the quality &

quantity of the product.

International marketing improved the competitive

efficiency of forms.

International marketing product is reasonable one

customer like the product and they keep on demanding.

International marketing depends product life cycle and

individual capacity.

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HYPOTHESIS

No planned activities existing in marketing.

Use of modern technology is essential.

Globalization brings all markets closer.

Political stability is essential for global market.

Goods can be made available in a global market.

Clear cut import –export policies are necessary.

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MAJOR FINDINGS

(Conclusions)

A product faces competition in a global market.

Political instability affects International market.

Environmental challenges create hurdles like natural

calamities.

International marketing decisions are differ than others.

Quality products are necessary for global market.

Advance changes in communication system bring market

closer.

Fastest movement of goods and proper logistic

management is possible.

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SUGGESTIONS

Quality product should be produced.

Cost of productions should be under control.

People should vote for political stability.

Simple rules and regulations for import & export business

are necessary.

E-commerce & E-banking should be used.

Research & development using should be proper.

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- SAMPLE DESIGN -

The present research work is important for planning are

development of international marketing, for effective research

purpose, 50 sample are selected from various organization. They

are of different age groups and they are engaged directly on

indirectly in the field.

AGE GROUP

18 - 25 27

26 - 35 12

36 - 45 09

46 - 55 02

56 - 65 00

Total 50

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The age group of the respondent is stated as above-

SEX

Male Female Total

34 16 50

For research purpose 34 males and 16 females were selected. The

questionnaire containing 17 guest ions were developing with the help of project guide.

The questions are as under:

Question type Question

no.

Yes / no. types

Personal information

Multiple choice

09

04

04

Total 17

The questionnaire was circulated among the 50 respondent for

getting information on the subject.

ANALYSIS OF DATA

Section -2 (questions wise)

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Q.1- Have you noticed\witnessed as unplanned

changes in

Marketing activities?

Yes No Total

45 05 50

45 respondents witnessed unplanned changes in marketing

activities.

05 respondents do not notice.

Q.2-Is their any good effect of modern technology on

International Marketing?

Yes No Total

48 02 50

Almost all agreed to above & very few do not agree.

Q.3-Development of Information & Communication

brings closer- International Markets? Do you

agree with?

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Yes No Total

47 03 50

47 respondents say that development in information &

communication brings closer international markets.

03 do not agree.

Q.4- Globalization brings changes in International

Marketing System is it true?

Yes No Total

40 10 50

40 respondents agreed to this & 10 do not respond

positively.

Q.5- Is it possible to globalize production of goods

and services?

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Yes No Total

41 09 50

41 respondents said product can be globalizes.

09 respondents disagreed to this.

Q.6- Domestic Marketing Decisions And

International Marketing Decisions Are Not Same? Is

It True?

Yes No Total

50 Nil 50

All respondents agreed to above statement.

Q.7- It Is True That Political Forces Within A

Country Affect The International Marketing

Decisions?

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101

Yes No Total

45 05 50

45 respondents agree.

05 respondents disagree.

Q.8- Do you agree that environmental challenges

influence the marketing strategy?

Yes No Total

42 08 50

42 respondents agree.

08 respondents do not agree.

Q.9-Do You Agree That Political Stability And

Government Policy Greatly Affects The International

Markets?

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Yes No Total

40 10 50

40 respondents agree that political stability & govt.

policies affect international marketing.

10 do not agree.

Q.10-Do You Agree That More Competition Is One

Of The Demerits Of International Market?

Yes No Total

47 03 50

47 respondents are agreeing for stiff competition.

03 respondents disagree.

ANALYSIS OF DATA

Section -2 (percentage wise)

Q.1- Have You Noticed\Witnessed As Unplanned Changes In Marketing Activities?

Yes No Total

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90 10 100

90% respondents witnessed unplanned changes in

marketing activities.

10% respondents do not notice.

Q.2- Is Their Any Good Effect Of Modern Technology On International Marketing?

Yes No Total

96 06 100

Almost all agreed to above & very few do not agree.

Q.3- Development Of Information & Communication Brings Closer- International

Markets? Do You Agree With?

Yes No Total

94 06 100

94% respondents say that development in information &

communication brings closer international markets.

06% do not agree.

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Q.4- Globalization Brings Changes In International

Marketing System Is It True?

Yes No Total

80 20 100

80% respondents agreed to this & 20% do not respond

positively.

Q.5- Is It Possible To Globalize Production Of Goods

And Services?

Yes No Total

82 18 100

82% respondents said product can be globalizes.

18% respondents disagreed to this.

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Q.6- Domestic Marketing Decisions And

International Marketing Decisions Are Not Same? Is

It True?

Yes No Total

100 Nil 100

All respondents agreed to above statement.

Q.7- It Is True That Political Forces Within A

Country Affect The International Marketing

Decisions?

Yes No Total

90 10 100

90% respondents agree.

10% respondents disagree.

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Q.8- Do you agree that environmental challenges

influence the marketing strategy?

Yes No Total

84 16 100

84 respondents agree.

16 respondents do not agree.

Q.9-Do You Agree That Political Stability And

Government Policy Greatly Affects The

International Markets?

Yes No Total

80 20 100

80% respondents agree that political stability & govt.

policies affect international marketing.

20% do not agree.

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Q.10-Do You Agree That More Competition Is One Of The Demerits Of International

Market?

Yes No Total

94 06 100

94% respondents are agreeing for stiff competition.

06% respondents disagree.

BIBLIOGRAPHY

www.google.com

www.yahoo.com

International marketing

Vipul Prakashan

International marketing

Himalaya Publication

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APPENDIX

The concept of international marketing

Questionnaire:

Name:

Age:

Sex: male/female

Qualification :

Profession:

Have You Noticed\Witnessed As Unplanned Changes In

Marketing Activities?

Yes/No

Is Their Any Good Effect Of Modern Technology On

International Marketing?

Yes/No

Development Of Information & Communication Brings

Closer- International Markets? Do You Agree With?

Yes/No

Globalization Brings Changes In International Marketing

System Is It True?

Yes/No

Is It Possible To Globalize Production Of Goods And Services?

Yes/No

Domestic Marketing Decisions And International Marketing

Decisions Are Not Same? Is It True?

Yes/No

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It Is True That Political Forces Within A Country Affect The

International Marketing Decisions?

Yes/No

Do You Agree That Environmental Challenges Influence The

Marketing Strategy?

Yes/No

Do You Agree That Political Stability and Government Policy

Greatly Affects the International Markets?

Yes/No

Do You Agree That More Competition Is One Of The Demerits

Of International Market?

Yes/No

Your Opinion?

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