The international marketing environmentDocument Transcript
BRANCH:-INTERNATIONAL BUSINESSSUBJECT:- INTERNATIONAL MARKETING ASSIGNMENT ON INTERNATIONAL MARKETING ENVIRONMENT
THE INTERNATIONAL MARKETING ENVIRONMENT The international marketing environment is a complex constellation ofdemands and constraints which the firm faces as it attempts to compete and grow.Identifying customer values in international markets requires a sophisticatedunderstanding of differentiated expressions of customer needs, many of which areinfluenced by culture. Similarly, the task of communicating the values provide andtheir delivery in international markets is complex, requiring a great deal ofunderstanding of the environment and its influences. International marketing ischaracterized by the convergence of the company marketing process, usually in onecountry, and the customer’s purchase decision process in another. This internationalmarketing environment consists of a number of elements most of which lie outsidethe control of the firm.
The following are the elements of the international marketing environment:- 1. ECONOMIC ENVIRONMENT:- The economic environment has much to do with the scope of business,business prospects and the business strategy. The nature and the level of development of economy, economic resources,size of economy, economic system and economic policies, economic conditions,trends in the GNP growth rate and per capita income, nature of and trends in foreigntrade, domestic supply and demand conditions are all the factors relevant tobusiness. The nations of the world are broadly classified as developing countries anddeveloped countries. The developing countries fall into two categories low income countries andmiddle income countries. Generally, high income countries are developed countries.While most of the high income economies are industrial economies some of them actas exporters. Low income economies are those with a GNP per capita of $825 or less in2004. Within the group of low income economies, the United Nations has identified aspecial category namely Least Developed countries, most of whom suffer from oneor more of the following constraints: a very low GNP per capita, land locked,remotely insularity, desertification and exposure to natural disasters. The middle income economies are those with a GNP per capita between $826and $10,066 in 2004. The middle income economies are further divided into twocategories; lower middle income between $826 and $3255 and upper middle incomebetween $3031 and $9360 The High income economies are those with a GNP per capita of $10,066 ormore, in 2004.The developed economies as a group are sometimes referred to asthe North with some exceptions like Australia and New Zealand, since most of themlie in the Northern hemisphere and the developing economies are referred as theSouthern hemisphere. The differences in the levels of development and income have implications forbusiness. In the developing countries, particularly in the low income economies, thedemand for many categories of goods and services is limited because of the lowlevels of income. The products that are regarded as essentials in advanced countrieslike refrigerator, electric fans, TV, etc. are regarded as luxuries in these countries.The price and the demand for them may be affected by high taxes on them becauseof their categorization as luxurious items. Many developing countries suffer fromsevere balance of payments problems and hence their import policies are very
restrictive. However, a number of developing countries hold out very good prospectsfor business in future because of three reasons: 1. A steady increase in population 2. Increase in income 3. Growing democratization and in dividual freedomThe share of the developing countries in the increase in the world income has beengrowing and it would continue in future. The developed economies are characterizedby high levels of income and consumption and business competition. Foreign tradeis more liberal in comparison with that of most of the developing countries. Importrestrictions are confined by and large, to import competing industries. The marketsfor many products in these economies are nearing saturation or have alreadysaturated or are even declining mostly because of the population trends. While theadvanced countries are characterized by high level of competition in the industrialsector and fast technological changes, most developing countries lag behind in theserespects. Companies in the developed economies even viewed the developingcountries as a market for obsolete technologies and products. The differences in the income levels may necessitate product and pricemodification. The Aero Shoes’ Woodland range of shoes has been introduced inIndia for less than one third of the US price although the Indian target is the uppersegment of the market. In countries where the income levels are low cost reductionmay become essential for price reduction. Low cost models of products without thefrills may be appropriate for these markets. A developing country firm intending to do business in the advanced andcompetitive markets must bear in mind the fact that the environment in such marketsmay be different from that in the domestic. Product quality, features, styling, andfinish, packaging, etc. are very important for success in these markets. The firm mustmake sure that the increased cost due to these factors be more than compensatedby the high price chargeable in foreign markets. The difference in the level ofdevelopment may cause a difference in the nature of the demand for a product. Onlythe areas that are electrified may the demand for electric consumer durables will bethere. In developing countries most of the household possess a moped, arefrigerator, a radio, a TV, and a number of other household appliances. Thedemand for most of these consumer durables is from the existing customers only.Creation of primary demand is very important in developed countries even forproducts that have become quite common in developed countries. This difference in the nature of demand has important implications formarketing. In developed countries the consumers become familiar with the productand are generally more capable of evaluating the product and are better equipped tomake a choice by not only identifying the common problems in the products but alsorectifying the minor problems. The economic environment of different countries is thus different indicatingthat different business strategies may be required for different markets. The differentregions of a national economy may show great diversity of economical nature. Insuch cases, it may not be appropriate to regard it as a single economic unit.2. POLITICAL ENVIRONMENT:- The critical concern Political environment has a very important impact onevery business operation no matter what its size, its area of operation. Whether thecompany is domestic, national, international, large or small political factors of thecountry it is located in will have an impact on it. And the most crucial & unavoidable
realities of international business are that both host and home governments areintegral partners. Reflected in its policies and attitudes toward business are agovernments idea of how best to promote the national interest, considering its ownresources and political philosophy. A government controls and restricts a companysactivities by encouraging and offering support or by discouraging and banning orrestricting its activities depending on the government. Here steps in international law.International law recognizes the right of nations to grant or withhold permission to dobusiness within its political boundaries and control its citizens when it comes toconducting business. Thus, political environment of countries is a critical concern forthe international marketer and he should examine the salient features of politicalfeatures of global markets they plan to enter.THE SOVEREIGNITY OF NATIONS: From the international laws point of view asovereign state is independent and free from external control; enjoys full legalequality; governs its own territory; selects its own political, social, economic systems;and has the power to enter into agreements with other nations. It is extension ofnational laws beyond a countrys borders that much of the conflict in internationalbusiness arises. Nations can and do abridge specific aspects of their sovereignrights in order to coexist with other countries. Like the European Union, NorthAmerican Free Trade Agreement (NAFTA) are examples of nations voluntarilyagreeing to give up some of their sovereign rights in order to participate with membernations for common, mutually beneficial goals. For example the pajama gamediscussed in global perspective is not unusual for multinational corporations. Thepajama caper was a controversy arose over a US embargo forbidding USbusinesses to trade with Cuba. Wal-Mart was selling Cuban made pajamas inCanadian market. When Wal-Mart officials in US came to know about this, theyordered all offending Cuban pajamas as it was against US law. Canada wasincensed with the obtrusion of US law on Canadian citizens. The Canadian citizensfelt that they should be able to buy Cuban-made pajamas if they wanted to. Wal-Mart was caught between a Canada-US foreign policy feud. Wal-Mart Canada wasbreaking US law if it continued to sell pajamas, and was subject to a million-dollarfine and possible imprisonment. However, if it did pull out pajamas from Canadianmarket it was subject to 1.2 million dollar fine under Canadian law. The ideal politicalclimate for a multinational firm is stable, friendly environment. Unfortunately, that isnever really the case, its not always friendly and stable. Since foreign businessesare judged by standards as variable as there are nations, the friendliness andstability of the government in each country must be assessed as an ongoingbusiness practice.STABILITY OF GOVERNMENT POLICIES: The most important of the politicalconditions that concern an international business is the stability or instability of theprevailing government policies. Political parties may change or get reelected but themain concern for MNCs is the continuity of the set rules or code of behaviorregardless of the party in power. A change in the government does not always meanchange in the level of political risks. In Italy the political parties have changed 50times since the end of World War II but the business continues to go on as usualinspite of the political turmoil. In comparison is India, where the government haschanged 51 times since 1945 but however much of the government policies remainhostile to foreign investments. Conversely, radical changes in policies toward foreignbusiness can occur in the most stable of the governments. Some of the Africancountries are among the unstable with seemingly unending civil wars, boundary
disputes and oppressive military regimes. Like one of the region with the greatestnumber of questions concerning long-term stability is Hong Kong as since China hasgained control, the official message is that nothing will change and thus everything isseemingly going smoothly but the political analysts say that it is too early to say howwill the business climate change, if it will. If there is potential for profit and if givenpermission to operate within a country, MNCs can function under any type ofgovernment as long as there is some long-term predictability and stability.POLITICAL PARTIES: Particularly important to the marketer is the knowledge of allphilosophies of all major political parties within a country, since anyone mightbecome dominant and alter prevailing attitudes. In those countries where there aretwo strong political parties where usually one succeeds the other, it is important toknow the direction each of the parties is likely to take. Changes in direction a countrymay take toward trade and related issues are caused not only by political parties butalso by politically strong interest groups and factions within different political parties,which cooperate to affect trade policies.NATIONALISM: Economic nationalism that exists to some degree in all countries isanother factor that affects international environment. Nationalism is intense feelingsof national pride and unity, an awakening of nations people to take pride in their owncountry. This pride can take an anti-foreign business bias. One of the central aims ofeconomic nationalism is the preservation of national economic anatomy wherenational interest and security are more important than international considerations.POLITICAL RISKS OF GLOBAL BUSINESS CONFISCATION, EXPROPRIATIONAND DOMESTICATION The most severe political risk is confiscation, which isseizing of companys assets without payment. Less severe is however,expropriation, which requires reimbursement, for the government seized investment.A third type of risk is domestication, which occurs when host country takes steps totransfer foreign investments to national control and ownership through series ofgovernment decrees. A change in the governments attitudes, policies, economicplans and philosophies toward the role of foreign investment is the reason behind thedecision to confiscate, expropriate or domesticate existing foreign assets.ECONOMIC RISKS International companies are often faced with many economicrisks most of which arise without any prior warning. Economic risks are an importantand a recurring part of political environment that a few companies can avoid. ·Exchange controls stems from shortage of foreign exchange held by the country.When this happens, controls may be placed upon all movements of capital orselectively against most politically vulnerable companies. Exchange controls areextended to cover products by applying a system of multiple exchange rates toregulate trade. · Local-content laws- companies often require a portion of anyproduct sold in a country to have a local content. · Import restrictions- selectiverestrictions on import of certain raw materials, machines and spare parts arecommon strategies used to force foreign companies to purchase more materialswithin host country creating markets for local products. · Tax controls- taxes are aclassified risk when used as a means of controlling foreign investments. They areoften raised without warning and in violation of formal agreements. · Price controls-essential products that command considerable public interest are often subject toprice controls. ASSESSING POLITICAL VULNERABILITY: Some products are morepolitically vulnerable than others, in that they receive more government attention.This special attention may result in positive or negative actions towards the
company. Unfortunately there are no absolute guidelines for marketers to followwhether the product will receive government attention or not.POLITICALLY SENSITIVE PRODUCTS: There are some generalizations that help toidentify the tendency for products to be politically sensitive. Products that have aneffect upon the environment exchange rates, national and economic security, andthe welfare of the people are more apt to be politically sensitive. For products judgednon essential the risk would be greater, but for those thought to be making animportant contribution, encouragement and special considerations could beavailable.FORECASTING POLITICAL RISKS: A number of firms are employing systematicmethods of measuring political risk. Political risk assessment can: · Help managersdecide if risk insurance is needed · Devise and intelligence network and an earlywarning system · Help managers develop a contingency plan · Build a database ofpast political events for use by corporate management · Interpret the data gatheredand getting forewarnings about political and economic situations REDUCINGPOLITICAL VULNERABILTY: Even though the company cannot directly control oralter the political environment, there are measures with which it can lessen thesusceptibility of a specific business venture. GOOD CORPORATE CITIZENSHIP Acompany can reduce its political vulnerability by being a corporate citizen andremembering: - 1. It is a guest in the country and should act accordingly 2. Theprofits are not its solely, the local employees and the economy of the nation shouldalso benefit. 3. It is not wise to try and win over new customers by totallyAmericanizing them. 4. A fluency in the local language helps making sales andcementing good public relationships. 5. It should train its executives to actappropriately in the foreign environment.STRATEGIES TO LESSEN POLITICAL RISKS: MNCs can use other strategies tominimize political risks and vulnerability. They are: - · Joint ventures · Expanding theinvestment base · Marketing and distribution · Licensing · Planned domestication ·Political payoffs GOVERNMENT ENCOURAGEMENT OF GLOBAL BUSINESSFOREIGN GOVERNMENT ENCOURAGEMENT Governments also encourageforeign investment. The most important reason to encourage investment is toaccelerate the development of an economy. An increasing number of countries areencouraging investments with specific guidelines toward economic goals. MNCs maybe expected to create local employment, transfer technology, generate export sales,stimulate growth and development of the local industry.US GOVENRMENT ENCOURAEMENT: The US government is motivated foreconomic as well as political reasons to encourage American firms to seekopportunities in the countries worldwide. It seeks to create a favorable climate foroverseas business by providing the assistance by providing the assistance that helpsminimize some of the troublesome politically motivated financial risks of doingbusiness abroad.3. LEGAL ENVIRONMENT:- Organizations must deal with laws at the international, federal, state, and locallevels. US laws directly affecting marketing typically fall into two categories: thosepromoting competition among firms and those protecting consumers and society.
Exhibit 3.8 presents examples of each type. Laws promoting competition focus onoutlawing practices that give a few firms unfair competitive advantages over others.The specific impact of these laws depends on court rulings that may change overtime or differ at the state and national levels. An interesting example is in the area ofpricing. A federal court ruled that American Airlines was not guilty of trying to driveweaker competitors out of business when it slashed fares in 1992. In contrast, astate court in Arkansas found Wal-Mart guilty of predatory pricing by sellingpharmacy products below cost to drive out competitors. These examples illustratethe complexity of the political/legal environment. Consumer protection laws generally indicate what firms must do to giveconsumers the information they need to make sound purchasing decisions or toensure that the products they buy are safe. For example, the Fair Packaging andLabeling Act requires packages to be labeled honestly; the Child Protection Actregulates the amount of advertising that can appear on children’s televisionprograms. Laws typically affect marketing activities by indicating what can or cannot bedone. Until recently, Germany had a law that forced most retail stores to close at6:30 PM on weekdays and 2 PM on Saturdays, and it did not allow commercialbaking on Sunday. This restricted the operations of retailers. A new law expandedallowable shopping hours to 8 PM on weekdays and 4 PM on Saturdays; it alsoallowed bakeries to sell fresh bread on Sunday mornings. Other stores mustremain closed on Sunday. Some laws are directed at providing marketing opportunities. Syria, forexample in trying to open its economy to the private sector and foreign investment,passed a law that exempts investors in approved projects from taxes for five tonine years, waives customs duties on certain imports, and removes regulations thatmade it difficult to do business in Syria. Known as No. 10, it has contributed to a7 to 8 percent growth in the Syrian economy.REGULATION AND REGULATORY AGENCIES: Most legislation in the US is enforced through regulations developed by avariety of agencies, and marketers must often work with regulatory authorities at thefederal, state, and local levels.Key US laws affecting marketingA. Promoting competitionAct Purposev Sherman Act (1890) Prohibits monopolistic practicesv Clayton Act (1914) Prohibits anticompetitive activitiesv Federal Trade Commission Act (1914) Establishes regulatory agency to enforcelaws against unfair competitionv Robinson–Patman Act (1936) Prohibits price discriminationv Lanham Trademark Act (1946) Protects trademarks & brand namesv Magnusson–Moss Act (1975) Regulates warrantiesv US–Canada Trade Act (1988) Allows free trade between US & CanadaB. Protecting consumers & societyAct Purposev Food, Drug, and Cosmetics Act (1938) Regulates food, drug & cosmetic industriesv Fair Packaging and Labeling Act (1966) Regulates packaging & labelingv Child Protection and Toy Safety Act (1969) Prevents marketing of dangerousproducts to children
v Consumer Credit Protection Act (1968) Requires full disclosure of financial chargesfor loansv Fair Credit Report Act (1970) Regulates reporting & use of credit informationv Fair Debt Collections Practice Act (1970) Regulates methods for collecting debtsv Child Protection Act (1990) Regulates advertising on children’s television programsv Americans with Disabilities Act (1990) Prohibits discrimination against consumerswith disabilities. Often, regulations are not the same at different depends on court rulings thatmay change over time or differ at the state and national levels. An interestingexample is in the area of pricing. A federal court ruled that American Airlines was notguilty of trying to drive weaker competitors out of business when it slashed fares in1992. In contrast, a state court in Arkansas found Wal-Mart guilty of predatory pricingby selling pharmacy products below cost to drive out competitors. These examplesillustrate the complexity of the political/legal environment. The governmental levels: For example, the Federal Trade Commission (FTC)enforces guidelines for how firms promote the environmental advantages of theirproducts, but these guidelines do not supersedestate laws or regulations. Now, 12 states regulate environmental claims in someway, with more states likely to follow in the future. Sorting through differentregulations is a complex task for marketers. Several of the most important federalagencies are described in Some of these regulatory agencies cut across industries (FTC, CPSC, EPA);others focus on specific industries (FDA, ICC, FCC). The impact of these regulatoryagencies is especially evident in the pharmaceutical industry. The FDA mustapprove a new drug before it is marketed and can place limitations on its use. Forexample, the FDA approved Warner-Lambert’s anticonvulsant, Neurontin, but onlyas an add-on therapy for patients taking other epilepsy medications. This stipulationlimits Warner-Lambert’s marketing efforts for Neurontin. FDA actions can alsoproducemarketing opportunities. The approval of smoking-cessation nicotine drugs as over-the-counter products opened up a large market to marketers of nicotine gum andpatches. As more firms participate in the global marketplace, the need forinternational regulations is emerging. One example is the International StandardsOrganization’s 25-page set of quality standards called ISO 9000. These standardsapply to 20 different functions within a company, such as product design, processcontrol, purchasing, customer service, inspection and testing, and training, and arebeing incorporated into laws of the European Union (EU) to regulate trade in Europe.A company must go through a long and expensive process to become ISO 9000–certified, which would indicate it meets world standards in many areas. Companiesnot ISO 9000– certified may not do business in Europe or many other countries.Even individual companies, like General Motors and Siemens, require their suppliersto be ISO 9000–certified.Regulations in different countries also change and presentmarket opportunities or threats. For example, the EU is deregulating European skies.Beginning April 1, 1997, any EU carrier can fly anywhere in the EU. Thisderegulation provides opportunities for EU airlines to open new markets, but theincreased competition is likely to reduce prices to consumers. Lower prices will exerttremendous pressure on profits. Many of the smaller, start-up airlines may not beable to survive. The larger airlines, such as Lufthansa, are already implementing costcutting measures to prepare for the more competitive environment. Sometimes
regulations are slow to develop for new markets. This is the case in Japan shows ofhow entrepreneurs are taking advantage of this situation.4.SOCIAL ENVIRONMENT:- The social environment includes all factors and trends related to groups ofpeople,including their number, characteristics, behavior, and growth projections.Since consumer markets have specific needs and problems, changes in the Identifyrelevant environmental factors & trends Does trend create a marketing opportunity?Does trend pose a marketing threat? Decide how to minimize threat Assess impactof trends on markets & marketing activities Decide how to take advantageof opportunity. Social environment can affect markets differently. Trends in the socialenvironment might increase the size of some markets, decrease the size of others,oreven help to create new markets. We discuss two important components of thesocial environment: the demographic environment and the cultural environment.Speaking from Experience Based in Hong Kong, Samuel Chi-HungLee’s company has established extensive business networks in southeast Asiancountries, such as Indonesia, Malaysia, Singapore, Burma, Vietnam, and southernChina. Samuel has been a senior sales and marketing management executive forseveral North American corporations with operations in Hong Kong and has an MBA.He describes some of the business opportunities made possible by the rapidlychanging marketing environment in China and Hong Kong.‘‘Tremendous changes have taken place in Hong Kong since Chinaimplementedits open-door policy to the outside world. Hong Kong has changed from amanufacturing center to an international financial and professional servicescenter. Because land and labor costs are high, many businesses in Hong Kongare knowledge-based and driven by information technology. My companyutilizesknowledge and information to help other companies pursue opportunities indifferent Asian countries. For example, we are working with a joint venture tobuild a chemical plant in Ho Chi Minh City, Vietnam.’’Demographic Environment The demographic environment refers to the size, distribution and growthrate of groups of people with different characteristics. The demographiccharacteristicsof interest to marketers relate in some way to purchasing behavior, because peoplefrom different countries, cultures, age groups, or household arrangement oftenexhibit different purchasing behaviors. A global perspective requires that marketersbe familiar with important demographic trends around the world as well as within theUnited States.GLOBAL POPULATION SIZE AND GROWTH Population size and growth rates provide one indication of potential marketopportunities. The world population is now more than 5.3 billion, and almost 100million people will be added each year during the 1990s. Thus, the world population
is expected to grow by 1 billion during the decade of the 1990s. Approximately 95percent of that growth will take place in developing countries in Asia, Africa, andLatin America.2 Population in the developed countries will grow at a much slowerrate. For example, the US population grew by approximately 1 percent per yearduring the 1980s, a low rate expected to persist throughout the 1990s. There is atremendous disparity in population size and growth rates across countries, Chinacurrently has the largest population, followed by India, with the US a distant third.The rapid growth of the Indian population is expected to make it the world’s mostpopulous nation by the year 2100. Other countries with large and growingpopulations are the developing nations of Indonesia, Brazil, Pakistan, Bangladesh,and Nigeria. The world population situation can be summarized as follows. Aboutevery two seconds, nine babies are born and three people die, for a net increase ofthree people each second. This leads to a growth rate of 10,600 people per hour,254,000 per day, 1.8 million per week, 7.7 million per month, and 93 million per year.Of this annual increase, developing countries will have 87 million new people, anddeveloped countries, 6 million. Annual growth will increase to 94million by the year 2000; by 2020 it will be 98 million, with 98 percent occurring indeveloping countries. These world population statistics make it clear that marketerscannot rely on population growth in developed countries alone for general increasesin market size. The largest growth markets, measured by population size, are in thedeveloping countries. Yet, lower income levels in developing countries may limit theactual market size for many products. Thus, marketers will have to look hard to findattractive growth markets in developed and developing countries.GLOBAL DEMOGRAPHIC CHARACTERISTICS AND TRENDS Overall world and country population statistics are important, but mostmarketers target subgroups within these large populations. Trends in populationsubgroups are therefore typically the most useful to marketers. An important trend inmany countries is growth of the urban population. Current and projected populationsfor the world’s largest cities are presented in In general, the largest cities and thehighest city growth rates are in developing countries such as Mexico, Brazil, andIndia; however, growth in urban population is evident in many developed countries.For example, in 1900 the US population was 39.6 percent urban and 60.4 percentrural; in 1990 the figures were 75.2 percent urban and 24.8 percent rural.4 Thismeans the largest and fastest-growing markets for many products are located in theurban areas of most countries. However, there has also been some growth in therural population in the US since 1990. US rural areas have seen a 5.1 percentpopulation increase in the past five years, the fastest rural growth rate in more thantwo decades. Much of this growth is from retirees, those seeking specific types ofrecreation, and those wanting a more peaceful life. Some families are moving to ruralareas; but in many of these households, at least one parent commutes to work in abig city or telecommutes. Retailers, such as Wal-Mart and Kmart are responding tothis growth by opening stores in these rural areas. Another interesting trend is theaging of the population in many countries. Current and projected median ages forselected countries The aging of the population is especially evident in Italy, Japan,Britain, and the US. Notice, however, the relatively young populations in thedeveloping countries, such as Nigeria, Mexico, Brazil, and China. Age distributiontrends in the US are presented in more detail in The largest percentage of growth isoccurring in the 45–64 and 65+ age brackets, with slight to moderate decreases inall younger age categories. These trends have important implications for marketers;older consumers have different needs and purchasing habits than younger
consumers. Marketers are responding to different age markets in a number of ways.For instance, • Financial institutions have increased marketing efforts to attract matureAmericans. Mutual fund giants, T. Rowe Price and Vanguard, offer softwareprograms to help older consumers plan for retirement. Merrill Lynch hired agerontologist to understand mature consumers better and to develop products to suittheir goals. ESPN developed the Alternative Sports Olympics to appeal toconsumers aged 18 to 29. Also called The Extreme Games, the program featuredsports that would attract the so-called Generation X (bungee jumping, street luging,sky surfing, and barefoot water ski jumping) and was sponsored by companies tryingto target those young consumers (Taco Bell, Mountain Dew, Nike, AT&T, andPontiac). More than 130,00 spectators saw the games live and 11.1 million watchedon television. ESPN has made this an annual sports competition. • Sega of America spends a great amount of time trying to understand teens.The company’s advertising agency visits the homes of 150 teens and goes shoppingwith them at the malls. This information helps Sega introduce new video gamessuccessfully. Yet another relevant demographic trend is the declining number ofhousehold units consisting of the ‘‘typical’’ family: married couples with children livingat home. Only 26 percent of US households fall in this category, down from 31percent in 1980. People living with nonrelatives is the fastest-growing householdtype, up 46 percent during the 1980s.9 In addition, 23 million Americans live bythemselves. This is an increase of 91 percent for women and 156 percent for menduring the 1980s.10 The needs and purchasing behaviors of different householdarrangements represent important trends affecting marketers. The world’s largest citiesCity1991(in thousands)2000 (est.)(in thousands)1. Tokyo—Yokohama, Japan 27,245 29,9712. Mexico City, Mexico 20,899 27,8723. Sa˜ o Paulo, Brazil 18,701 25,3544. Seoul, South Korea 16,792 21,9765. New York, USA 14,625 14,6486. Osaka—Kobe—Kyoto, Japan 13,872 14,2877. Bombay, India 12,109 15,3578. Calcutta, India 11,898 14,0889. Rio de Janeiro, Brazil 11,688 14,16910. Buenos Aires, Argentina 11,657 12,911Cultural Environment The cultural environment refers to factors and trends related to how peoplelive and behave. Cultural factors, including the values, ideas, attitudes, beliefs, andactivities of specific population subgroups, greatly affect consumers’ purchasingbehavior. Thus, marketers must understand important cultural characteristics andtrends in different markets.CULTURAL DIVERSITY Cultural differences are important in both internationaland domestic markets. A cultural group’s characteristics affect the types of productsit desires and how it purchases and uses those products. Different cultural groups in
international markets often require marketers to develop strategies specifically forthem. Campbell’s Soup has had some successes and some failures in doing this.The successes include hearty vegetable and fat-free soups in Australia, duck-gizzardsoup in Hong Kong, and the Godiva Chocolatier line in Japan. But the company hashad some failures due to lack of understanding cultural differences in some markets.German consumers did not like Campbell’s canned condensed soup. They prefer drysoups in envelopes. Polish consumers did not like Campbell’s prepared soups, sincethey would rather cook soup at home. Much of the population growth in the US isand will be accounted for by different cultural groups. The majority US population isexpected to grow by about 3 percent between 1990 and 2000. Compare this to the14 to 52 percent growth rates of different ethnic groups. A large portion of thispopulation growth is accounted for by African-Americans, Asian-Americans, andHispanic-Americans. However, significant growth is also expected from other culturalgroups: Arabs, Russians, Eastern Europeans, and Caribbeans. These differentcultural groups retain many of their habits, attitudes, interests, and behaviors eventhough they are proud to be Americans. The US is not a melting pot; it’s a mosaic ofunique people with a variety of cultures. Successful marketers understand thedelicate balance between important cultural differences and similarities that unitedifferent cultures. For example, the Arab-American sector consists of a diverse groupof people from 22 different countries, with the largest subgroups being Egyptians,Syrians, Lebanese, Palestinians, and Iraqis. Although these subgroups differ invarious ways, there is also cohesiveness among them due to their common Arabheritage. This cultural complexity provides marketers with a continual challenge.Take the cosmetics industry as an example. Maybelline introduced its Shades of Youcosmetics line to appeal women of color in 1991 and captured 41 percent of the$55 million ethnic cosmetics market by 1992. In 1993, Revlon and Cover Girlentered the ethnic market. These companies found out, however, that a large portionof their sales were to white women, even though marketing efforts were targeted tospecific cultural groups. The companies now offer a wide variety of cosmetic shades,but present them together in stores and advertise in generalmarket women’smagazines.Contrast that with the situation of Susan Yee. She and her five sisters wereconstantly frustrated by the lack of cosmetic products that would highlight the yellowundertones of their complexions. Susan decided to remedy the situation byestablishing Zhen, a line of cosmetics targeted to Asian women. Zhen, pronounced‘‘jen,’’ means genuine in Chinese. Zhen products are sold through a 12-page catalogand at some Nordstrom branches. Her typical customer is a working Asian-Americanwoman between the ages of 20 and 40.17 These examples in the cosmetics industryillustrate the importance of understanding the diversity among and within differentcultural markets. There are typically opportunities to market products across somecultural groups and to also target specific cultural groups. Sometimes, products fromone culture can appeal to consumers in another culture. Princess Asie Acansey ofGhana capitalized on such an opportunity when she formed Advanced BusinessConnections (ABC). She was disturbed about the imagery of Africa as typicallypresented in the US and decided to do something about it. ABC infuses Africanculture into the American teddy bear. The teddy bears represent African royalty andfollow African royal customs. The first teddy bear was the king’s protocol officer,Kwesi-Bear, then King Tutu Bear, followed by Queen Abena. Most of ABC’smarketing has been on the QVC home shopping network. The products have been
well received beyond the African-American market in the US, illustrating the potentialfrom mixing different cultures.CHANGING ROLES As more women enter the workforce and householdcompositions change, typical household roles are altered. No longer are financiallysupporting the household and developing a career solely the responsibility of men.No longer are household chores, child care, or grocery shopping solely theresponsibility of women. In many households, roles have shifted and distinctionshave become blurred. More men spend time on household and shopping chores,and many women are involved in career development and provide much or most ofthe financial resources for a household. Tremendous market opportunities exist forfirms that can develop effective strategies for appealing to these changing roles.Take golf as an example. Women now account for 21 percent of the 25 milliongolfers in the US. And this percentage is growing. Some of this growth is due tomore women playing golf as part of their business or professional life. Others playthe sport entirely for pleasure. In any case, women spend about $3 billion annuallyon golf equipment, clothing, travel, green fees, and other related products. One studyfound that women are more likely to take golf lessons, are less price sensitive, andare more concernedabout wearing fashionable clothing than men golfers. This growing, upscale marketof female golfers is attractive to marketers of golf products as well as other products.EMPHASIS ON HEALTH AND FITNESS Another cultural trend is an increasedemphasis on health and fitness. The pursuit of a healthier lifestyle includes eatingmore nutritious foods, exercising regularly, participating in various sports activities,and focusing on wellness. This translates into potential market opportunities for firmsthat provide products and services geared toward improving health and fitness.The organic food and beverage industry is illustrative. Sales have increased by morethan 20 percent for each of the past four years and are in excess of $3 billionannually. The number of new organic food and beverage products has increasedfrom 512 in 1991 to 1,015 in 1995. These products include everything from chickenpotpies to pinot noir wine. Every indication is that this growth will continue in thefuture.20 The emphasis on health and fitness has contributed to the longer lifeexpectancies in the US and other countries. Longer life spans increase theimportance of customer loyalty as discussed in ‘‘Earning Customer Loyalty: LongerLifetimes, More Lifetime Value.’’DESIRE FOR CONVENIENCE Changes in household composition, increases inthe number of working women, and a general shortage of time underlie an increaseddesire for convenience. Two-paycheck households often have more money thantime. And they are willing to spend this money to avoid spending time doingundesirable chores, such as cooking, cleaning, or auto maintenance. Thus, manyconsumers buy products and services to minimize time devoted to such chores,opening new market opportunities for companies able to meet these needs. Firmsspecializing in home shopping are taking advantage of this need by making it easyfor consumers to purchase products whenever it is convenient. QVC and HomeShopping Network dominate the $2.5 billion televised home shopping business. InJapan, consumers are purchasing US products through World Shopping Network(WSN). WSN is available 24 hours a day as an online computer service.CONSUMERISM Consumerism is the movement to establish and protect the rightsof buyers. Some say the consumerism movement will intensify as we move throughthe 1990s. Consumers are more educated, knowledgeable, and organized. They will
demand better consumer information, quality, service, and dependability, and fairprices.22 The consumerism movement is one reason marketers need to adopt anethics perspective. Giving consumers products that work, charging fair prices, beinghonest, and practicing social responsibility are the best ways to respond toconsumerism.one increasingly important consumer issue is environmentalism.As consumers worldwide become concerned with environmental issues, theirpurchasing behavior will change. Successful marketers can respond by developingenvironmentally safe products and communicating their environmental contributions.Ogallala Down Co. is taking advantage of this trend. The company’s philosophy is,‘‘Healthy products for people and the environment.’’ It markets down comforters andpillows that are hypoallergenic, warm, lightweight, breathable, and guaranteed for 10years. Established in 1989, the company has enjoyed rapid sales growth in anindustry long dominated by large firms. The American Marketing Associationrecognized the environmental achievements of Ogallala Down by presenting it withan Edison Environmental Award. POPULAR CULTURE The final cultural trend we note is the popularization ofthe US culture throughout much of the world. Movies, television shows, andcommercials typically express a culture’s values and attitudes, and US food, fashion,and entertainment trends are becoming increasingly popular worldwide.Technological advances and globalization of the media allow the export of thispopular culture, resulting in a variety of market opportunities. One firm takingadvantage of these opportunities is MTV, which beams music videos into 210 millionhouseholds in 71 countries. Revenues are increasing at the rate of 20 percent peryear as MTV establishes or expands operations in Europe, Australia, Latin America,Russia, China, Korea, and Taiwan.
THANK YOU SUBMITTED BY:-ASHWIN VIJAY DIDOLKAR SEMESTER: III