Opportunities and Risks of Effective International Advertising Strategies

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This was my Bachelor Thesis, written in 2008 as a student of Betriebswirtschaft und Internationales Management at the University of Applied Sciences (Bremen - Germany).

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Opportunities and Risks of Effective International Advertising Strategies

  1. 1. OPPORTUNITIES AND RISKSOF EFFECTIVE INTERNATIONAL ADVERTISING STRATEGIES Bachelor thesis By Víctor Clar Bononad Matriculation number: 193707 Summer Semester 2008
  2. 2. CONTENTS 1. Introduction………………………………………………………………………………………. p. 4 1.1. History 1.2. What Is Modern Advertising? 1.2.1. Definition 1.2.2. Art & Science 1.2.3. Build the Brand 1.2.4. Today’s Revolutions 1.2.4.1. Globalisation 1.2.4.2. New Communications and Media 2. Advertising and Marketing Concepts………………………………………………. p. 11 2.1. The Marketing Mix 2.2. Marketing Communications 2.3. The Advertising Plan 2.4. The Advertising Campaign 3. International Marketing and Advertising………………………………………….p. 18 3.1. Standardization vs. Differentiation 3.2. The International Marketing Mix 3.2.1. The Product 3.2.2. The Price 3.2.3. The Place 3.2.4. The Promotion 4. The International Advertising Environment………………………………………p. 28 4.1. The International Advertising Industry 4.1.1. International Branding 4.1.2. The Advertising Agency 4.2. Demographic and Economical Conditions 4.3. Cultural Environment 4.3.1. What Is Culture? 4.3.2. Elements of Culture 4.3.2.1. Language 4.3.2.1.1. Verbal Language 4.3.2.1.2. Nonverbal Language 4.3.2.1.3. High- & Low-Context Cultures 2
  3. 3. 4.3.2.2. Needs and Values4.3.2.3. Religion and Moral4.3.2.4. Customs and Consumption Patterns4.3.3. Cultural Classification4.3.3.1. Hofstede’s 5-D Model4.3.3.2. Intercultural Subcultures4.3.3.3. Culture-Bound Products and Universals4.4. Political and Legal Environment4.4.1. Political Issues4.4.2. Legal Differences4.4.3. Self-Regulation4.5. Social Responsibility4.6. The New Conversational Media5. Research and Objectives…………………………………………………………………. p. 585.1. International Research5.2. International Target Groups5.3. Setting Objectives6. The International Advertising Strategy…………………………………………… p. 656.1. The Creative Strategy6.1.1. Creativity in Advertising6.1.2. Creativity in an International Environment6.2. The media strategy7. Measuring Effectiveness…………………………………………………………………… p. 738. Conclusions………………………………………………………………………………………. p. 759. Bibliography…………………………………….……………………………………………. p. 79 3
  4. 4. 1. INTRODUCTION1.1. HISTORYAdvertising has been always present in human civilizations. In ancient times,Egyptians created sales messages in papyrus wall posters. Commercialmessages have been found in the ruins of Pompeii. Wall or rock painting forcommercial advertising can be traced back to Indian rock-art paintings, in theyear 4000 BC. And in fact, nearly all monuments could be considered just asbig propaganda, a certain form of political or governmental advertising: thepyramids of Gizeh reflect the eternity of the pharaohs, the Vatican the powerof the Catholic Church, the City of Arts and Sciences in Valencia is the newimage of modern Valencia, the City Hall and Roland in Bremen represent theliberty of Bremen… Well, going back to proper advertising, the first print adswere published in English newspapers in the 17th Century. They promotedbooks, newspapers, medicines and other products that became moreaffordable thanks to the technological progress.In fact, modern advertising roots in the Industrial Revolution, such progressmade mass-production possible and producers had to find new markets andexpand existing ones to maintain profits and keep control over prices. At thistime, retailers and wholesalers had the power to decide which products wereoffered, so manufacturers branded goods and advertised such brands toappeal to the middle class customers so that these would ask for theproducts.As the economy was expanding during the 19th century, the need foradvertising grew at the same pace. In the 20th century, after the SecondWorld War, two big events changed advertising: the welfare state and themarketing concept. When the welfare state was created, working classes hadenough income to purchase products. Therefore, advertising, which wassaturated in the middle classes, started to target lower classes too. Andmodern marketing was born with the marketing concept, first articulated byGeneral Electric, shifting the question from ‘what do we want to sell’ to‘what does the consumer want to buy’.It was also during this last century when international trade emerged withpower. Historically, the US was vast enough for corporate expansion, but atthe early 1900s some American firms started to expand to other countries. 4
  5. 5. The globalisation trend slowed down between the 20s and 40s because of theGreat Depression and the Second World War. But after the war, it was the USwho really started to invest outside, trying to strengthen the devastatedEuropean countries mainly to avoid communism expansion. After the conflict,the relative international peace, together with the creation of theInternational Monetary Fund and General Agreement on Tariffs and Tradeencouraged the growth of international trade. The 1960s was a golden decade for the advertising industry: advertising had a more scientific approach and creativity was allowed to shine, producing impacting messages which appeared tempting to the eyes of the consumers. Volkswagen Beetle’s “Think Small” campaign was the first one to promote a ‘unique selling proposition’, associating a brand with a specific idea in the mind of the public. See FIGURE A: FIGURE A: “Think Small” print ad. Source: Google ImagesAnd we finally arrive to the Communication Revolution. With Internet,destruction of traditional mass media (TV, radio and newspapers) didn’thappen, as some experts thought it would. Instead, the trend was an increasein media clutter and fragmentation brought on by the web and digital media.Marketing through the Internet opened new frontiers for advertisers and ledto the ‘.com’ boom of the 1990s.In the international sphere, new markets emerged in the last decades of the20th Century making globalisation truly global: the fall of communism openedthe markets of many countries, some underdeveloped countries like Brazil,China and India have become important players in international trade, tariffunions like the NAFTA between Canada, Mexico and the USA or the EuropeanUnion have suppressed many trade barriers. 5
  6. 6. The combination of these two phenomena (the new information technologiesand globalisation) fosters the growth in international advertising. This isreflected in the fact that New York’s Madison Avenue is no longer the centreof advertising, there are main leading ad cities all around the world: BuenosAires, London, Tokyo, Sao Paolo, Shangai...11.2. WHAT IS MODERN ADVERTISING?1.2.1. DEFINITIONDue to the relative youth of the topic as subject of study and its particularnature, there are numerous definitions for ‘Advertising’. As a generalaccepted one I will take Philip Kotler’s: “Advertising is any form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor.”We can find a more complete one in “Essentials of Contemporary Advertising”by William F. Arens and David H. Schaefer: “Advertising is the structured and composed non-personal communication of information, usually paid for and usually persuasive in nature, about products (goods, services and ideas) by defined sponsors through various media.”However, we can find all type of definitions, some of them may even soundlyrical, like my personal favourite one, from Lluis Bassat’s (President of theWPP Group Spain, Creative President of Ogilvy Europe… in short: ‘the Spanishadvertising guru’) book “El Libro Rojo de la Publicidad” (“the Red Book ofAdvertising”): “ADVERTISING IS THE ART OF CONVINCING CONSUMERS.”1 Sources of this section: - Wikipedia - “International Advertising” – pgs. 1-20 - “The Advertising Handbook” - pgs. 5-13 6
  7. 7. 1.2.2. ART & SCIENCEOne thing is for sure: advertising is part of marketing. All marketing brancheshave a magic formula based on a certain proportion of science and art.Advertising is the one that most art has. But the science is also there, thecounterweight, the alter ego that prevents the publicist forgetting about themarket’s reality. A kilo of adverting can have 999 grams of rationality, but itwill shine and it will be remembered for its gram of creativity.2Gerard J. Tellis in his book “Advertising and Sales Promotion Strategies”supports this point saying that one basic principle of advertising is that itdepends on: the scientific judgement of the businessmen, the naturalcreativity of the people and luck. There have been many studies about theinfluence and predominance of these three factors. The conclusion is thatcreativity has not diminished its importance while science illuminates thepaths for the communication strategies, art directors and copywriters.Science does not substitute creativity but reduces the dependence of luck. 3The role of advertising has always been inform and convince, but also seduceand persuade. Seducing requires tiny drops of passion and utopia. Theadvertising must talk to the consumer, promise him something, seduce him.Saying ‘how beautiful I am’ we talk about the product, but if we say ‘howhappy you will be with me’ we talk to the consumer about the benefits thathe will receive.41.2.3. BUILD THE BRANDAgencies claim that advertising’s power lays in building long-term brandloyalty, which is unquantifiable. The ‘power’ of a brand is eroded by greaterchoice of brands. But a customer doesn’t think only in one brand whenthinking in a product. Each brand has to try to be in the short list, a mentalrelation of brands that are the first ones to come to our head as ‘favourites’,‘liable’ or ‘best’. Customer loyalty is not won by impacts but with a gradualprocess. The best advice is to ascend step by step. If the customer fixes itsattention in the brand, that’s already a success.52 Cf.: “El Libro Rojo de la Publicidad” – pg. 1213 Cf.: “Estrategias de Publicidad y Promoción” – pg. 54 Cf.: “El Libro Rojo de la Publicidad” – pg. 505 Cf.: “El Libro Rojo de la Publicidad” – pgs. 39, 79 7
  8. 8. Some time ago, in the early 90s, some people predicted the end of thebrands, particularly after the “Marlboro Friday”, one of the most importantmoments in recent advertising history. The 2nd of April 1993, Phillip Morrisannounced a 20% price reduction for their Marlboro cigarettes in order to fightagainst the cheap brands that were increasing their market share. The expertscried out that it was a terrible move, the end not only of Marlboro but also ofall image-based brands. They defended that if a prestigious brand likeMarlboro, with such an advertising icon like the Marlboro Man (an image andidentity built up so carefully and constantly over so much time) was sodesperate that it had to enter a price war against unknown cigarettes, everyconcept of ‘brand’ lost validity. In fact, not only did Philip Morris’ share valuefall, but also other big brand’s like Coca-Cola and Heinz. Experts said thatbranding was dead and the advertising industry entered a crisis. However,nothing like that happened. In fact, it helped to understand the value of thebrand name and no single brand, not even Marlboro was doomed. And rightnow brands stand up even more powerful.6Why do brands have such a power? Because brands are a guarantee, but alsoan emotion. The products are rational but brands are emotional, although itis just an idea in the buyer’s mind. That is the challenge for today’sadvertising: SELL TODAY AND BUILD THE BRAND FOR TOMORROW.71.2.4. TODAY’S REVOLUTIONSWe are living times of change, and these are expected to be each time moreand faster. Two big factors or phenomena shape not only today’s industriesand the new products, but also our current economies, societies and everydaylife: globalisation and the new communications and media.1.2.4.1. GLOBALISATIONThe internationalisation of business operations is not new, but what is new isthe speed and extension at which the process has happened lately and is stillhappening nowadays. It is also quite amazing that people all around the globesmoke the same cigarettes, go jogging with the same shoes, drink the same6 Cf.: “No Logo” – pg. 407 Cf.: “El Libro Rojo de la Publicidad” – pg. 70 8
  9. 9. refreshments and eat the same hamburgers, despite belonging to completelyopposite cultures.Globalisation is a phenomenon that feedbacks itself, magnifying it up to thenth power. The globalisation of the economy both forces and helps businessesto expand out of their homeland and place themselves as internationalcompetition players. Businesses go global for several reasons: - The home market may be saturated and new markets are a good exit for overproduction. - The increase of competition makes the businesses more sensitive to the costs of salaries and raw materials. - In many industries, the product life cycles have shortened. Innovations become more profitable by selling in other markets. - Some industries may even be useless in their home countries but can find their way to be profitable for others, like for example with big industries like aircraft, not worthy only taking into account one single market. - The disadvantages of seasonality can also be lessened. E.g.: switch ski- selling in northern to southern hemisphere and vice versa when the summer arrives. - In many sectors, such as luxury goods, there is the same consumer behaviour, so the same product can be exploited in more markets. - Other firms from outside may be more competitive because they sell better products or at a better price, so going outside is a way to strike back. - Foreign markets may present higher profit opportunities. - The more customers, the bigger the economies of scale and the less the cost of producing. - If a firm operates in more countries, the risk is diversified. - The customers are leaving the home country. - The technical advance in the transports and communications increase the chances of mobility making it much easier.8This tendency marks a dynamic in which through internationalisation firms canboth expand to foreign markets but also receive more competition fromabroad. So globalisation also changes the environment in which the businessalready operate. However, internationalisation is not relevant for all8 Cf.: “Werbung” - pg. 388 & “Marketing Management” - pg. 385 9
  10. 10. businesses in the same way. For small firms it may be completely irrelevant,while for middle-sized with a local or regional action area, national expansionshould be considered first.1.2.4.2. NEW COMMUNICATIONS AND MEDIATraditional mass media is saturated with advertising, and it is increasinglydifficult to contact and impress the ad-vaccinated consumer of today’s mediaand information society. Historically, advertisers have been the exclusive top-down communicators, in control of what information is released, when, towhom and through which communication channels.9 But the Internet hasdemocratised media, giving the individual important tools for makingthemselves heard.Internet is now an important part of our daily life, at work, at home… In soonall of us will have constant access to the web in our cell phones! Theinteractivity it offers makes audiences actively involved in the ‘managementof media culture’, inventing new types of consumer interaction, participationand productivity. So there is a shift from mass media to the new media ofmass conversation. Conversational media are the communication services ofthe global network economy and information society.10Youtube, Veoh and similar website are excellent platforms for conversationalmedia. They diversify and extend the strategies available to independentproducers to include bottom-up approaches. These videos catch the attentionof the brands, sometimes even from mass media, adding further fuel to awider conversation in professional marketing communication networks aboutthe role of consumer-generated brand communications in marketingstrategies.11All of this happens at a global scale, at a fairly relative low price. You willfind a deeper analysis in section 4.6: “The New Conversational Media”.9 Cf.: “Advertising and New Media” – pg. 110 Cf.: “Advertising and New Media” – pg. 211 Cf.: “Advertising and New Media” – pgs. 3-4 10
  11. 11. 2. ADVERTISING AND MARKETING CONCEPTSFor a better understanding in international advertising, first we need to setthe basic knowledge with some concepts, especially to include advertising asan important part of Marketing.2.1. THE MARKETING MIXThere is a common mistake amongst the general public, and this mistakeconsists in considering ‘advertising’ as everything that the business says to theconsumers. The correct term for these various tools is marketingcommunications, and advertising is just one type.Marketing is an organisational function and a set of processes for creating,communicating and delivering value to consumers and for managing customerrelationships in a way that they benefit the organisation and thestakeholders.12The essence of this function is the Marketing Mix, the set of marketing toolsthat the business uses to pursue its marketing objectives in the targetmarket13, grouped in four key aspects, the 4Ps: Product, Price, Place andPromotion. Promotion involves disseminating information about a product,product line, brand or company.14 Advertising is one of the promotional tools,as you can see in FIGURE B: FIGURE B: THE MARKETING STRATEGY Source: “Essentials of Contemporary Advertising” – pg. 512 Cf.: “Essentials of Contemporary Advertising” – pg. 413 Cf.: “Marketing Management” – pg. 1514 Cf.: Wikipedia 11
  12. 12. The 4Ps was formulated by McCarthy in 1960, and it represents the tools fromthe seller’s point of view. Robert Lauterborn suggested in 1990 that from thebuyer’s point of view, the 4Ps corresponded to the 4Cs: - Product = Customer Solution - Price = Customer Cost - Place = Convenience - Promotion = CommunicationWinning companies will be those meeting the customer’s needs in aneconomical and convenient way, with an effective communication.152.2. MARKETING COMMUNICATIONSThe different promotional tools conform the Marketing Communications Mix.The company must consider four different factors when developing thepromotional mix or marketing communications mix: - The market position: advertising is better to keep market leaders in their position, while smaller competitors gain more with sales promotion. - The type of product: consumer markets spend more on sales promotions and advertising, but business marketers spend more on personal selling. - The buyer-readiness stage: advertising is more important at the beginning to raise awareness, but personal selling influences more when closing the sale. - The product life cycle stage: in the introduction phase, advertising and personal selling are important to sell the products to early adopters, while at the decline only sales promotion is important to sell the remaining stocks.16All the different elements must be in harmony. All these communications orbrand contacts (sponsored or not) are melt together in the customer’s mindcreating one integrated product that determines the customer’s perception of 17the company. Inconveniently, most companies rely in only one tool of the15 Cf.: “Marketing Management” – pg. 1716 Cf.: “Marketing Management” – pg. 58117 Cf.: “Essentials of Contemporary Advertising” – pg. 189 12
  13. 13. marketing communications mix while some others now understand better thatall parties involved in a campaign should be coordinated and work together.The different departments must blend together their messages to achievecommon goals, and therefore obtain synergy and be more competitive in anincreasingly sophisticated market.18 So it is imperative for firms to embraceIntegrated Marketing Communications: “Integrated Marketing Communications (IMC) is the process of building andreinforcing mutually profitable relationships with the employees, customers, other stakeholders, and the general public by developing and coordinating a strategic communications program that enables them to have a constructive encounter with the company/brand through a variety of media or other 19 contacts”The IMC recognises the added value of a comprehensive plan that evaluatesthe strategic roles of the different communicative tools and combines them toprovide a clear and consistent impact by the seamless integration of discretemessages.20With this idea in mind, many big advertising agencies bought businessesspecialised in sales promotion, public relations and direct marketing in orderto be able to offer the client the whole package. However, few clients likedthe idea and preferred to put together the specialised agencies themselves.This is because large companies have different professionals for each tool,who do not really know about the other fields and that usually have differentfavourite outside agencies. They defend that it is better to choose the bestagency for each purpose, and not a worse one only because it belongs to a‘superagency’.21The level of IMC to which a firm operates depends on the corporate culture,the relation firm-agencies and also the relation between the differentagencies. An example of a firm that does a good job with IMC is Apple Inc.Apple and its CEO Steve Jobs are well known for having everything strictlycentralised and under control, up to the tiniest detail. In every single activitythat they do towards the public you can perceive the same tone: the sense ofdesign, simplicity and ‘coolness’ is reflected in the Mac vs. PC spots, the iPod18 Cf.: “Advertising Campaign Strategy” - pg. 1519 Cf.: “Essentials of Contemporary Advertising” – pg. 18920 Cf.: “Marketing Management” – pg. 58321 Cf.: “Marketing Management” – pg. 584 13
  14. 14. Silhouettes print ads, the Mac Conferences, even in the purchasing experienceat an Apple Retail Shop.2.3. THE ADVERTISING PLANPlanning is a key factor for successful advertising. The advertising plan is anatural consequence of the marketing plan. It starts where the marketing planfinishes: setting the advertising goals, which then are converted into specificadvertising objectives (what do we want to achieve in respect to consumerawareness, attitude and preference). The advertising strategy is designed toachieve these goals. It consists of two ‘substrategies’: - Creative Strategy: the ‘making of’. Here ideas are developed to reach the target audience, after specifying which product benefits will be communicated. - Media Strategy: the timing and different communication channels in which the ad (or other actions) is going to be exploited.22On the following diagram (FIGURE C) you can see the entire process: first howthe marketing acts, then how the advertising objectives are drawn, later thestrategy is developed and finally we have an ad and the timing. The boxesthat directly influence in the advertising process are in bold, This is also thestructure that I am going to follow along the rest of this project. (The figurelacks the development of the other elements of the Promotional Mix.)22 Cf.: “Essentials of Contemporary Advertising” - pg. 196 14
  15. 15. FIGURE C: PLANING PROCESS Source: “Estrategias de Publicidad y Promoción” – pg. 36Philip Kotler refers to the process in another way. He defends that theadvertising program starts by the identification of the target and the buyingmotives. Once that is done, five major decisions have to be made to developthe advertising program, “the 5Ms”: Mission (what are the objectives?),Money (how much can we spend?), Message (what message should be sent?),Media (what media should be used?), Measurement (how are resultsevaluated?).23 See FIGURE D.23 Cf.: “Marketing Management” – pg. 590 15
  16. 16. FIGURE D: THE FIVE Ms OF ADVERTISING Source: “Marketing Management” – pg. 591Creative ideas are the campaign’s heart and soul of a campaign, but thestrategy is the brain. Strategy gives the campaign its competitive edge andalso provides a framework for all those elements involved in the campaign.But a major problem for strategies is that they take a long time and effort todevelop, sometimes even running the so-called ‘paralysis by analysis’ risk. Tenyears ago there was a contingency plan for every single thing that could gowrong. Today markets change so quickly that contingency plans are no longerworthy. Instead, firms should have sufficient flexibility to respond to changingsituations in a timely manner.242.4. THE ADVERTISING CAMPAIGNThe advertising campaign is the output of the entire process, a series ofadvertisements and the activities that help produce them, which are designedto achieve interrelated goals. It is the best way to plan promotional activitiesbecause it unifies all promotional efforts, interrelating all activities, makingads have a greater retentive value. Consumers will remember more and betterthe ads if there are other actions of the promotional mix supporting,reinforcing or even intensifying the message. Given the case, it could becalled a ‘marketing communication campaign’.2524 Cf.: “Advertising Campaign Strategy” - pg. 1725 Cf.: “Advertising Campaign Strategy” - pg. 16 16
  17. 17. What makes a campaign different from a collection of ads is the degree towhich each execution is connected. A campaign offers continuity bymaintaining some elements that can be observable (physical) or somethingone thinks about (psychological).2626 Cf.: “Advertising Campaign Strategy” - pg. 17 17
  18. 18. 3. INTERNATIONAL MARKETING AND ADVERTISING3.1. STANDARDIZATION VS. DIFFERENTIATIONInternational Marketing is the development of marketing activities in morethan one land, starting from two until all the countries on Earth. The veryfirst step in international marketing strategy is to choose Standardisation orDifferentiation (sometimes other terms like specialisation or customisationare used instead of Differentiation). Will the firm design a uniquestandardized marketing concept to be applied equally in all markets, or anindividual programme will be established for each one considering nationalidiosyncrasy?The standardisation strategy is the handling of the several markets under thesame uniform marketing mix. This situation is known as Global Marketing,while the opposite country-specific differentiation is called MultinationalMarketing.27 See FIGURE E. FIGURE E: BASIC CONCEPTS IN INTERNATIONAL MARKETING Source: “Werbung” - pg. 391The Marketing Concept defends that consumer’s needs are different and thatmarketing programmes are more effective when designed specifically for the27 Cf.: “Werbung” - pg. 390 18
  19. 19. target group, ant this idea is also applied to foreign markets.28 However,there are many thesis against and in favour of both strategies. TheodoreLevitt was one of the first defenders of Standardisation with an article in 1983in the Harvard Business Review. He wrote: “The globalisation of markets is at hand. With that, the multinational commercial world nears its end, and so does the multinational corporation.[…] The global corporation operates with resolute constancy – at low relative cost – as if the entire world were a single entity; it sells the same things in the same way everywhere. […]The world’s need and desires have been irrevocably homogenized. This makes the multinational corporation obsolete and he global corporation absolute […] Cosmopolitanism is no longer the monopoly of the intellectual and leisureclasses; it is becoming the established property and defining characteristic ofall sectors everywhere in the world. Gradually and irresistibly it breaks down the walls of economic insularity, nationalism and chauvinism. What we see today as escalating commercial nationalism is simply the last violent death rattle of an obsolete institution. […] The modern global corporation contrasts powerfully with the aging multinational corporation. Instead of adapting to superficial and even entrenched differences between nations, it will seek sensibly to force suitable standardized products and practices on the entire globe.”It is true that many consumer needs and wants around the globe are growinglysimilar because of the increasingly analogy of social-demographic andpsychographic characteristics amongst the market segments, as well as thebetter mobility and the communication technologies. This is what MarshallMcLuhan called “the global village” to describe the emerging world tightlylinked through telecommunications.29 The convergence of the consumer needsleads to a worldwide homogenization of the demand.3028 Cf.: “Marketing Management” – pg. 39429 Cf.: “International Advertising” – pg. 2530 Cf.: “Werbung”– pg. 390 19
  20. 20. Standardisation is embraced by big global brands such as Coca-Cola, Marlboro,Nike… But even these, that may seem pretty much the same from one countryto the other, they adapt in some degree to regional tastes. For example:Coca-Cola has more gas in Brazil and tastes sweeter in France, whileMcDonalds has no beef hamburgers in India…If the differences between the consumers in each country are more than thesimilarities then differentiation should be chosen instead of standardisation.The adaptation to local tastes will make the product or service more suitableand have a higher competitive advantage. The economies of scale will not beas big, but national concepts in an internationally directed business willcertainly generate profitable synergies for the global brand.31The decision of taking one path or the other corresponds to Michael Porter’scompetition analysis of cost or quality market leadership. See FIGURE F. FIGURE F: STRATEGIC DECISIONS IN INTERNATIONAL MARKETING Source: “Werbung” pg. 392; taken from “Interkulturelles Marketing” by Müller/Gelbrich, München 2004, pg. 46231 Cf.: “Werbung” - pg. 391 20
  21. 21. The more the marketing mix is standardised, the more economies of scale canbe generated but the more inflexible is a firm to react. Standardisation isproduction-oriented and aims at reducing costs, while differentiation isdirected at the particular market factors.32In the real world, it is not such a radical option, there are many mixedpossibilities. The position you take towards one or the other depends on theproduct itself. It is true that many consumer needs are globally uniform,“cross-cultural-groups” are also a reality… But in many other types ofproducts this is not the case because the differences among the countries aretoo big.333.2. THE INTERNATIONAL MARKETING MIXThe marketing environment has changed in the last decade, and the forecastfor the immediate future is more change. For a marketing programme to besuccessful, all the components of the equation must be in harmony, and this iseven more difficult to obtain operating internationally. We must have theright product, with the right promotion, at the right price and place. 343.2.1. THE PRODUCTGetting the right product is more difficult nowadays, requiring a deepunderstanding of how consumers and markets change. Years ago it was muchmore simple, marketing-oriented companies produced what consumerswanted, but now consumers often do not know what they want. We live inadvanced times, and we are provided with all type of products that cover allour necessities. So as it is easier for consumers to focus on feelings than whatthey really want, researchers ask for them about their complaints.Researchers are focusing less on needs and wants, but more on their currentchoice dissatisfactions. Consumers are also more sophisticated; they maketheir decisions based on ‘microissues’. So now for firms, every tiny aspectcan be considered to get an edge.32 Cf.: “Werbung” - pg. 39333 Cf.: “Werbung” - pg. 39434 Cf.: “Advertising Campaign Strategy” – pg. 4 21
  22. 22. However, if there is no valuable information in the consumers’ problems forthe business to exploit, the research focus is shifted from consumers’problems to consumer interests. And if there is nothing worthy of promotionin this aspect, then advertisers try to build a psychological value into a 35product with a personality or brand image.International product planning requires marketers to understand the needsand wants of consumers in different markets and determine how the firm’sproducts can satisfy these. And they do not only have to decide whichproducts have to be offered, but also if modifications are necessary. 36One option is Product Standardisation, to sell exactly the same productabroad as in the home market. This is especially advantageous because of thereduction of costs. More economies of scale are generated but also theresearch, development and design costs are saved. Standardisation is worthyor not depending on product category. Non-durables are believed to requiremore differentiation because they are directly influenced by tastes, habitsand customs, which are country-specific. Industrial products are more suitablefor standardisation because manufacturers are driven by efficiency, andstandardisation reduces costs. High-tech products are the same worldwidebecause it is a fairly recent and modern industry (not affected by nationalspecification apart from slight adaptations like the letters in the keyboard…)and also because all the high-tech users around the globe share the samelanguage.A mandatory product adaptation occurs when a product adapts to a countrybecause it has no other choice. Examples: frozen foods cannot be marketed incountries with retailers that do not have freezer facilities; variations inelectrical systems due to the differences in frequency and voltage;government regulations about product standards, which can function as a non-tariff barrier.A discretionary product adaptation happens if there are differences inconsumption patterns. The product may not be purchased by the sameconsumer group in the foreign market, or for the same purpose, maybe thepreparation method is different, the advantages and disadvantages of theproduct may not be of the same relevance… Campbell Soup failed in the 50s35 Cf.: “Advertising Campaign Strategy” – pg. 536 Cf.: “International Advertising” – pg. 27 22
  23. 23. when they were introduced in the UK because English housewives were 37unfamiliar with condensed soups.One study revealed that at least one marketing mix adaptation is made in 80%of the exports38. Sometimes, so many product modifications can makestandardisation not longer profitable, so a new product should be developed.3.2.2. THE PRICESetting a standard worldwide price means having exactly the same uniformprice for a product all around the world. But it can be too high for consumersin less developed countries, or too cheap for consumers with high purchasingpower in industrialised economies. Usually firms use a differentiated pricingstrategy, where the price is based on a number of factors to take account ofthe many local market considerations that play an important role in settingproduct prices. These factors are: objectives, competition, consumerdemand, government and regulatory considerations.39When selling abroad, multinationals also face several pricing problems thatprevent a standardised pricing strategy. There is price escalation because ofthe profit margins that the intermediaries add. Transfer prices (the pricethat the firm sets for another unit in the company) are also a problem to takeinto account because it affects directly the amount of tariff fee imposed.Dumping could make the firm face serious legal action. Inflation andexchange rates are determinant factors, causing for example grey markets,like for example with the first iPhone. The iPhone was very expensive inEurope and many Europeans bought in the US taking advantage of the weak USDollar.3.2.3. THE PLACEFirms have to decide about channels between countries (exporting,manufacturing abroad, licensing, joint ventures, etc) and within countries(wholesalers and retailers).4037 Cf.: “International Advertising” – pgs. 28-3038 Cf.: “Marketing Management” – pg. 39439 Cf.: “International Advertising” – pgs. 51-5240 Cf.: “International Advertising” – pg. 41 23
  24. 24. Distribution channels change a lot from one country to another. Astandardised approach may offer economies of scale, but the variation onnumber, size and nature of wholesalers and retailers, the differences ininfrastructures and packaging requirements make that when multinationalsfirst enter a country they rather work with local distributors that have goodlocal know-how, but normally there are frictions. Multinationals should firstchoose the right distributor and invest in them to get a better and moreefficient relationship.41Another option is to market the products directly to consumers viacatalogues, home shopping networks and especially through Internet.Computer databases enable businesses to target narrowly defined consumerswith a minimum waste.423.2.4. THE PROMOTIONFrom all the marketing mix, advertising is the most difficult to standardise.43Advertising is standard when exposed internationally without changing thetopic, text or picture, except of course for the necessary translation.Basically, advertising can be classified in three categories: 44 - National products with national advertising - International Products with national advertising - International products with international advertisingDespite the dimension of globalisation, advertising of the last type is not verycommon.The experts in favour of standardised campaigns say that the consumers havethe same needs all around the globe and therefore such needs can beaddressed in the same way. Others defend that consumers differ from onecountry to the other, and according to this only customised campaigns shouldbe realised to target them. Nevertheless, the needs may be similar or eventhe same, but we cannot assume that they can be addressed globally in the41 Cf.: “Marketing Management” – pg. 40142 Cf.: “Advertising Campaign Strategy” – pg. 643 Cf.: “International Advertising” – pg. 5744 Cf.: “Werbung” – pg. 402 24
  25. 25. same way.45 Besides, the role that advertising plays in society is not the samein each country.Some agencies jumped on the ‘globalisation bandwagon’ while others staycommitted to customisation. BBDO and Saatchi & Saatchi are firm believers,but Grey Advertising suggests that each world business challenge is unique soit defends a “global vision with a local touch”.46If the company adapts only the campaign, it goes through a process calledcommunication adaptation. If both product and communication are change,it is a dual adaptation. Considering the message, a firm has threepossibilities: - Use the same message all around the globe, only changing the language, name and colours if necessary. Example: in Spain, Mitsubishi changed the name of its model ‘Pajero’ (in Spanish means ‘Masturbator’) to ‘Montero’ (‘Mountaineer’) for obvious reasons… - Use the same theme globally but adapt the copy to each local market. This is what Absolut Vodka does, under the claim ‘In An Absolut World’ we can see different local views of the perfect Absolut world (Madrid with a beach, Times Square with master art pieces instead of ads…). See FIGURE G1 FIGURE G1: MADRID IN AN ABSOLUT WORLD Source: Google Images45 Cf.: “Werbung” - pg. 40346 Cf.: “International Advertising” - pg. 56 25
  26. 26. - Develop a pool of ads from which each country selects the most appropriate.47 Absolut also does this in its IAAW campaign with ads that address universal problems, like global warming, sex discrimination, false politic promises, etc (See FIGURE G2). They are then published nationally if suitable. FIGURE G2: POLITICIAN & PREGNANT MAN IN AN ABSOLUT WORLD Source: Google ImagesNot only creative considerations have to be taken care of, also mediadecisions require international adaptation because media availability changesfrom in each country.Another factor to take into account is the Country-of-Origin Effect, due towhich consumers evaluate the nationality of the products. Some haveespecially positive associations and the firm may want to take use of it. Theuse of ‘made in’ appeals fall into three categories:48 - Patriotism: to motivate the purchase of good produced in the home country. E.g.: Chevrolet used the slogan “Baseball, apple pie and Chevrolet” in the USA. - Highlight positive/stereotype attributes enhancing the image of the product. The Marlboro Man is a clear example of this.47 Cf.: “Marketing Management” – pg. 397-39848 Cf.: “International Advertising” – pg. 33 26
  27. 27. - Appeals to a particular expertise associated with the country. E.g.: Grey Goose, a super-premium vodka created in the US that uses the ‘frenchness’ of the ingredients to establish its super premium image.In this case it also depends on what type of product it is about. For example,the “Bacardi Feeling” can be communicated and understood worldwide,because of the rum and its Caribbean style and values, understood in thesame way everywhere. Milka is promoted in Germany as being made with milkfrom the Alps, considered the best in the country. But in Belgium such an ideawould make no sense because they have a rich chocolate culture, and forthem the best milk comes from the Ardennes. 27
  28. 28. 4. THE INTERNATIONAL ADVERTISING ENVIRONMENTIt is important for the advertiser and the advertising agency to understandhow the industry works. Acquiring and interpreting information from theforeign marketplace relating to each of the following areas is crucial forspotting opportunities and risks and the development of marketing andadvertising strategies.4.1. THE INTERNATIONAL ADVERTISING INDUSTRYIn FIGURE H (below this lines) you can see a table with the twenty largestworldwide advertisers. Most of them belong to the automobile, food andpersonal hygiene industry. FIGURE H: (part of) THE TOP 100 GLOBAL MARKETERS Source: Ad Age Data Center Spendings in Millions of US$All of these face the question not only of standardised campaigns, but also ofbrand name and logo. This is also called International Branding. 28
  29. 29. 4.1.1. INTERNATIONAL BRANDINGIn international markets, brands have the same functions: differentiate theproduct from the competition and facilitate the purchasing decision bylowering the risk. The difference is that in an international level, the brand isjudged by the cultural background of each of the countries. Thestandardisation of the name and logo is normal when the objective is to builda global brand. In such case, the name must be pronounceable, have similarassociations and meaning, protected legally… An exception is when acorporation enters a market by acquiring a brand; changing both the nameand logo would destroy the recently purchased brand equity, but in order tohave a degree of standardisation, you can do like Unilever did with its‘Heartbrand’ icecream product line, which has always the same logo butkeeps the old name, being called differently in nearly every country(Langnese in Germany, Algida in Italy, Frigo in Spain, Kibon in Brazil, Wall’s inthe UK…).49 See FIGURE I: FIGURE I: DIFFERENT HEARTBRANDS FROM UNILEVER Source: Google ImagesAC Nielsen stated that a brand could be defined as global when the followingrequirements are fulfilled: - Annual turnover at least 1 billion US$ - Geographical presence in all general regions of the world: North America, South America, Asia-Pacific, Europe-Middle East-Africa. - Sales volume outside of the homeland must be at least 5% of the total.50However, a global brand name does not mean that the corporation alsostandardises the product, package or advertising. There is a saying in themarketing world: “BRAND GLOBALLY, ADVERTISE LOCALLY”.49 Cf.: “Werbung” – pgs. 398-39950 Cf.: “Werbung” – pg. 400 29
  30. 30. 4.1.2. THE ADVERTISING AGENCYThe American Association of Advertising Agencies defines an advertisingagency as an independent organisation of creative people an businesspeoplethat prepare and develop marketing and advertising plans, advertisementsand other promotional tools. It also purchases advertising space and time inthe different media on behalf of different clients to find customers for theirofferings.51 One of the ways to classify advertising agencies is by beinginternal or external to the advertiser. - In-House Agency: it is cheaper, the company has all the control and it is easier to coordinate (specially if you approach IMC). You have all the information you want about the brand, products and company. It gives the liberty to create a unique style (Benetton for example).52 - External Agency: as it is independent (not owned by media, advertiser or suppliers) it can bring an objective point of view. They also have more experience in media and the creation of communicative ideas because they are exposed daily to a broad spectrum of marketing situations and problems,53 both here and abroad if we talk about international agencies and global networks. It is easier to coordinate international advertising because agency networks offer multi-country coverage, although there is no guarantee that offices in each county will be equally strong.54Managing an international campaign brings problems derived of thecomplexity. To be able to develop an international advertising programme,the need of information and coordination is huge. And the wider thecampaign, the more difficult it gets. In international advertising, marketershave three possibilities of control that correspond to the standardisation ordifferentiation of a firm, affecting directly the relation between the parentcompany and the national subsidiaries: - Centralization: the parent company decides everything about the global advertising. It corresponds to standardisation. Everything is conducted in the headquarters, normally in the country of origin. There are advantages like complete control (which is essential if the marketer51 Cf.: “Essentials of Contemporary Advertising” - pg. 7152 Cf.: “Estrategias de Publicidad y Promoción” – pg. 8553 Cf.: “Essentials of Contemporary Advertising” - pg. 7154 Cf.: “International Advertising” – pgs. 124-125 30
  31. 31. plans on integrated marketing communications) and easier coordination. But there are some disadvantages like the lack of ability to sense changes in foreign markets and the management in foreign markets will not have motivation and capability to respond correctly to the national changing environment. - Decentralisation: local managers in the foreign markets make all advertising decisions. Promotional programs are tailored to the specific national needs (Differentiation). It is more difficult to coordinate and to achieve economies of scale, but it is an optimal approach if markets are small or the volume of international business and advertising is too limited to warrant close attention from the headquarters. - Combination Approach: in practice, there are many mixed forms. Some promotional decisions are taken at the headquarters others are left up to local managers. An international (or network) agency can be designed as a lead agency, responsible for the ‘pattern advertising’ (what is advertised is centralised while how is localised). The result is an international umbrella campaign in which there is a certain degree of national variations and adjustments.55John Hartrey Jr., senior vice president for marketing for Seagram’s globalbrands division said: “The idea of a global campaign is not to say here’s onead and everybody will use it around the world; it is having the flexibility ofglobal execution.”56Advertising agencies can also be classified following the range of servicesthey offer: full-service, consumer agency, B2B advertising, media buyingservices, interactive agency, creative boutiques… 57 Also through theirgeographical spam of action (local/regional/national/international). In the80s and the 90s there was a lot of merging and acquisitions amongst agenciesworldwide in order to build the necessary agency infrastructure to face thechallenge of global clients and international campaigns. This made thatnowadays we have a handful of conglomerates that own most of the bigagency networks and many times also media agencies and some otherbusinesses of related sectors. For example, Omnicom Group (the largest55 Cf.: “International Advertising” – pgs. 122-123 & Cf.: “Werbung” - pgs. 396-39856 Cf.: “International Advertising” – pg. 12457 Cf.: “Essentials of Contemporary Advertising” pg. 60 31
  32. 32. conglomerate of the industry as you can see in FIGURE J) owns BBDO, DDB andTBWA, three of the biggest agency networks (see FIGURE K). FIGURE J: (part of) WORLD’S TOP 50 AGENCY COMPANIES Source: Ad Age Data Center Ranked by worldwide revenue in million US$ FIGURE K: TOP 10 WORLDWIDE AD AGENCIES Source: Ad Age Data Center Ranked by worldwide revenue from core advertising services in million US$ 32
  33. 33. The life in an advertising agency is very dynamic because it is a fast-changingmarket. The intense rivalry is reflected in the workforce in several ways: thecontracts are for short periods of time (never indefinite), they are pressuredwith possible streamlining, continuous renewal of workers… However, despitethe job insecurity, the challenge of making original spots attracts talentedpeople to this sector. It is so competitive because of two reasons: - Agencies offer ad-hoc services; each project is different and adapted to the client’s needs and problems, so there is a constant pressure to conceive new creative solutions as well as a complete dedication to the clients. - It is easy to enter the market. Only a few qualified people and some fixed assets are required. From the top 10 agencies in Spain, no one has more than 300 people. The only thing you need is a client. Take for example what happened to McCann-Erickson: in 1992, after 37 years being Coca-Cola’s agency, Coke decided to counterattack the effective advertising of Pepsi by contracting the services of Creative Artists Agency, an important but small model agency in Hollywood. The new original style of CAA made the new spots (the ones of the digitally- animated polar bears for example) very successful. Coca-Cola gained market share against Pepsi and displaced completely McCann-Erickson as the main agency.58As we have seen, the relationship agency-client is a really important factorin this industry. The three most successful ways to develop new business arehaving clients who strongly champion the agency, having superior ideas andpresentation skills, and cultivating a personal relationship with a network oftop executives. There are four forces influencing the agency-clientrelationship, the 4C’s, that need to be taken care about in order to don’tloose a client: - Chemistry: a close contact with the client, dine every now and then. - Communication: constant open communication and a explicit agreement on mutual contribution for mutual gain. - Conduct: the image of an agency affects the client’s image too. - Changes: the client’s market position or policies may change, or new management may arrive.5958 Cf.: “Estrategias de Publicidad y Promoción”– pgs. 82, 87-8859 Cf.: “Essentials of Contemporary Advertising” - pgs. 60, 81 33
  34. 34. 4.2. DEMOGRAPHIC, GEOGRAPHIC AND ECONOMICAL CONDITIONSDemographic, geographic and economical characteristics are important toevaluate the potential market of a country but also to design the marketingmix for the specific market.The first macroenvironmental force to monitor is population because marketsconsist of people. Generally speaking, the larger the market’s population, themore potential it has, but if all the other factors are equal. Only populationfigures are not enough.60 The world population has exploded over the lastdecades up to more than 6.7 billion and it is said to be 9 Billion in the year2040 (following the last information from the U.S. Census Bureau forWorldwide Population Information). Such an increase could be problematicbecause certain resources will be scarce (fuel, clean water, minerals…) tosupport so many people. Another problem is that population grows more incountries that can least afford it. More population does not mean biggermarkets unless the consumers have enough purchasing power.61The population is divided in age groups and the most populous group shapesde national marketing environment. In western countries, the populationpyramid is turning upside down. While in other emerging economies likeBrazil, 56% of the population is less than 29 years old.62 The age group,together with other factors like the historical moments they live and thetechnological progress, create generations. Each generation normally has theirown characteristics, values and different ways to be approached. Forexample, Donald Tapscott named one of the last generations (born between1077 and 1994) “Net-Gens” and said: “To them, digital technology is no moreintimidating than a VCR or a toaster.”Another factor to consider is the ethnic. Ethnic groups have specific desiresand buying habits. Ethno-marketing (targeting ethnic groups) is an importanttool in multi-cultural societies. However, marketers have to be careful not toovergeneralize, within each ethnic group are individual consumers andsometimes completely different cultures.63 For example: in the US it is verydifficult to target the Asian community because it is composed of manydifferent countries, cultures and languages (Vietnamese, Filipinos, Japanese,60 Cf.: “International Advertising” – pg. 6961 Cf.: “Marketing Management” – pg. 16362 Cf.: Instituto Brasileiro de Geografia e Estadistica63 Cf.: “Marketing Management” – pg. 165 34
  35. 35. Koreans, Chinese…). Hispanics are easier to target because even though theycome from all over Latin America, they share the language, religion andgeneral values (the importance of family and respect, etc).64The educational level of the people is something important too, the higherthe quantity of educated people, the more sophisticated the market is andthe higher the supply skills.65Household refers to the people (related or not) who occupy a housing unit,and the pattern has changed a lot recently. For example Spain is changing fastin this aspect. The traditional household was a married couple with threechildren, now there are single men and women, homosexual couples, un-married people living together, single fathers and mothers, divorced, familiesthat adopted children from other countries… it is also important to considerthe location, where do the people leave. Location makes a difference Inproduct preferences. Also migratory movements and shifts in populationchange a lot from one country to the other.66The economic environment surrounding the customers is another importantfactor because markets require people but also purchasing power. Incomedistribution and industrial structure are good indicators of this aspect.Consumer expenditures are also affected by savings, debt and creditavailability.67Geography, or in other words: surface, climate, proximity, topography andavailable resources affect whether to enter a country.68 Sometimes a countryprefers to enter another country because of psychic proximity. For example,many firms from the US sell in Canada, England and Australia instead ofMexico (larger and closer) because they feel more comfortable with thelanguage, laws and culture. Normally, a company enters countries with anattractive market, little market risk and with competitive advantages. Butmany other considerations have to be taken, like for example Eastern Europeor Singapur have all of the above-mentioned conditions, but maybe notenough infrastructures and a small population (respectively).6964 Cf.: “Advertising Campaign Strategy” – pgs. 257-26065 Cf.: “Marketing Management” – pg. 16666 Cf.: “Marketing Management” – pg. 16767 Cf.: “Marketing Management” – pgs. 168-16968 Cf.: “International Advertising” – pg. 7769 Cf.: “Marketing Management” – pg. 389 35
  36. 36. The result of all these tendencies is the fragmentation of the mass marketinto many micromarkets differentiated by all type of characteristics. Eachsegment prefers different things and is approached by targeted media anddistribution channels, which is possible thanks to the advance in transport andcommunication technology.704.3. CULTURAL ENVIRONMENT4.3.1. WHAT IS CULTURE?Culture is the set of meanings, beliefs, attitudes and ways of doing thingsthat are shared by some homogeneous social group and typically handed downfrom generation to generation.71 People absorb their culture and consequentvalues unconsciously, defining their personal view towards themselves,others, organisations, society, nature and the universe.72 As Edward T. Hallsaid: “No matter how hard man tries, it is impossible for him to divest himselfof his own culture”73.Advertising pursues the same internationally as nationally. Essentially,advertising in the international environment differs from national advertisingdue to complexity and culture. As advertising is a mirror of society, it mustconsider cultural specifications, and these peculiarities are reflected in twofactors: - The acceptance of advertising as a whole. In some countries, advertising may not be seen as something positive, or maybe only for certain industries or product origins. In others it may seem like a symbol of American capitalism (in extremist Islamic countries like Iran). - The advertising message is understandable. This is not only because countries have different levels of sophistication, but also because if a campaign develops its message on something that is not universal (E.g.: a particular wording, a nationally famous person…) it is doomed to fail in a global scale. The communication style shall correspond to the country’s values and imagery (the use of certain symbols, colours, the importance of status or he role of women…).70 Cf.: “Marketing Management” – pg. 16771 Cf.: “Essentials of Contemporary Advertising” - pg. 14272 Cf.: “Marketing Management” – pg. 17573 Cf.: “International Advertising” – pg. 87 36
  37. 37. Both factors influence the format and content of the advertising message,making cultural differences the main handicap for standardisation ofadvertising campaigns.74 Have a look at FIGURE L as an example. Thecigarettes West advertisement (the original, on the right) was too provocativefor Russia (on the left). FIGURE L: CIGARETTE ADS IN RUSSIA AND GERMANY Source: “Werbung” – pg. 4054.3.2. ELEMENTS OF CULTUREThe audience’s individual socio-cultural background influences how theinformation is processed and the subsequent interpretation of the advertisingmessage. The problem of communicating to people from different cultures isone of the biggest challenges in marketing communication. Internationalmarketers have to be culturally sensitive to be successful.7574 Cf.: “Werbung” - pg. 40475 Cf.: “International Advertising” – pg. 89 37
  38. 38. 4.3.2.1. LANGUAGECulture and communication are inextricably linked, culture both influencesand is influenced by language. And the more evident communicative barrier isthe language, both verbal and nonverbal.4.3.2.1.1. VERBAL LANGUAGELanguage adaptation is essential because to communicate with potentialconsumers, marketers have to choose a brand name, select a copy or text thatwill be included in the packaging, develop slogans, create advertisingmessages… All this will only be understood if it said in the language that thetarget speaks or if the original will be used, it should be pronounceable anddo not lead to problems of significance (the Ford ‘Pinto’ could not be sold inBrazil with that name because ‘pinto’ means ‘little penis’).76The vocabulary of all languages is adapted to the elements consideredimportant, like for example in the Eskimo language there are many differentwords to describe ‘snow’, while in English is only one. The Sapir-Whorfhypothesis suggests that languages are not just a mechanism forcommunicating, but also a shaper of ideas, so we are only capable of thinkingwhat our language permits. This is also called “linguistic determinism”.77There are many important facts to consider about language. There are over3,000 languages in the planet. Countries that contain different languages arepluricultural, and sometimes the different linguistic groups clash (like forexample in Spain, where Catalans and Basques want to be independent). Thesame language can be spoken in different countries (Spanish is the officiallanguage in 21 nations, English in 53, French in 3078), but can differ a lot fromone country to another. There are many dialects, idioms, tones, humours andslang expressions, and translators need to be familiar with these to avoidtranslation blunders. On top of that we must consider different alphabets anddifferent reading directions (in Western cultures you read from left to right,in Arab cultures it is the other way round), and also the fact that there aresome words and phrases simply cannot be translated.7976 Cf.: “International Advertising” – pg. 90 & “Werbung” – pg. 42477 Cf.: “International Advertising” – pg. 9078 Cf.: Wikipedia79 Cf.: “International Advertising” – pgs. 91-92 38
  39. 39. 4.3.2.1.2. NONVERBAL LANGUAGEIt has been estimated that only slightly more than 20% of the communicationbetween individuals is verbal, the rest (an astonishing 80%) is non-verbal. It isvery complex and there are many classification systems, but it is important tonote that nonverbal methods are not more universal than verbal methods.Nonverbal communication regulates human interaction in several importantways: sends messages about attitudes and feelings, elaborates on our verbalmessages and governs the timing and turns between the peoplecommunicating. Non-verbal communication is transmitted through facialexpression, gesture, the clothes you wear, the accessories you carry, eye-contact, touching, space usage (the physical distance you maintain withothers), time symbolism, colours and other signs and symbols, includingnumbers, shapes and animals.For example: in many Asian countries, the European businessmen are judgedimmediately by the brand of the watch, or how expensive the shoes becausethese represent your status, a really important characteristic in Easterncountries. An example regarding different colour significance: in Westerncultures, black signifies mourning, while purple is more adequate in suchsituations in Brazil and white means death in Japan and India.804.3.2.1.3. HIGH- & LOW-CONTEXT CULTURESIn each cultural group verbal and nonverbal communication have a differentrelation with each other. Edward T. Hall elaborated a theory to explain thisrelationship: high-context and low-context cultures. Low-context culturesplace high value on words, and communicators are encouraged to be direct,exact and unambiguous. Verbal communication is supposed to give all theimportant information. This is the case of Scandinavia and Germany, here a‘no’ means ‘no’ and there is no margin for further interpretations. Incontrast, high-context cultures consider verbal communications to be onlypart of the overall message, and communicators rely much more heavily oncontextual cues and nonverbal communication. This happens in Far Eastcountries, Arab nations and South-European countries. In these markets,direct fact advertising messages should be avoided. As we have seen, the80 Cf.: “International Advertising” – pgs. 92-98 & “Werbung” - pg. 420 39
  40. 40. differences between communications styles in high- vs. low- context cultureshave direct implications for the international advertiser.814.3.2.2. NEEDS AND VALUESThe assessment of cultural values helps in the success of marketing operationsin foreign countries. Edward C. Steward said that values “represent a learnedorganisation of rules for making choices and for resolving conflicts.” Severalstudies have been realised to categorise the population under values criteria,for example the Values and Life Styles (VALS), and the VALS 2, but suchclassification is very difficult to develop even at a national level, so extremelydifficult in an international level. The well-known theory of the Pyramid ofNeeds by Abraham Maslow is based on Western culture and has not provenapplicable to non-western or developing countries. However, insights tovalues (such as family belonging, respect) and life styles amongst consumersfrom different cultures can influence the advertising strategy selection.824.3.2.3. RELIGION AND MORALRobert Bartel stated: “the foundation of a nation’s culture and the mostimportant determinant of social and business conduct are the religious andphilosophic beliefs of people”The influences of religion on international marketing depend on howimportant and strict is the religion for society. In some countries, referencesto god or religion are taken seriously. Religion impacts directly the way itsbelievers live their daily life, the gender roles, how they feel about work andthe value they place on material goods. Religious traditions may forbid thesale, consume or the advertising of various products. In Saudi Arabia, forexample, alcoholic beverages are completely banned. Moral behaviour is alsodirectly influenced by religion, a clear example: human nudity. While inEurope it is not difficult to see an ad with a woman practically naked, in Arabcountries, this is unconceivable. Many major holydays are also tied to religion,and these have to be considered in the timing of a marketing program.8381 Cf.: “International Advertising” – pg. 114 & “Werbung” – pgs. 421-42382 Cf.: “International Advertising” – pgs. 99-10483 Cf.: “International Advertising” – pgs. 104-106 40
  41. 41. 4.3.2.4. CUSTOMS AND CONSUMPTION PATTERNSThe customs of a society affect directly the consumption patterns. The kind ofproducts consumed, how are they purchased, who makes the purchase, whoconsumes it and how much is bought and consumed. For example, in the USnearly all consumer goods are bought in big quantities, everything ‘king size’and not so often, while in Europe less quantity is purchased and Europeans goon a more regular basis to the supermarket. A marketer must be aware ofthese factors to be able to target the correct audience, adapt the packaging,etc.844.3.3. CULTURAL CLASSIFICATION4.3.3.1. HOFSTEDE’S 5-D MODELFor a better understanding of the culture and how marketers can adapt orstandardise their approaches (if cultures are similar), to see if the messagewill be adequate, there are specific cultural factors that must be considered.After making a survey to 116,000 IBM employees from 48 different countries,Hofstede saw how nationality affects personal assumptions and designed amodel with five dimensions in which culture can be classified, the 5-D Model.Power Distance: reflects the extent at which people accept authority andhierarchy. In countries with a high power distance like in the Far East or theMediterranean, subordinates consider their superiors another type of person.While in low power distance countries like in Scandinavia, superiors are moreaccessible and employees can bypass them to get their work done.85Individualism & Collectivism: responds to how independent or involved areyou in relation with a group. In individualist cultures, the identity of a personis defined individually, people are expected to take care of themselves andself-respect is very important (Anglo-Saxon countries for example). Incollectivist societies, the groups to which a person belongs shape the person’sidentity. In individualist cultures there is a strict separation between personaland professional life, while for collectivists it is not strict at all.8684 Cf.: “International Advertising” – pgs. 106-10885 Cf.: “Werbung” – pgs. 426-42786 Cf.: “Werbung” – pgs. 428-429 41
  42. 42. Masculinity & Femininity: in ‘male’ cultures (Austria, UK, Australia) theimportant values for society are money and success, while in ‘female’societies (Scandinavian countries), relationships, cooperation and quality oflife are more important than performance. 87Uncertainty Avoidance: the level at which people approach risk, trying toavoid ambiguous, unstructured or unsafe situations. This dimension isassociated with dogmatism, authoritarianism, traditionalism and superstition.Latin-European countries have hard uncertainty avoidance, Scandinavian andAnglo-Saxon countries have weak uncertainty avoidance.88Short- vs. Long-term Orientation: responds to what time perspective doesthe society have. Long-term orientation means that decisions are takenthinking in the far future and with patience, while in short-term only theimmediate future is important.89Hofstede’s dimensions can be applied to many other aspects. For example:national wealth and mobility between the social classes are related toindividualism; masculine states have more interest in the military industry andless in social areas; a long-term orientation country has more possibilities ofsolid economic growth; individualistic societies prefer verbal communicationwhile in collectivist cultures are more visual directed… These aspects shouldbe reflected in the advertisements, with more group situations in collectivistsocieties, more care given to status signs in ads for countries with a highpower distance…90Culture influences our perception, it affects how and what we communicate.Hoftede’s 5-D model points out that an advertising message developed in acountry will only be understood and cause the desired action in other culturesonly in exceptional cases: “There may be global products but there are noglobal people” (de Mooij 1998, S.XIV). If two nations belong to the sameculture then it is not that difficult. This phenomenon is explained by theCultural distance concept.9187 Cf.: “Werbung” – pg. 43288 Cf.: “Werbung” - pgs. 432-43389 Cf.: “Werbung” - pg. 43590 Cf.: “Werbung” - pgs. 435-43691 Cf.: “Werbung” - pgs. 437 42
  43. 43. Cultural distance origins in early international trade, it explains why tradetended to be concentrated in similar foreign markets. Migration is the reason,because migrants carry their culture to other countries. When messages arecommunicated cross-nationally between similar cultures, the decoding effectof the receiver produces results more nearly like those intended in theoriginal message encoding by the sender. So a campaign in the US will beeasier accepted in Canada, UK or Australia, not only because they share thelanguage but also because they belong to the same Anglo-Saxon ‘base’culture.924.3.3.2. INTERCULTURAL SUBCULTURESHowever, there are also variations within the cultures. Each culture hassubcultures, groups of people that share values based on commonexperiences. Subcultures provide more specific identification and socialisationfor their members. These are nationalities, religions, race, political groups,geographic regions, etc. It can also be included the specific age or incomegroup, and of course, an individual can belong to more than one subculture.Understanding a subculture in one country can help to understand similar onein other countries: a businessman from Paris will have more in common with acolleague from the US than with a French farmer.93Supporters of standardisation usually compare the job and age group of thedifferent countries to state similarities. William Roedy, director of MTVEurope said: “Eighteen-year-olds in Paris have more in common witheighteen-year olds in New York than with their own parents. They buy thesame products, go to the same movies, listen to the same music, sip the samecolas”. The existence of intercultural subcultures or segments may help onaggregating similar demands, but how are those demands approached byadvertising are not similar because of cultural differences. The Sony Walkmanfor example, was a hit worldwide, but in Western cultures it was seen as away to listen to music without being disturbed, while in Eastern it was seen asa way to listen to music without disturbing others. 9492 Cf.: “International Advertising” – pgs. 109-11093 Cf.: “International Advertising” – pgs. 88-89 & “Marketing Management” – pgs. 183-18494 Cf.: “Werbung” – pg. 437 43
  44. 44. 4.3.3.3. CULTURE-BOUND PRODUCTS AND UNIVERSALSCertainly the degree to which culture influences also depends on the producttype. There are culture-bound and culture-free products. Standardisation ismore possible in culture-free products like investment and technologicalgoods (they respond to objective and homogeneous criteria), while consumergoods and services are more bounded to culture and require a differentiationapproach. FIGURE M: CULTURE BONDAGE AND STANDARDISATION POTENTIAL OF PRODUCTS Source: “Werbung” - pg. 438; taken out of “Interkulturelles Marketing” by Müller/Gelbrich, München 2004 – pg. 555Much has been said about the cultural differences because differences standout more the similarities. Universal appeals are defined as values, emotionsand modes of behaviour common to all cultures because as human beings weall share basic biological similarities and feelings, such as love, beauty, socialprestige, luck, mourning, deception, humour, surprise, relax… However, howwe respond to the biological drives is shaped by culture. 44
  45. 45. 4.4. POLITICAL AND LEGAL ENVIRONMENTBusiness regulation exists for three reasons: to protect companies from unfaircompetition, protect consumers from unfair business practices, and to protectthe society from uncontrolled business behaviour. When does the costs ofregulation exceed the benefits? Each new law may have a fair reason to exist,but it may cut innovation and slowdown economic growth.954.4.1. POLITICAL ISSUESEntering a new market is normally a long-term commitment. And even thoughin most countries the political situation is stable, the marketer has to becautious. The politics and laws of a country shape its national businessenvironment and can impact directly on the marketing programme in positiveor negative ways.The political environment usually supports international marketing efforts ofnational firms, for example reducing trade barriers to increase tradeopportunities or taking protective measures to ensure domestic production(like tariffs and quotas). In other extreme cases, governments restrict theflow of goods with trade sanctions. These happen during wars or as a measureto pressure a country (for example the US has nowadays trade sanctionsagainst Cuba and North Korea). Export controls are used to prevent rivalsacquiring important goods or technology. This is very common in the defenceand weapon industry.96If the political risk is high in a host country, the firm may have to facenationalism, terrorism, war, social instability… The international firm could besubject to expropriation, confiscation or domestication (when the hostgovernment demands a partial transfer of power from the firm). Exchangecontrols and exchange rates can make international firms have problems toremove their investments or have the same value. Sometimes internationalcorporations may believe it is still profitable to do business in unstablecountries, but the situation affects directly how business are conducted.97 Aperfect example of this is happening right now in Iraq: many US firms operate95 Cf.: “Marketing Management” – pg. 17496 Cf.: “International Advertising” – pgs. 78-7997 Cf.: “International Advertising” – pgs. 80-83 45
  46. 46. there especially because of the profits from petrol, but only a few places arenot life-threatening…International firms have to pay attention to the political climate, if trade iscut off, it would be a significant loss for the business. There are severalpolitical risk assessment techniques available for firms to study entering amarket or not, and the status of the country changes as the national situationdevelops.4.4.2. LEGAL DIFFERENCESApart from the political climate, many legal issues have to be considered.Many countries have strict laws on what to say, show and do inadvertisements. There are also severe restrictions on advertising certainproducts, like for children. In Sweden TV spots for children are forbidden, inGreek TV there is no toy spot before 22h.98 Sometimes, legal restrictions arebased on religion, and marketers have to be very careful in extremistreligious societies. For example: in Malaysia, Islam is the national religion.The watch company Seiko had to change the slogan “Man invented time,Seiko perfected it” to “Man invented timekeeping, Seiko perfected it”because Allah, not man, invented time.99In some countries the regulation affecting advertising may be limited or lax,especially in developing markets. Meanwhile in others, advertising regulationmay be extensive and highly restrictive. Deceitful advertising (occurs whenthe claim is false or the information presented is too little or not completelytrue…) is illegal all around the world. And such practices should be avoidedbecause they harm the consumers but also the advertisers and the entireimage of the advertising industry.100Advertising regulation covers all different aspects of a campaign. Somecountries have restrictions on the products advertised, mainly alcohol,cigarettes and medicines. Sometimes even unanticipated restrictions, like inFrance, where margarine cannot be advertised. Countries may also restrictthe content or creative approach. In Taiwan, when the consumer buys the98 Cf.: “Essentials of Contemporary Advertising” – pg. 5599 Cf.: “International Advertising” – pg. 226100 Cf.: “International Advertising” – pg. 227 46
  47. 47. product, the advertising claims are considered a contract rather than a simplesolicitation. Comparative claims are rare in Japan not because of laws butbecause in their culture, direct confrontations are taboo. The extent ofpuffery changes from one country to another. In the US, puffery is “anadvertiser’s opinion of a product that is considered a legitimate expression ofbiased opinion”, but in Canada, puffery that actually claims superiority overother brands may cause legal action.101 In Germany only scientifically provablesuperlatives can be advertised (McCann-Erickson once had to change Coke’sslogan “Refreshes you best” for “Refreshes you right”).102 However,sometimes the situation turns out to be beneficial. France’s ban to showpeople smoking in cigarette ads was the reason for the birth of ‘Joe Camel’,the smiling camel and the brand’s most successful trade character.103Media availability is also limited in most countries and regulation variesgreatly depending on tradition, technological advancement andinfrastructure. Other laws may also require the ads to be produced in thecountry (in Malaysia all ad footage and music has to be produced locally andusing local talent). Governments do this to provide jobs in the country andguarantee an adaptation to the culture to avoid cultural imperialism.104To cover the needs of an international client, agencies need to be located inmany countries. But maybe there are restrictions to the ownership or theamount of locals that must work there. Taxes are also a factor to be awareof. In Australia, to raise money for the advertising industry watchdog, since1992 there is a 0.01% levy on gross media billings. In England, all media aretaxed except newspapers.105Despite the diversity of legal and political situations, there are someinitiatives to unify the requirements. The European Union dictates someguidelines, but the country may adopt them or not, or even add morerestrictions. Examples: all type of tobacco broadcast advertising is forbiddenall throughout Europe; alcoholic beverages spots can’t promote they havestimulating effects or contributes to social success (amongst others); noadvertising of prescriptive medicines is allowed; ads targeted at children shall101 Cf.: “International Advertising” – pgs. 226-230102 Cf.: “Essentials of Contemporary Advertising” – pg. 55103 Cf.: “International Advertising” – pgs. 226-230104 Cf.: “International Advertising” – pg. 231105 Cf.: “International Advertising” – pgs. 232-233 47
  48. 48. not contain images or messages that can damage the children physically ormorally….106The European Commission also admits that there is some overregulationamongst the EU members, sometimes even violating the freedom ofcommercial speech.107 Comparative advertising was accepted by a Guidelineof the European Parliament in 1997 and had already been adopted most of themembers. But it can’t be deceptive and must compare objectively one ormore essential characteristics.1084.4.3. SELF-REGULATIONThere are a variety of international laws and organisations that regulateinternational business: the International Monetary Fund, the World Bank, theWorld Trade Organisation, the International Chamber of Commerce… Thislast one (together with advertisers, media and agencies) developed the firstself-regulatory advertising code.109The editor of Adweek (an American advertising publication) Andrew Jaffesaid: “The industry should do all it can to raise standards and try to drive outthat which is misleading, untruthful, or downright tasteless andirresponsible. Otherwise, the pressure to regulate even more will becomeoverwhelming.”110At the early 20th Century there were many claims against deceitfuladvertising, with fake medicines for example, which were very dangerous forthe people’s health. Consumer movements and government reacted withlaws to regulate the advertising industry. In order to promote professionalismand safeguard the integrity of the industry, advertising practitioners in the USformed organisms like the current Association of National Advertisers (ANA)and the American Advertising Federation to self-regulate the industry.Nowadays there are similar organisations in most countries.111106 Cf.: “Estrategias de Publicidad y Promoción” – pgs. 62-66107 Cf.: “International Advertising” – pg. 235108 Cf.: “Estrategias de Publicidad y Promoción” - pg. 53109 Cf.: “International Advertising” – pg. 239110 Cf.: “Essentials of Contemporary Advertising” – pg. 55111 Cf.: “Essentials of Contemporary Advertising” – pg. 20 48
  49. 49. Voluntary self-regulation follows three objectives: - Protect consumers against false or misleading advertising and against advertising that intrudes on their privacy. - Protect legitimate advertising from competitor’s false/misleading ads - Promote public acceptance of advertising so it can continue as an 112 effective institution in the marketplace.Self-regulation of advertising started in the US and is proven successful. Fromall ads reviewed by the Federal Trade Commission (the US governmentalagency that takes legal action against incorrect ads) in a year, about 97% issatisfactory.113The trend towards self-regulation is clear throughout the world. In Spain, theAsociación para la Autorregulación de la Publicidad (also named‘Autocontrol’) was founded in 1995 to enforce a code of ethics in Spain. It ispart of the European Advertising Standards Alliance, an organisation of thedifferent self-regulatory bodies of the European countries.114 Thirteen LatinAmerican countries formed the Inter-American Society for the Freedom ofCommercial Speech to combat government restrictions and censorship. Inaddition, media organisations also act in monitoring advertising content (forexample in the US with the National Association of Broadcasters) becausethe ads they show could also affect negatively to their image. On top of that,many large corporations like Procter & Gamble or Revlon draw their ownguidelines.115Self-regulation is more agile and cheaper than the governmental control. Itprevents new regulation and administrative control, being not as expensivefor the business and the consumers, who are the ones that actually pay thegovernment. If it fosters the legal principles, doesn’t restrict competition andif it does not reduce the information directed to the consumer, self-regulationwill be legitimate and beneficial both for consumers and competitors.116112 Cf.: “International Advertising” – pg. 237113 Cf.: “Essentials of Contemporary Advertising” – pg. 55114 Cf.: “Estrategias de Publicidad y Promoción” – pg. 73115 Cf.: “International Advertising” – pgs. 238-239116 Cf.: “Estrategias de Publicidad y Promoción” – pg. 72 49
  50. 50. 4.5. SOCIAL RESPONSIBILITYAdvertising as a social force has been a major factor in improving thestandards of living. By publishing the material, social and culturalopportunities of a free enterprise society advertising has encouragedincreased productivity by both management and labour. Advertising gives you(as a free individual) the opportunity to select the products that match yourfunctional, financial or social needs and aspirations.117With the increasing concern about international marketing, the higheststandards must be applied to each of the elements in the marketing mix.Agencies have to ask themselves whether they represent clients that alsowork to such standards, if not, the agency’s image could be affected.118 Thesocietal marketing concept states that the organisation’s task is to determinethe needs, wants and interests of the target, and satisfy them better than thecompetitors but always in a way that preserves and enhances the well-beingof consumers, society119 and also of the environment. Businesses andindustries try to achieve them drawing ethical codes, and forming self-regulatory organisations (like in the advertising industry, mentioned above).However, these are not very impressive for consumers.Special interest groups have flourished and gained importance in the defenceof all type of people’s rights. Important to business in particular is theconsumerist movement: an organised movement of citizens and governmentto strengthen the rights and powers of buyers against sellers. 120 The consumer movement has made demands in three areas: - Consumer information: data about the products and services. - Consumer education: develop the basic knowledge of the public to have intelligent consumers. - Consumer protection: ask for governmental and legal action to safeguard consumer rights.121The issue of advertising effects in developing nations is controversial. Onone hand, it educates consumers and enables them to compare goods,117 Cf.: “Essentials of Contemporary Advertising” – pg. 20118 Cf.: “International Advertising” – pg. 247119 Cf.: “Marketing Management” – pg. 26120 Cf.: “Marketing Management” – pg. 175121 Cf.: “International Advertising” – pg. 246 50

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