International marketing (4)


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International marketing (4)

  1. 1. IMR 300 – Lecture 4 <ul><li>The Cultural environment of global markets </li></ul><ul><ul><li>The Political environment </li></ul></ul><ul><ul><li>The International legal environment </li></ul></ul>
  2. 2. The Cultural Dynamics
  3. 3. Culture <ul><li>Affects every part of our lives, every day from birth to death </li></ul><ul><ul><li>How we spend money </li></ul></ul><ul><ul><li>How we consume in general </li></ul></ul><ul><ul><li>How we sleep </li></ul></ul><ul><ul><li>Laws and age limits </li></ul></ul><ul><ul><li>Production </li></ul></ul>
  4. 4. How we sleep <ul><li>USA – alone </li></ul><ul><li>Asia – with parents </li></ul>
  5. 5. How we consume in general <ul><li>France – moderate – wine </li></ul><ul><li>Japan – sea – seafood </li></ul><ul><li>Mongolia – nomads – meat </li></ul>
  6. 6. Laws and age limits <ul><li>Laws against alcohol </li></ul><ul><ul><li>Liver cancer </li></ul></ul>
  7. 7. Spain – tobacco – lung cancer
  8. 8. Origins elements and consequences of culture Origins Consequences Geography History Technology and political economy Social institutions Peers Elements of culture Consumption decisions and behaviors Management style
  9. 9. A Cultural Framework (Elements)
  10. 10. Religion <ul><li>In China in 2007 (which was the year of the pig) all advertising which included pictures of pigs was banned. This was to maintain harmony with the country's Muslim population of around 2% . </li></ul>
  11. 11. Religion <ul><li>In 2005 France's Catholic Church won a court injunction to ban a clothing advertisement (by clothing designers Marithe and Francois Girbaud) based upon Leonardo da Vinci's Christ's Last Supper. </li></ul>
  12. 13. Values and Attitudes <ul><li>In 2004, China banned a Nike television commercial showing U.S. basketball star LeBron James in a battle with animated cartoon kung fu masters and two dragons, because it was argued that the ad insults Chinese national dignity. </li></ul>
  13. 14. Values and Attitudes <ul><li>In 2006, Tourism Australian launched its ad campaign entitled &quot;So where the bloody hell are you?&quot; in Britain. The $130 million (US) campaign was banned by the British Advertising Standards Authority from the United Kingdom. </li></ul>
  14. 15. Education <ul><li>In the People's Republic of China a nationwide system of public education is in place, which includes primary schools, middle schools (lower and upper), and universities. Nine years of education is compulsory for all Chinese students. </li></ul>
  15. 16. Technology and Material Culture <ul><li>Trevor Baylis launched the clockwork radio upon the African market. Since batteries were expensive in Africa and power supplies in rural areas are non-existent. The clockwork radio innovation was a huge success. </li></ul>
  16. 17. Trompenaars' cultural factors <ul><li>Fons Trompenaars is another Dutch culturalist who is into international culture. </li></ul><ul><li>Teamed with Charles Hampden-Turner (a dilemma enthusiast), they talk these days not so much of country stereotypes as the need to understand individuals </li></ul>
  17. 18. Trompenaars' cultural factors <ul><li>Universalism vs. Particularism </li></ul><ul><li>Analyzing vs. Integrating </li></ul><ul><li>Individualism vs. Communitarianism </li></ul><ul><li>Inner-directed vs. Outer-directed </li></ul><ul><li>Time as sequence vs. Time as synchronization </li></ul><ul><li>Achieved status vs. Ascribed status </li></ul><ul><li>Equality vs. Hierarchy </li></ul>
  18. 19. Hofstede's cultural factors <ul><li>    Geert Hofstede, a Dutch cultural anthropologist, analyzed cultures along five dimensions. </li></ul><ul><li>He rated 58 countries on each dimension on a scale from 1 to 100. </li></ul>
  19. 20. Hofstede's cultural factors <ul><li>Power: Power Distance (PD or PDI) . Malaysia, Panama, and Guatemala rated the highest in this category. The US was 38th. </li></ul><ul><li>Self: Individualism versus Collectivism (ID or IDV) . The US was number 1 here, closely followed by Australia and Great Britain. </li></ul><ul><li>Gender: Masculinity versus Femininity (MAS) . Japan led the list, followed by Austria and Venezuela. The US was 15th. </li></ul>
  20. 21. Hofstede's cultural factors <ul><li>Predictability: Uncertainty Avoidance (UA or UAI) . Greece was number 1, followed by Portugal and Guatemala. The US was 43rd. </li></ul><ul><li>Time: Long- versus Short-term Orientation (LTO) . China led this dimension, followed by its oriental colleagues, Hong Kong and Taiwan. The US was 17th. </li></ul>
  21. 22. Hall's cultural factors <ul><li>  Edward T. Hall was an anthropologist who made early discoveries of key cultural factors. </li></ul><ul><li>In particular he is known for his high and low context cultural factors. </li></ul>
  22. 23. Hall's model: Context <ul><li>High context: 'unwritten rules' of the culture. </li></ul><ul><li>Low context </li></ul><ul><li>Contrasting the two </li></ul><ul><li>France: short (high-context) </li></ul><ul><li>America: longer contracts content (low-context) </li></ul>
  23. 24. Hall's model: C ontext <ul><li>Highly mobile environments where people come and go need lower-context culture. </li></ul><ul><li>With a stable population, however, a higher context culture may develop. </li></ul>
  24. 25. Hall's model: Time <ul><li>Monochronic time: </li></ul><ul><ul><li>One thing at a time. </li></ul></ul><ul><ul><li>Time management </li></ul></ul><ul><ul><li>Low context </li></ul></ul><ul><li>Polychronic time: </li></ul><ul><ul><li>Several things at a time. </li></ul></ul><ul><ul><li>getting things done </li></ul></ul><ul><ul><li>more in their own time. </li></ul></ul><ul><ul><li>high context. </li></ul></ul>
  25. 26. Hall's model: Space <ul><li>Personal space is an example of a mobile form of territory </li></ul><ul><li>A Japanese person who needs less space thus will stand closer to an American, inadvertently making the American uncomfortable </li></ul><ul><li>Some people need bigger homes, bigger cars, bigger offices - driven by cultural factors , for example the space in America needs to greater use of space, whilst Japanese need less space (partly as a result of limited useful space in Japan). </li></ul>
  26. 27. Hall's model: Space <ul><li>High territoriality </li></ul><ul><ul><li>Some people are more territorial </li></ul></ul><ul><ul><li>where co-workers, or many wars </li></ul></ul><ul><ul><li>Territoriality also extends to anything that is 'mine' and ownership concerns extend to material things. </li></ul></ul><ul><ul><li>Security thus becomes a subject of great concern for people with a high need for ownership. </li></ul></ul><ul><ul><li>People high territoriality tend also to be low context. </li></ul></ul>
  27. 28. Hall's model: Space <ul><li>Low territoriality </li></ul><ul><ul><li>Less ownership of space and boundaries are less important. </li></ul></ul><ul><ul><li>Sense of 'stealing' is less developed (this is more important for highly territorial people). </li></ul></ul><ul><ul><li>People with low territoriality tend also to be high context. </li></ul></ul>
  28. 29. Cultural knowledge <ul><li>Factual – a straightforward fact about culture </li></ul><ul><li>Interpretive – requires a degree of insight </li></ul><ul><li>Cultural sensitivity and Cultural empathy </li></ul><ul><li>Cultures are not right or wrong, better or worse – They are simply different </li></ul>
  29. 30. Cultural change <ul><li>Cultural borrowing </li></ul>
  30. 31. Cultural change <ul><li>Resistance to change </li></ul><ul><li>The degree of resistance to new </li></ul>
  31. 32. Cultural change <ul><li>Planned and unplanned cultural change </li></ul><ul><ul><li>Relative Advantage: Significant improvement </li></ul></ul><ul><ul><li>Simplicity: easy to understand </li></ul></ul><ul><ul><li>Easy to Try: easy to introduce as well as easy to abandon </li></ul></ul><ul><ul><li>Easy to Measure: easy to measure the benefits, in money, time, efficiency or some other evaluation measure </li></ul></ul><ul><ul><li>Inexpensive </li></ul></ul>
  32. 33. Cultural Adaptation <ul><li>Cultural imperatives </li></ul><ul><li>Electives </li></ul><ul><li>Exclusive </li></ul>
  33. 34. Management objectives and aspirations <ul><li>Security and mobility </li></ul><ul><li>Personal life </li></ul><ul><li>Affiliation and acceptance </li></ul><ul><li>Power and achievement </li></ul>
  34. 35. Bribery: variations on a theme <ul><li>Bribery: voluntary offered payment by someone seeking unlawful advantage </li></ul><ul><li>Extortion: someone in authority </li></ul><ul><li>Lubrication: small sum of cash, a gift </li></ul><ul><li>Subornation : request for officials to turn their heads, to not to do their jobs /frequently/ </li></ul>
  35. 36. Dimensions of culture, synthesis <ul><li>Information Oriented </li></ul><ul><li>Low context </li></ul><ul><li>Individualism </li></ul><ul><li>Low power distance </li></ul><ul><li>Bribery less common </li></ul><ul><li>Low distance from English </li></ul><ul><li>Linguistic directness </li></ul><ul><li>Monochronic time </li></ul><ul><li>Internet </li></ul><ul><li>Foreground </li></ul><ul><li>Competition </li></ul><ul><li>Relationship Oriented </li></ul><ul><li>High context </li></ul><ul><li>Collectivism </li></ul><ul><li>High power distance </li></ul><ul><li>Bribery more common </li></ul><ul><li>High distance from English </li></ul><ul><li>Linguistic indirectness </li></ul><ul><li>Polychronic time </li></ul><ul><li>Face-to-face </li></ul><ul><li>Background </li></ul><ul><li>Reduce transaction costs </li></ul>
  36. 37. The Political Environment
  37. 38. The Political Environment <ul><li>The sovereignty of nations </li></ul><ul><li>Stability of government policies (In Italy: more than 50 different governments since World War II – business goes as usual; In India: hostile to foreign investments) </li></ul>
  38. 39. Forms of government <ul><li>Ancient Greeks </li></ul><ul><li>Rule by one </li></ul><ul><li>Rule by few </li></ul><ul><li>Rule my many </li></ul><ul><li>Today </li></ul><ul><li>Monarchy (Dictatorship) </li></ul><ul><li>Aristocracy (Oligarchy) </li></ul><ul><li>Democracy </li></ul>
  39. 40. The Political Environment <ul><li>Political parties </li></ul><ul><li>Nationalism </li></ul><ul><li>Targeted fear/ animosity </li></ul><ul><li>Trade disputes </li></ul>
  40. 41. Political risk of global business <ul><li>Confiscation: the seizing of a company’s payment without payment /1950s and 1960s/ </li></ul><ul><li>Expropriation: the government seizes the investment but some reimbursement for the asset </li></ul><ul><li>Domestication: the transfer of foreign investments to national control </li></ul>
  41. 42. Economic risks <ul><li>Exchange controls </li></ul><ul><li>Local content laws /Thailand: 50% milk from local farmers/ </li></ul><ul><li>Import restrictions </li></ul><ul><li>Tax controls </li></ul><ul><li>Price controls </li></ul><ul><li>Labor problems /layoff is forbidden, profits may have to shared/ </li></ul>
  42. 43. Assessing political vulnerability <ul><li>Politically sensitive products and issues </li></ul><ul><ul><li>Effect on environment </li></ul></ul><ul><ul><li>Exchange rates </li></ul></ul><ul><ul><li>National and economic security </li></ul></ul><ul><ul><li>Welfare of people </li></ul></ul>
  43. 44. Failed States Index 2010
  44. 45. Least risky countries, Score out of 100 <ul><li>Source: Euro-money Country risk March 2008 </li></ul>Rank Previous Country Overall score 1 1 Luxembourg 99.88 2 2 Norway 97.47 3 3 Switzerland 96.21 4 4 Denmark 93.39 5 5 Sweden 92.96 6 6 Ireland 92.36 7 10 Austria 92.25 8 9 Finland 91.95 9 8 Netherlands 91.95 10 7 United States 91.27
  45. 46. MNC are generally positive when <ul><li>Improves the balance of payment </li></ul><ul><li>Uses locally produced resources </li></ul><ul><li>Transfers capital, technology and skills </li></ul><ul><li>Creates jobs </li></ul><ul><li>Makes tax contributions </li></ul>
  46. 47. Strategies to minimize political risks <ul><li>Joint ventures </li></ul><ul><li>Expanding the investment base </li></ul><ul><li>Licensing </li></ul><ul><li>Planned domestications </li></ul><ul><li>Political bargaining </li></ul><ul><li>Political payoffs </li></ul>
  47. 48. The international legal environment
  48. 49. Bases for legal systems <ul><li>Common law </li></ul><ul><li>Code law </li></ul><ul><li>Islamic law </li></ul><ul><li>Socialist law </li></ul>
  49. 50. Common law <ul><li>the system in effect in the U.S., is based on a legal tradition of precedent.  </li></ul><ul><li>Each case that raises new issues is considered on its own merits, and then becomes a precedent for future decisions on that same issue.  </li></ul>
  50. 51. Code law <ul><li>which is common in Europe, </li></ul><ul><li>cannot come up with innovative solutions when new issues such as patentability of biotechnology come up.  </li></ul>
  51. 52. Islamic law <ul><li>based on the teachings of the Koran, </li></ul><ul><li>which puts forward mandates such as a prohibition of usury, or excessive interest rates.  </li></ul><ul><li>Attorneys may be consulted about what might please God rather than what is an explicit requirements of the government. </li></ul>
  52. 53. Socialist law <ul><li>based on the premise that “the government is always right” </li></ul><ul><li>and typically has not developed a sophisticated framework of contracts (you do what the governments tells you to do) or intellectual property protection (royalties are unwarranted since the government ultimately owns everything).  </li></ul>
  53. 54. International dispute resolution <ul><li>Conciliation </li></ul><ul><li>Arbitration </li></ul><ul><li>Litigation </li></ul>
  54. 55. Protection of intellectual property <ul><li>A special problem </li></ul><ul><li>Counterfeiting and piracy </li></ul>
  55. 56. Bayer AG - Aspirin <ul><li>German chemical company </li></ul><ul><li>In Russia: </li></ul><ul><ul><li>Russia’s Patent office registered its trademark to the word aspirin </li></ul></ul><ul><ul><li>Popular use </li></ul></ul><ul><ul><li>First manufacturer </li></ul></ul><ul><li>In USA </li></ul><ul><ul><li>Generic name: acetylsalicylic acid </li></ul></ul><ul><ul><li>Sterling Winthrop owned Bayer trademark </li></ul></ul><ul><ul><li>US confiscated domestic assets of Bayer AG after WWI </li></ul></ul><ul><ul><li>Bought from Kodak in 1994 </li></ul></ul>
  56. 57. International conventions <ul><li>The Paris Convention for the Protection of Industrial Property </li></ul><ul><li>The Inter- American Convention </li></ul><ul><li>The Madrid Arrangement </li></ul>
  57. 58. Commercial law <ul><li>Marketing laws: marketing activities in production, promotion, labeling, pricing, channels of distribution </li></ul><ul><li>Green marketing legislation </li></ul><ul><li>Antitrust </li></ul>