International marketing 5


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International marketing 5

  1. 1. IMR 300 – Lecture 5 Political environment Legal environment
  2. 2. The Political Environment
  3. 3. The Political Environment <ul><li>The sovereignty of nations </li></ul><ul><li>Stability of government policies </li></ul><ul><ul><li>In Italy: more than 50 different governments since World War II – business goes as usual </li></ul></ul><ul><ul><li>In India: hostile to foreign investments </li></ul></ul>
  4. 4. 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>
  5. 5. 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>
  6. 6. 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>
  7. 7. 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>
  8. 8. 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>
  9. 9. Failed States Index 2010
  10. 10. Least risky countries, Score out of 100 <ul><li>Source: Euro-money Country risk March 2008 </li></ul>91.27 United States 7 10 91.95 Netherlands 8 9 91.95 Finland 9 8 92.25 Austria 10 7 92.36 Ireland 6 6 92.96 Sweden 5 5 93.39 Denmark 4 4 96.21 Switzerland 3 3 97.47 Norway 2 2 99.88 Luxembourg 1 1 Overall score Country Previous Rank
  11. 11. Kidnappings by country 257 kidnappings  New Zealand # 10   281 kidnappings  Kuwait # 9   383 kidnappings  Romania # 8   432 kidnappings  Portugal # 7   491 kidnappings  Peru # 6   555 kidnappings  Tunisia # 5   994 kidnappings  Belgium # 4   2,933 kidnappings  Canada # 3   3,071 kidnappings  South Africa # 2   3,261 kidnappings  United Kingdom : # 1   Amount Countries   Rank  
  12. 12. Assault victims by country 1.2%  United States = 9   1.2%  Belgium = 9   1.4%  France = 7   1.4%  Denmark = 7   2.1%  Finland # 6   2.3%  Canada # 5   2.4%  New Zealand = 3   2.4%  Australia = 3   2.8%  United Kingdom # 2   3%  Saint Kitts and Nevis # 1   Amount Countries Rank  
  13. 13. 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>
  14. 14. 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>
  15. 15. The international legal environment
  16. 16. 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>
  17. 17. 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>
  18. 18. 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>
  19. 19. 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>
  20. 20. 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>
  21. 21. International dispute resolution <ul><li>Conciliation </li></ul><ul><li>Arbitration </li></ul><ul><li>Litigation </li></ul>
  22. 22. Protection of intellectual property <ul><li>A special problem </li></ul><ul><li>Counterfeiting and piracy </li></ul>
  23. 23. 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>
  24. 24. Software piracy rate by country 85%  Iraq = 10   87%  Venezuela # 9   88%  Libya # 8   89%  Yemen # 7   90%  Sri Lanka # 6   91%  Zimbabwe # 5   92%  Bangladesh = 2   92%  Azerbaijan = 2   92%  Moldova = 2   93%  Armenia # 1   Amount   Countries   Rank  
  25. 25. 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>
  26. 26. 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>
  27. 27. Marketing laws: <ul><li>US: prohibits human organ selling and buying </li></ul><ul><li>Philippines: allows this transaction </li></ul><ul><li>Greece, Norway, Denmark, Austria, Netherlands: restrict advertising directed at children </li></ul>
  28. 28. Alcohol law <ul><li>US: </li></ul><ul><li>the standard is that alcohol advertisements can only be placed in media where 70% of the audience is over the legal drinking age. </li></ul><ul><li>should not be designed to appeal to people under the age of 21, for example, using cartoon characters as spokespeople is discouraged </li></ul><ul><li>Currently the tobacco industry is forbidden to advertise on TV. </li></ul>
  29. 29. Alcohol law <ul><li>Malaysia </li></ul><ul><li>is not shown before 10:00 pm and during Malay-language programs. </li></ul><ul><li>non-Malay newspapers and magazines are allowed to continue alcohol advertising. </li></ul><ul><li>Supermarkets and hypermarkets are also criticized for advertising alcohol products on trolley, which is a disappointment for Muslims, which is an official religion of the country. </li></ul><ul><li>sponsorships of concerts and entertainment events. </li></ul>
  30. 30. Alcohol law <ul><li>Singapore </li></ul><ul><li>not allowed to be shown during programs intended for children and young persons and during Malay-language programs. </li></ul><ul><li>Hong Kong </li></ul><ul><li>alcohol advertising is not allowed to be shown during Family Viewing Hour programs. </li></ul>
  31. 31. Alcohol law <ul><li>Swedish law </li></ul><ul><li>generally forbidden. </li></ul><ul><li>permitted for beverages identified as &quot;class 1&quot; or &quot;light beer&quot; </li></ul><ul><li>Since 2005, newspapers have allowed advertisements for wine, and later for spirits, based on the provisions of an EU directive </li></ul>
  32. 32. Green marketing legislation <ul><li>Environmentally friendly products, and on product packaging and its effect on solid waste management </li></ul><ul><li>Germany: regulate management and recycling of packaging waste </li></ul>
  33. 33. International marketing research
  35. 35. MARKET RESEARCH <ul><li>a systematic, objective collection and analysis of data about a particular target market, competition, and/or environment </li></ul><ul><li>The purpose of any market research project is to achieve an increased understanding of the subject matter. </li></ul>
  36. 36. MARKET RESEARCH <ul><li>With markets throughout the world becoming increasingly more competitive, market research is now on the agenda of many organizations </li></ul>
  37. 37. MARKET RESEARCH <ul><li>Market Researchers can utilize many types of research techniques and methodologies to capture the data that they require. </li></ul>
  38. 38. Role of marketing research <ul><li>To provide management with </li></ul><ul><ul><li>relevant, </li></ul></ul><ul><ul><li>accurate, </li></ul></ul><ul><ul><li>reliable, </li></ul></ul><ul><ul><li>valid, and </li></ul></ul><ul><ul><li>current information. </li></ul></ul>
  39. 39. Research process <ul><li>Define the research problem and establish research objectives </li></ul><ul><li>Determine the sources of information to fulfill the research objectives </li></ul><ul><li>Consider the costs and benefits of the research effort </li></ul><ul><li>Gather the relevant data from secondary and primary sources or both </li></ul><ul><li>Analyze, interpret and summarize results </li></ul><ul><li>Effectively communicate the results to decision makers </li></ul>
  40. 40. The role of marketing research &quot;DECIDE&quot; model <ul><li>D - Define the marketing problem </li></ul><ul><li>E - Enumerate the controllable and uncontrollable decision factors </li></ul><ul><li>C - Collect relevant information </li></ul><ul><li>I - Identify the best alternative </li></ul><ul><li>D - Develop and implement a marketing plan </li></ul><ul><li>E - Evaluate the decision and the decision process </li></ul>
  41. 41. Classification of marketing research <ul><li>Organizations engage in marketing research for two reasons: </li></ul><ul><ul><li>to identify and </li></ul></ul><ul><ul><li>to solve marketing problems. </li></ul></ul>
  42. 42. Types of marketing research <ul><li>Advertising Research </li></ul><ul><li>Commercial eye tracking research </li></ul><ul><li>Cool-hunting </li></ul><ul><li>Demand estimation </li></ul><ul><li>Distribution channel audits </li></ul><ul><li>Internet strategic intelligence </li></ul><ul><li>Mystery shopping </li></ul>
  43. 43. International Marketing Research (IMR) <ul><li>market research conducted either simultaneously or sequentially to facilitate marketing decisions in more than one country </li></ul>
  44. 44. The process of international marketing research <ul><li>though involves the same disciplines as domestic research, has some differences </li></ul><ul><ul><li>The national differences between countries arising out of political, legal, economic, social and cultural differences and, </li></ul></ul><ul><ul><li>The comparability of research results due to these differences. </li></ul></ul>
  45. 45. National Differences: Cultural Differences <ul><li>Product </li></ul><ul><li>A soft drink was introduced into Arab countries with an attractive label that had six-pointed stars on it. </li></ul><ul><li>The Arabs interpreted this as pro-Israeli and refused to buy it. </li></ul>
  46. 46. National Differences: Cultural Differences <ul><li>Price </li></ul><ul><li>The Americans lost a lot of profit by jumping the gun and believing that Japanese respond just like the Americans do </li></ul>
  47. 47. Racial Differences <ul><li>For example, the types of hair care and cosmetic products needed in U.S would differ from those needed in South East Asia. </li></ul>
  48. 48. Top 9 of the market research sector 2009 (million USD ) 5.9 400.0 Arbitron 9 0.8 425.8 Westat 8 6.6 665.0 IRI 7 9.5 739.6 Synovate 6 6.5 1,077.0 Ipsos 5 5.4 1,397.3 GfK AG 4 8.9 1,958.6 IMS Health Inc 3 2.5 4,692 WPP Group - Kantar Group, TNS, Millward Brown, BMRB, IMRB International and Ziment Group 2 2.6 5,056.0 Nielsen Company 1 Growth% Sales Company
  49. 49. The Nielsen Company <ul><li>Global marketing and advertising research company headquartered in New York, NY. </li></ul><ul><li>Nielsen is active in over 100 countries, and employs some 36,000 people worldwide. </li></ul><ul><li>Total revenues amounted to $4.8 billion in 2009. </li></ul>
  50. 50. Specialists vs. Generalists <ul><li>Specialist approach: considering the uncontrollable factors particular to a market </li></ul><ul><li>Generalists: consider the world markets as a whole </li></ul>
  51. 51. Specialists vs. Generalists
  52. 52. Centralized vs. Decentralized Research <ul><li>Centralized research: from the headquarters. </li></ul><ul><ul><li>hierarchy </li></ul></ul><ul><ul><li>authority </li></ul></ul><ul><ul><li>Dispute </li></ul></ul><ul><ul><li>delay </li></ul></ul><ul><ul><li>inefficiency. </li></ul></ul>
  53. 53. Centralized vs. Decentralized Research <ul><li>Decentralized research: company office in each country conduct the research based on the guidelines from the headquarters. </li></ul><ul><ul><li>translate the information gathered correctly into the language at the headquarters. </li></ul></ul>
  54. 54. Centralized Research: Parker Pen <ul><li>Decentralized marketing: ad agencies in more than 40 countries. </li></ul><ul><li>A new team: centralized in the company’s headquarters </li></ul><ul><ul><li>to standardize the promotion, packaging, pricing, promotional materials, and advertising. </li></ul></ul><ul><ul><li>the difference in the cultures were less important than the similarities. </li></ul></ul>
  55. 55. Centralized Research: Parker Pen <ul><li>The same ad was used in all countries, </li></ul><ul><li>the ads tried to say something to everyone but ended up saying nothing to anyone. </li></ul>
  56. 56. Research Across Countries <ul><li>Single-country Research: </li></ul><ul><li>Multi-country Research: </li></ul><ul><ul><li>Independent Multi-country Research : the most common form </li></ul></ul><ul><ul><li>Sequential Multi-country Research : attractive as the lessons can be learned in the first one or two markets </li></ul></ul><ul><ul><li>Simultaneous Multi-country Research: It is a test for the researcher capabilities and also creates in its most acute form, the question of comparability. </li></ul></ul>
  57. 57. IMR: SURVEY <ul><li>useful for getting a great deal of specific information. </li></ul><ul><li>vulnerable to bias </li></ul><ul><ul><li>open-ended questions (e.g., “In which city and state were you born? ____________”) </li></ul></ul><ul><ul><li>closed-ended , (e.g., “Male”) </li></ul></ul>
  58. 58. IMR: SURVEY <ul><li>Mail survey: relatively inexpensive, but response rates are typically quite low—typically from 5-20%. </li></ul><ul><li>Phone-survey: get somewhat higher response rates, but not many questions can be asked </li></ul><ul><li>Mall intercepts: are a convenient way to reach consumers, but respondents may be reluctant to discuss anything sensitive face-to-face with an interviewer. very popular in the United States and Canada </li></ul>
  59. 59. IMR: FOCUS GROUP <ul><li>launch a new product or modify an existing one . </li></ul><ul><li>involves having some 8-12 people come together in a room to discuss their consumption preferences and experiences. </li></ul><ul><li>very good for getting breadth </li></ul>
  60. 60. IMR: FOCUS GROUP <ul><li>Small sample sizes. </li></ul><ul><li>Cannot give us in-depth information. </li></ul><ul><li>Inherently social. </li></ul><ul><li>Reluctant to speak about embarrassing issues (e.g., weight control, birth control). </li></ul>
  61. 61. IMR: FOCUS GROUP <ul><li>Women in the Middle East do not have as much freedom as women in the Western world. </li></ul><ul><li>In some Asian countries, the moderator must take special interest in introductions if the discussion is to be truly open and candid. </li></ul><ul><li>The French have been proven to resist innovations of any kind. </li></ul><ul><li>The Japanese hesitate to criticize new product ideas. </li></ul><ul><li>There is a very strong group mentality in Asian culture while most Americans tend to be individualistic </li></ul>
  62. 62. IMR: FOCUS GROUP <ul><li>Timeframe : A good estimate would be to calculate the time required for the research in the United States and double it for Europe. It would be longer for Asia. </li></ul><ul><li>Structure : In most of other countries, focus group panels consist of four to six people, versus eight to ten in the United States. The focus group interviews themselves last for almost four hours. </li></ul>
  63. 63. IMR: FOCUS GROUP <ul><li>Approach : Foreign moderators are not as structured and as authoritative as U.S moderators. </li></ul><ul><li>This can result in long periods of silence and digression. This is because foreign moderators feel it necessary to allow the group to settle down and establish trust to build up the necessary comfort. </li></ul>
  64. 64. IMR: PERSONAL INTERVIEW <ul><li>really into depth (when the respondent says something interesting, we can ask him or her to elaborate), </li></ul><ul><li>but this method of research is costly and can be extremely vulnerable to interviewer bias. </li></ul>
  65. 65. IMR: PERSONAL INTERVIEW <ul><li>Tend to be the dominant mode of data collection outside the United States and Canada </li></ul><ul><li>Lower wage costs imply that personal procedures are cheaper than in the United States. </li></ul><ul><li>In Latin countries, and particularly in the Middle East, interviewers are regarded with considerable suspicion. </li></ul><ul><li>In Latin countries, where tax evasion is more prevalent, interviewers are often suspected of being tax inspectors. </li></ul><ul><li>In the Middle East, where interviewers are invariably male, interviews with housewives often have to be conducted in the evenings when husbands are at home. </li></ul>
  66. 66. IMR: OBSERVATION OF CONSUMERS <ul><li>a powerful tool. </li></ul>
  67. 67. Equivalence Issues in Primary Data Collection
  68. 68. Construct equivalence <ul><li>the function of the product or service that is being researched and not the method used in collecting the information </li></ul><ul><li>Bicycle: USA – recreational, China - transportation </li></ul>
  69. 69. Measurement equivalence <ul><li>relates to establishing equivalence in terms of procedures used to measure concepts or attitudes. </li></ul><ul><li>Calibration Equivalence – Equivalence has to be established with regard to the calibration system used in measurement </li></ul><ul><ul><li>monetary units, </li></ul></ul><ul><ul><li>measures of weight, distance and volume and </li></ul></ul><ul><ul><li>perceptual cues like color, shape or form. </li></ul></ul>
  70. 70. Measurement equivalence <ul><li>Translation Equivalence – The research instrument has to be translated such that respondents in all countries involved in the study understand it. </li></ul><ul><li>Metric Equivalence –the scoring or scalar equivalence of the measure used. The researcher has to ensure equivalence of the scaling or scoring procedure used to establish the measure. </li></ul>
  71. 71. Sampling equivalence <ul><li>Japanese tend to take a neutral point, so it is wise to avoid a scale with a neutral point in order to obtain useful information. </li></ul><ul><li>Latin Americans and Italians tend to exaggerate their response </li></ul><ul><li>Americans do not typically go into details with open-ended question. </li></ul><ul><li>Factors such as this should be kept in mind while designing the scales for measurement </li></ul>