The document discusses cultural factors that impact global marketing strategies. It provides context around culture and defines it as shared ways of living transmitted between generations. Culture includes both material and non-material elements like attitudes, beliefs, and values. Religion is an important source of a society's worldviews. Differences in aesthetics must also be considered. Successful global marketing requires understanding local cultures while also leveraging shared characteristics.

1. This IS AN EXAMPLE OF SOMEONE ELSE IN THE CLASS.
BELOW IS HOW THE DISCUSSION SHOULD BE DONE.
Discussion Part 1:
I have selected to be the VP of Marketing for Coke and explore
some of the strategies that would need to be taken in gaining
more share in the India market.
In India there is a very low market share for what is considered
packaged drinks. Currently there is between a 4-5 percent of all
beverages consumed in India are packaged, more people are
choosing to drink tap water, tea, juices, and dairy products. In
order to be successful Coca Cola would need to ensure that
“company researchers broaden their definition of competitors in
international markets to include competitive pressures that
would not be present in the domestic market.” (Keegan &
Green, 2020). This is a cultural and economic characteristic that
impacts buying patterns in the India market.
There is market potential for success based off increasing
consumer spending habits, and a rise in lower to middle class.
When the India consumers have had more disposable income,
they have shown to spend more on what is considered packaged
drinks. Coke does have a current competitive advantage in that
is portfolio mix does currently consist of drinks that offer a
variety of fruit flavors and tastes to accommodate the local
appetite. Sprite, Fanta, and possibly partnering with local
vendors for other India only flavors, which is a similar approach
in other countries, could prove very beneficial. Coke has shown
that it can partner with local vendors for bottling of its products
to reduce costs, but also give back to its local communities.
This is another part of their strategy to ensure that they are
being responsible to support their local communities.
Strengths
-Broad existing portfolio of products

2. -Brand Recognition
-Partnership with local vendors
Weaknesses
-Emerging market may take time to build
-Cultural tastes may not gravitate to traditional coke
Opportunities
-Reduce cost using local vendors for glass and packaging
-increasing market growth could allow to bring more portfolio
items over
Threats
-Potential for other vendors to move into market
-Economic downturn could decrease sales/ potential future sales
Discussion Part 2:
I chose LUVS diapers as my focus from Proctor and Gamble and
potential emergence into India as well. Its a latent market in
that they uses other methods aside from diapers for natural
infant hygiene (clothe diapers, etc). This means that there could
be a need if the major environmental concerns could be met as
well as done so in an economical way. A latent market means
that there is not currently large market share or not market share
of. This is critical information needed to decide if a company
should enter or not.
In order to identify if there is a need, the following analytical
techniques should be applied.
1: Use multiple measures to predict future sales opportunity.
Rather than rely solely on one piece of data, utilize several
resources and data to help make the best possible decision.
2: Conduct a comparative analysis in other markets: There are
other countries that are in a similar state as India that can
provide insight into what others have tried, and what has
succeeded.
3: Observations/ Control Study: This is an opportunity to start

3. out on a smaller scale to evaluate and learn about the approach,
price point, and marketing that will need to implemented to
create success.
How Coca Cola Manages 90 Emerging Markets: William
Holstein, 2011
https://www.strategy-
business.com/article/00093?gko=6397d (Links to an external
site.)
Keegan, W & Green, M. , 2020. Global Marketing
4 Social and Cultural Environments
Learning Objectives
4-1 Define culture and identify the -various expressions and
-manifestations of culture that can impact global marketing
strategies.
4-2 Compare and contrast the key aspects of high- and low-
context cultures.
4-3 Identify and briefly explain the major dimensions of
Hofstede’s social ­values typology.
4-4 Explain how the self-reference -criterion can affect
decision making at global companies, and provide a step-by-
step example of a company adapting to conditions in a global
market.
4-5 Analyze the components of diffusion theory and its
applicability to global marketing.
4-6 Explain the marketing implications of different social

4. and cultural environments around the globe.
Case 4-1 Strange Brew: Coffee Culture Around the World
Coffee beans are the second-most widely traded commodity in
the world (Can you guess what is number 1?). According to
legend, the bean’s stimulant properties were discovered
hundreds of years ago by a goat herder in Kaffa, a highland
region of Ethiopia. Beans and plants were eventually
transported across the Red Sea to the Arabian Peninsula. By the
end of the fifteenth century, coffee cultivation had taken root in
Yemen, and a hot beverage brewed using roasted beans quickly
became part of Islamic cultural life.
The growth and evolution of the global coffee trade from the
early 1600s through today is documented in many sources,
including John Keay’s history of the British East India
Company. In the fertile valleys of Yemen, Captain John
Jourdain found groves of plantings that he called “cohoo.”
Jourdain wrote:
The seeds of this cohoo is a great marchandise [sic] for it is
carried to Grand Cairo and all other places of Turkey and the
Indias.1
As Keay notes, traders had indeed brought coffea Arabica from
Africa to the Middle East for cultivation. “Kahwa” was the
word used in the Arab world. The crop was cultivated only in
this region, and, at the time, no market for coffee existed in
Europe.
By the 1660s, coffee had become the staple export of the Red
Sea ports. Gradually, coffee made its way to Europe. London’s
first coffee house opened in 1652; diarist Samuel Pepys was a
regular patron. Venetian traders imported coffee from Egypt and
sold it to wealthy citizens of the Venetian Republic; Italy’s first

5. coffee café was opened in the early 1680s.
Although the British East India Company dominated the export
trade at the Yemeni port of Mocha, by the end of the
seventeenth century the rival Dutch East India Company
(Verenigde Oostindische Copagnie) had established coffee
plantations in Indonesia on the island of Java. Other European
nations followed suit, introducing the crop in their far-flung
networks of colonies. Coffee had gone global!
Today, coffee culture continues to spread around the globe. The
brew is even becoming popular in countries such as India and
China, where tea has traditionally been the hot beverage of
choice (see Exhibit 4-1). Meanwhile, in Ethiopia, where coffee
was first discovered, conflict is brewing between government
budget needs and consumer aspirations: The government wants
to generate more revenues by boosting exports of premium
coffee beans, while consumers want to drink more coffee made
from those same beans.
Exhibit 4-1
The conflicting priorities of commerce and consumption in
Ethiopia, the broader acceptance of coffee worldwide, and the
rapid growth of coffee-centric brands such as Starbucks
illustrate the ways that the social and cultural environments
impact marketing opportunities and dynamics around the globe.
This chapter focuses on the forces that shape and affect
individual, group, and corporate behavior in the marketplace.
We start with a general discussion of the basic aspects of
culture and society and the emergence of a twenty-first-century
global consumer culture. Next, several useful conceptual
frameworks for understanding culture are presented, including
Hall’s concept of high- and low-context cultures, Maslow’s
hierarchy of needs, Hofstede’s cultural typology, the self-
reference criterion, and diffusion theory. The chapter also cites
specific examples of the impact of culture and society on the

6. marketing of both consumer and industrial products.
Clearly, coffee’s popularity is on the rise around the world. It
remains to be seen, however, how rising levels of consumption
can be balanced with increased production in Ethiopia and other
emerging markets. You will have the opportunity to explore the
issue in the continuation of this case at the end of the chapter.
The discussion questions at the end of the case will give you a
chance to reflect further on “lessons learned.”
4-1 Society, Culture, and Global Consumer Culture
4-1 Define culture and -identify the various expressions and
manifestations of culture that can impact global marketing
strategies.
Both differences and similarities characterize the world’s
cultures, meaning that the task of the global marketer is
twofold. First, marketers must study and understand the cultures
of the countries in which they will be doing business. Second,
they must incorporate this understanding into the marketing
planning process. In some instances, strategies and marketing
programs will have to be adapted to the local culture; however,
marketers should also take advantage of shared cultural
characteristics and avoid unneeded and costly adaptations of the
marketing mix.
Any systematic study of a new geographic market requires a
combination of tough-mindedness and open-mindedness. While
marketers should be secure in their own convictions and
traditions, an open mind is required to appreciate the integrity
and value of other ways of life and points of view. Put simply,
people must overcome the prejudices that are a natural result of
the human tendency toward ethnocentricity. Although “culture
shock” is a normal human reaction to the new and unknown,
successful global marketers strive to comprehend human
experience from the local point of view. One reason cultural

7. factors challenge global marketers is that many of these factors
are hidden from view. Because culture is a learned behavior
passed on from generation to generation, it can be difficult for
outsiders to fathom. However, as they endeavor to understand
cultural factors, outsiders gradually become insiders and
develop cultural empathy. There are many different paths to the
same goals in life: The global marketer understands this and
revels in life’s rich diversity.
Anthropologists and sociologists have offered scores of
different definitions of culture. As a starting point, culture can
be understood as “ways of living, built up by a group of human
beings, that are transmitted from one generation to another.” A
culture acts out its ways of living in the context of social
institutions, including family, educational, religious,
governmental, and business institutions. Those institutions, in
turn, function to reinforce cultural norms. Culture also includes
both conscious and unconscious values, ideas, attitudes, and
symbols that shape human behavior and that are transmitted
from one generation to the next. Organizational anthropologist
Geert Hofstede defines culture as “the collective programming
of the mind that distinguishes the members of one category of
people from those of another.”2 A particular “category of
people” may constitute a nation, an ethnic group, a gender
group, an organization, a family, or some other unit.
Some anthropologists and sociologists divide cultural elements
into two broad categories: material culture and nonmaterial
culture. The former is sometimes referred to as the physical
component or physical culture; it includes physical objects and
artifacts created by humans such as clothing and tools.
Nonmaterial culture (also known as subjective or abstract
culture) includes intangibles such as religion, perceptions,
attitudes, beliefs, and values. It is generally agreed that the
material and nonmaterial elements of culture are interrelated
and interactive. Cultural anthropologist George P. Murdock

8. studied material and nonmaterial culture and identified dozens
of “cultural universals,” including athletic sports, body
adornment, cooking, courtship, dancing, decorative art,
education, ethics, etiquette, family feasting, food taboos,
language, marriage, mealtime, medicine, mourning, music,
property rights, religious rituals, residence rules, status
differentiation, and trade.3
It is against this background of traditional definitions that
global marketers should understand a key worldwide
sociocultural phenomenon of the early twenty-first century:4
Consumption has become the hallmark of postmodern society.
As cultural information and imagery flow freely across borders
via satellite TV, the Internet, and other communication
channels, new global consumer cultures are emerging. Persons
who identify with these cultures share meaningful sets of
consumption-related symbols. Some of these cultures are
associated with specific product categories; marketers speak of
“coffee culture,” “credit-card culture,” “fast-food culture,” “pub
culture,” “soccer/football culture,” and so on. This
cosmopolitan culture, which is composed of various segments,
owes its existence in large part to a wired world in which there
is increasing interconnectedness of various local cultures. It can
be exploited by global consumer culture positioning (GCCP), a
marketing tool that will be explained in more detail in Chapter
7. In particular, marketers can use advertising to communicate
the notion that people everywhere consume a particular brand or
to appeal to human universals.
Attitudes, Beliefs, and Values
If we accept Hofstede’s notion of culture as “the collective
programming of the mind,” then it makes sense to learn about
culture by studying the attitudes, beliefs, and values shared by a
specific group of people. An attitude is a learned tendency to
respond in a consistent way to a given object or entity.
Attitudes are clusters of interrelated beliefs. A belief is an

9. organized pattern of knowledge that an individual holds to be
true about the world. Attitudes and beliefs, in turn, are closely
related to values. A value can be defined as an enduring belief
or feeling that a specific mode of conduct is personally or
socially preferable to another mode of conduct.5 In the view of
Hofstede and others, values represent the deepest level of a
culture and are present in the majority of the members of that
particular culture.
Some specific examples will allow us to illustrate these
definitions by comparing and contrasting attitudes, beliefs, and
values. The Japanese, for example, strive to achieve
cooperation, consensus, self-denial, and harmony. Because these
all represent feelings about modes of conduct, they are values.
Japan’s monocultural society reflects the belief among the
Japanese that they are unique in the world. Many Japanese,
especially young people, also believe that the West is the source
of important fashion trends. As a result, many Japanese share a
favorable attitude toward American brands. Within any large,
dominant cultural group, there are likely to be subcultures—that
is, smaller groups of people with their own shared subset of
attitudes, beliefs, and values. Values, attitudes, and beliefs can
also be surveyed at the level of any “category of people” that is
embedded within a broad culture. For example, if you are a
vegetarian, then eating meat represents a mode of conduct that
you and others who share your views avoid. Subcultures often
represent attractive niche marketing opportunities.
Religion
Religion is an important source of a society’s beliefs, attitudes,
and values. The world’s major religions include Buddhism,
Hinduism, Islam, Judaism, and Christianity; the last includes
Roman Catholicism and numerous Protestant denominations.
Examples abound of religious tenets, practices, holidays, and
histories directly impacting the way people of different faiths
react to global marketing activities. For example, Hindus do not

10. eat beef, which means that McDonald’s does not serve
hamburgers in India (see Case 1-2). In Muslim countries, Yum!
Brands successfully promotes KFC in conjunction with religious
observances. In the Islamic world, Ramadan is a time of fasting
that begins in the ninth month of the Islamic calendar. In
Indonesia, home to the world’s largest Muslim population, KFC
uses Ramadan-themed outdoor advertising to encourage
Indonesians to come to the restaurants at buka puasa, the end of
each day’s fast. Business at KFC Indonesia’s 500 units
increases as much as 20 percent during Ramadan.
When followers of a particular religion believe they have been
offended, the response can sometimes be tragic (see Exhibit 4-
2). In the aftermath of the September 2001 terrorist attacks in
New York and Washington, D.C., and the subsequent U.S.
military actions in the Middle East and Afghanistan, some
Muslims have tapped into anti-American sentiment by urging a
boycott of American brands. One entrepreneur, Tunisian-born
Tawfik Mathlouthi, launched a soft drink brand, Mecca-Cola, as
an alternative to Coca-Cola for Muslims living in the United
Kingdom and France. The brand’s name is both an intentional
reference to the holy city of Islam and an ironic swipe at Coca -
Cola, which Mathlouthi calls “the Mecca of capitalism.”
London’s Sunday Times called Mecca-Cola “the drink now seen
as politically preferable to Pepsi or Coke.”6 In 2003, Qibla Cola
(the name comes from an Arabic word for “direction”) was
launched in the United Kingdom. Founder Zahida Parveen
hoped to reach a broader market than Mecca-Cola by
positioning the brand “for any consumer with a conscience,
irrespective of ethnicity or religion.”7
Aesthetics
Within every culture, there is an overall sense of what is
beautiful and what is not beautiful, what represents good taste
as opposed to tastelessness or even obscenity, and so on. Such
considerations are matters of aesthetics. Global marketers must

11. understand the importance of visual aesthetics embodied in the
color or shape of a product, label, or package. Likewise,
different parts of the world perceive aesthetic styles—various
degrees of complexity, for example—differently. Aesthetic
elements that are attractive, appealing, and in good taste in one
country may be perceived in an entirely different way in another
country.
In some cases, a standardized color can be used in all countries;
examples include Caterpillar Yellow, the trademark of the
earthmoving equipment company and its licensed outdoor gear.
Likewise, Cadbury has trademarked the color purple for its
chocolate confectionary packaging. In surveys about color
preferences, 50 percent of respondents indicate blue is their
favorite—and it is favored by a wide margin over the next-
preferred color. The use of blue dates back millennia; artisans
in ancient Egypt, China, and Mayan civilizations all worked
with the color after the advent of mining led to the extraction of
minerals containing blue pigment. Because it was rare and
expensive, blue came to be associated with royalty and
divinity.8 Today, Tiffany Blue is a trademarked color that the
luxury goods marketer uses on its gift bags and boxes. When
Prince William and his family visit other European royalty, blue
is a frequent wardrobe choice (see Exhibit 4-3).
Exhibit 4-3
Members of the British royal family make diplomatic tours
during which their wardrobe choices often reflect cultural
awareness. When the Duke and Duchess of Cambridge arrived
in Germany in 2017, the duchess wore Prussian blue; Prince
William wore a matching tie.
Because color perceptions can vary among cultures, adaptation
to local preferences may be required. Such perceptions should
be taken into account when making decisions about product
packaging and other brand-related communications. In highly

12. competitive markets, inappropriate or unattractive product
packaging may put a company or brand at a distinct
disadvantage. New color schemes may also be needed because
of a changing competitive environment.
There is nothing inherently “good” or “bad” about any color of
the spectrum; all associations and perceptions regarding color
arise from culture. Red is a popular color in most parts of the
world: Besides being the color of blood, in many countries red
is tied to centuries-old traditions of viticulture and winemaking.
One eight-country study of color perceptions found that red is
associated with perceptions such as “active,” “hot,” and
“vibrant”; in most countries studied, it also conveys meanings
such as “emotional” and “sharp.”9 As such, red has positive
connotations in many societies. In contrast, in Korea, it is taboo
to write a person's name in red ink. Why? Because traditi onally,
red was used to record the names of the deceased. Blue, because
of its associations with sky and water, has an elemental
connotation with undertones of dependability, constancy, and
eternity. White connotes purity and cleanliness in the West, but
is often associated with death, mourning, and funerals in China
and other parts of Asia. Attitudes are changing quickly among
the younger generation, however; today, many Chinese women
rent white wedding gowns and pose for photos with their friends
to commemorate graduating from university!10
Another research team concluded that gray connotes
inexpensive in China and Japan, whereas it is associated with
high quality and high cost in the United States. The researchers
also found that the Chinese associate brown with soft drink
labels and perceive the color as connoting a beverage that tastes
good; in contrast, South Korean and Japanese consumers
associate yellow with soft drinks that “taste good.” For
Americans, the color red has those associations.11
Music is an aesthetic component of all cultures and is accepted

13. as a form of artistic expression and a source of entertainment.
In one sense, music represents a “transculture” that is not
identified with any particular nation. For example, rhythm, or
movement through time, is a universal aspect of music. But
music is also characterized by considerable stylistic variation
with regional or country-specific associations. For example,
bossa nova rhythms are associated with Argentina; samba with
Brazil; salsa with Cuba; reggae with Jamaica; merengue with
the Dominican Republic; and blues, driving rock rhythms, hip-
hop, and rap with the United States. Sociologists have noted
that national identity derives in part from a country’s
indigenous or popular music; a unique music style can
“represent the uniqueness of the cultural entity and of the
community.”12
Music provides an interesting example of the “think globally,
act locally” theme of this book. Musicians in different countries
draw from, absorb, adapt, and synthesize transcultural music
influences, as well as country-specific ones, as they create
hybrid styles such as Polish reggae or Italian hip-hop. Motti
Regev describes this paradox as follows:
Producers of and listeners to these types of music feel, at one
and the same time, participants in a specific contemporary,
global-universal form of expression and innovators of local,
national, ethnic, and other identities. A cultural form associated
with American culture and with the powerful commercial
interests of the international music industry is being used in
order to construct a sense of local difference and authenticity.13
Because music plays an important role in advertising, marketers
must understand which style is appropriate to use in their
campaigns in a given national market. Although background
music can be used effectively in broadcast commercials, the
type of music appropriate for a commercial in one part of the
world may not be acceptable or effective in another part.

14. Government restrictions must also be taken into account. In
China, authorities have the power to dictate which songs can be
marketed and performed, as the Rolling Stones can attest.
Dietary Preferences
Cultural influences are also quite apparent in food preparation
and consumption patterns and habits. Need proof? Consider the
following examples:
Domino’s Pizza, the world’s largest pizza-delivery company,
pulled out of Italy because Italians perceived its product to be
“too American.” In particular, the tomato sauce was too bold
and the toppings were too heavy. Domino’s had better luck in
India, where it -localized its recipes with offerings that include
pizza keema do pyaaza, peppy paneer, and five -peppers.14
Today, Domino’s is the largest foreign fast-food chain in India,
with more than 700 stores.
When Dunkin’ Donuts opened its first Indian outlets in 2012,
morning business was slow because most Indians eat breakfast
at home. Success finally came after the company introduced a
new menu item: Original Tough Guy Chicken Burgers.15
These examples underscore the fact that a solid understanding
of food-related cultural preferences is important for any
company that seeks to market food or beverage products
globally. Titoo Ahluwalia, chairman of a market research firm
in Mumbai, has pointed out that local companies can also
leverage superior cultural understanding to compete effectively
with large foreign firms: “Indian companies have an advantage
when they are drawing from tradition. When it comes to food,
drink, and medicine, you have to be culturally sensitive.”16
Companies that lack such sensitivity are bound to make
marketing mistakes. To avoid this kind of problem, when
Subway expanded into India, the company chose two U.S.-
educated Indian brothers to help open stores and supervise

15. operations.
Although some food preferences remain deeply embedded in
culture, plenty of evidence suggests that global dietary
preferences are converging. Over the past half century, the fast-
food culture has gained increased acceptance around the world.
Heads of families in many countries are pressed for time and are
disinclined to prepare home-cooked meals. Millennials, who are
open to different cultures and lifestyles, are experimenting with
different foods. In addition, the global tourism boom has
exposed travelers to pizza, pasta, and other ethnic foods.
Shorter lunch hours and tighter budgets are forcing workers to
find a place to grab a quick, cheap bite before returning to
work. As food-related cultural differences become less relevant,
such convenience products are likely to be purchased wherever
consumers’ disposable incomes are high enough to afford them
(see Exhibit 4-5).
Exhibit 4-5
SPAM, the iconic brand of canned ham, is a reliable, if
unglamorous, pantry staple in American households. SPAM is
so deeply embedded in American food culture that there is even
a SPAM Museum in Austin, Minnesota, home to parent
company Hormel Foods Corporation.
In South Korea, SPAM is regarded as a delicacy, often packaged
in gift sets for holiday giving. It turns out that SPAM is a
favorite of Chloe Kim, the American gold medalist in
snowboarding at the 2018 Winter Olympics in PyeongChang,
South Korea.
Source: Jodi Cobb/National Geographic Image
Collection/Alamy.
Chapt. 5
5 The Political, Legal, and Regulatory Environments

16. Learning Objectives
5-1 Understand the elements of a country’s political
environment that can impact global marketing activities.
5-2 Define international law and describe the main types of
legal systems found in different parts of the world.
5-3 Understand the most important business issues that can
lead to legal problems for global marketers.
5-4 Describe the available alternatives for conflict resolution
and dispute settlement when doing business outside the home
country.
5-5 In general terms, outline the regulatory environment in
the European Union.
Case 5-1 Travis Kalanick and Uber
Travis Kalanick is an entrepreneur who has achieved a level of
success and notoriety rarely matched in the modern era.
Kalanick is cofounder of Uber Technologies, the parent
company of the wildly popular Uber ride-sharing service.
Kalanick, along with friend and cofounder Garrett Camp,
launched the Uber service in San Francisco in 2010. By now,
most people are familiar with the way Uber works: Customers
download the Uber app to a smartphone and set up an account
that includes mobile payment information. Then, when the
customer needs a ride, he or she opens the app and types in a
destination. The app’s GPS identifies the customer’s current
location and calculates an estimated fare, distance, and trip time
to the destination. If the fare is acceptable, the customer then
requests a car and driver.

17. By the end of 2014, Uber had raised venture capital that valued
the company at nearly $40 billion! The service was available in
more than 250 cities worldwide, and some industry observers
hailed the company as a prime example of digital technology
disrupting an established industry. Uber’s rapid growth was
another example that the “sharing economy,” also known as
“collaborative consumption,” was gaining traction, as evidenced
by the success of Lyft (an Uber competitor), room rental service
Airbnb, and others.
However, Uber has encountered resistance as its popularity has
grown. In London and other major cities, drivers have staged
demonstrations and mass protests against what they claim is
unfair competition from unregulated drivers. Several cities,
including Brussels, Miami, and Las Vegas, have banned Uber.
In Brussels, a court fines drivers who use the service. Uber has
been paying the fines and providing legal support. Regulators in
Germany succeeded in obtaining a temporary injunction banning
the service; after a series of appeals and counter-appeals, the
injunction was lifted.
The European Commission, the executive arm of the EU,
conducted an inquiry to determine whether Uber was an
“information-society service company,” as Uber maintained, or
the equivalent of a taxi service, as the French government
alleged (see Exhibit 5-1).
Exhibit 5-1
Protests against Uber have been staged in Spain, France, the
United Kingdom, and other countries.
Kalanick’s company provides a case study of the impact that the
political, legal, and regulatory environments can have on
international trade and global marketing activities. Each of the
world’s national governments regulates trade and commerce
with other countries and attempts to control the access outside
enterprises have to their country’s national resources. Every

18. country has its own unique legal and regulatory system that
affects the operations and activities of the global enterprise,
including the global marketer’s ability to address market
opportunities and threats. Laws and regulations constrain the
cross-border movement of products, services, people, money,
and know-how. The global marketer must attempt to comply
with each set of national—and, in some instances, regional—
constraints. The fact that laws and regulations are frequently
ambiguous and continually changing hampers these efforts.
And, in the case of Uber, new technologies are evolving at a
faster pace than laws and regulations can follow.
In this chapter, we consider the basic elements of the political,
legal, and regulatory environments of global marketing,
including the most pressing current issues, and offer some
suggestions for dealing with those issues. Some specific
topics—such as rules for exporting and importing industrial and
consumer products; standards for health and safety; and
regulations regarding packaging, labeling, advertising, and
promotion—are examined in later chapters devoted to individual
marketing mix elements.
5-1 The Political Environment
5-1 Understand the elements of a country’s political
environment that can impact global marketing activities.
Global marketing activities take place within the political
environment of governmental institutions, political parties, and
organizations through which a country’s people and rulers
exercise power. As we saw in Chapter 4, each nation has a
unique culture that reflects its society. Each nation also has a
political culture that reflects the relative importance of the
government and legal system and provides a context within
which individuals and corporations understand their relationship
to the political system. Any company doing business outside its
home country should carefully study the political culture in the

19. target country and analyze salient issues arising from the
political environment. These issues include the governing
party’s attitude toward sovereignty, present and future levels of
political risk, tax policies, the threat of equity dilution, and the
risk of expropriation.
Nation-States and Sovereignty
Sovereignty can be defined as supreme and independent
political authority. A century ago, U.S. Supreme Court Chief
Justice Melville Fuller said, “Every sovereign state is bound to
respect the independence of every other sovereign state, and the
courts in one country will not sit in judgment on the acts of
government of another done within its territory.” The late
Richard Stanley, founder and former president of the Stanley
Foundation, offered the following concise description:
A sovereign state was considered free and independent. It
regulated trade, managed the flow of people into and out of its
boundaries, and exercised undivided jurisdiction over all
persons and property within its territory. It had the right,
authority, and ability to conduct its domestic affairs without
outside interference and to use its international power and
influence with full discretion.1
Government actions taken in the name of sovereignty occur in
the context of two important criteria: a country’s stage of
development, and the political and economic systems in place in
the country.
As outlined in Chapter 2, the economies of individual nations
may be classified as industrialized, newly industrializing, or
developing. Many governments in developing countries exercise
control over their nations’ economic development by passing
protectionist laws and regulations. Their primary objective is to
encourage economic development by protecting emerging or
strategic industries in the home country, but government leaders

20. can also engage in cronyism and provide favors for family
members or “good friends.”
Conversely, when many nations reach advanced stages of
economic development, their governments declare that (in
theory, at least) any practice or policy that restrains free trade
is illegal. Antitrust laws and regulations are established to
promote fair competition. Advanced-country laws often define
and preserve a nation’s social order; these laws may extend to
political, cultural, and even intellectual activities and social
conduct.
In France, for example, laws forbid the use of foreign words
such as le weekend or le marketing in official documents. Also,
a French law that went into effect in 1994 required that at least
40 percent of the songs played by popular radio stations be in
the French language. The rationale? To protect against an
“Anglo-Saxon cultural invasion.” In 2016, the quota was
reduced to 35 percent, as Daft Punk and other French recording
artists released music with English-language lyrics to appeal to
a global audience. Companies that may be affected positively or
negatively by legislative acts sometimes use advertising as a
vehicle for expressing their positions on issues (see Exhibit 5-
2).
Exhibit 5-2
Many global companies use corporate advertising to advocate
their official position on trade-related issues. In the mid-1990s,
Mobil mounted an advocacy campaign that addressed a number
of topics of public interest, including trade issues, clean air,
alternative fuels, and health care reform. This op-ed urged the
U.S. -Congress to approve GATT.
Political Risk
Political risk is the possibility of a change in a country’s
political environment or government policy that would

21. adversely affect a company’s ability to operate effectively and
profitably. As Ethan Kapstein, a professor at INSEAD, has
noted:
Perhaps the greatest threats to the operations of global
corporations, and those that are most difficult to manage, arise
out of the political environment in which they conduct their
business. One day, a foreign company is a welcome member of
the local community; the next day, opportunistic politicians
vilify it.5
Political risk can deter a company from investing abroad. Put
another way, when a high level of uncertainty characterizes a
country’s political environment, the country may have difficulty
attracting foreign investment.
As Professor Kapstein has pointed out, executives often fail to
conceptualize political risk because they have not studied
political science—which means they have not been exposed to
the issues that students of politics ask about the activities of
global companies. (A strong argument for a liberal arts
education!) The modern corporation is coming under increasing
scrutiny from business and government leaders as well as the
general public; the same is true of free-market capitalism in
general. This trend can be viewed as contributing to political
risk.
Without a doubt, current events must be part of the corporate
information agenda; for example, business managers need to
stay apprised of the formation and evolution of political parties
as well as the public’s perception of political institutions. The
emergence of far-right parties such as the Alternative for
Germany (AfD), whose success in the 2017 national elections
has been described as a “political earthquake,” is a case in
point.6 Other potential disruptors of continental Europe’s
established political order include Austria’s Freedom Party,

22. France’s National Front, and the Party for Freedom in the
Netherlands.
“If you want to be in growing markets you have to assume
and expect some volatility. You can’t be in growth markets
without presuming there will be risks.”7
Jørgen Buhl Rasmussen, CEO, Carlsberg
Valuable sources of current-events information include the
Financial Times, The Economist, and other daily and weekly
business periodicals. The Economist Intelligence Unit (EIU;
www.eiu.com), the Geneva-based Business Environment Risk
Intelligence (BERI; www.beri.com), and the PRS Group
(www.prsgroup.com) publish up-to-date political risk reports on
individual country markets. Note that these commercial sources
vary somewhat in the criteria they consider to constitute
political risk. For example, BERI focuses on societal and
system attributes, whereas the PRS Group focuses more directly
on government actions and economic functions (see Table 5-1).
Table 5-1 Categories of Political Risk
Source: Adapted from Llewellyn D. Howell, The Handbook of
Country and Political Risk Analysis, 2nd ed. (East Syracuse,
NY: The PRS Group, 1998). Reprinted by permission.
As noted in Case 5-2, the political maneuverings of the Russian
government create a high level of political risk for companies
that seek to do business in that country. During his first two
terms as Russia’s president (2000–2008), Vladimir Putin
implemented reforms in an effort to pave the way for Russia’s
membership in the World Trade Organization (WTO) and to
attract foreign investment. He also created an environment of
uncertainty for foreign companies. In 2010, Paul Melling, a
partner at the law firm of Baker & McKenzie, explained, “Many

23. multinationals are thinking long and hard about how big their
company in Russia ought to be—the bigger the company, the
bigger the risk.”8 In 2018, Putin was elected to a fourth term as
president, and the level of political risk remains elevated owing
to tense relations between the White House and the Kremlin.
Meanwhile, the current political climate in the rest of Central
and Eastern Europe is still characterized by varying degrees of
uncertainty. In the Economic Intelligence Unit’s Political
Instability Index rankings, Hungary, Albania, and Latvia are
identified as having moderate levels of risk. Hungary and Latvia
have already achieved upper-middle-income status. Now that
Latvia has joined the euro zone, it is expected that lower
interest rates will promote further economic growth. Moreover,
political winds continue to shift in in the region: Poland and
Hungary are two examples of countries that have recently
elected populist governments. Common themes include
opposition to adopting the euro, concern about welcoming
migrants, and resistance to deeper integration with the EU.
Albania’s progress in transitioning to a market economy has
attracted investment from abroad. Moreover, products that are
labeled “Made in Albania” are finding acceptance in global
markets. The evidence can be seen in the success of DoniAnna,
a shoe manufacturer that was founded by Albanian entrepreneur
Donika Mici.9 Diligent attention to risk assessment throughout
the region should be ongoing to determine when the risk has
decreased to levels acceptable to management.
Companies can purchase insurance to offset potential risks
arising from the political environment. In Japan, Germany,
France, Britain, the United States, and other industrialized
nations, various agencies offer investment insurance to
corporations doing business abroad. The Overseas Private
Investment Corporation (OPIC; www.opic.gov) provides various
types of political risk insurance to U.S. companies; in Canada,

24. the Export Development Corporation performs a similar
function.
Taxes
Governments rely on tax revenues to fund social services, to
support their military forces, and to cover other expenditures.
Unfortunately, government taxation policies on the sale of
goods and services frequently motivate companies and
individuals to profit by not paying taxes. For example, in China,
import duties have dropped since the country joined the WTO.
Even so, many goods are still subject to double-digit duties plus
a 17 percent value-added tax (VAT). As a result, significant
quantities of oil, cigarettes, photographic film, personal
computers, and other products are smuggled into China. In some
instances, customs documents are falsified to undercount goods
in a shipment; the Chinese military has allegedly escorted goods
into the country as well.
Ironically, global companies can still profit from the practice; i t
has been estimated, for example, that 90 percent of the foreign
cigarettes sold in China are smuggled in. For Philip Morris, this
means annual sales of $100 million to distributors in Hong
Kong, which then smuggle the smokes across the border.10
High excise and VAT taxes can also encourage legal cross-
border shopping as consumers go abroad in search of good
values. In Great Britain, for example, the Wine and Spirit
Association estimates that, on average, cars returning from
France are loaded with 80 bottles of wine.
The diverse geographical activity of the global corporation also
requires that special attention be given to tax laws. The issue is
especially acute in the tech sector; many companies make
efforts to minimize their tax liability by shifting the location in
which they declare income. Facebook, Amazon, Google, and
Apple are some of the companies that have shifted profits

25. earned from intellectual property to low-tax jurisdictions such
as Ireland and Luxembourg. In addition, tax minimization by
foreign companies doing business in the United States costs the
U.S. government billions of dollars each year in lost revenue.
After the 2016 U.S. presidential election, companies looked to
the Trump administration for broad-based tax reform. They
were rewarded with a major tax cut that was passed in
December 2017.
Seizure of Assets
The ultimate threat that a government can impose on a company
is seizing its assets. -Expropriation refers to governmental
action to dispossess a foreign company or investor.
Compensation is generally provided, albeit often not in the
“prompt, effective, and adequate” manner provided for by
international standards. If no compensation is provided, the
action is referred to as -confiscation.11 International law is
generally interpreted as prohibiting any act by a government to
take foreign property without compensation. Nationalization is
generally broader in scope than expropriation; it occurs when
the government takes control of some or all of the enterprises in
a particular industry. International law recognizes
nationalization as a legitimate exercise of government power, as
long as the act satisfies a “public purpose” and is accompanied
by “adequate payment” (i.e., payment that reflects fair market
value of the property).
In 1959, for example, the newly empowered Castro government
nationalized property belonging to American sugar producers in
retaliation for new American import quotas on sugar. Castro
offered compensation in the form of Cuban government bonds,
which was adequate under Cuban law. Because Cuban-owned
sugar producers were not nationalized, the U.S. State
Department viewed this particular act as discriminatory and the
compensation offered as inadequate.12 More recently, the late
Venezuelan President Hugo Chávez nationalized Electricidad de

26. Caracas, a utility company, and CANTV, a telecommunications
provider. The Venezuelan government paid AES Corporation
$739.3 million for Electricidad de Caracas; Verizon
Communications received $572 million for its stake in
CANTV.13
Short of outright expropriation or nationalization, the phrase
creeping expropriation has been applied to limitations on
economic activities of foreign firms in particular countries.
These limitations have involved repatriation of profits,
dividends, royalties, and technical assistance fees from local
investments or technology arrangements. Other issues include
increased local content requirements, quotas for hiring local
nationals, price controls, and other restrictions affecting return
on investment. Global companies have also suffered
discriminatory tariffs and nontariff barriers that limit market
entry of certain industrial and consumer goods, as well as
discriminatory laws on patents and trademarks. Intellectual
property restrictions have had the practical effect of eliminating
or drastically reducing protection of pharmaceutical products.
In the mid-1970s, Johnson & Johnson (J&J) and other foreign
investors in India had to submit to a host of government
regulations to retain majority equity positions in companies
they had already established. Many of these rules were later
copied in whole or in part by Malaysia, Indonesia, the
Philippines, Nigeria, and Brazil. By the late 1980s, after a “lost
decade” in Latin America characterized by debt crises and low
gross national product (GNP) growth, lawmakers reversed many
of these restrictive and discriminatory laws. The goal was to
again attract foreign direct investment and badly needed
Western technology. The end of the Cold War and the
restructuring of political allegiances contributed significantly to
these changes.
When governments expropriate foreign property, a number of

27. impediments can limit actions to reclaim that property. For
example, according to the U.S. Act of State Doctrine, if the
government of a foreign state is involved in a specific act, the
U.S. courts will not get involved. Instead, representatives of
expropriated companies may seek recourse through arbitration
at the World Bank’s International Centre for Settlement of
Investment Disputes (ICSID). It is also possible to buy
expropriation insurance from either a private company or a
government agency such as OPIC.
The expropriation of copper companies operating in Chile in the
early 1970s shows the effect that companies can have on their
own fate. Companies that strenuously resisted government
efforts to introduce home-country nationals into the company
management were expropriated outright; those companies that
made genuine efforts to follow Chilean guidelines were allowed
to remain under joint Chilean–U.S. management.
5-2 International Law
5-2 Define international law and describe the main types of
legal systems found in different parts of the world.
International law may be defined as the rules and principles that
nation-states consider binding upon themselves. International
law pertains to property, trade, immigration, and other areas
that have traditionally been under the jurisdiction of individual
nations. International law applies only to the extent that
countries are willing to assume all rights and obligations in
these areas. The roots of modern international law can be traced
back to the seventeenth-century Peace of Westphalia. Early
international law was concerned with waging war, establishing
peace, and handling other political issues such as diplomatic
recognition of new national entities and governments.
Although elaborate international rules gradually emerged—
covering, for example, the status of neutral nations—the

28. creation of laws governing commerce proceeded on a state-by-
state basis in the nineteenth century. International law still has
the function of upholding order, although in a broader sense
than laws dealing with problems arising from war. At first,
international law was essentially an amalgam of treaties,
covenants, codes, and agreements. As trade grew among
nations, order in commercial affairs assumed increasing
importance. The law had originally dealt only with nations as
entities, but a growing body of law rejected the idea that only
nations could be subject to international law.
Paralleling the expanding body of international case law in the
twentieth and twenty-first centuries, new international judiciary
organizations have contributed to the creation of an established
rule of international law: the Permanent Court of International
Justice (1920–1945); the International Court of Justice (ICJ;
www.icj-cij.org), which is the judicial arm of the United
Nations and was founded in 1946; and the International Law
Commission, established by the United States in 1947 (see
Exhibit 5-4). Disputes arising between nations are issues of
public international law, and they may be taken before the ICJ
(also known as the World Court), located in The Hague. As
described in the supplemental documents to the United Nations
Charter, Article 38 of the ICJ Statute concerns international
law:
he Court, whose function is to decide in accordance with
international law such disputes as are submitted to it, shall
apply:
international conventions, whether general or particular,
establishing rules expressly recognized by the contesting states;
international custom, as evidence of a general practice
accepted as law;
the general principles of law recognized by civilized nations;

29. subject to the provisions of Article 59, judicial decisions and
the teachings of the most highly qualified publicists of the
various nations, as subsidiary means for the determination of
rules of law.
Other sources of modern international law include treaties,
international customs, judicial case decisions in the courts of
law of various nations, and scholarly writings. What happens if
a nation allows a case against it to be brought before the ICJ
and then refuses to accept a judgment against it? The plaintiff
nation can seek recourse through the United Nations Security
Council, which can use its full range of powers to enforce the
judgment.
Common Law versus Civil Law
Private international law is the body of law that applies to
disputes arising from commercial transactions between
companies based in different nations. As noted, the laws
governing commerce emerged gradually, leading to a major split
in legal systems among various countries.14 The story of law in
the Western world can be traced to two sources: Rome, from
which the continental European civil-law tradition originated,
and English common law, from which the U.S. legal system
originated.
A civil-law country is one in which the legal system reflects the
structural concepts and principles of the Roman Empire in the
sixth century.
For complex historical reasons, Roman law was received
differently and at vastly different times in various regions of
Europe, and in the nineteenth century each European country
made a new start and adopted its own set of national private-law
codes, for which the Code Napoleon of 1804 was the prototype.
But the new national codes drew largely on Roman law in

30. conceptual structure and substantive content. In civil-law
countries, the codes in which private law is cast are formulated
in broad general terms and are thought of as completely
comprehensive, that is, as the all-inclusive source of authority
by reference to which every disputed case must be referred for
decision.15
“To understand stare decisis, you have to understand English
common law. To understand English common law, you have to
understand where England came from—the Norman Conquest,
the Vikings, the Romans … “16
U.S. Supreme Court Justice Clarence Thomas
In a common-law country, many disputes are decided by
reliance on the authority of past judicial decisions (cases). A
common-law legal system is based on the concept of precedent,
sometimes called stare decisis. Precedent is the notion that past
judicial decisions on a particular issue are binding on a court
when that same issue is presented later. This description is
somewhat cryptic, because it is easier to observe the operation
of precedent than to define it. Nevertheless, precedent and stare
decisis represent the fundamental principles of common-law
decision making.
In its origins, the legal system of the United States was
substantially influenced by English law. The English and
American systems are common law in nature; that is, the law is
pronounced by courts when there are no statutes to follow.
Common-law systems are distinguishable from the civil-law
systems found in much of Europe. Although much of
contemporary American and English law is legislative in origin,
the law inferred from past judicial decisions is equal in
importance to the law set down in codes. Common-law countries
often rely on codification in certain areas—the U.S. Uniform
Commercial Code (UCC) is one example—but these codes are

31. not the all-inclusive, systematic statements found in civil-law
countries.
The UCC, which has been fully adopted by 49 U.S. states,
codifies a body of specifically designed rules covering
commercial conduct. (Louisiana has adopted parts of the UCC,
but its laws are still heavily influenced by the French civil
code.) The host country’s legal system—that is, common or
civil law—directly affects the form a legal business entity will
take. In common-law countries, companies are legally
incorporated by state authority. In civil-law countries, a
contract between two or more parties who are fully liable for
the actions of the company forms a company.
The United States, 9 of Canada’s 10 provinces, and other former
colonies with an Anglo-Saxon history founded their systems on
common law. Historically, much of continental Europe was
influenced by Roman law and, later, the Napoleonic Code (see
Exhibit 5-5). Asian countries are split on this issue: India,
Pakistan, Malaysia, Singapore, and Hong Kong are common-law
jurisdictions, whereas Japan, Korea, Thailand, Indochina,
Taiwan, Indonesia, and China are civil-law jurisdictions. The
legal systems in Scandinavia are mixed, displaying some civil-
law attributes and some common-law attributes. Today, the
majority of countries have legal systems based on civil -law
traditions.
Exhibit 5-5
Civil-law systems rely more heavily on statutes and codes, such
as the Napoleonic Code of 1804, in deciding cases. From these
code provisions, abstract principles are recognized and then
applied in specific cases. By contrast, common-law courts find
abstract principles in particular cases and then generalize what
the law is from those principles.
Chapter 6

32. Global marketers utilize analytical techniques to solve specific
issues. The primary analytical techniques are the Pareto
principle, SWOT analysis, and gap analysis (Kadlecova, 2012).
The Pareto principle simplifies management and decision-
making that relies on twenty percent of causes generating eighty
percent. At the same time, SWOT analysis is an analytical
technique that evaluates internal and external factors that affect
organizational success. Gap analysis is a methodology that
helps in decision-making and problem-solving in situations that
have experienced a change in strategies.