International marketing

1. INTERNATIONAL MARKETING
Recommended Book:- Cateora and Graham

2. PGDM (IIM Raipur)
Bakhresa FMCG (South Africa)
Relationship Manager (HDFC Bank)
MD- Shyam Hospital
Faculty(MBA)- GLA University, Mathura
Swarit Yadav

3. Topics to be covered
 Political environment
 Political systems
 Political risks
 Indicators of political risks
 Analysis and measures to minimize political risks
 Legal systems
 Legal form of organization
 Multiplicity of legal environment
 Bribery
 Branch v/s subsidiary
 Counterfeiting
 Gray market
 Cultures and its characteristics
 Influence of culture on consumption, thinking, communication process
 Cultural universals

11. Political Environment
Stability of
Government
policies
 In Italy, for example, more than 50 different
governments have been formed since the end of
World War II
 While the political turmoil in Italy continues,
business goes on as usual
 India has had as many different governments
since 1945 as Italy
 Several in the past few years favorable to foreign
investment and open markets
 Even after elections of parties favoring economic
reform
 The bureaucracy continues to be staffed by old-
style central planners in India

12. Political Environment
Stability of
Government
policies
 The Institutional Revolutionary Party (PRI), controlled
Mexico from 1929 to 2000
 The PRI created a stable political environment for
foreign investment, in contrast to earlier
expropriations and harassment
 Relatively stable and prosperous Kenya fell victim to
political violence in 2008
 Central Africa, where ethnic wars have embroiled
seven nations, is one of the most politically unstable
regions in the world
 A recent World Bank study showed that the 47
nations of sub-Saharan Africa were attracting less
than $2 billion annually in direct foreign investment
 About one-tenth of what a developing nation such as
Mexico attracts

13. Political Environment
Stability of
Government
policies
 PepsiCo, for example, operated
profitably in the Soviet Union
 When it had one of the world’s most
extreme political systems

14. Political Environment
Stability of
Government
policies
 5 main political causes of instability
in international markets
 Forms of government
 Political parties
 Nationalism
 Targeted fear/animosity
 Trade disputes

15. Political Environment
Stability of
Government
policies
 Forms of government
 Rule by one(monarchy/dictatorship)
 Rule by few(aristocracy/oligarchy)
 Rule by many(democracy)
 More than 200 sovereign states on the
planet
 Almost all have at least nominally
representative governments

17. Political Environment
Stability of
Government
policies
 Forms of government
 In Bolivia, you can vote at 18 if you are married
and at 21 if single
 In Peru, police and military personnel cannot vote
 In Croatia, you can vote at 16 if employed
 In Lebanon, only women with at least an elementary
education can vote (though all men can vote)
 Saudi Arabia precludes women from voting
 Nigeria, Kenya, Bangladesh, Venezuela, Georgia,
and Kyrgyzstan- some countries toward
autocracy and away from democracy

18. Political Environment
Stability of
Government
policies
 Political parties
 In Great Britain, for example, the
Labour Party traditionally has been
more restrictive regarding foreign
trade than the Conservative Party
 The Labour Party, when in control, has
limited imports, whereas the
Conservative Party has tended to
liberalize foreign trade when it is in
power.

19. Political Environment
Stability of
Government
policies
 Nationalism
 Nationalism can best be described as an intense feeling of
national pride and unity, an awakening of a nation’s people to
pride in their country
 A call to “buy our country’s products only” (e.g., “Buy
American”)
 Restrictions on imports
 Restrictive tariffs, and other barriers to trade
 During the period after World War II, new countries were
founded
 India imposed such restrictive practices on foreign investments
that companies such as Coca-Cola, IBM, and many others chose
to leave rather than face the uncertainty of a hostile economic
climate
 U.S. negotiators pushed Japan to import more rice to help
balance the trade deficit between the two countries
 All imported foreign rice had to be mixed with Japanese rice
before it could be sold

20. Political Environment
Stability of
Government
policies
 Targeted fear/animosity
 Nationalism v/s targeted fear
 A mistake made by Toyota in the United States in
the late 1980s and early 1990s
 Sales of Japanese cars were declining in the States
 Assumed the problem was American nationalism
 Sales of German cars were not experiencing the
same kinds of declines
 Americans considered the economic threat from
Japan greater than the military threat from the
Soviet Union
 Showing Camrys being made by Americans in a
Toyota plant in Kentucky
 It may well have exacerbated the fear that the
Japanese were “colonizing” the United States

21. Political Environment
Stability of
Government
policies
 Trade Disputes
 Banana war
 Undervalued Chinese currency
 The ban on beef imports into Japan
 Chinese subsidies in apparent
violation of WTO rules
 Farm subsidies in developed countries
the long-simmering AIRBUS–Boeing
battle over subsidies

22. Political Environment
Political risk
of Global
Business
 Confiscation, expropriation and
domestication
 Economic risks
 Exchange controls
 Local content laws
 Import restrictions
 Tax controls
 Price controls
 Labor problems
 Political sanctions
 Political and social activists and NGOs
 Violence, terrorism and war
 Cyber-terrorism and cybercrime

23. Political Environment
Political risk
of Global
Business
 Confiscation, Expropriation and Domestication
 Confiscation is the seizing of a company’s assets without
payment
 Expropriation , where the government seizes an investment
but makes some reimbursement for the assets
 In 2008 the Chavez regime in Venezuela expropriated Mexico’s
CEMEX operations
 Paying a negotiated price
 It becomes a government-run entity
 Much of the economic success of countries such as South Korea,
Singapore, and Taiwan is tied to foreign investments
 In Mexico, for example, privatization of the national telephone
company resulted in almost immediate benefits
 A similar scenario has played out in Brazil, Argentina, India,
and many eastern European countries

24. Political Environment
Political risk
of Global
Business
 Economic Risks
 Exchange Controls
 When a nation faces shortages of foreign
exchange and/or a substantial amount of
capital is leaving the country
 Controls may be levied over all movements
of capital or selectively against the most
politically vulnerable companies to
conserve the supply of foreign exchange
for the most essential uses
 Check next slide

26. Political Environment
Political risk
of Global
Business
 Economic Risks
 Local-content laws
 Thailand, for example, requires that all
milk products contain at least 50 percent
milk from local dairy farmers
 The European Union has had a local-
content requirement as high as 45 percent
for “screwdriver operations,” a name
often given to foreign-owned assemblers
 NAFTA requires 62 percent local content
for all cars coming from member countries

27. Political Environment
Political risk
of Global
Business
 Economic Risks
 Import restrictions
 Tax controls
 India, for example, taxes PepsiCo and the Coca-Cola
Company 40 percent on all soda bottled in India
 Price controls
 Labor Problems
 In France, the belief in full employment is almost
religious
 Layoffs of any size, especially by foreign-owned
companies, are regarded as national crises
 Walmart closed a store in Quebec rather than let it
be unionized

28. Political Environment
Political risk
of Global
Business
 Political sanctions
 The United States has long-term
boycotts of trade with Cuba and Iran
 Has come under some criticism for its
demand for continued sanctions
against Cuba
 Threats of future sanctions against
countries that violate human rights
issues
 Refer to crossing the border

29. Political Environment
Political risk
of Global
Business
 Political and social activists and
NGOs
 Refer next slide

32. Political Environment
Political risk
of Global
Business
 Violence terrorism and war
 In the past 30 years, 80 percent of
terrorist attacks against the United
States have been aimed at American
businesses
 Since September 11, McDonald’s, KFC,
and Pizza Hut combined have been
bombed in more than 10 countries,
including Turkey, Saudi Arabia,
Russia, Lebanon, and China
 US travel warning on next slide

34. Political Environment
Political risk
of Global
Business
 Cyber-terrorism and Cybercrime
 The “I Love You” worm, which caused an estimated $25 billion
in damage, was probably just an out-of-control prank
 The Melissa virus and the denial of service (DoS) attacks that
overloaded the Web sites of CNN, ZDNet, Yahoo!, and
Amazon.com with a flood of electronic messages, crippling
them for hours, were considered purposeful attacks on specific
targets
 The “Slammer,” for example, brought Internet service to a
crawl.
 It doubled its numbers every 8.5 seconds during the first minute
of its attack
 Infected more than 75,000 hosts within 10 minutes
 After infecting hundreds of thousands of computers in Europe
and North America, the “Goner worm” traveled to Australia
overnight and brought down government agencies, financial and
manufacturing sites, and at least 25 MNCs

35. Political Environment
Lessening
political
vulnerability
 Joint ventures
 Expanding the investment base
 Licensing
 Planned domestication
 Political bargaining
 Political payoffs

36. Political Environment
Lessening
political
vulnerability
 Microsoft, recognizing that developing countries need
sophisticated technical assistance
 Pledged more than $100 million in technology and
training as part of a deal to put government services
online in Mexico
 Cisco Systems, the leading maker of Internet
hardware, relies on nonprofit organizations to run its
10,000 networking academies
 Train college and high school students to create
computer networks in 150 countries
 In China, Procter & Gamble is helping local schools
and universities train and educate leaders
 In Malaysia, Motorola and Intel have instituted
training programs to enhance the skills of local
workers

37. Political Environment
Lessening
political
vulnerability
 Merck, the pharmaceutical company,
has developed a pill to fight river
blindness in Africa and Latin
America
 River blindness is a parasitic
disease transmitted to humans
through the bite of the black fly
commonly found along the
riverbanks in some African countries

38. Political Environment
Lessening
political
vulnerability
 Joint ventures
 Expanding the investment base
 Licensing
 Planned domestication
 Political bargaining
 Mattel issued an extraordinary apology to China over the recall
of Chinese-made toys
 Saying the items were defective because of Mattel’s design flaws
rather than faulty manufacturing
 In doing so, Mattel was
 (1) Protecting the huge and all-important head of its value chain
 (2) Recognizing that it would be easier to fix its design and
inspection routines than quickly affect manufacturing practices
in China
 (3) Uniquely for an American firm, publicly admitting its own
very real culpability

39. Political Environment
Lessening
political
vulnerability
 Toyota once considered raising prices
of its cars in the American market to
“help” its ailing American competitors
 The Japanese government has set
quotas on auto exports in the past as
American car companies have
struggled
 Political payoffs

40. Legal Environment
Legal forms
of
organization
 Sole proprietorship
 Easy and inexpensive to start and stop legally
 Generally less expensive to start
 No profit sharing
 No business tax
 Owner is in charge and makes decisions
 sell or transfer business at your discretion
 Speed in decision making
 Unlimited personal liability
 Owner's limitations (skills, time, etc) limit business
 Harder to access capital
 Continuity of business - re-establish all contracts and
relationships is sold or transferred; terminates with
death of owner
 Personal assets subject to lien

41. Legal Environment
Legal forms
of
organization
 Partnerships
 Mutual Agency - any partner can act
on behalf of the other partners; all
partners fully represent the business
for any action or transaction.
 Unlimited Liability - each partner is
fully responsible and liable for the
business and the acts of the partners.

42. Legal Environment
Legal forms
of
organization
 Partnerships
 Three types of partnerships:
 General
 Limited
 at least one general partner
 plus one or more limited partners
 liability limited to investment for limited partners;
unlimited liability for general partners
 no management participation for limited partners
 requires a certificate of limited partnership and a
written partnership agreement
 can allocate profits and losses
 interests are freely transferable
 Joint Venture

43. Legal Environment
Legal forms
of
organization
 Partnerships
 Limited Life of the Legal
Partnership: The partnership ends and its
affairs must be concluded:
 accomplish the partnership objective
 admit a new partner
 withdrawal of partner
 death of partner
 personal bankruptcy
 time or date set for dissolution
 partner incapacity (need court decree)
 misconduct…

44. Legal Environment
Legal forms
of
organization
 Partnerships
 Co-Ownership of Property - all property,
whether donated, purchased with capital or
gained through profit and growth is co-
mingled. It is considered fully owned by each
partner and subject to each partners
discretion for use as an asset of the business.
 Non Taxable Entity - the partnership itself is
not subject to taxes. The owners each pay
personal income tax based upon their
respective shares of profits and at their
individual tax rates. Each partnerships profit
or loss is personal taxable income or loss.

45. Legal Environment
Legal forms
of
organization
 Partnerships
 Profits/Losses equally divided - unless
modified in a partnership agreement, all
profit or loss is equally divided
proportionally amongst the number of
partners ( 3 partners, three equal shares)
 Entered into by any combination of
individuals or legal business entities - A
partnership can be any combination of
individuals, other partnerships, or
corporations.

46. Legal Environment
Legal forms
of
organization
 Advantages of a Partnership
 Easy and inexpensive to start legally
 Greater access to capital
 no business tax
 informal management and structure
 Greater access to skills, time, money, an
so on.
 no written agreement required (but
advisable)

47. Legal Environment
Legal forms
of
organization
 Disadvantages of a Partnership
 Unlimited liability of general partners
 Joint and several liability
 Harder to keep profit in the business for
growth (Capital Accumulation)
 More difficult to raise capital
 Changing the partnership agreement may
dissolve the partnership or be difficult
 Interest is not freely transferable
 Personal and authority conflicts
 Decision making is slow, shared, and partners
are bound by the law of agency
 difficult or expensive to dissolve

48. Legal Environment
Legal forms
of
organization
 Coporations
 General characteristics of corporations
include:
 Dividends
 Double taxation
 Shielded from personal liability as "owner"
(stockholders)
 Salary is expense
 Can offer fringe benefits
 Stock:
 common
 preferred: 1st dividends & claim to assets, no
vote
 many other types of stock are possible

49. Legal Environment
Legal forms
of
organization
 Coporations
 General characteristics of corporations
include:
 Ownerships (shares of stock) freely transferable
 Domestic, Foreign, Alien (Domestic = in state;
foreign = other state; alien = other country)
 Articles of Incorporation and Bylaws
 More difficult to start and operate in terms of effort,
paperwork, organizational structure and meetings
 Perpetual life
 Legal requirements include Board of Director
meetings, shareholder participation and annual
reports, etc.

50. Legal Environment
Legal forms
of
organization
 Coporations
 Advantages of a Corporation
 No personal liability for stockholders (owners)
 Can attract capital easier and in large amounts
 Has a "perpetual" life
 Easy to transfer ownership/transfer may not affect
operations
 Attract skilled people
 Easier to raise capital
 Disadvantages of a Corporation
 Cost and time to incorporate/paperwork, legalities to
operate
 Double taxation (corporate profits,
dividends/salaries)
 Potential loss of control by founder

51. Legal Environment
Multiplicity
of legal
environment
 The two major legal systems: common law
and statute law
 Common law
 There are some twenty-five common law or British
law countries.
 A common law system is a legal system that relies
heavily on precedents.
 Judges’ decisions are guided not so much by
statutes as by previous court decisions and
interpretations of what certain laws are or should
be.
 Countries with such a system include the USA, Great
Britain, Canada, India, and other British colonies

52. Legal Environment
Multiplicity
of legal
environment
 Statute Law
 Countries employing a statute law system,
also known as code or civil law, include
most continental European countries and
Japan.
 The main rules of the law are embodied in
legislative codes.
 Every circumstance is clearly spelled out
to indicate what is legal and what is not.
 There is also a strict and literal
interpretation of the law under this system

53. Legal Environment
Multiplicity
of legal
environment
 Distinction b/w these two
 In practice, the two systems overlap, and the
distinction between them is not clear-cut.
 Therefore, the only major distinction between
the systems is the freedom of the judge in
interpreting laws.
 In a common law country, a judge’s ability to
interpret laws in a personal way gives that judge
a great deal of power to apply the law as it fits
the situation.
 In contrast, a judge in a civil law country has a
lesser role in using personal judgment to create
or interpret laws because that judge must
strictly follow the “letter of the law.”

54. Legal Environment
Branch v/s
subsidiary
 One legal decision that an MNC must make is
whether to use branches or subsidiaries to carry
out its plans and to manage its operations in a
foreign country.
 A branch is the company’s extension or outpost at
another location.
 Although physically detached, it is not legally
separated from its parent.
 A subsidiary, in contrast, is both physically and
legally independent.
 It is considered a separate legal entity in spite of its
ownership by another corporation.
 A subsidiary may either be wholly owned (i.e., 100
percent owned) or partially owned.

55. Legal Environment
Branch v/s
subsidiary
 Reasons why MNC’s choose subsidiary
 When compared to the use of branches, the use of
subsidiaries adds complexity to the corporate structure,
they are also expensive.
 There are several reasons why a subsidiary is the preferred
structure.
 One reason has to do with recruitment of management.
 Titles mean a great deal in virtually all parts of the world.
 A top administrator of an overseas operation wants a
prestigious title of president, chief executive, or managing
director rather than being merely a “branch manager.”
 Another reason for forming a subsidiary may involve gaining
quick access to a particular market by acquiring an existing
company within the market and making it a subsidiary.

56. Legal Environment
Bribery  Legal Dimension: Foreign Corrupt
Practices Act (FCPA)
 Bribery is "the use of interstate commerce
to offer, pay, promise to pay, or authorize
giving anything of value to influence an act
or decision by a foreign government,
politician, or political party to assist in
obtaining, retaining, or directing business
to any person."

57. Legal Environment
Bribery  Types of Payment
 Permissible: expediting payments
 payments to low-level officials who exercise
only "ministerial" or "clerical" functions
 Illegal: payments to an official exercising
discretionary authority
 Ethical Dimension
 Morality as a function of culture
 Corporate codes of conduct

58. Legal Environment
Bribery  Reasons for bribe
 To speed up the required work or processing
 To secure a contract
 To avoid the cancellation of the contract
 To prevent competitors from getting the
contract.

59. Legal Environment
Counterfeiting
 Counterfeiting
 The spread of counterfeit goods (commonly called
"knockoffs") has become global in recent years and
the range of goods subject to infringement has
increased significantly.
 A very high percentage of counterfeit goods originate
in China
 Counterfeit products infiltrate legitimate supply
chains
 New technologies, including the internet, have given
counterfeiters access to new channels of distribution
 Counterfeit products are bought and sold in virtually
all economies

60. Legal Environment
Counterfeiting  Counterfeiting
 Factors Behind Counterfeiting
 Free trade – relaxed border controls
 Long distribution chains; parallel trade; trading
of pharmaceuticals by brokers as commodities
 Economic motive – poverty, and looking for
“bargain” products
 Lax enforcement – low prioritization to
counterfeits
 Loose distribution systems outside pharmacies
 New element -- the Internet
 Weak intellectual property protection
 Not recognized as an international threat

61. Legal Environment
Gray Market  Gray Market
 White Markets
(Registered/GenuineProduct and
Authorised dealer – iPhone)
 Black Market (Illegal and
unauthoriseddealer– heroine, weapons)
 Gray Market

62. Legal Environment
Gray Market  Gray Market
 Gray marketing is the sale of genuine
trademarked products through legal
distribution channels unauthorized by
the manufacturer or brand owner

64. Legal Environment

66. Cultural environment
 Cultures and its characteristics
 Influence of culture on consumption, thinking,
communication process
 Cultural universals

67. Features & Characteristics of Culture
 Culture is learned
 Culture is not inherited biologically but it is learnt socially by man
in a society.
 It is not an inborn tendency but acquired by man from the
association of others, e.g. drinking, eating, dressing, walking,
behaving, reading are all learnt by man.
 Culture is social
 It is not an individual phenomena but it is the product of society.
 It develops in the society through social interaction.
 It is shared by the man of society.
 No man can acquire it without the association of others.
 It helps to develop qualities of human beings in a social
environment.

68. Features & Characteristics of Culture
 Culture is shared
 Culture is something shared.
 It is nothing that an individual can passes but
shared by common people of a territory.
 For example, customs, traditions, values, beliefs are
all shared by man in a social situation.
 These beliefs and practices are adopted by all
equally.

69. Features & Characteristics of Culture
 Culture is transmitted
 Culture is capable of transmitted from one generation to the
next.
 Parents papas cultural traits to their children and in return
they pass to their children and son on.
 It is not transmitted through genes but through language.
 Language is means to communication which passes cultural
traits from one generation to another
 Culture is continuous
 It is continuous process.
 It is like a stream which is flowing from one generation to
another through centuries.
 “Culture is the memory of human race.”

70. Features & Characteristics of Culture
 Culture is accumulative
 Culture is not a matter of month or a year.
 It is the continuous process and adding new cultural traits.
 Many cultural traits are borrowed from out side and these
absorbed in that culture which adopt it, as culture is
accumulative and combines the suitable cultural traits.
 Culture is integrated
 All the cultural aspects are inter-connected with each other.
 The development of culture is the integration of its various
parts.
 For example, values system is interlinked with morality,
customs, beliefs and religion.

71. Features & Characteristics of Culture
 Culture is changing
 It remains changing but not static.
 Cultural process undergoes changes.
 But with different speeds from society to society and generation to
generation.
 Culture varies from society to society
 Every society has its own culture and ways of behaving.
 It is not uniform every where but occurs differently in various
societies.
 Every culture is unique in itself is a specific society.
 For example, values, customs, traditions, ideologies, religion, belief,
practices are not similar but different in every society.
 However the ways of eating, drinking, speaking, greeting, dressing
etc are differs from one social situation to another in the same time.

72. Features & Characteristics of Culture
 Culture is gratifying
 It is gratifying and provide all the opportunities for needs and desires
satisfaction.
 These needs may be biological or social but It is responsible to satisfy it.
 Our needs are food, shelter, clothing and desires are status, fame, money, sex
etc are all the examples which are fulfilled according to the cultural ways.
 In fact it is defined as the process through which human beings satisfy their
need.
 Linked with society
 Last but not the least one of the characteristics of culture that culture and
society are one and the same.
 But if we say that these turn two are twin sister, it would not be wrong.
 Society is a composite of people and they interact each other through it
 It is to bind the people within the society.