SlideShare a Scribd company logo

Culture, Management Style, and Business SystemsChapter 5.docx

•Download as DOCX, PDF•
•
F
faithxdunce63732

Culture, Management Style, and Business Systems Chapter 5 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives LO1 The necessity for adapting to cultural differences LO2 How and why management styles vary around the world LO3 The extent and implications of gender bias in other countries LO4 The importance of cultural differences in business ethics LO5 The differences between relationship-oriented and information-oriented cultures 5-‹#› Business Customs in Global Marketing Business etiquette is largely driven by cultural norms. Cultural analysis often pinpoints market opportunities, gives companies a competitive edge 5-‹#› What we learned in Chapter 4, particularly Hofstede’s cultural value dimensions are applicable to business customs and how business is conducted in various countries. For example, in high power distance countries, authority and hierarchy needs to be respected while conducting business. 3 Requires Adaptation Adaptation is a key concept in international marketing To successfully deal with individuals, firms, or authorities in foreign countries, managers should exhibit: open tolerance, flexibility, humility, justice/fairness, ability to adjust to varying tempos, curiosity/interest, knowledge of the country, liking for others, ability to command respect, and ability to integrate oneself into the environment 5-‹#› Unless marketers remain flexible by accepting differences in basic patterns of thinking, local business tempo, religious practices, political structure, and family loyalty, they are hampered, if not prevented, from reaching satisfactory conclusions to business transactions. 4 Cultural Imperatives, Electives and Exclusives Cultural imperatives: business customs and expectations that must be met, conformed, recognized and accommodated if relationships are to be successful Cultural electives: areas of behavior or to customs that cultural aliens may wish to conform to or participate in but that are not required 5-‹#› Cultural imperatives are “must do” things in another culture, such as meeting and greeting, exchange of business cards in Asian cultures (eg: China, Japan and Korea). Cultural electives are optional activities that a foreigner may or may not want to engage in, such as drinking aperitifs (strong alcoholic drinks) before lunch in the Czech Republic or coffee in Saudi Arabia, no offense is taken if one refuses to participate in these cultural customs. 5 BEIJING, CHINA: German Chancellor Angela Merkel and Chinese Prime Minister Wen Jiabao toast after the EU–China Business Summit at the Great Hall of the People in Beijing. The summit was boosted by the settlement of a trade row that had left 80 million Chinese-made garments piled up in European seaports, unable to be delivered to shops under a quota pact agreed to at the time. Drinking half a bottle is a cultural elective, but taking a sip is more o.

Education
1 of 114
Culture, Management Style, and Business Systems Chapter 5 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives LO1 The necessity for adapting to cultural differences LO2 How and why management styles vary around the world LO3 The extent and implications of gender bias in other countries LO4 The importance of cultural differences in business ethics LO5 The differences between relationship-oriented and information-oriented cultures 5-‹#› Business Customs in Global Marketing Business etiquette is largely driven by cultural norms. Cultural analysis often pinpoints market opportunities, gives companies a competitive edge 5-‹#›
What we learned in Chapter 4, particularly Hofstede’s cultural value dimensions are applicable to business customs and how business is conducted in various countries. For example, in high power distance countries, authority and hierarchy needs to be respected while conducting business. 3 Requires Adaptation Adaptation is a key concept in international marketing To successfully deal with individuals, firms, or authorities in foreign countries, managers should exhibit: open tolerance, flexibility, humility, justice/fairness, ability to adjust to varying tempos, curiosity/interest, knowledge of the country, liking for others, ability to command respect, and ability to integrate oneself into the environment 5-‹#› Unless marketers remain flexible by accepting differences in basic patterns of thinking, local business tempo, religious practices, political structure, and family loyalty, they are hampered, if not prevented, from reaching satisfactory conclusions to business transactions. 4 Cultural Imperatives, Electives and Exclusives
Cultural imperatives: business customs and expectations that must be met, conformed, recognized and accommodated if relationships are to be successful Cultural electives: areas of behavior or to customs that cultural aliens may wish to conform to or participate in but that are not required 5-‹#› Cultural imperatives are “must do” things in another culture, such as meeting and greeting, exchange of business cards in Asian cultures (eg: China, Japan and Korea). Cultural electives are optional activities that a foreigner may or may not want to engage in, such as drinking aperitifs (strong alcoholic drinks) before lunch in the Czech Republic or coffee in Saudi Arabia, no offense is taken if one refuses to participate in these cultural customs. 5 BEIJING, CHINA: German Chancellor Angela Merkel and Chinese Prime Minister Wen Jiabao toast after the EU–China Business Summit at the Great Hall of the People in Beijing. The summit was boosted by the settlement of a trade row that had left 80 million Chinese-made garments piled up in European seaports, unable to be delivered to shops under a quota pact agreed to at the time. Drinking half a bottle is a cultural elective, but taking a sip is more of an imperative in this case. 5-6 Cultural Imperatives, Electives
and Exclusives Cultural exclusives: customs or behavior patterns reserved exclusively for the locals and from which the foreigner is barred and must not participate 5-‹#› In general, politics and religion are taboo in conversations many cultures, particularly for foreigners. In Mexico, McDonalds used the national symbol of the Mexican Flag on paper placemats and insulted the people (as you treat anything with the national symbol with the utmost respect). These are cultural exclusives, things you never engage in or do when in another culture. 7 The Impact of American Culture Ways in which U.S. culture has influenced management style include, but are not limited to, the following: Personnel selection and reward based on merit Decisions based on objective analysis Wide sharing in decision making Never-ending quest for improvement Competition yielding efficiency 5-‹#› American culture is based on a few basic premises listed above, reward is based on merit and not group performance. Decisions are made objectively not subjectively, it is a competitive business environment where continuous improvement and to get
better is the goal. 8 American Culture and Management Style There are at least three reasons to focus briefly on American culture and management style: for Americans, it is important to be aware of the elements of culture influencing decisions and behaviors. for those new to American culture, it is useful to better understand business associates from the States as the U.S. market is the biggest export market in the world since the late 1990s, American business culture has been exported around the world 5-‹#› For Americans, a self-awareness will help adapt to working with associates in other cultures. This knowledge will help everyone be more patient while conducting business across borders. Just as in the 1980s Japanese management practices were imitated almost everywhere. 9 Differences in Management Styles Around the World Authority and Decision Making In high-PDI countries subordinates are not likely to contradict bosses, but in low-PDI countries they often do Three typical patterns exist: top-level management decisions, decentralized decisions, and committee or group decisions Management Objectives and Aspirations
Security and Mobility Personal Life Affiliation and Social Acceptance Power and Achievement 5-‹#› Differences in Management Styles Around the World Differences in Communication Styles Face to Face Communication Internet Communication According to Edward T. Hall, the symbolic meanings of time, space, things, friendships, and agreements, vary across cultures Hall places eleven cultures along a high-context/low-context continuum Communication in a high-context culture depends heavily on the contextual (who says it, when it is said, how it is said) or nonverbal aspects of communication Communication in a low-context culture depends more on explicit, verbally expressed communications 5-‹#› 5-12 This picture demonstrates office space in the U.S. and Japan, the U.S. is more individualistic, more space between cubicles and Japan more collectivistic. 12
Differences in Management Styles Around the World Formality and Tempo Level of formality in addressing business clients by first name Level of formality in addressing your boss by first name Tempo or speed in getting “down to business” Perception of time varies in many cultures 5-‹#› Differences in Management Styles Around the World P-Time versus M-Time M-time, or monochronic time, typifies most North Americans, Swiss, Germans, and Scandinavians Most low-context cultures operate on M-time concentrating on one thing at a time P-time, or polychronic time, is more dominant in high-context cultures P-time is characterized by multi-tasking and by “a great involvement with people” 5-‹#› Differences in Management Styles Around the World Negotiations Emphasis Differences with respect to the product, its price and terms, services associated with the product, and finally, friendship between vendors and customers Market Orientation American companies are embracing the market orientation
philosophy Other countries are still in the traditional production, product and selling orientations 5-‹#› Gender Bias in International Business The gender bias against women managers exists in some countries Women are not easily accepted in upper level management roles in Asia, Middle East, and Latin America (although this is changing) Gender bias poses significant challenges in cross-cultural negotiations 5-‹#› Gender bias is an issue in international negotiations. Women may not be easily accepted in certain cultures (eg: Middle East and Latin America). This poses challenges in cross-cultural negotiations. 16 5-17 5-18
Percent of women executives in different countries. 18 Business Ethics Business ethics is complex in the international marketplace because value judgments differ widely among culturally diverse groups Corruption varyingly defined from culture to culture 5-‹#› Business Ethics Existence of different levels of corruption, bribery, and fraud The Foreign Corrupt Practices Act 1977: Imprisonment for bribery Bribery creates a major conflict between ethics and profitability 5-‹#› Bribery is a problem when conducting business cross-culturally. It is an illegal concept in the U.S and U.S. subsidiaries are not allowed to take bribes. The Foreign Corrupt Practices of 1977 applies to all U.S. companies. 20 Bribery: Variations on a Theme Bribery Voluntarily offered payment by someone seeking unlawful advantage Extortion Payments are extracted under duress by someone in authority
from a person seeking only what they are lawfully entitled 5-‹#› 21 Bribery: Variations on a Theme Lubrication Involves a relatively small sum of cash, a gift, or a service given to a low-ranking official in a country where such offerings are not prohibited by law Subornation Involves giving large sums of money—-frequently not properly accounted for—designed to entice an official to commit an illegal act on behalf of the one offering the bribe; involves breaking the law 5-‹#› A Framework for Ethical Principles 5-‹#› (1) Utilitarian ethics Does the action optimize the “common good” or benefits of all constituencies? And, who are the pertinent constituencies?
(2) Rights of the parties Does the action respect the rights of the individuals involved? (3) Justice or fairness Does the action respect the canons of justice or fairness to all parties involved? THE END 5-‹#› Cultural Dynamics in Assessing Global Markets Chapter 4
McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives LO1 The importance of culture to an international marketer LO2 The origins of culture LO3 The elements of culture LO4 The impact of cultural borrowing LO5 The strategy of planned change and its consequences 4-‹#› Culture’s Pervasive Impact Culture influences every part of our lives Cultures impact on birth rates Birthrates have implications for sellers of diapers, toys, schools, and colleges 4-‹#› Culture is a very important part of international marketing, it affects us from the time we wake up in the morning till we go to bed and even while we sleep the products we use are impacted by culture. Culture impacts birthrates; eg: contraception is not permitted by religion in primarily strict Catholic or Muslim nations. Rich and developed countries are not adding to their population due to lifestyle, higher education levels as well as women in the workforce. This will be reflected in a decline in
birthrates in the developed world. 3 Culture’s Pervasive Impact Consumption of different types of food influences culture Chocolate by Swiss, seafood by Japanese preference, beef by British, wines by France and Italy Even diseases are influenced by culture stomach cancer in Japan, and lung cancer in Spain 4-‹#› Different types of food are consumed in different cultures (Exhibit 4.2). In hot, tropical countries, spicy food is eaten as spices preserve the food even without refrigeration. The geography of the country also shapes food habits, the Japanese eat a lot of fish and seafood since that is the primary source of food for a country made up of tiny islands in the pacific ocean. The French are famous for wines and champagne because the weather and soil are conducive for grape farming. Diseases also follow food habits such as lung cancer in Spain due to excessive smoking, liver disease in Germany due to consumption of fatty foods (Exhibit 4.3). 4 Three Definitions of Culture Culture is the sum of the “values, rituals, symbols, beliefs, and thought processes that are learned, shared by a group of people, and transmitted from generation to generation” “software of the mind, problem-solving tool” (Hofstede) “An invisible barrier… a completely different way of organizing life, of thinking, and of conceiving the underlying assumptions about the family and the state, the economic system, and even Man himself” (Hall)
4-‹#› 5 4-6 We as humans and consumers are able to adapt to changing environments through innovation. Individuals can learn culture from social institutions through socialization (where one is raised and how) and acculturation (adjusting to a new culture). We also learn and adapt to a culture through role modeling, or imitation of peers. People also make decisions about consumption and production through application of their cultural-based knowledge. 6 Origins of Culture: Geography Geography, which includes climate, topography, flora, fauna, and microbiology, influences our social institutions Jared Diamond states that historically innovations spread faster east-to-west than north-to-south Philip Parker reports strong correlations between the latitude (climate) and the per capita GDP of countries 4-‹#› Geography includes more than just the weather and temperature,
it is also what kind of plants and animals can be raised in the region and that influences society and consumption. According to Diamond, innovations spread faster from east to west. Before the advent of transoceanic shipping, ideas flowed over the Silk Road but not across the Sahara or the Isthmus of Panama. Parket advocates for a strong correlation between latitude and GDP, for example the GDP of Scandinavian countries are much higher than South American countries. 7 Origins of Culture: History The impact of specific events in history can be seen reflected in technology, social institutions, cultural values, and even consumer behavior The military conflicts in the Middle East in 2003 bred new cola brands, Mecca Cola, Muslim Up, and Arab Cola 4-‹#› See the cola pictures, Turkey has their own cola called “Cola Turkey,” a coca cola taste alike, but a local brand. Military conflicts in the Middle East bred these brands, because of an anti U.S. sentiment. 8 Origins of Culture: Technology Technological innovations influence cultural values Jet aircraft, air conditioning, televisions, computers, and the internet have all influenced culture
4-‹#› Every technological innovation has a profound impact on culture. For example, as we have moved from VHS tapes to DVDs to BluRay it has impacted our lifestyle, taking up less space and providing more convenience. The internet has changed the way we communicate and has made the world a smaller place. 9 Religious Value Systems School & Education Government Policies Social Institutions Family Behaviors Corporations Media 4-10 Social institutions including family, religion, school, the media, government, and corporations all culture, society and behavior. 10
Origins of Culture: Social Institutions Social institutions including family, religion, school, the media, government, and corporations all affect culture The family, social classes, group behavior, age groups, and how societies define decency and civility are interpreted differently within every culture 4-‹#› Origins of Culture: Social Institutions Family behavior varies across the world, e.g., extended families living together to Dad washing dishes Religious value systems differ across the world, e.g., Muslims not allowed to eat pork to Hindus not allowed to consume beef School and education, and literacy rates affect culture and economic growth 4-‹#› Origins of Culture: Social Institutions Media (magazines, TV, the Internet) influences culture and behavior Government policies influence the thinking and behaviors citizens of adult citizens, e.g., the French government offers new “birth bonuses” of $800 given to women as an incentive to increase family size Corporations influence culture via the products they market, e.g., MTV
4-‹#› Rituals Thought Processes Beliefs Cultural Values Symbols Elements of Culture 4-14 Underlying the cultural diversity that exists among countries are fundamental differences in cultural values , that is, the importance of things and ideas. The most useful information on how cultural values influence various types of business and market behavior comes from the work of Dutch researcher Geert Hofstede. 14 Cultural Values Hofstede, who studied over 90,000 people in 66 countries, found that the cultures differed along four primary dimensions Individualism/Collective Index (IDV), which focuses on self- orientation Power Distance Index (PDI), which focuses on authority orientation Uncertainty Avoidance Index (UAI), which focuses on risk
orientation; and Masculinity/Femininity Index (MAS), which focuses on assertiveness and achievement 4-‹#› The four 4 dimensions of culture proposed by Hofstede are described briefly above and in the following slides. Because MAS has proven least useful, our text does not consider it further. 15 Rituals and Symbols Rituals are patterns of behavior and interaction that are learned and repeated vary from country to country e.g., extended lunch hours in Spain and Greece Language as Symbols: the “languages” of time, space, things, friendships, and agreements 4-‹#› Rituals are important in every culture. How Easter is celebrated in the U.S. with the Easter Bunny’s visit and a traditional meal, is very different from how it is celebrated in Mexico, where it is tradition to visit the tombstones and pay homage to the dead. Wedding gowns are typically white in the West, but very colorful and bright in the country of India where the groom arrives on a horse with an entourage (refer to the movie Monsoon Wedding mentioned in the text). Symbols in a culture include language, both verbal and non-verbal and includes the perception of time, space and relationships. 16
Rituals and Symbols In Canada, language has been the focus of political disputes Differences in language vocabulary varies widely, even English is different in different countries Aesthetics as Symbols the arts, folklore, music, drama, and dance of a culture influences marketing 4-‹#› In Canada, French versus English has been a point of contention between regions. Aesthetics includes a country’s music, art, folklore and drama. 17 Whose English? 4-18 United States Trunk Hood Convertible Top
Elevator Toilet Bathroom Vacuum United Kingdom Boot Bonnet Hood Lift W.C. Tub or Shower Hoover
Exhibit 4.8 Metaphorical Journeys through 23 Nations Source: Martin J. Gannon, Understanding global Cultures, Metaphorical Journeys through 23 Nations, 2nd ed. Copright 2001. 4-19 Beliefs Beliefs, which mainly stem from religious training, vary from culture to culture The western aversion to the number 13 or refusing to walk under a ladder Japanese concern about Year of the Fire Horse The Chinese practice of Feng Shui in designing buildings 4-‹#› In Asian countries such as Japan and China the number 4 represents death and it is avoided at all costs, some building even skip the fourth floor and go from 3 to 5. Similar to the superstition about the number 13 in the West. Other examples of beliefs/superstitions are: not opening an umbrella in the house (Western) or not passing salt directly to a person (Eastern).
20 Thought Processes Thought processes also vary across cultures “Asian and Western” thinking Other examples? 4-‹#› Nisbett in his book discusses differences between Asian and Western thinking. Asians (although grouping all Asian countries into one category is not generally preferred) tend to see the big picture and have a more long-term orientaion. When compared to people in the West (North America and Europe). 21 Cultural Sensitivity and Tolerance Successful foreign marketing begins with cultural sensitivity — being familiar with nuances A new culture can be viewed objectively, evaluated, and appreciated. 4-‹#› Cultural sensitivity, or cultural empathy, must be carefully cultivated. For every amusing, annoying, peculiar, or repulsive cultural trait we find in a country, others see a similarly amusing, annoying, or repulsive trait in our culture. For example, we bathe, perfume, and deodorize our bodies in a daily ritual that is seen in many cultures as compulsive, while we oft
en become annoyed with those cultures less concerned with natural body odor. Just because a culture is different does not make it wrong. 22 Cultural Sensitivity Has to Be Cultivated Cultural sensitivity can be developed by acquiring knowledge about a culture including: Different meanings of colors, and different tastes General facts about a culture It can also be developed by learning the more in-depth meaning of cultural facts: The meaning of time, and attitudes toward people Developing a degree of insight 4-‹#› Resistance to Change Although some cultures embrace change others are resistant to it Working women in masculine societies like Saudi Arabia Lack of acceptance of GM foods (or “Frankenfood”) in Europe 4-‹#› Typically everyone is resistant to change, some are more resistant than others. For example, western companies have tried to change the habit of Indians of eating warm breakfasts. However, in India, people still continue to do things like using
warm milk in their cereal to have a “warm” breakfast instead of having cold cereal. 24 4-25 History and Geography: The Foundations of Culture Chapter 3 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives LO1 The importance of history and geography in understanding international markets LO2 The effects of history on a country’s culture LO3 How culture interprets events through its own eyes LO4 How long-past U.S. international policies still affect customer attitudes abroad LO5 The effect of geographic diversity on economic profiles of a country LO6 Why marketers need to be responsive to the geography of a country LO7 The economic effects of controlling population growth and aging populations LO8 Communication infrastructures are an integral part of international commerce
3-‹#› History & Contemporary Behavior Historical events between nations influence business and history Any nation’s business and political culture is shaped by history 3-‹#› History has a lot to do with modern day relationships between countries. The historical development of trade in China along the silk road certainly had an impact on trade between China and the rest of the world. The cold war with the former U.S.S.R. still impacts relationships with the U.S. even long after the break up of the former Soviet Union. 3 Case in Point: Japan Why do the Japanese have such strong loyalty toward their companies? Why is a distribution system so difficult for an outsider to develop? Why are decisions made by consensus? Why are they loyal to family, to country, to company, and to social group? 3-‹#›
Japanese culture is based primarily on Confucian philosophy, taught throughout Japan’s history. It emphasizes the basic virtue of loyalty “of friend to friend, of wife to husband, of child to parent, of brother to brother, but, above all, of subject to lord,” that is, to country. A fundamental premise of Japanese ideology reflects the importance of cooperation for the collective good. 4 Manifest Destiny Manifest Destiny and Monroe Doctrine were the basis of U.S. foreign policy in the 19th and 20th centuries Manifest Destiny meant that Americans were a chosen people ordained by God to create a model society. It referred to the territorial expansion of the United States from the Atlantic to the Pacific 3-‹#› This was followed by the Roosevelt Corollary, which stated that not only would the U.S. prohibit European intervention in Latin America, but would monitor Latin America to see that the countries in the region met their international obligations. This corollary was used to justify American intervention in Latin America including the Dominican Republic and the acquisition of the Panama Canal from Columbia. 5 Geography and Global Markets Climate & Topography Geography, Nature & Economic Growth Social Responsibility and Environmental Management Resources
3-‹#› Geography is one of the uncontrollable elements that international marketers have to deal with. Geography has three major components, Climate and Topography, Economic Growth and Development and Natural Resources. 6 Climate and Topography 3-7 The weather, terrain, humidity, altitudes and temperature affect a firm’s operations in a country and requires product adaptation. For example in countries with high humidity levels, corrugated paper or cardboard packaging would be ineffective. Wal-Mart tried to sell the same tennis balls in Mexico City that were used in other places in North America but realized that they needed to make special kinds of tennis balls because of the higher elevations in Mexico City. Even within the United States, there is a need for different or adapted products, for example, snow tires or chains for tires are not generally available in Southern States. Monsoons that are seasonal in countries like India affect transportation and purchase behavior. 7 Knowledge about geography, the climate and physical terrain when appraising a market Influences marketing from product adaptation to the development of marketing systems
Climatic features affect uses and functions of products and equipment Climate and Topography 3-8 The weather, terrain, humidity, altitudes and temperature affect a firm’s operations in a country and requires product adaptation. For example in countries with high humidity levels, corrugated paper or cardboard packaging would be ineffective. Wal-Mart tried to sell the same tennis balls in Mexico City that were used in other places in North America but realized that they needed to make special kinds of tennis balls because of the higher elevations in Mexico City. Even within the United States, there is a need for different or adapted products, for example, snow tires or chains for tires are not generally available in Southern States. Monsoons that are seasonal in countries like India affect transportation and purchase behavior. 8 Products may require special cooling or lubrication to function adequately in tropical zones
Climate differences in Europe caused Bosch-Siemens to alter its washing machines Geographic terrain such as mountain ranges in a country can influence transportation of products. Geography, Nature & Economic Growth 3-9 Climate and topography coupled with civil wars, poor environmental policies, and natural disasters push these countries further into economic stagnation. The recent multiple earthquakes in caused by climate have had a ripple effect on recovery and economic development of an already poor country. Bangladesh is a country constantly plagued by floods because of it’s vulnerability to many monsoons because of its landscape and location. Every time a country tries to rebuild from one disaster, it is struck by another and has weakened its economy. 9 Linkage exists between geographic location and economic growth
Association between landlocked countries and level of economic development Countries with hostile climates associated with economic stagnation Countries that suffer the most from major calamities are among the poorest in the world, which influences ability to market products Social Responsibility & Environmental Management 3-10 Climate and topography coupled with civil wars, poor environmental policies, and natural disasters push these countries further into economic stagnation. The recent multiple earthquakes in caused by climate have had a ripple effect on recovery and economic development of an already poor country. Bangladesh is a country constantly plagued by floods because of it’s vulnerability to many monsoons because of its landscape and location. Every time a country tries to rebuild from one disaster, it is struck by another and has weakened its economy. 10 Environmental protection is not an optional extra; it is an essential part of the complex process of doing business.
Of special concern to governments and businesses are ways to stem the tide of pollution and to clean up decades of neglect. Many governments are drafting new regulations and enforcing existing ones. A strong motivator is the realization that pollution is on the verge of getting completely out of control. Resources 3-11 Natural resources are an important part of geography. However, natural resources are depleting and firms should use them responsibly and have a plan to replenish depleting resources. We have seen the price of oil and gas increase steadily as these resources are heavily used especially by the developed world. 11 Importance of natural resources especially to manufacturing of products; Supply of natural resources not endless Human labor provides the preponderance of energy in many countries
Importance of oil and gas in world energy consumption Global Population Trends 3-12 World Population statistics and growth rate: 1800= 1 billion 1900=2 billion 1960=3 billion 1974=4 billion 1986=5 billion 1999=6 billion 2011=7 billion It used to take 100 years to add 1 billion to the world population, now it takes about 12-13 years. World population is to reach nearly 9 billion by 2050. 14% in the developed world are over 65. Special problems arise with the increasing number of elderly such as need for healthcare and retirement facilities. The majority of the people are over 65 or under 15 in the U.S., Europe and Japan. As a result there is a worker shortage and immigration from neighboring highly populated countries with a younger population. For example, Mexican immigration into North America and Polish immigration into Western Europe.
The population is shifting from rural to urban. Over 40% of the world lives in urban areas. By 2025 this number is expected to increase to 60%. 12 Important to know about current population trends because people constitute markets for various categories of goods Necessary to know about: rural/urban population shifts rates of growth age levels population control population decline and aging worker shortage and immigration
Exhibit 3.5 Source: World Population Prospects, The 2011 Revision, United Nations Economic and Social Affairs, www.unpopulation.org. 2012. 3-13 By 2050, 86% of the world population will be in Asia, Latin America and Africa. 98% of growth will happen in less developed regions. Industrialized countries will add less than 100 million. 13 Population Control Issues Adequate Incomes High literacy levels Education for women Health care Family planning Cultural attitudes Political reasons 3-‹#› The problems related to an increasing population in urban areas and in less developed countries are lowered income levels, the less literate have more children and hence education becomes a priority. Educating women on the benefits of a smaller family helps in population control, of course religion is a big factor. Health care availability becomes a challenge and a need as the world population explodes. Family planning is related to cultural and religious attitudes. Some countries for political
reasons believe in strength in numbers and therefore ignore the impact of a large population on economic development. 14 World Trade Routes & Communication Links Knowledge about trade routes over land, sea, and air important in making marketing decisions The majority of world trade is among the most industrialized and industrializing countries of Europe, North America, and Asia Need to be aware about communication links—the underpinning of all commerce Impact of the Internet revolution especially for global marketing of products 3-15 15 The Dynamic Environment of International Trade Chapter 2 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Trade Barriers Barriers to trade are one of the major issues confronting international marketers They can be tariff or non-tariff barriers Countries continue to use non-tariff barriers for a variety of reasons Tariff barriers have reduced considerably in recent years 2-‹#› Whether it is legislation regarding Pringles being the same potato chips in the UK and causing additional value added taxes for P&G or what percentage of California Rice can be mixed with “inferior” Japanese rice and still be labeled California Rice, these are examples of non-tariff trade barriers that can be used to prevent the easy entry of foreign companies into the country. 2 Exhibit 2.1 Top Ten 2011 U.S. Trading Partners ($ billions, merchandise trade) 2-3 Media, global communications and technology has allowed world trade to flourish and expand in recent years. As Exhibit 2.1 illustrates, world trade is an important economic activity. Increased competition also leads to increased protectionism.
The creation of the World Trade Organization (WTO) is one of the biggest advancement for free trade among countries. Trade statistics such as those listed in Exhibit 2.1 have often served to focus the attention of government officials around the world. We should however, view this data with caution. For example, although it is evident that the imbalance of trade is the biggest with China for the United States. However, often U.S. imports from China include a majority of parts made in other countries. The parts of the majority of computers assembled in China (Lenovo for example) are made in surrounding countries like Taiwan. 3 2-4 Over the past 30 years, U.S. dominance in export markets has diminished as Japan, Germany, and a number of newly industrialized countries such as South Korea and China have taken a larger share of world exports. Similarly, the industrialized nations of Germany, France, and the United Kingdom, faced a decline in world market share of largest corporations. This decline in the position of the U.S. and other industrialized countries was a relative decline, reflecting the faster economic growth of several other countries, particularly in Asia. 4 World Trade and U.S. Multinationals Dominance of U.S. multinationals in the 1950s and 1960s Large investments by U.S. companies in Europe and Latin America Concern in Latin America resulting in expropriation of direct
U.S. investments In Europe, there was strong public demand to limit foreign investment 2-‹#› The threat felt by Europeans was best expressed in the popular book The American Challenge, published in 1968, in which the French author J. J. Servan-Schreiber wrote: “Fifteen years from now it is quite possible that the world’s third greatest industrial power, just after the United States and Russia, will not be Europe but American Industry in Europe. Already, in the ninth year of the Common Market, this European market is basically American in organization.” Servan-Schreiber’s prediction did not come true for many reasons as described in the following slides. 5 Source: Complied from annual reports of listed firms, 2012 2-6 The relative importance of U.S. multinational corporations (MNCs) after World War II declined where U.S. multinationals compete with strong corporations from Japan, Western Europe, Asia and many developing countries such as China and Mexico. This is forcing U.S. MNCs to examine new ways to remain competitive. From the 1960s to 2011, the U.S. moved from being the world's dominant industrial power to accounting for only 29 of the world’s 100 largest corporations (see Exhibit
2.3). Countries once classified as less developed were reclassified as newly industrialized countries (NICs). NICs such as Brazil, Mexico, South Korea, Taiwan, Singapore, and Hong Kong went through experienced rapid industrialization in specific industries such as steel, shipbuilding, consumer electronics, auto mobiles, light aircraft, shoes, textiles, apparel, and more. In short, economic power and potential became more evenly distributed among countries and Servan-Schreiber warning to Europe about U.S. multinational domination did not come close to becoming true. 6 Exhibit 2.3 The Nationality of the World’s 100 Largest Industrial Corporations (size measured by annual revenues) Source: “2011 Global 500,” Fortune, http://www.fortune.com , 2012. 2-7 Balance of Trade Favorable balance of trade means that the US sold more to other countries than it bought from them. The balance of merchandise trade also reflected the changing role of the United States in world trade Between 1888 and 1971, the United States had a favorable balance of trade By 1971, the United States had a trade deficit of $2 billion that grew to at $160 billion in 1987 Trade deficit peaked in 2007, with the continued weakness in the U.S. dollar The positive consequence of the global financial crisis in 2008
in the United States was the halving of the U.S. trade deficit during 2009 from its high in 2007 2-‹#› Favorable balance of trade means that the U.S. sold more to other countries than it bought from them. 8 Balance of Payments When countries trade there are financial transactions among businesses or consumers of different nations Money constantly flows into and out of a country The system of accounts that records a nation’s international financial transactions is called its balance of payments (BP) It records all financial transactions between a country’s firms, and residents, and the rest of the world usually over a year The BP is maintained on a double-entry bookkeeping system 2-‹#› As barriers to the free flow of goods, services, and capital have fallen over time, and as other countries increased their shares of world output, non-U.S. firms increasingly began to invest across national borders. If we look 20 years into the future, most forecasts now predict a rapid rise in the share of world output accounted for by developing nations such as China, India, Indonesia, Thailand, South Korea, Mexico, and Brazil, and a corresponding decline in the share of rich industrialized nations
such as Great Britain, Germany, Japan, and the United States. The World Bank, for example, has estimated that if current trends continue, by 2020 the Chinese economy could be larger than that of the United States, while the economy of India will approach that of Germany. The World Bank also estimates that today's developing nations may account for more than 60 percent of world economic activity by 2020, while today's rich nations, which currently account for over 55 percent of world economic activity, may account for only about 38 percent by 2020. As these trends continue and economies become closely tied with each other, one way to impact the inflow of goods and services into the domestic market is through the use of protectionism. The Balance of Payments and it reflects the economic position of the country. The more protectionist a country is, it imports less and exports more and that is reflected in its Balance of Payments as a surplus. The U.S. has had a negative balance of payments in recent years and the country that accounts for a large portion of this deficit is China. This can be explained by the fact that a lot of the consumer goods sold in the United States are manufactured and imported into the United States and the amount of goods and services exported from the U.S. into China is relatively small. 9 Balance of Payments The BP is the difference between receipts and payments 2-10 Receipts
merchandise export sales. money spent by foreign tourists. transportation. payments of dividends and interest from FDI abroad. new foreign investments in the U.S. Payments costs of goods imported. spending by U.S. tourists overseas. new overseas investments. cost of foreign military and economic aid. Balance of Payments
A balance-of-payments statement includes three accounts the current account, a record of all merchandise exports, imports, and services plus unilateral transfers of funds the capital account, a record of direct investment, portfolio investment, and short-term capital movements to and from countries; and the official reserves account, a record of exports and imports of gold, increases or decreases in foreign exchange, and increases or decreases in liabilities to foreign central banks. Of the three, the current account is of primary interest to international business. 2-‹#› 11 Protectionism The reality of trade is this is a world of tariffs, quotas, and nontariff barriers and nontariff barriers designed to protect a country’s markets from foreign investment Although the World Trade Organization has been effective to some extent in reducing tariffs, countries still resort to measures of protectionism Countries use legal barriers, exchange barriers, and psychological barriers to restrict the entry of unwanted goods 2-‹#› The complex distribution system in Japan, is a good example of a market structure creating a barrier to trade. Most recently the United States and other countries have accused China of
keeping the value of its currency artificially low to boost exports and limit exports. 12 Arguments for Protectionism maintain employment and reduce unemployment increase of business size, and retaliation and bargaining protection of the home market need to keep money at home encouragement of capital accumulation 2-‹#› Arguments for Protectionism maintenance of the standard of living and real wages conservation of natural resources protection of an infant industry industrialization of a low-wage nation national defense 2-‹#› The Impact of Tariff (Tax) Barriers Tariff Barriers tend to increase: Inflationary pressures Special interests’ privileges Government control and political considerations in economic matters The number of tariffs they beget via reciprocity
2-‹#› The Impact of Tariff (Tax) Barriers Tariff Barriers tend to weaken: Balance-of-payments positions Supply-and-demand patterns International relations (they can start trade wars) Tariff Barriers tend to restrict: Manufacturer’ supply sources Choices available to consumers Competition 2-‹#› Six Types of Non-Tariff Barriers (1) Specific Limitations on Trade: Quotas Import Licensing requirements Proportion restrictions of foreign to domestic goods (local content requirements) Minimum import price limits Embargoes (2) Customs and Administrative Entry Procedures: Valuation systems Antidumping practices Tariff classifications Documentation requirements Fees
2-‹#› Six Types of Non-Tariff Barriers (3) Standards: Standard disparities Intergovernmental acceptances of testing methods and standards Packaging, labeling, and marking (4) Government Participation in Trade: Government procurement policies Export subsidies Countervailing duties Domestic assistance programs 2-‹#› Six Types of Non-Tariff Barriers (5) Charges on imports: Prior import deposit subsidies Administrative fees Special supplementary duties Import credit discriminations Variable levies Border taxes (6) Others: Voluntary export restraints Orderly marketing agreements
2-‹#› Three Types of Monetary Barriers Blocked currency: Blockage is accomplished by refusing to allow importers to exchange its national currency for the sellers’ currency. Differential exchange rates: It encourages the importation of goods the government deems desirable and discourages importation of goods the government does not want by adjusting the exchange rate. The exchange rate for importation of a desirable product is favorable and vice-versa Government approval: In countries where there is a severe shortage of foreign exchange, an exchange permit to import foreign goods is required from the government 2-‹#› The Omnibus Trade and Competitiveness Act (OTCA) 1988 Many countries are allowed to trade freely with the United States but do not grant equal access to U.S. products in their countries. To ease trade restrictions, the OTCA focused on correcting perceived injustice in trade practices. It dealt with trade deficits, protectionism, and the overall fairness of our trading partners. 2-‹#› The Omnibus Trade and Competitiveness Act (OTCA) 1988 Covers three areas for improving U.S. trade:
market access, export expansion, and import relief 2-‹#› General Agreement on Tariffs and Trade (GATT) Covers three basic areas: trade shall be conducted on a nondiscriminatory basis; protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas; and consultation shall be the primary method used to solve global trade problems. 2-‹#› World Trade Organization (WTO) It sets many rules governing trade between its 132 members WTO provides a panel of experts to hear and rule on trade disputes between members, and, unlike GATT, issues binding decisions Unlike GATT, WTO is an institution, not an agreement 2-‹#› WTO The Internet exposed protected industries to global competition
WTO was established January 1, 1995 through the Uruguay round of GATT (1986-1993) Statutory powers to adjudicate trade disputes 2-‹#› WTO Permanent international organization New legal and institutional foundation Platform for trade relations: collective debate, negotiation and adjudication Dispute settlement faster Evolution of GATS, TRIMS, TRIPS 2-‹#› The World Trade Organization (like its predecessor GATT) is primarily responsible for regulating world trade and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO member states. 147 nations that collectively accounted for 97 percent of world trade are members of the WTO, thereby giving the organization enormous scope and influence. The WTO is also responsible for facilitating the establishment of additional multinational agreements between WTO member states. Over its entire history, and that of the GATT before it, the WTO has promoted the lowering of barriers to cross-border trade and investment. In doing so, the WTO has been the instrument of its member states, which have sought to create a more open global business system unencumbered by barriers to trade and investment between countries. Without an institution such as the WTO, the globalization of markets and production is unlikely to have proceeded as far as it has. It is
interesting to see the history of WTO’s dispute resolution among countries. See the “Banana Wars” (http://news.bbc.co.uk/2/hi/business/8391752.stm) dispute that has been ongoing for over 16 years and the resolution in the case for an example of the role of the WTO and the type of disputes that it has ruled on. Immediately after the Banana Wars ruling, the EU filed a complaint with the WTO against the U.S. that establishing Foreign Sales Corporations (http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds108_e. htm) gives the U.S.an undue tax advantage and should not be allowed to make the playing field level for all countries. 26 The IMF and the World Bank The International Monetary Fund (IMF) and the World Bank Group are two global institutions created to assist nations in becoming and remaining economically viable. These organizations play important roles in international trade: by helping maintain stability in the financial markets and by assisting countries that are seeking economic development and restructuring 2-‹#› The International Monetary Fund (IMF) and the World Bank were both created in 1944 by 44 nations that met at Bretton Woods, New Hampshire. The task of the IMF was to maintain order in the international monetary system, and that of the World Bank was to promote economic development. In the 60 years since their creation, both institutions have emerged as significant players in the global economy. The World Bank is the less controversial of the two sister institutions. It has focused on making low-interest-rate loans to cash-strapped
governments in poor nations that wish to undertake significant infrastructure investments (such as building dams or roads). The IMF is often seen as the lender of last resort to nation- states whose economies are in turmoil and currencies are losing value against those of other nations. Frequently, in the recent past, for example, the IMF has bailed out governments of troubled nation states, including Argentina, Indonesia, Mexico, Russia, South Korea, Thailand, and Turkey. 27 The Scope and Challenge of International Marketing Chapter 1 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives LO1 The benefits of international markets LO2 The changing face of U.S. business LO3 The scope of the international marketing task LO4 The importance of the self-reference criterion (SRC) in international marketing LO5 The increasing importance of global awareness LO6 The progression of becoming a global marketer 1-‹#›
Global Commerce Causes Peace Global commerce thrives during peacetime Economic boom in North America in the late 1990s largely due to the end of the cold war 1-‹#› In times of peace, international trade flourishes as relationships between countries improve. This has a ripple effect and a positive impact of the economies of all countries involved. 3 The Internationalization of U.S. Businesses Exhibit 1.1 Foreign Acquisitions of U.S. Companies, Sources: Compiled from annual reports of listed forms, 2012. 1-4 The ownership of many U.S. businesses is located with companies headquartered outside of the U.S. It is interesting to see that a company like Burger King is British and Seven Eleven is Japanese, brands in our daily life that we consider “American.” 4 1-5
Gigante, one of Mexico’s largest supermarket chains, now has several stores in Southern California, including this one in Anaheim. On store shelves are a variety of Bimbo bakery products. Grupo Bimbo, a growing Mexican multinational, has recently purchased American brand-named firms such as Oroweat, Webers, Sara Lee, and Mrs. Baird’s Bread. 5 The International Marketing Task One Two Three Four 1-6 What makes international marketing so much more complicated than domestic marketing are the various uncontrollable factors that companies have to encounter in international markets in addition to all the uncontrollable factors they would normally face in domestic markets. The uncontrollables in a foreign country could range from political or legal regulations that are unique to a country, competition, to consumer tastes and socio- cultural differences that are new to the company. Exhibit 1.3: The International Marketing Task illustrates the environment in which a firm operates in global markets. Case 1–1, Starbucks-Going Global Fast, is a good way to think about the marketing mix and the effects of uncontrollables and controllables both in the domestic and foreign environments. How would you have done things differently to overcome some of the problems illustrated in the case? Starbucks is looking to boost its overall rate of growth by applying its business formula
to other nations that lack a Starbucks-type chain. In doing so, it is helping to change aspects of the material culture of those countries it enters, to feel more like the U.S. At the same time, Starbucks has found that to succeed internationally, it must customize aspects of its operations and marketing to local conditions, by introducing new versions of its basic drinks that appeal to local tastes for example. 6 Exhibit 1.2 Selected U.S. Companies and Their International Sales Source: Compied from annual reports of listed firms, 2012 1-7 The changing world economy has created unique opportunities for marketers. A product that has reached the end of its lifecycle in a mature western market may have tremendous potential in emerging markets such as Brazil, Russia or China. The reduced barriers and access to cross-border trade makes it possible for firms to source from various countries, reduce costs and sell worldwide. Deregulated markets in the former USSR and Eastern Europe, increasing competition, and open foreign investment policies in Asia, South America, and Africa have created new opportunities. It has allowed businesses to expand internationally. 7 1-8
Photo Caption: A Citibank branch in the heart of Brazil on a rainy day. The address on the Avenida Paulista is 1776—how American! One of the world’s great multinational corporations barely survived the financial debacle of October 2008. Perhaps its red, white, and blue umbrella logo protected it from “adverse weather” on Wall Street? Indeed, during the past few years, its international operations have performed much better than its domestic ones. In particular, emerging markets such as China, India, and Brazil proved relatively resilient during the global financial crisis that began in 2008. 8 Self-Reference Criterion & Ethnocentrism Self-Reference Criterion (SRC) is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions. Ethnocentrism is the notion that people in one’s own company, culture, or country know best how to do things. Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true light. 1-‹#› The need to customize products and operations to local conditions that Starbucks encountered is a consistent theme in international marketing. Similarly, Starbucks' decision to take on foreign partners to help expand internationally is one that many companies must deal with. It also illustrates that it is inevitable for companies not to be influenced by Self Reference Criterion (SRC) or Ethnocentric attitudes, it is important that
they consciously pay attention to overcome these attitudes while entering foreign markets. A person from one culture is often not aware that a reaction is influenced by one’s cultural background and that those from another culture may have a different perspective. The nature of the SRC is that whenever confronted by some aspect of another culture one’s reaction and evaluation is routinely clouded by one’s own cultural experiences. For example, it is common for one to frown upon the foods of another country when the same feelings may be expressed when people from that country visit other world regions. It is how one is raised and the foods one is accustomed to, such pepperoni topping on pizza in the U.S., a topping which most of the rest of the world is not familiar with. When this topping was requested by an American tourist in Germany, she received a pizza topped with “pepperoncini” peppers. In Korea, it is common to top ice cream with canned corn, which most of the western world may view with distaste at first reaction which is a natural reaction based on one’s own SRC and ethnocentric values. 9 Developing Global Awareness To be globally aware is to have: tolerance of cultural differences and knowledge of cultures, history, world market potential, and global economic, social, and political trends 1-‹#› Tolerance for cultural differences is crucial in international marketing. Tolerance is understanding cultural differences and accepting and working with others whose behaviors may be
different from ours. Global awareness also involves knowledge of world market potentials and global economic, social, and political trends. Over the next few years, there will be major changes in the socio-economic and political scenes round the world, particularly in the developed world. Global awareness is not simply recognizing that your world views are different from others, but also accepting the diverse perspectives of others. For example, that slurping and burping is a sign of respect for the host’s cooking and not bad manners, it means that the guests are thoroughly enjoying the food. Behaviors are not standard across countries, what’s acceptable in one country may be completely taboo in another. 10 Stages of International Marketing Involvement No Direct Foreign Marketing Infrequent Foreign Marketing Regular Foreign Marketing International Marketing Global Marketing 1-‹#› No Direct Foreign Marketing In this stage, a company does not send its products overseas directly, but its products may become available in other countries through intermediaries or middlemen such as trading companies. Occasional internet sales because of a request from an overseas customer may also fall into this category. Infrequent Foreign Marketing Temporary surpluses in inventory may cause companies to sell their excess product in overseas markets. Note that in the first two stages of International
Marketing Involvement, the strategies are reactive rather than proactive. Regular Foreign Marketing In this stage a firm has committed permanent resources towards international marketing and engages in it regularly on a proactive basis. The firm may use intermediaries to engage in international marketing. International Marketing In this stage has planned production and marketing to many countries around the world with specific targets for each overseas country market. It involves not only marketing but also production of goods in overseas markets. Global Marketing In the global marketing stage, the firm starts viewing the world, including their home market as one market. The major change is the orientation towards world markets and the activities directed at supporting this view. When exploring the different stages of international marketing involvement, it is important that we understand the differences between global markets and global products. We also need to understand that a global marketing orientation does not necessarily mean standardization across all markets. Instead it may mean operating as if all country markets in a company’s scope of operations (including the domestic market) are approached as a single global market that may have multiple market segments extending across national borders and that the company may be seeking commonalties across country markets in order to standardize the marketing mix where it is culturally feasible and cost effective. 11 Factors Favoring Faster Internationalization Companies with either high technology and/or marketing-based resources are better equipped to internationalize than more traditional manufacturing companies (Tseng et. al., 2007) Smaller home markets and larger production capacities favor
internationalization (Fan & Phan, 2007) and Firms with key managers well networked internationally are able to accelerate the internationalization process (Freeman and Cavusgil, 2007) 1-‹#› Refer to text page 20, footnotes for the references on this slide. 12 The Orientation of International Marketing Environmental/cultural approach Relate the foreign environment to the marketing process Illustrate how culture influences the marketing task The cultural environment within which the marketer must implement marketing plans can change dramatically from country to country 1-‹#› The text addresses issues relevant to any company marketing in or into any other country or groups of countries, however slight the involvement or the method of involvement. Hence this discussion of international marketing ranges from the marketing and business practices of small exporters, such as a Colorado- based company that generates more than 50 percent of its $40,000 annual sales of fish-egg sorters in Canada, Germany, and Australia, to the practices of global companies such as Microsoft, Mary Kay, and Johnson & Johnson, all of which generate more than 50 percent of their annual profits from the sales of multiple products to multiple country-market segments all over the world.
13 Developing a Global Vision through Marketing Research Chapter 8 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. International Marketing Research Cross-cultural communications are difficult Environments are different Important to recognize cross-country similarities and differences Important to recognize and overcome SRC (Self Reference Criterion) SRC is an unconscious reference to one's own cultural values, experiences, and knowledge as a basis for decisions. 8-‹#› 2 It is important to pay attention to differences and similarities in cultures and consumption by conducting marketing research.
Many multinationals have committed blunders due to the lack of meticulous marketing research as well as the presence of SRC when operating in a foreign market. An example would be that of Sears in Brazil when they failed to adjust the shelf heights to fit the shorter height of the average Brazilian. Marketing research and in turn information obtained from it are critical in developing successful marketing strategies. Information needs range from the general data required to assess market opportunities to specific market information for decisions about product, promotion, distribution, and price. Information can be gathered from a variety of sources ranging from consumers to suppliers to competitors. Research: It is important to pay attention to differences and similarities in cultures and consumption by conducting marketing research. Many multinationals have committed blunders due to the lack of meticulous marketing research as well as the presence of SRC when operating in a foreign market. An example would be that of Sears in Brazil when they failed to adjust the shelf heights to fit the shorter height of the average Brazilian. Marketing research and in turn information obtained from it are critical in developing successful marketing strategies. Information needs range from the general data required to assess market opportunities to specific market information for decisions about product, promotion, distribution, and price. Information can be gathered from a variety of sources ranging from consumers to suppliers to competitors. 8-‹#›
Research processes and methods are same whether applied in Columbus, Ohio, or Colombo, Sri Lanka. Marketing research is traditionally defined as the systematic gathering, recording, and analyzing of data to provide information useful to marketing decision making. International Marketing Research 8-‹#› 4 International marketing has some additional complexities such as communicating information across cultures. For example, the headquarters in the U.S has to convey the results of a research project to the Brazilian subsidiary and the Brazilian subsidiary has to translate that into meaningful information that they can put to use. This could be vice versa as well, the U.S using information collected in the Brazilian subsidiary. Many marketing research firms are able to provide services such as cross-cultural translations. The other complexity with international marketing research is that environments in which research is conducted may vary. Tried and tested methods may not be meaningful or apply in a foreign culture. International marketing has some additional complexities such as communicating information across cultures. For example, the headquarters in the U.S has to convey the results of a research project to the Brazilian subsidiary and the Brazilian subsidiary has to translate that into meaningful information that they can put to use. This could be vice versa as well, the U.S using information collected in the Brazilian subsidiary. Many marketing research firms are able to provide services such as
cross-cultural translations. The other complexity with international marketing research is that environments in which research is conducted may vary. Tried and tested methods may not be meaningful or apply in a foreign culture. 8-‹#› International Marketing Research International marketing research involves two additional complications: Information must be communicated across cultural boundaries. The environments in which research tools are applied are often different in foreign markets. 8-‹#› Breadth & Scope of International Marketing Research Foreign market research is broader in scope than domestic research Research can be divided into three types based on information needs: general information about the country, area, and/or market; information necessary to forecast future marketing requirements by anticipating social, economic, consumer, and industry trends within specific markets or countries; and specific market information used to make product, promotion, distribution, and price decisions and to develop marketing plans
8-‹#› 7 In domestic operations, mostly emphasis is placed gathering specific market information, because the other data are usually available from secondary sources. In an international setting, a country’s political stability, cultural attributes, and geographical characteristics are some of the kinds of information not ordinarily gathered for the purpose of domestic marketing research. See the example of Unisys Corporation and the steps it uses to gather information. The Research Process for All Countries 8-‹#› 1 Define the research problem and establish research objectives. 2 Determine the sources of information to fulfill the research objectives.
Consider the costs and benefits of the research effort. 3 4 Gather the relevant data from secondary or primary sources, or both. 5 Analyze, interpret, and summarize the results. 6 Effectively communicate the results to decision makers.
Defining the Problem and Establishing Research Objectives Begin with a definition of the research problem and the establishment of specific research objectives. The market researcher must be certain the problem definition is sufficiently broad to cover the whole range of response possibilities and not be clouded by his or her SRC. Once the problem is adequately defined and research objectives established, the researcher must determine the availability of the information needed. An example of this would be Disney when they established their first European location in Paris failed to take into account that flights from Germany to Florida were cheaper than getting to Paris and that didn’t make the opening of Disney Paris attractive to many Europeans. 8-‹#› This is the first and most crucial step in the research process as it is the backbone of the entire research. Errors could be made because of overlooking local culture or due to one’s own Self Reference Criterion (SRC). An example of this would be Disney when they established their first European location in Paris failed to take into account that flights from Germany to Florida were cheaper than getting to Paris and that didn’t make the opening of Disney Paris attractive to many Europeans. 9 Problems with Secondary Data
8-‹#› Availability of Data The United States is by far the country with the largest quantity of data available. The data available on and in Japan is a close second, and several European countries do a good job of collecting and reporting data. Sometimes, the quality of data collected in these other countries may be better than that collected in the U.S. Another problem with the availability of data is the lack of language skills in the country that a firm is operating in. For example in Japan, one needs to know Japanese to access the available data. Reliability of Data Data may be available but not reliable. Data reported may be biased depending on who reported it, for example government reported data may be biased in population or economic statistics. Less developed countries tend to be overly optimistic and unreliable in reporting relevant economic data about their countries. Th e European Union (EU) tax policies can affect the accuracy of reported data also. Production statistics are frequently inaccurate because these countries collect taxes on domestic sales. Comparability of Data Comparability of available data is the third problem for companies. In the U.S. data is readily available through a variety of sources and is usually current. In other countries, especially less developed ones, data can be old and outdated and is not updated frequently enough. Either things may be changing too rapidly for these countries to document (lack of currency) or there is a lack of historical data (they only started documenting recently). Validating Secondary Data Checking the consistency of one set of secondary data with other data of known validity is an effective and oft en-used way of judging validity. For example, a researcher might check the sale of baby products with the
number of women of childbearing age and birthrates, or the number of patient beds in hospitals with the sale of related hospital equipment. 10 Availability Reliability Comparability Validation Checking the Accuracy of Secondary Data Secondary data from any source, including the United States, must be checked and interpreted carefully. The following questions should be asked to effectively judge the reliability of secondary data sources: Who collected the data? Would there be any reason for purposely misrepresenting the facts? For what purposes were the data collected? How (by what methodology) were the data collected? Are the data internally consistent and logical in light of known data sources or market factors?
8-‹#› www.ita.doc.gov www.usatradeonline.gov http://www.census.gov/foreign-trade/www/ https://www.cia.gov/library/publications/the-world-factbook/ http://www.cbp.gov/ www.opic.gov www.exim.gov Sources of Secondary Data: Websites for International Marketing 8-‹#› www.imf.org www.wto.org www.oecd.org www.jetro.go.jp www.euromonitor.com University-based websites, e.g., http://www.lib.berkeley.edu/BUSI/ www.worldchambers.com www.ipl.org/ref/RR/static/bus4700.html Sources of Secondary Data: Websites for International Marketing
8-‹#› http://www.wtcaonline.com/cms_wtca/ www.worldtradewt100.com/ MSU-CIBER- Globaledge World Bank IMF OECD U.N. Syndicated data sets: A.C. Nielsen and Information Resources Inc. Sources of Secondary Data: Websites for International Marketing 8-‹#› Problems with Qualitative Research Focus group interviews are difficult to conduct in Confucian societies – i.e. social & ethical philosophy (mostly in Chinese culture) Personal referrals are needed to contact consumers People are often hesitant to criticize new product ideas when companies seek candid opinions. 8-‹#›
15 Problems with Primary Research Sampling in Field Surveys: reliability of lists poor postal service availability of data census and socioeconomic data SS# data street maps telephones postal unit sample size & sampling procedure 8-‹#› There are many issues related to sampling and field surveys as listed on the slide, mostly relates to infrastructure and availability of data that we take for granted exists in all countries. Many times, there are no street addresses available in countries. In India for example, it is typical to state in your address that your house is located “Opposite to the State bank of India.” Language is an impediment and surveys need to be translated into the local language. For translation, one of two methods can be used, parallel translation or back translation, the questionnaire is simultaneously developed in English and the local language and parallel translated until they are equivalent or it is done English to the local language and then back to
English until the surveys sound alike and are meaningful. The third alternative is decentering which is a hybrid of parallel and back translation. It is a successive process of translation and retranslation of a questionnaire, each time by a different translator. Even Spanish can be different depending on which region of the world, the word for juice is “zumo” in Spain and “jugo” in Mexico. On my first visit to Portugal I prepared by learning basic Portuguese phrases, only to find out that I had learned Brazilian Portuguese (which is what is available in the U.S.) and no one could understand me. 16 Marketing researchers in India have to consider the problems of language diversity. Here the primary 13 languages (besides English) are listed on a 20-rupee bill. 8-17 Problems with Quantitative Research Different types of biases: One may encounter many problems with quantitative research. A number of biases come into play such as not wanting to respond, being courteous to the interviewer and hence not providing a candid response, some cultures tend to say “Yea” or “Nay” to questions regardless of whether they understand the question, responses to some questions that relate to social class or residential area may involve social desirability bias. And, some questions related to income, gender or taxes may be taboo. 8-‹#›
One may encounter many problems with quantitative research. A number of biases come into play such as not wanting to respond, being courteous to the interviewer and hence not providing a candid response, some cultures tend to say “Yea” or “Nay” to questions regardless of whether they understand the question, responses to some questions that relate to social class or residential area may involve social desirability bias. And, some questions related to income, gender or taxes may be taboo. 18 Research on the Internet: A Growing Opportunity For many companies the Internet provides a new and increasingly important medium for conducting a variety of international marketing research There are at least seven different uses for the Internet in international research: Online surveys and buyer panels Online focus groups Web visitor tracking Advertising measurement Customer identification systems E-mail marketing lists Embedded research 8-‹#› International Internet use is growing almost twice as fast as American use. A variety of methods that were not available a few years ago can be used now in international marketing research due to the availability of technology and the
penetration of the internet. 19 The END. 8-‹#› The International Legal Environment: Playing By the Rules Chapter 7 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Introduction No single, uniform international commercial law governing foreign business transactions exists International marketers must comply with the laws of each country within which it operate 7-‹#› It is impossible to explore the legal system of every country,
but it is important to understand that the laws are different and the need to comply with the laws of each country. 2 Bases for Legal Systems Common Law Civil or Code Law Islamic Law Commercial Legal System in Marxist-Socialist economies or states 7-‹#› There are three basic types of legal systems and the commercial legal system in Marxist economies although not a “formal” system is worth discussing. 3 Bases for Legal Systems Common law, derived from English law and found in England, the United States, Canada, and other countries once under English influence The basis for common law is tradition, past practices, and legal precedents set by the courts through interpretations of statutes, legal legislation, and past rulings. 7-‹#› Common Law is based on historical or past practices. Therefore, under common law, all judgments in court are based
on precedence. Common law seeks “interpretation through the past decisions of higher courts which interpret the same statutes or apply established and customary principles of law to a similar set of facts.” 4 Bases for Legal Systems Civil or code law, derived from Roman law and found in Germany, Japan, France, and in non-Islamic and non--Marxist countries Code law is based on an all-inclusive system of written rules (codes) of law. 7-‹#› All laws are codified, however, some broad interpretations are possible. More comparisons between common and code law are in the following slides. 5 7-6 Common Law Based on tradition, past practices and legal precedents set by courts through interpretation of past rulings/statutes, etc.
Code Law Based on an all-inclusive system of written rules (codes) of law. Legal system is divided into 3 codes: commercial, civil & criminal. Not All-Inclusive Considered complete “catchall provisions” Some broad interpretations are possible. 7-7 Common Law
Ownership is determined by use Code Law Based on an all-inclusive Ownership is determined by registration Agreements may be binding so long as proof of the agreement can be established. Agreements may not be enforceable unless properly notarized or registered. 7-8
Common Law Impossibility of performance does not excuse non-compliance with the provisions of the contract, unless it was an act of God. Code Law Acts of God are not necessarily limited to acts of nature but include “unforeseeable human acts” such as labor strikes or riots. Common Law countries are codifying Commercial Law. Bases for Legal Systems Islamic law, derived from the interpretation of the Koran and found in Pakistan, Iran, Saudi Arabia, and other Islamic states
7-‹#› 9 Islamic Law The Koran forms the basis for the Shari’ah (Islamic law) It includes issues such as property rights, economic decision making, and types of economic freedom The overriding objective of the Islamic system is social justice Islamic law prohibits the payment of interest or “riba” It describes secular aspects of the law regulating human acts. It describes specific patterns of social and economic behavior for all individuals. 7-‹#› Because the laws are based on interpretation of the Koran, the international marketer must have knowledge of the religion’s tenets and understand the way the law may be interpreted in each region. Some Islamic Law countries are more liberal than others in the interpretation of the Koran. 10 Commercial Law in Marxist Economies A commercial legal system in the Marxist–socialist economies of Russia and the republics of the former Soviet Union, Eastern Europe, China, and other Marxist–socialist states Legal system centered on the economic, political, and social policies of the state
As each country moves toward its own version of a free market system and enters the global market, a commercial legal system is also evolving from Marxist–socialist tenets. 7-‹#› As socialist countries become more directly involved in trade with non-Marxist countries, it has been necessary to develop a commercial legal system that permits them to engage in active international commerce. For example, China has announced that it will adopt a constitution-based socialist legal system but with Chinese characteristics. For example, China has strict Cyber Laws and prohibits the use and access to certain websites such as Facebook but has formed its own social media site that the government can monitor closely called qq. Some formerly communist eastern European countries had a formally codified legal system before the onset of communism and are adapting that to engage in global trade. 11 Jurisdiction in International Legal Disputes Determining whose legal system has jurisdiction when a commercial dispute arises is another problem of international marketing. The World Court at The Hague and the International Court of Justice resolve international disputes between sovereign nations of the world rather than between private citizens. Legal disputes can arise in three situations: between governments, between a company and a government, and between two companies
7-‹#› There is no legal body to resolve disputes between citizens of different countries. The World Court can only intervene if the legal disputes are between governments, a company and a government or between two companies. 12 Jurisdiction in International Legal Disputes The World Court can adjudicate disputes between governments, but disputes in situations 2 and 3 must be handled in the courts of the country of one of the parties involved or through arbitration. When international commercial disputes must be settled under the laws of one of the countries concerned, the paramount question in a dispute is: Which law governs? 7-‹#› Because there is no international commercial law, the marketer has to look into the type or law and the specifics laws of each country the firm has operations in. 13 Jurisdiction in International Legal Disputes Jurisdiction is generally determined in one of three ways, on the basis of: jurisdictional clauses included in contracts where a contract was entered into, or where the provisions of the contract were performed
7-‹#› It is very important that when operating in another country to have the supporting documents that clearly state the jurisdiction in case a dispute occurs and whose laws will apply. 14 International Dispute Resolution Conciliation Arbitration Litigation 7-‹#› If a buyer or partner in another country refuses to keep their end of the contract, there are various options to enforce it. The first steps usually involve resolving the issue informally, if that fails the above three methods are options. 15 Conciliation Conciliation or mediation is a non-binding agreement between parties to resolve disputes by asking a third party to mediate differences. Discussion between parties and mediator are confidential and statements made by either party may not be used in future litigation or arbitration. It is not legally binding.
7-‹#› Conciliation is considered especially effective in resolving disputes with the Chinese as it is non-threatening. 16 Arbitration Parties select a disinterested and informed party as a referee to determine the merits of the case and make a judgment both parties agree to honor. 7-‹#› Most arbitration is conducted under the auspices of one of the more formal domestic and international arbitration groups. These groups have formal rules for the process. In most countries, decisions reached in formal arbitration are enforceable under the law. 17 Litigation Fear of creating a poor image Fear of unfair treatment in a foreign court Difficulty in collecting a judgment Cost and time Loss of confidentiality
7-‹#› Litigation is the last resort and not a preferred option in most disputes, especially in countries where it considered public humiliation. For all of the above reasons, disputes are best resolved through conciliation or arbitration. 18 Protection of Intellectual Property: Counterfeiting and Piracy Firms spend millions of dollars establishing brand names or trademarks to symbolize quality and design only to be counterfeited and pirated Piracy and counterfeiting leads to lost sales from the unauthorized use of U.S. patents, trademarks, and copyrights which amount to about $60 billion annually as well as lost jobs Counterfeited pharmaceutical drugs can also lead death and bad publicity 7-‹#› Counterfeit products such as Rolex watches are very common in many countries, China and India being top on the list. Pirated music CDs, movies and books are some of the products commonly counterfeited. In the country of Turkey for example, there are stores that officially call themselves “Genuinely Fake” and sell counterfeit products. Piracy and counterfeiting causes losses in sales and profits for companies. However, some companies take a different approach; Microsoft’s Bill Gates states that he would rather have the Chinese copy MS products, because some day technology will force them to purchase some of the products and if one is familiar with MS, that’s the
product consumers will choose to purchase. 19 Intellectual Property Rights: Inadequate Protection There is inadequate protection from products being counterfeited or pirated as many countries do not recognize trademarks and patents registered in other countries 7-‹#› Not only is there inadequate protection for trademarks or brands, others in the country can register and have rights to a brand like McDonald’s or Coach and there is no legal protection. However, it is better today when companies are refusing to pay billions of dollars to get their trademark back from squatters, they give it up as there is no benefit to them. 20 In the United States, a common-law country, ownership of intellectual property rights is established by prior use In many code-law countries, ownership is established by registration rather than by prior use For example, a trademark in Jordan belongs to whoever registers it first in Jordan so there are “McDonald’s” restaurants, “Microsoft” software, and “Safeway” groceries all legally belonging to a Jordanian Intellectual Property Rights: Prior Use vs. Registration 7-‹#›
As mentioned in the previous slide, in code law countries, individuals can register a trademark (however famous the brand is) and sit ion it and demand payment from the multinational company to release the trademark. A case in point is Starbucks Coffee when it first entered Japan, all of it’s Seattle theme, logo, colors and men u items were registered by Morinara Coffee. Starbucks fought its battles in court but to no avail and therefore had to change it’s usual menu, colors and most everything in order not to violate Morinara’s registered trademark! 21 International Conventions Many countries participate in international conventions designed for mutual recognition and protection of intellectual property rights The three major international conventions include: The Paris Convention for the Protection of Industrial Property, commonly referred to as the Paris Convention, includes the United States and 100 other countries The Inter-American Convention includes most of the Latin American nations and the United States. The Madrid Arrangement, which established the Bureau for International Registration of Trademarks, includes 26 European countries. 7-‹#› The World Intellectual Property Organization (WIPO) of the United Nations is promotes the protection of intellectual property and for the administration of the various multilateral treaties through cooperation among its member states. The Patent Cooperation Treaty (PCT) facilitates the patent
application process among its member countries. The European Patent Convention (EPC) has a regional patent system that allows any nationality to file a single international application for a European patent. The side agreement of the WTO called TRIPS (Trade Related Aspects of Intellectual Property Rights) is one of the most comprehensive treaties that details intellectual property right protection in member nations. 22 Other Managerial Approaches The traditional, but weak remedies for American companies operating in countries such as China are several prevention, that is, engage local representation and diligently register IP with the appropriate agencies pursue negotiation and alternative dispute resolution complain to the Chinese authorities complain to the U.S. government and World Trade Organization (WTO). Multinational companies such as Microsoft, Philips and warner Brothers are coming up with other alternative approaches based on the factors that motivate consumers to engage in piracy 7-‹#› Microsoft: If they steal I want them to steal my product philosophy that paid off when Bill Gates legally signed a deal with Lenovo in 2006 for all Lenovo computers to come with MS products. Philips: Engages in an open innovation policy Warner Brothers: Engages in “charge what the market will bear” policy It seemed to work for all three of these companies.
23 Cyberlaw: Unresolved Issues 7-24 Existing internet law is vague or does not completely cover such issues as the protection of domain names, taxes, jurisdiction in cross-border transactions, and contractual issues ` The European Union, the U.S. and many other countries are drafting legislation to address the myriad legal questions not clearly addressed by current law Laws being considered deal with Cybersquatters—those who buy and register descriptive nouns, geographic names, ethnic groups, pharmaceutical substances and other similar descriptors and hold them until they are sold at an inflated price No other issue in e-commerce concerns the collection of taxes on sale of products, i.e., when taxes should be collected, where they should be collected, and by whom, are all issues under consideration by countries around the world
Cybersquatting The practice of registering a domain name that is the trademark of another person or company Cybersquatters hope that the owner of the trademark will pay huge dollar amounts to acquire the URL Some Cybersquatters misrepresent themselves as the trademark owner for fraudulent purposes Microsoft.pt, Yahoo.pt, Altavista.pt, Shop.pt, Shopping.pt! 7-‹#› Cybersquatters register a well-known brand or trademark that misdirects a person to the CSQ’s site or to a competing company’s site. They also register the domain names of famous companies such as Microsoft in Portugal hoping to extort money from the multinational company. In the case of Microsoft in Portugal, Microsoft decided to register a new name Microsoft1.pt and informed all its customers that this was the company’s actual site and the CSQ gave up the domain. 25 Taxes A typical tax system relies on knowing where a particular economic activity is located But the Internet enables individual workers to operate in many different countries from a computer When taxes should be collected, where they should be collected, and by whom are all issues under consideration by countries
around the world. 7-‹#› In the past, a company was deemed to have a taxable presence in a country if it had a permanent establishment there. But whether the existence of a server or a website qualifies as such a presence is not clear. One proposal that has enthusiastic support from tax authorities is for servers to be designated as “virtual permanent establishments” and thus subject to local taxes. On another note, the U.S. government is trying to impose a tax on consumers for all internet purchases. For example, if a consumer that lives in a State that has Sales Tax, but shops online from a state with no Sales Tax, the appropriate taxes would be levied on the citizens come the end of the calendar year. 26 Jurisdiction of Disputes and Validity of Contracts Since existing laws relating to commerce do not always clearly address the uniqueness of the Internet, a body of cyberlaw is being created. Two of the most troubling areas are: determining whose laws will prevail in legal disputes between parties located in different countries establishing the contractual validity of electronic communications 7-‹#›
Cyber business makes it difficult to enforce anything in case a dispute arises. A body of law is being compiled based on experiences and past practices. 27 Commercial Law within Countries: Marketing Laws When doing business in more than one country, a firm must comply with different marketing laws All countries have laws regulating marketing activities in promotion, product development, labeling, pricing, and distribution channels In Austria, premium offers, free gifts, or coupons are considered as cash discounts and are prohibited Premium offers in Finland are allowed as long as the word free is not used French law permits sales only twice a year, in January and August 7-‹#› Each country has its own marketing laws that the international marketer needs to comply with and be aware of. One of the most common regulation in advertising is a ban on comparative advertising. 28 Patent Law USA Operates under “first to invent” rule Protects individual inventors
Patent applications secret Patents granted in up to 24 months Patents valid for 17 years from application date issued Japan Operates under “first to register” rule Promotes technology sharing Patent applications public Patents granted in 4 to 6 years Patents valid 20 years from application date issued 7-29 U.S. Laws Apply in Host Countries Leaving the boundaries of a home country does not exempt a business from home-country laws What is illegal for an American business at home can also be -illegal by U.S. law in foreign jurisdictions for the firm, its subsidiaries, and licensees of U.S. technology 7-‹#› U.S. companies operating overseas are still bound by U.S. Law, particularly the three specified in the following slide. 30 U.S. Laws Apply in Host Countries 7-31
(1) Foreign Corrupt Practices Act (FCPA) Makes it illegal for companies to pay bribes to foreign officials, candidates, or political parties U.S. firms, their foreign subsidiaries, or foreign firms that are licensees of U.S. technology cannot sell a product to a country which could affect national security of the U.S. (2) National Security Laws The control of the sale of goods that have a strategic and military value was prohibited to communist countries that were viewed as major threats to U.S. security (3) Antitrust Laws Protects American consumers from actions that restricts competition Protects American export and investment opportunities against any privately imposed restrictions to compete on merit Stiff penalties can be assessed against company officials found guilty of paying a bribe
The END. The Political Environment: A Critical Concern Chapter 6 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Sovereignty of Nations A sovereign state is independent and free from all external control enjoys full legal equality with other states governs its own territory selects its own political, economic, and social systems and has the power to enter into agreements with other nations.
Sovereignty refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members 6-‹#› A citizen is subject to the state’s laws even outside the country’s borders. Nations can and do abridge specific aspects of their sovereign rights to coexist with other nations. The European Union and NAFTA are examples of agreements between nations to give up their sovereignty for free trade and other common benefits. Some countries view the WTO as a threat to sovereignty, the fear of relinquishing their nation’s rights for a common goal that might not benefit them or be detrimental to their goals. Foreign investment is also viewed as a threat to sovereignty, for example it took many years after the NAFTA was passed for the Mexican government to allow foreign companies to invest in the energy and banking sectors which were government controlled monopolies until then. 2 Stability of Government Policies Radical shifts in government philosophy can occur when: An opposing political party ascends to power Pressure from nationalist and self-interest groups Weakened economic conditions Bias against foreign investment or conflicts between governments 6-‹#›
For foreign firms, the ideal situation is a stable government in the country they are operating in. Unfortunately, this is not always the case. A change in government, whether by election or coup, does not always mean a change in the level of political risk. Conversely, radical changes in policies toward foreign business can occur in the most stable governments as well (Coke in India is an example). The political changes in Mexico in 2000, a change after many years of the PRI party to the PAN party helped open up the Mexican market to foreign investment and a more liberal government trade policy. The newly elected President of Mexico in 2012, Enrique Peña Nieto is planning a major upgrade of the 1994 U.S.-Canada-Mexico free trade deal, that is, he wants NAFTA to expand just beyond the current three country deal if this region is to compete effectively with China and its neighboring countries. He is also proposing greater collaboration with the United States. 3 Instability of Governments and Policies: Political Reasons Some forms of government seem to be inherently unstable Changes in political parties during elections can have major effects on trade conditions Nationalism Animosity targeted toward specific countries Trade disputes 6-‹#› Instability can be caused for various reasons, some governments are inherently unstable. An example would be where there are too many political parties that a coalition government has to be formed and is weak and therefore can be ousted by opposition
parties. India and Italy are prime examples of coalition governments that have been unstable. When Lucent Technologies sold cellular phones for the first time in India many years ago, they had a huge sale of cell phones that resulted in millions of dollars. However, within six months of this, the Indian government changed and the new political party in power imposed a special tax on all cell phone owners, and this resulted in many giving up their cell phones. The current government in India has a liberal policy on cell phones and therefore there is once again a large penetration of cell phones in the country at all economic and social class levels. Being very nationalistic can be a reason for instability as well as having historical feelings of dislike towards certain countries can lead to specific policies. And, as described at the beginning of the chapter, trade disputes such as the banana wars can lead to specific policies as well. 4 Forms of Government Democracy or market directed government ideology Communist governments Theocratic Republic Islamic Law countries where political parties can exist but have little power The religious leader controls government and all governmental decisions 6-‹#› The form of government greatly dictates the extent of government interference in business activities. Most governments in the world are democracies that allow participation of the country’s citizens in electing their leaders.
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx
Culture, Management Style, and Business SystemsChapter 5.docx

Recommended

Cultural systems
Cultural systemsCultural systems
Cultural systemskunal kumar
 
culturebusinesssystems-120422012158-phpapp01.pdf
culturebusinesssystems-120422012158-phpapp01.pdfculturebusinesssystems-120422012158-phpapp01.pdf
culturebusinesssystems-120422012158-phpapp01.pdfRienarahRhyjinChaizu
 
Ch3 boveec3
Ch3 boveec3Ch3 boveec3
Ch3 boveec3jyc0287
 
Tugas MS Bab 11 - Lusiyanti
Tugas MS Bab 11 - LusiyantiTugas MS Bab 11 - Lusiyanti
Tugas MS Bab 11 - LusiyantiTheresia Lusiyanti
 
Chapter 5 PowerPoint
Chapter 5 PowerPoint Chapter 5 PowerPoint
Chapter 5 PowerPoint rogergomes14
 
International marketing 1
International marketing 1International marketing 1
International marketing 1Swarit Yadav
 
imternational marketing
imternational marketingimternational marketing
imternational marketingmukulshuvo41
 
Chapter 3 culture management style and business systems
Chapter 3 culture management style and business systemsChapter 3 culture management style and business systems
Chapter 3 culture management style and business systemsDr. John V. Padua
 

Recommended

Cultural systems
Cultural systemsCultural systems
Cultural systemskunal kumar
 
culturebusinesssystems-120422012158-phpapp01.pdf
culturebusinesssystems-120422012158-phpapp01.pdfculturebusinesssystems-120422012158-phpapp01.pdf
culturebusinesssystems-120422012158-phpapp01.pdfRienarahRhyjinChaizu
 
Ch3 boveec3
Ch3 boveec3Ch3 boveec3
Ch3 boveec3jyc0287
 
Tugas MS Bab 11 - Lusiyanti
Tugas MS Bab 11 - LusiyantiTugas MS Bab 11 - Lusiyanti
Tugas MS Bab 11 - LusiyantiTheresia Lusiyanti
 
Chapter 5 PowerPoint
Chapter 5 PowerPoint Chapter 5 PowerPoint
Chapter 5 PowerPoint rogergomes14
 
International marketing 1
International marketing 1International marketing 1
International marketing 1Swarit Yadav
 
imternational marketing
imternational marketingimternational marketing
imternational marketingmukulshuvo41
 
Chapter 3 culture management style and business systems
Chapter 3 culture management style and business systemsChapter 3 culture management style and business systems
Chapter 3 culture management style and business systemsDr. John V. Padua
 
HPRINMGMT Lesson 2
HPRINMGMT Lesson 2HPRINMGMT Lesson 2
HPRINMGMT Lesson 2Mervyn Maico Aldana
 
cultural in international marketing
cultural in international marketing cultural in international marketing
cultural in international marketing Phong Đá
 
290 Slides.pptx
290 Slides.pptx290 Slides.pptx
290 Slides.pptxSakura708682
 
2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docx
2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docx2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docx
2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docxeugeniadean34240
 
Cultural dimension & Business environment of USA
Cultural dimension & Business environment of USACultural dimension & Business environment of USA
Cultural dimension & Business environment of USAMD. SAJJADUL KARIM BHUIYAN
 
culture issues
culture issuesculture issues
culture issuesmieyla101
 
M&A Culture Factor Indian Context
M&A Culture Factor Indian ContextM&A Culture Factor Indian Context
M&A Culture Factor Indian ContextSumit Singh
 
Week11 presentation The China Syndrome
Week11 presentation The China SyndromeWeek11 presentation The China Syndrome
Week11 presentation The China Syndromemdorazio
 
Culture, Management Style, and Business Systems
Culture, Management Style, and Business SystemsCulture, Management Style, and Business Systems
Culture, Management Style, and Business SystemsSavaş Şakar
 
Business Ethics-in a Global ContextTopics.docx
Business Ethics-in a Global ContextTopics.docxBusiness Ethics-in a Global ContextTopics.docx
Business Ethics-in a Global ContextTopics.docxhumphrieskalyn
 
Top 10 Problems Faced by International MarketingInternational ma.docx
Top 10 Problems Faced by International MarketingInternational ma.docxTop 10 Problems Faced by International MarketingInternational ma.docx
Top 10 Problems Faced by International MarketingInternational ma.docxjuliennehar
 
4Political and Regulatory ClimateLearning .docx
4Political and Regulatory ClimateLearning .docx4Political and Regulatory ClimateLearning .docx
4Political and Regulatory ClimateLearning .docxgilbertkpeters11344
 
CH 5 MANAGING ACROSS CULTURES
CH 5 MANAGING ACROSS CULTURES CH 5 MANAGING ACROSS CULTURES
CH 5 MANAGING ACROSS CULTURES Shadina Shah
 
403 ib International Business Environment model Q&A
403 ib International Business Environment model Q&A403 ib International Business Environment model Q&A
403 ib International Business Environment model Q&AASM's IBMR- Chinchwad
 
Ethical issues management
Ethical issues managementEthical issues management
Ethical issues managementCarol Ewican
 
Socio cultural factors affecting global marketing
Socio cultural factors affecting global marketingSocio cultural factors affecting global marketing
Socio cultural factors affecting global marketingMatthew Balie
 
Culture and Diveristy in Business.ppt
Culture and Diveristy in Business.pptCulture and Diveristy in Business.ppt
Culture and Diveristy in Business.pptGelmelinaLeaLepitenH
 
Countries as brands
Countries as brandsCountries as brands
Countries as brandsMarcus Leaning
 
Global Campaign Strategy and Development
Global Campaign Strategy and DevelopmentGlobal Campaign Strategy and Development
Global Campaign Strategy and DevelopmentSimon Hjorth
 
SUMMARY OF 5 SEMINARS
SUMMARY OF 5 SEMINARSSUMMARY OF 5 SEMINARS
SUMMARY OF 5 SEMINARSmirabell Neh Suh
 
Assignment DetailsScenario You are member of a prisoner revie.docx
Assignment DetailsScenario You are member of a prisoner revie.docxAssignment DetailsScenario You are member of a prisoner revie.docx
Assignment DetailsScenario You are member of a prisoner revie.docxfaithxdunce63732
 
Assignment DetailsScenario You are an investigator for Child .docx
Assignment DetailsScenario You are an investigator for Child .docxAssignment DetailsScenario You are an investigator for Child .docx
Assignment DetailsScenario You are an investigator for Child .docxfaithxdunce63732
 

More Related Content

Similar to Culture, Management Style, and Business SystemsChapter 5.docx

cultural in international marketing
cultural in international marketing cultural in international marketing
cultural in international marketing Phong Đá
 
2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docx
2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docx2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docx
2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docxeugeniadean34240
 
Cultural dimension & Business environment of USA
Cultural dimension & Business environment of USACultural dimension & Business environment of USA
Cultural dimension & Business environment of USAMD. SAJJADUL KARIM BHUIYAN
 
culture issues
culture issuesculture issues
culture issuesmieyla101
 
M&A Culture Factor Indian Context
M&A Culture Factor Indian ContextM&A Culture Factor Indian Context
M&A Culture Factor Indian ContextSumit Singh
 
Week11 presentation The China Syndrome
Week11 presentation The China SyndromeWeek11 presentation The China Syndrome
Week11 presentation The China Syndromemdorazio
 
Culture, Management Style, and Business Systems
Culture, Management Style, and Business SystemsCulture, Management Style, and Business Systems
Culture, Management Style, and Business SystemsSavaş Şakar
 
Business Ethics-in a Global ContextTopics.docx
Business Ethics-in a Global ContextTopics.docxBusiness Ethics-in a Global ContextTopics.docx
Business Ethics-in a Global ContextTopics.docxhumphrieskalyn
 
Top 10 Problems Faced by International MarketingInternational ma.docx
Top 10 Problems Faced by International MarketingInternational ma.docxTop 10 Problems Faced by International MarketingInternational ma.docx
Top 10 Problems Faced by International MarketingInternational ma.docxjuliennehar
 
4Political and Regulatory ClimateLearning .docx
4Political and Regulatory ClimateLearning .docx4Political and Regulatory ClimateLearning .docx
4Political and Regulatory ClimateLearning .docxgilbertkpeters11344
 
CH 5 MANAGING ACROSS CULTURES
CH 5 MANAGING ACROSS CULTURES CH 5 MANAGING ACROSS CULTURES
CH 5 MANAGING ACROSS CULTURES Shadina Shah
 
403 ib International Business Environment model Q&A
403 ib International Business Environment model Q&A403 ib International Business Environment model Q&A
403 ib International Business Environment model Q&AASM's IBMR- Chinchwad
 
Ethical issues management
Ethical issues managementEthical issues management
Ethical issues managementCarol Ewican
 
Socio cultural factors affecting global marketing
Socio cultural factors affecting global marketingSocio cultural factors affecting global marketing
Socio cultural factors affecting global marketingMatthew Balie
 
Culture and Diveristy in Business.ppt
Culture and Diveristy in Business.pptCulture and Diveristy in Business.ppt
Culture and Diveristy in Business.pptGelmelinaLeaLepitenH
 
Global Campaign Strategy and Development
Global Campaign Strategy and DevelopmentGlobal Campaign Strategy and Development
Global Campaign Strategy and DevelopmentSimon Hjorth
 

Similar to Culture, Management Style, and Business SystemsChapter 5.docx (20)

HPRINMGMT Lesson 2
HPRINMGMT Lesson 2HPRINMGMT Lesson 2
HPRINMGMT Lesson 2
 
cultural in international marketing
cultural in international marketing cultural in international marketing
cultural in international marketing
 
290 Slides.pptx
290 Slides.pptx290 Slides.pptx
290 Slides.pptx
 
2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docx
2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docx2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docx
2 Cross-Cultural BusinessLearning ObjectivesHelsinki, Finland—.docx
 
Cultural dimension & Business environment of USA
Cultural dimension & Business environment of USACultural dimension & Business environment of USA
Cultural dimension & Business environment of USA
 
culture issues
culture issuesculture issues
culture issues
 
M&A Culture Factor Indian Context
M&A Culture Factor Indian ContextM&A Culture Factor Indian Context
M&A Culture Factor Indian Context
 
Week11 presentation The China Syndrome
Week11 presentation The China SyndromeWeek11 presentation The China Syndrome
Week11 presentation The China Syndrome
 
Culture, Management Style, and Business Systems
Culture, Management Style, and Business SystemsCulture, Management Style, and Business Systems
Culture, Management Style, and Business Systems
 
Business Ethics-in a Global ContextTopics.docx
Business Ethics-in a Global ContextTopics.docxBusiness Ethics-in a Global ContextTopics.docx
Business Ethics-in a Global ContextTopics.docx
 
Top 10 Problems Faced by International MarketingInternational ma.docx
Top 10 Problems Faced by International MarketingInternational ma.docxTop 10 Problems Faced by International MarketingInternational ma.docx
Top 10 Problems Faced by International MarketingInternational ma.docx
 
4Political and Regulatory ClimateLearning .docx
4Political and Regulatory ClimateLearning .docx4Political and Regulatory ClimateLearning .docx
4Political and Regulatory ClimateLearning .docx
 
CH 5 MANAGING ACROSS CULTURES
CH 5 MANAGING ACROSS CULTURES CH 5 MANAGING ACROSS CULTURES
CH 5 MANAGING ACROSS CULTURES
 
403 ib International Business Environment model Q&A
403 ib International Business Environment model Q&A403 ib International Business Environment model Q&A
403 ib International Business Environment model Q&A
 
Ethical issues management
Ethical issues managementEthical issues management
Ethical issues management
 
Socio cultural factors affecting global marketing
Socio cultural factors affecting global marketingSocio cultural factors affecting global marketing
Socio cultural factors affecting global marketing
 
Culture and Diveristy in Business.ppt
Culture and Diveristy in Business.pptCulture and Diveristy in Business.ppt
Culture and Diveristy in Business.ppt
 
Countries as brands
Countries as brandsCountries as brands
Countries as brands
 
Global Campaign Strategy and Development
Global Campaign Strategy and DevelopmentGlobal Campaign Strategy and Development
Global Campaign Strategy and Development
 
SUMMARY OF 5 SEMINARS
SUMMARY OF 5 SEMINARSSUMMARY OF 5 SEMINARS
SUMMARY OF 5 SEMINARS
 

More from faithxdunce63732

Assignment DetailsScenario You are member of a prisoner revie.docx
Assignment DetailsScenario You are member of a prisoner revie.docxAssignment DetailsScenario You are member of a prisoner revie.docx
Assignment DetailsScenario You are member of a prisoner revie.docxfaithxdunce63732
 
Assignment DetailsScenario You are an investigator for Child .docx
Assignment DetailsScenario You are an investigator for Child .docxAssignment DetailsScenario You are an investigator for Child .docx
Assignment DetailsScenario You are an investigator for Child .docxfaithxdunce63732
 
Assignment DetailsScenario You are a new patrol officer in a .docx
Assignment DetailsScenario You are a new patrol officer in a .docxAssignment DetailsScenario You are a new patrol officer in a .docx
Assignment DetailsScenario You are a new patrol officer in a .docxfaithxdunce63732
 
Assignment DetailsScenario Generally, we have considered sexual.docx
Assignment DetailsScenario Generally, we have considered sexual.docxAssignment DetailsScenario Generally, we have considered sexual.docx
Assignment DetailsScenario Generally, we have considered sexual.docxfaithxdunce63732
 
Assignment DetailsPower’s on, Power’s Off!How convenient is.docx
Assignment DetailsPower’s on, Power’s Off!How convenient is.docxAssignment DetailsPower’s on, Power’s Off!How convenient is.docx
Assignment DetailsPower’s on, Power’s Off!How convenient is.docxfaithxdunce63732
 
Assignment DetailsIn 1908, playwright Israel Zangwill referred to .docx
Assignment DetailsIn 1908, playwright Israel Zangwill referred to .docxAssignment DetailsIn 1908, playwright Israel Zangwill referred to .docx
Assignment DetailsIn 1908, playwright Israel Zangwill referred to .docxfaithxdunce63732
 
Assignment DetailsPart IRespond to the following.docx
Assignment DetailsPart IRespond to the following.docxAssignment DetailsPart IRespond to the following.docx
Assignment DetailsPart IRespond to the following.docxfaithxdunce63732
 
Assignment DetailsPlease discuss the following in your main post.docx
Assignment DetailsPlease discuss the following in your main post.docxAssignment DetailsPlease discuss the following in your main post.docx
Assignment DetailsPlease discuss the following in your main post.docxfaithxdunce63732
 
Assignment DetailsPennsylvania was the leader in sentencing and .docx
Assignment DetailsPennsylvania was the leader in sentencing and .docxAssignment DetailsPennsylvania was the leader in sentencing and .docx
Assignment DetailsPennsylvania was the leader in sentencing and .docxfaithxdunce63732
 
Assignment DetailsPart IRespond to the followingReview .docx
Assignment DetailsPart IRespond to the followingReview .docxAssignment DetailsPart IRespond to the followingReview .docx
Assignment DetailsPart IRespond to the followingReview .docxfaithxdunce63732
 
Assignment DetailsPart IRespond to the following questio.docx
Assignment DetailsPart IRespond to the following questio.docxAssignment DetailsPart IRespond to the following questio.docx
Assignment DetailsPart IRespond to the following questio.docxfaithxdunce63732
 
Assignment DetailsPart IRespond to the following questions.docx
Assignment DetailsPart IRespond to the following questions.docxAssignment DetailsPart IRespond to the following questions.docx
Assignment DetailsPart IRespond to the following questions.docxfaithxdunce63732
 
Assignment DetailsOne thing that unites all humans—despite cultu.docx
Assignment DetailsOne thing that unites all humans—despite cultu.docxAssignment DetailsOne thing that unites all humans—despite cultu.docx
Assignment DetailsOne thing that unites all humans—despite cultu.docxfaithxdunce63732
 
Assignment DetailsMN551Develop cooperative relationships with.docx
Assignment DetailsMN551Develop cooperative relationships with.docxAssignment DetailsMN551Develop cooperative relationships with.docx
Assignment DetailsMN551Develop cooperative relationships with.docxfaithxdunce63732
 
Assignment DetailsInfluence ProcessesYou have been encourag.docx
Assignment DetailsInfluence ProcessesYou have been encourag.docxAssignment DetailsInfluence ProcessesYou have been encourag.docx
Assignment DetailsInfluence ProcessesYou have been encourag.docxfaithxdunce63732
 
Assignment DetailsIn this assignment, you will identify and .docx
Assignment DetailsIn this assignment, you will identify and .docxAssignment DetailsIn this assignment, you will identify and .docx
Assignment DetailsIn this assignment, you will identify and .docxfaithxdunce63732
 
Assignment DetailsFinancial statements are the primary means of .docx
Assignment DetailsFinancial statements are the primary means of .docxAssignment DetailsFinancial statements are the primary means of .docx
Assignment DetailsFinancial statements are the primary means of .docxfaithxdunce63732
 
Assignment DetailsIn this assignment, you will identify a pr.docx
Assignment DetailsIn this assignment, you will identify a pr.docxAssignment DetailsIn this assignment, you will identify a pr.docx
Assignment DetailsIn this assignment, you will identify a pr.docxfaithxdunce63732
 
Assignment DetailsHealth information technology (health IT) .docx
Assignment DetailsHealth information technology (health IT) .docxAssignment DetailsHealth information technology (health IT) .docx
Assignment DetailsHealth information technology (health IT) .docxfaithxdunce63732
 
Assignment DetailsDiscuss the followingWhat were some of .docx
Assignment DetailsDiscuss the followingWhat were some of .docxAssignment DetailsDiscuss the followingWhat were some of .docx
Assignment DetailsDiscuss the followingWhat were some of .docxfaithxdunce63732
 

More from faithxdunce63732 (20)

Assignment DetailsScenario You are member of a prisoner revie.docx
Assignment DetailsScenario You are member of a prisoner revie.docxAssignment DetailsScenario You are member of a prisoner revie.docx
Assignment DetailsScenario You are member of a prisoner revie.docx
 
Assignment DetailsScenario You are an investigator for Child .docx
Assignment DetailsScenario You are an investigator for Child .docxAssignment DetailsScenario You are an investigator for Child .docx
Assignment DetailsScenario You are an investigator for Child .docx
 
Assignment DetailsScenario You are a new patrol officer in a .docx
Assignment DetailsScenario You are a new patrol officer in a .docxAssignment DetailsScenario You are a new patrol officer in a .docx
Assignment DetailsScenario You are a new patrol officer in a .docx
 
Assignment DetailsScenario Generally, we have considered sexual.docx
Assignment DetailsScenario Generally, we have considered sexual.docxAssignment DetailsScenario Generally, we have considered sexual.docx
Assignment DetailsScenario Generally, we have considered sexual.docx
 
Assignment DetailsPower’s on, Power’s Off!How convenient is.docx
Assignment DetailsPower’s on, Power’s Off!How convenient is.docxAssignment DetailsPower’s on, Power’s Off!How convenient is.docx
Assignment DetailsPower’s on, Power’s Off!How convenient is.docx
 
Assignment DetailsIn 1908, playwright Israel Zangwill referred to .docx
Assignment DetailsIn 1908, playwright Israel Zangwill referred to .docxAssignment DetailsIn 1908, playwright Israel Zangwill referred to .docx
Assignment DetailsIn 1908, playwright Israel Zangwill referred to .docx
 
Assignment DetailsPart IRespond to the following.docx
Assignment DetailsPart IRespond to the following.docxAssignment DetailsPart IRespond to the following.docx
Assignment DetailsPart IRespond to the following.docx
 
Assignment DetailsPlease discuss the following in your main post.docx
Assignment DetailsPlease discuss the following in your main post.docxAssignment DetailsPlease discuss the following in your main post.docx
Assignment DetailsPlease discuss the following in your main post.docx
 
Assignment DetailsPennsylvania was the leader in sentencing and .docx
Assignment DetailsPennsylvania was the leader in sentencing and .docxAssignment DetailsPennsylvania was the leader in sentencing and .docx
Assignment DetailsPennsylvania was the leader in sentencing and .docx
 
Assignment DetailsPart IRespond to the followingReview .docx
Assignment DetailsPart IRespond to the followingReview .docxAssignment DetailsPart IRespond to the followingReview .docx
Assignment DetailsPart IRespond to the followingReview .docx
 
Assignment DetailsPart IRespond to the following questio.docx
Assignment DetailsPart IRespond to the following questio.docxAssignment DetailsPart IRespond to the following questio.docx
Assignment DetailsPart IRespond to the following questio.docx
 
Assignment DetailsPart IRespond to the following questions.docx
Assignment DetailsPart IRespond to the following questions.docxAssignment DetailsPart IRespond to the following questions.docx
Assignment DetailsPart IRespond to the following questions.docx
 
Assignment DetailsOne thing that unites all humans—despite cultu.docx
Assignment DetailsOne thing that unites all humans—despite cultu.docxAssignment DetailsOne thing that unites all humans—despite cultu.docx
Assignment DetailsOne thing that unites all humans—despite cultu.docx
 
Assignment DetailsMN551Develop cooperative relationships with.docx
Assignment DetailsMN551Develop cooperative relationships with.docxAssignment DetailsMN551Develop cooperative relationships with.docx
Assignment DetailsMN551Develop cooperative relationships with.docx
 
Assignment DetailsInfluence ProcessesYou have been encourag.docx
Assignment DetailsInfluence ProcessesYou have been encourag.docxAssignment DetailsInfluence ProcessesYou have been encourag.docx
Assignment DetailsInfluence ProcessesYou have been encourag.docx
 
Assignment DetailsIn this assignment, you will identify and .docx
Assignment DetailsIn this assignment, you will identify and .docxAssignment DetailsIn this assignment, you will identify and .docx
Assignment DetailsIn this assignment, you will identify and .docx
 
Assignment DetailsFinancial statements are the primary means of .docx
Assignment DetailsFinancial statements are the primary means of .docxAssignment DetailsFinancial statements are the primary means of .docx
Assignment DetailsFinancial statements are the primary means of .docx
 
Assignment DetailsIn this assignment, you will identify a pr.docx
Assignment DetailsIn this assignment, you will identify a pr.docxAssignment DetailsIn this assignment, you will identify a pr.docx
Assignment DetailsIn this assignment, you will identify a pr.docx
 
Assignment DetailsHealth information technology (health IT) .docx
Assignment DetailsHealth information technology (health IT) .docxAssignment DetailsHealth information technology (health IT) .docx
Assignment DetailsHealth information technology (health IT) .docx
 
Assignment DetailsDiscuss the followingWhat were some of .docx
Assignment DetailsDiscuss the followingWhat were some of .docxAssignment DetailsDiscuss the followingWhat were some of .docx
Assignment DetailsDiscuss the followingWhat were some of .docx
 

Recently uploaded

The basics of sentences session 3pptx.pptx
The basics of sentences session 3pptx.pptxThe basics of sentences session 3pptx.pptx
The basics of sentences session 3pptx.pptxheathfieldcps1
 
Unit 3 Emotional Intelligence and Spiritual Intelligence.pdf
Unit 3 Emotional Intelligence and Spiritual Intelligence.pdfUnit 3 Emotional Intelligence and Spiritual Intelligence.pdf
Unit 3 Emotional Intelligence and Spiritual Intelligence.pdfDr Vijay Vishwakarma
 
How to Manage Global Discount in Odoo 17 POS
How to Manage Global Discount in Odoo 17 POSHow to Manage Global Discount in Odoo 17 POS
How to Manage Global Discount in Odoo 17 POSCeline George
 
NO1 Top Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...
NO1 Top Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...NO1 Top Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...
NO1 Top Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...Amil baba
 
COMMUNICATING NEGATIVE NEWS - APPROACHES .pptx
COMMUNICATING NEGATIVE NEWS - APPROACHES .pptxCOMMUNICATING NEGATIVE NEWS - APPROACHES .pptx
COMMUNICATING NEGATIVE NEWS - APPROACHES .pptxannathomasp01
 
Basic Intentional Injuries Health Education
Basic Intentional Injuries Health EducationBasic Intentional Injuries Health Education
Basic Intentional Injuries Health EducationNeilDeclaro1
 
REMIFENTANIL: An Ultra short acting opioid.pptx
REMIFENTANIL: An Ultra short acting opioid.pptxREMIFENTANIL: An Ultra short acting opioid.pptx
REMIFENTANIL: An Ultra short acting opioid.pptxDr. Ravikiran H M Gowda
 
This PowerPoint helps students to consider the concept of infinity.
This PowerPoint helps students to consider the concept of infinity.This PowerPoint helps students to consider the concept of infinity.
This PowerPoint helps students to consider the concept of infinity.christianmathematics
 
Interdisciplinary_Insights_Data_Collection_Methods.pptx
Interdisciplinary_Insights_Data_Collection_Methods.pptxInterdisciplinary_Insights_Data_Collection_Methods.pptx
Interdisciplinary_Insights_Data_Collection_Methods.pptxPooja Bhuva
 
Google Gemini An AI Revolution in Education.pptx
Google Gemini An AI Revolution in Education.pptxGoogle Gemini An AI Revolution in Education.pptx
Google Gemini An AI Revolution in Education.pptxDr. Sarita Anand
 
HMCS Vancouver Pre-Deployment Brief - May 2024 (Web Version).pptx
HMCS Vancouver Pre-Deployment Brief - May 2024 (Web Version).pptxHMCS Vancouver Pre-Deployment Brief - May 2024 (Web Version).pptx
HMCS Vancouver Pre-Deployment Brief - May 2024 (Web Version).pptxmarlenawright1
 
How to Add New Custom Addons Path in Odoo 17
How to Add New Custom Addons Path in Odoo 17How to Add New Custom Addons Path in Odoo 17
How to Add New Custom Addons Path in Odoo 17Celine George
 
Graduate Outcomes Presentation Slides - English
Graduate Outcomes Presentation Slides - EnglishGraduate Outcomes Presentation Slides - English
Graduate Outcomes Presentation Slides - Englishneillewis46
 
Accessible Digital Futures project (20/03/2024)
Accessible Digital Futures project (20/03/2024)Accessible Digital Futures project (20/03/2024)
Accessible Digital Futures project (20/03/2024)Jisc
 
Fostering Friendships - Enhancing Social Bonds in the Classroom
Fostering Friendships - Enhancing Social Bonds in the ClassroomFostering Friendships - Enhancing Social Bonds in the Classroom
Fostering Friendships - Enhancing Social Bonds in the ClassroomPooky Knightsmith
 
Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...
Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...
Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...Pooja Bhuva
 
General Principles of Intellectual Property: Concepts of Intellectual Proper...
General Principles of Intellectual Property: Concepts of Intellectual Proper...General Principles of Intellectual Property: Concepts of Intellectual Proper...
General Principles of Intellectual Property: Concepts of Intellectual Proper...Poonam Aher Patil
 
Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...pradhanghanshyam7136
 
On_Translating_a_Tamil_Poem_by_A_K_Ramanujan.pptx
On_Translating_a_Tamil_Poem_by_A_K_Ramanujan.pptxOn_Translating_a_Tamil_Poem_by_A_K_Ramanujan.pptx
On_Translating_a_Tamil_Poem_by_A_K_Ramanujan.pptxPooja Bhuva
 

Recently uploaded (20)

The basics of sentences session 3pptx.pptx
The basics of sentences session 3pptx.pptxThe basics of sentences session 3pptx.pptx
The basics of sentences session 3pptx.pptx
 
Unit 3 Emotional Intelligence and Spiritual Intelligence.pdf
Unit 3 Emotional Intelligence and Spiritual Intelligence.pdfUnit 3 Emotional Intelligence and Spiritual Intelligence.pdf
Unit 3 Emotional Intelligence and Spiritual Intelligence.pdf
 
How to Manage Global Discount in Odoo 17 POS
How to Manage Global Discount in Odoo 17 POSHow to Manage Global Discount in Odoo 17 POS
How to Manage Global Discount in Odoo 17 POS
 
NO1 Top Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...
NO1 Top Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...NO1 Top Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...
NO1 Top Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...
 
COMMUNICATING NEGATIVE NEWS - APPROACHES .pptx
COMMUNICATING NEGATIVE NEWS - APPROACHES .pptxCOMMUNICATING NEGATIVE NEWS - APPROACHES .pptx
COMMUNICATING NEGATIVE NEWS - APPROACHES .pptx
 
Mehran University Newsletter Vol-X, Issue-I, 2024
Mehran University Newsletter Vol-X, Issue-I, 2024Mehran University Newsletter Vol-X, Issue-I, 2024
Mehran University Newsletter Vol-X, Issue-I, 2024
 
Basic Intentional Injuries Health Education
Basic Intentional Injuries Health EducationBasic Intentional Injuries Health Education
Basic Intentional Injuries Health Education
 
REMIFENTANIL: An Ultra short acting opioid.pptx
REMIFENTANIL: An Ultra short acting opioid.pptxREMIFENTANIL: An Ultra short acting opioid.pptx
REMIFENTANIL: An Ultra short acting opioid.pptx
 
This PowerPoint helps students to consider the concept of infinity.
This PowerPoint helps students to consider the concept of infinity.This PowerPoint helps students to consider the concept of infinity.
This PowerPoint helps students to consider the concept of infinity.
 
Interdisciplinary_Insights_Data_Collection_Methods.pptx
Interdisciplinary_Insights_Data_Collection_Methods.pptxInterdisciplinary_Insights_Data_Collection_Methods.pptx
Interdisciplinary_Insights_Data_Collection_Methods.pptx
 
Google Gemini An AI Revolution in Education.pptx
Google Gemini An AI Revolution in Education.pptxGoogle Gemini An AI Revolution in Education.pptx
Google Gemini An AI Revolution in Education.pptx
 
HMCS Vancouver Pre-Deployment Brief - May 2024 (Web Version).pptx
HMCS Vancouver Pre-Deployment Brief - May 2024 (Web Version).pptxHMCS Vancouver Pre-Deployment Brief - May 2024 (Web Version).pptx
HMCS Vancouver Pre-Deployment Brief - May 2024 (Web Version).pptx
 
How to Add New Custom Addons Path in Odoo 17
How to Add New Custom Addons Path in Odoo 17How to Add New Custom Addons Path in Odoo 17
How to Add New Custom Addons Path in Odoo 17
 
Graduate Outcomes Presentation Slides - English
Graduate Outcomes Presentation Slides - EnglishGraduate Outcomes Presentation Slides - English
Graduate Outcomes Presentation Slides - English
 
Accessible Digital Futures project (20/03/2024)
Accessible Digital Futures project (20/03/2024)Accessible Digital Futures project (20/03/2024)
Accessible Digital Futures project (20/03/2024)
 
Fostering Friendships - Enhancing Social Bonds in the Classroom
Fostering Friendships - Enhancing Social Bonds in the ClassroomFostering Friendships - Enhancing Social Bonds in the Classroom
Fostering Friendships - Enhancing Social Bonds in the Classroom
 
Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...
Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...
Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...
 
General Principles of Intellectual Property: Concepts of Intellectual Proper...
General Principles of Intellectual Property: Concepts of Intellectual Proper...General Principles of Intellectual Property: Concepts of Intellectual Proper...
General Principles of Intellectual Property: Concepts of Intellectual Proper...
 
Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
 
On_Translating_a_Tamil_Poem_by_A_K_Ramanujan.pptx
On_Translating_a_Tamil_Poem_by_A_K_Ramanujan.pptxOn_Translating_a_Tamil_Poem_by_A_K_Ramanujan.pptx
On_Translating_a_Tamil_Poem_by_A_K_Ramanujan.pptx
 

Culture, Management Style, and Business SystemsChapter 5.docx

  • 1. Culture, Management Style, and Business Systems Chapter 5 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives LO1 The necessity for adapting to cultural differences LO2 How and why management styles vary around the world LO3 The extent and implications of gender bias in other countries LO4 The importance of cultural differences in business ethics LO5 The differences between relationship-oriented and information-oriented cultures 5-‹#› Business Customs in Global Marketing Business etiquette is largely driven by cultural norms. Cultural analysis often pinpoints market opportunities, gives companies a competitive edge 5-‹#›
  • 2. What we learned in Chapter 4, particularly Hofstede’s cultural value dimensions are applicable to business customs and how business is conducted in various countries. For example, in high power distance countries, authority and hierarchy needs to be respected while conducting business. 3 Requires Adaptation Adaptation is a key concept in international marketing To successfully deal with individuals, firms, or authorities in foreign countries, managers should exhibit: open tolerance, flexibility, humility, justice/fairness, ability to adjust to varying tempos, curiosity/interest, knowledge of the country, liking for others, ability to command respect, and ability to integrate oneself into the environment 5-‹#› Unless marketers remain flexible by accepting differences in basic patterns of thinking, local business tempo, religious practices, political structure, and family loyalty, they are hampered, if not prevented, from reaching satisfactory conclusions to business transactions. 4 Cultural Imperatives, Electives and Exclusives
  • 3. Cultural imperatives: business customs and expectations that must be met, conformed, recognized and accommodated if relationships are to be successful Cultural electives: areas of behavior or to customs that cultural aliens may wish to conform to or participate in but that are not required 5-‹#› Cultural imperatives are “must do” things in another culture, such as meeting and greeting, exchange of business cards in Asian cultures (eg: China, Japan and Korea). Cultural electives are optional activities that a foreigner may or may not want to engage in, such as drinking aperitifs (strong alcoholic drinks) before lunch in the Czech Republic or coffee in Saudi Arabia, no offense is taken if one refuses to participate in these cultural customs. 5 BEIJING, CHINA: German Chancellor Angela Merkel and Chinese Prime Minister Wen Jiabao toast after the EU–China Business Summit at the Great Hall of the People in Beijing. The summit was boosted by the settlement of a trade row that had left 80 million Chinese-made garments piled up in European seaports, unable to be delivered to shops under a quota pact agreed to at the time. Drinking half a bottle is a cultural elective, but taking a sip is more of an imperative in this case. 5-6 Cultural Imperatives, Electives
  • 4. and Exclusives Cultural exclusives: customs or behavior patterns reserved exclusively for the locals and from which the foreigner is barred and must not participate 5-‹#› In general, politics and religion are taboo in conversations many cultures, particularly for foreigners. In Mexico, McDonalds used the national symbol of the Mexican Flag on paper placemats and insulted the people (as you treat anything with the national symbol with the utmost respect). These are cultural exclusives, things you never engage in or do when in another culture. 7 The Impact of American Culture Ways in which U.S. culture has influenced management style include, but are not limited to, the following: Personnel selection and reward based on merit Decisions based on objective analysis Wide sharing in decision making Never-ending quest for improvement Competition yielding efficiency 5-‹#› American culture is based on a few basic premises listed above, reward is based on merit and not group performance. Decisions are made objectively not subjectively, it is a competitive business environment where continuous improvement and to get
  • 5. better is the goal. 8 American Culture and Management Style There are at least three reasons to focus briefly on American culture and management style: for Americans, it is important to be aware of the elements of culture influencing decisions and behaviors. for those new to American culture, it is useful to better understand business associates from the States as the U.S. market is the biggest export market in the world since the late 1990s, American business culture has been exported around the world 5-‹#› For Americans, a self-awareness will help adapt to working with associates in other cultures. This knowledge will help everyone be more patient while conducting business across borders. Just as in the 1980s Japanese management practices were imitated almost everywhere. 9 Differences in Management Styles Around the World Authority and Decision Making In high-PDI countries subordinates are not likely to contradict bosses, but in low-PDI countries they often do Three typical patterns exist: top-level management decisions, decentralized decisions, and committee or group decisions Management Objectives and Aspirations
  • 6. Security and Mobility Personal Life Affiliation and Social Acceptance Power and Achievement 5-‹#› Differences in Management Styles Around the World Differences in Communication Styles Face to Face Communication Internet Communication According to Edward T. Hall, the symbolic meanings of time, space, things, friendships, and agreements, vary across cultures Hall places eleven cultures along a high-context/low-context continuum Communication in a high-context culture depends heavily on the contextual (who says it, when it is said, how it is said) or nonverbal aspects of communication Communication in a low-context culture depends more on explicit, verbally expressed communications 5-‹#› 5-12 This picture demonstrates office space in the U.S. and Japan, the U.S. is more individualistic, more space between cubicles and Japan more collectivistic. 12
  • 7. Differences in Management Styles Around the World Formality and Tempo Level of formality in addressing business clients by first name Level of formality in addressing your boss by first name Tempo or speed in getting “down to business” Perception of time varies in many cultures 5-‹#› Differences in Management Styles Around the World P-Time versus M-Time M-time, or monochronic time, typifies most North Americans, Swiss, Germans, and Scandinavians Most low-context cultures operate on M-time concentrating on one thing at a time P-time, or polychronic time, is more dominant in high-context cultures P-time is characterized by multi-tasking and by “a great involvement with people” 5-‹#› Differences in Management Styles Around the World Negotiations Emphasis Differences with respect to the product, its price and terms, services associated with the product, and finally, friendship between vendors and customers Market Orientation American companies are embracing the market orientation
  • 8. philosophy Other countries are still in the traditional production, product and selling orientations 5-‹#› Gender Bias in International Business The gender bias against women managers exists in some countries Women are not easily accepted in upper level management roles in Asia, Middle East, and Latin America (although this is changing) Gender bias poses significant challenges in cross-cultural negotiations 5-‹#› Gender bias is an issue in international negotiations. Women may not be easily accepted in certain cultures (eg: Middle East and Latin America). This poses challenges in cross-cultural negotiations. 16 5-17 5-18
  • 9. Percent of women executives in different countries. 18 Business Ethics Business ethics is complex in the international marketplace because value judgments differ widely among culturally diverse groups Corruption varyingly defined from culture to culture 5-‹#› Business Ethics Existence of different levels of corruption, bribery, and fraud The Foreign Corrupt Practices Act 1977: Imprisonment for bribery Bribery creates a major conflict between ethics and profitability 5-‹#› Bribery is a problem when conducting business cross-culturally. It is an illegal concept in the U.S and U.S. subsidiaries are not allowed to take bribes. The Foreign Corrupt Practices of 1977 applies to all U.S. companies. 20 Bribery: Variations on a Theme Bribery Voluntarily offered payment by someone seeking unlawful advantage Extortion Payments are extracted under duress by someone in authority
  • 10. from a person seeking only what they are lawfully entitled 5-‹#› 21 Bribery: Variations on a Theme Lubrication Involves a relatively small sum of cash, a gift, or a service given to a low-ranking official in a country where such offerings are not prohibited by law Subornation Involves giving large sums of money—-frequently not properly accounted for—designed to entice an official to commit an illegal act on behalf of the one offering the bribe; involves breaking the law 5-‹#› A Framework for Ethical Principles 5-‹#› (1) Utilitarian ethics Does the action optimize the “common good” or benefits of all constituencies? And, who are the pertinent constituencies?
  • 11. (2) Rights of the parties Does the action respect the rights of the individuals involved? (3) Justice or fairness Does the action respect the canons of justice or fairness to all parties involved? THE END 5-‹#› Cultural Dynamics in Assessing Global Markets Chapter 4
  • 12. McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives LO1 The importance of culture to an international marketer LO2 The origins of culture LO3 The elements of culture LO4 The impact of cultural borrowing LO5 The strategy of planned change and its consequences 4-‹#› Culture’s Pervasive Impact Culture influences every part of our lives Cultures impact on birth rates Birthrates have implications for sellers of diapers, toys, schools, and colleges 4-‹#› Culture is a very important part of international marketing, it affects us from the time we wake up in the morning till we go to bed and even while we sleep the products we use are impacted by culture. Culture impacts birthrates; eg: contraception is not permitted by religion in primarily strict Catholic or Muslim nations. Rich and developed countries are not adding to their population due to lifestyle, higher education levels as well as women in the workforce. This will be reflected in a decline in
  • 13. birthrates in the developed world. 3 Culture’s Pervasive Impact Consumption of different types of food influences culture Chocolate by Swiss, seafood by Japanese preference, beef by British, wines by France and Italy Even diseases are influenced by culture stomach cancer in Japan, and lung cancer in Spain 4-‹#› Different types of food are consumed in different cultures (Exhibit 4.2). In hot, tropical countries, spicy food is eaten as spices preserve the food even without refrigeration. The geography of the country also shapes food habits, the Japanese eat a lot of fish and seafood since that is the primary source of food for a country made up of tiny islands in the pacific ocean. The French are famous for wines and champagne because the weather and soil are conducive for grape farming. Diseases also follow food habits such as lung cancer in Spain due to excessive smoking, liver disease in Germany due to consumption of fatty foods (Exhibit 4.3). 4 Three Definitions of Culture Culture is the sum of the “values, rituals, symbols, beliefs, and thought processes that are learned, shared by a group of people, and transmitted from generation to generation” “software of the mind, problem-solving tool” (Hofstede) “An invisible barrier… a completely different way of organizing life, of thinking, and of conceiving the underlying assumptions about the family and the state, the economic system, and even Man himself” (Hall)
  • 14. 4-‹#› 5 4-6 We as humans and consumers are able to adapt to changing environments through innovation. Individuals can learn culture from social institutions through socialization (where one is raised and how) and acculturation (adjusting to a new culture). We also learn and adapt to a culture through role modeling, or imitation of peers. People also make decisions about consumption and production through application of their cultural-based knowledge. 6 Origins of Culture: Geography Geography, which includes climate, topography, flora, fauna, and microbiology, influences our social institutions Jared Diamond states that historically innovations spread faster east-to-west than north-to-south Philip Parker reports strong correlations between the latitude (climate) and the per capita GDP of countries 4-‹#› Geography includes more than just the weather and temperature,
  • 15. it is also what kind of plants and animals can be raised in the region and that influences society and consumption. According to Diamond, innovations spread faster from east to west. Before the advent of transoceanic shipping, ideas flowed over the Silk Road but not across the Sahara or the Isthmus of Panama. Parket advocates for a strong correlation between latitude and GDP, for example the GDP of Scandinavian countries are much higher than South American countries. 7 Origins of Culture: History The impact of specific events in history can be seen reflected in technology, social institutions, cultural values, and even consumer behavior The military conflicts in the Middle East in 2003 bred new cola brands, Mecca Cola, Muslim Up, and Arab Cola 4-‹#› See the cola pictures, Turkey has their own cola called “Cola Turkey,” a coca cola taste alike, but a local brand. Military conflicts in the Middle East bred these brands, because of an anti U.S. sentiment. 8 Origins of Culture: Technology Technological innovations influence cultural values Jet aircraft, air conditioning, televisions, computers, and the internet have all influenced culture
  • 16. 4-‹#› Every technological innovation has a profound impact on culture. For example, as we have moved from VHS tapes to DVDs to BluRay it has impacted our lifestyle, taking up less space and providing more convenience. The internet has changed the way we communicate and has made the world a smaller place. 9 Religious Value Systems School & Education Government Policies Social Institutions Family Behaviors Corporations Media 4-10 Social institutions including family, religion, school, the media, government, and corporations all culture, society and behavior. 10
  • 17. Origins of Culture: Social Institutions Social institutions including family, religion, school, the media, government, and corporations all affect culture The family, social classes, group behavior, age groups, and how societies define decency and civility are interpreted differently within every culture 4-‹#› Origins of Culture: Social Institutions Family behavior varies across the world, e.g., extended families living together to Dad washing dishes Religious value systems differ across the world, e.g., Muslims not allowed to eat pork to Hindus not allowed to consume beef School and education, and literacy rates affect culture and economic growth 4-‹#› Origins of Culture: Social Institutions Media (magazines, TV, the Internet) influences culture and behavior Government policies influence the thinking and behaviors citizens of adult citizens, e.g., the French government offers new “birth bonuses” of $800 given to women as an incentive to increase family size Corporations influence culture via the products they market, e.g., MTV
  • 18. 4-‹#› Rituals Thought Processes Beliefs Cultural Values Symbols Elements of Culture 4-14 Underlying the cultural diversity that exists among countries are fundamental differences in cultural values , that is, the importance of things and ideas. The most useful information on how cultural values influence various types of business and market behavior comes from the work of Dutch researcher Geert Hofstede. 14 Cultural Values Hofstede, who studied over 90,000 people in 66 countries, found that the cultures differed along four primary dimensions Individualism/Collective Index (IDV), which focuses on self- orientation Power Distance Index (PDI), which focuses on authority orientation Uncertainty Avoidance Index (UAI), which focuses on risk
  • 19. orientation; and Masculinity/Femininity Index (MAS), which focuses on assertiveness and achievement 4-‹#› The four 4 dimensions of culture proposed by Hofstede are described briefly above and in the following slides. Because MAS has proven least useful, our text does not consider it further. 15 Rituals and Symbols Rituals are patterns of behavior and interaction that are learned and repeated vary from country to country e.g., extended lunch hours in Spain and Greece Language as Symbols: the “languages” of time, space, things, friendships, and agreements 4-‹#› Rituals are important in every culture. How Easter is celebrated in the U.S. with the Easter Bunny’s visit and a traditional meal, is very different from how it is celebrated in Mexico, where it is tradition to visit the tombstones and pay homage to the dead. Wedding gowns are typically white in the West, but very colorful and bright in the country of India where the groom arrives on a horse with an entourage (refer to the movie Monsoon Wedding mentioned in the text). Symbols in a culture include language, both verbal and non-verbal and includes the perception of time, space and relationships. 16
  • 20. Rituals and Symbols In Canada, language has been the focus of political disputes Differences in language vocabulary varies widely, even English is different in different countries Aesthetics as Symbols the arts, folklore, music, drama, and dance of a culture influences marketing 4-‹#› In Canada, French versus English has been a point of contention between regions. Aesthetics includes a country’s music, art, folklore and drama. 17 Whose English? 4-18 United States Trunk Hood Convertible Top
  • 22. Exhibit 4.8 Metaphorical Journeys through 23 Nations Source: Martin J. Gannon, Understanding global Cultures, Metaphorical Journeys through 23 Nations, 2nd ed. Copright 2001. 4-19 Beliefs Beliefs, which mainly stem from religious training, vary from culture to culture The western aversion to the number 13 or refusing to walk under a ladder Japanese concern about Year of the Fire Horse The Chinese practice of Feng Shui in designing buildings 4-‹#› In Asian countries such as Japan and China the number 4 represents death and it is avoided at all costs, some building even skip the fourth floor and go from 3 to 5. Similar to the superstition about the number 13 in the West. Other examples of beliefs/superstitions are: not opening an umbrella in the house (Western) or not passing salt directly to a person (Eastern).
  • 23. 20 Thought Processes Thought processes also vary across cultures “Asian and Western” thinking Other examples? 4-‹#› Nisbett in his book discusses differences between Asian and Western thinking. Asians (although grouping all Asian countries into one category is not generally preferred) tend to see the big picture and have a more long-term orientaion. When compared to people in the West (North America and Europe). 21 Cultural Sensitivity and Tolerance Successful foreign marketing begins with cultural sensitivity — being familiar with nuances A new culture can be viewed objectively, evaluated, and appreciated. 4-‹#› Cultural sensitivity, or cultural empathy, must be carefully cultivated. For every amusing, annoying, peculiar, or repulsive cultural trait we find in a country, others see a similarly amusing, annoying, or repulsive trait in our culture. For example, we bathe, perfume, and deodorize our bodies in a daily ritual that is seen in many cultures as compulsive, while we oft
  • 24. en become annoyed with those cultures less concerned with natural body odor. Just because a culture is different does not make it wrong. 22 Cultural Sensitivity Has to Be Cultivated Cultural sensitivity can be developed by acquiring knowledge about a culture including: Different meanings of colors, and different tastes General facts about a culture It can also be developed by learning the more in-depth meaning of cultural facts: The meaning of time, and attitudes toward people Developing a degree of insight 4-‹#› Resistance to Change Although some cultures embrace change others are resistant to it Working women in masculine societies like Saudi Arabia Lack of acceptance of GM foods (or “Frankenfood”) in Europe 4-‹#› Typically everyone is resistant to change, some are more resistant than others. For example, western companies have tried to change the habit of Indians of eating warm breakfasts. However, in India, people still continue to do things like using
  • 25. warm milk in their cereal to have a “warm” breakfast instead of having cold cereal. 24 4-25 History and Geography: The Foundations of Culture Chapter 3 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives LO1 The importance of history and geography in understanding international markets LO2 The effects of history on a country’s culture LO3 How culture interprets events through its own eyes LO4 How long-past U.S. international policies still affect customer attitudes abroad LO5 The effect of geographic diversity on economic profiles of a country LO6 Why marketers need to be responsive to the geography of a country LO7 The economic effects of controlling population growth and aging populations LO8 Communication infrastructures are an integral part of international commerce
  • 26. 3-‹#› History & Contemporary Behavior Historical events between nations influence business and history Any nation’s business and political culture is shaped by history 3-‹#› History has a lot to do with modern day relationships between countries. The historical development of trade in China along the silk road certainly had an impact on trade between China and the rest of the world. The cold war with the former U.S.S.R. still impacts relationships with the U.S. even long after the break up of the former Soviet Union. 3 Case in Point: Japan Why do the Japanese have such strong loyalty toward their companies? Why is a distribution system so difficult for an outsider to develop? Why are decisions made by consensus? Why are they loyal to family, to country, to company, and to social group? 3-‹#›
  • 27. Japanese culture is based primarily on Confucian philosophy, taught throughout Japan’s history. It emphasizes the basic virtue of loyalty “of friend to friend, of wife to husband, of child to parent, of brother to brother, but, above all, of subject to lord,” that is, to country. A fundamental premise of Japanese ideology reflects the importance of cooperation for the collective good. 4 Manifest Destiny Manifest Destiny and Monroe Doctrine were the basis of U.S. foreign policy in the 19th and 20th centuries Manifest Destiny meant that Americans were a chosen people ordained by God to create a model society. It referred to the territorial expansion of the United States from the Atlantic to the Pacific 3-‹#› This was followed by the Roosevelt Corollary, which stated that not only would the U.S. prohibit European intervention in Latin America, but would monitor Latin America to see that the countries in the region met their international obligations. This corollary was used to justify American intervention in Latin America including the Dominican Republic and the acquisition of the Panama Canal from Columbia. 5 Geography and Global Markets Climate & Topography Geography, Nature & Economic Growth Social Responsibility and Environmental Management Resources
  • 28. 3-‹#› Geography is one of the uncontrollable elements that international marketers have to deal with. Geography has three major components, Climate and Topography, Economic Growth and Development and Natural Resources. 6 Climate and Topography 3-7 The weather, terrain, humidity, altitudes and temperature affect a firm’s operations in a country and requires product adaptation. For example in countries with high humidity levels, corrugated paper or cardboard packaging would be ineffective. Wal-Mart tried to sell the same tennis balls in Mexico City that were used in other places in North America but realized that they needed to make special kinds of tennis balls because of the higher elevations in Mexico City. Even within the United States, there is a need for different or adapted products, for example, snow tires or chains for tires are not generally available in Southern States. Monsoons that are seasonal in countries like India affect transportation and purchase behavior. 7 Knowledge about geography, the climate and physical terrain when appraising a market Influences marketing from product adaptation to the development of marketing systems
  • 29. Climatic features affect uses and functions of products and equipment Climate and Topography 3-8 The weather, terrain, humidity, altitudes and temperature affect a firm’s operations in a country and requires product adaptation. For example in countries with high humidity levels, corrugated paper or cardboard packaging would be ineffective. Wal-Mart tried to sell the same tennis balls in Mexico City that were used in other places in North America but realized that they needed to make special kinds of tennis balls because of the higher elevations in Mexico City. Even within the United States, there is a need for different or adapted products, for example, snow tires or chains for tires are not generally available in Southern States. Monsoons that are seasonal in countries like India affect transportation and purchase behavior. 8 Products may require special cooling or lubrication to function adequately in tropical zones
  • 30. Climate differences in Europe caused Bosch-Siemens to alter its washing machines Geographic terrain such as mountain ranges in a country can influence transportation of products. Geography, Nature & Economic Growth 3-9 Climate and topography coupled with civil wars, poor environmental policies, and natural disasters push these countries further into economic stagnation. The recent multiple earthquakes in caused by climate have had a ripple effect on recovery and economic development of an already poor country. Bangladesh is a country constantly plagued by floods because of it’s vulnerability to many monsoons because of its landscape and location. Every time a country tries to rebuild from one disaster, it is struck by another and has weakened its economy. 9 Linkage exists between geographic location and economic growth
  • 31. Association between landlocked countries and level of economic development Countries with hostile climates associated with economic stagnation Countries that suffer the most from major calamities are among the poorest in the world, which influences ability to market products Social Responsibility & Environmental Management 3-10 Climate and topography coupled with civil wars, poor environmental policies, and natural disasters push these countries further into economic stagnation. The recent multiple earthquakes in caused by climate have had a ripple effect on recovery and economic development of an already poor country. Bangladesh is a country constantly plagued by floods because of it’s vulnerability to many monsoons because of its landscape and location. Every time a country tries to rebuild from one disaster, it is struck by another and has weakened its economy. 10 Environmental protection is not an optional extra; it is an essential part of the complex process of doing business.
  • 32. Of special concern to governments and businesses are ways to stem the tide of pollution and to clean up decades of neglect. Many governments are drafting new regulations and enforcing existing ones. A strong motivator is the realization that pollution is on the verge of getting completely out of control. Resources 3-11 Natural resources are an important part of geography. However, natural resources are depleting and firms should use them responsibly and have a plan to replenish depleting resources. We have seen the price of oil and gas increase steadily as these resources are heavily used especially by the developed world. 11 Importance of natural resources especially to manufacturing of products; Supply of natural resources not endless Human labor provides the preponderance of energy in many countries
  • 33. Importance of oil and gas in world energy consumption Global Population Trends 3-12 World Population statistics and growth rate: 1800= 1 billion 1900=2 billion 1960=3 billion 1974=4 billion 1986=5 billion 1999=6 billion 2011=7 billion It used to take 100 years to add 1 billion to the world population, now it takes about 12-13 years. World population is to reach nearly 9 billion by 2050. 14% in the developed world are over 65. Special problems arise with the increasing number of elderly such as need for healthcare and retirement facilities. The majority of the people are over 65 or under 15 in the U.S., Europe and Japan. As a result there is a worker shortage and immigration from neighboring highly populated countries with a younger population. For example, Mexican immigration into North America and Polish immigration into Western Europe.
  • 34. The population is shifting from rural to urban. Over 40% of the world lives in urban areas. By 2025 this number is expected to increase to 60%. 12 Important to know about current population trends because people constitute markets for various categories of goods Necessary to know about: rural/urban population shifts rates of growth age levels population control population decline and aging worker shortage and immigration
  • 35. Exhibit 3.5 Source: World Population Prospects, The 2011 Revision, United Nations Economic and Social Affairs, www.unpopulation.org. 2012. 3-13 By 2050, 86% of the world population will be in Asia, Latin America and Africa. 98% of growth will happen in less developed regions. Industrialized countries will add less than 100 million. 13 Population Control Issues Adequate Incomes High literacy levels Education for women Health care Family planning Cultural attitudes Political reasons 3-‹#› The problems related to an increasing population in urban areas and in less developed countries are lowered income levels, the less literate have more children and hence education becomes a priority. Educating women on the benefits of a smaller family helps in population control, of course religion is a big factor. Health care availability becomes a challenge and a need as the world population explodes. Family planning is related to cultural and religious attitudes. Some countries for political
  • 36. reasons believe in strength in numbers and therefore ignore the impact of a large population on economic development. 14 World Trade Routes & Communication Links Knowledge about trade routes over land, sea, and air important in making marketing decisions The majority of world trade is among the most industrialized and industrializing countries of Europe, North America, and Asia Need to be aware about communication links—the underpinning of all commerce Impact of the Internet revolution especially for global marketing of products 3-15 15 The Dynamic Environment of International Trade Chapter 2 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 37. Trade Barriers Barriers to trade are one of the major issues confronting international marketers They can be tariff or non-tariff barriers Countries continue to use non-tariff barriers for a variety of reasons Tariff barriers have reduced considerably in recent years 2-‹#› Whether it is legislation regarding Pringles being the same potato chips in the UK and causing additional value added taxes for P&G or what percentage of California Rice can be mixed with “inferior” Japanese rice and still be labeled California Rice, these are examples of non-tariff trade barriers that can be used to prevent the easy entry of foreign companies into the country. 2 Exhibit 2.1 Top Ten 2011 U.S. Trading Partners ($ billions, merchandise trade) 2-3 Media, global communications and technology has allowed world trade to flourish and expand in recent years. As Exhibit 2.1 illustrates, world trade is an important economic activity. Increased competition also leads to increased protectionism.
  • 38. The creation of the World Trade Organization (WTO) is one of the biggest advancement for free trade among countries. Trade statistics such as those listed in Exhibit 2.1 have often served to focus the attention of government officials around the world. We should however, view this data with caution. For example, although it is evident that the imbalance of trade is the biggest with China for the United States. However, often U.S. imports from China include a majority of parts made in other countries. The parts of the majority of computers assembled in China (Lenovo for example) are made in surrounding countries like Taiwan. 3 2-4 Over the past 30 years, U.S. dominance in export markets has diminished as Japan, Germany, and a number of newly industrialized countries such as South Korea and China have taken a larger share of world exports. Similarly, the industrialized nations of Germany, France, and the United Kingdom, faced a decline in world market share of largest corporations. This decline in the position of the U.S. and other industrialized countries was a relative decline, reflecting the faster economic growth of several other countries, particularly in Asia. 4 World Trade and U.S. Multinationals Dominance of U.S. multinationals in the 1950s and 1960s Large investments by U.S. companies in Europe and Latin America Concern in Latin America resulting in expropriation of direct
  • 39. U.S. investments In Europe, there was strong public demand to limit foreign investment 2-‹#› The threat felt by Europeans was best expressed in the popular book The American Challenge, published in 1968, in which the French author J. J. Servan-Schreiber wrote: “Fifteen years from now it is quite possible that the world’s third greatest industrial power, just after the United States and Russia, will not be Europe but American Industry in Europe. Already, in the ninth year of the Common Market, this European market is basically American in organization.” Servan-Schreiber’s prediction did not come true for many reasons as described in the following slides. 5 Source: Complied from annual reports of listed firms, 2012 2-6 The relative importance of U.S. multinational corporations (MNCs) after World War II declined where U.S. multinationals compete with strong corporations from Japan, Western Europe, Asia and many developing countries such as China and Mexico. This is forcing U.S. MNCs to examine new ways to remain competitive. From the 1960s to 2011, the U.S. moved from being the world's dominant industrial power to accounting for only 29 of the world’s 100 largest corporations (see Exhibit
  • 40. 2.3). Countries once classified as less developed were reclassified as newly industrialized countries (NICs). NICs such as Brazil, Mexico, South Korea, Taiwan, Singapore, and Hong Kong went through experienced rapid industrialization in specific industries such as steel, shipbuilding, consumer electronics, auto mobiles, light aircraft, shoes, textiles, apparel, and more. In short, economic power and potential became more evenly distributed among countries and Servan-Schreiber warning to Europe about U.S. multinational domination did not come close to becoming true. 6 Exhibit 2.3 The Nationality of the World’s 100 Largest Industrial Corporations (size measured by annual revenues) Source: “2011 Global 500,” Fortune, http://www.fortune.com , 2012. 2-7 Balance of Trade Favorable balance of trade means that the US sold more to other countries than it bought from them. The balance of merchandise trade also reflected the changing role of the United States in world trade Between 1888 and 1971, the United States had a favorable balance of trade By 1971, the United States had a trade deficit of $2 billion that grew to at $160 billion in 1987 Trade deficit peaked in 2007, with the continued weakness in the U.S. dollar The positive consequence of the global financial crisis in 2008
  • 41. in the United States was the halving of the U.S. trade deficit during 2009 from its high in 2007 2-‹#› Favorable balance of trade means that the U.S. sold more to other countries than it bought from them. 8 Balance of Payments When countries trade there are financial transactions among businesses or consumers of different nations Money constantly flows into and out of a country The system of accounts that records a nation’s international financial transactions is called its balance of payments (BP) It records all financial transactions between a country’s firms, and residents, and the rest of the world usually over a year The BP is maintained on a double-entry bookkeeping system 2-‹#› As barriers to the free flow of goods, services, and capital have fallen over time, and as other countries increased their shares of world output, non-U.S. firms increasingly began to invest across national borders. If we look 20 years into the future, most forecasts now predict a rapid rise in the share of world output accounted for by developing nations such as China, India, Indonesia, Thailand, South Korea, Mexico, and Brazil, and a corresponding decline in the share of rich industrialized nations
  • 42. such as Great Britain, Germany, Japan, and the United States. The World Bank, for example, has estimated that if current trends continue, by 2020 the Chinese economy could be larger than that of the United States, while the economy of India will approach that of Germany. The World Bank also estimates that today's developing nations may account for more than 60 percent of world economic activity by 2020, while today's rich nations, which currently account for over 55 percent of world economic activity, may account for only about 38 percent by 2020. As these trends continue and economies become closely tied with each other, one way to impact the inflow of goods and services into the domestic market is through the use of protectionism. The Balance of Payments and it reflects the economic position of the country. The more protectionist a country is, it imports less and exports more and that is reflected in its Balance of Payments as a surplus. The U.S. has had a negative balance of payments in recent years and the country that accounts for a large portion of this deficit is China. This can be explained by the fact that a lot of the consumer goods sold in the United States are manufactured and imported into the United States and the amount of goods and services exported from the U.S. into China is relatively small. 9 Balance of Payments The BP is the difference between receipts and payments 2-10 Receipts
  • 43. merchandise export sales. money spent by foreign tourists. transportation. payments of dividends and interest from FDI abroad. new foreign investments in the U.S. Payments costs of goods imported. spending by U.S. tourists overseas. new overseas investments. cost of foreign military and economic aid. Balance of Payments
  • 44. A balance-of-payments statement includes three accounts the current account, a record of all merchandise exports, imports, and services plus unilateral transfers of funds the capital account, a record of direct investment, portfolio investment, and short-term capital movements to and from countries; and the official reserves account, a record of exports and imports of gold, increases or decreases in foreign exchange, and increases or decreases in liabilities to foreign central banks. Of the three, the current account is of primary interest to international business. 2-‹#› 11 Protectionism The reality of trade is this is a world of tariffs, quotas, and nontariff barriers and nontariff barriers designed to protect a country’s markets from foreign investment Although the World Trade Organization has been effective to some extent in reducing tariffs, countries still resort to measures of protectionism Countries use legal barriers, exchange barriers, and psychological barriers to restrict the entry of unwanted goods 2-‹#› The complex distribution system in Japan, is a good example of a market structure creating a barrier to trade. Most recently the United States and other countries have accused China of
  • 45. keeping the value of its currency artificially low to boost exports and limit exports. 12 Arguments for Protectionism maintain employment and reduce unemployment increase of business size, and retaliation and bargaining protection of the home market need to keep money at home encouragement of capital accumulation 2-‹#› Arguments for Protectionism maintenance of the standard of living and real wages conservation of natural resources protection of an infant industry industrialization of a low-wage nation national defense 2-‹#› The Impact of Tariff (Tax) Barriers Tariff Barriers tend to increase: Inflationary pressures Special interests’ privileges Government control and political considerations in economic matters The number of tariffs they beget via reciprocity
  • 46. 2-‹#› The Impact of Tariff (Tax) Barriers Tariff Barriers tend to weaken: Balance-of-payments positions Supply-and-demand patterns International relations (they can start trade wars) Tariff Barriers tend to restrict: Manufacturer’ supply sources Choices available to consumers Competition 2-‹#› Six Types of Non-Tariff Barriers (1) Specific Limitations on Trade: Quotas Import Licensing requirements Proportion restrictions of foreign to domestic goods (local content requirements) Minimum import price limits Embargoes (2) Customs and Administrative Entry Procedures: Valuation systems Antidumping practices Tariff classifications Documentation requirements Fees
  • 47. 2-‹#› Six Types of Non-Tariff Barriers (3) Standards: Standard disparities Intergovernmental acceptances of testing methods and standards Packaging, labeling, and marking (4) Government Participation in Trade: Government procurement policies Export subsidies Countervailing duties Domestic assistance programs 2-‹#› Six Types of Non-Tariff Barriers (5) Charges on imports: Prior import deposit subsidies Administrative fees Special supplementary duties Import credit discriminations Variable levies Border taxes (6) Others: Voluntary export restraints Orderly marketing agreements
  • 48. 2-‹#› Three Types of Monetary Barriers Blocked currency: Blockage is accomplished by refusing to allow importers to exchange its national currency for the sellers’ currency. Differential exchange rates: It encourages the importation of goods the government deems desirable and discourages importation of goods the government does not want by adjusting the exchange rate. The exchange rate for importation of a desirable product is favorable and vice-versa Government approval: In countries where there is a severe shortage of foreign exchange, an exchange permit to import foreign goods is required from the government 2-‹#› The Omnibus Trade and Competitiveness Act (OTCA) 1988 Many countries are allowed to trade freely with the United States but do not grant equal access to U.S. products in their countries. To ease trade restrictions, the OTCA focused on correcting perceived injustice in trade practices. It dealt with trade deficits, protectionism, and the overall fairness of our trading partners. 2-‹#› The Omnibus Trade and Competitiveness Act (OTCA) 1988 Covers three areas for improving U.S. trade:
  • 49. market access, export expansion, and import relief 2-‹#› General Agreement on Tariffs and Trade (GATT) Covers three basic areas: trade shall be conducted on a nondiscriminatory basis; protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas; and consultation shall be the primary method used to solve global trade problems. 2-‹#› World Trade Organization (WTO) It sets many rules governing trade between its 132 members WTO provides a panel of experts to hear and rule on trade disputes between members, and, unlike GATT, issues binding decisions Unlike GATT, WTO is an institution, not an agreement 2-‹#› WTO The Internet exposed protected industries to global competition
  • 50. WTO was established January 1, 1995 through the Uruguay round of GATT (1986-1993) Statutory powers to adjudicate trade disputes 2-‹#› WTO Permanent international organization New legal and institutional foundation Platform for trade relations: collective debate, negotiation and adjudication Dispute settlement faster Evolution of GATS, TRIMS, TRIPS 2-‹#› The World Trade Organization (like its predecessor GATT) is primarily responsible for regulating world trade and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO member states. 147 nations that collectively accounted for 97 percent of world trade are members of the WTO, thereby giving the organization enormous scope and influence. The WTO is also responsible for facilitating the establishment of additional multinational agreements between WTO member states. Over its entire history, and that of the GATT before it, the WTO has promoted the lowering of barriers to cross-border trade and investment. In doing so, the WTO has been the instrument of its member states, which have sought to create a more open global business system unencumbered by barriers to trade and investment between countries. Without an institution such as the WTO, the globalization of markets and production is unlikely to have proceeded as far as it has. It is
  • 51. interesting to see the history of WTO’s dispute resolution among countries. See the “Banana Wars” (http://news.bbc.co.uk/2/hi/business/8391752.stm) dispute that has been ongoing for over 16 years and the resolution in the case for an example of the role of the WTO and the type of disputes that it has ruled on. Immediately after the Banana Wars ruling, the EU filed a complaint with the WTO against the U.S. that establishing Foreign Sales Corporations (http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds108_e. htm) gives the U.S.an undue tax advantage and should not be allowed to make the playing field level for all countries. 26 The IMF and the World Bank The International Monetary Fund (IMF) and the World Bank Group are two global institutions created to assist nations in becoming and remaining economically viable. These organizations play important roles in international trade: by helping maintain stability in the financial markets and by assisting countries that are seeking economic development and restructuring 2-‹#› The International Monetary Fund (IMF) and the World Bank were both created in 1944 by 44 nations that met at Bretton Woods, New Hampshire. The task of the IMF was to maintain order in the international monetary system, and that of the World Bank was to promote economic development. In the 60 years since their creation, both institutions have emerged as significant players in the global economy. The World Bank is the less controversial of the two sister institutions. It has focused on making low-interest-rate loans to cash-strapped
  • 52. governments in poor nations that wish to undertake significant infrastructure investments (such as building dams or roads). The IMF is often seen as the lender of last resort to nation- states whose economies are in turmoil and currencies are losing value against those of other nations. Frequently, in the recent past, for example, the IMF has bailed out governments of troubled nation states, including Argentina, Indonesia, Mexico, Russia, South Korea, Thailand, and Turkey. 27 The Scope and Challenge of International Marketing Chapter 1 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives LO1 The benefits of international markets LO2 The changing face of U.S. business LO3 The scope of the international marketing task LO4 The importance of the self-reference criterion (SRC) in international marketing LO5 The increasing importance of global awareness LO6 The progression of becoming a global marketer 1-‹#›
  • 53. Global Commerce Causes Peace Global commerce thrives during peacetime Economic boom in North America in the late 1990s largely due to the end of the cold war 1-‹#› In times of peace, international trade flourishes as relationships between countries improve. This has a ripple effect and a positive impact of the economies of all countries involved. 3 The Internationalization of U.S. Businesses Exhibit 1.1 Foreign Acquisitions of U.S. Companies, Sources: Compiled from annual reports of listed forms, 2012. 1-4 The ownership of many U.S. businesses is located with companies headquartered outside of the U.S. It is interesting to see that a company like Burger King is British and Seven Eleven is Japanese, brands in our daily life that we consider “American.” 4 1-5
  • 54. Gigante, one of Mexico’s largest supermarket chains, now has several stores in Southern California, including this one in Anaheim. On store shelves are a variety of Bimbo bakery products. Grupo Bimbo, a growing Mexican multinational, has recently purchased American brand-named firms such as Oroweat, Webers, Sara Lee, and Mrs. Baird’s Bread. 5 The International Marketing Task One Two Three Four 1-6 What makes international marketing so much more complicated than domestic marketing are the various uncontrollable factors that companies have to encounter in international markets in addition to all the uncontrollable factors they would normally face in domestic markets. The uncontrollables in a foreign country could range from political or legal regulations that are unique to a country, competition, to consumer tastes and socio- cultural differences that are new to the company. Exhibit 1.3: The International Marketing Task illustrates the environment in which a firm operates in global markets. Case 1–1, Starbucks-Going Global Fast, is a good way to think about the marketing mix and the effects of uncontrollables and controllables both in the domestic and foreign environments. How would you have done things differently to overcome some of the problems illustrated in the case? Starbucks is looking to boost its overall rate of growth by applying its business formula
  • 55. to other nations that lack a Starbucks-type chain. In doing so, it is helping to change aspects of the material culture of those countries it enters, to feel more like the U.S. At the same time, Starbucks has found that to succeed internationally, it must customize aspects of its operations and marketing to local conditions, by introducing new versions of its basic drinks that appeal to local tastes for example. 6 Exhibit 1.2 Selected U.S. Companies and Their International Sales Source: Compied from annual reports of listed firms, 2012 1-7 The changing world economy has created unique opportunities for marketers. A product that has reached the end of its lifecycle in a mature western market may have tremendous potential in emerging markets such as Brazil, Russia or China. The reduced barriers and access to cross-border trade makes it possible for firms to source from various countries, reduce costs and sell worldwide. Deregulated markets in the former USSR and Eastern Europe, increasing competition, and open foreign investment policies in Asia, South America, and Africa have created new opportunities. It has allowed businesses to expand internationally. 7 1-8
  • 56. Photo Caption: A Citibank branch in the heart of Brazil on a rainy day. The address on the Avenida Paulista is 1776—how American! One of the world’s great multinational corporations barely survived the financial debacle of October 2008. Perhaps its red, white, and blue umbrella logo protected it from “adverse weather” on Wall Street? Indeed, during the past few years, its international operations have performed much better than its domestic ones. In particular, emerging markets such as China, India, and Brazil proved relatively resilient during the global financial crisis that began in 2008. 8 Self-Reference Criterion & Ethnocentrism Self-Reference Criterion (SRC) is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions. Ethnocentrism is the notion that people in one’s own company, culture, or country know best how to do things. Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true light. 1-‹#› The need to customize products and operations to local conditions that Starbucks encountered is a consistent theme in international marketing. Similarly, Starbucks' decision to take on foreign partners to help expand internationally is one that many companies must deal with. It also illustrates that it is inevitable for companies not to be influenced by Self Reference Criterion (SRC) or Ethnocentric attitudes, it is important that
  • 57. they consciously pay attention to overcome these attitudes while entering foreign markets. A person from one culture is often not aware that a reaction is influenced by one’s cultural background and that those from another culture may have a different perspective. The nature of the SRC is that whenever confronted by some aspect of another culture one’s reaction and evaluation is routinely clouded by one’s own cultural experiences. For example, it is common for one to frown upon the foods of another country when the same feelings may be expressed when people from that country visit other world regions. It is how one is raised and the foods one is accustomed to, such pepperoni topping on pizza in the U.S., a topping which most of the rest of the world is not familiar with. When this topping was requested by an American tourist in Germany, she received a pizza topped with “pepperoncini” peppers. In Korea, it is common to top ice cream with canned corn, which most of the western world may view with distaste at first reaction which is a natural reaction based on one’s own SRC and ethnocentric values. 9 Developing Global Awareness To be globally aware is to have: tolerance of cultural differences and knowledge of cultures, history, world market potential, and global economic, social, and political trends 1-‹#› Tolerance for cultural differences is crucial in international marketing. Tolerance is understanding cultural differences and accepting and working with others whose behaviors may be
  • 58. different from ours. Global awareness also involves knowledge of world market potentials and global economic, social, and political trends. Over the next few years, there will be major changes in the socio-economic and political scenes round the world, particularly in the developed world. Global awareness is not simply recognizing that your world views are different from others, but also accepting the diverse perspectives of others. For example, that slurping and burping is a sign of respect for the host’s cooking and not bad manners, it means that the guests are thoroughly enjoying the food. Behaviors are not standard across countries, what’s acceptable in one country may be completely taboo in another. 10 Stages of International Marketing Involvement No Direct Foreign Marketing Infrequent Foreign Marketing Regular Foreign Marketing International Marketing Global Marketing 1-‹#› No Direct Foreign Marketing In this stage, a company does not send its products overseas directly, but its products may become available in other countries through intermediaries or middlemen such as trading companies. Occasional internet sales because of a request from an overseas customer may also fall into this category. Infrequent Foreign Marketing Temporary surpluses in inventory may cause companies to sell their excess product in overseas markets. Note that in the first two stages of International
  • 59. Marketing Involvement, the strategies are reactive rather than proactive. Regular Foreign Marketing In this stage a firm has committed permanent resources towards international marketing and engages in it regularly on a proactive basis. The firm may use intermediaries to engage in international marketing. International Marketing In this stage has planned production and marketing to many countries around the world with specific targets for each overseas country market. It involves not only marketing but also production of goods in overseas markets. Global Marketing In the global marketing stage, the firm starts viewing the world, including their home market as one market. The major change is the orientation towards world markets and the activities directed at supporting this view. When exploring the different stages of international marketing involvement, it is important that we understand the differences between global markets and global products. We also need to understand that a global marketing orientation does not necessarily mean standardization across all markets. Instead it may mean operating as if all country markets in a company’s scope of operations (including the domestic market) are approached as a single global market that may have multiple market segments extending across national borders and that the company may be seeking commonalties across country markets in order to standardize the marketing mix where it is culturally feasible and cost effective. 11 Factors Favoring Faster Internationalization Companies with either high technology and/or marketing-based resources are better equipped to internationalize than more traditional manufacturing companies (Tseng et. al., 2007) Smaller home markets and larger production capacities favor
  • 60. internationalization (Fan & Phan, 2007) and Firms with key managers well networked internationally are able to accelerate the internationalization process (Freeman and Cavusgil, 2007) 1-‹#› Refer to text page 20, footnotes for the references on this slide. 12 The Orientation of International Marketing Environmental/cultural approach Relate the foreign environment to the marketing process Illustrate how culture influences the marketing task The cultural environment within which the marketer must implement marketing plans can change dramatically from country to country 1-‹#› The text addresses issues relevant to any company marketing in or into any other country or groups of countries, however slight the involvement or the method of involvement. Hence this discussion of international marketing ranges from the marketing and business practices of small exporters, such as a Colorado- based company that generates more than 50 percent of its $40,000 annual sales of fish-egg sorters in Canada, Germany, and Australia, to the practices of global companies such as Microsoft, Mary Kay, and Johnson & Johnson, all of which generate more than 50 percent of their annual profits from the sales of multiple products to multiple country-market segments all over the world.
  • 61. 13 Developing a Global Vision through Marketing Research Chapter 8 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. International Marketing Research Cross-cultural communications are difficult Environments are different Important to recognize cross-country similarities and differences Important to recognize and overcome SRC (Self Reference Criterion) SRC is an unconscious reference to one's own cultural values, experiences, and knowledge as a basis for decisions. 8-‹#› 2 It is important to pay attention to differences and similarities in cultures and consumption by conducting marketing research.
  • 62. Many multinationals have committed blunders due to the lack of meticulous marketing research as well as the presence of SRC when operating in a foreign market. An example would be that of Sears in Brazil when they failed to adjust the shelf heights to fit the shorter height of the average Brazilian. Marketing research and in turn information obtained from it are critical in developing successful marketing strategies. Information needs range from the general data required to assess market opportunities to specific market information for decisions about product, promotion, distribution, and price. Information can be gathered from a variety of sources ranging from consumers to suppliers to competitors. Research: It is important to pay attention to differences and similarities in cultures and consumption by conducting marketing research. Many multinationals have committed blunders due to the lack of meticulous marketing research as well as the presence of SRC when operating in a foreign market. An example would be that of Sears in Brazil when they failed to adjust the shelf heights to fit the shorter height of the average Brazilian. Marketing research and in turn information obtained from it are critical in developing successful marketing strategies. Information needs range from the general data required to assess market opportunities to specific market information for decisions about product, promotion, distribution, and price. Information can be gathered from a variety of sources ranging from consumers to suppliers to competitors. 8-‹#›
  • 63. Research processes and methods are same whether applied in Columbus, Ohio, or Colombo, Sri Lanka. Marketing research is traditionally defined as the systematic gathering, recording, and analyzing of data to provide information useful to marketing decision making. International Marketing Research 8-‹#› 4 International marketing has some additional complexities such as communicating information across cultures. For example, the headquarters in the U.S has to convey the results of a research project to the Brazilian subsidiary and the Brazilian subsidiary has to translate that into meaningful information that they can put to use. This could be vice versa as well, the U.S using information collected in the Brazilian subsidiary. Many marketing research firms are able to provide services such as cross-cultural translations. The other complexity with international marketing research is that environments in which research is conducted may vary. Tried and tested methods may not be meaningful or apply in a foreign culture. International marketing has some additional complexities such as communicating information across cultures. For example, the headquarters in the U.S has to convey the results of a research project to the Brazilian subsidiary and the Brazilian subsidiary has to translate that into meaningful information that they can put to use. This could be vice versa as well, the U.S using information collected in the Brazilian subsidiary. Many marketing research firms are able to provide services such as
  • 64. cross-cultural translations. The other complexity with international marketing research is that environments in which research is conducted may vary. Tried and tested methods may not be meaningful or apply in a foreign culture. 8-‹#› International Marketing Research International marketing research involves two additional complications: Information must be communicated across cultural boundaries. The environments in which research tools are applied are often different in foreign markets. 8-‹#› Breadth & Scope of International Marketing Research Foreign market research is broader in scope than domestic research Research can be divided into three types based on information needs: general information about the country, area, and/or market; information necessary to forecast future marketing requirements by anticipating social, economic, consumer, and industry trends within specific markets or countries; and specific market information used to make product, promotion, distribution, and price decisions and to develop marketing plans
  • 65. 8-‹#› 7 In domestic operations, mostly emphasis is placed gathering specific market information, because the other data are usually available from secondary sources. In an international setting, a country’s political stability, cultural attributes, and geographical characteristics are some of the kinds of information not ordinarily gathered for the purpose of domestic marketing research. See the example of Unisys Corporation and the steps it uses to gather information. The Research Process for All Countries 8-‹#› 1 Define the research problem and establish research objectives. 2 Determine the sources of information to fulfill the research objectives.
  • 66. Consider the costs and benefits of the research effort. 3 4 Gather the relevant data from secondary or primary sources, or both. 5 Analyze, interpret, and summarize the results. 6 Effectively communicate the results to decision makers.
  • 67. Defining the Problem and Establishing Research Objectives Begin with a definition of the research problem and the establishment of specific research objectives. The market researcher must be certain the problem definition is sufficiently broad to cover the whole range of response possibilities and not be clouded by his or her SRC. Once the problem is adequately defined and research objectives established, the researcher must determine the availability of the information needed. An example of this would be Disney when they established their first European location in Paris failed to take into account that flights from Germany to Florida were cheaper than getting to Paris and that didn’t make the opening of Disney Paris attractive to many Europeans. 8-‹#› This is the first and most crucial step in the research process as it is the backbone of the entire research. Errors could be made because of overlooking local culture or due to one’s own Self Reference Criterion (SRC). An example of this would be Disney when they established their first European location in Paris failed to take into account that flights from Germany to Florida were cheaper than getting to Paris and that didn’t make the opening of Disney Paris attractive to many Europeans. 9 Problems with Secondary Data
  • 68. 8-‹#› Availability of Data The United States is by far the country with the largest quantity of data available. The data available on and in Japan is a close second, and several European countries do a good job of collecting and reporting data. Sometimes, the quality of data collected in these other countries may be better than that collected in the U.S. Another problem with the availability of data is the lack of language skills in the country that a firm is operating in. For example in Japan, one needs to know Japanese to access the available data. Reliability of Data Data may be available but not reliable. Data reported may be biased depending on who reported it, for example government reported data may be biased in population or economic statistics. Less developed countries tend to be overly optimistic and unreliable in reporting relevant economic data about their countries. Th e European Union (EU) tax policies can affect the accuracy of reported data also. Production statistics are frequently inaccurate because these countries collect taxes on domestic sales. Comparability of Data Comparability of available data is the third problem for companies. In the U.S. data is readily available through a variety of sources and is usually current. In other countries, especially less developed ones, data can be old and outdated and is not updated frequently enough. Either things may be changing too rapidly for these countries to document (lack of currency) or there is a lack of historical data (they only started documenting recently). Validating Secondary Data Checking the consistency of one set of secondary data with other data of known validity is an effective and oft en-used way of judging validity. For example, a researcher might check the sale of baby products with the
  • 69. number of women of childbearing age and birthrates, or the number of patient beds in hospitals with the sale of related hospital equipment. 10 Availability Reliability Comparability Validation Checking the Accuracy of Secondary Data Secondary data from any source, including the United States, must be checked and interpreted carefully. The following questions should be asked to effectively judge the reliability of secondary data sources: Who collected the data? Would there be any reason for purposely misrepresenting the facts? For what purposes were the data collected? How (by what methodology) were the data collected? Are the data internally consistent and logical in light of known data sources or market factors?
  • 70. 8-‹#› www.ita.doc.gov www.usatradeonline.gov http://www.census.gov/foreign-trade/www/ https://www.cia.gov/library/publications/the-world-factbook/ http://www.cbp.gov/ www.opic.gov www.exim.gov Sources of Secondary Data: Websites for International Marketing 8-‹#› www.imf.org www.wto.org www.oecd.org www.jetro.go.jp www.euromonitor.com University-based websites, e.g., http://www.lib.berkeley.edu/BUSI/ www.worldchambers.com www.ipl.org/ref/RR/static/bus4700.html Sources of Secondary Data: Websites for International Marketing
  • 71. 8-‹#› http://www.wtcaonline.com/cms_wtca/ www.worldtradewt100.com/ MSU-CIBER- Globaledge World Bank IMF OECD U.N. Syndicated data sets: A.C. Nielsen and Information Resources Inc. Sources of Secondary Data: Websites for International Marketing 8-‹#› Problems with Qualitative Research Focus group interviews are difficult to conduct in Confucian societies – i.e. social & ethical philosophy (mostly in Chinese culture) Personal referrals are needed to contact consumers People are often hesitant to criticize new product ideas when companies seek candid opinions. 8-‹#›
  • 72. 15 Problems with Primary Research Sampling in Field Surveys: reliability of lists poor postal service availability of data census and socioeconomic data SS# data street maps telephones postal unit sample size & sampling procedure 8-‹#› There are many issues related to sampling and field surveys as listed on the slide, mostly relates to infrastructure and availability of data that we take for granted exists in all countries. Many times, there are no street addresses available in countries. In India for example, it is typical to state in your address that your house is located “Opposite to the State bank of India.” Language is an impediment and surveys need to be translated into the local language. For translation, one of two methods can be used, parallel translation or back translation, the questionnaire is simultaneously developed in English and the local language and parallel translated until they are equivalent or it is done English to the local language and then back to
  • 73. English until the surveys sound alike and are meaningful. The third alternative is decentering which is a hybrid of parallel and back translation. It is a successive process of translation and retranslation of a questionnaire, each time by a different translator. Even Spanish can be different depending on which region of the world, the word for juice is “zumo” in Spain and “jugo” in Mexico. On my first visit to Portugal I prepared by learning basic Portuguese phrases, only to find out that I had learned Brazilian Portuguese (which is what is available in the U.S.) and no one could understand me. 16 Marketing researchers in India have to consider the problems of language diversity. Here the primary 13 languages (besides English) are listed on a 20-rupee bill. 8-17 Problems with Quantitative Research Different types of biases: One may encounter many problems with quantitative research. A number of biases come into play such as not wanting to respond, being courteous to the interviewer and hence not providing a candid response, some cultures tend to say “Yea” or “Nay” to questions regardless of whether they understand the question, responses to some questions that relate to social class or residential area may involve social desirability bias. And, some questions related to income, gender or taxes may be taboo. 8-‹#›
  • 74. One may encounter many problems with quantitative research. A number of biases come into play such as not wanting to respond, being courteous to the interviewer and hence not providing a candid response, some cultures tend to say “Yea” or “Nay” to questions regardless of whether they understand the question, responses to some questions that relate to social class or residential area may involve social desirability bias. And, some questions related to income, gender or taxes may be taboo. 18 Research on the Internet: A Growing Opportunity For many companies the Internet provides a new and increasingly important medium for conducting a variety of international marketing research There are at least seven different uses for the Internet in international research: Online surveys and buyer panels Online focus groups Web visitor tracking Advertising measurement Customer identification systems E-mail marketing lists Embedded research 8-‹#› International Internet use is growing almost twice as fast as American use. A variety of methods that were not available a few years ago can be used now in international marketing research due to the availability of technology and the
  • 75. penetration of the internet. 19 The END. 8-‹#› The International Legal Environment: Playing By the Rules Chapter 7 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Introduction No single, uniform international commercial law governing foreign business transactions exists International marketers must comply with the laws of each country within which it operate 7-‹#› It is impossible to explore the legal system of every country,
  • 76. but it is important to understand that the laws are different and the need to comply with the laws of each country. 2 Bases for Legal Systems Common Law Civil or Code Law Islamic Law Commercial Legal System in Marxist-Socialist economies or states 7-‹#› There are three basic types of legal systems and the commercial legal system in Marxist economies although not a “formal” system is worth discussing. 3 Bases for Legal Systems Common law, derived from English law and found in England, the United States, Canada, and other countries once under English influence The basis for common law is tradition, past practices, and legal precedents set by the courts through interpretations of statutes, legal legislation, and past rulings. 7-‹#› Common Law is based on historical or past practices. Therefore, under common law, all judgments in court are based
  • 77. on precedence. Common law seeks “interpretation through the past decisions of higher courts which interpret the same statutes or apply established and customary principles of law to a similar set of facts.” 4 Bases for Legal Systems Civil or code law, derived from Roman law and found in Germany, Japan, France, and in non-Islamic and non--Marxist countries Code law is based on an all-inclusive system of written rules (codes) of law. 7-‹#› All laws are codified, however, some broad interpretations are possible. More comparisons between common and code law are in the following slides. 5 7-6 Common Law Based on tradition, past practices and legal precedents set by courts through interpretation of past rulings/statutes, etc.
  • 78. Code Law Based on an all-inclusive system of written rules (codes) of law. Legal system is divided into 3 codes: commercial, civil & criminal. Not All-Inclusive Considered complete “catchall provisions” Some broad interpretations are possible. 7-7 Common Law
  • 79. Ownership is determined by use Code Law Based on an all-inclusive Ownership is determined by registration Agreements may be binding so long as proof of the agreement can be established. Agreements may not be enforceable unless properly notarized or registered. 7-8
  • 80. Common Law Impossibility of performance does not excuse non-compliance with the provisions of the contract, unless it was an act of God. Code Law Acts of God are not necessarily limited to acts of nature but include “unforeseeable human acts” such as labor strikes or riots. Common Law countries are codifying Commercial Law. Bases for Legal Systems Islamic law, derived from the interpretation of the Koran and found in Pakistan, Iran, Saudi Arabia, and other Islamic states
  • 81. 7-‹#› 9 Islamic Law The Koran forms the basis for the Shari’ah (Islamic law) It includes issues such as property rights, economic decision making, and types of economic freedom The overriding objective of the Islamic system is social justice Islamic law prohibits the payment of interest or “riba” It describes secular aspects of the law regulating human acts. It describes specific patterns of social and economic behavior for all individuals. 7-‹#› Because the laws are based on interpretation of the Koran, the international marketer must have knowledge of the religion’s tenets and understand the way the law may be interpreted in each region. Some Islamic Law countries are more liberal than others in the interpretation of the Koran. 10 Commercial Law in Marxist Economies A commercial legal system in the Marxist–socialist economies of Russia and the republics of the former Soviet Union, Eastern Europe, China, and other Marxist–socialist states Legal system centered on the economic, political, and social policies of the state
  • 82. As each country moves toward its own version of a free market system and enters the global market, a commercial legal system is also evolving from Marxist–socialist tenets. 7-‹#› As socialist countries become more directly involved in trade with non-Marxist countries, it has been necessary to develop a commercial legal system that permits them to engage in active international commerce. For example, China has announced that it will adopt a constitution-based socialist legal system but with Chinese characteristics. For example, China has strict Cyber Laws and prohibits the use and access to certain websites such as Facebook but has formed its own social media site that the government can monitor closely called qq. Some formerly communist eastern European countries had a formally codified legal system before the onset of communism and are adapting that to engage in global trade. 11 Jurisdiction in International Legal Disputes Determining whose legal system has jurisdiction when a commercial dispute arises is another problem of international marketing. The World Court at The Hague and the International Court of Justice resolve international disputes between sovereign nations of the world rather than between private citizens. Legal disputes can arise in three situations: between governments, between a company and a government, and between two companies
  • 83. 7-‹#› There is no legal body to resolve disputes between citizens of different countries. The World Court can only intervene if the legal disputes are between governments, a company and a government or between two companies. 12 Jurisdiction in International Legal Disputes The World Court can adjudicate disputes between governments, but disputes in situations 2 and 3 must be handled in the courts of the country of one of the parties involved or through arbitration. When international commercial disputes must be settled under the laws of one of the countries concerned, the paramount question in a dispute is: Which law governs? 7-‹#› Because there is no international commercial law, the marketer has to look into the type or law and the specifics laws of each country the firm has operations in. 13 Jurisdiction in International Legal Disputes Jurisdiction is generally determined in one of three ways, on the basis of: jurisdictional clauses included in contracts where a contract was entered into, or where the provisions of the contract were performed
  • 84. 7-‹#› It is very important that when operating in another country to have the supporting documents that clearly state the jurisdiction in case a dispute occurs and whose laws will apply. 14 International Dispute Resolution Conciliation Arbitration Litigation 7-‹#› If a buyer or partner in another country refuses to keep their end of the contract, there are various options to enforce it. The first steps usually involve resolving the issue informally, if that fails the above three methods are options. 15 Conciliation Conciliation or mediation is a non-binding agreement between parties to resolve disputes by asking a third party to mediate differences. Discussion between parties and mediator are confidential and statements made by either party may not be used in future litigation or arbitration. It is not legally binding.
  • 85. 7-‹#› Conciliation is considered especially effective in resolving disputes with the Chinese as it is non-threatening. 16 Arbitration Parties select a disinterested and informed party as a referee to determine the merits of the case and make a judgment both parties agree to honor. 7-‹#› Most arbitration is conducted under the auspices of one of the more formal domestic and international arbitration groups. These groups have formal rules for the process. In most countries, decisions reached in formal arbitration are enforceable under the law. 17 Litigation Fear of creating a poor image Fear of unfair treatment in a foreign court Difficulty in collecting a judgment Cost and time Loss of confidentiality
  • 86. 7-‹#› Litigation is the last resort and not a preferred option in most disputes, especially in countries where it considered public humiliation. For all of the above reasons, disputes are best resolved through conciliation or arbitration. 18 Protection of Intellectual Property: Counterfeiting and Piracy Firms spend millions of dollars establishing brand names or trademarks to symbolize quality and design only to be counterfeited and pirated Piracy and counterfeiting leads to lost sales from the unauthorized use of U.S. patents, trademarks, and copyrights which amount to about $60 billion annually as well as lost jobs Counterfeited pharmaceutical drugs can also lead death and bad publicity 7-‹#› Counterfeit products such as Rolex watches are very common in many countries, China and India being top on the list. Pirated music CDs, movies and books are some of the products commonly counterfeited. In the country of Turkey for example, there are stores that officially call themselves “Genuinely Fake” and sell counterfeit products. Piracy and counterfeiting causes losses in sales and profits for companies. However, some companies take a different approach; Microsoft’s Bill Gates states that he would rather have the Chinese copy MS products, because some day technology will force them to purchase some of the products and if one is familiar with MS, that’s the
  • 87. product consumers will choose to purchase. 19 Intellectual Property Rights: Inadequate Protection There is inadequate protection from products being counterfeited or pirated as many countries do not recognize trademarks and patents registered in other countries 7-‹#› Not only is there inadequate protection for trademarks or brands, others in the country can register and have rights to a brand like McDonald’s or Coach and there is no legal protection. However, it is better today when companies are refusing to pay billions of dollars to get their trademark back from squatters, they give it up as there is no benefit to them. 20 In the United States, a common-law country, ownership of intellectual property rights is established by prior use In many code-law countries, ownership is established by registration rather than by prior use For example, a trademark in Jordan belongs to whoever registers it first in Jordan so there are “McDonald’s” restaurants, “Microsoft” software, and “Safeway” groceries all legally belonging to a Jordanian Intellectual Property Rights: Prior Use vs. Registration 7-‹#›
  • 88. As mentioned in the previous slide, in code law countries, individuals can register a trademark (however famous the brand is) and sit ion it and demand payment from the multinational company to release the trademark. A case in point is Starbucks Coffee when it first entered Japan, all of it’s Seattle theme, logo, colors and men u items were registered by Morinara Coffee. Starbucks fought its battles in court but to no avail and therefore had to change it’s usual menu, colors and most everything in order not to violate Morinara’s registered trademark! 21 International Conventions Many countries participate in international conventions designed for mutual recognition and protection of intellectual property rights The three major international conventions include: The Paris Convention for the Protection of Industrial Property, commonly referred to as the Paris Convention, includes the United States and 100 other countries The Inter-American Convention includes most of the Latin American nations and the United States. The Madrid Arrangement, which established the Bureau for International Registration of Trademarks, includes 26 European countries. 7-‹#› The World Intellectual Property Organization (WIPO) of the United Nations is promotes the protection of intellectual property and for the administration of the various multilateral treaties through cooperation among its member states. The Patent Cooperation Treaty (PCT) facilitates the patent
  • 89. application process among its member countries. The European Patent Convention (EPC) has a regional patent system that allows any nationality to file a single international application for a European patent. The side agreement of the WTO called TRIPS (Trade Related Aspects of Intellectual Property Rights) is one of the most comprehensive treaties that details intellectual property right protection in member nations. 22 Other Managerial Approaches The traditional, but weak remedies for American companies operating in countries such as China are several prevention, that is, engage local representation and diligently register IP with the appropriate agencies pursue negotiation and alternative dispute resolution complain to the Chinese authorities complain to the U.S. government and World Trade Organization (WTO). Multinational companies such as Microsoft, Philips and warner Brothers are coming up with other alternative approaches based on the factors that motivate consumers to engage in piracy 7-‹#› Microsoft: If they steal I want them to steal my product philosophy that paid off when Bill Gates legally signed a deal with Lenovo in 2006 for all Lenovo computers to come with MS products. Philips: Engages in an open innovation policy Warner Brothers: Engages in “charge what the market will bear” policy It seemed to work for all three of these companies.
  • 90. 23 Cyberlaw: Unresolved Issues 7-24 Existing internet law is vague or does not completely cover such issues as the protection of domain names, taxes, jurisdiction in cross-border transactions, and contractual issues ` The European Union, the U.S. and many other countries are drafting legislation to address the myriad legal questions not clearly addressed by current law Laws being considered deal with Cybersquatters—those who buy and register descriptive nouns, geographic names, ethnic groups, pharmaceutical substances and other similar descriptors and hold them until they are sold at an inflated price No other issue in e-commerce concerns the collection of taxes on sale of products, i.e., when taxes should be collected, where they should be collected, and by whom, are all issues under consideration by countries around the world
  • 91. Cybersquatting The practice of registering a domain name that is the trademark of another person or company Cybersquatters hope that the owner of the trademark will pay huge dollar amounts to acquire the URL Some Cybersquatters misrepresent themselves as the trademark owner for fraudulent purposes Microsoft.pt, Yahoo.pt, Altavista.pt, Shop.pt, Shopping.pt! 7-‹#› Cybersquatters register a well-known brand or trademark that misdirects a person to the CSQ’s site or to a competing company’s site. They also register the domain names of famous companies such as Microsoft in Portugal hoping to extort money from the multinational company. In the case of Microsoft in Portugal, Microsoft decided to register a new name Microsoft1.pt and informed all its customers that this was the company’s actual site and the CSQ gave up the domain. 25 Taxes A typical tax system relies on knowing where a particular economic activity is located But the Internet enables individual workers to operate in many different countries from a computer When taxes should be collected, where they should be collected, and by whom are all issues under consideration by countries
  • 92. around the world. 7-‹#› In the past, a company was deemed to have a taxable presence in a country if it had a permanent establishment there. But whether the existence of a server or a website qualifies as such a presence is not clear. One proposal that has enthusiastic support from tax authorities is for servers to be designated as “virtual permanent establishments” and thus subject to local taxes. On another note, the U.S. government is trying to impose a tax on consumers for all internet purchases. For example, if a consumer that lives in a State that has Sales Tax, but shops online from a state with no Sales Tax, the appropriate taxes would be levied on the citizens come the end of the calendar year. 26 Jurisdiction of Disputes and Validity of Contracts Since existing laws relating to commerce do not always clearly address the uniqueness of the Internet, a body of cyberlaw is being created. Two of the most troubling areas are: determining whose laws will prevail in legal disputes between parties located in different countries establishing the contractual validity of electronic communications 7-‹#›
  • 93. Cyber business makes it difficult to enforce anything in case a dispute arises. A body of law is being compiled based on experiences and past practices. 27 Commercial Law within Countries: Marketing Laws When doing business in more than one country, a firm must comply with different marketing laws All countries have laws regulating marketing activities in promotion, product development, labeling, pricing, and distribution channels In Austria, premium offers, free gifts, or coupons are considered as cash discounts and are prohibited Premium offers in Finland are allowed as long as the word free is not used French law permits sales only twice a year, in January and August 7-‹#› Each country has its own marketing laws that the international marketer needs to comply with and be aware of. One of the most common regulation in advertising is a ban on comparative advertising. 28 Patent Law USA Operates under “first to invent” rule Protects individual inventors
  • 94. Patent applications secret Patents granted in up to 24 months Patents valid for 17 years from application date issued Japan Operates under “first to register” rule Promotes technology sharing Patent applications public Patents granted in 4 to 6 years Patents valid 20 years from application date issued 7-29 U.S. Laws Apply in Host Countries Leaving the boundaries of a home country does not exempt a business from home-country laws What is illegal for an American business at home can also be -illegal by U.S. law in foreign jurisdictions for the firm, its subsidiaries, and licensees of U.S. technology 7-‹#› U.S. companies operating overseas are still bound by U.S. Law, particularly the three specified in the following slide. 30 U.S. Laws Apply in Host Countries 7-31
  • 95. (1) Foreign Corrupt Practices Act (FCPA) Makes it illegal for companies to pay bribes to foreign officials, candidates, or political parties U.S. firms, their foreign subsidiaries, or foreign firms that are licensees of U.S. technology cannot sell a product to a country which could affect national security of the U.S. (2) National Security Laws The control of the sale of goods that have a strategic and military value was prohibited to communist countries that were viewed as major threats to U.S. security (3) Antitrust Laws Protects American consumers from actions that restricts competition Protects American export and investment opportunities against any privately imposed restrictions to compete on merit Stiff penalties can be assessed against company officials found guilty of paying a bribe
  • 96. The END. The Political Environment: A Critical Concern Chapter 6 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Sovereignty of Nations A sovereign state is independent and free from all external control enjoys full legal equality with other states governs its own territory selects its own political, economic, and social systems and has the power to enter into agreements with other nations.
  • 97. Sovereignty refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members 6-‹#› A citizen is subject to the state’s laws even outside the country’s borders. Nations can and do abridge specific aspects of their sovereign rights to coexist with other nations. The European Union and NAFTA are examples of agreements between nations to give up their sovereignty for free trade and other common benefits. Some countries view the WTO as a threat to sovereignty, the fear of relinquishing their nation’s rights for a common goal that might not benefit them or be detrimental to their goals. Foreign investment is also viewed as a threat to sovereignty, for example it took many years after the NAFTA was passed for the Mexican government to allow foreign companies to invest in the energy and banking sectors which were government controlled monopolies until then. 2 Stability of Government Policies Radical shifts in government philosophy can occur when: An opposing political party ascends to power Pressure from nationalist and self-interest groups Weakened economic conditions Bias against foreign investment or conflicts between governments 6-‹#›
  • 98. For foreign firms, the ideal situation is a stable government in the country they are operating in. Unfortunately, this is not always the case. A change in government, whether by election or coup, does not always mean a change in the level of political risk. Conversely, radical changes in policies toward foreign business can occur in the most stable governments as well (Coke in India is an example). The political changes in Mexico in 2000, a change after many years of the PRI party to the PAN party helped open up the Mexican market to foreign investment and a more liberal government trade policy. The newly elected President of Mexico in 2012, Enrique Peña Nieto is planning a major upgrade of the 1994 U.S.-Canada-Mexico free trade deal, that is, he wants NAFTA to expand just beyond the current three country deal if this region is to compete effectively with China and its neighboring countries. He is also proposing greater collaboration with the United States. 3 Instability of Governments and Policies: Political Reasons Some forms of government seem to be inherently unstable Changes in political parties during elections can have major effects on trade conditions Nationalism Animosity targeted toward specific countries Trade disputes 6-‹#› Instability can be caused for various reasons, some governments are inherently unstable. An example would be where there are too many political parties that a coalition government has to be formed and is weak and therefore can be ousted by opposition
  • 99. parties. India and Italy are prime examples of coalition governments that have been unstable. When Lucent Technologies sold cellular phones for the first time in India many years ago, they had a huge sale of cell phones that resulted in millions of dollars. However, within six months of this, the Indian government changed and the new political party in power imposed a special tax on all cell phone owners, and this resulted in many giving up their cell phones. The current government in India has a liberal policy on cell phones and therefore there is once again a large penetration of cell phones in the country at all economic and social class levels. Being very nationalistic can be a reason for instability as well as having historical feelings of dislike towards certain countries can lead to specific policies. And, as described at the beginning of the chapter, trade disputes such as the banana wars can lead to specific policies as well. 4 Forms of Government Democracy or market directed government ideology Communist governments Theocratic Republic Islamic Law countries where political parties can exist but have little power The religious leader controls government and all governmental decisions 6-‹#› The form of government greatly dictates the extent of government interference in business activities. Most governments in the world are democracies that allow participation of the country’s citizens in electing their leaders.