international marketing I(powerpoint).pptx

Well come to the course
international marketing
OROMIA STATE UNIVERSITY
Department of Business Management
&Entrepreneurship
Course outline

Course Overview
Basic concepts of international
marketing and its environment;
Relationship between international
marketing and international trade;
theory of comparative advantage;
world trade situation and
international marketing, analysis of
marketing across national trade
5/18/2024
2 Department of BME,set by Lemmi Tafa(MA)

Continued …
 applications of marketing principles to
international marketing, analysis of
marketing across national boundaries,
different levels of international marketing
involvement; marketing-mix element
decision in international marketing process
of practical international marketing;
Opportunities and challenges of
international marketing( Globalization) for
Developing Countries like Ethiopia
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General information
Course: agricultural entrepreneurship (BME-342) ,
credit hrs=03 ,or contact hr
Name of the instructor:-Lemmi Tafa (MA)
Day= Wednesday 11:50-2:50 Place=PSCO
,Room=
Prerequisites =understanding of principle of
marketing.
Office hours for the student =Mon and Fri day
Tel.No =0911757577.0919266979, email. address
= mesilemmi@gmail.com, lammumma
@yahoo.com office phone= 5/18/2024

Policy statement
student should respect the rule,
Law and procedure of the college.
they are free from any
academic offense i.e cheating,
plagiarism , dalliance in attending
the class and in submitting any
project and assignment
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Learning outcome:
 at the end of this course student should be
able to understand the concept and
definition of the international market and
have to relate the theoretical aspect with
their environmental experiences. Specifically
after completing this course the students will
be able to:
 Understand what differentiate international
marketing from domestic marketing
 Take an informed view of the international
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Cont…
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Department of BME,set by Lemmi Tafa(MA)
7
 Know and make use of the various techniques,
models, strategies and factors affecting decision
making in international marketing
 Express a reasoned view about the importance and
benefits of coordinating international marketing
activities and processes
 Define marketing and identify marketing
management philosophies.
 Identify the marketing environment and describe
their influence on marketing activities.
 Understand the nature of consumer and business
markets.

Course content
Chapter 1- Introduction
 1.1 International marketing
 1.2. Why Internationally?
 Chapter 2. Economic Environment
 2.1. Picture, composition and pattern of world
trade
 2.2 International trade theory and balance of
Payment
 2.3. Commercial policy
 2.4. Institutions in the world economy and
emerging markets 5/18/2024

Cont..
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9
 Chapter 3. Cultural, political and Legal Environment
 3.1. Cultural environment
 3.2. Political environment
 3.3 Legal environment
Chapter 4. International Product Policy
 4.1. Product
 4.2. Product strategies
 4.3. New product development
Chapter 5. Global Marketing strategy
 5.1. Process of formulating global Strategy
 5.2. Why should firm think globally?
 5.3. Global marketing strategies
 5.4. Alternative mark-entry strategy

Cont…
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10
Chapter6 Distribution in Foreign Markets
 6.1. Method of foreign market entry
 6.2. Managing foreign distribution
 6.3. Logistics for international market
Chapter 7 International Promotion
 7.1. Advertising
 7.1.1 Constraints on international advertising
 7.2 Personal selling
Marketing mix as a promotion

The instructional approach that will be
used in this course are
lecturing,:-delivered in the form of
interactive way
group assignment, project work, group
work: all the students are strongly
participated individually and in group
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Course materials:
:International Marketing materials or
document provided by the college
 Cateora, Philip. R and Graham, Jhon L,
International marketing, 1oth ed.
Terpastra, v. sand sarathy (2000) International
marketing 8th edition
Any other related journal and artclle related to
international marketing
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Assignment and evaluation
 Continuous assessment …………60%=
quiz(10%) regular test after every two
chapter (10%x3) assignment on project
preparation and business plan and class
participation (20%) Final Examination
=40% total =100%(It may be amended
and arranged as per the colleges
grading system and schedules
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April 08,2017
29/7/2009
5/18/2024

INTRODUCTION TO INTERNATIONAL
MARKETING
1.1 Marketing and Economic
Development
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 Marketing has arguably become the most
important idea in business and the most
dominant force in culture,
 Today mass media encapsulates our lives,
satellite Television, broadband internet
access, instant communication via web and
mobile phone, all of which mean messages
can reach you virtually any time and place..
 Marketing defined as a combination of
management tasks and decisions aimed at
meeting opportunities and threats in a
dynamic environment.. 5/18/2024

Cont…
Traditional Marketing: Marketing is
commonly misunderstood as simple as a
colorful term for advertising and
promotion.
 In reality however, it is far more than
that.
However, the term ‘marketing’ actually
covers everything from company
culture and positioning, through :
market research,
new business/product development,
advertising and promotion, 5/18/2024

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18
It is systematic attempt to fulfill
human desires by producing
goods and services that people
will buy.
It is where the cutting edge of
human nature meets the
versatility of technology.
Marketing-oriented companies
help us discover desires we

Cont…
Definition of Marketing: Marketing is
defined as the management process
responsible for
 identifying, anticipating and satisfying
customer requirements profitably’.
Thus marketing involves:
focusing on the needs and wants of
customers,
identifying the best method of satisfying
those needs and wants. ……(The
Chartered Institute of Marketing)
Nowadays, marketing is at the heart of the
financial success of any business, be it
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The reason why marketing ideas are
important for the economy is that

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A fundamental question is:
If governments can no longer fix
world markets,
nor guarantee national market
shares,
who decides
what the standards of quality,
service and value are?
Who decides
who wins and losses? The answer
is obvious: the customer. 5/18/2024

When we talk about new world
competitive order it becomes
obvious that customer choice,
preference and demand are its
exclusive driving forces
Peter Drucker put forward
similar sentiments forty years
earlier in an essay titled
"Markets and economic
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23
Drucker says that the development of
marketing,

therefore.
 Marketing ideas are important for the
economy:
 it is a source of competitive ability,
economic growth, and wealth
creation
 Marketing Idea:-economic development
is the result of
 purposeful,
 responsible,
 risk-taking actions of individuals as
managers and entrepreneurs? 5/18/2024

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1.3. The Difference between Domestic
and International Marketing
Domestic Marketing– Domestic
Marketing usually refers to any
International Marketing – is
marketing across national borders
that
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when a company moves from a domestic to
an international market there are two main
differences.
there are different levels at which
international marketing can be approached
and,
, the uncontrollable elements of the
marketing environment are more complex
and multidimensional given the multiplicity
of markets that constitute the global
marketplace.
In comparison with domestic markets, there
are many factors within the international

.
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Domestic Marketing International
Marketing
 Relatively Homogenous
culture and similar product
needs and desires
 Heterogeneous and Culture
often diverse and
multicultural markets
 Relatively smooth sales
transaction Processes
 The sales transactions need
somewhat very complex
processes
 The product Markets are less
widespread and not more
fragmented
 Markets widespread and
sometimes fragmented
 Relatively easy to obtain and
with least costs/ low expenses
 Data difficult to obtain and
often expensive

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 Politics: dealing with a single
country’s regime is more
manageable than dealing with
varying regime and
stability–political risks can be
easily forecasted before they
are happening
 Politics: regimes vary in
stability– political risk
becomes an important
variable
 The home country
Government often provide
supporting services for
domestic business instead of
strongly influencing and
strictly regulating domestic
business ventures
 Governments: can be a
strong influence in
regulating importers and
foreign business ventures

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31
 Economies: relatively similar levels of
development among regions of the
home country and similar and often
stable currencies
 Economies: varying levels of
development and varying and
sometimes unstable currencies
 Finance: single finance system, and
same financial policy as well very few
regulatory bodies
 Finance: many differing finance
systems and regulatory bodies
 Stakeholders: commercial, and home
country
 Stakeholders: commercial, home
country and host country
 Business: a single country’s business
rules, and cultural homogeneity
 Business: diverse rules, cultural
heterogeneity/ culturally influenced
 Control: Relatively easy to control and
coordinate across local markets.
 Control: difficult to control and
coordinate across markets.
 Markets are somewhat narrowed and
less fragmented
 Markets are widespread and
sometimes fragmented

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 Research has revealed a number of
factors favoring faster
internationalization: (3)
 1) Companies with either high-
technology and/or marketing-based
resources appear to be better
equipped to internationalize
 2) smaller home markets and larger
production
 3) firms with key managers well
networked internationally are able to

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 Companies can be described by one of
three orientations to international
marketing management: (3)
1.
)
The domestic company that seeks
sales extension of its domestic
products into foreign markets
It views its international operations
as secondary
The primary motive is to dispose of
excess domestic production.

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Domestic business is its priority
foreign sales are seen as a
profitable.
the orientation remains basically
domestic.
The firm’s orientation is to market
to foreign customers in the same
manner
It seeks markets where demand is
similar to the home market
its domestic product will be

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35
Markets are vastly different
they may be, depending on the
product) ,
market success requires
independent program for each
country.
Firms with separate marketing

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36
Subsidiaries operate
independently of one another in
establishing marketing objectives
and plans.
Separate marketing mixes with
little interaction among them.
 Products are adapted for each
market with minimum
coordination, Advertising

3. Global Marketing Concept
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 A company guided by this new
orientation or philosophy is generally
referred to as a global company,
 Its market coverage is the world.
A company employing a Global
Marketing Strategy strives for
efficiencies of scale by :-
developing a standardized product
dependable quality, to be sold at a
reasonable price to a global market.

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Regiocentric & Geocentric. With
this orientation a company attempts
to
standardize practical on a world-
wide basis.
Some decisions are viewed as
applicable worldwide or local
influence ,
The world as a whole is viewed as
the market and

1.4.2. How a firm involve in outside its
country markets?
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Methods of Involvements in
international Markets
As transnational, multinational,
international traders, exporters,
etc.
 There are a variety of stages in
the process of becoming involved

marketing in
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40

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41
: which involves
the company manipulating a series of
controllable variables such as
price,
advertising,
distribution and
the product/service attributes
a largely uncontrollable external
environment that is made up of different
economic structures, competitors,
cultural values and legal infrastructure

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42
which
involves operating across a number
of foreign country markets in which
not only do the uncontrollable
variables
differ significantly between one
market and another,
but the controllable factors in the
form of cost and price structures,

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43
 3. it is a larger and
more complex international operation. Here a
company
 coordinates,
integrates and
controls a whole series of marketing programmes
into a substantial global effort.
The primary objective of the company is to achieve a
degree of synergy ,by taking advantage of different
exchange rates,
tax rates,
labor rates,
skill levels and
market opportunities,
the organization as a whole will be greater than the

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International marketing manager
has a dual responsibility;
foreign marketing (marketing
within foreign countries) and
global marketing (co-coordinating
marketing in multiple markets in
the face of global competition).
: in which case the
firm markets its goods and/or
services across national/political
boundaries.

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45
 is in which the
whole organization focuses on
the selection and exploitation of
global marketing opportunities and
 marshals (arrange) resources
around the globe with the objective
of achieving a global competitive
advantage.

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The world is seen as a market
segmented by
social,
 legal,
economic,
 political and
technological environmental
factors groupings

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Note: At the global marketing
stage,
companies treat the world,
including their home market, as
one market.
Market segmentation decisions
are no longer focused on national
borders.
Instead, market segments are
defined by :

The stages of international marketing
involvement:
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 There are a variety of stages in the
process of in
international marketing.

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49
The rationales ( underlying principles/
basis/foundation) of Involving in
International Markets
What makes International
marketing so important?
Why a firm goes to the
international Markets?
Please try to identify a few major
reasons for one firm to go to in
other countries’ markets.

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The emergence of new product market
opportunities in other countries or outside
of home market
Relatively high abundance of resources
(material and non-material resources) and
cheap costs of resources in other countries
The existence of relatively smooth and
friendly business climate (business
policies, laws and regulations, etc) when
comparing to a particular firm’s home country.
The various investment incentives provided
by different host countries’ government.

Forces of Internationalization and
Globalization
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 The following factors can be taken as few of the
majored forces of international and global marketing:
The convergences of societies’ needs and desires
living in different countries towards the same product
The provision of standardized products are less
costly than the provision of custom made products
across different countries’ markets
The production of standardized products with slight
quality differences produced by different companies
residing/exixting/ in different counties of the world.
The advancement of transport and communication
technologies for convergence/meeting/ of different
countries on the glop which is merely into one global
village-this is called globalization and hence contributed
today’s market globalization

The Benefits of International Marketing
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 The following are some of the major benefits of
international trade:
 Increased sales. Because of the size of the global market,
selling internationally offers considerably more sales
opportunities than the domestic market.
 Increased profits. offer greater profit opportunities because the
product competes very successfully in a niche area or is unique
in some way. However, more often than not, the profits available
in international markets are less than in domestic markets
because of the competitive nature of the global market.
 Reduced risk. By selling in more than one market,
organizations can reduce their overall risks because should
something go wrong in one market (an economic slump, for
example),
 Lower unit costs. Selling a greater number of items across a
number of different markets means that the overall cost of
producing a single item drops (in other words, the cost per unit
falls).

Cont…
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53
Reducing seasonal fluctuations. In the case of
swimwear which sells better in summer months than in
winter months. By selling these products in the northern
hemisphere, which has opposite seasons to South Africa,
Extending the product life cycle. When product come to
the end of its life cycle, it may be possible in some cases,
to extend the life cycle, by exporting the product to one or
more countries where the product may gain a new lease of
life.
Improve efficiency and product quality. The competitive
nature of these markets forces the exporting company to
improve its overall competitiveness; it becomes more
efficient and adheres to higher quality standards, thus
improving its competitive position not only in foreign
markets, but in the domestic market as

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 Untapped markets. A company may have a
unique product that is not yet available
elsewhere in the world. In this instance,
untapped markets are likely to drive the firm’s
international marketing activities.
 By gain access to foreign funding ;at interest
rates that are much lower than in South
Africa.
 Status as an international marketer. For
some companies, the status of being involved
in international trade is very important to

The Challenges of International Marketing
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The primary obstacles to success in
international marketing are a person's self-
reference criterion (SRC) and an
associated ethnocentrism.
The SRC is an unconscious reference to
one's own
cultural values,
experiences, and
knowledge as a basis for decisions.
Our reaction, is based on meanings, values,
symbols, and behavior relevant to our own

Cont…
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Avoiding Errors International
Business Decisions:
The most important step in international
business decisions is
defining the business problem or goal in
home-country cultural traits, habits, or
norms is the first step provided in the
analysis framework to avoid errors in
business decisions owing to SRC.
Not only are the environments different,
but governments often taking deliberate

Process
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 The international marketing process comprises of
five steps which marketers have to take as part of
their integrated marketing effort:
1. Situation Analysis:
Situational analysis is a thorough analysis of the
situation in which the firm finds itself it serves as
the basis for
 identifying opportunities to satisfy unfulfilled
customer needs.
 understand its own capabilities and the
environment
viewed in terms the analysis of:
The external environment :-described in terms of
macro environmental factors that broadly affect
many firms,

Cont..
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58
It should include past, present, and future
aspects.
It should include a history outlining how
the situation evolved
If the situation analysis reveals gaps
between what consumers want and what
currently is offered to them,
then there may be opportunities to
introduce products to better satisfy those
consumers.
situation analysis should yield a summary
of problems and opportunities..
There are several frameworks that can be

cont..
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 5CAnalysis - company, customers, competitors,
collaborators, climate. Company represents the
internal situation; the other four cover aspects of the
external situation
 PESTEL analysis - for macro-environmental political,
economic, societal, and technological, ecological and
legal factors. A PESTEL analysis can be used as the
"climate" portion of the 5C framework.
 SWOT analysis - strengths, weaknesses,
opportunities, and threats - for the internal and external
situation. A SWOT analysis can be used to condense
the sitrelevant problems and opportunities uation
analysis into a listing of the most and to assess how

2. Strategy Formulization for a Value
Propositioning:
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Once the marketer has identified the
potential opportunities in the first step now
is the time to select the groups of potential
international customers (target markets) to
whom to sell the products or services.
The marketing strategy then involves:
Segmentation
Targeting (target market selection)
Positioning the product within the target
market

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 To explain it more, this step involves
 identifying the potential buyers, demand
measurement & forecasting, market
segmentation, market targeting & market
positioning.
 Segmentation involved identifying groups
of potential customers from the total
potential market that are homogeneous on
certain aspects of identity and behavior
and are heterogeneous on the same
aspects from others in the target
population. This step selected target
customers and on what aspects to

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This requires the firm to adopt a
coherent and appropriate logic or
strategy to
direct and control the alignment,
coordination and
optimization of its business and
marketing effort.
Porter has concluded that
successful firms have adopted one
of the three strategies, i.e.,
1.Cost
2 leadership, 3. differentiation or

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Other scholars have identified that
successful firms adopted strategies that
were aligned with their market position,
i.e., 1. market leader, 2. challenger,3
follower & niche strategies.
 Other researchers have asserted that
firms have achieved success in markets
through adopting on of the three value
discipline strategies, i.e.,
1operational excellence,
2.customer intimacy or

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The fourth step in the marketing process is
developing the international marketing mix,
product, place, price & promotion.
 Marketing mix identifies four key areas for
developing a well-coordinated marketing
strategy.
To create a strong marketing impact a firm
needs to develop appropriate programs in
these four key areas
also need to ensure that all these four aspects
of a firms marketing program are well
coordinated and in conformity with each other

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Developing a good marketing program is
not good enough for success.
A firm also needs to manage the
international marketing effort properly. Quite
often firms fail not because they did not
have a viable marketing program,
They failed in properly implementing their
well-designed plans.
Firms also need proper analysis, planning,
implementation and control of their
marketing program.

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Most of the firms are eyeing at the global
marketplace to improve their
competitiveness.
They must consider both – external
environmental forces and internal
organizational factors, before they arrive at
an international marketing strategy.
 2.1.1.Understanding of Global Trends World
trading patterns:
According to Theodore Levitt (1983), new
commercial reality – the emergence of global

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Population growth and increased
affluence /wealth, riches, prosperity/ together have
helped create a ‘ global youth culture’
– teenagers now account for 30 per
cent of the population globally.
In many countries, more than half the
population is pre-adult, creating one
of the world’s biggest single markets,
the youth market.
When ‘virtual reality’ is commonplace,

cont…
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 The global marketplace is no longer the summation
of a large number of independent country markets
 but much more multilateral ( many sided, joint, mutual) and
interdependent, economically, culturally and
technically..
 The combination of all these forces has meant that
all companies need to develop a marketing
orientation which is international in nature and
 that companies need managers who have the skills
to analyze, plan and implement strategies across
the globe.
 It is for these reasons that international marketing
has become such a critical area of study for
managers and an important component of the

Cont…
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The international environment is
commonly divided into at least
Four different sub-categories
the socio-cultural environment,
the legal environment,
the economic environment, and
 the technological environment”.
(Political environment)

Awareness …
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The Two Main Dimensions for
Global Awareness or the
mechanisms for developing a global
awareness.
(1)Tolerant of Cultural Differences,
and
(2)Knowledgeable of: (a) Culture, (b)
History, (c) World Market Potential,
(d) Global Economic, Social and

Understanding the Stages of International Marketing
Involvement-
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 five different phases in going international:
1) The first phase includes those domestic firms
which have no foreign business activity
except those sales made to foreign customers
who come directly to the firm.
2) The second phase includes domestic firms
which have temporary surpluses which are
sold abroad. or no intention for continuing
market representation.
3) The third phase includes the domestic firms
that have permanent productive capacity
which is utilized to produce goods which are
sold on a continuing basis in foreign markets.
4) The fourth phase includes the international
company that produces a product for the

Conditions that have led to the development
of global markets:
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 According to Professor Levitt
1) new communications technology, travel
and other factors
2) segments that have had similar
experiences and have common needs.
3) These common needs are described as a
demand for high quality, reasonably priced,
standardized products.
4) There is a strong feeling that within each
country’s market-
5) There is a strong feeling that being driven
toward a converging commonality of taste
and needs leading toward global markets.


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Difference between a global
company and a multinational
company :
“Global company assumes there are
segments across countries which
have
the same needs and wants and
designs a standardized,
high quality,
reasonably priced product for those
segments and markets

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 “Multinational company operates:-
in a number of countries and adjusts
its products and marketing practices
for each market.
The multinational company has a
specific marketing plan and adapts
products for each country market.
The philosophy for the multinational
company is that there are cultural
differences among countries that
require specific adaptations for those
markets”

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international marketer has an
understanding of
the trend in economic and financial
understanding important world level
in terms of :
world trading infrastructure ,
world institutions and
 trade agreements developed
 regional level
regional trade integration and at a

2.1.3.1.The Trend in Economic
Development
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A country’s economy and the factors that
affect the economy may have a dramatic
impact on the successful export of goods to
a particular country.
Factors:
The general economic outlook, :-is the
economy expanding or contracting;
The size of the economy, measured by the
country’s gross domestic product (GDP), as
well as the size of the population;
Disposable income (how of the income that
citizens receive is available for spending
after income tax has been deducted);

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The GDP per capita income (in other
words, the income of the country
shared among its citizens; this
provides a good indication of how
well-off the average citizen is);
Demographic variables, including
gender,
race,
religion and
education comparisons;

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Employment levels- (do people have
jobs in order to afford to buy your
products);
The distribution of income (is it
evenly distributed or are there
distinct groups of very wealthy
and very poor citizens);
Competitive and complementary
products, highlights the potential
market that already exists in a
country (this would include the size
and distribution of competing firms);

Cont…
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The political and economic environments
are greatly intertwined and, sometimes,
difficult to categories.
It is important, that a firm operating in
international markets assesses the
countries in which it operates .
Firms need to be aware of the economic
policies of countries and the direction in
which a particular market is developing
economically
To make an assessment as to whether
they can profitably satisfy market demand

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Challenges and problems in
International Marketing:
how they can develop an integrated
strategy across a number of
international markets
when there are divergent levels of
economic development. Such
disparities often make it difficult to
have a cohesive /unified, solid/ strategy,
especially in pricing.

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economic situations and
how they affect business operations, about
products and services
how they vary over time,
how they can be produced efficiently, about
monetary policies and governing bodies of
financial intuitions and
what regulates financial resource
availabilities,
how it produces profit,
how their policy affects business operations,

Cont…
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Economic Classification and
analysis of Countries of the
World:
Another economic challenge for
a firm in international markets is
the economic
development
disparities among different

Cont…
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 The usefulness of economic
classification of countries for
International Marketing.
the
leading economies that include the
developed economies of :-
the North American Free Trade Area
(NAFTA),
European Union (EU) and Japan account
for 80 per cent of world trade.
 In the European Union nearly 70 per cent
of the international goods traded are
traded within the European Union;
 in NAFTA, 50 per cent of goods exported

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in
countries such as Brazil, Russia, India
and China, (the BRIC economies)
there is a huge and growing demand
for everything from automobiles to
cellular phones and all are viewed
as key growth markets where there
is an evolving pattern of
government-directed economic
reforms, lowering of restrictions on

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All these emerging economies herald
significant opportunities for the
international marketing firm.
Such markets often have what is termed
as a ‘dual economy( imbalance b/n economic sectors)=
economies in different sectors are growing at different rates).
Income distribution tends to be much
more skewed ( uneven , unsymmetrical)) between
the ‘haves’ and the ‘have not’s than in
developed countries.
From negligible numbers a few years
ago, China now has a middle class of

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this
group includes underdeveloped countries
and fewer developing countries.
 The main features are a low GDP per
capita,
 a limited amount of manufacturing
activity and a very poor and fragmented
infrastructure.
 Typical infrastructure weaknesses are in
transport, communications, education and
healthcare.

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 It is common to find that less developed
countries (LDCs) are heavily reliant
/dependent/ on one product and often on one
trading partner.
 In many LDCs this product is the main export
earner.
 In Angola, for instance, the sole export is
oil and
 in the Sudan oil accounts for 99 per cent
of their exports.
 In addition, three-quarters of LDCs depend
on their main trading partner for more than
one-quarter of their export revenue.

Cont…
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The strategic market
implications of the economic
classifications of countries of
the world.
What do you think about the
strategic marketing implications
of classifying countries of the
world into the Developed
Economies (DEs), Emerging

Cont…
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2.1.3.2.The Trend in International
financial System
Whilst we have examined economic
factors within markets, we also need
to bear in mind that in international
marketing transactions invariably
(always, habitually) take place between
countries,
so exchange rates and currency
movements are an important aspect

Cont…
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 World currency movements, stimulated by
worldwide trading and foreign exchange
dealing, are an additional complication in the
international environment.
 In Europe, the formation of the European
Monetary Union (EMU) and the
establishment of the Single European
Payments Area (SEPA) have led to greater
stability for firms operating in the market.
 The formation of the European Monetary
Union and the introduction of the single
currency across Europe have had important
implications for company strategies

Cont…
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A. Exchange rate systems
 Exchange rate is the price of one country’s
currency in terms of another country’s
currency.
 Three types of exchange rate systems are
give in the following;
1) Fixed exchange rate system (the exchange rate
is fixed)
2) Flexible (floating) exchange rate system (the
exchange rate is determined by market forces
and changes freely)
3) Managed exchange rate system (the exchange
rates are allowed to move only within limits

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B. Price Logic Dominates-Reverse PPP
Prices need to be established in the
context of local consumers’
purchasing power, rather than in
relation to international standards.
Purchasing Power Parity (PPP)
exchange rates estimate the value of
a currency in terms of the basket of
goods.
It buys (compared with the cost of a
similar basket in a reference country
and currency) rather than in terms of

Cont..
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By this measure, most emerging
market currencies are severely
undervalued relative to hard
currencies,
This meaning that they actually
buy more than one would expect,
given the market exchange rate.
 International firms are attracted to
many emerging markets precisely

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Fixed exchange-rate system Flexible exchange-rate
system
Pros Cons Pros Cons
– Reduces riskiness
of international
trade and it is
important anti-
inflationary tool
– Wide swings
(move forth and
back) in the
values of key
currencies can
disrupt/Disturb/
sound
international
– Represents
true state
of economy
– With BOP equilibrium,
domestic policy makers
can concentrate on
domestic economy

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 Factors influencing exchange-rates:
businesses in international markets are strongly
affected by exchange rates of host and home
countries’ currencies as well as with other
exchange rates.
The major factors that affect exchange rates are
discussed in the following:
1) Capital controls on any foreign currency would often work to
increase its exchange rate as its trading gets restricted.
2) Higher exchange-rate spreads (difference between buying
and selling rate of a currency) allows more flexibility to
buyers and sellers to change exchange rates.
3) Strong balance-of-payments statistics of any country affect
that country’s currency to strengthen.
Factors influencing exchange-rates:

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4. Higher foreign-exchange reserves of any country
influence that currency of that country to
appreciate in value
5. Direction and strength of economic growth
any country also affects its currency’s
exchange rates
6. Government spending increases money in
circulation and also affects growth ot certain
sectors of a country’s economy and may also affect
exchange rates.
7. Relative inflation rates (purchasing power parity -
higher relative inflation leads to lower purchasing
power of currency & hence lower exchange value)
also affect exchange rates with pressure on the
currency of the country with higher inflation to

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9. Interest-rate differentials (investors will
arbitrage to keep exchange rates in
equilibrium) also work like the relative inflation
rates in affecting the currency of a country.
10. Trends in exchange-rate movements also
impact the direction of exchange rate
movements, at-least in near-term future.
11. In time of economic turmoil in the regains of
the world investors move their capital in the
currencies that are strong (safe haven) and
with increasing demand their exchange rates
may increase.

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 Business implications of exchange rates: Changes in
exchange rates of international currencies impact
business decisions in many ways.
 Business Implications of Exchange Rates:
A. Marketing Decisions
Changes in exchange rates affect demand for products
(home & abroad)
Marketer may need to change prices of products and
services
B. Production Decisions
Changes in exchange rates may affect production costs in
various countries
C. Financial Decisions

Cont…
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 2.2.International trade theory and balance of
Payment
 the world economy and its interrelationship,
comparative advantage and essence and
advantage of economies of scale.
2.2.1.The Reasons Countries Trading Each
Other
1) To expand sales of the firm
2) To acquire resources / technology / skills from
foreign countries
3) To diversify their sources of sales and supplies
4) To capitalize on incentives from governments,
local and foreign

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Reasons for recent growth of business in international
markets:
 International business has increase on a rapid
pace, especially after the 2nd world war of
1940’s.
1) Expansion of technology that results in a
quicker and cheaper transportation, and
communications enable controls from afar
2) Liberalization of cross-border movements of
goods, services and factors of production,
such as labor, capital and technology etc.
3) Development of supporting institutional
arrangements for international exchange of
goods and funds

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4. Increase in global competition forcing
firms to expand in international markets
5.Support from national governments for
internationalization of local firms and for
attracting foreign direct investments.
6. Growth of resources available to MNC’s
and with large pool of funds ands and
other resources firms could easily
expand businesses in world markets.

Cont…
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 Reasons for Internationalization:
1) Growth of the company
2) Access to new markets
3) Access to resources
4) Survival
5) Against competitors with lower costs (due to
increased access to resources)
6) Leveraging Key Success Factors Abroad
7) Follow Customers Abroad
8) Pursuing Diversification
9) Taking Advantage of Different Growth Rates of
Economies
10) Exploiting Product Life Cycle Differences
11) Internationalizing for Defensive Reasons

Cont…
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Means(ways) of Engaging in International
Markets:
1) Merchandise Exports and Imports:
Merchandise exports and import are tangible
products (goods) manufactured in one country and
sent out /brought in of that country to another one.
2) Service Exports and Imports: Service exports
and imports are international earnings that do not
come from a tangible product which physically
crosses a border.
3) Tourism and Transportation: When an American
flies to Germany on Lufthansa (a German airline)
and spends a few days in a German hotel, the
payments made to Lufthansa and the hotel are

Cont..
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4). Performance of Services: Fees in banking, insurance,
rentals etc., turnkey operations, management contracts
etc. When an American engineering firm receives a
payment for designing a plant in France, it is a service
export for the United States and a service import for
France.
5.) Use of Assets: International licensing agreements and
franchising allow foreign entities to use another firm’s
trademarks, patents, or technology. Payments for the
right to use these assets are a service export for the
country receiving those payments and a service import
for the country making the payments.
6.) Licensing: Use of assets such as trademarks, patents,
copyrights, or expertise under contracts

Cont..
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7. Franchising: Franchiser sells/leases the use of assets
and also assists the franchisee on a continuing basis in
operations
8. Investments: Foreign investment means ownership of
foreign property is exchanged for a financial return
(example, interest and dividends). It can be direct
investment or portfolio investment
9. Direct Investment: Foreign direct investment (FDI)
occurs when an investor gains a controlling interest in a
foreign company. That controlling interest can be 100% or
much less. Direct investment - with controlling interest (at
least 10% of voting or ownership control) such as wholly
owned, joint venture, mixed venture (when a government
joins as a partner), etc.
10. : Portfolio investment is a non-controlling investment . It
is usually a purchase of stock in a foreign company or

Cont…
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B. International Companies and Terms to Describe Them:
 The term “collaborative arrangements” between international
companies comprises
joint ventures,
licensing, and
manufacturing contracts.
“Strategic alliances” importance to the competitive viability
of one or more of the collaborating firms.
Multinational enterprise (MNE),
multinational company (MNC),
transnational company (TNC) organizations operating in
multiple countries
A “global company” tends to integrate its international
operations in order to efficiently produce a globally
standardized product.
A “multi-domestic company” tends to be locally responsive
and tailors its products to each national market where it
operates

Cont…
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2.2.2.Theoretical Background of International
Trade & Investment
Trade theories are essentially explanations of
business between domestic firms or regions, as
well as international firms.
They explain "multi domestic" investment and
intra-national trade.
Empirical studies have distinguished
international from domestic business strategies
and operations. The lack of a proper theoretical
focus has diverted the discipline from an
emphasis on policy and on conflicts and

2.2.2.Theoretical Background of International Trade &
Investment
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 A framework for constructing such a theory can be built on
existing

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A) Classical/traditional/ Country Based Theories
Exports spark /flash, a factor or device that act as stimulant/ additional
economic activity in domestic economy as
companies of country can expand their sales
and profits by selling to foreign markets.
Imports can pressure domestic economy as
foreign products flood domestic markets and
result in closing down of non-competitive local
businesses.
Some countries in the world are successful in
exporting manufactured and non-
manufactured goods as well as services to
other countries and have become prosperous.
While there are other countries that have ton
been so successful and hence have remained

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=B. Mercantilism
 This is an old 16th century economic
philosophy that attempted to explain
how countries may become
prosperous and strong.
 Salient /most important, main/ points of this
philosophy are in the following;
Country’s wealth is measured by its
holdings of gold & silver (reserves of
modern era)
Country’s goal should be to enlarge
those holdings

Cont…
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A country should then promote exports &
discourage imports - if exports are more than
imports foreigners have to pay the difference
in gold & silver
Today’s “unfavorable balance of trade” when
exports of any country are less than its
imports, is the extension of the same idea
With larger holdings of gold and silver kings
could have more wealth – and hence could
afford larger armies to expand kingdoms
This approach would make exporters happy
and domestic manufacturers of export
products would also be happy as their

Cont…
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 Arguments against ‘Mercantilism’
Approach are:
country more members of society are at loss
as export subsidy is paid by taxpayers and
import restriction leads to higher domestic
prices
In the age of imperialism the burden of the
subsidy was shifted to colonies
Mercantilism actually weakens a country as
the subsidized and protected export sector
fails to become efficient and the domestic
economy suffers to provide support to the
exports.

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Country’s real wealth is dependent on
production of goods & services rather
than accumulation of gold reserves
More wealth of more citizens will provide
more tax base & hence a wealthy king
Mercantilism causes inefficiencies,
some special interest groups may benefit,
reduces wealth of country as a whole
Free trade among countries enlarges a
country’s wealth (specialize in
production of some goods & services
while import others)

Trade Theory
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1) Trade should be greatest between
countries with the greatest difference
between them.
2) Gains from trade should be greatest
between countries with the greatest
differences.
3) Trade should cause countries to
specialize more in production and to
export goods distinctly different from
what they import.

Cont…
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5. Factor prices should be more similar
between countries with more liberal trade
policies between them.
6. Free trade should equalize factor prices
being countries with similar enough
relative factor endowments but not
between countries with very different
factor endowments.
7. Domestic interest groups should be
identified by factors rather than industries.
8. International investment should be stimulated
by differences in factor endowments.
9. International trade and international
investment should be negatively correlated.

C: Theory of Absolute Advantage:
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This theory was forwarded in
1776 by Adam Smith. The
Salient features of this theory
are in the following;
It advocates free trade among world countries
to maximize citizens’ wealth
Free trade enables a country to expand the
amount of goods and services available to it by
specializing in production of some goods and
services and trading of others
A country can have certain advantages over

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Natural advantage: climatic conditions,
natural resources, abundant cheap
labor-force etc
Acquired advantage: development of
product or process, skills development
etc
A country should export those goods
& services for which it is more
productive than others
Import those goods & services for
which other countries are more

Cont…
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Comparative Advantage and Gains
from
Trade Comparative advantage is one of
the most fundamental ideas in trade
theory.
Forwarded in early 19th century, the
theory of Comparative Advantage
resolves the above issue.
 A country should produce and export
such products where it has
comparatively more advantage and

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A country has comparative advantage in a
good if it has a lower opportunity cost of
producing the good than another country.
 Countries are expected to export goods for
which their autarky (economic self-sufficient) relative
prices are lower than other countries.
Countries gain from trade when they have
different autarky relative prices of goods.
The theory of comparative advantage is an
economic theory about the potential gains
from trade for individuals, firms, or nations that
arise from differences in their factor

Cont…
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D. Hecksher-Ohlin Theory
 One of the reasons why a country might have
comparative advantage in a good is that
 countries differ in their factor endowments.
There are two factors capital and labor.
The home country is the capital abundant one,
the one with more capital per unit of labor.
One of the goods is more capital intensive than
the other: it uses more capital per unit of labor
than the other good.
 Countries have access to same technologies -
factor endowments only deference between

Cont…
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 Under free trade, the capital abundant country
(home) is expected to produce relatively more
of the capital intensive good than the other
country.
 Capital abundant country (home) therefore is
expected to export the capital intensive good
if no strong bias in consumption.
 Owners of capital in the capital abundant country
(home) benefit due to seeing their rents rise
relative to prices of goods,
 As long as capital endowments in the two
countries are not too different and which good is
capital intensive is the same in both countries, the
wage and rent will be the same across countries

Cont.
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Salient Features of this Theory are:
 A country should produce & export those
goods & services for which it is relatively
more productive than other countries
 Implement concept of opportunity cost
(what a country gives up to get / produce
a certain good) in determining which
goods a country should produce
 Factor – Proportions concept (identifies which
products may offer comparative advantage to a
country)

Cont…
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E. Country Similarity Theory:
Most trade today occurs among
apparently similar countries
Same per-capita income
Similar infrastructure / distribution
systems
Same language / culture / religion /
tastes etc.
Similarity among countries on the
above aspects allows their products
and services to be sold easily in each

Cont..
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F. Modern Firm Based Theories
 Explore the firm’s role in promoting exports
and imports. These theories incorporate
additional factors i.e.,
 quality,
 technology,
 brand names,
 customer loyalty,
 product life-cycles etc. into explaining
success

Cont.
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G. International Product Life - Cycle
Theory:
 This theory attempts to explain the
impact of a product’s life-cycle stage
on flow of its trade (where a product
would be manufactured and where it
would be in demand).
 According to this theory shifts in
manufacturing and trade flow of a
product goes through four phases
 (New Product Stage, Growth Stage,
Mature stage, and Decline stage)

Pictorial Presentation of the Product Life
Cycle
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Cont..
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1. New product stage
 A product will be initially produced & sold mostly in the
country in which it is .
 For most advanced and technology products these will
initially be conceptualized in developed countries and
sold in these markets
2. Growth stage
 At the next stage, the market for the
successful product would start to
rapidly grow.
 In this stage the product would be produced
in the innovating and other industrial
countries – and sold in many industrial

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Mature stage
 product would become competitive and buyer would
become experienced.
• competitive pressured would require the
manufacturers to seek lower production costs.
• At this stage production of the products shifts from
industrialized countries to countries where costs are
lower – the innovating country may stop producing
& start importing

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Decline stage
 At this stage demand for the product declines,
especially in advanced countries, as other
more effective technologies and products are
introduced.
 At this stage production and market of the
product is mainly in less developed countries

Cont…
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H. Global Strategic Rivalry Theory
 This theory was forwarded in 1980 by Paul
Krugman. He studied firms that were
successful in competing in international
markets and concluded that;
I. Firms struggle to dominate world markets by
Owning intellectual property rights
Investing in research & development
Achieving economies of scale & scope
Exploiting the experience curve
Such firms could become more efficient with
time were able to succeed in international

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I. Porter’s Theory of National Competitive Advantage
ProfessorMichael Porter ,This theory was forwarded
in 1990.
According to Porter’s Theory of National Competitive Advantage succes
in international trade comes from the interaction of four country - and
firm - specific elements;
1. Factor conditions: abundance and quality of land, raw
materials, labor, capital, educational level of workforce, country’s
infrastructure etc. The factors that are need essentially for
producing certain products and services.
2. Demand conditions: large sophisticated domestic
market stimulated development and distribution of
innovative products which may also be exported –
most new innovative products are first developed by
firms for domestic markets and then sold in other
countries.

Cont..
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3. Related and supporting industries:
today most products require many
complex technologies for successful
manufacturing
Industries of any country that are successful
in international markets are the ones where
related and supporting firms are co-located in
proximity to allow effective and efficient
transactions and collaborations.
4. Firm strategy, structure &rivalry:
presence of a competitive domestic market forces
local firms to focus efforts in skills training,
strategizing and research and development (R&D)
that eventually shapes companies to reduce costs &
become competitive internationally.

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Trade is a powerful driver of productivity
growth through a dynamic process of market
competition, as it enables exporters to grow
and gain market share, while causing weaker
firms to shrink
Foreign Trade connects national economies
together. The reason for foreign trade is the
domestic production of certain goods is not
possible.
The economic relationships with other
countries are very important for all of us.
The export of the country’s goods and

Defining Foreign Trade
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Foreign Trade: by foreign trade we mean
a national economy’s cross-border traffic
in goods and services.
Import describes the importation of goods
and services from other counties.
Export is the exportation of goods and
services to other countries
In this connection foreign trade
encompasses both the purchase foreign
goods and services (import) as well as the
sale of domestic goods and services
abroad (export).

The Importance of Exporting:
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increase country’s economic growth
create better jobs
It diversifies a country’s economy
has significant positive effects on the
productivity, innovation, and R&D of the
exporting firms.
Exporting stimulates productivity growth
through scale economies, through learning,
and through re-allocation of resources
across products
Exporting stimulates innovation and R&D

The Importance of Importing
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Consumers gain from lower costs,
create essential competition for local
companies
Keep levels of prices and hence
inflation low as with open imports
prices of products
The balance of payments is a record
of all of the economic transactions
between residents of a country and

Cont…
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The current account is a record of all of the
recurring trade in merchandise and service,
between countries.
The capital account is a record of all long-
term direct investment, portfolio investment,
and other short- and long-term capital flows.
In general, a country accumulates reserves
when the net of its current and capital
account transactions shows a surplus;
Balance of payment:- the system of account
that record a nation’s international financial
transaction is known as Balance of Payment

Commercial policy and Government involvement
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Nearly all governments today play active
roles in their countries’ economies..
 government’s attitudes and policies
towards foreign business are its ideas
about how best to promote national
interest in light of the country’s
economic and political resources and
objectives.
Foreign products and investment seen to
be vital to the growth and development of
the economy. treatment from the
government in the form of the reduced

Commercial Policy
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Commercial policy: is the term
used to refer to government
regulations bearing on foreign trade.
The principal tools of commercial
policy are
tariffs,
quotas,
exchange control, and
administrative regulation (the

Barriers to world trade
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The different actions that governments
take to restrict trade with other countries
are referred to as trade barriers.
Imposition of import tariffs, import
licenses, quotas, subsidies, voluntary
export restraints, local content
requirements, standards, embargos,
labeling requirements and more.
 Trade barriers generally have the effect
of increasing the cost and hence the price

1. Tariff:-
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Tariff:- is a schedule of customer
duties levied on traded goods or
commodities as they pass over a
national boundary in order to enter a
particular country
The tariff regime applicable in a country
(developed countries generally have a
more open, less protectionist economy,
while emerging markets generally
protect their local economy more

Investment
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Strengthening the social networks which
underpin international trade and investment
flows,
Strengthening the internationalization
capabilities of innovative and high-growth
businesses;
Providing access to information and advice
which the private sector alone would not or
could not provide, both to inward investors
Facilitating beneficial co-operation among a
country’s international businesses, enabling
them to work together to overcome barriers and

Institutions in the world economy and
emerging markets
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1) The International competitive
landscape
2) International and Regional
Institutions and Their Impacts on
Trades
3) Rethinking Marketing Programs
for Emerging Markets
4) Africa as an Emerging Market

Cont…
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pattern of international competition
shifts towards
globalization,
 regional economic integration
In a global business industry, functions of
 finance,
marketing,
business and
 Government relationship change
according to global configuration and
co-ordination.

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A major difference for managers
operating on international markets is
 the impact all these currents and
cross-currents have on the
competitive landscape.
The task of achieving a competitive
environment where firms are subject
to local, regional and global
competition can be immensely
challenging..

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Across international markets,
advanced countries are seeing
significant competition from both
emerging markets and less developed
countries who are exploiting modern
technology and their own low labor
costs to compete in markets no longer
so protected by tariff walls..
Competitiveness depends upon
internal as well as external factors.

Cont…
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 Nine cross cultural management in
competencies are identified as core in
competencies which led to failure across a
spread of country markets and they are
defined as ‘the bundle of activities.
 The first three are interrelated and relate to
the failure to be market driven
1. Inability to find the right market niches.
2. Unwillingness to adapt and update
products to local needs.
3. Not having unique products that are viewed
as sufficiently higher added value by

Cont…
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1. A vacillating commitment. It takes time to learn
how to function in countries such as Japan.
2. Assigning the wrong people. Picking the wrong
people or the wrong top team in an affiliate.
3. Picking the wrong partners. There is a list of
difficulties in building alliances;
4. Inability to manage local stakeholders.
5. Developing mutual distrust and lack of respect
between HQ and the affiliates at different
levels of management.
6. Inability to leverage ideas developed in one
country to other countries worldwide.

2.4.2. International and Regional
Institutions and Their Impacts on Trades
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 The Development of the World Trading
System
1) Up until the Great Depression of the 1930s,
most countries had some degree of
protectionism. Eg UK
2) in 1930 the US enacted the Smoot-Hawley tariff, which
created significant import tariffs on foreign goods..
3) After WWII, the US and other nations realized
the value of freer trade, and established the
General Agreement on Tariffs and Trade
(GATT). [Referred to sometimes as the General
Agreement to Talk and Talk.

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5. During the 1980s and early 1990s the world
trading system as “managed” by GATT underwent
strains.
 First, Japan’s economic strength and huge trade
surplus stressed what had been more equal trading
patterns, eg. Japan’s
 Second, the persistent trade deficits by the US, the
world’s largest economy, caused significant
economic problems .
 Thirdly, many countries found that although limited
by GATT from utilizing tariffs
6. Against the background of rising protectionist
pressures, in 1986 GATT members embarked on

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7. The agreement, however, left several important
matters unaddressed: financial services, broadcast
entertainment, environmental matters, worker’s rights,
and foreign direct investment..
8. When the WTO was established, its creators hoped
the WTO’s enforcement mechanisms would make it a
more effective policeman of the global trade rules
than the GATT had been.
9. Under the WTO, 68 countries that account for more
than 90% of world telecommunications revenues
pledged to open their markets to foreign competition
and to abide by common rules funfair competition in
telecommunications. 168
10. Substantial work still remains to be done on the

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 In global business today, four stand out as the most
dynamic, the ones that will influence the shape of
international business beyond today's "rough roads"
and far into the future:
 (1) the rapid growth of the World Trade
Organization(WTO) and regional free trade areas
such as the North American Free Trade Area
(NAFTA),and the European Union(EU); ASEAN Free
Trade Area (AFTA), and the Asian–Pacific Economic
Cooperation (APEC);
 (2) the trend toward the acceptance of the free
market system among developing countries in Latin
America, Asia, and eastern Europe;
 (3) the burgeoning impact of the Internet, mobile
phones, and other global media on the dissolution of

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1) Clearly, trade barriers negatively impact the
ability of firms to locate activities in the
economically optimal location or source
materials from the best producers.
2) Even if specific quotas, tariffs, local content,
etc. regulations do not specifically require
that certain actions be taken,.
3) Certain trade barriers may even make some
operations no longer viable, and force a firm
to give up particular markets or production
sites.

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Emerging markets
Explain what developing or
emerging markets are?
Emerging markets or emerging
economies are nations with social
or business activity in the process of
rapid growth and industrialization.
The seven largest emerging and
developing economies by either
nominal GDP or GDP (PPP) are

2.4.3. Rethinking Marketing Programs
for Emerging Markets
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 .Marketers identify three key factors that
characterize emerging markets:
1. Low incomes,
2. Variability in consumers and infrastructure,
and
3. The relative cheapness of labor, which is
often substituted for capital.
Multinationals bring to emerging markets not
just their products, technology, and skills,
but also implicitly, their understanding of
market structures from developed-country

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Africa as an emerging economy is a sleeping
giant. Africa has resources in abundance.
 Africa has young people to its benefit. All over,
emerging economies such as China and India
are looking towards Africa to solve their
resource scarcity problems.
Developing nations have an unrelenting
hunger for learning, improvement,
achievement, success and recognition.
Developing countries are hurrying to catch up,
grab hold of opportunities, improve their
fortunes, and help their countries to take their
deserved place in the global society.

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marketing in Africa The so called seven
struggles for developing nations in which most
of these struggles relate to marketing:
“reaching deep into the markets;
pinpointing,
thinking big,
acting fast,
going outside” and
the embracing of “bottom of the pyramid
markets,
the embracing of ‘manyness’”.

Cont…
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The challenge for marketing in
Africa, however, is
to understand the culture of so
many nations and peoples,
the politics and the role of power
within the different nations, t
he importance of infrastructure
development and technology.

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 2.5.The Development of Regional
Economic Integration
Forming series of trade blocks-based on the
regional economic grouping of countries-or
what is generally known regional economic
integration seems to have been the pattern of
the world economy is increasingly taking.
Economic integration is the process of
eliminating restrictions on the international
trade payments and other factor mobility and
result from uniting of two or more regional
economies in a regional trading arrangement.

Cont….
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The World Trade Organization
has led negotiations on a series
of worldwide agreements
to expand quotas,
reduce tariffs and
introduce a number of
innovative measures
to encourage trade amongst
countries.

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The development of world
institutions to foster
international trade and the
development of world trading
groups such as (EU, (NAFTA),
the Asian Pacific trading region
and countries that make up
BRIC are playing major roles on
the decisions international

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these reforms constitute a move to a more
politically stable international trading
environment.
Trading bloc reduce trade restrictions and
tariffs among themselves in order to develop
closer links
But it leave restrictions in place against the
rest of the world). in the country’s membership
of multilateral organizations such as the World
Trade Organization (WTO), the International
Monetary Fund (IMF) and the World Bank, etc

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 This summary of African Trade Blocs and Agreements
was prepared by Whitehouse & Associates for the African
Resource Network. There are essentially 6 key trading
blocs in Africa:
1) the Southern African Development Community
(SADC),
2) Southern African Customs Union (SACU) and
Common Monetary Area (CMA)
3) Preferential Trade Area for Eastern and Southern
African States (PTA) and Common Market for
Eastern and Southern Africa (COMESA),
4) Economic Community of West African States
(ECOWAS),
5) Union Douaniere et Economique de l’Afrique

Southern African Development Community
(SADC)
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Originally known as the Southern African
Development Co-ordination Conference
(SADCC), one of the ironies of SADC is that
the organization was launched in 1980 with the
original objectives of reducing dependence on
apartheid South Africa and creating a channel
for donor aid to the region.
Development Community (SADC) which
replaced the Co-ordination Conference was
signed in August 1992.
The organization currently has 14 member
states namely Angola, Botswana, Democratic

The aims of SADC are:
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The promotion of economic co-
operation and integration amongst
member states with a view to
becoming a fully-fledged common
market. These aims are achieved
through the application of eight basic
fundamentals.
1) Preservation of democracy, peace
and security in the region;
2) Investment in infrastructure and

Cont..
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1) Investment in human resources;
2) Conservation and management
of natural resources;
3) The pursuit of market economic
principles;
4) The creation of a large market;
5) Investment protection;
6) The promotion of science and
technology.

Southern African Customs Union
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SACU is a customs union comprising
Botswana, Lesotho, Namibia, Swaziland (the
BLNS states) and South Africa.
There are no duties payable on goods traded
between SACU members.
Import tariffs imposed on goods from outside
of SACU generally discourage the switching of
the BLNS imports to alternative sources of
supply,
 even where the cost of South African
products is higher than for comparable items
sourced elsewhere.

Common Monetary Area
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Allied to SACU is the Common Monetary Area
(CMA) which links South Africa, Lesotho and
Swaziland into a Monetary Agreement,
 Southern African equivalent of the Franc Zone in
West Africa.
Namibia automatically became a member upon
independence but withdrew with the introduction of
the Namibian dollar in 1993.
The same is true with the lilangeni of Swaziland
and the loti of Lesotho. Although the rand is no
longer legal tender in Swaziland and Lesotho, it still
circulates freely in both countries.
Foreign exchange regulations and monetary policy
throughout the CMA continue to reflect the
influence of the South African Reserve Bank.

UNIT THREE
CULTURAL, POLITICAL AND LEGAL
ENVIRONMENT
3.1 The Environmental Influences on
International Marketing
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By marketing environment, we mean
both the macro-environment and micro
enviroment
The macro-environment or forces are
normally divided into economic-
demographic factors, technological

The Environmental Influences on
International Marketing
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Enviroment
al influence
on
Internation
al
Marketing
Economic
Developed Economies
Emerging Economies
Less Developed
Economies and
Currency risks
Social/cultural
Religion, language,
Aesthetic value,
attributes , Social
organization and
material culture
Legal
Local domistic
laws, international
law, and home
domestic law
Political
Operational
Restrictions,
Discriminatory
restrictions and
physical actions
Technological
sattelite
Communication
ISDN Internet
WWW
The eletronic
Supper highway

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 The social/cultural environment is an important
area for international marketing managers
 It follows that the key problem faced by the
international marketing manager is that of
coming to terms with the details and
complexities of the international environment.
 An international firm needs to work to maintain
its advantage by manipulating the controllable
functions of marketing within the largely
uncontrollable marketing environment
 such as Social, Economic, Political& Legal, and
Technological environments.

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The social and cultural influences on
international marketing are
immense(huge). Differences in
social conditions,
religion and material culture all affect
consumers’ perceptions and patterns
of buying behavior.
In this case, as international marketer
you should perform the following

major impacts socio-cultural factors on
your international marketing
performances:
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Understand the impact of culture on
international marketing;
Apply key cultural concepts when
evaluating international MKt
Evaluate ways in which cultural
differences impede international
communication;
Recognize the importance of social

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The task of adjusting to a new cultural
environment is probably one of the
biggest challenges of international
marketing.
International marketing attempts are
frequently unsuccessful because the
marketer – either consciously – or
unconsciously – makes decisions or
evaluations from a frame of reference
that is acceptable to his or her own
culture, but that is unacceptable in a

Cont…
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Cultural differences and especially
language differences have a significant
impact on the way a product may be used
in a market, its brand name and the
advertising campaign.
Example: Initially, Coca-Cola had
enormous problems in China as Coca-
Cola sounded like ‘Cooke Koula’ which
translates into ‘A thirsty mouthful of
candle wax’.
They managed to find a new
pronunciation ‘Kee Kou Keele’ which

Cont..
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The dominance of a number of world
brands such as Microsoft, Intel, Coca-
Cola, McDonald’s, Nike etc
However, it is important not to confuse
globalization of brands with the
homogenization of cultures.
There are a large number of global
brands but even these have to
manage cultural differences between
and within national country
boundaries.

Cont…
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There are also a number of cultural
paradoxes which exist. For example,
in Asia, the Middle East, Africa and
Latin America there is evidence both
for the westernization of tastes and
the assertion of ethnic, religious and
cultural differences.
The social/cultural environment is an
important area for international

3.4.1, Cultural Environment
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 Culture is the human-made part of the human
environment
the sum total of humankind’s
knowledge,
beliefs,
art,
morals,
laws,
 customs and other capabilities and habits. In this way,
the members of a particular society become
conditioned to accept certain ‘truths’ about life around
them.
 The inability or unwillingness to do so could become a

The Sub-Division of Culture
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The concept of culture can be
divided into several sub-
components:
Language
 Within each cultural group, the use of words reflects
the lifestyle, attitudes and many of the customs of
that group. Language is central to the expression of
culture.
 Language is not only a key to understanding the
group; it is the principal way of communicating within
it.

Cont
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 A language usually defines the parameters of a
particular culture.
 Thus, if several languages are spoken within
the borders of a country, that country is seen to
have as many cultures.
 In Canada, for instance, both English and
French are spoken;
 in Belgium, French and Flemish;
 South Africa there are 11 official languages –
different dialects, accents, pronunciations and
terminology may distinguish one cultural group

Cont..
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 The importance of being able to
understand other languages cannot be
over-emphasized –
 this is particularly relevant when
executives travel abroad and are
negotiating with people of different
language groups.
 Because English I a predominant
language of business in the Western
world, people with English as a home
language are usually reluctant to learn

Cont…
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If international marketers do not
speak the language of the country
they plan to visit,
they should be least establish the
extent to which their own language
is spoken there and,.
Thus, translations should be
undertaken in the country
concerned or at least by a native of
the country in question.

Cont..
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 Material culture
 The material culture of a particular market
will affect the nature and extent of
demand for a product.
Example, the many shades of green
 The significance of different colors may
vary considerably from one culture to
another Green, a popular color in many
Muslim countries, is often associated with
disease in countries with dense, green
jungle.

Cont…
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Material culture relates to the way in
which a society organizes and views its
economic activities.
The material culture of a particular market
will affect the nature and extent of demand
for a product.
The material culture of a country may also
necessitate modifications to the product.
To illustrate this, most people in the United
States consumes
hamburger/cheeseburger in contrast to
Ethiopian people that most of the time

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 Electrical appliances, for example, may
have to be adapted to cater for
differences in voltage levels. For
Example, the United States operates
under a system of 110 V in contrast to
South Africa’s 220 V, alternatively,
 weights and measurements may have to
be converted to those applicable in the
importing country (again, the United
States uses measures such as miles,
gallons and pounds

Cont…
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Material culture an also have a
significant effect on the proposed
marketing and distribution strategies.
While highways and rail transport are
the principal means of moving goods
in the United States, rivers and canals
are used extensively in certain
European countries.

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A culture’s aesthetics refer to its idea
concerning taste and beauty as
expressed in the fine arts – music,
drama and dance –
the appreciation of color and form.
Insensitivity to aesthetic values can
not only lead to ineffective advertising
and package design for products, it
can also offend prospective

Cont..
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 . Aesthetics also embrace people’s
dress and appearance, Distinctive
national attire, for instance, includes
the cultural dressing styles of
Ethiopian women and the reflection of
art and design on different statues
found in different regions within
Ethiopia,
 “A culture’s aesthetics refers to its
ideas concerning good taste and
beauty as expressed in the fine arts-

D. Social organization
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Social organization refers to the way
in which people relate to one another,
form groups and organize their
activities, teach acceptable behavior
and govern themselves.
If the consumers are largely illiterate,
advertising materials or packages
labels may have to be adapted to the
needs of the market.

Cont..
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 . there are unspoken signals which
identify cultural differences, from certain
taboos to less obvious practices like the
time taken to answer a letter.
 In some societies, for instance, an
important issue is dealt with
immediately; in others, promptness is
taken as a sign that the matter is
regarded as unimportant, the time taken
corresponding with the gravity of the

Religious beliefs, attitudes and
values
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While language, material culture,
aesthetics and social organization
are outward manifestations of a
culture,
it is a society’s religious beliefs,
attitudes and values that dictate
the behavior of its members.

Cont…
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A religious belief system refers to the
spiritual side of a culture or its
approach to the supernatural. Western
culture is accepted as having been
largely influenced by the Judeo-
Christian traditions, while Eastern or
Oriental cultures have been strongly
influenced by Buddhism,
Confucianism, Taoism and Hinduism.

Cont…
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Although very few religions influence
business activities directly, the impact
of religion on human value systems and
decision making is significant. Thus,
religion exerts a considerable influence
on people’s actions and outlook on life,
as well as on the products they buy. In
certain parts of the world, such as Latin
American, the influence of religion
extends even beyond the individual or
family and is manifested in an entire
community’s deep involvement in, and

Cont…
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 A society’s religious belief system is often
dependent on its stage of human or
economic development. Primitive
tribesmen tend to be superstitious about
life in general, while people in
technologically advanced cultures seem to
have dismissed the notion of traditional
religious worship and practice in favor of a
more scientific approach to life and death.
To disregard the significance of religious
beliefs or superstitions evident in a

Cont…
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A religious system refers to the
spiritual side of a culture or its
approach to the supernatural.”
“Attitudes are psychological states
that predispose people to behave in
certain.”
“Stereotypes are sets of attitudes in
which one attributes qualities or
characteristics to a person on the

Cont…
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 Attitudes are psychological states that
predispose people to behave in certain ways.
Attitudes may relate, for example, to work,
wealth, achievement, change, the role of
women in the economy, etc. Western cultures,
for example, value individualism and promote
the importance of autonomy and personal
achievement needs. In contrast, in many
Eastern and developing countries, there is a
strong sense of collectivism and the
importance of social and security needs. For
instance, the Hindu religion imparts a type of
work ethic that considers work central to one’s
life but maintains that it must be performed as

Cont…
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Stereotypes are sets of attitudes in
which one contributes qualities or
characteristics to a person on the
basis of the group to which that
person belongs. An international
businessperson’s tendency to judge
others by his or her personal and
cultural standards instead of
attempting to understand others in
the context of their unique historical,

Cont…
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 Values are judgments regarding what is valuable
or important in life, and they vary greatly from one
culture to another. On the one hand, people who
are operating at a survival level will value food,
shelter and clothing. Those with high security
needs, on the other hand, may value job security,
status, money, etc. from its value system; a
culture sets norms – in other words, acceptable
standards of behavior.
 The concept of space is different wherever one
goes. In Western corporate culture, the size and
location of an executive’s office is usually
determined by his or her level of seniority in the
company. The locality and size of an Arab
business executive’s office, however, are a poor

Cont
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 Conversation distance between two
people is learned early in life – almost
completely unconsciously. A Western
business executive, conditioned to
operating within a certain amount of
personal space, may feel uncomfortable
or alarmed at the closeness and physical
contact displayed in the Middle East or
Latin America, for example.
 Time also has a different meaning in
each country. Western cultures tend to

3.2.2.1 The concept of the self-reference criterion (SRC)
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 In dealing with unfamiliar markets, marketers
must be aware of the frames of reference they
are using in making their decisions or evaluating
the potential of a market, because judgments
are derived from experience that is the result of
acculturation in the home country.One the
major obstacles in the international marketing is
the self-reference criterion(SRC) which is an
unconscious reference to one's own cultural
values, experiences, and knowledge as a basis
for decisions. Closely connected is
ethnocentrism, that is, the notion that people in
one's own company, culture, or country know

Cont…
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 When faced with a problem in another culture,
our tendency is to react instinctively and refer
to our SRC for a solution. Our reaction,
however, is based on meanings, values,
symbols, and behavior relevant to our own
culture and usually different from those of the
foreign culture. Such decisions are often not
good ones. To avoid errors in business
decisions, the knowledgeable marketer will
conduct a cross-cultural analysis that isolates
the SRC influences and maintains vigilance
regarding ethnocentrism.

Cont…
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 Mechanisms to avoid international business
decisions errors
 To avoid errors in business decisions, it is necessary to
conduct a cross-cultural analysis that isolates the self-
reference criterion influences.
The fourkey steps are:
1. define the business problem or goal in home-country
cultural traits, habits, or norms;
2. define business problem or goal in foreign-country
cultural traits, habits, or norms through consultation
with natives of the target country--make no value
judgments;
3. isolate the SRC influence in the problem and examine
it carefully to see how it complicates the problem;
and,
4. Redefine the problem without the SRC influence and

3.2.2.2. Social factors
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 Growth and movement in populations around the
world are important factors heralding social
changes.
 Please take a look at recent information identified
from United Nation Development Programme-
UNDP, given to you as exemplary indicators of
social factors below.
 Nowadays, there are also visible moves in the
population within many countries, leading to the
formation of huge urban areas where consumers
have a growing similarity of needs across the
globe.
 In this case, urban dwellers require similar

Cont…
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Similarly, they demand services,
telephones and transportation of
all kinds and modern visual
communications.
It also means, for the incoming
company, that customers are
accessible.
They are identifiable and firms
can communicate with them

The political and Legal Environment:
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The political and legal environment
in international marketing is more
complicated than in domestic
marketing.
The greater the level of involvement
in foreign markets is,
the greater is the need to monitor
the political climate of the countries
in which business is conducted.
 Nearly all governments today play
active roles in their countries’

Cont…
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The following aspects must be
taken into consideration:
It is important, therefore, for the firm
to know - the political and legal
environments in each of its
markets:
Identify those aspects of the
political-legal environment that
affect a firm’s international

Cont
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Determine how the international
political-legal environment impacts
on each element of the marketing
mix;
Outline which options are available
to minimize political-legal risk;
Appreciate the way legal systems
differ and the impact of these
differences on the drawing up of
contracts and resolving disputes;
and
 Identify the ways in which the impact
of national laws might be minimized

international marketing I(powerpoint).pptx

international marketing I(powerpoint).pptx

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