Global Marketing
Value
Enduring belief or feeling that a specific mode of conduct is personally or socially preferable to another mode of conduct
Product Saturation Levels
* The % of potential buyers or households who own a product
Five stages in the evolution of global marketing
-Domestic Marketing -Export Marketing -International Marketing -Multinational Marketing -Global Marketing *not all companies go through the complete evolution from a purely domestic marketing stage to a purely global marketing stage. *evolution depends on the economic, cultural, political, and legal environments of various country markets in which the company operates, as well as the nature of the company's offerings. *companies are under constant competitive pressure to move forward reactively and proactively
Polycentric Orientation
-Each country is unique -Each subsidiary develops its own unique business and marketing strategies -Often referred to as multinational -Leads to a localized or adaptation approach that assumes products must be adapted to local market conditions
Geocentric Orientation
-Entire world is a potential market -Strives for integrated global strategies -Also known as a global or transnational company -Retains an association with the headquarters country -Pursues serving world markets from a single country or sources globally to focus on select country markets -Leads to a combination of extension and adaptation elements -*more standardization, but you're not standardizing to the home market- you're standardizing across national markets. Trying to find a segment that crosses national markets and standardize to that* FROM BOOK: -*proactive willingness to adopt a global perspective instead of country-by-country or region-by-region perspective in developing
Political Environment—Individual Governments
-Incentives and Government Programs -Government Procurement -Trade Laws -Embargoes and Sanctions -Tariff and Nontariff Barriers -Export License Requirements -Investment Regulations (ownership and financial controls) -Macroeconomic Policies (governments' monetary and fiscal policies such as the cost of capital, level of economic growth, rates of inflation and international exchange rates)
Who manages international trade?
-Intra-firm trade: Trade between MNCs and their foreign affiliates. Comprises 34 percent of world trade. -An additional 33 percent of world trade was exports between MNCs and their affiliates. -In other words, two-thirds of world trade is managed one way or another by MNCs.
How global are you?
-Number of countries in which you are marketing -% sales that are foreign -% assets that are foreign -Nationality of top mgt (ex: IKEA as opposed to Lenovo. At Lenovo, English is the official language, many senior executives are foreign, and they forego traditional HQ, opting for centers of excellence around the world)
•GLOBE (Global Leadership and Organizational Behavior Effectiveness) Research Program
-Project GLOBE is a large-scale ongoing research program that explores cultural values and their impact on organizational leadership in 62 countries (Exhibit 4-7). -Three dimensions (collectivism I, uncertainty avoidance, and power distance) are the same as Hofstede's constructs.
Zeroing in on Economic Systems
-Services provided by the state or state funded: Pensions, health care, education. -Institutions: Country characterized by transparency, standards, absence of corruption? Standards ignored and court system compromised? -Markets: Entrepreneurial high risk/high reward? Socialized market? Government dominated price and wage controls?
Power distance
-The degree of inequality among people that is viewed as being acceptable.
Individualism:
-The degree to which people's image is defined in terms of "me" versus "we."
Uncertainty avoidance:
-The way that a culture deals with the fact that the future can never be known.
International Law and Local Legal Environments
-Types of Legal Systems •Common Law •Code (written) Law •Islamic Law (Sharia)
international trade and foreign production
-intertwined -managed on a global basis from book
Customer Perceived Value
> Competitive Advantage is when a company succeeds in creating more value for customers than competitors
how is international marketing/global marketing the same/different from domestic marketing
> goals and objectives -toolbox is the same, but the tool you choose to use in a global market may be different depending on the specific market and its characteristics (EX: I may choose to maximize market share in US and profit in Japan) > strategies -toolbox is the same, but the tool you choose to use in a global market may be different depending on the specific market and its characteristics (EX: I may choose to maximize market share in US and profit in Japan) > External environment -increased complexity (a company that services only the US does not have as complex of an external environment as Coca-Cola servicing 200 countries) -interaction among environments --> campbells example (dog soup) --> Darlie exaple: Still Darlie in English, Black People Toothpaste in Chinese *darkie*
what is globalization
A process that involves the entire world and results in making something worldwide in scope. Makes more products available to more people Has raised incomes around the world
Regiocentric Orientation
A region is the relevant geographic unit Ex: The NAFTA or European Union market Some companies serve markets throughout the world but on a regional basis Ex: General Motors had four regions for decades
Belief
An organized pattern of knowledge that an individual holds to be true about the world
The US represents
Approximately 25% of the total world market for all products and services
Corruption is a reflection of multiple aspects of society
Degree of economic freedom Legitimacy of the legal system Socio-political stability Culture
Globalization (Standardization)
Developing standardized products marketed worldwide with a standardized marketing mix Essence of mass marketing
How to increase value
Either increase benefits or reduce costs Increase benefits by tailoring the product to be exactly what the customer wants Reduce costs by looking for the lowest cost labor
Ethical Issues
Ethics vary around the world •What is acceptable in one country, may be considered unethical in another •To "do the right thing" and generate publicity, companies can take an active approach on ethical issues
Is the customer king?
Example of executives that ranked their business very low in areas such as commitment to customer, dialog with customers, role of the customer defined, and that their company takes any customer that is willing to pay Not every customer is right for your business model
Information on Trade Barriers
Example of website on trade barriers Examples of recent trade barriers on slides in weekly folder
The importance of going global
For U.S. companies, 75% of total world market for goods and services is outside the country -Coca-Cola earns 75% of operating income and 2/3 of profit outside of North America For Japanese companies, 90% of world market is outside the country Approximately 94% of market potential is outside of Germany for its companies even though it is the largest EU market
US Laws Apply in Host Countries
Foreign Corrupt Practices Act The FCPA was designed to prohibit the payment of any money or anything of value to a foreign official, foreign political party, or any candidate for foreign political office for purposes of obtaining, retaining, or directing business The FCPA does not prohibit so called facilitating or grease payments. FCPA does not prohibit bribery payments to nongovernmental personnel. National Security Laws Wal Mart FCAA Bribery Settlement Vitol FCAA settlement 2020
Global Financial Markets vs. global labor markets vs. global customer markets
Global financial markets are very integrated Global labor markets are not as integrated because immigration is a big issue, it is not a free flow of labor from one market to another How integrated are global customer markets?
Standardization vs. adaptation
Globalization (standardization) Global localization (Adaptation) -think globally, act locally --Advertising example of non-obvious adaptation
Ethnocentric Orientation
Home country is superior to others Sees only similarities in other countries Assumes products and practices that succeed at home will be successful everywhere Leads to a standardized or extension approach
Value goes beyond the monetary cost
It is also the cost of time and effort
Economic Globalization constitutes integration of national economies into the international economy through trade, direct foreign investment (by corporations and multinationals), short-term capital flows, international flows of workers and humanity generally, and flows of technology
Jagdish Bhagwati
Restraining Forces Affecting Global Integration and Global Marketing
Management myopia (restricts integration and reduces standardization) Organizational culture National Controls opposition to globalization
4 strategies for growing marketplace
Market Penetration Strategy Product Development Strategy Market Development Strategy Diversification Strategy
Global localization (Adaptation)
Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction Essence of segmentation Think globally, act locally
forces affecting global integration and global marketing
Multilateral trade agreements Converging Market needs and wants and the information revolution Transportation and communication improvements Product development costs
-Long-termism:
Oriented primarily on the present and the future.
Market Characteristics
Population demographics -World's largest cities Income -CIA World Factbook Consumption patterns -Global Market Information Database
Low Context Cultures
Put the most emphasis on written or spoken words; e.g., USA, Scandinavia, Germany.
Why is global marketing imperative
Saturation of domestic markets: As the domestic market gets saturated there is a limit to how much a business can grow Global competition: Even if you only want to focus on the local market, your competition is global Need for global cooperation due to global competition Internet revolution: makes globalization easier, can be born global the term global epitomizes both the competitive pressure and expanding market opportunities Whether a company operates domestically or across national boundaries, it can no longer avoid competitive pressures from around the world
Global vs. regular marketing
Scope of activities are outside the home-country market
Indulgence
The extent to which people try to control their desires and impulses, based on the way they were raised
-Masculinity:
The importance of "male" values (assertiveness, status, success, competitive drive within society, achievement) versus "female" values (being people-oriented, solidarity, quality of life).
Old Definition of Marketing
The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives
Cost of Protectionism
The real reason mfg jobs are disappearing •Study of 21 protected industries: -U.S. consumers pay $70 billion in higher prices -Cost per job saved = $170,000 per year -Cost in specific industries may be much higher, e.g. steel - $835,351 per job saved - -From Cateora 2007
net exporter
The value of the goods that a country exports exceeds the value of the goods that it imports. Net exporters have positive trade balances, meaning that the value of the goods that they sell to other countries exceeds the value of the goods that they buy from other countries. BOOK
China is now
The world's 2nd largest economy; Japan is 3rd
3 Ethical Principles
Utilitarian Ethics: Does the action optimize the "common good" or benefits of all constituencies? Rights of the Parties: Does the action respect the rights of the individuals involved? Justice or Fairness: Does the action respect the canons of justice or fairness to all parties involved?
•The remaining six dimensions include: collectivism II, gender egalitarianism, assertiveness, performance orientation, humane orientation, and future orientation.
World Value Survey (WVS): •The WVS is conducted by a network of social scientists at leading universities worldwide. •The WVS has been done multiple times and the population covered is much broader than in other similar studies. •The WVS encompasses two broad categories: traditional versus secular values, and survival versus self-expression values.
Driving forces affecting global integration and global marketing
World economic trends -Growing middle class in China, India, Brazil, etc. -Rapid growth in China, India etc. -Generally, movement to free markets worldwide over past few decades, with current backlash from nationalist perspectives
market development strategy
a growth strategy that employs the existing marketing offering to reach new market segments, whether domestic or international
product development strategy
a growth strategy that offers a new product or service to a firm's current target market
diversification strategy
a growth strategy whereby a firm introduces a new product or service to a market segment that it does not currently serve
Attitude
a learned tendency to respond consistently toward a given object or entity
market penetration
a marketing strategy that tries to increase market share among existing customers
Born Global Firm
company that adopts a global perspective and engages in international business from or near its inception
Domestic Marketing
domestic focus, home country customers, ethnocentric orientation, made at headquarters Ethnocentric - believing in the superiority of one's own ethnic and cultural group, and having a corresponding disdain for all other groups As a result, companies may be vulnerable to the sudden changes forced on them by foreign competition
Marketing is not only much broader than selling, but it also
encompasses the entire company's market orientation toward customer satisfaction in a competitive environment BOOK
Export Marketing
indirect vs. direct exporting; country choice, exports; ethnocentric orientation; home country customers made at headquarters Initially, export marketing the internationalization process is a consequence of incremental adjustments to the changing conditions of the company and its environment rather than a result of its deliberate strategy Pattern is due to: -greater uncertainty in international business -higher costs of information -lack of technical knowledge about international marketing activities Some companies progress to a more involved stage of internationalization by *direct exporting*, once three internal conditions are satisfied: (1) The management of the company obtains favorable expectations of the attractiveness of exporting based on experience. (2) The company has access to key resources necessary for undertaking additional export-related tasks. (3) Management is willing to commit adequate resources to export activities. *favorable experience is a key component* External pressures also prod companies into export marketing activities. EX: saturated domestic market. Export marketers begin paying attention to technological and other changes in the global marketplace that domestic marketers tend to ignore. Export marketers still tend to take an ethnocentric approach to foreign markets as being an extension of their domestic market and export products developed primarily for home country customers with limited adaptation to foreign customers needs
Global Marketing
international & multinational geocentric orientation; company's willingness to adopt a global perspective; global products with local variations Global Marketing refers to marketing activities by companies that emphasize the following: (1) standardization efforts - standardizing marketing programs across different countries particularly with respect to product offering, promotional mix, price, and channel structure (2) coordination across markets - reducing cost inefficiencies and duplication of efforts among their national and regional subsidiaries (3) global integration - participating in many major world markets to gain competitive leverage and effective integration of the firm's competitive campaigns across these markets by being able to subsidize operations in some markets with resources generated in others and responding to competitive attacks in one market by counterattacking in others
multinational marketing
many markets; consolidation on regional basis; regio-centric orientation; standardization within regions At this stage, the company markets its products in many counties around the world. Management comes to realize the benefit of economies of scale in product development, manufacturing, and marketing by consolidating some of its activities on a regional basis. economies of scale - the property whereby long-run average total cost falls as the quantity of output increases
International marketing
markets in many countries; polycentric orientation; use of multi-domestic marketing when customer needs are different across national markets made in each country polycentric - The belief that locals of the host country know their culture better and should run a business accordingly. International marketing happens once export marketing becomes an integral part of the company's marketing activity and it begins to seek new directions for growth and expansion. Multi-domestic Marketing - If international marketing is taken to the extreme, a company may establish an independent foreign subsidiary in each and every foreign market and have each of the subsidiaries operate independently of each other without any measurable headquarters control.
Quite often marketers have focused excessively
on satisfying customer needs while ignoring competitors In the process competitors have outmaneuvered them in the marketplace with better, less-expensive products. It is widely believed that in many cases, US companies have won the battle of discovering and filling customer needs initially, only to be defeated in the competitive war by losing the markets they pioneered to European and Japanese competitors BOOK
Value =
ratio of benefits/price
New Definition of Marketing
the activity, set of institutions, and processes for creating, communicating, delivering, and *exchanging* offerings that have *value* for customers, clients, partners, and society at large
The global marketplace has evolved from
the competitive landscape is changing. While the US still has the most of the largest companies (at 32) in 1970 they had 64. In 1970 china had none of the largest companies and now they have 17
Current Challenges
•BREXIT: Trying to work it out. Full exit? Stay as part of Customs Union? Stay as part of Free Trade Area? •Political Developments in the US and free trade backlash • •TPP resurrected without the US
Resolution of Ethical Dilemmas
•Blanchard and Peale -Is it legal? -Is it balanced? -How does it make me feel? •Front Page of the Newspaper Test •WSJ Model -Compliance (is it legal) -Contribution (to shareholders, employees, community And customers) -Consequences (PR etc)
Additionally, consider violence, terrorism, cyber-terrorism, and cybercrime
•Businesses may be targets: -Easier targets than Government and Military -Public Relations around the world -Money: Business kidnappings as a business
Common Law vs. Civil Law
•Civil Law •Legal system reflects the structural concepts and principles of the Roman Empire •Companies are formed by contract between two or more parties who are fully liable for the actions of the company •Common Law •Disputes are decided by reliance on the authority of past judicial decisions •Companies are legally incorporated by state authority •Code law is used in only a few areas; the U.S. Uniform Commercial Code fully adopted by 49 states, Louisiana still influenced by French civil law
Risk Reduction Strategies
•Avoidance •Local Partners •Invaluable Status •International sourcing •Control of distribution •Control of brand •Local Borrowing •Minimizing Fixed Investments •Political Risk Insurance -Private: Kidnapping, Terrorism, Expropriation -Public: US-OPIC, Japan—EID/MITI, Germany-TREUARBEIT are the largest programs •Multilateral agencies: World Bank (IBRD—MIGA, Multilateral Investment Guarantee Agency, est. 1988), Inter-American Development Bank, and regional programs for selected projects •Government Lobbying •Benjamin Franklin, as Poor Richard "Do well by doing good." •Stimulation of Local Economy: Buy Local
Role of Women and Men in Society
•Access to/appropriateness of occupations •Access/freedom to all aspects of society •Access to maternity/paternity leave •Access to child support • •Can be radical differences across cultures. Saudi Arabia is an extreme example. September 26, 2017 women finally got the right to drive, but they still must have a male's permission to travel or marry. More women than men attend university, but they make up only 15% of Saudi workforce. There are many changes occurring in Saudi Arabia now due to crown Prince Muhammad bin Salman.
Terrorism and the World Economy
•According to an IMF study, the September 11, 2001 terrorist attacks in New York and Washington D.C. resulted in a direct loss of $21.4 billion. •The short-term lost economic output was estimated as $47 billion. •The stock market lost $1.7 trillion. Terrorist activities and military skirmishes disrupt international movement of supplies and merchandise as well as international financial flow and tourism
Evolution of Cooperative Global Trade Agreements
•Although WTO is a global institutional proponent of free trade, it is not without critics. •The WTO dispute settlement mechanism is faster, more automatic, and less susceptible to blockages than the old GATT system. •The WTO Work Program on Electronic Commerce is in the process of defining the trade-related aspects of electronic commerce that would fall under the parameters of WTO mandates.
Regional Economic Arrangements
•An evolving trend in international economic activity has been the formation of multinational trading blocs. •There are over 120 regional free trade areas worldwide. •Market groups take many forms, depending on the degree of cooperation and inter-relationships, which lead to different levels of integration among the participating countries.
Attitudes, Beliefs, and Values
•Attitude-learned tendency to respond in a consistent way to a given object or entity •Belief-an organized pattern of knowledge that an individual holds to be true about the world •Value-enduring belief or feeling that a specific mode of conduct is personally or socially preferable to another mode of conduct
Stages of Market Development
•Countries/markets are at different stages of development •GNP per capita provides a useful way of grouping countries into 4 categories •Categories are a useful basis for: -Market segmentation -Target marketing •BEMs, identified a number of years ago, were countries in Central Europe, Latin America, and Asia that were to have rapid economic growth •More recently, the focus was on BRIC: Brazil, Russia, India, and China, but they have slowed •Today much of the focus is on China: -BAT: Baidu, Alibaba and Tencent (established internet giants) -New wave of innovative upstarts: •Didi Chuxing—ride sharing firm that scared away Uber •Ofo, bike-sharing start-up going global -China led the world in financial-tech investments and is closing in on other sectors such as AI, Virtual reality, Robotics and drones, education tech, and autonomous driving -And they are expanding globally -There are over 600 billionaires in China compared with around 550 in US
Country Competitiveness
•Country competitiveness refers to the productiveness of a country, which is represented by its firms' domestic and international productive capacity. •Country competitiveness is not fixed. •The role of human skill resources has become increasingly important as a primary determinant of industry and country competitiveness.
Cultures
•Cultures may be defined by national borders, especially when countries are isolated by natural barriers. •Cultures contain subcultures that have little in common with one another. •How to be Parisian in One Hour (caution: some limited "foul" language is used)
Switch from Macro to Micro:Core Themes of a Market Orientation
•Customer focus •Coordinated marketing: Market orientation is not solely the responsibility of a marketing department •Profitability: Profitability as a consequence of a market orientation rather than a part of it
Dietary Preferences
•Domino's Pizza pulled out of Italy because its products were seen as "too American" with bold tomato sauce and heavy toppings. •Subway had to educate Indians about the benefits of sandwiches because they do not normally eat American style bread • •McDonald's India •Unique McDonald's Menu Items
Aids to Success
•Economic Similarity •Cultural Similarity •Political Similarity •Geographical Closeness
Reported July 20, 2011
•Entire "Fake" Apple stores in China -Looks just like an Apple retail outlet -Sign outside says "Apple Store", (not Apple icon) -Employees thought they were really working for Apple -Chinese law prohibits copying "look and feel" of retail outlet, but spottily enforced 2 stores later ordered to close, not because of copying Apple, but because they lacked business permit
Why we Fail to Reach Good Decisions in Ethical Dilemmas
•Everybody else does it. •If we don't do it, someone else will. •That's the way it has always been done. •We'll wait until the lawyers tell us it's wrong. •It doesn't really hurt anyone •The system is unfair. •If you think this is bad—you should have seen.... •I was just following orders. •It's a gray area.
Social Institutions
•Family •Education >>Ex. As of 2017 it is illegal in Turkey To teach evolution in public schools •Religion •Government •Business These institutions function to reinforce cultural norms
Elements of Culture
•Following are the elements of culture: -Material life (technologies that are used to produce, distribute, and consume goods and services)
Bill Gate's approach: guile, prescience and patience
•From a 1998 interview: -"Although about 3 million computers get sold every year in China, people don't pay for the software. Someday they will, though. And as long as they're going to steal it, we want them to steal ours. They'll get sort of addicted, and then we'll somehow figure out how to collect something in the next decade". -April 18, 2006 Microsoft inked deal with Lenovo for $1.2 million of software to be included in the Chinese firm's computers.
Evolution of Cooperative Global Trade Agreements
•GATT (General Agreements on Tariffs & Trade): -After 1950, GATT succeeded ITO. -The main operating principle of GATT was the concept of most favored nations (MFN). -GATT was successful in lowering trade barriers.
Low-Income Countries
•GNI per capita of $1,036 or less •Characteristics -Limited industrialization -High percentage of population involved in farming -High birth rates -Low literacy rates -Heavy reliance on foreign aid -Political instability and unrest -Examples Kenya and Turkmenistan
Lower-Middle-Income Countries
•GNI per capita: $1036 to $4.045 •Characteristics -Early stages of industrialization -Expanding consumer markets - •Major competitive advantage in the production of mature, standardized, labor-intensive products - - -Examples are India, Cambodia
High-Income Countries
•GNI per capita: $12,536 or more •Achieved through sustained economic growth •Post-industrial countries •The information-society countries •Ascendancy of knowledge over capital •The most powerful nations in this group are the G20 and the G7 •Also, a focus is moving to Africa •Other areas to watch, South Korea, Poland, Turkey (less advance and leadership more problematic than SK and Poland), Indonesia (also political challenges), the Philippines (now an outsourcing powerhouse) and SE Asia in general. •And don't forget Mexico •Also, China not as cheap as it used to be. Wage rates have equalized with Mexico And, remember to factor in transportation costs from China vs Mexico
Upper-Middle-Income Countries
•GNI per capita: $4.046 to $12,535 •Characteristics -Rising wages -High rates of literacy -Advanced education •Experience rapidly, export-driven economic growth •Become formidable competitors •Examples: Brazil, Malaysia, Venezuela, Russian Federation
Types of Political Risks
•Generally, ownership (property and life), control (ongoing operations interference), transfer risk (in shifting funds between countries), and risk to the value of the firm •More Specifically: •Nondiscriminatory risks •Discriminatory risks •Discriminatory sanctions •Wealth deprivation •2007: ExxonMobil and ConocoPhillips expropriated in Venezuela after they declined to restructure their holdings to give gov't agency majority control. Total, Chevron, Statoil and BP agreed, and retain minority interests. •March 2012, Zimbabwe's Mugabe gov't. passed a law forcing all foreign-owned companies to transfer 51% to "indigenous" people. Law gives any business with assets of more than $500,000 45 days to submit plan for achieving this transfer of ownership within 5 years. •South Africa passed a law in 2016 that allows land to be expropriated. Withdrawn August 2018.
Changes in Lifestyle
•Globally, Euromoniter predicts the world will add 48m new single residents by 2020, an increase of 20% •Most marked in West: ½ of US adults are unmarried, up from 22% in 1950. Nearly 15% live alone, up from 4%. •But is occurring in emerging markets too
Political Environment - Individual Governments
•Government affects almost every aspect of business life in a country. •National politics affect business environment directly, through changes in policies, regulations, and laws. •The political stability and mood in a country affect the actions a government will take.
International Agreements
•Group of Seven (G7) is an economic policy coordination group made up of political leaders from Canada, England, France, Germany, Italy, Japan, and the United States. •Group of Eight (G8) consists of G7 and Russia. •Group of Twenty (G20) expanded G8 in 1999 to bring industrialized and developing economies together to promote economic growth and international financial stability in the global economy at the ministerial level. •Wassenaar Arrangement was founded in 1995 as a multilateral export control agreement on conventional arms and dual-use goods and technologies.
Culture Continued
•Human spatial behavior has been studied hundreds of times •Recent study found age and gender influence interpersonal space difference, and some variation can be explained by temperature differences (Journal of Cross-Cultural Psychology, Vol I-16, 2017). -Women generally prefer greater distances...this is inconsistent with previous studies. -Age was a significant predictor of personal and intimate distance (younger people are more likely to engage in physical contact with others) -Women and people in colder countries prefer greater distance toward strangers -Older people and women prefer greater distance to an acquaintance -Older people and people in warmer countries prefer greater distance with people they consider close.
Issues Transcending National Boundaries
•ISO 9000 certification has become an essential marketing tool for firms. A set of international standards on quality management and quality assurance developed to help companies effectively document the quality system elements to be implemented to maintain an efficient quality system. They are not specific to any one industry and can be applied to organizations of any size. •ISO 14000 is based on the principle of self-regulation, thereby minimizing surveillance and sanctions by the EPA and its state-level counterparts. a series of environmental management standards developed and published by the International Organization for Standardization ( ISO ) for organizations. The ISO 14000 standards provide a guideline or framework for organizations that need to systematize and improve their environmental management efforts. •Intellectual Property Protection -TRIPS (Trade-Related Aspects of Intellectual Property Rights) -World Intellectual Property Organization
The World Economy—An Overview
•In the early 20th century economic integration was at 10%; today it is >50% •EU and US-Mex-Can Agreement are very integrated: BREXIT etc. •Global competitors have displaced or absorbed local ones •The new realities: -Capital movements have replaced trade as the driving force of the world economy -Production has become uncoupled from employment -The world economy, not individual countries, is the dominating factor -Supply chains are integrated and global The new realities, continued: •E-Commerce diminishes the importance of national barriers and forces companies to re-evaluate business models •There is a current backlash against the global system •Automation is impacting employment, not only in developed countries. •Ex., McKinsey estimated machines could eliminate 52% of India's jobs if current technology was adopted across the board (Economist, 9/16/17, p. 33). •Affects not only mfg. In 2017 India's IT industry laid off thousands of workers. •Survey of private-sector workers by the Economic Times (Indian daily) found 62% agree their job prospects are shrinking.
Income and Purchasing Power
•Income -Single most important indicator of market potential •Purchasing Power Parities -Comparison of goods and services that can be bought with local currency in different countries •Gross National Product (GNP) -Sum of the money values of all final goods & services produced during a year
Intellectual Property
•Intellectual property must be registered in each country where business is conducted -Patent -Trademark •Squatters, and cyber-squatters (right of first use vs first registration) •Cornell Law School Information about US Trademarks -Copyright - -For more information related to intellectual property, copyrights, patents and trademarks, check out: -LexMercatoria info on international law
International Law and Local Legal Environment
•International Law, or "the law of nations," may be defined as a body of rules that is binding on states and other international persons in their mutual relations. It comes from three main sources: -Customs -International treaties -Court decisions •Local Legal Systems and Laws -Business Practices and the Legal System
Introduction
•International marketers should be aware that the economic interests of their companies can differ widely from those of the countries in which they do business. •International marketers must abide by various international agreements, treaties, and laws. •Political and legal climates are inherently related and inseparable because laws are generally a manifestation of a country's political processes.
High Context Cultures
•Interpretation of messages rests on contextual cues; e.g., China, Korea, Japan, Latin America.
Antitrust
•Laws are designed to combat restrictive business practices and to encourage competition -Enforced by FTC in the U.S., Fair Trade Commission in Japan, European Commission in European Union -The Sherman Act of 1890 prohibits certain restrictive business practices including fixing prices, limiting production, allocating markets, or any other scheme designed to limit or avoid competition. Law applies to U.S. companies outside U.S. borders and to foreign companies operating in the U.S. Although antitrust laws are on the books in many countries, they are often weak or loosely enforced. A recent rash of antitrust actions brought in the United States against foreign companies has raised concerns that the United States is violating international law as well as the sovereignty of other nations. The U.S. antitrust laws are a legacy of the nineteenth-century trust-busting era and are intended to maintain free competition by limiting the concentration of economic power. There have been calls for the EU to revamp its approach to antitrust issues and reduce its caseload. Any proposed changes will pit modernists against traditionalists. As one European attorney complained, "The commission is putting resources into regulating cases that don't actually restrict competition, which means that the cases that do need to be looked at are not being resolved efficiently." For the past four decades, the competition authority of the European Commission has had the power to prohibit agreements and practices that prevent, restrict, and distort competition. The commission has jurisdiction over European-based companies as well as non-European-based ones that generate significant revenues in Europe. The commission can block a proposed merger or joint venture, approve it with only minor modifications, or demand substantial concessions before granting approval •Google fined record $2.7 billion in E. U. Antitrust Ruling, June 27, 2017 -More than double the previous largest penalty in this type of antitrust case -Relates to Google's online Shopping Service -Google product search results used to steer traffic to Amazon.com and eBay as well as smaller merchants for free -Google made $ by running paid product search ads alongside product search results. -In 2012 Google renamed product service Google Shopping and only merchants who take out paid ads are included in search result. Big revenue boost for Google. -Provides Google way to combat Amazon.com (> ½ Americans start their online shopping search on Amazon; <28% start search on the Web according to BloomReach) -Challenge for consumers: understand the diff between paid search ads and organic search results -Sept. 2017: Google adjusted its shopping-services business in Europe so that rivals have a better chance of having their ads displayed.
Islamic Law
•Legal system in many Middle Eastern countries •Sharia-a comprehensive code governing Muslim conduct in all areas of life, including business -Koran-Holy Book; like code law -Hadith-like common law •Based on life, sayings, and practices of Muhammad •Identifies forbidden practices "haram" Any Westerner doing business in Malaysia and in the Middle East should have, at minimum, a rudimentary understanding of Islamic law and its implications for commercial activities. Brewers, for example, must refrain from advertising beer on billboards or in local-language newspapers. A Asian countries are split. India, Pakistan, Malaysia, Singapore, and Hong Kong are common-law countries. Japan, Korea, Thailand, Indochina, Taiwan, Indonesia, and China are civil-law jurisdictions. Scandinavian countries use parts of both systems. The majority of countries today have civil-law systems. Many countries that were colonized up Europeans continue the legal systems imposed upon them. i.e., Singapore and Hong Kong were British colonies and have a common law system. Former French colonies, like Niger and Guyana have civil law systems. In post-communist Eastern and Central Europe, consultants from both civil and common law countries are trying to influence the process. Central Europe relies on the German civil law system while Russia looks to the U.S. system. Germans think that U.S. law is too complicated and the U.S. response is that the German system is outdated.
conflict resolution
•Litigation •Formal arbitration -Settles disputes outside of court -Groups agree to abide by panel's decision •1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) -Most important treaty regarding international arbitration signed by 107 countries
Euro Monetary and Budgetary Requirements
•No more than 1.5% inflation higher than the average of the 3 best performing member states •A) Ratio of annual govt debt to GDP not exceed 3% at end of preceding fiscal year. If not, required to reach close. Only exceptional and temp excesses granted for exceptional cases. B) Ratio of gross govt debt to GDP must not exceed 60% at end of preceding fiscal year. If can't achieve, ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace. •Should have joined the exchange-rate mechanism under European Monetary System for 2 consecutive years and not have devalued its currency during that period. •Nominal long-term interest rate must not be more than 2% points higher than in the 3 lowest inflation member states. • The purpose of the criteria is to maintain the price stability within the Eurozone.
Begin Environmental Scanning
•Opportunity Analysis: -Opportunity Identification: Identify new types or classes of buyers, uncover unsatisfied needs, or create new ways for satisfying needs -Opportunity-Organization Matching: Determines whether an identified market niche is consistent with the definition of the organization's business, purpose, and distinctive competency -Opportunity Evaluation: Qualitative and Quantitative phase
Ramifications for Marketers of increase in Multinational Market Groups
•Price transparency •Intensified competitive pressure •Streamlined supply chains •New opportunities for small and medium-sized firms •Adaptation of internal organizational structures
Economic Freedom
•Rankings of economic freedom among countries -"free" "mostly free" "mostly unfree" "repressed" •Variables considered include such things as: -Trade policy -Taxation policy -Capital flows and foreign investment -Banking policy -Wage and price controls -Property rights -Black market
Aesthetics and Color
•Red-associated with blood, wine-making, activity, heat, and vibrancy in many countries but is poorly received in some African countries. •Blue—since the pigment was rare, ancient Egyptians, Chinese, Mayans associated it with royalty and divinity. Half of interviewees state blue is the favorite color. •White-identified with purity and cleanliness in the West, with death in parts of Asia. •Gray-means inexpensive in Japan and China, but high quality and expensive in the U.S.
Jurisdiction
•Refers to a court's authority to rule on particular types of issues arising outside of a nation's borders or to exercise power over individuals or entities from different countries. •Employees of foreign companies should understand the extent to which they are subject to the jurisdiction of host-country courts. •Courts have jurisdiction if it can be demonstrated that the company is doing business in the state in which the court sits. Revlon sued a British company, UOL, for breach of contract in a federal court in New York. UOL claimed the court lacked jurisdiction. Revlon cited the presence of UOL's name on an office building in the city in which the company had 50% ownership. The judge ruled against the motion to dismiss.
Regional Economic Integration(Multinational Market Groups)
•Regional Cooperation Agreement •Free Trade Area •Customs Union •Common Market •Economic Harmonization •Political Union
Techniques for Political Risk Analysis
•Secondary Sources: Economist Intelligence Unit, International Country Risk Guide -Information on Political, Economic, and Financial Risk •Qualitative -Out-source—"Old Hands" •May be ad hoc, such as Executive contacts in academia, media or govt. or more permanent, formal contacts such as consulting firms. Example: Control Risk -Grand Tours: addresses the micro level risk ignored in other approaches (specific risk for a given firm). But is very, very subjective, difficult for comparability, and SRC (self-reference criterion) can cloud perceptions. Poor for forecasting. -Delphi: technique for organizing expert opinion. Ex. Business International (BI—since 1971) and Business Environmental Risk Index (BERI—since 1966) use this approach •Quantitative: use macro-level statistics to generate models of political risk. Ex. The Political Risk Index (PRI—introduced 1973). It uses factor and regression analysis to measure political instability
Example: Didi
•Services for elderly •Can send a driver to take you home in your own car •Provides about 20m rides a day in China, several times the # managed by Uber worldwide. •Hopes to use AI to predict customers' transport needs, including cars, public transport or bicycles. •Owns stakes in India's Ola and South-East Asia's Gran, Brazil's 99 and America's Lyft. Invested in Estonia's Taxify which serves Europe and Africa and Dubai's Careem, which operates in Mid-East
Types of Trade Barriers
•Tariffs -Revenue and Protectionist -Ad valorem and Specific -Countervailing duties and Tariff surcharges •Non-Tariff Barriers -Customs Valuation and classification -Inspection -National Health -Product packaging -Product specifications -Intergovernmental acceptance of testing -Export subsidies -Quotas -Voluntary export restraints (VERs)
3 reasons for China's entrepreneurial success
•The economy is big enough to let firms get huge scale just by succeeding at home (more homogeneous language than Europe and physical infrastructure is new and excellent, unlike in US) •Consumers are voracious for new tech and venturesome •State-dominated industries are inefficient and hostile to consumers allowing agile newcomers who put the customer firs to jump ahead more easily than in developed markets.
Religion
•The world's major religions include Buddhism, Christianity, Hinduism, Islam, and Judaism and are an important source of beliefs, attitudes, and values. •Religious tenets, practices, holidays, and history impact global marketing activities. •Different ways of viewing the world •Managing under the abaya: teaching women leadership in S. Arabia
Regional Economic Arrangements
•Types of Regional Economic Arrangements: -Free Trade Areas: Formal agreement among two or more countries to reduce or eliminate customs duties and nontariff barriers. Examples: NAFTA/US-Mex-Can, MERCOSUR, CAFTA-DR & FTAA (proposed and currently stalled) -Customs Union: Addition of common external tariffs to the provisions of free trade agreements. Example: ASEAN. -Common Market: Eliminates all tariffs and other barriers, adopts a common set of external tariffs on nonmembers, and remove all restrictions on the flow of capital and labor among member nations. Example: European Union. -Monetary Union: Represents the fourth level of integration with a single currency among politically independent countries. Example: EU and the euro. -Political Union: Highest level of integration resulting in a political union. Sometimes, countries come together in a loose political union for historical reasons, as in the case of the British Commonwealth which exists as a forum for discussion and common historical ties.
UBER
•Uber currently operating in CA while they appeal mandate to categorize their drivers as employees rather than independent contractors •Uber suspended service in Barcelona in Jan 2019 after gov't. imposed 15 min waiting period before picking up passengers (following taxi driver protests) •Uber not avail in Denmark, Hungary, Thailand, Canada (not all cities), Germany, Romania, Bulgaria, Ital, Portugal and Saudi Arabia
Intellectual Property Protection impacting Nature of Ownership for Consumers
•Used to be you bought a product, you owned it. If it broke, you fixed it. If you no longer wanted it you threw it away or sold it. •The digital age is changing that. -Elon Musk forbade Tesla drives from using their cars to work for firms like Uber or Lyft -Owners of John Deere tractors told to use only approved software and authorized repair shops. -Owners of smartphones don't own the software, just have the right to use it -The iRobot creates a digital map of the home's interior that can be sold to advertisers -Canadian mfger of We-Vibe in 2017 ordered to pay customers $10,000 each by IL court after it was found the device collected data on temperature and vibration intensity of users
Aesthetics
•Visual-embodied in the color or shape of a product, label, or package •Styles-various degrees of complexity, for example, are perceived differently around the world •The sense of what is beautiful and what is not beautiful •China Beach Trend •What represents good taste as opposed to tastelessness or even obscenity
Evolution of Cooperative Global Trade Agreements
•WTO (World Trade Organization): -The eighth and last round of GATT talks - called the Uruguay Round (1986-1994) established an international body called the WTO which took effect on January 1, 1995. -As of July 2016, WTO had 164 member countries. -WTO has statutory powers to adjudicate trade disputes among nations and has its own secretariat. -WTO is the new legal and institutional foundation for a multilateral trading system. •Since the the WTO began regulating international trade in 1995, the country bringing a complaint to the WTO has won about 90% of the time. Most cases (about 2/3) are settled before being adjudicated. •From 1995 to March 2018, the US has prevailed on 91% of adjudicated issues. •Governments generally don't bring WTO complaints unless they are pretty sure they will win.
The Influential Digital Subcultures
•Youth: -The number of people age 10-24 the highest number in human history -Their number will continue to grow -90% live in LDCs -They set trends for their seniors esp in pop culture fields (music, movies, sports, food, fashion, technology), but are tribal so are very fragmented -Even if don't target them right now, objective is to infl them since in the future they will be customers -Often early adopters •Women: -Often as as CFO of the household -Often the final decision-maker on brand choice -They are more likely to have patience and interest to go through comprehensive process of researching best choice -Thus, are gatekeepers of products/services to families -Tend to be holistic shoppers: consider everything—functional benefits, emotional benefits, etc -before determining true value to entire family •Netizens (citizens of the internet): -As digital natives they are savvy in connecting with others online to share info. -Freely express opinions and feelings about brands. Can be very aggressive with opinions both positive and negative. -Create ratings, comments, and often content