Chapter 2 - Global, ethical, and sustainable marketing

embargo

a quota completely prohibiting specified goods from entering or leaving a country

self-driving vehicle

a self-driving or autonomous car (also known as a driverless car or robotic car) and unmanned ground vehicle is a vehicle that is capable of sensing its environment and navigating without human input.

Arab spring

a series of anti-government protests and uprisings in a number of Arab countries facilitated by new social media tools available to people in the region

Cultureal Values

a society's deeply held beliefs about right and wrong ways to live

balance of payments

a statement of how much trade a country has going out compared to how much it has coming in. If a country is buying more than it is selling, it will have a negative balance of payments.

joint venture

a strategic alliance in which a new entity owned by two or more firms allows the partners to pool their resources for common goals

countertrade

a type of trade in which goods are paid for with other items instead of with cash

global warming

a warming of the planet earth that will have disastrous effects on the planet

sachet

affordable one-use packages of cleaning products, fabric softeners, shampoo, etc., for sale to consumers in least developed and developing countries

2.1 Take a Bow: Marketing on the Global Stage

2.1 Understand the big picture of international marketing and the decisions firms must make when they consider globalization. Here's an important question: Do you primarily see yourself only as a resident of Smalltown, USA, or as a member of a global community? The reality is that you and all your classmates are citizens of the world and participants in a global marketplace. It is likely that you eat bananas from Ecuador, drink beer from Mexico, and sip wine from Australia, South Africa, or Chile. When you come home, you may take off your shoes that were made in Thailand, put your feet up on the cocktail table imported from Indonesia, and watch the World Cup football (soccer) match being played in Brazil or Canada on your Smart TV while checking your Facebook page on your smartphone, both made in China. Hopefully, you also have some knowledge and concern for important world events such as the "Brexit" vote in which Britain began divorce proceedings from the European Union; the mass killings, systematic rape, and torture of the Rohingya people in Myanmar; the defeat of the Islamic State in Mosul by Iraqi and Syrian forces; and the growing concern about North Korea's nuclear testing. And on a more positive note you may even be looking for an exciting career with a firm that does business around the globe. Firms doing business in this global economy face uncertainty in the future of the global marketplace. For a number of years, consumers and world leaders have argued that the development of free trade and a single global marketplace will benefit us all because it allows people who live in developing countries to enjoy the same economic benefits as citizens of more developed countries. There are other reasons that many leaders want a single marketplace. One important reason comes from fears that the Greenhouse Effect may threaten the future of the planet. What is the Greenhouse Effect? In simple terms, our factories and automobiles continue to pump more and more carbon dioxide (the most important of the greenhouse gases) into our atmosphere while at the same time we cut down the rain forests and reduce the amount of oxygen the trees add to the atmosphere. This increase in greenhouse gases causes the Earth to get warmer, just like a greenhouse provides a warm place for tender plants. The result, many believe, is global warming, a warming of the Earth, which will have disastrous effects on the planet. These fears have caused many to demand international agreements that would force industries and governments to develop and adhere to the same environmental standards to protect the future of the planet. Of course, there is another side to the issue of a single marketplace. The Arab Spring, a series of anti-government protests and uprisings in a number of Arab countries were largely aided by new social media tools available to people in the region. These protests gave hope to many that dictatorships in countries in the Middle East would become democracies and bring a better life to peoples of the countries. Instead, new violent, radical groups such as ISIS took over large portions of these countries. This was accompanied by a growing number of terrorist attacks in other parts of the world, causing citizens and country leaders to propose greater restrictions on immigration and on trade with countries that aid or harbor terrorists. You may be asking, "What do these current events have to do with a marketing course?" Whether we like it or not, we are a global community. Everything that happens in any part of the world has a potential to influence what marketers need to do to be successful at home and around the globe. We'll be talking about these influences in this chapter and throughout the book. The global marketing game is exciting, the stakes are high, and it's easy to lose your shirt. Competition comes from both local and foreign firms, and differences in national laws, customs, and consumer preferences can make your head spin. In this section, we will first discuss the status of world trade today. Then, we'll look at the decisions firms must make as they consider their global opportunities. World Trade World trade refers to the flow of goods and services among different countries—the total value of all the exports and imports of the world's nations. In 2009, the world suffered a global economic crisis that resulted in dramatic decreases in worldwide exports. Today, we see increasing growth in world trade with world exports of merchandise increasing from $12 trillion in 2009 to nearly $16 trillion in 2015, down from a high of $19 trillion in 2014. Just how much is $19 trillion? Think about it this way: A recent lottery prize grew to a whopping $1 billion. If a lottery awarded a $1 billion prize every day, it would take more than 43 years to equal $16 trillion. The decline in 2015 was primarily due to declining commodity prices and changing exchange rates rather than to declines in trade volume. Of course, not all countries participate equally in the trade flows among nations. Understanding the "big picture" of who does business with whom is important to marketers when they devise global trade strategies. Figure 2.1 shows the value of merchandise North American countries traded with major partners around the world in 2014. Knowing who does business with whom is essential to develop an overseas marketing strategy. As this figure shows, North America trades most heavily with Asia, Europe, and Latin America. It's often a good thing to have customers in remote markets, but to serve their needs well requires flexibility and the ability to adapt to local social and economic conditions. For example, you may have to adapt to the needs of foreign trading partners when those firms can't pay cash for the products they want to purchase. Believe it or not, the currencies of as many as 100 countries—from the Chinese Yuan to the Indian Rupee—are not convertible, usually due to government restrictions. This means you can't spend or exchange them outside the country's borders. In some countries, because sufficient cash or credit simply is not available, trading firms work out elaborate countertrade deals in which they trade (or barter) their products with each other or even supply goods in return for tax breaks from the local government. Our ever-increasing access to products from around the world does have a dark side: The growth in world trade in recent years has been accompanied by a glut of unsafe products—toys with lead paint, toothpaste containing poisonous diethylene glycol, and more recently, crayons laced with cancer-causing asbestos—many of which have come from China.1 In 2014, the European Commission's early warning system for dangerous products (RAPEX) reported a notable increase in alerts of unsafe products; of the more than 2,000 alert issues the commission received, almost two-thirds of the unsafe products came from China.2 Although most Chinese manufacturers make quality products, some unscrupulous producers have damaged the reputation of Chinese manufacturers and prompted U.S. and European officials to increase their inspections of Chinese imports.

2.2 Understand International, Regional, and Country Global Trade Controls

2.2 Explain how international organizations such as the World Trade Organization (WTO), the World Bank, the International Monetary Fund (IMF), economic communities, and individual country regulations facilitate and limit a firm's opportunities for globalization. Even the most formidable competitive advantage does not guarantee success in foreign markets. Many governments participate in activities that support the idea that the world should be one big open marketplace, where companies from every country are free to compete for business. The actions of others frequently say the reverse. In many countries, the local government may "stack the deck" in favor of domestic competitors. Often, they erect roadblocks (or at least those pesky speed bumps) designed to favor local businesses over outsiders, making it even more difficult to expand into foreign markets. Indeed, in the United States, the issue of whether to regulate trade to give American companies an advantage—or to lessen the advantage that companies based in other countries have from their own governments—is one of the most divisive issues in political and business circles. Initiatives in International Cooperation and Regulation In recent years, a number of international initiatives have diminished barriers to unfettered world trade. Most notably, after World War II, the United Nations established the General Agreement on Tariffs and Trade (GATT), which did much to establish free trade among nations. During a meeting in 1984 known as the Uruguay Round, GATT created the World Trade Organization (WTO). With 164 members and 23 observer states seeking membership, the WTO member nations account for around 98 percent of world trade. The WTO has made giant strides to create a single, open world market. It is the only international organization that deals with the global rules of trade between nations. Its main function is "to ensure that trade flows as smoothly, predictably and freely as possible."5 The WTO also tackles other issues that stand in the way of an open and fair world market. Perhaps you have spent time in other countries, and noticed the huge numbers of luxury watches, leather bags, and current music CDs that sell for ridiculously low prices. Who can resist a Rolex watch for $20? Of course, there is a catch: They're fake or pirated illegally. Protection of copyright and patent rights is a huge headache for many companies, and it's a priority the WTO tries to tackle. Pirating is a serious problem for companies because illegal sales significantly erode their profits. All too often, we see news headlines about police confiscating millions of dollars' worth of goods—from counterfeit luxury handbags to fake Viagra.6 Two additional organizations have a strong influence on the advancement of global trade: The World Bank and the International Monetary Fund (IMF). The World Bank, founded in 1944 and owned by its 189 member countries, is an international lending institution. The goal of the World Bank is to reduce poverty and better peoples' lives by improving economies and promoting sustainable development. In pursuit of this goal, the World Bank lends about $20 billion a year to development projects. The poorest countries may have up to 50 years to repay the loans without interest.7 The primary purpose of the IMF, also founded in 1944, is to ensure the stability of the international monetary exchange by controlling fluctuations in foreign exchange rates, also referred to as forex rates. Exchange rates are simply the price of one currency in terms of another currency. Stabilizing exchange rates can help to prevent severe balance of payments problems and thereby make it possible for countries to trade with each other. A country's balance of payments is a statement of how much trade a country has going out compared to how much it has coming in. If a country is buying more than it is selling, it will have a negative balance of payments (which is not necessarily a bad thing).8 When we look in Figure 2.1 at the amount of merchandise various regions of the world import and export, we can get a good picture of the inequality of the balance of payments around the globe. Protected Trade: Quotas, Embargoes, and Tariffs Whereas the WTO works for free trade, some governments adopt policies of protectionism when they enforce rules on foreign firms to give home companies an advantage. Many governments set import quotas on foreign goods to reduce competition for their domestic industries. Quotas can make goods more expensive to a country's citizens because the absence of cheaper foreign goods reduces pressure on domestic firms to lower their prices. For example, when President Donald Trump placed tariffs on solar panels (30 percent) and washing machines (up to 50 percent) in order to aid U.S. manufacturers, there was concern that consumers would be the ones who would ultimately pay in higher prices for these products.9 While we normally think of import quotas that protect manufacturing and agricultural producers within a country, China also has strict import quotas on foreign films. A Hollywood-China co-production is exempt from the quota. Matt Damon created buzz in China when he began production as the star of a film in March 2016. The story of the co-production is about an army of elite warriors who must transform the Great Wall into a weapon "in order to combat wave after wave of otherworldly creatures hell-bent on devouring humanity."10 An embargo is an extreme quota that prohibits commerce and trade with a specified country altogether. For over 50 years, hardcore cigar smokers in the United States have had to do without as the U.S. government prohibited the import of Cuban cigars as well as rum and other products because of political differences with its island neighbor. In 2017, President Trump extended the ban under the Trading with the Enemy Act on Cuban products for at least one more year. Still, the U.S. government has moved toward the normalization of relations between the two countries, meaning Americans may again enjoy these uniquely Cuban products. Governments also use tariffs, or taxes on imported goods, to give domestic competitors an advantage in the marketplace by making foreign competitors' goods more expensive than their own products. New Balance is the only major sneaker company that produces shoes in the United States. They make or assemble more than four million pairs per year in the United States, a limited portion of their sales. According to the Department of Commerce, the average U.S. tariff for footwear is 10.8 percent, much higher than the average for all industrial products of 1.5 percent.11 No wonder those Nike Air Jordan III Retro Infrared 23 shoes are so expensive!12 Economic Communities Groups of countries may also band together to promote trade among themselves and make it easier for member nations to compete elsewhere. These economic communities coordinate trade policies and ease restrictions on the flow of products and capital across their borders. Economic communities are important to marketers because they set policies in areas such as product content, package labeling, and advertising regulations. The United States, for example, is a member of the North American Free Trade Agreement (NAFTA), which includes the United States, Canada, and Mexico. In 2018, the three countries signed a new agreement that, if approved, would make major changes in rules for automakers and U.S. dairy product sales to Canada. The new agreement is named the United States-Mexico-Canada Agreement, or U.S.M.C.A.13 The European Union (EU) represents more than 500 million consumers, more than 300 million of whom use the euro as their currency. In June 2016, U.K. voters approved the United Kingdom's divorce or withdrawal from the European Union, causing alarm and concern around the globe. This action is referred to as Brexit, the merging of the words Britain and Exit—a shorthand way of saying Britain's exit from the EU. Brexit is scheduled to officially take place on March 29, 2019.14 The long-term effects of this move will only be known after the passage of time. Table 2.1 lists the world's major economic communities. Community Member Countries Andean Community (www.comunidadandina.org) Bolivia, Colombia, Ecuador, Peru Association of Southeast Asian Nations (ASEAN) (www.aseansec.org) Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam Common Market for Eastern and Southern Africa (COMESA) (www.comesa.int) Burundi, Comoros, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe European Union (EU) (www.Europa.eu.int) Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden (In 2016, the United Kingdom voted to withdraw from the EU on Friday, March 29, 2019.) MERCOSUR (www.mercosur.org) Brazil, Paraguay, Uruguay, Argentina North American Free Trade Agreement (NAFTA) (www.nafta-sec-alena.org) Canada, Mexico, United States South Asian Association for Regional Cooperation (SAARC) (www.saarc-sec.org) Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka

2.3 Analyze the External Marketing Environment

2.3 Understand how factors in a firm's external business environment influence marketing strategies and outcomes in both domestic and global markets. Whether or not you decide to venture out of your own country (at least for now) to succeed, you can't simply bury your head in the sand and ignore what's going on in the rest of the world. You can be sure your competitors aren't! Marketing planning demands that marketers understand the firm's internal and external environments. We'll talk about the internal environment of a firm in Chapter 3. In this chapter, we'll look at how an understanding of a firm's external environment is even more important if your firm has decided to go global. The external environment consists of elements outside the firm that may affect it either positively or negatively. The key elements of the external environment are the economic environment, competitive environment, technological environment, political and legal environments, and the sociological environment. Because managers can't directly control these external factors, they must be aware and respond to them in marketing planning. Things can happen very quickly, and new developments can trip up even the most sophisticated marketers. Just ask Tata Motors, which is a major player in the Indian auto industry. In 2016, Tata prepared to launch a new hatchback with the name Zica. Oops—that name was too close to the Zika virus that was spreading around the world—so the company quickly renamed the car Tiago.3/.15 And, if you have decided to go global, understanding local conditions in a potential new country or in regional markets helps you to figure out where to go. Figure 2.3 provides a snapshot of these different external environments we'll dive into now.

2.4 How "Global" Should a Global Marketing Strategy Be?

2.4 Explain some of the strategies and tactics that a firm can use to enter global markets. Going global is not a simple task. Even a company known for its keen marketing prowess can make blunders when it reaches beyond its familiar borders. Disney, for example, learned several lessons from mistakes it made when it opened Hong Kong Disneyland:37 Bigger parks are better. Unlike giant American parks, which Chinese visitors to the United States are accustomed to, Hong Kong Disneyland is Disney's smallest park, easily seen in a single day. Cinderella who? Chinese visitors know characters from recent movies like Toy Story, but they didn't grow up hearing about Cinderella, so that emotional connection to Disney's traditional characters is lacking, even though they're seen throughout the park. When Disney opened its first mainland China Disney theme park in June 2016, in Shanghai, it was clear that the company learned its lesson. Unlike the Hong Kong Disneyland, the new park includes the Enchanted Storybook Castle—the largest Disney castle on the planet—and six unique and unforgettable lands that relate to Disney characters that Chinese families are familiar with: Mickey Avenue, Gardens of Imagination, Fantasyland, Adventure Isle, Treasure Cove, and Tomorrowland. There is also a Toy Story hotel.38 Company-Level Decisions: The Market Entry Strategy If a firm decides to expand beyond its home country, it must make important decisions about how to structure its business and whether to adapt its product marketing strategy to accommodate local needs. Just like a romantic relationship, a firm must determine the level of commitment it is willing to make to operate in another country. This commitment ranges from casual involvement to a full-scale "marriage." At one extreme the firm simply exports its products, whereas at the other extreme it directly invests in another country by buying a foreign subsidiary or opening its own stores or manufacturing facility. This decision about the extent of commitment entails a trade-off between control and risk. Direct involvement gives the firm more control over what happens in the country, but its risk also increases if the operation is not successful. Let's review four globalization strategies representing increased levels of involvement: exporting, contractual agreements, strategic alliances, and direct investment. Table 2.5 summarizes these options. Table 2.5Market-Entry Strategies Strategy Exporting Strategy Contractual Agreements Strategic Alliances Direct Investment Level of risk Low Medium Medium High Level of control Low Medium Medium High Options Sell on its own Rely on export merchants Licensing License a local firm to produce the product Franchising A local firm adopts your entire business model Joint venture, where firm and local partner pool their resources Complete ownership, often buying a local company Advantages Low investment, so presents the lowest risk of financial loss Can control quality of product Avoid difficulties of producing some products in other countries Avoid barriers to entry Limit financial investment and thus risk Local franchisee avoids barriers to entry Limit financial investment and risk Easy access to new markets Preferential treatment by governments and other entities Maximum freedom and control Avoid import restrictions Disadvantages May limit growth opportunities Perceived as a "foreign" product Lose control over how product is produced and marketed, which could tarnish company and brand image Potential unauthorized use of formulas, designs, or other intellectual property Franchisee may not use the same-quality ingredients or procedures, thus damaging brand image High level of financial risk Highest level of commitment and financial risk Potential for nationalization or expropriation if government is unstable Exporting If a firm chooses to export, it must decide whether it will attempt to sell its products on its own or rely on intermediaries to represent it in the target country. These specialists, or export merchants, understand the local market and can find buyers and negotiate terms. An exporting strategy allows a firm to sell its products in global markets and cushions it against downturns in its domestic market. Because the firm actually makes the products at home, it is able to maintain control over design and production decisions. Contractual Agreements The next level of commitment a firm can make to a foreign market is a contractual agreement with a company in that country. Two of the most common forms of contractual agreements are licensing and franchising: In a licensing agreement, a firm (the licensor) gives another firm (the licensee) the right to produce and market its product in a specific country or region in return for royalties on goods sold. The licensee is able to avoid many of the barriers to entry that the licensor would have but the licensor also loses control over how the product is produced and marketed. There are, however, added risks, not the least of which is that by sharing product designs and technologies, firms may be a target for violations of intellectual property rights, infringement with regard to patents, and copyright or trademark violations. Such misappropriation of trade secrets can violate either civil or criminal laws depending on the type of intellectual property involved. Franchising is a form of licensing that gives the franchisee the right to adopt an entire way of doing business in the host country. Firms need to monitor these operations carefully to ensure the partner maintains their brand image. Strategic Alliances Firms that choose to develop an even deeper commitment to a foreign market enter a strategic alliance with one or more domestic firms in the form of a joint venture, in which two or more firms create a new entity. Strategic alliances also allow companies easy access to new markets and preferential treatment in the partner's home country. Direct Investment An even deeper level of commitment occurs when a firm expands internationally through ownership. When a firm buys all or part of a domestic firm, it can take advantage of a domestic company's political savvy and market position in the host country.

ethics is job one in marketing planning

2.5 Understand the importance of ethical marketing practices. It's hard to overemphasize the importance of ethical marketing decisions. Businesses touch many stakeholders, and they need to do what's best for all of them where possible. On a more selfish level, unethical decisions usually come back to bite you later. The consequences of low ethical standards become visible when you consider the number of highly publicized corporate scandals that have made news headlines since the turn of the century. The fallout from unethical practices often means people lose their jobs and even their pensions. Stockholders lose their investments and consumers pay for worthless merchandise or services. In 2015, the U.S. Environmental Protection Agency (EPA) accused Volkswagen AG of dodging air-pollution requirements by fitting about 482,000 U.S. diesel-powered vehicles with a "defeat device" in the form of computer software that would make the cars appear to be running cleaner than they were. Later Volkswagen admitted that they had fitted eight million vehicles with the software. The result: Volkswagen's stock value plunged, sales dropped, car owners and investors filed lawsuits, and Volkswagen was last in Fortune magazine's 2016 ranking of the 100 largest companies by business reputation.46 In 2018, Volkswagen and their diesel-engine Beetles were again in the news when it was discovered that in 2014, Volkswagen financed research using monkeys to prove that their new technology made their diesel Beetles cleaner than the older models. The news in 2018 was that the diesel Beetle supplied for the test had been rigged to produce emissions less harmful than emissions of the Beetle on the road. And then there's the problem of harmful emissions testing on monkeys.47 Ethical Philosophies Of course, what constitutes ethical behavior is often different for different people. We can point to various ethical philosophies and look at how each guides people to make their decisions. Table 2.6 presents a few of these different philosophies and how they reflect on ethical decision making. Table 2.6Some Common Ethical Philosophies Ethical Philosophy Description of the Ethical Decision Questions for Decision Making Utilitarian approach The decision that provides the most good or the least harm (i.e., the best balance of good and harm). Which option will produce the most good and do the least harm? Rights approach The decision that does the best job of protecting the moral rights of all affected. These include the following: The right to decide what kind of life to lead The right to be told the truth The right not to be injured The right to privacy Which option best respects the rights of all who have a stake in the decision? Fairness or justice approach The decision that treats all human beings equally—or, if unequally, then fairly based on some standard that is defensible. Which option treats people equally? Common good approach The decision that contributes to the good of all in the community. Which option best serves the community as a whole, not just some members? Virtue approach The decision is in agreement with certain ideal virtues. Honesty, courage, compassion, generosity, tolerance, love, fidelity, integrity, fairness, self-control, and prudence are all examples of virtues. Which option leads me to act as the sort of person I want to be? For example, if one uses the utilitarian approach to make a decision on different safety features to include in a new product, the ethical choice is the one that provides the most good and the least harm. The rights approach seeks to protect the rights of all. The fairness or justice approach advocates treating all human beings equally so that decisions about employee compensation would pay everyone the same or to be able to justify why one salary is higher than another. The good of all in the community is the focus of the common good approach while certain ideal values drive decisions under the virtue approach. Of course, there are other factors that influence behavior. Ethical relativism suggests that what is ethical in one culture is not necessarily the same as in another culture. In other words, what is right or wrong is relative to the moral norms within the culture. Business leaders who have experienced a sheltered life in American companies are often shocked to find that they cannot expect the same ethical standards of some others in the global community. Westerners, for example, are often painfully honest. If an American business contact cannot meet a deadline or attend a meeting or provide the needed services, he or she will normally say so. In other cultures, the answer, even if untrue, will always be "yes." Westerners see such dishonest answers as unethical, but in some areas of the world, people believe saying "no" to any request is extremely rude—even if there's no way they intend to honor the request.

2.6 Sustainability: Marketers Do Well by Doing Good

2.6 Explain the role of sustainability in marketing planning. In Chapter 1, we saw that many firms today have adopted a triple-bottom-line orientation. These firms don't just look at their financial successes but also focus on how they contribute to their communities (their social bottom line) and create sustainable business practices (the environmental bottom line). Today, many believe that sustainability is no longer an option. It's necessary, it's happening, and it will continue to be a part of strategic planning into the future. Why are sustainable business practices so important? It's really simple. All of the things we need today or in the future to maintain life as we know it depend on the natural resources of our planet—air, water, and our mineral resources in the earth. Today, our Earth's population continues to grow at staggering rates. Economic growth, especially the growth in developing countries, means we consume our natural resources at higher rates. The massive growth of developing countries like China and India doesn't just provide expanding marketing opportunities; the growing middle classes in these countries look at the lives of consumers in developed countries and want that same life, thus creating even greater levels of unsustainable consumption. Sustainability Is a Sensible Business Decision To understand sustainable marketing better, we might go back to the societal marketing concept discussed in Chapter 1: marketers must satisfy customers' needs in ways that also benefit society and deliver profit to the firm. Sustainability means the firm seeks to sustain itself and at the same time, the long-term future of society. Today we see an increasing number of firms moving toward greater sustainability by increasing operational efficiencies, decreasing their use of raw materials, conserving energy, increasing the use of recycled materials, and preventing the discharge of wastes into the natural and social environment.52

Brand you: finding the right fit

2.7 Recognize which industry and which work environment (both domestic and international) are best for you. Taylor is excited and eager to begin his journey of developing a personal brand. He recognizes that a personal brand will not only help him land an internship or a first job, but also allow him to control his career options in the future. Taylor understands that marketing is about meeting needs. Employers are looking for people who are able to accomplish tasks and solve problems. A personal brand will allow Taylor to discover and communicate what makes him unique and sets him apart from other job candidates. If you have had an opportunity to visit different college campuses, you know that each one "feels" different. Some seem cold and impersonal while others are warm and inviting. The inviting ones are places where students like to be and spend time just enjoying each other. This is because different campuses, like different organizations, have different organizational cultures. Just like you found a college that was the "right fit," you need to find an industry that is the best fit for your style. Will you be more comfortable in the conservative culture of a financial institution, or do you crave the freedom of coming to work in jeans and flip-flops at a company like Zappos, where the culture is much more relaxed? In this section, you will learn how to: Recognize the industry that provides the best fit for you Discover which work environment is best for you Understand options to consider in an international career Organizational Culture Just like we define the culture of a group of people as the values, beliefs, and customs of that group, values, beliefs, and customs are important parts of an organizational culture. For an organization, values are deeply held beliefs about the right and wrong way to run a business. These beliefs may have been influenced by the values of the founder of the business and over time have become so strongly entrenched that they are difficult if not impossible to change. In many organizations, deeply ingrained ways of doing things may include everything from the when and where you eat your lunch to what you can place in your office or cubicle. For example, some companies expect employees to follow company guidelines in their dress and in the treatment of vendors and channel members. In very structured organizations, new ideas often must run up the appropriate chain of command and receive approval before they can be implemented. In less structured organizations, employees have more freedom to try out a new idea and see how it works. At Zappos, the Internet retailer, no one, not even the CEO, has an office; everyone has the same sized cubicle, which they are encouraged to decorate to express themselves. They can do their work in any part of the campus they wish and even take a nap in a room full of hammocks, placed there just for that purpose. Observe the culture while you are on every job interview. It's the small things that you see (or don't see) that can tell you so much about the organization's culture. Are the people you meet as you walk through the hallways friendly, smiling, and enthusiastic? Do they look like they enjoy working there, or do they seem to be less than excited about their jobs? It's okay to ask about the organization's culture during the job interview. You can ask such questions as "How would you describe the company culture?" and "What is an average work day here like?" to get a feel for the culture of the organization. In addition, it's always a good idea to ask the same questions of each person with whom you interview to see if you get consistent responses. Some other things that you can observe and that will tell you a lot about the work environment are: The location of the business. This element refers to the look of the building and the design of its workspaces. Does everyone have a cubicle or office, or are workspaces open and configured around a hub? The personality of key players. Who is more important: scientists, dealmakers, or others? The management philosophy and style. Do managers micromanage every detail, or do they set goals and then step aside so employees can accomplish them? Risk-taking. Does the company take risks, or is it financially conservative? What are the consequences if an employee makes a mistake? Ethics. Does the company have a code of ethics? Do employees follow the code? Social responsibility. Does the organization contribute to the public good? Is it a good citizen in its community? You can learn many of these things on a company website and from business or trade publications, such as Advertising Age and Fortune magazine. The best source may be from someone in your network who works for the organization—and be sure to seek this person's insight before your interview.

dumping

A company tries to get a toehold in a foreign market by pricing its products lower than it offers them at home.

Monopoly

A market situation in which one firm, the only supplier of a particular product, is able to control the price, quality, and supply of that product.

perfect competition

A market structure in which many small sellers, all of whom offer similar products, are unable to have an impact on the quality, price, or supply of a product.

brics countries

Also referred to as the brics, Brazil, Russia, India, China, and South Africa are the fastest growing of the developing countries. With more than 3 billion people, they represent over 41% of the world's population and about 22% of the gross world product.

licensing agreement

an agreement in which one firm gives another firm the right to produce and market its product in a specific country or region in return for royalties

standard of living

an indicator of the average quality and quantity of goods and services consumed in a country

polycentric pricing

A pricing strategy where the local partners set the prices for the product in each global market.

U.S. Generalized System of Preferences (GSP)

A program to promote economic growth in developing countries by allowing duty-free entry of goods into the U.S.

Sustainable Customer Behavior

A sustainability approach doesn't end with an improvement in manufacturing processes. Marketers also need to motivate customers to seek out, pay for, and use sustainable options. Many do buy products that minimize the use of natural resources; encourage the use of recycled, reused, and repurposed products; purchase fair trade and organic food; use environmentally friendly cleaning products and toiletries not tested on animals; and share cars, even at the expense of higher prices, less convenience, and lower product performance. Consumers can be an important part of sustainable marketing practices when they become knowledgeable about environmental concerns and environmentally friendly products.

world bank

an international lending institution that seeks to reduce poverty and improve the lives of people by improving economies and promoting sustainable development

International Monetary Fund (IMF)

an international organization that seeks to ensure the stability of the international monetary exchange by controlling fluctuations in exchange rates

The Economic Environment

After several rocky years of economic stumbling caused by the Great Recession of 2008-2009, the global economy has made giant strides toward a full comeback. It's a slow process—the global economy grew by only 2.6 percent in 2014 and 3.0 percent and 3.3 percent in 2015 and 2016, respectively. The IMF predicted 3.5 percent growth in 2017 and 3.6 percent in 2018. Countries with the highest incomes have experienced lower growth rates (2.4 percent in 2016) compared to much higher growth rates in lower income countries (5.3 percent) and 5.9 percent in countries with the lowest level of development, the least developed countries (LDCs). We'll talk more about LDCs and other levels of economic development later in this section. When we look at the future of the world economy, two areas of concern may impact future growth: the decline in oil prices because of a decrease in demand coupled with an increase in supply and the disruptive effects on trade due to geopolitical tensions in some regions of the world.16 Marketers need to understand the state of the economy from two different perspectives: (1) the overall economic health and level of development of a country and (2) the current stage of its business cycle. Let's take a look at each now. Indicators of Economic Health Just as a doctor takes your temperature during a medical checkup, companies need to know about the overall "health" of a country's economic environment before they conduct a more detailed exam. You can easily find information about most countries in the World Factbook of the Central Intelligence Agency (CIA) (no, you don't need high-level security clearance to access this information online). The most commonly used measure of economic health is a country's gross domestic product (GDP): the total dollar value of goods and services it produces within its borders in a year. Table 2.2 shows the GDP and other economic and demographic characteristics of a sampling of countries. In addition to total GDP, marketers may also compare countries on the basis of per capita GDP: the total GDP divided by the number of people in a country. The per capita GDP is the better indicator of economic health because it is adjusted for the population size of each country. Table 2.2Selected Comparisons of Economic and Demographic Characteristics Democratic Republic of the Congo India China Brazil Russia United States Qatar Ranking* 2 64 109 106 138 177 189 Total GDP $67.99 Billion $8.852 Trillion $21.66 Trillion $3,219 Trillion $3.93 Trillion $18.95 Trillion $333.3 Billion Per capita GDP $800 $6,800 $15,700 $15,500 $27,400 $59,500 $127,300 Population below poverty level 63.0% 21.9% 3.3% 3.7% 13.3% 15.1% N/A Inflation rate 17.6% 4.5% 2.0% 8.7% 7.0% 1.3% 2.7% Unemployment rate N/A 8.0% 4.0% 11.3% 5.5% 4.9% 0.7% Population 83.3 Million 1,282 Million 1,379 Million 207 Million 142 Million 326.6 Million 2.3 Million Birthrate per 1,000 population 33.5 19.0 12.3 14.1 11.0 12.5 9.6 Population growth rate 2.37% 1.17% 0.41% 0.73% −0.08% 0.81% 2.27% Population aged 0-14 41.745% 27.34% 17.15% 22.33% 17.12% 18.73% 12.63% Population aged 15-24 21.46% 17.9% 12.78% 16.36% 9.46% 13.27% 12.35% Population aged 25-54 30.53% 41.08% 48.51% 43.86% 44.71% 39.45% 70.59% Population aged 55-64 3.6% 7.45% 10.75% 9.12% 14.44% 12.91% 3.42% Population aged 65 and older 2.67% 6.24% 10.81% 8.33% 14.28% 15.63% 1.0% Life expectancy 57.7 yrs 68.8 yrs 75.7 yrs 74.0 yrs 71.0 yrs 80.0 yrs 78.9 yrs Literacy rate 77.0% 71.2% 96.4% 92.6% 99.7% N/A 97.3% School life expectancy 10 yrs 12 yrs 14 yrs 15 yrs 15 yrs 17 yrs 13 yrs Cell phones per 100 population 48 89 99 119 163 129 157 Internet users 3.8% 29.5% 53.2% 59.7% 76.4% 76.2% 94.3% *Based on values expressed in current international dollars, reflecting a single year's (the current year) currency exchange rates and purchasing-power-parity (PPP) adjustments. The ranking goes from the poorest (#1) to the wealthiest (#189). Source for ranking: Jonathan Gregson, "The Poorest Countries in the World," Global Finance Magazine, February 13, 2017, https://www.gfmag.com/global-data/economic-data/the-poorest-countries-in-the-world?page=12 (accessed February 15, 2018); data based on Central Intelligence Agency (CIA), The World Factbook, https://www.cia.gov/library/publications/the-world-factbook/docs/profileguide.html (accessed February 15, 2018). The World Factbook is updated biweekly. Still, these comparisons may not tell the whole story. Per capita GDP can be deceiving, because of the income inequality where the wealth of a country may be concentrated in the hands of a few. In these cases, most citizens don't have the means to obtain basic necessities. Furthermore, the costs of the same goods and services are much lower in some global markets. This is why it's important for companies that want to enter a foreign market to consider exchange rates as well. The foreign exchange rate that we mentioned earlier is simply the price of a nation's currency in terms of what a bank will exchange it for with another currency. For example, if we want to know how much a U.S. dollar is worth in countries that are members of the European Union, we might find that it is only worth 80.0 cents in Europe ($1 = €0.80). If our neighbors in Europe look at the same exchange rate with the euro as the base currency, they would find that a euro is worth about 25 percent more in the United States (i.e., the forex rate would be €1 = $1.25). Why does the exchange rate matter? The rate determines the price of a product in a different country and thus a firm's ability to sell outside its borders. If the dollar becomes stronger so that for example it takes fewer dollars to equal one euro, a dollar can buy more French wine or escargot, and customers in the United States will buy more of it. If the dollar drops in value compared to the euro, then the dollar will buy less when you hike through Italy, whereas European tourists will flock to the United States for a "cheap" vacation. Of course, GDP and exchange rates alone do not provide the information marketers need to decide if a country's economic environment makes for an attractive market. They also need to consider whether they can conduct "business as usual" in another country. A country's economic infrastructure refers to the availability of the resources that make doing business in a country possible. These resources include transportation, distribution networks, financial institutions, communications networks, and energy resources. For example, countries with less-developed financial institutions may operate as a cash economy in which consumers and business customers must pay for goods and services with cash rather than with credit cards or checks. This may lead to false reporting of incomes of both businesses and individuals, which in turn may create inaccurate GDP figures and lower the tax revenues for the country. The physical infrastructure is equally important. In poorer countries without good road systems, sellers may use donkey carts, hand trucks, or bicycles to deliver goods to the many small retailers who are their customers. Level of Economic Development When marketers scout the world for opportunities, it helps to consider a country's level of economic development. Economists look past simple facts such as growth in GDP to decide this; they also look at what steps the country is taking to reduce poverty, inequality, and unemployment. Analysts also take into account a country's standard of living, an indicator of the average quality and quantity of goods and services a country consumes. They describe the following two basic levels of development: As we said earlier, a country at the lowest stage of economic development is a least developed country (LDC). In most cases, its economic base is agricultural. Analysts consider many nations in Africa and South Asia to be LDCs. In LDCs, the standard of living is low, as are literacy levels. Opportunities to sell many products, especially luxury items such as diamonds and caviar, are minimal because most people don't have enough spending money. They grow what they need and barter for the rest. These countries are attractive markets for staples such as rice and inexpensive goods such as shoes and fabrics from which people can make clothing. In addition, they present opportunities for new products that these consumers need, such as solar-operated cell phones and computers that will survive without air conditioning. When an economy shifts its emphasis from agriculture to industry, standards of living, education, and the use of technology rise. These countries are developing countries. In such locales, there may be a viable middle class, often composed largely of entrepreneurs working hard to run successful small businesses. Because more than 8 out of 10 consumers now live in developing countries, the number of potential customers and the presence of a skilled labor force attract many firms to these areas. Marketers see these developing countries as the future market for consumer goods like skin care products and laundry detergents. Within these LDCs and developing countries is a group of consumers known as the bottom of the pyramid (BOP), which is the collective name for the group of more than 4 billion consumers throughout the world who live on less than $2 a day.17 These BOP consumers represent a potentially huge marketing opportunity with purchasing power parity of $5 billion. They also present a big challenge for marketers, as unlike other consumer groups, they generally are unable to afford to purchase "inventory," such as a bottle of shampoo. Procter & Gamble, Unilever, and other companies meet these needs when they offer cleaning products, fabric softeners, and shampoo that can be used in cold water in affordable one-use sachet packaging. The largest of the developing or newly industrialized countries—Brazil, Russia, India, China, and South Africa—are referred to as the BRICS countries, or simply as the BRICS. Originally known as "BRIC," they became BRICS when South Africa joined in 2010. These five countries are the fastest growing of the developing countries; with more than 3 billion people, they represent over 42 percent of the world's population. Their total GDP of $16.6 trillion is equivalent to about 22 percent of the gross world product (GWP). Marketers are attracted to these countries because of the masses of consumers who are not wealthy but who are beginning their move toward economic prosperity.18 The BRICS present exciting opportunities to marketers, but we must approach with caution because of the many ups-and-downs that make these economies unstable. As examples, the political crisis in Brazil discourages foreign investment, Russia's "oil rush" has been reduced to a trickle because of the drop in oil prices, and China's exploding economy is starting to sputter. A developed country (also referred to as a more developed country or a more economically developed country) boasts sophisticated marketing systems, strong private enterprise, and bountiful market potential for many goods and services. Such countries are economically advanced, and they offer a wide range of opportunities for international marketers. In 1976, the most economically developed countries in the world—France, West Germany, Italy, Japan, the United Kingdom, and the United States—formed what became known as the Group of Six, or G6. Later with the addition of Canada in 1976 and Russia in 1998, the G6 became the Group of Eight (G8). In 2014, Russia's membership was revoked because of its involvement in the Crimean crisis, so we are down to the Group of Seven (G7).19 The purpose of the G7 is to provide a way for these countries, democracies with highly developed economies, to deal with major economic and political issues that other countries and the international community face. In addition to topics of the world economy and international trade, G7 summits have more recently included discussions of other issues, such as energy, terrorism, unemployment, the information highway, crime and drugs, arms control, and the environment.20 The Business Cycle The business cycle describes the overall pattern of changes or fluctuations of an economy. All economies go through cycles of prosperity (high levels of demand, employment, and income), recession (falling demand, employment, and income), and recovery (gradual improvement in production, lowering unemployment, and increasing income). A severe recession is a depression, a period during which prices fall but there is little demand because few people have money to spend and many are out of work. Inflation occurs when prices and the cost of living rise while money loses its purchasing power because the cost of goods escalates. During inflationary periods, dollar incomes may increase, but real income—what the dollar will buy—decreases because goods and services cost more. The business cycle is especially important to marketers because of its effect on customer purchasing behavior. During times of prosperity, consumers buy more goods and services. Marketers try to grow their businesses, maintain inventory levels and develop new products that meet customers' willingness to spend. During periods of recession, such as that experienced by countries all over the globe beginning in 2008, consumers simply buy less. They may also "trade down" as they substitute less expensive or lower-quality brands to stretch a dollar (or euro, or other currency). The Competitive Environment A second important element of a firm's external environment is the competitive environment. For products ranging from toothpaste to sport utility vehicles, firms must keep abreast of what the competition is doing so they can develop new product features, new pricing schedules, or new advertising to maintain or gain market share. As we will see, marketers need to understand their competitive position among product alternatives in their microenvironment and in the structure of their industries, that is, their macroenvironment. Like players in a global chess game, marketing managers size up their competitors according to their strengths and weaknesses, monitor their marketing strategies, and try to predict their next moves. To do this, an increasing number of firms around the globe engage in competitive intelligence (CI) activities where they gather and analyze publicly available information about rivals from such sources as the Internet, the news media, and publicly available government documents, such as building permits and patents. Successful CI means that a firm learns about a competitor's new products, its manufacturing processes, or the management styles of its executives. Then the firm uses this information to develop superior marketing strategies (we'll learn more about collecting market intelligence in Chapter 4). Competition in the Microenvironment Competition in the microenvironment means the product alternatives from which members of a target market may choose. We think of these choices at three different levels: Discretionary income or the amount of money people have left after they pay for necessities such as housing, utilities, food, and clothing. Do we plow "leftover" money into a new computer tablet, donate it to charity, or turn over a new leaf and lose those extra pounds by investing in a healthy lifestyle? These choices vary by country. For Russians, the bulk of monthly income goes to food, alcohol, and tobacco. In the United States, healthcare is the biggest expenditure. In Japan, housing costs take just over a quarter of the average income, while in Saudi Arabia almost 10 percent is spent on furniture.21 Product competition, where other organizations offer different ways to satisfy the same consumers' needs and wants. So, for example, if a couch potato decides to use some discretionary income to get buff (i.e., in shape), he or she may consider whether either joining a health club or buying a used Soloflex machine on eBay to pump iron at home might be a good idea. Brand competition, where competitors offer similar goods or services, vying for consumer dollars, euros, or pounds. So, our flabby friend who decides to join a gym still must choose among competitors within this industry, such as Gold's Gym, Soul Cycle, or the YMCA, or he or she may forgo the exercise thing altogether and just buy bigger pants. Competition in the Macroenvironment When we talk about examining competition in the macroenvironment, we mean that marketers need to understand the big picture—the overall structure of their industry. This structure can range from one firm having total control to numerous firms that compete on an even playing field. No, it's not just a board game: A monopoly exists when one seller controls a market. Because the seller is "the only game in town," it feels little pressure to keep prices low or to produce quality goods or services. In most U.S. industries today, the government attempts to ensure consumers' welfare by limiting monopolies through the prosecution of firms that engage in activities that would limit competition and thus violate antitrust regulations. In an oligopoly, there are a relatively small number of sellers, each holding substantial market share, in a market with many buyers. Because there are few sellers, the actions of each directly affect the others. Oligopolies most often exist in industries that require substantial investments in equipment or technology to produce a product. The airline industry is an oligopoly. In a state of monopolistic competition, many sellers compete for buyers in a market. Each firm, however, offers a slightly different product, and each has only a small share of the market. For example, many athletic shoe manufacturers, including Nike, New Balance, and Under Armour, vigorously compete with one another to offer consumers some unique benefit—even though only Adidas (at least for now) offers you a $250 computerized running shoe that senses how hard the ground is where you are running and adapts to it. Finally, perfect competition exists when there are many small sellers, each offering basically the same good or service. In such industries, no single firm has a significant impact on quality, price, or supply. Although true conditions of perfect competition are rare, agricultural markets (in which there are many individual farmers, each producing the same corn or jalapeño peppers) come the closest.

business ethics

basic values that guide a firm's behavior

group of 7 (g7)

An informal forum of the seven most economically developed countries that meets annually to discuss major economic and political issues facing the international community. Formerly the G8, Russia was excluded from the group as a result of its invasion of Crimea in 2014.

World Trade Organization (WTO)

An organization that replaced GATT; the WTO sets trade rules for its member nations and mediates disputes between nations.

Marketing Mix Strategies: To "P" or Not to "P?"

In addition to "big-picture" decisions about how a company will operate in other countries, managers must decide on how to market their product in each country. Do they need to modify or create new Four Ps—product, price, promotion, and place—to suit local conditions? When they go global, marketers ask such questions as these: To what extent will the company need to adapt its marketing communications to the specific styles and tastes of each local market? Will the same product appeal to people there? Will it have to be priced differently? And, of course, how does the company get the product into people's hands? Marketers must decide which is better—standardization or localization? Advocates of standardization argue that basic needs and wants are the same everywhere. A focus on the similarities among cultures means a firm doesn't have to make any changes to its marketing strategy to compete in foreign countries and can realize large economies of scale because it can spread the costs of product development and promotional materials over many markets. Widespread, consistent exposure also helps create a global brand like Coca-Cola because it forges a strong, unified image all over the world. In contrast, those in favor of localization feel that the world is not that small; you need to tailor products and promotional messages to local environments. These marketers argue that each culture is unique, with a distinctive set of behavioral and personality characteristics. If you visit the World of Coca-Cola in Atlanta, you can sample the products Coke sells around the globe. Product Decisions A firm can choose from three distinct localization/standardization strategies when it develops a product for a global market: to offer the same, a modified, or a new product: A straight extension strategy (standardization) retains the same product for domestic and foreign markets. The Apple iPad is a good example of a straight extension strategy. No matter where you go in the world, every iPad is basically the same. A product adaptation strategy (modified localization) recognizes that in many cases people in different cultures do have strong and different product preferences. Sometimes these differences can be subtle yet important. In South Korea, for example, the familiar pink-and-orange neon Dunkin' Donuts sign beckons customers inside to sample its gourmet coffee and traditional glazed doughnuts, but also on the menu are items influenced by Korean fare, such as black rice doughnuts, jalapeño sausage pie doughnuts, and rice sticks.39 A product adaptation strategy also means a company adapts the same basic product to sync with local sensibilities. You may fondly recall Thomas the Tank Engine and his locomotive pals from your youth. Thomas is, in fact, one of the world's largest toy and TV franchises that delivers more than $1 billion per year to Mattel, which bought the company in 2012. Mattel started to catch some heat about the lack of diversity of Thomas's friends, who are primarily male and white. Mattel's answer: The company is introducing 14 new friends who represent different countries. You can decide whether these new characters are valuable additions to the team, or if they just reflect cultural stereotypes. Here are some examples of them:40 Raul of Brazil: "feisty" and "strong and agile." Yong Bao of China: "driven to achieve and make progress." Ashima of India (female): "shows no fear" and "happy to help out." Carlos of Mexico: "proud" and "always wearing a smile." A product invention strategy (localization) means a company develops a new product as it expands to foreign markets. In some cases, a product invention strategy takes the form of backward invention. For example, there are still nearly 1.5 billion people or more than 20 percent of the world's population who have no access to reliable electricity, primarily in Africa, Asia, and the Middle East. This provides a challenge for firms to develop products such as refrigerators, smartphones, and computers that can operate without electric power.41 Many of these people use kerosene lamps for light that are hazardous to both themselves and the environment. Here are just a few startling statistics: Fumes from kerosene lamps kill approximately 1.5 million African women and children annually. More than 1.5 million people in India suffer burns from kerosene lamps each year. Kerosene lamps burn fossil fuels and emit carbon dioxide (more than two pounds annually when used daily for four hours), contributing to greenhouse gas emissions.42 To combat these and other serious problems co-creators Jim Reeves and Martin Riddiford developed the $5 GravityLight, a small, batteryless LED that is powered by gravity. The light, which is attached to a bag filled with up to 28 pounds of sand, dirt, or rock (or whatever you have handy), works when the bag is hoisted into the air. As gravity pulls the weight of the bag downward, a notched belt spins a series of gears that drives the motor for the light. After you've used up approximately 25 minutes of light, you simply raise up the weight for another go.43 As long as you've got a little muscle, you've got sustainable light. Promotion Decisions Marketers must also decide whether it's necessary to modify how they speak to consumers in a foreign market. Some firms endorse the idea that the same message will appeal to everyone around the world, whereas others feel the need to customize it. When Unilever introduced its Dexona deodorant to China with dreams of selling its product to billions of Chinese, sales were far below expectations. Both cultural differences and biology—scientists have found that East Asian consumers simply don't have body odor issues—less than 10 percent of China's population uses deodorant. In order to give female Chinese consumers a reason to buy deodorant, Nivea has introduced deodorants with whitening functions in a market where fair skin is prized.44 Price Decisions Similar to the three product strategies discussed (product extension, product adaptation, and product invention), marketers have three pricing alternatives: extension or ethnocentric pricing, adaptation or polycentric pricing, and geocentric pricing. With ethnocentric pricing strategies, the price of a product is the same around the globe. When a firm uses a polycentric pricing policy, the global subsidiaries or distributors set their own prices based on their understanding of their market environment without concern for the coordination of prices from one country to another. For example, Starbucks uses a polycentric pricing policy to build its affordable luxury brand image. In the United States, the price of Starbucks is higher than other coffee chains—on average a latte costs about $2.75. Even in countries where labor is cheaper, the same latte costs more. For example, a latte is priced higher in three of the BRICS countries: Russia $12.32, India $7.99, and China $7.19. In countries such as these, people see Starbucks as a symbol of having a luxurious life, and they are willing to pay the high price.45 A geocentric pricing strategy establishes a global price floor or minimum for a product but also recognizes that unique local market conditions such as costs, income levels, competition, and the rest of the global marketing program must be considered in setting the price in each global market. It's often more expensive to manufacture a product in a foreign market than at home. This may occur when there are higher costs stemming from transportation, tariffs, differences in currency exchange rates, and the need to source local materials. To ease the financial burden of tariffs on companies that import goods, some countries have established free trade zones. These are designated areas where foreign companies can warehouse goods without paying taxes or customs duties until they move the goods into the marketplace. One danger of pricing too high is that competitors will find ways to offer their product at a lower price, even if they do so illegally. Gray market goods are items that are imported without the consent of the trademark holder. Although gray market goods are not counterfeit, they may be different from authorized products in warranty coverage and compliance with local regulatory requirements. Products such as toothpaste and pharmaceuticals may have the same formula but consist of inferior ingredients. The Internet offers exceptional opportunities for marketers of gray market goods ranging from toothpaste to textbooks. But, as the saying goes, "If it seems too good to be true, it probably is." Another unethical and often illegal practice is dumping, through which a company prices its products lower than it offers them at home. This removes excess supply from home markets and keeps prices up there. And dumping isn't restricted to just retail products—agricultural products can be dumped too. Place/Distribution Decisions Getting your product to consumers in a remote location can be quite a challenge. It's essential for a firm to establish a reliable distribution system if it's going to succeed in a foreign market. Marketers used to dealing with a handful of large wholesalers or retailers in their domestic market may have to rely instead on thousands of small "mom and pop" stores or distributors, some of whom transport goods to remote rural areas on oxcarts, wheelbarrows, or bicycles. In LDCs, marketers may run into problems when they want to package, refrigerate, or store goods for long periods. So far, we've talked about marketers' need to understand the external environment and make good marketing mix decisions to be successful both at home and globally. In the next section, we'll discuss an even more important part of long-term marketing success: ethical marketing practices.

Codes of Business Ethics

Ethics are rules of conduct—how most people in a culture judge what is right and what is wrong. Business ethics are basic values that guide the behavior of individuals within a business organization. Ethical values govern all sorts of marketing planning decisions that managers make, including what goes into their products, where they source raw materials, how they advertise, and what type of pricing they establish. Developing sound business ethics is a major step toward creating a strong relationship with customers and others in the marketplace. To let employees and other stakeholders know definitively what is expected of them, many firms develop their own code of ethics—written standards of behavior to which everyone in the organization must subscribe—as part of the planning process. For example, AT&T's Code of Business Conduct, an 11-page document available via its website at www.att.com, details its commitments to honesty and to each other (to act with integrity and create a safe workplace), to the business and its shareholders (to work lawfully and to protect physical assets and intellectual property), to its customers (to follow ethical sales practices and guard customer communications), to its communities (to be responsible for the environment), to others (to maintain integrity in recording and reporting and to comply with antitrust laws), and to the code itself.48 Of course, even the best code of ethics won't protect customers and the reputation of the organization unless employees are rewarded for ethical behavior. Wells Fargo found this out the hard way when they offered employees incentives to open more accounts by cross-selling other banking products to customers. Employees not only increased their cross-selling but some created fake accounts in the names of existing customers, resulting in Wells Fargo firing 5,300 employees.49 To help marketers adhere to ethical behavior in their endeavors, the American Marketing Association (AMA) developed a code of ethics for marketers. We present the highlights of that code in Table 2.7. Table 2.7Highlights of the American Marketing Association Statement of Ethics Ethical Norms and Values for Marketers PREAMBLE The American Marketing Association commits itself to promoting the highest standard of professional ethical norms and values for its members (practitioners, academics, and students). Norms are established standards of conduct that are expected and maintained by society and/or professional organizations. Values represent the collective conception of what communities find desirable, important and morally proper. Values also serve as the criteria for evaluating our own personal actions and the actions of others. As marketers, we recognize that we not only serve our organizations but also act as stewards of society in creating, facilitating, and executing the transactions that are part of the greater economy. In this role, marketers are expected to embrace the highest professional ethical norms and the ethical values implied by our responsibility toward multiple stakeholders (e.g., customers, employees, investors, peers, channel members, regulators, and the host community). ETHICAL NORMS As marketers, we must: 1. Do no harm. 2. Foster trust in the marketing system. 3. Embrace ethical values. ETHICAL VALUES Honesty—to be forthright in dealings with customers and stakeholders. Responsibility—to accept the consequences of our marketing decisions and strategies. Respect—to acknowledge the basic human dignity of all stakeholders. Transparency—to create a spirit of openness in marketing operations. Citizenship—to fulfill the economic, legal, philanthropic, and societal responsibilities that serve stakeholders. IMPLEMENTATION We expect AMA members to be courageous and proactive in leading and/or aiding their organizations in the fulfillment of the explicit and implicit promises made to those stakeholders.

When is a Bribe not a Bribe? Ethical Issues for Global Business

In many LDCs and developing countries, salaries for midlevel people are, sadly, very low; the economy runs on a system we would call blatant bribery or extortion. Some of these "payments" are only petty corruption, and the "favors" are inconsequential, whereas others may involve high-level government or business officials and can have devastating consequences. If you need to park your car or your delivery truck illegally where there is no parking space, you give a little money to a police officer who is willing to accept a bribe. If the shopkeeper wants an officer to watch over his store, he finds an officer who is willing to do so in exchange for a shirt from his stock once in a while. If an importer wants to get her merchandise out of customs before it spoils, she pays off a government worker who can hold up her shipment for weeks. And if someone wants the contract to build a new building or wants an unsafe building to pass inspection—well, you get the idea. We mentioned earlier that a cash economy can lead to inaccurate GDPs and reduced tax revenues. Bribery and extortion are also more likely to occur in cash economies where there is no paper (or digital) trail of income or expenditures. Bribery occurs when someone voluntarily offers payment to get an illegal advantage. Extortion occurs when someone in authority extracts payment under duress. The Foreign Corrupt Practices Act of 1977 (FCPA), however, puts U.S. businesses at a disadvantage because it bars them from paying bribes to sell overseas. The FCPA does, however, allow payments for "routine governmental action . . . such as obtaining permits, licenses, or other official documents; processing governmental papers, such as visas and work orders; [and] providing police protection."51

least developed country (LDC)

a country at the lowest stage of economic development

developed country

a country that boasts sophisticated marketing systems, strong private enterprise, and bountiful market potential for many goods and services

Is Marketing Unethical?

Most marketers want to be ethical. Some follow the Rights Approach Philosophy and behave ethically because it's the right thing to do, whereas others are motivated by a desire not to get into trouble with consumers or government regulators. Still, there are examples of questionable or unethical marketing. We'll discuss some of these criticisms here: Marketing serves the rich and exploits the poor: Many marketers are concerned about their bottom line, but they also want to provide a better quality of life for all consumers, that is, the societal marketing concept that we discussed in Chapter 1. But there are exceptions. For example, because of decreasing sales of cigarettes in developed countries, tobacco companies target smokers in LDCs and developing countries and thus contribute to the health problems of those populations.50 Products are not safe: Whether marketers are truly dedicated to providing their customers with the safest products possible or because of the fear of government regulation and liability issues, most firms do make safe products and, if they find a problem, quickly notify customers and recall the defective product. Poor-quality products: Many people bemoan the loss of U.S. manufacturing, feeling that imported products such as textiles and furniture are of poor quality. Product quality, however, is determined by what consumers want in a product. Do you want a refrigerator that lasts 50 years? Home appliance manufacturers could design and sell that, but would consumers be willing to pay what it would cost? Until consumers are willing to pay for higher quality, marketers have to provide products at the prices consumers want. Planned obsolescence: To remain profitable, marketers must offer new products after an existing product has been on the market a period of time. The iPhone is an example. Have you noticed that about the time your cellular provider contract runs out, there is a newer and better iPhone that you just must have? For many people, this is a good thing because new phones have better features. There are others who still like their old flip phone and will use it until it falls apart in their hands. Easy consumer credit makes people buy things they don't need and can't afford: Many are concerned about businesses such as payday loan and car title loan companies that charge interest rates that can exceed 400 percent annually. Their customers typically are people with limited financial resources and even less knowledge about how to manage their money. One firm leases tires to consumers who can't afford to buy them. Of course, by the time the tires are paid off, the customer has spent enough to buy several sets of tires.

franchising

a form of licensing involving the right to adapt an entire system of doing business

local content rules

a form of protectionism stipulating that a certain proportion of a product must consist of components supplied by industries in the host country or economic community

Should we go global

Step 1. "Go" or "no go"—is it in our best interest to focus exclusively on our home market or should we cast our net elsewhere as well? Step 2. If the decision is "go," which global markets are most attractive? Which country or countries offer the greatest opportunity for us? Step 3. What market-entry strategy, or rather, what level of commitment is best? As we'll see, it's pretty low risk to simply export products to overseas markets. On the other hand, although the commitment and the risk are substantial if the firm decides to build and run manufacturing facilities in other countries, the potentially greater payoff may be worth the extra risk. Step 4. How do we develop successful marketing mix strategies in these foreign markets—should we standardize what we do across all the countries where we operate or develop a unique localized marketing strategy for each country? We'll look at the first of these decisions now—whether or not to go global. Entering global markets involves a sequence of decisions. Although the prospect of millions—or even billions—of consumers salivating for your goods in other countries is tempting, not all firms can or should go global. When they make these decisions, marketers need to consider a number of factors that may enhance or detract from their success abroad. Let's review two that are critical to the decision: domestic demand and the competitive advantage the firm enjoys at home. Look at Market Conditions and Opportunities Many times, a firm decides it's time to go global because the opportunity for growing the business and greater profit within its domestic market has already peaked and may even be declining while foreign markets offer opportunities for large growth. Of course, if there is still room to grow business and profits at home, it may not be a good idea to invest in the larger global market for now. Starbucks has served coffee to just about every American who drinks it. The company opened its first store in 1971 in Seattle. After conquering its home city, the company spread across the United States. The company's global expansion began in 1996, when it opened its first store outside of North America in Tokyo. Starbucks has opened stores in additional countries every year since. Today, Starbucks operates more than 28,000 stores in 76 markets.3 That's a lot of lattes. Consider Your Competitive Advantage In Chapter 1, we discussed how firms hope to create a competitive advantage over rivals. When firms enter a global marketplace, this challenge is even greater. There are more players involved, and typically local firms have a "home-court advantage." It's like soccer—increasing numbers of Americans play the game, but they are up against an ingrained tradition of soccer fanaticism in Europe and South America, where kids start dribbling a soccer ball when they start to walk. If a firm wants to go global, it needs to examine the competitive advantage that makes it successful in its home country. Will this leg up "travel" well to other countries? If the answer is yes, then a firm is probably wise to consider globalization more seriously. Starbucks, long known for its product quality, superior customer service, fair treatment of employees, and respect for local cultures, is experiencing great growth overseas as well as strong sales in the United States.4 Now that we've discussed this first step in the global decision process, we'll look at important factors that help marketers make decisions about what markets to enter, including global trade controls that governments have in place. We'll also look at the various elements of the external environment that influence marketing decisions both at home and abroad. Finally, we'll examine marketers' decisions on the level of commitment and if and how to adapt marketing strategies used in the domestic market for success in other countries.

brexit

Term used to refer to the U.K.'s (Britain's) exit from the European Union.

patent

a legal mechanism to prevent competitors from producing or selling an invention, aimed at reducing or eliminating competition in a market for a period of time

Oligopoly

a market structure in which a relatively small number of sellers, each holding a substantial share of the market, compete in a market with many buyers

monopolistic competition

a market structure in which many firms, each having slightly different products, offer unique consumer benefits

protectionism

a policy adopted by a government to give domestic companies an advantage

The political and legal environment

The political and legal environment refers to the local, state, national, and global laws and regulations that affect businesses. Legal and regulatory controls can be prime motivators for many business decisions. Although firms that choose to remain at home have to worry about local regulations only, global marketers must understand more complex political issues that can affect how they are allowed to do business around the world. American Laws U.S. laws governing business generally have one or both of two purposes. Some, such as the Sherman Antitrust Act and the Wheeler-Lea Act, make sure that businesses compete fairly with each other. Others, such as the Food and Drug Act and the Consumer Product Safety Commission Act, make sure that businesses don't take advantage of consumers. Although some businesspeople argue that excessive legislation only limits competition, others say that laws ultimately help firms because they maintain a level playing field for businesses and support troubled industries. Table 2.3 lists a few of the major federal laws that protect and preserve the rights of U.S. consumers and businesses. Federal and state governments have created a host of regulatory agencies—government bodies that monitor business activities and enforce laws. Table 2.4 lists some of the agencies whose actions affect marketing activities. Table 2.3Significant American Legislation Relevant to Marketers Law Purpose Sherman Antitrust Act (1890) Developed to eliminate monopolies and to guarantee free competition. Prohibits exclusive territories (if they restrict competition), price fixing, and predatory pricing. Food and Drug Act (1906) Prohibits harmful practices in the production of food and drugs. Federal Trade Commission (FTC) Act (1914) Created the Federal Trade Commission to monitor unfair practices. Robinson-Patman Act (1936) Prohibits price discrimination (offering different prices to competing wholesalers or retailers) unless cost is justified. Wheeler-Lea Amendment to the FTC Act (1938) Revised the FTC Act. Makes deceptive and misleading advertising illegal. Lanham Trademark Act (1946) Protects and regulates brand names and trademarks. Consumer Credit Protection Act (1968) Protects consumers by requiring full disclosure of credit and loan terms and rates. Child Protection and Toy Safety Act (1969) Sets standards for child-resistant packaging. National Do Not Call Registry (2003) Established by the Federal Trade Commission to allow consumers to limit number of telemarketing calls they receive. Credit Card Accountability, Responsibility, and Disclosure Act of 2009 Bans unfair rate increases, prevents unfair fee traps, requires disclosures be in plain language, and protects students and young people. The Affordable Care Act of 2013 Mandates healthcare coverage for Americans who do not receive benefits through an employer. Revises insurance regulations by eliminating denial of coverage for preexisting conditions, ending lifetime limits on coverage, and so on. Digital Accountability and Transparency Act of 2014 (DATA Act) Gives consumers access to files of personal information a data broker compiles, the ability to correct inaccuracies, and the chance to opt out of the sale of those data to other companies. USA Freedom Act of 2015 A result of Edward Snowden's revelations about the National Security Agency's (NSA) practices regarding collecting and monitoring of phone conversations. Requires that phone metadata be stored by phone companies, not the U.S. government. The Tax Cuts and Jobs Act of 2017 A sweeping update to the U.S. tax code designed to lower taxes on businesses and individuals and create higher wages, more jobs, and a larger, dynamic economy. The bill makes large reductions in the corporate tax rate. Table 2.4U.S. Regulatory Agencies and Responsibilities Regulatory Agency Responsibilities Consumer Financial Protection Bureau (CFPB) Responsible for consumer protection in the financial sector. The CFPB develops and enforces rules for bank and nonbank financial institutions, including credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, and other financial companies operating in the United States. Consumer Product Safety Commission (CPSC) Protects the public from potentially hazardous products. Through regulation and testing programs, the CPSC helps firms make sure their products won't harm customers. Environmental Protection Agency (EPA) Develops and enforces regulations aimed at protecting the environment. Such regulations have a major impact on the materials and processes that manufacturers use in their products and thus on the ability of companies to develop products. Federal Communications Commission (FCC) Regulates telephone, radio, TV, and more recently the use of the Internet. FCC regulations directly affect the marketing activities of companies in the communications industries, and have indirect effects on all firms that use these media. Federal Trade Commission (FTC) Enforces laws, primarily through fines, against deceptive advertising and product labeling regulations. Food and Drug Administration (FDA) Enforces laws and regulations on foods, drugs, cosmetics, and veterinary products. FDA approval is required before marketers can introduce many products to the market. Interstate Commerce Commission (ICC) Regulates interstate bus, truck, rail, and water operations and therefore affects the ability of a firm to efficiently move products to its customers. Political Constraints on Trade Global firms know that the political actions a government takes can drastically affect their business operations. At the extreme, of course, when two countries go to war, the business environment changes dramatically. Short of war, a country may impose economic sanctions that prohibit trade with another country, as the United States has done with several countries, including Cuba, North Korea, and, more recently, Russia. After Russia invaded eastern Ukraine in 2014, the U.S. and European countries increased economic sanctions against the country.25 In 2017, the U.S. Congress passed a bill that included 12 types of sanctions against Russia that included freezing assets and banning exports. It took these extreme measures due to Russia's alleged interference in the 2016 U.S. election, its human rights violations, and the 2014 invasion of eastern Ukraine.26 In some situations, internal pressures may prompt the government to take over the operations of foreign companies that do business within its borders. Nationalization occurs when the domestic government seizes private assets, usually declaring the assets the property of the state. It happens without any reimbursement and the country typically justifies this action as being in the best interest of the country or state. In contrast, expropriation is when a government seizes a foreign company's assets and reimburses the company owners (often not for the full value). One of the more famous examples of nationalization occurred when Egyptian president Gamal Abdel Nasser nationalized the Suez Canal Company in 1956. Similarly, following World War II, Germany and other European countries nationalized privately owned businesses. In 1959, following the Cuban Revolution, the Cuban government confiscated all foreign-owned private companies, most of which were owned by U.S. firms or individuals. Now that the United States has normalized relations with Cuba, will these firms seek reimbursement for their lost property? Regulatory Constraints on Trade Governments and economic communities regulate what products are allowed in the country, what products should be made of, and what claims marketers can make about them. Other regulations ensure that the host country gets a piece of the action. Local content rules are a form of protectionism that stipulates that a certain proportion of a product must consist of components and services supplied by service providers in the host country or economic community. For example, Brazil has recently tightened its local content rules regarding the manufacture and assembly of wind turbines. Under these rules, a minimum of 70 percent of the steel plates and 100 percent of the cement used to build the towers must be of Brazilian origin. In addition, the tower's nacelles (the assemblies that house the machinery) must be assembled locally.27 Such rules ensure that Brazil is able to create more domestic manufacturing jobs for its citizens. Human Rights Issues Some governments and companies are vigilant about denying business opportunities to countries that mistreat their citizens. They are concerned about conducting trade with local firms that exploit their workers or that keep costs down by employing children or prisoners for slave wages or by subjecting workers to unsafe working conditions, like locked factory doors. Nike, once the poster child for unsafe labor practices, has spent almost two decades admitting to and correcting its formerly abusive practices with increased wages and factory audits, and is now a company others can learn from and look up to.28 The U.S. Generalized System of Preferences (GSP) is a program Congress established to promote economic growth in the developing world. GSP regulations allow developing countries to export goods duty free to the United States. The catch is that each country must constantly demonstrate that it is making progress toward improving the rights of its workers. On the other side of the coin, the low wages that U.S. firms can pay to local workers often entices them to expand or entirely move their operations overseas. Although they provide needed jobs, some companies have been criticized for exploiting workers when they pay wages that fall below local poverty levels, for damaging the environment, or for selling poorly made or unsafe items to consumers.

The Sociocultural Environment

The sociocultural environment refers to the characteristics of the society, the people who live in that society, and the culture that reflects the values and beliefs of the society. Whether at home or in global markets, marketers need to understand and adapt to the customs, characteristics, and practices of its citizens. Basic beliefs about cultural priorities, such as the role of family or proper relations between the sexes, affect people's responses to products and promotional messages in any market. To understand some of these values requires knowledge of a culture's history. For example, someone who appreciates that South Korea has long had a significant U.S. military presence might not be as surprised to learn that SPAM—that American mystery meat—sells $235 million of the pork shoulder product there every year. During the Korean War, food was scarce and only a select few Koreans could gain access to PX stores on U.S. military bases. As a result, the humble product became a status symbol, and it remains so today though many young Koreans who love to order "military stew" have no idea of its origins. Demographics The first step toward understanding the characteristics of a society is to look at its demographics. These are statistics that measure observable aspects of a population, such as population size, age, gender, ethnic group, income, education, occupation, and family structure. The information demographic studies reveal is of great value to marketers when they want to predict the size of markets for many products, from home mortgages to brooms and can openers. We'll talk more about how demographic factors impact marketing strategies in Chapter 7. Tupperware's explosive growth in overseas markets illustrates the importance of demographics. Faced with a static market in the U.S., the company is prospering by planting its flag in other countries where there are more favorable conditions. One such sweet spot is Indonesia. It turns out there is an Indonesian tradition called an arisan ("gathering") where women meet with a group of friends to socialize, share recipes, and even pool their money to buy gifts for one another. Tupperware, which relies on social networks like these, sends sellers to arisans to promote their products and to recruit new agents. For the container company, it's a natural fit.30 Values Every society has a set of cultural values, or deeply held beliefs about right and wrong ways to live, that it imparts to its members.31 Those beliefs influence virtually every aspect of our lives, even the way we mark the time we live them. For example, for most Americans, punctuality is a core value; indeed, business leaders often proclaim that "time is money." For countries in Latin America and other parts of the world, this is not true. If you schedule a business meeting at 10:00 a.m., you can be assured most people are not expected to arrive until around 10:30—or later. Differences in cultural values often explain why marketing efforts that are a big hit at one time can flop just a few years later. The cultural icon Barbie doll was introduced in 1959, and sported curly bangs and a black-and-white-striped swimsuit. In 1971, Malibu Barbie was introduced. In the 1980s, the McDonald's waitress Barbie and the first black Barbie were added. Then in 2015, the Barbie Fashionistas were brought to market. These ethnically diverse dolls included 3 distinct body types (petite, curvy, and tall), 7 skin tones, 22 eye colors, and 24 hairstyles to reflect the growing cultural value of diversity and to keep Barbie a cultural icon for parents to buy their kids.32 In 2018, Mattel introduced a new gang of Barbie Fashionistas that included 40 dolls, 7 body types, 11 skin tones, and 28 hairstyles. Next Gen Ken came in three body types: broad, slim, and original, and new looks that included a man bun, cornrows, and freckles.33 One important dimension on which cultures differ is their emphasis on collectivism versus individualism. In collectivist cultures, such as those we find in Venezuela, Pakistan, Taiwan, Thailand, Turkey, Greece, and Portugal, people tend to subordinate their personal goals to those of a stable community. In contrast, consumers in individualist cultures, such as the United States, Australia, Great Britain, Canada, and the Netherlands, tend to attach more importance to personal goals, and people are more likely to change memberships when the demands of the group become too costly.34 You may not do the Downward-Facing Dog, but if, like many consumers, you love to shop at Lululemon, you probably look like you do. The yoga craze is sweeping America, but not surprisingly, it's (for now, at least) even bigger in India, where it originates. Yoga is closely tied to other long-standing spiritual practices in that country that link to food, medicinal treatments (Ayurveda), and even home furnishings. Indian consumers crave modern versions of these products, and a new wave of businesspeople known as the "Baba Cool Movement" are giving them what they want as they market healthy items based upon ancient beliefs. For example, Baba Ramdev is a swami (holy man), but he's also an effective marketer who translates traditional values into modern versions. He and other entrepreneurs have been so successful that sales of large multinationals have suffered. They in turn have to adapt or die—that is why Colgate recently introduced toothpastes containing the extract of neem, an Indian tree, and charcoal that Indian villagers use to clean their teeth.35 Social Norms Values are general ideas about good and bad behaviors. From these values flow social norms, or specific rules that dictate what is right or wrong, acceptable or unacceptable, within a society. Social norms indicate what ways to dress, how to speak, what to eat (and how to eat), and how to behave. For example, local customs dictate the appropriate hour at which the meal should be served—many Europeans, Middle Easterners, and Latin Americans do not begin dinner until around 9:00 p.m. or later, and they are amused by American visitors, whose stomachs growl by 7:00 p.m. Customs tell us how to eat the meal, including such details as the utensils, the table etiquette, and even the appropriate apparel for dinnertime (no thongs at the dinner table!). Conflicting customs can be a problem when U.S. marketers try to conduct business in other countries, where executives have different ideas about what is proper or expected. These difficulties even include body language; people in Latin countries tend to stand much closer to each other than do Americans, and they will be insulted if their counterpart tries to stand farther away. In many countries, even casual friends greet each other with a kiss (or two) on the cheek. In the United States, a kiss on the cheek of a person of the opposite sex is the norm—and one kiss only, please. In Spain and other parts of Europe, kissing includes a kiss on each cheek for both people of the same and the opposite sex, whereas in the Middle East, unless a special friend, it is unacceptable for a man to kiss a woman or a woman to kiss a man. Instead, it is the norm to see two men or two women holding hands or walking down the street with their arms entwined. Language The language barrier is one obvious problem that confronts marketers who wish to break into foreign markets. A notice at a hotel in Acapulco proclaimed, "The manager has personally passed all the water served here." These translation snafus are not just embarrassing. They can affect product labeling and usage instructions, advertising, and personal selling as well. It's vital for marketers to work with local people who understand the subtleties of language to avoid confusion. Tell that to Audi, which may encounter a bit of trouble when it sells its new e-tron line of electric cars in France. In the French language, the word Étron doesn't conjure up images of speed, sustainability, or sophistication—it means another four-letter word that starts with s.36 Consumer Ethnocentrism Ethnocentrism refers to the belief that one's own national or ethnic group is superior to others. Similarly, consumer ethnocentrism refers to consumers' beliefs about products produced in their country versus those from another. Consumers may feel that products from their own country are superior, or they may feel it is wrong, immoral, or unpatriotic to buy products produced in another country. Consumer ethnocentrism can cause consumers to be unwilling to try products made elsewhere.

The technological environment

The technological environment profoundly affects marketing activities. Of course, the Internet is the biggest technological change in marketing within recent times—even bigger than hoverboards! Online sales offer consumers virtually anything they want (and even some things they don't want) without ever leaving home. Some people believe the next innovations to be game changers in marketing are already here. Some of these are: In 2013, Amazon CEO Jeff Bezos surprised CBS journalist Charlie Rose with the announcement that Amazon had been secretly working on "Prime Air," a project to use "octocopters" or drones or unmanned aerial vehicles (UAVs) to deliver packages to homes all over the country within 30 minutes.22 A second game-changing innovation is self-driving, driverless, or autonomous vehicles, that is, automobiles, delivery vans, and now tractor-trailers without a human at the wheel. These autonomous cars and other vehicles are capable of sensing the environment and navigating (safely, we hope) without traditional controls like steering wheels and pedals or a human driver. Think the driverless 18-wheeler is at least 20 years away? With companies including Uber, Tesla, Volvo, Google, BMW, GM, and Ford working on autonomous vehicles, it's a pretty good bet that we will see them a lot sooner. In January 2018, GM announced that it would be mass producing driverless cars without traditional controls like steering wheels and pedals by the end of 2019.23 Driverless 18-wheelers are reported to be 5 to 10 years away and could revolutionize the transportation industry.24 Successful marketers continuously scan the external business environment in search of ideas and trends to spark their own research efforts. When inventors feel they have come across something exciting, they usually want to protect their exclusive right to produce and sell the invention by applying for a patent. This is a legal document that grants inventors exclusive rights to produce and sell a particular invention in that country.

locavorism

The trend for shoppers to actively look for products that come from farms within 50 to 100 miles of where they live.

Landing a job overseas

The world is fast becoming a global marketplace. BMW and Mercedes automobiles may be made by German companies, but many of their cars are made in the U.S. At the same time, U.S. automaker General Motors manufactures vehicles in Canada, Mexico, China, Germany, Turkey, Brazil, Argentina, Australia, and South Africa, and Toyota makes its cars in 18 countries, including Argentina, Belgium, Indonesia, Poland, South Africa, the U.S., and, oh yes, Japan, just to name a few. All of these firms provide employment opportunities for short- or longer-term work in another country. In addition to the opportunity to live somewhere else and to travel, these jobs provide invaluable learning experiences. Being able to do business on the international stage and working successfully with other cultures can't be learned in the classroom. Generally, it is easier to find these jobs from home, beginning by securing a position with a multinational corporation in your own country. Once you have acquired skills and gained some job experience, you'll be ready to apply for a transfer to a branch in a different country. One way you can increase your marketability in the global job market is to study abroad while working on your degree. Taylor has learned that, just as there are big differences among the cultures (values, beliefs, and norms) of various countries and groups of people, the corporate culture of companies and industries often vary greatly. He also recognizes that to get a job that is a great "fit" for him, he needs to learn as much about a potential employer's culture by observation and by asking questions during the job interviewing process. He also knows that in today's global marketplace there may be exciting opportunities for working in other countries.

geocentric pricing

a pricing strategy that establishes a global price floor for a product but recognizes local conditions in setting the price in each market

Developing a sustainable marketing mix

We can examine how some companies already implement sustainable marketing practices to gather some clues about the best ways to do that as we tweak our target marketing and Four Ps to do well by doing good: Target marketing strategies: Marketers need to understand the attitudes of their customers toward sustainability. They must know which consumers are willing to pay a few cents more for an environmentally friendly product. This allows marketers to successfully target green customers—those consumers who are most likely to actively look for and buy products that are eco-friendly. Product strategies: Sustainable product strategies include the use of environmentally friendly and recycled materials in products and in packaging. Marketers need to develop and put into production more environmentally friendly products, such as electric automobiles. Some firms also strive to choose fair trade suppliers. This term refers to companies that outsource production only to firms that pay workers in developing countries a fair/living wage. Price strategies: Many consumers would like to buy green products, but they don't because the price is higher than comparable traditional products. Sustainable marketing practices aim to establish prices for green products that are the same or close to the prices of other products. A truly sustainable strategy actually reduces prices in the long term because it encourages more efficiency and less waste. Place/distribution strategies: Sustainable distribution strategies can include retailers who focus on a reduction in the use of energy to benefit from both monetary savings and the loyalty of green consumers. Both producers and retailers can choose to buy from nearby suppliers to reduce dependence on long-haul trucking, a major source of air pollution. Within the food industry in particular, we witness the growing trend of locavorism—the trend in which shoppers actively look for products that come from farms within 50 to 100 miles of where they live.53 Promotion strategies: The most obvious sustainable promotion strategies are those that inform customers of the firm's commitment to the planet and future generations through advertising and other messages. But there are other opportunities. The cost of creating a TV commercial is enormous and may take two or three days of shooting to complete. Some firms have begun to "reuse" old commercials while letting customers know that this is their way of practicing sustainability.

expropriation

When a domestic government reimburses a foreign company (often not for the full value) for its assets after taking it over.

Differences among industries

While much of an organization's culture is influenced by the size, management philosophy, and CEO's personal style, the culture of the company may also be heavily influenced by the culture of the industry. The following list provides information about the work environment in some key industries. Agriculture, Mining, and Construction (agribusiness, petrochemical, forestry, aquaculture, residential/commercial construction) Employees are likely to be practical people who take pride in their skills and accomplishments. College grads get jobs in project management, finance, marketing, and sales. Manufacturing/Research and Development (automotive, aerospace, clothing, pharmaceuticals, computers) Employees face strict timelines, tight budgets, and quality control standards. Detail-oriented, level-headed problem solvers do best with these companies. Sales/Marketing (autos, clothing, food, retail stores and Web-based sellers, cosmetics) Employees need quantitative and analytical skills to work in this fast-paced, fluid environment. There is little tolerance for failure, and jobs are suited for high achievers with creative ideas and high energy. Information/Media/Entertainment (publishing, mass media, software publishing, telecommunications, advertising, public relations, film) These industries offer entry-level jobs that require technical skills such as editing, researching, and reporting. Creativity and fresh ideas are important for successful careers. Finance/Insurance (banking, commercial real estate, insurance, securities, venture capitalists) Employees in this sector must have personal integrity and self-confidence. Jobs require a detailed mind, a full understanding of the financial world, and "looking the part." Professional and Business Services (computer systems design, employment services, benefits consultants, management, scientific and technical consulting, public accounting and legal firms, client services organizations) Jobs require excellent communication skills, technical skills, a talent for building client relationships, self-discipline, and enjoyment in selling your expertise and knowledge. Education and Health Services (edutainment—e.g., video, e-learning—psychological and social services, educational institutions, hospitals, clinics, fitness trainers, nutritionists) Employees enjoy work that makes a difference in the lives of others. Leisure/Hospitality/Culture (restaurants, hotels, resorts, recreational facilities, parks, entertainment, museums, art galleries) Employees like serving other people or helping them enjoy their time off, can stay cool under pressure, and are willing to work for low pay. Employees have flexible hours, making time to pursue other interests. Government/Not-for-Profits/Nongovernmental Organizations (federal, state, and local agencies; politicians; city managers; planners; foundations; not-for-profit organizations; charities; and service organizations) These jobs are good for those who enjoy working to solve complex issues. People work in a collegial work environment. Transportation and Utilities (trucking firms, expediters, airlines, electric companies, alternative fuels) Jobs require professional skills, sensitivity to customer needs, the ability to implement business plans, and the ability to balance the sometimes conflicting goals of customer service and profitability. Many jobs offer collegial work environments, challenges, and service to others.

ethnocentric pricing

a pricing strategy where the firm sets a single price for a product around the globe

fair trade suppliers

companies that pledge to pay a fair price to producers in developing countries, to ensure that the workers who produce the goods receive a fair wage, and to ensure that these manufacturers rely where possible on environmentally sustainable production practices

consumer ethnocentrism

consumers feelings that products from their own country are superior or that it is wrong to buy products produced in another country

developing countries

countries in which the economy is shifting its emphasis from agriculture to industry

collectivist cultures

cultures in which people subordinate their personal goals to those of a stable community

individualist cultures

cultures in which people tend to attach more importance to personal goals than to those of the larger community

free trade zone

designated areas where foreign companies can warehouse goods without paying taxes or customs duties until they move the goods into the marketplace

strategic alliance

relationship developed between a firm seeking a deeper commitment to a foreign market and a domestic firm in the target country

utilitarian approach

ethical philosophy that advocates a decision that provides the most good or the least harm

Common Good Approach

ethical philosophy that advocates the decision that contributes to the good of all in the community

Rights Approach

ethical philosophy that advocates the decision that does the best job of protecting the moral rights of all

virtue approach

ethical philosophy that advocates the decision that is in agreement with certain ideal values

fairness or justice approach

ethical philosophy that advocates the decision that treats all human beings equally

economic communities

groups of countries that band together to promote trade among themselves and to make it easier for member nations to compete elsewhere

export merchants

intermediaries a firm uses to represent it in other countries

General Agreement on Tariffs and Trade (GATT)

international treaty to reduce import tax levels and trade restrictions

gray market goods

items manufactured outside a country and then imported without the consent of the trademark holder

import quotas

limitations set by a government on the amount of a product allowed to enter or leave a country

product invention strategy

product strategy in which a firm develops a new product for foreign markets

product adaption strategies

product strategy in which a firm offers a similar but modified product in foreign markets

straight extension strategy

product strategy in which a firm offers the same product in both domestic and foreign markets

social norm

specific rules dictating what is right or wrong, acceptable or unacceptable

Demographics

statistics that measure observable aspects of a population, including size, age, gender, ethnic group, income, education, occupation, and family structure

ethical relativism

suggests that what is ethical in one culture is not necessarily the same as in another culture

tariffs

taxes on imported goods

level of economic development

the broader economic picture of a country

bottom of the pyramid

the collective name for the group of consumers throughout the world who live on less than $2 a day

world trade

the flow of goods and services among different countries - the value of all the exports and imports of the world's nations

business cycle

the overall patterns of change in the economy - including periods of prosperity, recession, depression, and recovery - that affect consumer and business purchasing power

discretionary income

the portion of income people have left over after paying for necessities such as housing, utilities, food, and clothing

foreign exchange rate (forex rate)

the price of a nation's currency in terms of another currency

competitive intelligence (CI)

the process of gathering and analyzing publicly available information about rivals

economic infrastructure

the quality of a country's distribution, financial, and communications systems

Gross Domestic Product (GDP)

the total dollar value of goods and services produced by a nation within its borders in a year

Greenhouse effect

the turning of our atmosphere into a kind of greenhouse as a result of the addition of carbon dioxide and other greenhouse gasses

external environment

the uncontrollable elements outside an organization that may affect its performance either positively or negatively

green customers

those consumers who are most likely to actively look for and buy products that are eco-friendly

Nationalization

when a domestic government seizes a foreign company's assets without any reimbursement

product competition

when firms offering different products compete to satisfy the same consumer needs and wants

brand competition

when firms offering similar goods or services compete on the basis of their brand's reputation or perceived benefits

extortion

when someone in authority extracts payment under duress

bribery

when someone voluntarily offers payment to get an illegal advantage

code of ethics

written standards of behavior to which everyone in the organization must subscribe