International Marketing Test 2

What is the difference between nationalism and patriotism?

"patriotism is commitments - readiness to sacrifice for the nation - while nationalism is commitment plus exclusion of others, a readiness to sacrifice bolstered by hostility towards other" patriot - love and pride for country nationalism- love yours above all others no matter what ethnocentrism - yours is the nation that does things the way they ought to be done

Political risks of Global Business

Confiscation - the most severe political risk, seizing of a company's assets without payment Expropriation - gov seizes an investment, but some reimbursement for the assets is made; often the expropriated investment is nationalized to become a gov-run entity Domestication - host countries gradually cause the transfer of foreign investments to national control and ownership through a series of gov decrees that mandate local ownership and greater national involvement in a company's management

National Brands

A different strategy is followed by some companies like Nestlé. In some markets, it acquires well-established national brands for strength. In other markets where there are no strong brands it can acquire, it uses global brand names. Unilever also follows a strategy of a mix of national and global brands. Multinationals must also consider increases in nationalistic pride that occur in some countries and their impact on brands.

Import Restricitons

Selective restrictions on the import of consumer products, raw materials, machines, and spare parts are fairly common strategies to force foreign industry to purchase more supplies within the host country and thereby create markets for local industry.

Forms of Government

Monarchy (Dictatorship) - rule by one Aristocracy (oligarchy) - rule by few Democracy - rule by many

Jurisdiction of Disputes and Validity of Contracts

Since existing laws relating to commerce do not always clearly address the uniqueness of the internet and its related activities, a body of cyber law is being created Two of the most troubling areas are: -determining whose laws will prevail in legal disputes between parties located in different countries -establishing the contractual validity of electronic communications

Production of Innovations

Some consideration must be given to the inventiveness of companies and countries. The Japanese government diagnosed lack of business training as a problem for growth. Many Japanese firms also take advantage of American innovativeness by establishing design centers in the United States. American automobile firms have established design centers in Europe. Research is focusing on the related issue of "conversion-ability" or the success firms have when they take inventions to market. Three factors favor conversion in the global pharmaceutical industry: patience, focus on a few important innovations, and experience.

Qualitative Research: Uses

Used in international marketing research to formulate and define a problem more clearly and to determine relevant questions to be examined in subsequent research Used to stimulate ad message ideas and where interest centers on gaining an understanding of a market rather than quantifying relevant aspects Helpful in revealing the impact of socio-cultural factors on behavior patterns Helpful in developing research hypotheses that can be tested in subsequent studies designed to quantify the concepts and relevant relationships uncovered in qualitative data collection

Political risk assessment

an attempt to forecast political instability to help management identify and evaluate political events and their potential influence on current and future international business decisions uses to estimate the level of risk a company is assuming when making an investment and to help determine the amount of risk it is prepared to accept

Common Law

based on president derived from english law and found in England, the US, Canada, and other countries based from tradition, past practices, and legal precedents set by the courts through interpretations of statues, legal legislation, and past rulings Common: impossibility of performance does not excuse noncompliance with the provisions of the contract, unless it wan an act of God common law countries are codifying commercial law

Sovereign state

is independent and free from all external control governs its own territory selects its own political, economic, and social systems has the power to enter into agreements with other nations enjoys full legal equality with other states

Conciliation

or mediatation is a nonbiding agreement between parties to resolve disputes by asking a third party to mediate differences discussion betweeen parties and mediator are confidential and statements made by either party may not be used in future litigation or arbitration it is not legally binding considered especially effective

Sovereignty

refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members.

civil or code law

rule we go by is derived from Roman law and found in Germany, Japan, France, and in non-Islamic and non-Marxist countries is based on an all-inclusive system of written rules (codes) of law Code: acts of God are not necessarily limited to acts of nature but include "unforeseeable human act" such as labor strikes or riots

Political and Social Activists and Nongovernmental Organizations

those who seek to bring about peaceful change those who resort to violence and terrorism to effect change

Exchange controls

when a nation faces shortages of foreign exchange and/or a substantial amount of capital is leaving the country, controls may be levied over all movements of capital or selectively against the most politically vulnerable companies to conserve the supply of foreign exchange for the most essential uses.

Export Restrictions

Export licensing controls apply to exports of commodities and technical data from the United States; re-exports of U.S.-origin commodities and technical data from a foreign destination to another foreign destination Most items requiring special permission or a license for exportation are under the control of the Bureau of Industry and Security (BIS) of the Department of Commerce

Protection of Intellectual Property

Firms spend millions of dollars establishing brand names or trademarks to symbolize quality and design, only to be counterfeited and pirated. Piracy and counterfeiting lead to lost sales from the unauthorized use of US patents, trademarks, and copyrights (know difference), which amounts to about $300 billion annually as well as lost jobs. Counterfeited pharmaceutical drugs can lead to bad publicity and even deaths.

Instability in the International Market

Five main political issues: 1. governments that are inherently unstable 2. changes in political parties during elections - policy changes 3. nationalism 4. animosity targeted toward specific countries 5. trade disputes themselves

Green Marketing and Product Development

Green marketing is a term used to identify concern with the environmental consequences of a variety of marketing activities. Two critical issues that affect product development are: the control of the packaging component of solid waste consumer demand for environmentally friendly products The European Commission issued guidelines for ecolabeling that became operational in 1992. A product is evaluated on all significant environmental effects throughout its life cycle, from manufacturing to disposal.

Local-Content Laws

In addition to restricting imports of essential supplies to force local purchase, countries often require a portion of any product sold within the country to have local content, that is, to contain locally made parts.

Green Marketing Legislation

Multinational corporations also face a growing variety of legislation designed to address environmental issues Global concern for the environment extends beyond industrial pollution, hazardous waste disposal, and rampant deforestation to include issues that focus directly on consumer products Green marketing laws focus on environmentally friendly products and product packaging and its effect on solid waste management

Targeted Fear and/or Animosity

NO nation-state, however secure, will tolerate penetration by a foreign company into its market and economy if it perceives a social, cultural, economic, or political threat to its well-being Nationalism: targets all foreign countries Animosity: targets specific nations

Internationalization process

No export export sales subsidiary Wholly Owned Subsidiary

Government Encouragement

Reasons to encourage foreign investment: -accelerate development -create local employment -transfer technology -generate export sales -stimulate growth and development of local industry -conserve foreign exchange

Tax Controls

Taxes must be classifies as a political risk when used as a means of controlling foreign investments

Problems of Availability and Use of Secondary Data

The problem for American marketing researchers is sorting through too much data. Available data may not have the level of reliability necessary for confident decision making for many reasons. Comparability of data can even be a problem when the best commercial research firms collect data across countries, and managers are well advised to query their vendors about this problem. Can have flaws in data collection

What is internationalization?

The process of adapting firm operations to international environments

Deterrents to Litigation

-Fear of creating a poor image and damaging public relations -Fear of unfair treatment in a foreign court -Difficulty in collecting a judgment that may otherwise have been collected in a mutually agreed settlement through arbitration -Cost and time -Loss of confidentiality

Economic risks

-exchange controls -local content laws -import restrictions -tax controls -price controls -labor problems

Lessening Political Vulnerability

-joint ventures: business owned by 2 or more other businesses (lessens bc splits liability, know environment *most effective way to lessen*) -expanding the investment base -licensing -planned domestication -political bargaining -political payoffs

Estimating Market Demand

Expert Opinion -Experts are polled for their opinions about market size and growth rates. -The key in using expert opinion to help forecast demand is triangulation, that is, comparing estimates produced by different sources. Analogy -Assumes that demand for a product develops in much the same way in all countries, as comparable economic development occurs in each country.

The Research Process

1. Define the research problem and establish research objectives 2. Determine the sources of information to fulfill the research objectives 3. Consider the costs and benefits of the research effort 4. Gather relevant data from secondary or primary sources, or both 5. Analyze, interpret, and summarize the results 6. Effectively communicate the results to decision makers

Jurisdiction is generally determined in one of three ways, on the basis of:

1. jurisdictional clauses included in contracts 2. where a contract was entered into 3. where the provisions of the contract were performed

Example of international Marketing Research

2 samples in the US Primary, quantitative Survey questionnaire Constructs: Openness to Experience Agreeableness Global Identification National Identification Attitudes toward locally positioned brands Attitudes toward globally positioned brands

Internalization Costs

P-costs associated with the physical presence F-cost associated with familiarizing the firm to the local market T-costs associated with transfer of knowledge abroad C-costs associated with controlling the expanded organization IC= P+F+T+C NEB=(Ta+Tp)-(P+F+T+C)

Brands in International Markets

A global brand is defined as the worldwide use of a name, term, sign, symbol (visual and/or auditory), design, or combination thereof intended to identify goods or services of one seller and to differentiate them from those of competitors. A successful brand is the most valuable resource a company has. The brand name encompasses the years of advertising, goodwill, quality evaluations, product experience, and other beneficial attributes the market associates with the product. Brand image is at the very core of business identity and strategy. Research shows that the importance and impact of brands (and the success of their extensions) vary with cultural values around the world.

Assessing Political Vulnerability

A marketer has: no absolute guidelines to determine whether a company and its products will be subject to political attention. Countries seeking investments in high-priority industries may well excuse companies from: -taxes -customs duties -quotas -exchange controls -other impediments to investment

Problems of Gathering Primary Data

Ability to communicate opinions Willingness to respond Sampling in field surveys Language and comprehension

Marketing Consumer Services Globally

Advice regarding adapting products for international consumer markets also applies to adapting services or intangible products. However, many consumer services are distinguished by four unique characteristics: Intangibility, Inseparability, Heterogeneity, and Perishability Products are often classified as tangible, whereas services are intangible. The intangibility of services results in characteristics unique to a service: - It is inseparable in that its creation cannot be separated from its consumption. - It is heterogeneous in that it is individually produced and is thus unique. - It is perishable in that once created it cannot be stored but must be consumed simultaneously with its creation.

National Security Laws

American firms (as well as firms in other countries), their foreign subsidiaries, or foreign firms that are licensees of U.S. technology cannot sell products to a country in which the sale is considered by the U.S. government to affect national security. The events of September 11, 2001 added another set of restrictions related to weapons of mass destruction (WMD). Exports are controlled for the protection and promotion of human rights, as a means of enforcing foreign policy, because of national shortages, to control technology, and for a host of other reasons.

Innovative Products and Adaptation

An important first step product adaptation is to determine the degree of newness as perceived by the intended market. Any idea perceived as new by a group of people is an innovation. Products new to a social system are innovations, and knowledge about the diffusion (i.e., the process by which innovation spreads) of innovation is helpful in developing a successful product strategy. The goal of a foreign marketer is to gain product acceptance by the largest number of consumers in the market in the shortest span of time. Diffusion research refers to research on the process by which innovations spread to the members of a social system.

US antitrust laws that apply in Foreign markets

Antitrust enforcement has two purposes in international commerce: -protect american consumers by ensuring that they benefit from products and ideas produced by foreign competitors as well as by domestic competitors -protect american export and investment opportunities against any privately imposed restrictions

Stability of Government Policies

At the top of the list of political issues concerning foreign businesses is the stability or instability of prevailing government policies. Other issues include: -opposing political party ascends to power -pressure from nationalist and self-interest groups -weakened economic conditions -bias against foreign investment -conflict among governments

Problems in Analyzing and Interpreting Research Information

Both secondary and primary data collected by the market researcher are subject to many limitations. Accepting information at face value in foreign markets is imprudent. -The meanings of words, the consumer's attitude toward a product, the interviewer's attitude, or the interview situation can distort research findings.

What is the COO Effect

COO -positive or negative effect -affects choice process and subsequent behavior -quality perceptions of products - this effect differs by product categorty and quality level of the country of production

Global Brands

Companies with strong brands strive to use those brands globally. The Internet and other technologies accelerate the pace of the globalization of brands. Ideally a global brand gives a company uniformly positive worldwide brand associations that enhance efficiency and cost savings when introducing other products with the brand name, but not all companies believe a single global approach is the best. Companies that already have successful country-specific brand names must balance the benefits of a global brand against the risk of losing the benefits of an established brand. Researchers are beginning to address the sometimes difficult problem of brand extensions in global markets.

International Dispute Resolution

Conciliation Arbitration Litigation

Responsibility for Conducting Marketing Research

Decentralization: Local analysts provide information more rapidly and accurately than a staff research department Advantage -Control rests in hands closer to the market Disadvantage -Possible ineffective communications with home-office executives -Potential unwarranted dominance of large-market studies in decisions about global standardization

Communicating with Decision Makers

Decision makers must be provided with analyses and interpretation of information gathered in a timely manner. Decision makers must be involved in the fieldwork of seeing the market and hearing the voice of the customers in the most direct ways when the occasion warrants. - Marketing decision makers have questions about how best to serve customers, and those questions are posed and answered often through the media of questionnaires and research agencies.

What Influences COO Effect

Economy Technological Environment Government

Price Controls

Essential products that command considerable public interest, such as pharmaceuticals, food, gasoline, and cars, are often subjected to price controls. Such controls applied during inflationary periods can be used to control the cost of living. They may also be used to force foreign companies to sell equity to local interests

Diffusion of Innovations

Everett Rogers noted that crucial elements in the diffusion of new ideas are: an innovation which is communicated through certain channels over time, among the members of a social system The element of time differentiates diffusion from other types of communications research. Patterns of diffusion also vary substantially. Evidence suggests that an understanding of diffusion theory may suggest ways to accelerate the process of diffusion. It helps as follows: -provides the foreign marketer with the ability to assess the time it takes for a product to diffuse—before a financial commitment is necessary. -focuses the marketer's attention on features of a product that provoke resistance. -provides an opportunity to minimize resistance and hasten product acceptance. At least three extraneous variables affect the rate of diffusion of an object: -the degree of perceived newness -the perceived attributes of the innovation and -the method used to communicate the idea The perception of innovation can often be changed if the marketer understands the perceptual framework of the consumer.

intellectual property rights: Prior Use vs Registration

In the US, a common-law country, ownership of intellectual property rights is established by prior use in many code-law countries, ownership is established by registration rather than by prior use

Arbitration

Parties select a disinterested and informed party as a referee to determine the merits of the case and make a judgement both parties agree to honor. Some of the active arbitrarily centers established by countries, organizations, and institutions: - The Inter-American Commercial Arbitration Commission -The Canaidan- American Commercial arbitration commision - The london court of arbitration -the american arbitration association

Nationalism

Intense feeling of national pride and unity national interest and security are more important that international relations Manifestations: call to "buy our country's products only" ex: buy american restrictions on imports, restrictive tariffs, other barriers to trade

Multicultural Research: A Special Problem

Involves countries that have different languages, economies, social structures, behavior, and attitude patterns -Ensure comparability and equivalency of results -Consider varying reliabilities in different countries

Labor Problems

Labor unions with strong government support may use it effectively to obtain special concessions from businesses. Layoffs may be forbidden, profits may have to be shared, and an extraordinary number of services may have to be provided

US Laws Apply in Host Countries

Leaving the boundaries of a home country does not exempt a business from home-country laws What is illegal for an American business at home can also be illegal by US law in foreign jurisdictions for the firm, its subsidiaries, and licensees of US technology

Foreign Corrupt Practices Act

Makes it illegal for companies to pay bribes to foreign officials, candidates, or political parties Stiff penalties can be assessed against company officials found guilty of paying a bribe or of knowingly participating in or authorizing the payment of a bribe

International Conventions

Many countries participate in international conventions designed for mutual recognition and protection of intellectual property rights

Marketing Research

Marketing research is the systematic gathering, recording, and analyzing of data to provide information useful to marketing decision making As an enterprise broadens its scope of operations to include international markets, the need for current, accurate information is magnified A marketer must find the most accurate and reliable data possible within the limits imposed by time, cost, and the present state of the art

Political Sanctions

One or a group of nations may boycott another nation, thereby stopping all trade between the countries, or may issue sanctions against the trade of specific products.

Gathering Primary Data: Quantitative and Qualitative Research

Primary data - Data collected specifically for the particular research project at hand -Collected if even after seeking all reasonable secondary data sources, research questions are still not adequately answered Sources: Sales representatives Distributors Middlemen Customers

Product Adaptation

Product adaptation is important for both small and larger global companies. - As competition for world markets intensifies, selling what is produced for the domestic market in the same manner as it is sold at home is less effective. - Some products cannot be sold at all in foreign markets without modification. - Others may be sold as is, but their acceptance is greatly enhanced when tailored specifically to market needs.

Physical or Mandatory Requirements and Adaptation

Products may change in a number of ways to meet the physical or mandatory requirements of a new market, ranging from simple package changes to total redesign of the physical core product. Product homologation is used to describe the changes mandated by local product and service standards. Legal, economic, political, technological, and climatic requirements of the local marketplace often dictate product adaptation The less economically developed a market is, the greater degree of change a product may need for acceptance. Laws that vary among countries usually set specific package sizes and safety and quality standards.

Politically Sensitive Products and Issues

Products that have or are perceived to have an effect on the : environment exchange rates national and economic security welfare of people- particularly children health

Breadth & Scope of International Marketing Research

Research can be divided into three types on the basis of information needs 1. General information about the country, area, and/or market 2. Information necessary to forecast future marketing requirements by anticipating social, economic, consumer and industry trends within specific markets or countries 3. Specific market information used to make product, promotion, distribution, and price decisions and to develop marketing plans

International Marketing Research

Researchers maintain that entry into a fast developing, new-to-the-firm foreign market is one of the most daunting and ambiguous strategic decisions an executive can face. Complications in international marketing research: -Information must be communicated across cultural boundaries. -The environments within which the research tools are applied are often different in foreign markets.

Foreign Countries' Antitrust Laws

The European Community, Japan, and many other countries have begun to actively enforce their antitrust laws patterned after those in the United States Anti monopoly, price discrimination, supply restrictions, and full-line forcing are areas in which the European Court of Justice has dealt severe penalties

Country-of-Origin Effect

The country-of-origin effect on the market's perception of the product is a great concern to multinational companies that manufacture worldwide. Country-of-origin effect (COE) can be defined as any influence that the country of manufacture, assembly, or design has on a consumer's positive or negative perception of a product. When the customer becomes aware of the country of origin, there is the possibility that the place of manufacture will affect product or brand image. The country, the type of product, and the image of the company and its brands all influence whether the country of origin will engender a positive or negative reaction. Ethnocentrism can also have country-of-origin effects; feelings of national pride can influence attitudes toward foreign products. Countries are also stereotyped on the basis of whether they are industrialized, in the process of industrializing, or developing. The more technical the product, the less positive is the perception of something manufactured in a less developed or newly industrializing country. Foreign products fare not as well in developing countries because consumers have stereotypes about the quality of foreign-made products, even from industrialized countries. Fads that often surround products from particular countries or regions in the world. Fads are most often product specific and generally involve goods that are themselves faddish in nature. Once the market gains experience with a product, negative stereotypes can be overcome. Country stereotyping can be overcome by good marketing. Brands effectively advertised and products properly positioned can help ameliorate a less-than-positive country stereotype.

Intellectual Property Rights: Inadequate Protection

The failure to protect intellectual property rights adequately in the world marketplace can lead to the legal loss of rights in potentially profitable markets Patents, processes, trademarks, and copyrights are valuable in all countries, but come companies have found their assets appropriated and profitably exploited in foreign countries without license or reimbursement There have been many cases in which companies have legally lost the rights to trademarks and have had to buy back these rights or pay royalties for their use.

Determining Export Requirements

The first step when complying with export licensing regulations is to determine the appropriate license for the product. The general license permits exportation of certain products that are not subject to EAR control with nothing more than a declaration of the type of product, its value, and its destination. The validated license, issued only on formal applications, is a specific document authorizing exportation within specific limitations designated under the EAR. Three steps necessary to determine the type of license required and/or if an item can be shipped are as follows: -The exporter is responsible for selecting the proper classification number, known as the Export Control Classification Number (ECCN) , for the item to be exported. The ECCN leads to a description in the Commerce Control List (CCL) , which indicates the exportability status of the item. The exporter must decide from the CCL if the items have end-use restrictions and if the product has a dual use, that is, if it can be used in both commercial and restricted applications. The exporter is responsible for determining the ultimate end customer and end uses of the product, regardless of the initial buyer.

Five Characteristics of Innovation

The five characteristics of an innovation can assist in determining the rate of acceptance or resistance of the market to a product: -the relative advantage (the perceived marginal value of the new product relative to the old) -compatibility (its compatibility with acceptable behavior, norms, values, and so forth) -complexity (the degree of complexity associated with product use) -trialability (the degree of economic and/or social risk associated with product use) -observability (the ease with which the product benefits can be communicated).

Validating Secondary Data

The following questions should be asked to effectively judge the reliability of secondary data sources: 1. Who collected the data? Would there be any reason for purposely misrepresenting the facts? 2. For what purposes were the data collected? 3. How (by what methodology) were the data collected? 4. Are the data internally consistent and logical in light of known data sources or market factors?

Arbitration clauses require agreement on two counts:

The parties agree to arbitrate in the case of a dispute according to the rules and procedures of some arbitration tribunal, and They agree to abide by the awards resulting from the arbitration

Defining the Problem and Establishing Research Objectives

The major difficulty here is converting a series of often ambiguous business problems into tightly drawn and achievable research objectives. - Researchers often embark on the research process with only a vague grasp of the total problem. Other difficulties stem from failures to establish problem limits broad enough to include all relevant variables. - Information on a far greater range of factors is necessary to offset the unfamiliar cultural background of the foreign market.

Coping with Disparities

The researcher must possess a high degree of cultural understanding of the market in which research is being conducted. - The social customs, semantics, current attitudes, and business customs of a society or a subsegment of a society A creative talent for adapting research methods is necessary. A skeptical attitude in handling both primary and secondary data is helpful.

Other Managerial Approaches

The traditional but weak remedies for American companies operation in countries such as China are several: -prevention, engage local representation and diligently register IP with the appropriate agencies -pursue negotiation and alternative dispute resolution -complain to the Chinese authorities -complain to the US gov and World Trade Organization

Services Opportunities in Global Markets

Tourism Transportation Financial Services Education Telecommunications Entertainment Information Health Care

Internalization

When do firms decide to go with investment entry modes over contractual entry modes? Internalization (Transaction Cost Logic) Transaction Costs - a cost incurred in making an economic exchange of some sort, or in other words the cost of participating in a market (cost of a market transaction) Ex-ante (Ta): contracting costs Ex-post (Tp): cost of opportunism to the exploited firm Total Transaction Cost (TTC): Ta+TP

When do firms internalize?

When the net economic benefit is greater than zero In other words, when the transaction costs outweigh the internalization costs; firms must internalize to stay efficient