IB B461F exam review

Short-term oriented societies:

"live now, pay later" mindset

what is free trade areas?

- Formal agreement among two or more countries to reduce or eliminate customs duties and nontariff barriers. Examples: NAFTA, MERCOSUR, CAFTA-DR & FTAA (proposed and currently stalled)

product policy

-Certain products are more culture-bound than other products. Food, beverages, and clothing products tend to be very culture-bound. -Products and services may need to be tailored to local values and preferences to make them more appealing in the host market e.g. Dunkin' Donuts -Cultural norms sometimes open up new product opportunities e.g. Kit Kat in Japan

Distribution

-Cultural differences may also dictate distribution strategies. -E.g. Dell suspended is direct sales model in Russia (customers have little experience with e-commerce) and in China (face-to-face contact is important)

promotion

-Culture will typically have a major influence on a firm's communication strategy. Local cultural taboos and norms also influence advertising styles. -North Americans more persuaded by promotion-focused information (benefits to be gained) while Chinese consumers are driven more by prevention-focused message (problems can be avoided) -Adaptation of advertising message to high- vs. low- context cultures; indirect and subtle communication for high-context countries and more factual data and reasoning for low-context countries

low context culture are:

-More straightforward communications -Words spoken contain most of the information, and can be separate from the environment and manner that it occurs -What is meant is what is said -Messages are clear and explicit -What is important: what is said, not HOW it is said and NOT the surrounding environment within which it is said

high context culture are:

-Much information is contained in the non-verbal aspect of the communication which is often more important than what is said -Without understanding the context (i.e. social circumstance), the message cannot be fully understood, example of contextual cues: message sender's values, position, background and associations in the society. -Communication may be indirect, expressive manner in which the message is delivered become crucial Nurturing trust and rapport plays a big role

pricing

-Price and quality perception e.g. Walmart in Germany -End-8 pricing in China

how to avoid SRC?

1.Define business problem in terms of own cultural customs and values 2.Define the business problem or goal in terms of the host culture's customs and values 3.Isolate the SRC influence in the problem and examine it scrupulously to see how it interferes with the problem 4.Redefine the business problem, without the SRC influence

what is custom union?

Addition of common external tariffs to the provisions of free trade agreements. Example: ASEAN.

Design versus manufacturing:

Both the country of design and the country of manufacturing/assembly play a role. MNCs can target patriotic consumers by set up assembly base locally

Stability over time:

COO-effects are not stable. Country image can change e.g. when product's actual quality improves over time

Product category:

COO-effects depend upon on product category; the country's image may be more favorable in one product category but not in others

Internal Resources, Assets and Capabilities:

Companies with tight resources (human or financial) or limited assets are constrained to low-commitment entry modes such as exporting or licensing which are not too demanding on resources. Sometimes, companies may lack the skills that are critical for the success in the foreign market, thus need to cooperate with local firms (e.g. JV)

what is common union?

Eliminates all tariffs and other barriers, adopts a common set of external tariffs on nonmembers, and remove all restrictions on the flow of capital and labor among member nations. Example: European Union

Indulgence

Extent to which people try to control their desires and impulses, based on the way they were raised

Long-term orientation versus short-term focus:

Future versus past and present orientations.

Market Maturity:

Gaps in cross-market maturity levels require different advertising approaches. Advertising on products that are relatively new to the market need to be more educational on explaining product benefits; other advertising goals gain prominence at later stage

what is political union?

Highest level of integration resulting in a political union. Sometimes, countries come together in a loose political union for historical reasons, as in the case of the British Commonwealth which exists due to common historical ties.

Advertising Regulations:

Local regulations pose a barrier to standardization. E.g. Malaysia and Indonesia impose restrictions on foreign-made ads

Sometime, government actively invests in certain industries that are considered important to national interests, or that lack the experience and size to compete internationally. Trade may be restricted because of __________, ______________, ______________, _________________________________________________________________________________...

National security, developing new industries, protecting declining industries, incentives and government programs, government procurement, tariff, nontariff barriers, embargos and sanction, export license requirements, ownership control, financial control and macroeconomic policies.

___________ is described by the width and the length of the product mix

Product assortment

Self-reference criterion (SRC):

Refers to the people's unconscious tendency to resort to their own cultural experience and value systems to interpret a given business situation.

What is economic union?

Represents the fourth level of integration with a single currency among politically independent countries. It requires the harmonization of fiscal and monetary policies. Example: The Eurozone countries

Not-Invented-Here Syndrome:

Resistance from the local subsidiaries; block attempts to standardization

______________________ of host countries, e.g. feelings of _________________________ (e.g. the sovereignty dispute between Japan and China over Diaoyu Islands, lead to anti-Japan demonstrations by the Chinese)

Social factors as part of the political environment/ nationalistic sentiment

________________ can force governments to _______________ (e.g. minimum wage) or to ______________________ differently; also affect the political stability of a country

Social pressures/ make new laws/ enforce existing policies

Individualism

The degree to which people prefer to act as individuals rather than group members

Collectivism

The extent to which individuals see themselves as interdependent and part of a larger group or society.

uncertainty avoidance

The extent to which people in a given culture prefer structured situations with clear rules over unstructured ones

Masculinity

The importance of "male" values (assertiveness, success, competitive drive, achievement) versus "female" values (solidarity, quality of life).

history

When MNCs expand by acquisition, it may include acquired product lines that are outside of their core business

high power distance has __________ in income and wage distribution, and low power distance that society are _________.

accept wide difference/ more egalitarian

Cross-fertilization:

advertising ideas that have proven successful in some markets can be used in other markets (to exploit good ideas)

the country of origin influences, customers rely on product's country-of-origin as ______________________________. This is because consumer form an ____________________ based on their _____________________production and marketing strengths and weaknesses.

an important cue to assess its quality/ overall perception of a product/ prior perceptions of the country's

Political movement may change prevailing _______________________ and result in new regulations

attitudes toward foreign corporations

Consumer ethnocentrism: _____________

behavior resulting from nationalistic or patriotic belief that home country products are best and should be purchases instead of import or foreign goods

Creative Talent:

by running advertising campaign, small markets can benefit form having the same high-quality creative ads

Width of product mix refers to the ____________of the firm Length of product line is the _________________ within a single line

collection of different product lines/ number of different items

Local Infrastructure:

consists of the country's distribution system, transportation network and communication system. The poorer the local infrastructure, the more reluctant the company is to commit major resources (monetary or human)

Brand name familiarity:

consumers are more likely to use the origin of a product as a cue when they are unfamiliar with the brand name

Willingness to pay:

consumers are more willing to pay more for branded products from a country with favorable image

communication and cultural value, When __________ match the _______________, the liking for the brand increases. North Americans more persuaded by ____________ information (benefits to be gained) while Chinese consumers are driven more by ___________ message (problems can be avoided) Adaptation of advertising message to __________________ ______________ is not acceptable in collectivist cultures and viewed as too aggressive in feminine cultures.

consumers' values/ values expressed by the advertising/ promotion-focused/ prevention-focused/ high- vs. low- context cultures/ Comparative advertising

2 types of cross cultural comparison

context of culture/ Hofstede's cultural classification scheme

Restrained societies:

control the gratification of desires; happiness, freedom, and leisure are less important

Cultural Differences:

cultural differences still persist in terms of lifestyles, benefits sought, usage context (e.g. cognac consumed as stand-alone drink in U.S. but as an after-dinner drink in Europe)

Competitive climate is _______________ explains why firm offer certain product lines in some countries but not in others. E.g. broader variety of Coca cola's products in Japan due to intense rivalry

differences in competitive environment

Need for Control:

entry mode options which require more resource commitment can provide firms with more control over proprietary know-how and the marketing mix plan

Indulgent societies:

exhibit a strong desire to enjoy life, place a high emphasis on play/leisure

Width and/or length can be different across countries (1) an _________ of the domestic product line (2) a _________ of the home market's product line (3) a ____________________ product lines (4) a _________________ product line

extension/ subset/ mixture of local and non-local/ completely localized

Company Objectives:

firms with limited aspirations will typically prefer entry options that require minimum amount of commitment. Proactive companies with ambitious strategic objectives will pick entry modes that give the most control to achieve the goals

individualist societies

focus is on the individual's own interests and those of the immediate family; one's identity is based on one's personal achievement

Organizational structure:

for MNC organized on a country-to-country basis, product lines evolve independently in different countries

government regulations

government regulations may constrain the set of entry options available

domestication/ phased out policy

gradually turning over management and operation responsibilities as ownership to local companies

Long-term oriented societies:

have values that center around the future

Global Consumer Segments:

high-tech and business-to-business products typically have global customer needs

Expropriation

host government take over company's assets with compensation fall short of their market value

Nationalization

host government's takeover for the purpose of making the industry a government-run industry

Cultural Distance:

in culturally distant markets, companies can lower risk exposure by cooperating with local firms (e.g. through joint venture) than setting up wholly owned subsidiary

power distance is the degree of _______________ that is ________________.

inequality among people/ viewed as being acceptable

Political and legal climates are ______________ because laws are generally a manifestation of a country's _____________.

inherently related and inseparable/ political processes

Collectivist societies

interests of the group take center stage, People differentiate between in-group members who are part of its group and all other people, People expect protection from the group and remain loyal to their group.

cultural issues are:

language, religion, education, and value system

market size and growth

market potential can be determined by the current size of the market while future market potential can be measured via the growth rate. Large markets justify more resources commitments

Which product line should be added and which ones are to be dropped? > When markets are entered at the first time, ____________ can be helpful for designing the_____________ (except radically new products, new emerging markets) •Start with a product line that has a ___________ •______________ the amount of product variety over time by _____________________________________ •Analyze the ________________ and other market feedback •Based on the market response, ___________ the product line further

market research/ initial assortment/ minimum level of variety/ Gradually adjust/ adding new items and dropping existing ones/ actual sales data/ fine-tune

When necessary, ____________ must be made in the execution to comply with __________ or to make the ad _____________ (voice-overs, local actors)

minor changes/ local regulations/ more appealing to the local audiences

in the cultural barrier, that the language is one of the most formidable barriers in global marketing; promotional efforts have _________ because of ___________. "Avoid embarrassment, use Parker Pens", when translating the slogan to Spanish, "embarrassed" mistakenly becomes "embarazada", MNCs should __________________________in developing the promotional campaign, other cultural barriers _______________ e.g. in Saudi Arabia, only veiled women can be shown in TV

misfired/ language-related mishaps/ involve local advertising agencies or translators/ including local norms and cultural taboos

what are political risks?

nationalization, expropriation, confiscation, domestication/ phased out policy, and countertrade

Consumer preferences:

new items added to individual country to cater to distinct customer needs. E.g. McDonald's adaptation of its menus across countries

Standardization means that __________ (e.g. strategy, selling proposition, platform) of the communication campaign _________

one or more elements/ are kept the same

Low uncertainty avoidance:

people tend to be more easygoing, innovative and entrepreneurial

National politics affect business environments directly, through changes in ___, ____, and _____

policies, regulations, and laws

5 types of regional economic arrangement (most integrated to least integrated)

political union, economic union, common union, customs union, and free trade area

High uncertainty avoidance:

prefer rigid rule and formality that structure life, uncertainty creates anxiety

Consistent Image:

prevent advertising themes varied from country to country, establish single brand identity

Scale Economies:

producing a single commercial is far cheaper than making different ones for individual markets

High in consumer ethnocentrism:

resentful or reluctant to buy a foreign-made product

risk

risk relates to the instability in the political and economic environment that may impact the company's business prospects. Greater the risk factor, less eager to make major resources commitments.

As the COO negative stereotype, product is to ______________, pricing to _______________, distribution to ________________, and communication to ____________________.

select a brand name that disguise the COO, or to improve product quality/ sell products at relatively low price to attract value-conscious customers who are not concerned about the brand's COO/ -use highly respected distribution channel e.g. Herborist distributed through upscale French cosmetics retailer/ improve the country's image or bolster the brand image by aggressive advertising campaigns

As the multinational diffusion, the ____________ of ____________ for a given new product can _________________. A new product might succeed in one country but turns out to be a disaster in other countries.

speed and pattern/ market penetration/ differ greatly across countries

confiscation

take over of assets by the host governments without compensation

Ethnocentrism refers to _______.

the feeling of one's own cultural superiority

Culture:

the influences of COO are different between individualist and collectivist cultures. Collectivists evaluate home country product more favorably regardless of product superiority, but not the case for individualists

Competitive Environment:

the nature of competitive situation in the local market can be a driver of which entry mode to be used. E.g. to challenge Kellogg's dominance in the global cereal market, General Mills and Nestle formed a joint venture

price spectrum is ________________________, firms offer __________________. Upscale products are ______________________ whereas budget products are offer as entry-level products for other consumers (e.g., diffusion line in fashion)

to compete across the price spectrum/ both premium and budget products/ target towards wealthy consumers

Flexibility :

to cope with environmental change (e.g. new market segments emerge, local competitors become more sophisticated), companies need certain amount of flexibility. E.g. when exit barriers exist, wholly owned subsidiaries are hard to divest

Relative advantage:

to what extent the new product offers more value to customers than existing alternatives

countertrade

trading of products without direct monetary payments e.g. PepsiCo in Russia

Companies that sell the same product in multiple markets need to decide to ______ their ____________

what degree/ advertising campaign should be standardized

Triability:

whether customers are able to try out the product on a limited basis

Observability:

whether potential customers are able to observe the results or benefits of the new product

Compatibility:

whether the product is consistent with the consumers' existing values and consumption practices

Complexity:

whether the product is easy to use or understand

Government determines ________________ in the country and which determines fiscal and monetary policies, then _________________

which industries will receive protection/ affect investment and return

Low in consumer ethnocentrism:

willingness to accept a foreign-made products

value system

•All cultures have value system that shape people's norms and standards which influence people's attitudes towards objects and behaviors •Example of important values in China, saving face

education

•Marketers need to exercise caution in product labelling, print ad for countries of low literacy rate •Shortage for talents in countries of low education quality

religion

•Religion influences buying motives, customs and practices e.g. halal status for food and beverages in Muslim countries •Modify marketing mix in light of religious taboos •Religious holidays open up marketing opportunities

language (verbal vs silent)

•Some cultures focus more on silent language than others •Gestures have different meanings across cultures •People from different cultures read facial expression differently •Diversity of languages e.g. 14 official languages in India •Careful translations of brand names and advertising slogans