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
