As soon as possible
Vicmestro
MAC_W4_Lecture_C.pdf
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Marketing across Cultures
Week 4
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WHY DO WE TRADE INTERNATIONALLY?
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• Cost-Benefit exchange • Today’s links were formed
in the 18th/19th centuries
• Key reasons for international trade:
• - the theory of comparative advantage
• - the international product life cycle
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Suggests trade takes place between countries because one country can produce at lower price than elsewhere. Example: Japan (e.g. Hitachi, Sony) – domination of the European TV market due to a strategy of: • Better product quality and design • Lower prices due to economies of scale and superior
manufacturing technology
Reasons Countries Trade – the theory of comparative advantage (Ricardo)
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• Sustained period of investment in the organisation may lead to lower operating costs
• Lower labour costs – by locating operations in a newly industrialised economy (NIE)
• Proximity to raw materials –low inventory and logistics costs • Subsidies to help native industries
How to Achieve Comparative Advantage?
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PRODUCT LIFE CYCLE
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INTERNATIONAL PRODUCT LIFE CYCLE
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1. US firms manufacture for home market and start to export 2. Foreign companies begin to manufacture 3. US exports decline 4. Foreign company begins exporting to USA; directly competing.
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If a country exports a greater value than it imports, it has a trade surplus or positive trade balance, and conversely, if a country imports a greater value than it exports, it has a trade deficit or negative trade balance.
BALANCE OF TRADE
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Balance of Import vs Exports
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Overt Barriers: • Direct taxes and charges imposed on imports • Traditionally used by poorer nations to collect revenue • Also used to protect the home producer from import competition Covert Barriers: • Local subsidy = penalty for importers • Customs entry procedures and delays in granting permission to
produce/import (Law, Compliance) • Quotas: restrictions placed on the volume of a product that may be
imported
Barriers to World Trade and Marketing
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Four Tests for a Successful Trading Bloc
• Similar per capita income • Geographical proximity • Compatible trading
regimes • Political commitment
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North American Free Trade Area
Central American Integration System
Union of South American Nations
European Union
African Union
Arab League
South Asian Association for Regional Cooperation
Pacific Islands Forum
Association of Southeast Asian Nations
Shanghai Cooperation Organisation
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World Population
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Potential new Markets
Developing Countries
Developed
Total World Population
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GDP
To look at a country’s potential we look at the GDP or GDP per capita.
GDP (Gross Domestic Product) is the total market value of all final goods and
services produced in a country in a given period. Each country reports its data in its own currency. To compare the data, each country's statistics must be
converted into a common currency. The two most common methods to convert
GDP into a common currency are nominal and purchasing power parity (PPP).
GDP per capita is the total output divided by the number of people in the
population, so you can get a figure of the average output of each person.
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GDP
To look at a country’s potential we look at the GDP or GDP per capita.
GDP (Gross Domestic Product) is the total market value of all final goods and
services produced in a country in a given period. Each country reports its data in its own currency. To compare the data, each country's statistics must be
converted into a common currency. The two most common methods to convert
GDP into a common currency are nominal and purchasing power parity (PPP).
GDP per capita is the total output divided by the number of people in the
population, so you can get a figure of the average output of each person.
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NOMINAL GDP AND PPP
Nominal GDP estimates are commonly used to determine the economic performance of a whole country or region, and to make international comparisons.
It is the original concept of GDP. In Nominal method, market exchange rates are
used for conversion. It does not take into account differences in the cost of living
in different countries.
PPP stands for Purchasing Power Parity, which means it adjusts for costs within
the country. It varies from Nominal GDP in the sense that it takes into
consideration the costs of each country. PPP basis arguably more useful when comparing differences in living standards between nations.
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Largest economies by PPP GDP in 2019 Largest economies by Nominal GDP in 2019
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THE THREE SECTOR MODEL
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INTERNATIONAL APPROACH TO BUSSINESS AND MARKETING
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What has led to International markets? - Emergence of a more open world economy - Globalisation of consumer tastes - Greater inter-dependence and inter-connection of national economies
across the world: the butterfly effect
The International Business scenario:
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The International Business scenario:
What can the Marketing professional do?
- Understand the concept of international marketing
- Appreciate the complexities of marketing internationally
- Develop skills to respond to the changes
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The International Business scenario:
Most companies can be divided into one of these categories when it
comes to International Marketing operations:
- INTERNATIONAL
- MULTINATIONAL
- GLOBAL
- TRANSNATIONAL
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INTERNATIONAL
An International organization does business in international markets but keeps its headquarters and offices in domestic territory.
These companies rely on export management companies (ECM) to have their products sold internationally. ECMs provide legal advise and are specialized in
each country’s policies and compliance in order to facilitate the entrance of the
product to the destination country. However ECMs rarely take care of
communications – this would still fall on the side of the domestic officers.
Companies choosing to do Export through ECM partners rarely adapt products.
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MULTINATIONAL
A Multinational organization does business in international markets and does have some kind of investment in the target country: a lease contract on a building
to house service operations, a plant on foreign soil, or a foreign marketing agency.
The term multinational implies a limited number of countries (as opposed to
Global or Transnational companies) which also allows the company to be more
sensible to the local preferences (traditions, likings, etcetera), and therefore, they
are more prone to product adaption rather than standardisation.
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GLOBAL
A Global organization has FDI (foreign direct investments) in over a dozen countries – more countries than the Multinational companies.
They focus on economy of scale: They standardise their products to keep production costs as low as possible.
Their marketing campaigns usually have the same message globally as a
clear indication that they are following a smooth type of business, treating each country like; not prone to particularities of each country.
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TRANSNATIONAL
Transnational companies operate in many countries, like Global companies, but they that do take into account the local preferences.
They might have a corporate headquarters located in their country of origin but they would be organized with international division and business units to facilitate
the adaption of their products. Because of this reason, these companies usually
have R&D in each country they work in.
These companies are harder to manage as there are a lot of interests involved
(both locally (domestic) and internationally).
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The International Business scenario:
Most companies can be divided into one of these categories when it
comes to International Marketing operations:
- INTERNATIONAL
- MULTINATIONAL
- GLOBAL
- TRANSNATIONAL
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The International Business scenario:
Regardless of their category – these businesses would follow different structures and ways of organizing when going international.
- The company has its own offices abroad: run from local headquarters
- The company has its own offices abroad: run from each country
- Subsidiary (daughter company): same company, different name
- Joint venture: domestic company + target country company
- Franchise: same company, different management (pays a fee)
- Distribution: the products are sold through an associated retailer.
- ...
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The International Business scenario:
The same marketing principles that you know of apply whether from a
domestic or international perspective. The difference is that in International Marketing you add new ways of doing.
Standardisation vs Adaptation
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Standardisation vs Adaptation
Standardisation means to use the same Marketing Mix (4Ps) here and there. Your market entry strategy will not vary in terms of product, place, price and
promotion. Your aim is to have an homogenised production everywhere.
You effort here is to entice consumers everywhere by making them believe that
their wants and needs are the same in every country. If you are going with
Standardisation it usually means you are pursuing cost efficiency.
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Standardisation vs Adaptation
Adaptation involves modifying a product so as to meet the local requirements and customs such as the primary resources that you use or your marketing
efforts. It also means to meet the foreign laws and regulations.
You effort here is to adapt your product to the type of product and consumer
behaviour that the foreign people are used to. If you are going with Adaptation it
usually means you can afford extra costs because you’re expecting extra returns
as well.
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Standardisation vs Adaptation
Adaptation involves modifying a product so as to meet the local requirements and customs such as the primary resources that you use or your marketing
efforts. It also means to meet the foreign laws and regulations.
There are four main types of Adaption:
Intangible: Change your positioning or your brand name
Tangible: Change physical aspects: packaging
Price adaption: Change either price or your product’s size and quantity
Promotional adaption: Change your advertising: message and channels…
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Standardisation vs Adaptation
Aspects to remember then choosing one or the other:
CULTURE
- Often diverse (Cultural framework)
MARKETS
- Widespread and often fragmented
DATA (MARKET SENSING)
- Difficult to obtain and most likely very expensive
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Standardisation vs Adaptation
Aspects to remember then choosing one or the other:
POLICIES / GOVERNMENTS
- Very unstable. Prone to change. Could be business-friendly or not.
POLITICS
- Different interests between right and left wing. Conservative vs liberal.
ECONOMICS AND FINANCE
- Regulatory bodies (bureaucracy, compliance), taxes, methodologies…
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Standardisation vs Adaptation
Aspects to remember then choosing one or the other:
STAKEHOLDERS
- Two types: Home country stakeholders and Target country stakeholders
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The International Business scenario:
What can go wrong – will make the International effort useless:
– Inability to find right market niche – Unwilling to adapt products – Products not perceived as sufficiently unique – Vacillating commitment – Delegate in the wrong people – Picking the wrong partners – Inability to manage local stakeholders – Mutual distrust/lack of respect between HQ & Management – Inability to leverage ideas to all countries
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The International Business scenario:
How to succeed – if applied correctly:
– Ability to find right market niche – Willingness to adapt products – Products are perceived as sufficiently unique – Consistent commitment – Delegate in the right people – Picking the right partners – Ability to manage local stakeholders – Mutual trust/respect between HQ & management – Ability to leverage ideas to all countries
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CULTURAL FRAMEWORK RE-VISITED
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CULTURE
RELIGION VALUES
ATTITUDES
EDUCATION
SOCIAL ORGANISATIONS
TECHNOLOGY & MATERIAL CULTURE
LAW & POLITICS
AESTHETICS
LANGUAGE
C U L T U R A L F R A M E W O R K (Terpstra, Foley and Sarathy, 2012)
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LANGUAGE
Things to consider:
- Spoken language: tone, speed, volume - How many languages? - English literacy? - Non-verbal communication - Behaviour at work
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VALUES AND ATTITUDES
Things to consider:
- How do they look at Time - Individual or group achievements - Work-Life balance - Encourage/Discourage risk-taking - Capacity of adapting to new offerings
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RELIGION
Things to consider:
- Types of food to eat - When is it possible to eat them - Local (religious) holidays - Views on alcohol and other questionable products (cigarettes) - Views on unlawful / permissible / discouraged behaviour
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EDUCATION
Things to consider:
- How many people is educated - How many of educational levels do they have - Implications of literacy - Will these affect the comprehension of my message (campaign)? - Will these affect the ability to buy my product?
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LAWS AND POLITICS
Things to consider:
- Who is in charge? - Left and right preferences - Business-friendly or strongly regulated - Can I influence regulation? - Can I control Compliance?
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SOCIAL ORGANISATIONS
Things to consider:
- Are there any? - Literacy-wise, salary-wise (status) - Are men and women kept apart? - What is everyone’s role? What is expected of each gender? - Are they prone to individual ownership or to group sharing?
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TECHNOLOGY
Things to consider:
- Technology is everyday's choice or an extra - Is it equal for everyone? - Does a digital divide exist? - Behaviour towards technology: trust or distrust - Is technology diffusion fast enough?
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AESTHETICS
Things to consider:
- Branding - The meaning of the colours - Will they pay more for State-of-the-art design? - Importance of music in communication (as a language) - Packaging: beautiful or pragmatic
