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 Lars Perner, Ph.D.
Assistant Professor of Clinical Marketing
Department of Marketing
Marshall School of Business
University of Southern California
Los Angeles, CA 90089-0443, USA
(213) 740-7127

INTERNATIONAL MARKETING

The Global Market Place

Globalization of Markets and Competition: Trade is increasingly global

in scope today. There are several reasons for this. One significant reason is
technological—because of improved transportation and communication
opportunities today, trade is now more practical. Thus, consumers and
businesses now have access to the very best products from many different
countries. Increasingly rapid technology lifecycles also increases the
competition among countries as to who can produce the newest in
technology. In part to accommodate these realities, countries in the last
several decades have taken increasing steps to promote global trade through
agreements such as the General Treaty on Trade and Tariffs, and trade
organizations such as the World Trade Organization (WTO), North
American Free Trade Agreement (NAFTA), and the European Union (EU).

Stages in the International Involvement of a Firm. We discussed several

stages through which a firm may go as it becomes increasingly involved
across borders. A purely domestic firm focuses only on its home market, has
no current ambitions of expanding abroad, and does not perceive any
significant competitive threat from abroad. Such a firm may eventually get
some orders from abroad, which are seen either as an irritation (for small
orders, there may be a great deal of effort and cost involved in obtaining
relatively modest revenue) or as "icing on the cake." As the firm begins to
export more, it enters the export stage, where little effort is made to market
the product abroad, although an increasing number of foreign orders are
filled. In the international stage, as certain country markets begin to appear
especially attractive with more foreign orders originating there, the firm may
go into countries on an ad hoc basis—that is, each country may be entered
sequentially, but with relatively little learning and marketing efforts being
shared across countries. In the multi-national stage, some efficiencies are
pursued by standardizing across a region (e.g., Central America, West
Africa, or Northern Europe). Finally, in the global stage, the focus centers on
the entire World market, with decisions made optimize the product’s
position across markets—the home country is no longer the center of the
product. An example of a truly global company is Coca Cola.

Note that these stages represent points on a continuum from a purely

domestic orientation to a truly global one; companies may fall in between
these discrete stages, and different parts of the firm may have characteristics
of various stages—for example, the pickup truck division of an auto-
manufacturer may be largely domestically focused, while the passenger car
division is globally focused. Although a global focus is generally
appropriate for most large firms, note that it may not be ideal for all
companies to pursue the global stage. For example, manufacturers of ice
cubes may do well as domestic, or even locally centered, firms.

Some forces in international trade. The text contains a rather long-winded

appendix discussing some relatively simple ideas. Comparative advantage,
discussed in more detail in the economics notes, suggests trade between
countries is beneficial because these countries differ in their relative
economic strengths—some have more advanced technology and some have
lower costs. The International Product Life Cycle suggests that countries
will differ in their timing of the demand for various products. Products tend
to be adopted more quickly in the United States and Japan, for example, so
once the demand for a product (say, VCRs) is in the decline in these
markets, an increasing market potential might exist in other countries (e.g.,
Europe and the rest of Asia). Internalization/transaction costs refers to the
fact that developing certain very large scale projects, such as an automobile
intended for the World market, may entail such large costs that these must
be spread over several countries.

Economics of International Trade

Exchange rates come in two forms:

• “Floating”—here, currencies are set on the open market based on the

supply of and demand for each currency. For example, all other
things being equal, if the U.S. imports more from Japan than it exports
there, there will be less demand for U.S. dollars (they are not desired
for purchasing goods) and more demand for Japanese yen—thus, the
price of the yen, in dollars, will increase, so you will get fewer yen for
a dollar.
• “Fixed”—currencies may be “pegged” to another currency (e.g., the
Argentine currency is guaranteed in terms of a dollar value), to a
composite of currencies (i.e., to avoid making the currency dependent
entirely on the U.S. dollar, the value might be 0.25*U.S.
dollar+4*Mexican peso+50*Japanese yen+0.2*German
mark+0.1*British pound), or to some other valuable such as gold.
Note that it is very difficult to maintain these fixed exchange rates—
governments must buy or sell currency on the open market when
currencies go outside the accepted ranges. Fixed exchange rates,
although they produce stability and predictability, tend to get in the
way of market forces—if a currency is kept artificially low, a country
will tend to export too much and import too little.

Trade balances and exchange rates. When exchange rates are allowed to
fluctuate, the currency of a country that tends to run a trade deficit will tend
to decline over time, since there will be less demand for that currency. This
reduced exchange rate will then tend to make exports more attractive in
other countries, and imports less attractive at home.

Measuring country wealth. There are two ways to measure the wealth of a
country. The nominal per capita gross domestic product (GDP) refers to the
value of goods and services produced per person in a country if this value in
local currency were to be exchanged into dollars. Suppose, for example, that
the per capita GDP of Japan is 3,500,000 yen and the dollar exchanges for
100 yen, so that the per capita GDP is (3,500,000/100)=$35,000. However,
that $35,000 will not buy as much in Japan—food and housing are much
more expensive there. Therefore, we introduce the idea of purchase parity
adjusted per capita GDP, which reflects what this money can buy in the
country. This is typically based on the relative costs of a weighted “basket”
of goods in a country (e.g., 35% of the cost of housing, 40% the cost of food,
10% the cost of clothing, and 15% cost of other items). If it turns out that
this measure of cost of living is 30% higher in Japan, the purchase parity
adjusted GPD in Japan would then be ($35,000/(130%) = $26,923. (The
Gross Domestic Product (GPD) and Gross National Product (GNP) are
almost identical figures. The GNP, for example, includes income made by
citizens working abroad, and does not include the income of foreigners
working in the country. Traditionally, the GNP was more prevalent; today
the GPD is more commonly used—in practice, the two measures fall within
a few percent of each other.)

In general, the nominal per capita GPD is more useful for determining local
consumers’ ability to buy imported goods, the cost of which are determined
in large measure by the costs in the home market, while the purchase parity
adjusted measure is more useful when products are produced, at local costs,
in the country of purchase. For example, the ability of Argentinians to
purchase micro computer chips, which are produced mostly in the U.S. and
Japan, is better predicted by nominal income, while the ability to purchase
toothpaste made by a U.S. firm in a factory in Argentina is better predicted
by purchase parity adjusted income.

It should be noted that, in some countries, income is quite unevenly

distributed so that these average measures may not be very meaningful. In
Brazil, for example, there is a very large underclass making significantly less
than the national average, and thus, the national figure is not a good
indicator of the purchase power of the mass market. Similarly, great
regional differences exist within some countries—income is much higher in
northern Germany than it is in the former East Germany, and income in
southern Italy is much lower than in northern Italy.

Political and Legal Influences

The political situation. The political relations between a firm’s country of

headquarters (or other significant operations) and another one may, through
no fault of the firm’s, become a major issue. For example, oil companies
which invested in Iraq or Libya became victims of these countries’
misconduct that led to bans on trade. Similarly, American firms may be
disliked in parts of Latin America or Iran where the U.S. either had a
colonial history or supported unpopular leaders such as the former shah.

Certain issues in the political environment are particularly significant. Some

countries, such as Russia, have relatively unstable governments, whose
policies may change dramatically if new leaders come to power by
democratic or other means. Some countries have little tradition of
democracy, and thus it may be difficult to implement. For example, even
though Russia is supposed to become a democratic country, the history of
dictatorships by the communists and the czars has left country of corruption
and strong influence of criminal elements.

Laws across borders. When laws of two countries differ, it may be

possible in a contract to specify in advance which laws will apply, although
this agreement may not be consistently enforceable. Alternatively,
jurisdiction may be settled by treaties, and some governments, such as that
of the U.S., often apply their laws to actions, such as anti-competitive
behavior, perpetrated outside their borders (extra-territorial application).
By the doctrine known as compulsion, a firm that violates U.S. law abroad
may be able to claim as a defense that it was forced to do so by the local
government; such violations must, however, be compelled—that they are
merely legal or accepted in the host country is not sufficient.

The reality of legal systems. Some legal systems, such as that of the U.S.,
are relatively “transparent”—that is, the law tends to be what its plain
meaning would suggest. In some countries, however, there are laws on the
books which are not enforced (e.g., although Japan has antitrust laws similar
to those of the U.S., collusion is openly tolerated). Further, the amount of
discretion left to government officials tends to vary. In Japan, through the
doctrine of administrative guidance, great latitude is left to government
officials, who effectively make up the laws.

One serious problem in some countries is a limited access to the legal

systems as a means to redress grievances against other parties. While the
U.S. may rely excessively on lawsuits, the inability to effectively hold
contractual partners to their agreement tends to inhibit business deals. In
many jurisdictions, pre-trial discovery is limited, making it difficult to make
a case against a firm whose internal documents would reveal guilt. This is
one reason why personal relationships in some cultures are considered more
significant than in the U.S.—since enforcing contracts may be difficult, you
must be sure in advance that you can trust the other party.

Legal systems of the World. There are four main approaches to law across
the World, with some differences within each:

• Common law, the system in effect in the U.S., is based on a legal

tradition of precedent. Each case that raises new issues is considered
on its own merits, and then becomes a precedent for future decisions
on that same issue. Although the legislature can override judicial
decisions by changing the law or passing specific standards through
legislation, reasonable court decisions tend to stand by default.
• Code law, which is common in Europe, gives considerably shorter
leeway to judges, who are charged with “matching” specific laws to
situations—they cannot come up with innovative solutions when new
issues such as patentability of biotechnology come up. There are also
certain differences in standards. For example, in the U.S. a supplier
whose factory is hit with a strike is expected to deliver on provisions
of a contract, while in code law this responsibility may be nullified by
such an “act of God.”
 • Islamic law is based on the teachings of the Koran, which puts
forward mandates such as a prohibition of usury, or excessive interest
rates. This has led some Islamic countries to ban interest entirely; in
others, it may be tolerated within reason. Islamic law is ultimately
based on the need to please God, so “getting around” the law is
generally not acceptable. Attorneys may be consulted about what
might please God rather than what is an explicit requirements of the
government.
• Socialist law is based on the premise that “the government is always
right” and typically has not developed a sophisticated framework of
contracts (you do what the governments tells you to do) or intellectual
property protection (royalties are unwarranted since the government
ultimately owns everything). Former communist countries such as
those of Eastern Europe and Russia are trying to advance their legal
systems to accommodate issues in a free market.

U.S. laws of particular interest to firms doing business abroad.

Anti-trust. U.S. antitrust laws are generally enforced in U.S. courts even if
the alleged transgression occurred outside U.S. jurisdiction. For example, if
two Japanese firms collude to limit the World supply of VCRs, they may be
sued by the U.S. government (or injured third parties) in U.S. courts, and
may have their U.S. assets seized.

• The Foreign Corrupt Influences Act came about as Congress was

upset with U.S. firms’ bribery of foreign officials. Although most if
not all countries ban the payment of bribes, such laws are widely
flaunted in many countries, and it is often useful to pay a bribe to get
foreign government officials to act favorably. Firms engaging in this
behavior, even if it takes place entirely outside the U.S., can be
prosecuted in U.S. courts, and many executives have served long
prison sentences for giving in to temptation. In contrast, in the past
some European firms could actually deduct the cost of foreign bribes
from their taxes! There are some gray areas here—it may be legal to
pay certain “tips” –known as “facilitating payments”—to low level
government workers in some countries who rely on such payments as
part of their salary so long as these payments are intended only to
speed up actions that would be taken anyway. For example, it may be
acceptable to give a reasonable (not large) facilitating payment to get
 customs workers to process a shipment faster, but it would not be
legal to pay these individuals to change the classification of a product
into one that carries a lower tariff.
• Anti-boycott laws. Many Arab countries maintain a boycott of Israel,
and foreigners that want to do business with them may be asked to
join in this boycott by stopping any deals they do with Israel and
certifying that they do not trade with that country. It is illegal for U.S.
firms to make this certification even if they have not dropped any
actual deals with Israel to get a deal with boycotters.
• Trading With the Enemy. It is illegal for U.S. firms to trade with
certain countries that are viewed to be hostile to the U.S.—e.g., Libya
and Iraq.

Culture

Culture is part of the external influences that impact the consumer. That is,
culture represents influences that are imposed on the consumer by other
individuals.

The definition of culture offered one text is “That complex whole which
includes knowledge, belief, art, morals, custom, and any other capabilities
and habits acquired by man person as a member of society.” From this
definition, we make the following observations:

• Culture, as a “complex whole,” is a system of interdependent

components.
• Knowledge and beliefs are important parts. In the U.S., we know and
believe that a person who is skilled and works hard will get ahead. In
other countries, it may be believed that differences in outcome result
more from luck. “Chunking,” the name for China in Chinese, literally
means “The Middle Kingdom.” The belief among ancient Chinese
that they were in the center of the universe greatly influenced their
thinking.
• Other issues are relevant. Art, for example, may be reflected in the
rather arbitrary practice of wearing ties in some countries and wearing
turbans in others. Morality may be exhibited in the view in the United
States that one should not be naked in public. In Japan, on the other
hand, groups of men and women may take steam baths together
without perceived as improper. On the other extreme, women in some
 Arab countries are not even allowed to reveal their faces. Notice, by
the way, that what at least some countries view as moral may in fact
be highly immoral by the standards of another country.

Culture has several important characteristics: (1) Culture is

comprehensive. This means that all parts must fit together in some logical
fashion. For example, bowing and a strong desire to avoid the loss of face
are unified in their manifestation of the importance of respect. (2) Culture
is learned rather than being something we are born with. We will consider
the mechanics of learning later in the course. (3) Culture is manifested
within boundaries of acceptable behavior. For example, in American
society, one cannot show up to class naked, but wearing anything from a suit
and tie to shorts and a T-shirt would usually be acceptable. Failure to
behave within the prescribed norms may lead to sanctions, ranging from
being hauled off by the police for indecent exposure to being laughed at by
others for wearing a suit at the beach. (4) Conscious awareness of cultural
standards is limited. One American spy was intercepted by the Germans
during World War II simply because of the way he held his knife and fork
while eating. (5) Cultures fall somewhere on a continuum between static
and dynamic depending on how quickly they accept change. For example,
American culture has changed a great deal since the 1950s, while the culture
of Saudi Arabia has changed much less.

Dealing with culture. Culture is a problematic issue for many marketers

since it is inherently nebulous and often difficult to understand. One may
violate the cultural norms of another country without being informed of this,
and people from different cultures may feel uncomfortable in each other’s
presence without knowing exactly why (for example, two speakers may
unconsciously continue to attempt to adjust to reach an incompatible
preferred interpersonal distance).

Warning about stereotyping. When observing a culture, one must be

careful not to over-generalize about traits that one sees. Research in social
psychology has suggested a strong tendency for people to perceive an
“outgroup” as more homogenous than an “ingroup,” even when they knew
what members had been assigned to each group purely by chance. When
there is often a “grain of truth” to some of the perceived differences, the
temptation to over-generalize is often strong. Note that there are often
significant individual differences within cultures.
Cultural lessons. We considered several cultural lessons in class; the
important thing here is the big picture. For example, within the Muslim
tradition, the dog is considered a “dirty” animal, so portraying it as “man’s
best friend” in an advertisement is counter-productive. Packaging, seen as a
reflection of the quality of the “real” product, is considerably more
important in Asia than in the U.S., where there is a tendency to focus on the
contents which “really count.” Many cultures observe significantly greater
levels of formality than that typical in the U.S., and Japanese negotiator tend
to observe long silent pauses as a speaker’s point is considered.

Cultural characteristics as a continuum. There is a tendency to stereotype

cultures as being one way or another (e.g., individualistic rather than
collectivistic). Note, however, countries fall on a continuum of cultural
traits. Hofstede’s research demonstrates a wide range between the most
individualistic and collectivistic countries, for example—some fall in the
middle.

Hofstede’s Dimensions. Gert Hofstede, a Dutch researcher, was able to

interview a large number of IBM executives in various countries, and found
that cultural differences tended to center around four key dimensions:

• Individualism vs. collectivism: To what extent do people believe in

individual responsibility and reward rather than having these measures
aimed at the larger group? Contrary to the stereotype, Japan actually
ranks in the middle of this dimension, while Indonesia and West
Africa rank toward the collectivistic side. The U.S., Britain, and the
Netherlands rate toward individualism.
• Power distance: To what extent is there a strong separation of
individuals based on rank? Power distance tends to be particularly
high in Arab countries and some Latin American ones, while it is
more modest in Northern Europe and the U.S.
• Masculinity vs. femininity involves a somewhat more nebulous
concept. “Masculine” values involve competition and “conquering”
nature by means such as large construction projects, while “feminine”
values involve harmony and environmental protection. Japan is one
of the more masculine countries, while the Netherlands rank relatively
low. The U.S. is close to the middle, slightly toward the masculine
side. ( The fact that these values are thought of as “masculine” or
“feminine” does not mean that they are consistently held by members
of each respective gender—there are very large “within-group”
 differences. There is, however, often a large correlation of these
cultural values with the status of women.)
• Uncertainty avoidance involves the extent to which a “structured”
situation with clear rules is preferred to a more ambiguous one; in
general, countries with lower uncertainty avoidance tend to be more
tolerant of risk. Japan ranks very high. Few countries are very low in
any absolute sense, but relatively speaking, Britain and Hong Kong
are lower, and the U.S. is in the lower range of the distribution.

Although Hofstede’s original work did not address this, a fifth dimension of
long term vs. short term orientation has been proposed. In the U.S.,
managers like to see quick results, while Japanese managers are known for
take a long term view, often accepting long periods before profitability is
obtained.

High vs. low context cultures: In some cultures, “what you see is what you
get”—the speaker is expected to make his or her points clear and limit
ambiguity. This is the case in the U.S.—if you have something on your
mind, you are expected to say it directly, subject to some reasonable
standards of diplomacy. In Japan, in contrast, facial expressions and what is
not said may be an important clue to understanding a speaker’s meaning.
Thus, it may be very difficult for Japanese speakers to understand another’s
written communication. The nature of languages may exacerbate this
phenomenon—while the German language is very precise, Chinese lacks
many grammatical features, and the meaning of words may be somewhat
less precise. English ranks somewhere in the middle of this continuum.

Ethnocentrism and the self-reference criterion. The self-reference

criterion refers to the tendency of individuals, often unconsciously, to use
the standards of one’s own culture to evaluate others. For example,
Americans may perceive more traditional societies to be “backward” and
“unmotivated” because they fail to adopt new technologies or social
customs, seeking instead to preserve traditional values. In the 1960s, a
supposedly well read American psychology professor referred to India’s
culture of “sick” because, despite severe food shortages, the Hindu religion
did not allow the eating of cows. The psychologist expressed disgust that
the cows were allowed to roam free in villages, although it turns out that
they provided valuable functions by offering milk and fertilizing fields.
Ethnocentrism is the tendency to view one’s culture to be superior to others.
The important thing here is to consider how these biases may come in the
way in dealing with members of other cultures.

It should be noted that there is a tendency of outsiders to a culture to

overstate the similarity of members of that culture to each other. In the
United States, we are well aware that there is a great deal of heterogeneity
within our culture; however, we often underestimate the diversity within
other cultures. For example, in Latin America, there are great differences
between people who live in coastal and mountainous areas; there are also
great differences between social classes.

Language issues. Language is an important element of culture. It should

be realized that regional differences may be subtle. For example, one word
may mean one thing in one Latin American country, but something off-color
in another. It should also be kept in mind that much information is carried in
non-verbal communication. In some cultures, we nod to signify “yes” and
shake our heads to signify “no;” in other cultures, the practice is reversed.
Within the context of language:

• There are often large variations in regional dialects of a given

language. The differences between U.S., Australian, and British
English are actually modest compared to differences between dialects
of Spanish and German.
• Idioms involve “figures of speech” that may not be used, literally
translated, in other languages. For example, baseball is a
predominantly North and South American sport, so the notion of “in
the ball park” makes sense here, but the term does not carry the same
meaning in cultures where the sport is less popular.
• Neologisms involve terms that have come into language relatively
recently as technology or society involved. With the proliferation of
computer technology, for example, the idea of an “add-on” became
widely known. It may take longer for such terms to “diffuse” into
other regions of the world. In parts of the World where English is
heavily studied in schools, the emphasis is often on grammar and
traditional language rather than on current terminology, so neologisms
have a wide potential not to be understood.
• Slang exists within most languages. Again, regional variations are
common and not all people in a region where slang is used will
necessarily understand this. There are often significant generation
gaps in the use of slang.
Writing patterns, or the socially accepted ways of writing, will differs
significantly between cultures.

In English and Northern European languages, there is an emphasis on

organization and conciseness. Here, a point is made by building up to it
through background. An introduction will often foreshadow what is to be
said. In Romance languages such as Spanish, French, and Portuguese, this
style is often considered “boring” and “inelegant.” Detours are expected and
are considered a sign of class, not of poor organization. In Asian languages,
there is often a great deal of circularity. Because of concerns about potential
loss of face, opinions may not be expressed directly. Instead, speakers may
hint at ideas or indicate what others have said, waiting for feedback from the
other speaker before committing to a point of view.

Because of differences in values, assumptions, and language structure, it is

not possible to meaningfully translate “word-for-word” from one language
to another. A translator must keep “unspoken understandings” and
assumptions in mind in translating. The intended meaning of a word may
also differ from its literal translation. For example, the Japanese word hai is
literally translated as “yes.” To Americans, that would imply “Yes, I
agree.” To the Japanese speaker, however, the word may mean “Yes, I hear
what you are saying” (without any agreement expressed) or even “Yes, I
hear you are saying something even though I am not sure exactly what you
are saying.”

Differences in cultural values result in different preferred methods of

speech. In American English, where the individual is assumed to be more in
control of his or her destiny than is the case in many other cultures, there is a
preference for the “active” tense (e.g., “I wrote the marketing plan”) as
opposed to the passive (e.g., “The marketing plan was written by me.”)

Because of the potential for misunderstandings in translations, it is

dangerous to rely on a translation from one language to another made by one
person. In the “decentering” method, multiple translators are used. The text
is first translated by one translator—say, from German to Mandarin
Chinese. A second translator, who does not know what the original German
text said, will then translate back to German from Mandarin Chinese
translation. The text is then compared. If the meaning is not similar, a third
translator, keeping in mind this feedback, will then translate from German to
Mandarin. The process is continued until the translated meaning appears to
be satisfactory.

Different perspectives exist in different cultures on several issues; e.g.:

• Monochronic cultures tend to value precise scheduling and doing one

thing at a time; in polychronic cultures, in contrast, promptness is
valued less, and multiple tasks may be performed simultaneously.
(See text for more detail).
• Space is perceived differently. Americans will feel crowded where
people from more densely populated countries will be comfortable.
• Symbols differ in meaning. For example, while white symbols purity
in the U.S., it is a symbol of death in China. Colors that are
considered masculine and feminine also differ by culture.
• Americans have a lot of quite shallow friends toward whom little
obligation is felt; people in European and some Asian cultures have
fewer, but more significant friends. For example, one Ph.D. student
from India, with limited income, felt obligated to try buy an airline
ticket for a friend to go back to India when a relative had died.
• In the U.S. and much of Europe, agreements are typically rather
precise and contractual in nature; in Asia, there is a greater tendency
to settle issues as they come up. As a result, building a relationship of
trust is more important in Asia, since you must be able to count on
your partner being reasonable.
• In terms of etiquette, some cultures have more rigid procedures than
others. In some countries, for example, there are explicit standards as
to how a gift should be presented. In some cultures, gifts should be
presented in private to avoid embarrassing the recipient; in others, the
 gift should be made publicly to ensure that no perception of secret
bribery could be made.

Cross-Cultural Market Research

Primary vs. secondary research. There are two kinds of market research:
Primary research refers to the research that a firm conducts for its own needs
(e.g., focus groups, surveys, interviews, or observation) while secondary
research involves finding information compiled by someone else. In
general, secondary research is less expensive and is faster to conduct, but it
may not answer the specific questions the firm seeks to have answered (e.g.,
how do consumers perceive our product?), and its reliability may be in
question.

Secondary sources. A number of secondary sources of country information

are available. One of the most convenient sources is an almanac, containing
a great deal of country information. Almanacs can typically be bought for
$10.00 or less. The U.S. government also publishes a guide to each country,
and the handbook International Business Information: How to Find It, How
to Use It (HF 54.5.P33 [1998] in the Reference Department of the Gelman
Library), provides leads on numerous sources by topic. Stat-USA, a
database compiled by the U.S. Department of Commerce and available
through the Gelman Library (you can access it through the “Links” section
of my web-site), contains a great deal of statistical information online.
Excellent full text searchable indices to periodicals include Lexis-Nexis and
RDS Business and Industry, also available through Gelman.

Several experts may be available. Anthropologists and economists in

universities may have built up a great deal of knowledge and may be
available for consulting. Consultants specializing in various regions or
industries are typically considerably more expensive. One should be careful
about relying on the opinions of expatriates (whose views may be biased or
outdated) or one’s own experience (which may relate to only part of a
country or a certain subsegment) and may also suffer from the limitation of
being a sample of size 1.

Hard vs. soft data. “Hard” data refers to relatively quantifiable measures
such as a country’s GDP, number of telephones per thousand residents, and
birth rates (although even these supposedly “objective” factors may be
subject to some controversy due to differing definitions and measurement
approaches across countries). In contrast, “soft” data refers to more
subjective issues such as country history or culture. It should be noted that
while the “hard” data is often more convenient and seemingly objective, the
“soft” data is frequently as important, if not more so, in understanding a
market.

Data reliability. The accuracy and objectivity of data depend on several

factors. One significant one is the motivation of the entity that releases it.
For example, some countries may want to exaggerate their citizens’ literacy
rates owing to national pride, and an organization promoting economic
development may paint an overly rosy picture in order to attract investment.
Some data may be dated (e.g., a census may be conducted rarely in some
regions), and some countries may lack the ability to collect data (it is
difficult to reach people in the interior regions of Latin America, for
example). Differences in how constructs are defined in different countries
(e.g., is military personnel counted in people who are employed?) may make
figures of different jurisdictions non-comparable.

Cost of data. Much government data, or data released by organizations

such as the World Bank or the United Nations, is free or inexpensive, while
consultants may charge very high rates.

Issues in primary research. Cultural factors often influence how people

respond to research. While Americans are used to market research and tend
to find this relatively un-threatening, consumers in other countries may fear
that the data will be reported to the government, and may thus not give
accurate responses. In some cultures, criticism or confrontation are
considered rude, so consumers may not respond honestly when they dislike a
product. Technology such as scanner data is not as widely available outside
the United States. Local customs and geography may make it difficult to
interview desired respondents; for example, in some countries, women may
not be allowed to talk to strangers.

Country Entry: Decisions and Strategies

Segmentation, Targeting, and Positioning. Segmentation, in marketing, is

usually done at the customer level. However, in international marketing, it
may sometimes be useful to see countries as segments. This allows the
decision maker to focus on common aspects of countries and avoid
information overload. It should be noted that variations within some
countries (e.g., Brazil) are very large and therefore, averages may not be
meaningful. Country level segmentation may be done on levels such as
geography—based on the belief that neighboring countries and countries
with a particular type of climate or terrain tend to share similarities,
demographics (e.g., population growth, educational attainment, population
age distribution), or income. Segmenting on income is tricky since the
relative prices between countries may differ significantly (based, in part, on
purchasing power parity measures that greatly affect the relative cost of
imported and domestically produced products).

The importance of STP. Segmentation is the cornerstone of marketing—

almost all marketing efforts in some way relate to decisions on who to serve
or how to implement positioning through the different parts of the marketing
mix. For example, one’s distribution strategy should consider where one’s
target market is most likely to buy the product, and a promotional strategy
should consider the target’s media habits and which kinds of messages will
be most persuasive. Although it is often tempting, when observing large
markets, to try to be "all things to all people," this is a dangerous strategy
because the firm may lose its distinctive appeal to its chosen segments.

In terms of the "big picture," members of a segment should generally be as

similar as possible to each other on a relevant dimension (e.g., preference for
quality vs. low price) and as different as possible from members of other
segments. That is, members should respond in similar ways to various
treatments (such as discounts or high service) so that common campaigns
can be aimed at segment members, but in order to justify a different
treatment of other segments, their members should have their own unique
response behavior.

Approaches to global segmentation. There are two main approaches to

global segmentation. At the macro level, countries are seen as segments,
given that country aggregate characteristics and statistics tend to differ
significantly. For example, there will only be a large market for expensive
pharmaceuticals in countries with certain income levels, and entry
opportunities into infant clothing will be significantly greater in countries
with large and growing birthrates (in countries with smaller birthrates or
stable to declining birthrates, entrenched competitors will fight hard to keep
the market share).
There are, however, significant differences within countries. For example,
although it was thought that the Italian market would demand "no frills"
inexpensive washing machines while German consumers would insist on
high quality, very reliable ones, it was found that more units of the
inexpensive kind were sold in Germany than in Italy—although many
German consumers fit the predicted profile, there were large segment
differences within that country. At the micro level, where one looks at
segments within countries. Two approaches exist, and their use often
parallels the firm’s stage of international involvement. Intramarket
segmentation involves segmenting each country’s markets from scratch—
i.e., an American firm going into the Brazilian market would do research to
segment Brazilian consumers without incorporating knowledge of U.S.
buyers. In contrast, intermarket segmentation involves the detection of
segments that exist across borders. Note that not all segments that exist in
one country will exist in another and that the sizes of the segments may
differ significantly. For example, there is a huge small car segment in
Europe, while it is considerably smaller in the U.S.

Intermarket segmentation entails several benefits. The fact that products and
promotional campaigns may be used across markets introduces economies
of scale, and learning that has been acquired in one market may be used in
another—e.g., a firm that has been serving a segment of premium quality
cellular phone buyers in one country can put its experience to use in another
country that features that same segment. (Even though segments may be
similar across the cultures, it should be noted that it is still necessary to learn
about the local market. For example, although a segment common across
two countries may seek the same benefits, the cultures of each country may
cause people to respond differently to the "hard sell" advertising that has
been successful in one).

The international product life cycle suggests that product adoption and
spread in some markets may lag significantly behind those of others. Often,
then, a segment that has existed for some time in an "early adopter" country
such as the U.S. or Japan will emerge after several years (or even decades)
in a "late adopter" country such as Britain or most developing countries. (We
will discuss this issue in more detail when we cover the product mix in the
second half of the term).

Positioning across markets. Firms often have to make a tradeoff between

adapting their products to the unique demands of a country market or
gaining benefits of standardization such as cost savings and the maintenance
of a consistent global brand image. There are no easy answers here. On the
one hand, McDonald’s has spent a great deal of resources to promote its
global image; on the other hand, significant accommodations are made to
local tastes and preferences—for example, while serving alcohol in U.S.
restaurants would go against the family image of the restaurant carefully
nurtured over several decades, McDonald’s has accommodated this demand
of European patrons.

The Japanese Keiretsu Structure. In Japan, many firms are part of a

keiretsu, or a conglomerate that ties together businesses that can aid each
other. For example, a keiretsu might contain an auto division that buys from
a steel division. Both of these might then buy from a iron mining division,
which in turns buys from a chemical division that also sells to an agricultural
division. The agricultural division then sells to the restaurant division, and
an electronics division sells to all others, including the auto division. Since
the steel division may not have opportunities for reinvestment, it puts its
profits in a bank in the center, which in turns lends it out to the electronics
division that is experiencing rapid growth.
This practice insulates the businesses to some extent against the business
cycle, guaranteeing an outlet for at least some product in bad times, but this
structure has caused problems in Japan as it has failed to "root out"
inefficient keiretsu members which have not had to "shape up" to the rigors
of the market.

Methods of entry. With rare exceptions, products just don’t emerge in

foreign markets overnight—a firm has to build up a market over time.
Several strategies, which differ in aggressiveness, risk, and the amount of
control that the firm is able to maintain, are available:

• Exporting is a relatively low risk strategy in which few investments

are made in the new country. A drawback is that, because the firm
makes few if any marketing investments in the new country, market
share may be below potential. Further, the firm, by not operating in
the country, learns less about the market (What do consumers really
want? Which kinds of advertising campaigns are most successful?
What are the most effective methods of distribution?) If an importer is
willing to do a good job of marketing, this arrangement may represent
a "win-win" situation, but it may be more difficult for the firm to enter
on its own later if it decides that larger profits can be made within the
country.
• Licensing and franchising are also low exposure methods of entry—
you allow someone else to use your trademarks and accumulated
expertise. Your partner puts up the money and assumes the risk.
 Problems here involve the fact that you are training a potential
competitor and that you have little control over how the business is
operated. For example, American fast food restaurants have found that
foreign franchisers often fail to maintain American standards of
cleanliness. Similarly, a foreign manufacturer may use lower quality
ingredients in manufacturing a brand based on premium contents in
the home country.
• Contract manufacturing involves having someone else manufacture
products while you take on some of the marketing efforts yourself.
This saves investment, but again you may be training a competitor.
• Direct entry strategies, where the firm either acquires a firm or builds
operations "from scratch" involve the highest exposure, but also the
greatest opportunities for profits. The firm gains more knowledge
about the local market and maintains greater control, but now has a
huge investment. In some countries, the government may expropriate
assets without compensation, so direct investment entails an
additional risk. A variation involves a joint venture, where a local firm
puts up some of the money and knowledge about the local market.

Entry Strategies

Methods of entry. With rare exceptions, products just don’t emerge in

foreign markets overnight—a firm has to build up a market over time.
Several strategies, which differ in aggressiveness, risk, and the amount of
control that the firm is able to maintain, are available:

• Exporting is a relatively low risk strategy in which few investments

are made in the new country. A drawback is that, because the firm
makes few if any marketing investments in the new country, market
share may be below potential. Further, the firm, by not operating in
the country, learns less about the market (What do consumers really
want? Which kinds of advertising campaigns are most successful?
What are the most effective methods of distribution?) If an importer is
willing to do a good job of marketing, this arrangement may represent
a "win-win" situation, but it may be more difficult for the firm to enter
on its own later if it decides that larger profits can be made within the
country.
• Licensing and franchising are also low exposure methods of entry—
you allow someone else to use your trademarks and accumulated
expertise. Your partner puts up the money and assumes the risk.
 Problems here involve the fact that you are training a potential
competitor and that you have little control over how the business is
operated. For example, American fast food restaurants have found that
foreign franchisers often fail to maintain American standards of
cleanliness. Similarly, a foreign manufacturer may use lower quality
ingredients in manufacturing a brand based on premium contents in
the home country.
• Turnkey Projects. A firm uses knowledge and expertise it has gained
in one or more markets to provide a working project—e.g., a factory,
building, bridge, or other structure—to a buyer in a new country. The
firm can take advantage of investments already made in technology
and/or development and may be able to receive greater profits since
these investments do not have to be started from scratch again.
However, getting the technology to work in a new country may be
challenging for a firm that does not have experience with the
infrastructure, culture, and legal environment.
• Management Contracts. A firm agrees to manage a facility—e.g., a
factory, port, or airport—in a foreign country, using knowledge
gained in other markets. Again, one thing is to be able to transfer
technology—another is to be able to work in a new country with a
different infrastructure, culture, and political/legal environment.
• Contract manufacturing involves having someone else manufacture
products while you take on some of the marketing efforts yourself.
This saves investment, but again you may be training a competitor.
• Direct entry strategies, where the firm either acquires a firm or builds
operations "from scratch" involve the highest exposure, but also the
greatest opportunities for profits. The firm gains more knowledge
about the local market and maintains greater control, but now has a
huge investment. In some countries, the government may expropriate
assets without compensation, so direct investment entails an
additional risk. A variation involves a joint venture, where a local firm
puts up some of the money and knowledge about the local market.

Product Issues in International Marketing

Products and Services. Some marketing scholars and professionals tend to

draw a strong distinction between conventional products and services,
emphasizing service characteristics such as heterogeneity (variation in
standards among providers, frequently even among different locations of the
same firm), inseperability from consumption, intangibility, and, in some
cases, perishability—the idea that a service cannot generally be created
during times of slack and be “stored” for use later. However, almost all
products have at least some service component—e.g., a warranty,
documentation, and distribution—and this service component is an integral
part of the product and its positioning. Thus, it may be more useful to look
at the product-service continuum as one between very low and very high
levels of tangibility of the service. Income tax preparation, for example, is
almost entirely intangible—the client may receive a few printouts, but most
of the value is in the service. On the other hand, a customer who picks up
rocks for construction from a landowner gets a tangible product with very
little value added for service. Firms that offer highly tangible products often
seek to add an intangible component to improve perception. Conversely,
adding a tangible element to a service—e.g., a binder with information—
may address many consumers’ psychological need to get something to show
for their money.

On the topic of services, cultural issues may be even more prominent than
they are for tangible goods. There are large variations in willingness to pay
for quality, and often very large differences in expectations. In some
countries, it may be more difficult to entice employees to embrace a firm’s
customer service philosophy. Labor regulations in some countries make it
difficult to terminate employees whose treatment of customers is
substandard. Speed of service is typically important in the U.S. and western
countries but personal interaction may seem more important in other
countries.

Product Need Satisfaction. We often take for granted the “obvious” need
that products seem to fill in our own culture; however, functions served may
be very different in others—for example, while cars have a large
transportation role in the U.S., they are impractical to drive in Japan, and
thus cars there serve more of a role of being a status symbol or providing for
individual indulgence. In the U.S., fast food and instant drinks such as Tang
are intended for convenience; elsewhere, they may represent more of a treat.
Thus, it is important to examine through marketing research consumers’ true
motives, desires, and expectations in buying a product.

Approaches to Product Introduction. Firms face a choice of alternatives

in marketing their products across markets. An extreme strategy involves
customization, whereby the firm introduces a unique product in each
country, usually with the belief tastes differ so much between countries that
it is necessary more or less to start from “scratch” in creating a product for
each market. On the other extreme, standardization involves making one
global product in the belief the same product can be sold across markets
without significant modification—e.g., Intel microprocessors are the same
regardless of the country in which they are sold. Finally, in most cases firms
will resort to some kind of adaptation, whereby a common product is
modified to some extent when moved between some markets—e.g., in the
United States, where fuel is relatively less expensive, many cars have larger
engines than their comparable models in Europe and Asia; however, much
of the design is similar or identical, so some economies are achieved.
Similarly, while Kentucky Fried Chicken serves much the same chicken
with the eleven herbs and spices in Japan, a lesser amount of sugar is used in
the potato salad, and fries are substituted for mashed potatoes.

There are certain benefits to standardization. Firms that produce a global

product can obtain economies of scale in manufacturing, and higher
quantities produced also lead to a faster advancement along the experience
curve. Further, it is more feasible to establish a global brand as less
confusion will occur when consumers travel across countries and see the
same product. On the down side, there may be significant differences in
desires between cultures and physical environments—e.g., software sold in
the U.S. and Europe will often utter a “beep” to alert the user when a
mistake has been made; however, in Asia, where office workers are often
seated closely together, this could cause embarrassment.

Adaptations come in several forms. Mandatory adaptations involve changes

that have to be made before the product can be used—e.g., appliances made
for the U.S. and Europe must run on different voltages, and a major problem
was experienced in the European Union when hoses for restaurant frying
machines could not simultaneously meet the legal requirements of different
countries. “Discretionary” changes are changes that do not have to be made
before a product can be introduced (e.g., there is nothing to prevent an
American firm from introducing an overly sweet soft drink into the Japanese
market), although products may face poor sales if such changes are not
made. Discretionary changes may also involve cultural adaptations—e.g., in
Sesame Street, the Big Bird became the Big Camel in Saudi Arabia.
Another distinction involves physical product vs. communication
adaptations. In order for gasoline to be effective in high altitude regions, its
octane must be higher, but it can be promoted much the same way. On the
other hand, while the same bicycle might be sold in China and the U.S., it
might be positioned as a serious means of transportation in the former and as
a recreational tool in the latter. In some cases, products may not need to be
adapted in either way (e.g., industrial equipment), while in other cases, it
might have to be adapted in both (e.g., greeting cards, where the both
occasions, language, and motivations for sending differ). Finally, a market
may exist abroad for a product which has no analogue at home—e.g., hand-
powered washing machines.

Branding. While Americans seem to be comfortable with category specific

brands, this is not the case for Asian consumers. American firms observed
that their products would be closely examined by Japanese consumers who
could not find a major brand name on the packages, which was required as a
sign of quality. Note that Japanese keiretsus span and use their brand name
across multiple industries—e.g., Mitsubishi, among other things, sells food,
automobiles, electronics, and heavy construction equipment.
The International Product Life Cycle (PLC). Consumers in different
countries differ in the speed with which they adopt new products, in part for
economic reasons (fewer Malaysian than American consumers can afford to
buy VCRs) and in part because of attitudes toward new products
(pharmaceuticals upset the power afforded to traditional faith healers, for
example). Thus, it may be possible, when one market has been saturated, to
continue growth in another market—e.g., while somewhere between one
third and one half of American homes now contain a computer, the
corresponding figures for even Europe and Japan are much lower and thus,
many computer manufacturers see greater growth potential there. Note that
expensive capital equipment may also cycle between countries—e.g.,
airlines in economically developed countries will often buy the newest and
most desired aircraft and sell off older ones to their counterparts in
developing countries. While in developed countries, “three part” canning
machines that solder on the bottom with lead are unacceptable for health
reasons, they have found a market in developing countries.

Diffusion of innovation. Good new innovations often do not spread as

quickly as one might expect—e.g., although the technology for microwave
ovens has existed since the 1950s, they really did not take off in the United
States until the late seventies or early eighties, and their penetration is much
lower in most other countries. The typewriter, telephone answering
machines, and cellular phones also existed for a long time before they were
widely adopted.

Certain characteristics of products make them more or less likely to spread.

One factor is relative advantage. While a computer offers a huge advantage
over a typewriter, for example, the added gain from having an electric
typewriter over a manual one was much smaller. Another issue is
compatibility, both in the social and physical sense. A major problem with
the personal computer was that it could not read the manual files that firms
had maintained, and birth control programs are resisted in many countries
due to conflicts with religious values. Complexity refers to how difficult a
new product is to use—e.g., some people have resisted getting computers
because learning to use them takes time. Trialability refers to the extent to
which one can examine the merits of a new product without having to
commit a huge financial or personal investment—e.g., it is relatively easy to
try a restaurant with a new ethnic cuisine, but investing in a global
positioning navigation system is riskier since this has to be bought and
installed in one’s car before the consumer can determine whether it is
worthwhile in practice. Finally, observability refers to the extent to which
consumers can readily see others using the product—e.g., people who do not
have ATM cards or cellular phones can easily see the convenience that other
people experience using them; on the other hand, VCRs are mostly used in
people’s homes, and thus only an owner’s close friends would be likely to
see it.

At the societal level, several factors influence the spread of an innovation.

Not surprisingly, cosmopolitanism, the extent to which a country is
connected to other cultures, is useful. Innovations are more likely to spread
where there is a higher percentage of women in the work force; these women
both have more economic power and are able to see other people use the
products and/or discuss them. Modernity refers to the extent to which a
culture values “progress.” In the U.S., “new and improved” is considered
highly attractive; in more traditional countries, their potential for disruption
cause new products to be seen with more skepticism. Although U.S.
consumers appear to adopt new products more quickly than those of other
countries, we actually score lower on homiphily, the extent to which
consumers are relatively similar to each other, and physical distance, where
consumers who are more spread out are less likely to interact with other
users of the product. Japan, which ranks second only to the U.S., on the
other hand, scores very well on these latter two factors.

International Promotion
Promotional tools. Numerous tools can be used to influence consumer
purchases:

• Advertising—in or on newspapers, radio, television, billboards,

busses, taxis, or the Internet.
• Price promotions—products are being made available temporarily as
at a lower price, or some premium (e.g., toothbrush with a package of
toothpaste) is being offered for free.
• Sponsorships
• Point-of-purchase—the manufacturer pays for extra display space in
the store or puts a coupon right by the product
• Other method of getting the consumer’s attention—all the Gap stores
in France may benefit from the prominence of the new store located
on the Champs-Elysees

Promotional objectives. Promotional objectives involve the question of

what the firm hopes to achieve with a campaign—“increasing profits” is too
vague an objective, since this has to be achieved through some intermediate
outcome (such as increasing market share, which in turn is achieved by some
change in consumers which cause them to buy more). Some common
objectives that firms may hold:

• Awareness. Many French consumers do not know that the Gap even
exists, so they cannot decide to go shopping there. This objective is
often achieved through advertising, but could also be achieved
 through favorable point-of-purchase displays. Note that since
advertising and promotional stimuli are often afforded very little
attention by consumers, potential buyers may have to be exposed to
the promotional stimulus numerous times before it “registers.”
• Trial. Even when consumers know that a product exists and could
possibly satisfy some of their desires, it may take a while before they
get around to trying the product—especially when there are so many
other products that compete for their attention and wallets. Thus, the
next step is often to try get consumer to try the product at least once,
with the hope that they will make repeat purchases. Coupons are
often an effective way of achieving trial, but these are illegal in some
countries and in some others, the infrastructure to readily accept
coupons (e.g., clearing houses) does not exist. Continued advertising
and point-of-purchase displays may be effective. Although Coca Cola
is widely known in China, a large part of the population has not yet
tried the product.
• Attitude toward the product. A high percentage of people in the U.S.
and Europe has tried Coca Cola, so a more reasonable objective is to
get people to believe positive things about the product—e.g., that it
has a superior taste and is better than generics or store brands. This is
often achieved through advertising.
• Temporary sales increases. For mature products and categories,
attitudes may be fairly well established and not subject to cost-
effective change. Thus, it may be more useful to work on getting
temporary increases in sales (which are likely to go away the
incentives are removed). In the U.S. and Japan, for example, fast food
restaurants may run temporary price promotions to get people to eat
out more or switch from competitors, but when these promotions end,
sales are likely to move back down again (in developing countries, in
contrast, trial may be a more appropriate objective in this category).

Note that in new or emerging markets, the first objectives are more likely to
be useful while, for established products, the latter objectives may be more
useful in mature markets such as Japan, the U.S., and Western Europe.
Constraints on Global Communications Strategies. Although firms that
seek standardized positions may seek globally unified campaigns, there are
several constraints:

• Language barriers: The advertising will have to be translated, not

just into the generic language category (e.g., Portuguese) but also into
the specific version spoken in the region (e.g., Brazilian Portuguese).
(Occasionally, foreign language ads are deliberately run to add
mystique to a product, but this is the exception rather than the rule).
• Cultural barriers. Subtle cultural differences may make an ad that
tested well in one country unsuitable in another—e.g., an ad that
featured a man walking in to join his wife in the bathroom was
considered an inappropriate invasion in Japan. Symbolism often
differs between cultures, and humor, which is based on the contrast to
people’s experiences, tends not to travel well. Values also tend to
differ between cultures—in the U.S. and Australia, excelling above
the group is often desirable, while in Japan, “The nail that sticks out
gets hammered down.” In the U.S., “The early bird gets the worm”
while in China “The first bird in the flock gets shot down.”
• Local attitudes toward advertising. People in some countries are
more receptive to advertising than others. While advertising is
accepted as a fact of life in the U.S., some Europeans find it too crass
and commercial.
• Media infrastructure. Cable TV is not well developed in some
countries and regions, and not all media in all countries accept
advertising. Consumer media habits also differ dramatically;
newspapers appear to have a higher reach than television and radio in
parts of Latin America.
 • Advertising regulations. Countries often have arbitrary rules on what
can be advertised and what can be claimed. Comparative advertising
is banned almost everywhere outside the U.S. Holland requires that a
toothbrush be displayed in advertisements for sweets, and some
countries require that advertising to be shown there be produced in the
country.

Some cultural dimensions:

• Directness vs. indirectness: U.S. advertising tends to emphasize

directly why someone would benefit from buying the product. This,
however, is considered too pushy for Japanese consumers, where it is
felt to be arrogant of the seller to presume to know what the consumer
would like.
• Comparison: Comparative advertising is banned in most countries
and would probably be very counterproductive, as an insulting
instance of confrontation and bragging, in Asia even if it were
allowed. In the U.S., comparison advertising has proven somewhat
effective (although its implementation is tricky) as a way to persuade
consumers what to buy.
• Humor. Although humor is a relatively universal phenomenon, what
is considered funny between countries differs greatly, so pre-testing is
essential.
• Gender roles. A study found that women in U.S. advertising tended
to be shown in more traditional roles in the U.S. than in Europe or
Australia. On the other hand, some countries are even more
traditional—e.g., a Japanese ad that claimed a camera to be “so simple
that even a woman can use it” was not found to be unusually insulting.
• Explicitness. Europeans tend to allow for considerably more explicit
advertisements, often with sexual overtones, than Americans.
 • Sophistication. Europeans, particularly the French, demand
considerably more sophistication than Americans who may react more
favorably to emotional appeals—e.g., an ad showing a mentally
retarded young man succeeding in a job at McDonald’s was very
favorably received in the U.S. but was booed at the Cannes film
festival in France.
• Popular vs. traditional culture. U.S. ads tend to employ
contemporary, popular culture, often including current music while
those in more traditional cultures tend to refer more to classical
culture.
• Information content vs. fluff. American ads contain a great deal of
“puffery,” which was found to be very ineffective in Eastern
European countries because it resembled communist propaganda too
much. The Eastern European consumers instead wanted hard, cold
facts.

Advertising standardization. Issues surrounding advertising

standardization tend to parallel issues surrounding product and positioning
standardization. On the plus side, economies of scale are achieved, a
consistent image can be established across markets, creative talent can be
utilized across markets, and good ideas can be transplanted from one market
to others. On the down side, cultural differences, peculiar country
regulations, and differences in product life cycle stages make this approach
difficult. Further, local advertising professionals may resist campaigns
imposed from the outside—sometimes with good reasons and sometimes
merely to preserve their own creative autonomy.

Legal issues. Countries differ in their regulations of advertising, and some

products are banned from advertising on certain media (large supermarket
chains are not allowed to advertise on TV in France, for example). Other
forms of promotion may also be banned or regulated. In some European
countries, for example, it is illegal to price discriminate between consumers,
and thus coupons are banned and in some, it is illegal to offer products on
sale outside a very narrow seasonal and percentage range.

Pricing Issues in International Marketing

Price can best be defined in ratio terms, giving the equation

resources given up
price = ———————————————
goods received

This implies that there are several ways that the price can be changed:

• "Sticker" price changes—the most obvious way to change the price is

the price tag— you get the same thing, but for a different (usually
larger) amount of money.
• Change quantity. Often, consumers respond unfavorably to an
increased sticker price, and changes in quantity are sometimes noticed
less—e.g., in the 1970s, the wholesale cost of chocolate increased
dramatically, and candy manufacturers responded by making smaller
candy bars. Note that, for cash flow reasons, consumers in less
affluent countries may need to buy smaller packages at any one time
(e.g., forking out the money for a large tube of toothpaste is no big
deal for most American families, but it introduces a greater strain on
the budget of a family closer to the subsistence level).
• Change quality. Another way candy manufacturers have effectively
increased prices is through a reduction in quality. In a candy bar, the
"gooey" stuff is much cheaper than chocolate. It is frequently
tempting for foreign licensees of a major brand name to use inferior
ingredients.
• Change terms. In the old days, most software manufacturers provided
free support for their programs—it used to be possible to call the
WordPerfect Corporation on an 800 number to get free help.
Nowadays, you either have to call a 900 number or have a credit card
handy to get help from many software makers. Another way to change
terms is to do away with favorable financing terms.
Reference Prices. Consumers often develop internal reference prices, or
expectations about what something should cost, based mostly on their
experience. Most drivers with long commutes develop a good feeling of
what gasoline should cost, and can tell a bargain or a ripoff.

Reference prices are more likely to be more precise for frequently purchased
and highly visible products. Therefore, retailers very often promote soft
drinks, since consumers tend to have a good idea of prices and these
products are quite visible. The trick, then, is to be more expensive on
products where price expectations are muddier.

Marketers often try to influence people's price perceptions through the use of
external reference prices—indicators given to the consumer as to how much
something should cost. Examples include:

• Manufacturer's Suggested Retail Price (MSRP). This is often pure

fiction. The suggested retail prices in certain categories are
deliberately set so high that even full service retailers can sell at a
"discount." Thus, although the consumer may contrast the offering
price against the MSRP, this latter figure is quite misleading.
• "SALE! Now $2.99; Regular Price $5.00." For this strategy to be used
legally in most countries, the claim must be true (consistency of
enforcement in some countries is, of course, another matter).
However, certain products are put on sale so frequently that the
"regular" price is meaningless. In the early 1990s, Sears was reported
to sell some 55% of its merchandise on sale.
• "WAS $10.00, now $6.99."
• "Sold elsewhere for $150.00; our price: $99.99."

Reference prices have significant international implications. While

marketers may choose to introduce a product at a low price in order to
induce trial, which is useful in a new market where the penetration of a
product is low, this may have serious repercussions as consumers may
develop a low reference price and may thus resist paying higher prices in the
future.
Selected International Pricing Issues. In some cultures, particularly where
retail stores are smaller and the buyer has the opportunity to interact with the
owner, bargaining may be more common, and it may thus be more difficult
for the manufacturer to influence retail level pricing.
Two phenomena may occur when products are sold in disparate markets.
When a product is exported, price escalation, whereby the product
dramatically increases in price in the export market, is likely to take place.
This usually occurs because a longer distribution chain is necessary and
because smaller quantities sold through this route will usually not allow for
economies of scale. "Gray" markets occur when products are diverted from
one market in which they are cheaper to another one where prices are higher
—e.g., Luis Vuitton bags were significantly more expensive in Japan than in
France, since the profit maximizing price in Japan was higher and thus bags
would be bought in France and shipped to Japan for resale. The
manufacturer therefore imposed quantity limits on buyers. Since these
quantity limits were circumvented by enterprising exchange students who
were recruited to buy their quota on a daily basis, prices eventually had to be
lowered in Japan to make the practice of diversion unattractive. Where the
local government imposes price controls, a firm may find the market
profitable to enter nevertheless since revenues from the new market only
have to cover marginal costs. However, products may then be attractive to
divert to countries without such controls.

Transfer pricing involves what one subsidiary will charge another for
products or components supplied for use in another country. Firms will often
try to charge high prices to subsidiaries in countries with high taxes so that
the income earned there will be minimized.

Antitrust laws are relevant in pricing decisions, and anti-dumping

regulations are especially noteworthy. In general, it is illegal to sell a
product below your cost of production, which may make a penetration
pricing entry strategy infeasible. Japan has actively lobbied the World Trade
Organization (WTO) to relax its regulations, which generally require firms
to price no lower than their average fully absorbed cost (which incorporates
both variable and fixed costs).
Alternatives to "hard" currency deals. Buyers in some countries do not have
ready access to convertible currency, and governments will often try limit
firms’ ability to spend money abroad. Thus, some firms have been forced
into non-cash deals. In barter, the seller takes payment in some product
produced in the buying country—e.g., Lockheed (back when it was an
independent firm) took Spanish wine in return for aircraft, and sellers to
Eastern Europe have taken their payment in ham. An offset contract is
somewhat more flexible in that the buyer can get paid but instead has to buy,
or cause others to buy, products for a certain value within a specified period
of time.

Psychological issues: Most pricing research has been done on North

Americans, and this raises serious problems of generalizability. Americans
are used to sales, for example, while consumers in countries where goods are
more scarce may attribute a sale to low quality rather than a desire to gain
market share. There is some evidence that perceived price quality
relationships are quite high in Britain and Japan (thus, discount stores have
had difficulty there), while in developing countries, there is less trust in the
market. Cultural differences may influence the extent of effort put into
evaluating deals (potentially impacting the effectiveness of odd-even pricing
and promotion signaling). The fact that consumers in some economies are
usually paid weekly, as opposed to biweekly or monthly, may influence the
effectiveness of framing attempts—"a dollar a day" is a much bigger chunk
from a weekly than a monthly paycheck.
International Distribution

Promotional tools. Numerous tools can be used to influence consumer

purchases:

• Advertising—in or on newspapers, radio, television, billboards,

busses, taxis, or the Internet.
• Price promotions—products are being made available temporarily as
at a lower price, or some premium (e.g., toothbrush with a package of
toothpaste) is being offered for free.
• Sponsorships
• Point-of-purchase—the manufacturer pays for extra display space in
the store or puts a coupon right by the product
• Other method of getting the consumer’s attention—all the Gap stores
in France may benefit from the prominence of the new store located
on the Champs-Elysees.

Promotional objectives. Promotional objectives involve the question of

what the firm hopes to achieve with a campaign—“increasing profits” is too
vague an objective, since this has to be achieved through some intermediate
outcome (such as increasing market share, which in turn is achieved by some
change in consumers which cause them to buy more). Some common
objectives that firms may hold:

• Awareness. Many French consumers do not know that the Gap even
exists, so they cannot decide to go shopping there. This objective is
often achieved through advertising, but could also be achieved
through favorable point-of-purchase displays. Note that since
advertising and promotional stimuli are often afforded very little
attention by consumers, potential buyers may have to be exposed to
the promotional stimulus numerous times before it “registers.”
• Trial. Even when consumers know that a product exists and could
possibly satisfy some of their desires, it may take a while before they
get around to trying the product—especially when there are so many
other products that compete for their attention and wallets. Thus, the
next step is often to try get consumer to try the product at least once,
with the hope that they will make repeat purchases. Coupons are
often an effective way of achieving trial, but these are illegal in some
countries and in some others, the infrastructure to readily accept
coupons (e.g., clearing houses) does not exist. Continued advertising
 and point-of-purchase displays may be effective. Although Coca Cola
is widely known in China, a large part of the population has not yet
tried the product.
• Attitude toward the product. A high percentage of people in the U.S.
and Europe has tried Coca Cola, so a more reasonable objective is to
get people to believe positive things about the product—e.g., that it
has a superior taste and is better than generics or store brands. This is
often achieved through advertising.
• Temporary sales increases. For mature products and categories,
attitudes may be fairly well established and not subject to cost-
effective change. Thus, it may be more useful to work on getting
temporary increases in sales (which are likely to go away the
incentives are removed). In the U.S. and Japan, for example, fast food
restaurants may run temporary price promotions to get people to eat
out more or switch from competitors, but when these promotions end,
sales are likely to move back down again (in developing countries, in
contrast, trial may be a more appropriate objective in this category).

Note that in new or emerging markets, the first objectives are more likely to
be useful while, for established products, the latter objectives may be more
useful in mature markets such as Japan, the U.S., and Western Europe.

Constraints on Global Communications Strategies. Although firms that

seek standardized positions may seek globally unified campaigns, there are
several constraints:

• Language barriers: The advertising will have to be translated, not

just into the generic language category (e.g., Portuguese) but also into
the specific version spoken in the region (e.g., Brazilian Portuguese).
(Occasionally, foreign language ads are deliberately run to add
mystique to a product, but this is the exception rather than the rule).
• Cultural barriers. Subtle cultural differences may make an ad that
tested well in one country unsuitable in another—e.g., an ad that
featured a man walking in to join his wife in the bathroom was
considered an inappropriate invasion in Japan. Symbolism often
differs between cultures, and humor, which is based on the contrast to
people’s experiences, tends not to travel well. Values also tend to
differ between cultures—in the U.S. and Australia, excelling above
the group is often desirable, while in Japan, “The nail that sticks out
 gets hammered down.” In the U.S., “The early bird gets the worm”
while in China “The first bird in the flock gets shot down.”
• Local attitudes toward advertising. People in some countries are
more receptive to advertising than others. While advertising is
accepted as a fact of life in the U.S., some Europeans find it too crass
and commercial.
• Media infrastructure. Cable TV is not well developed in some
countries and regions, and not all media in all countries accept
advertising. Consumer media habits also differ dramatically;
newspapers appear to have a higher reach than television and radio in
parts of Latin America.
• Advertising regulations. Countries often have arbitrary rules on what
can be advertised and what can be claimed. Comparative advertising
is banned almost everywhere outside the U.S. Holland requires that a
toothbrush be displayed in advertisements for sweets, and some
countries require that advertising to be shown there be produced in the
country.

Some cultural dimensions:

• Directness vs. indirectness: U.S. advertising tends to emphasize

directly why someone would benefit from buying the product. This,
however, is considered too pushy for Japanese consumers, where it is
felt to be arrogant of the seller to presume to know what the consumer
would like.
• Comparison: Comparative advertising is banned in most countries
and would probably be very counterproductive, as an insulting
instance of confrontation and bragging, in Asia even if it were
allowed. In the U.S., comparison advertising has proven somewhat
effective (although its implementation is tricky) as a way to persuade
consumers what to buy.
• Humor. Although humor is a relatively universal phenomenon, what
is considered funny between countries differs greatly, so pre-testing is
essential.
• Gender roles. A study found that women in U.S. advertising tended
to be shown in more traditional roles in the U.S. than in Europe or
Australia. On the other hand, some countries are even more
traditional—e.g., a Japanese ad that claimed a camera to be “so simple
that even a woman can use it” was not found to be unusually insulting.
 • Explicitness. Europeans tend to allow for considerably more explicit
advertisements, often with sexual overtones, than Americans.
• Sophistication. Europeans, particularly the French, demand
considerably more sophistication than Americans who may react more
favorably to emotional appeals—e.g., an ad showing a mentally
retarded young man succeeding in a job at McDonald’s was very
favorably received in the U.S. but was booed at the Cannes film
festival in France.
• Popular vs. traditional culture. U.S. ads tend to employ
contemporary, popular culture, often including current music while
those in more traditional cultures tend to refer more to classical
culture.
• Information content vs. fluff. American ads contain a great deal of
“puffery,” which was found to be very ineffective in Eastern
European countries because it resembled communist propaganda too
much. The Eastern European consumers instead wanted hard, cold
facts.

Advertising standardization. Issues surrounding advertising

standardization tend to parallel issues surrounding product and positioning
standardization. On the plus side, economies of scale are achieved, a
consistent image can be established across markets, creative talent can be
utilized across markets, and good ideas can be transplanted from one market
to others. On the down side, cultural differences, peculiar country
regulations, and differences in product life cycle stages make this approach
difficult. Further, local advertising professionals may resist campaigns
imposed from the outside—sometimes with good reasons and sometimes
merely to preserve their own creative autonomy.

Legal issues. Countries differ in their regulations of advertising, and some

products are banned from advertising on certain media (large supermarket
chains are not allowed to advertise on TV in France, for example). Other
forms of promotion may also be banned or regulated. In some European
countries, for example, it is illegal to price discriminate between consumers,
and thus coupons are banned and in some, it is illegal to offer products on
sale outside a very narrow seasonal and percentage range.

Perceptions of Ethical Problems in International Marketing-

Abstract:

U.S. international marketing practitioners identified the most difficult ethical

problems they have encountered in foreign trade. These ethical problems
were rated as occurring infrequently and having a moderate impact on a
firm's overseas competitiveness. Conversely, the respondents saw ethical
problems as likely to tarnish the firm's domestic image and to generate much
concern for top management. This suggests such problems may have a
stronger negative impact upon a firm's domestic public image but may not
be a major factor inhibiting its international trade. The strategic alternatives
to, and management implications of, avoiding markets which may pose
ethical problems are discussed.

Multinational Business Management (4)

Managerial responses to problems of international business organizations
and operations. Strategy formulation in an international context; design and
control of multinational organization; adaptation of management systems
and policies to different economic, sociocultural, and political environments.
Prerequisite: B A 500 or course in international economics or trade or
international finance, or permission of graduate office.

Effects of cultural differences in international business and price

negotiation

University essay from Växjö universitet/Ekonomihögskolan; Växjö

universitet/Ekonomihögskolan; Växjö universitet/Ekonomihögskolan

Author: Hasim Deari; Viktoria Kimmel; Paola Lopez; [2008]

Keywords: International business; negotiation; pricing; culture;

Abstract:

The number of companies operating internationally is growing constantly.

The world is opening up for foreign firms and new destinations in the
company´ business are increasing. Because of high competition the
companies operating abroad are faced with a much larger task then before.

When going international the challenges the company must handle are new
and unfamiliar. Obstacles the firm never faced before are becoming crucial
in the every day work. Culture is one of these obstacles and can affect the
entire co-operation.

Culture can influence the business in different ways. Language problems,

pricing difficulties and culture collisions are not uncommon, especially in
the beginning. The company must be able to handle these difficulties in a
way that is satisfying also for the other part. Mistakes can be difficult to
correct and disrespect for the foreign culture can destroy the entire
operation.

There are some general advices the company always must have in mind
before and during a co-operation on the international market. It is important,
even before entering the foreign country, to inform the personal about the
manners and customs in that new culture. If the first impression becomes
negative, this can be hard to shake. Foreign cultures have different ways of
doing business, for example when it comes to planning ahead and keeping
delivery times. Culture can be both a positive and negative influence and
many companies are struggling in the new and foreign environment.

The important thing to always have in mind is that the foreign culture is not
as we are used to at home and to be prepared before starting the new foreign
operation. Respecting and understanding the new culture without forcing our
own beliefs on people, are things that can be extremely helpful to consider.
By learning the host country’s language, can respect and trust more easily be
won, and competitive advantages can arises.

Conversion Rate Problem of SMEs in Internet Marketing - a

Developing Country Perspective

University essay from Blekinge Tekniska Högskola/Sektionen för

Management (MAM)

Author: Mohammad Sheikh; [2009]

Keywords: företagsekonomi; business administration - marketing;

marketing; e-commerce; b2c; business to consumer; conversion; conversion
rate; consumer; pakistan; pakistani consumer;

Abstract: In the recent years, electronic commerce has become an important

alternative or additional sales and marketing channel. Many companies are
only selling through this channel while many others are using it as an
additional channel for boosting their sales. Business-to-consumer (B2C) e-
commerce represents an important research area because retail consumer
expectations, attitudes, and behavior are studied. Companies can design their
marketing models around desires and preferences of the customers. Because
of inherent nature of e-commerce retail websites, customers can log on to the
sites, perform research and product / price comparisons, fill in their shopping
carts, and may log off without making any purchases. Main reasons on the
part of website visitors for not converting into paying customers are low
level of trust on this medium of purchases because customers are required to
give out financial and personal data, customers can do comparison shopping
or window shopping, high shipping costs, unclear pricing and return, and
refund policies of the websites, etc. From the point of view of sellers,
abandoned shopping carts represent potential sales that could not be realized.
Companies are, for obvious reasons, interested in converting these lost
customers into sales. Retail websites, of large as well as small-to-medium
sized (SME) categories, experience this low conversion rate problem for
customers including those from developing countries. Specifically, purpose
of this research was formulated as four research questions: 1. Categories of
products and services e-commerce consumers from Pakistan prefer to buy
from internet. 2. Reasons for low conversion rates. 3. Extent to which
Pakistani online customers are price-sensitive. 4. Choice between product /
service differentiation and low price Pakistani customers would make. This
thesis aimed to look at what goes on in the minds of customers from
developing countries when they do not make purchases at retail e-commerce
websites. A questionnaire asking customers from Pakistan as to what are
their preferences about e-sellers and their main turn-offs at vendor websites
was developed and circulated among the sample population. Analysis of
data collected via the survey indicates the following with respect to the
research questions: 1. In terms of preferences and features concerning
products purchased over internet, Pakistani consumers are not basically
different from their international counterparts as Pakistani consumers
generally purchase the same kind of products and services as international
consumers do according to what is reported in the relevant literature.
However, some concerns revealed by subjects of the survey were related to
reluctance of merchants to ship to Pakistani destinations, potential credit
card problems, unavailability of services like Pay Pal in Pakistan, etc. 2.
Main reasons for low conversion rates for Pakistani consumers are also
similar to those reported for international consumers from a number of
countries. Major reason of low conversion rates is low trust in websites
because of concerns related to sharing personal and financial information on
the internet. 3. Pakistani consumers are found to be relatively low users of e-
shopping and strongly price sensitive. 4. Paksitani consumers are also found
to not very much interested in availing differentiated products/services over
the internet. This thesis also presents a review of relevant literature and
offers some recommendations for future research into the relevant area.

Risk in international trade

Companies doing business across international borders face many of the

same risks as would normally be evident in strictly domestic transactions.
For example,

• Buyer insolvency (purchaser cannot pay);

• Non-acceptance (buyer rejects goods as different from the agreed
upon specifications);
• Credit risk (allowing the buyer to take possession of goods prior to
payment);
• Regulatory risk (e.g., a change in rules that prevents the transaction);
• Intervention (governmental action to prevent a transaction being
completed);
• Political risk (change in leadership interfering with transactions or
prices); and
• War and Acts of God.

In addition, international trade also faces the risk of unfavorable exchange

rate movements (and, the potential benefit of favorable movements).[14

What are the advantages and disadvantages of doing business

internationally?

Advantages

Faster growth: Firms that have operate internationally tend to develop at a

much quicker pace than those operating locally

Access to cheaper inputs: Operating internationally may enable the firm to

source raw materials or labor at lower prices
Increased quality and efficiency: Exposure to foreign competition will
encourage increased efficiency. Doing business in the international market
allows firms to improve the quality of their product in order to gain a
competitive advantage.

New market opportunities: International business presents firms with new

market opportunities. These new markets provide more opportunities for
expansion, growth, and income. A bigger market means more customers,
increased revenue, a larger profit margin, and allows the business to realize
economies of scale.

Diversification: As the firm diversifies its market, it becomes less

vulnerable to changes in local demand. This reduces wild swings in a
company's sales and profits.

Disadvantages

Increased costs: There are increased operating expenses including the

establishment of facilities abroad, the hiring of additional staff, traveling of
personnel, specialized transport networks, information and communication
technology.

Foreign regulations and standards: The firm may need to conform to new
standards. This may require changes such as in the production process,
inputs and packaging, incurring additional costs.

Delays in payments: International trade may cause delays in payments,

adversely affecting the firm's cash flow.

Complex organizational structure: International business usually requires

changes to the firms operating structure. Training/retraining of management
may be necessary to facilitate restructuring.

Advantages & Disadvantages Of International Trade

ADVANTAGES AND DISADVANTAGES OF INTERNATIONAL

TRADE
International trade allows countries to exchange good and services with the
use of money as a medium of exchange. Several advantages can be
identified with reference to international trade. However international trade
does have its limitations as well. Discussed below are both advantages and
disadvantages of international trade.
Advantages
• Greater variety of goods available for consumption – international trade
brings in different varieties of a particular product from different
destinations. This gives consumers a wider array of choices which will not
only improve their quality of life but as a whole it will help the country
grow.

• Efficient allocation and better utilization of resources since countries tend

to produce goods in which they have a comparative advantage. When
countries produce through comparative advantage, wasteful duplication of
resources is prevented. It helps save the environment from harmful gases
being leaked into the atmosphere and also provides countries with a better
marketing power.

• Promotes efficiency in production as countries will try to adopt better

methods of production to keep costs down in order to remain competitive.
Countries that can produce a product at the lowest possible cost will be able
to gain a larger share in the market. Therefore an incentive to produce
efficiently arises. This will help standards of the product to increase and
consumers will have a good quality product to consume.

• More employment could be generated as the market for the countries’

goods widens through trade. International trade helps generate more
employment through the establishment of newer industries to cater to the
demands of various countries. This will help countries bring down their
unemployment rates.

Advantages and Disadvantages of International Trade

Advantages to consider:

• Enhance your domestic competitiveness

 • Increase sales and profits
• Gain your global market share
• Reduce dependence on existing markets
• Exploit international trade technology
• Reduce dependence on existing markets
• Exploit international trade technology
• Extend sales potential of existing products
• Stabilize seasonal market fluctuations
• Enhance potential for expansion of your business
• Sell excess production capacity
• Maintain cost competitiveness in your domestic market

Disadvantages to keep in mind:

• You may need to wait for long-term gains

• Hire staff to launch international trading
• Modify your product or packaging
• Develop new promotional material
• Incur added administrative costs
• Dedicate personnel for traveling
• Wait long for payments
• Apply for additional financing
• Deal with special licenses and regulations

What's international business?discuss the reasons for the recent growth

of international bsuiness activity?

International Business is Business across national borders.

There has been international business as long as there have been nations.
Recent growth has been due to numerous reasons. One has been
technological changes which have resulted in economic entities being able to
produce significantly more of a product than can be consumed locally. Mass
production of products results in costs that are so low that the transportation
cost to deliver the product to another country does not make the product
more expensive than low volume production in the other country.
Transportation costs between countries has also diminished after taking into
account inflation.
I do not have statistics but people usually talk about labor cost differentials
remaining high.
Economic Growth and International Competitiveness

Rationale

In his State of the Nation Address (6 February 2004),

President Mbeki stated that "(South Africa) must continue to
focus on the growth, development and modernisation of the
First Economy, to generate the resources without which it
will not be possible to confront the challenges of the Second
Economy. This is going to require further and significant
infrastructure investments, skills development, scientific and
technological research, development and expansion of the
knowledge economy..."

South Africa must develop a competitive, sustainable, fast-

growing economy that creates national prosperity. The
extent to which this challenge is addressed will depend on a
dynamic and multi-disciplinary knowledge base capable of
integrating technology, management and labour. The keys
to building a competitive industrial base are knowledge,
innovation and productivity.

Technological change is one of the most important sources

of change in the economy. The capacity for science and
technology in South Africa is not been adequately translated
into innovative and dynamic business organisation or
enterprise. The economy remains largely dependent on
natural resources, primary processing and manufacturing
and, for the most part, on imported technologies. A sound
scientific and technological base, from which wealth-creating
technological innovations and applications can develop, is
essential to economic growth in a competitive international
environment. This knowledge base should address the full
spectrum of economic accumulation, from mobilising
resources, to effective production to knowledge-based
marketing, sales, services and distribution of manufactured
products . This is particularly important in the knowledge
era, as boundaries disappear between knowledge and its
various applications.

South Africa needs to improve its international

competitiveness. With the increasing impact of globalisation
on business, the scope for competition is no longer limited
by national boundaries or by the definition of a particular
industrial sector. This implies, among other things, that it
has become imperative to develop and maintain knowledge
and skills as assets that can lead to the development and
successful commercialisation of a wide variety of products
and services that meet the demands of international
markets In his State of the Nation Address, President Mbeki
also highlighted the need to penetrate global markets more
deeply, increase savings levels, expand black economic
empowerment and grow small and medium enterprises in
order to address present and future economic challeneges.

Competitiveness at the level of the enterprise is of utmost

importance. In the industrial economy, access to cheap raw
materials, access to cheap unskilled labour, access to
proprietary production technology and privileged access to
markets were driving competitiveness. New drivers that are
related to customer value have emerged in the knowledge
era. These include the ownership of designs and brands, the
excellence of marketing skills and a focus on consumer
demands. Smart production processes are vital.
Management of technology, innovation and information have
also emerged as key requirements for success in the 21st
century enterprise.

Economic growth and international competitiveness are

increasingly dependent on the generation and transfer of
knowledge and technology. Research underpins economic
growth and competitiveness by advancing knowledge and
skills that sustain innovation and help solve problems for
industry and business.
Aims

The primary aims of this focus area are to:

• Establish and grow research with the potential to

impact on economic growth and competitiveness
• Support pre-competitive research innovation and
development relevant to industry in areas of national
importance, such as wealth creation, job creation,
enhancement of foreign direct investment, and
ultimately economic growth
• Promote links with relevant stakeholders in key sectors
of industry and business
• Develop innovative technologies and technology-based
solutions to strengthen the competitiveness of sectors
and enterprises
• Strongly promote entrepreneurship, business creation,
commercialisation of research, business development
and protection of intellectual property
• Encourage researchers in science and technology to link
up with the human and social sciences in
multidisciplinary research endeavours
• Raise awareness of the value of public investment in
knowledge generation
• Develop research capacity through basic and applied
research initiatives undertaken by researchers as
individuals or in teams

Research Themes

The main areas for consideration within this focus area have
been grouped into two clusters:

• Technologies for Competitiveness, and

• Management for Competitiveness.

1. Technologies for Competitiveness

The sectors and processes of production that will drive the
economy need to be supported through the generation and
transfer of knowledge. The emphasis is on how to make
sectors more competitive through technology - focusing on
sectors with a demonstrated ability or potential to make the
country competitive. Sectors to be addressed include:

• Agro-processing, commercial farming and fisheries

• Business, financial and related services
• Manufacturing and materials
• Mineral Resources, metallurgy and minerals processing
• Energy
• Forestry
• Tourism
• Biotechnology
• Transport.

Possible issues within each of the above sectors include:

• Processes of production (including basic technologies,

control, distribution, incorporation of information and
communication technology, logistics of production)
• Simulation and modelling
• Critical and emerging technologies (A Centre of
Excellence approach may be followed)
• Clean production, technical management of emissions
and other environmental considerations
• Pollution and waste management/minimisation
• Market relevance of skills and research results.

2. Management for Competitiveness

This theme is further sub-divided into three sub-themes, as

below.

2.1 Environment for economic growth

The focus here is on the issues affecting economic growth,
development and business and industrial competitiveness,
such as:

• SMMEs as a route to growth

• Infrastructure and services (including transportation,
telecommunications, construction)
• Markets and market-specific studies
• The role of government and the regulatory and
legislative environment
• Institutional framework for growth
• Entrepreneurship
• Impact of social processes (e.g. crime, flight of capital,
HIV)
• Privatisation
• Micro-economics issues
• Economic impact of environmental issues.

2.2 Management of the enterprise

The organisation and internal management of enterprises

and industry has a profound effect on economic growth and
competitiveness. Issues that could be examined in this sub-
theme include:

• Management of organisations of the future

• Technology and research management
• Knowledge management and intellectual property
issues
• Optimal use of resources of the enterprise
• Logistics
• Value-chain management
•
• E-business
• Brand development
• Business systems
• Technology transfer
 • Environment in which the business operates (for
example, legal issues, relationship to profitability)
• Case research, understanding business success and
failure and drivers for competitiveness and reflecting
the South African perspective.

2.3 Human resources

Human resource requirements in the knowledge era are

changing the organisation of production, the skills needed
from workers and the relationships within enterprises.
Issues that could to be examined in this sub-theme include:

• Skills requirements and skills availability in various

sectors
• Quality of labour training systems and skills transfer
processes
• Occupational health and safety
• Knowledge workers
• Unemployment and employment creation
• In-company and higher education sector training
systems

nternational business

From Wikipedia, the free encyclopedia

Jump to: navigation, search

This article may require cleanup to meet Wikipedia's quality
standards. Please improve this article if you can. (January 2010)

International business is a term used to collectively describe all

commercial transactions (private and governmental, sales, investments,
logistics,and transportation) that take place between two or more nations.
Usually, private companies undertake such transactions for profit;
governments undertake them for profit and for political reasons.[1] It refers to
all those business activities which involves cross border transactions of
goods, services, resources between two or more nations. Transaction of
economic resources include capital, skills, people etc. for international
production of physical goods and services such as finance, banking,
insurance, construction etc.[2]

A multinational enterprise (MNE) is a company that has a worldwide

approach to markets and production or one with operations in more than a
country. An MNE is often called multinational corporation (MNC) or
transnational company (TNC). Well known MNCs include fast food
companies such as McDonald's and Yum Brands, vehicle manufacturers
such as General Motors, Ford Motor Company and Toyota, consumer
electronics companies like Samsung, LG and Sony, and energy companies
such as ExxonMobil, Shell and BP. Most of the largest corporations operate
in multiple national markets.

Areas of study within this topic include differences in legal systems,

political systems, economic policy, language, accounting standards, labor
standards, living standards, environmental standards, local culture, corporate
culture, foreign exchange market, tariffs, import and export regulations,
trade agreements, climate, education and many more topics. Each of these
factors requires significant changes in how individual business units operate
from one country to the next.

The conduct of international operations depends on companies' objectives

and the means with which they carry them out. The operations affect and are
affected by the physical and societal factors and the competitive
environment.

Operations

• Objectives: sales expansion, resource acquisition, risk minimization

Means

• Modes: importing and exporting, tourism and transportation, licensing

and franchising, turnkey operations, management contracts, direct
investment and portfolio investments.
• Functions: marketing, global manufacturing and supply chain
management, accounting, finance, human resources
• Overlaying alternatives: choice of countries, organization and control
mechanisms

Physical and societal factors

 • Political policies and legal practices
• Cultural factors
• Economic forces
• Geographical influences

Competitive factors

• Major advantage in price, marketing, innovation, or other factors.

• Number and comparative capabilities of competitors
• Competitive differences by country

There has been growth in globalization in recent decades due to the

following eight factors:

• Technology is expanding, especially in transportation and

communications.
• Governments are removing international business restrictions.
• Institutions provide services to ease the conduct of international
business.
• Consumers know about and want foreign goods and services.
• Competition has become more global.
• Political relationships have improved among some major economic
powers.
• Countries cooperate more on transnational issues.
• Cross-national cooperation and agreements.

Studying international business is important because:

• Most companies are either international or compete with international

companies.
• Modes of operation may differ from those used domestically.
• The best way of conducting business may differ by country.
• An understanding helps you make better career decisions.
• An understanding helps you decide what governmental policies to
support.

Managers in international business must understand social science

disciplines and how they affect all functional business fields.
Tom Travis, the managing partner of Sandler, Travis & Rosenberg, PA. and
international trade and customs consultant, uses the Six Tenets when giving
advice on how to globalize one's business. The Six Tenets are as follows[3]:

1. Take advantage of trade agreements: think outside the border

o Familiarize yourself with preference programs and trade
agreements.
o Read the fine print.
o Participate in the process.
o Seize opportunities when they arise.
2. Protect your brand at all costs
o You and your brand are inseparable.
o You must be vigilant in protecting your intellectual property
both at home and abroad.
o You must be vigilant in enforcing your IP rights.
o Protect your worldwide reputation by strict adherence to labor
and human rights standards.
3. Maintain high ethical standards
o Strong ethics translate into good business.
o Forge ethical strategic partnerships.
o Understand corporate accountability laws.
o Become involved with the international business self-regulation
movement.
o Develop compliance protocols for import and export
operations.
o Memorialize your company's code of ethics and compliance
practices in writing.
o Appoint a leader.
4. Stay secure in an insecure world
o Security requires transparency throughout the supply chain.
o Participate in trade-government partnerships.
o Make the most of new security measures.
o Secure your data.
o Keep your personnel secure.
5. Expect the Unexpected
o The unexpected will happen.
o Do your research now.
o Address your particular circumstances.
6. All global business is personal
o Go to the source.
 o Keep communications open.
o Keep the home office operational.
o Fly the flag at your overseas locations.
o Relate to offshore associates on a personal level.
o Be available to overseas clients and customers 24/7.

According to C.K. Prahalad & S. Hart,2002, The fortune at the bottom of the
pyramid, Strategy & Business, 26: 54-67, and (2) S.Hart, 2005, Capitalism
at the Crossroads (p. 111), Philadelphia: Wharton School Publishing.

Top Tier: Per capita GDP/GNI > $20,000 Approximately one billion people

Second Tier: Per capita GDP/GNI $2,000-$20,000 Approximately one

billion people

Base of the Pyramid Per capita GDP/GNI < $2,000 Approximately four
billion people

Recent technological developments, including the printing press, the

telephone, and the Internet, have lessened physical barriers to
communication and allowed humans to interact freely on a global scale.
However, not all technology has been used for peaceful purposes; the
development of weapons of ever-increasing destructive power has
progressed throughout history, from clubs to nuclear weapons.

Technology has affected society and its surroundings in a number of ways.

In many societies, technology has helped develop more advanced economies
(including today's global economy) and has allowed the rise of a leisure
class. Many technological processes produce unwanted by-products, known
as pollution, and deplete natural resources, to the detriment of the Earth and
its environment. Various implementations of technology influence the
values of a society and new technology often raises new ethical questions.
Examples include the rise of the notion of efficiency in terms of human
productivity, a term originally applied only to machines, and the challenge
of traditional norms.

transport A mode of transport is a solution that makes use of a particular

type of vehicle, infrastructure and operation. The transport of a person or of
cargo may involve one mode or several modes, with the latter case being
called intermodal or multimodal transport. Each mode has its advantages
and disadvantages, and will be chosen for a trip on the basis of cost,
capability, route, and speed. Transport or transportation is the movement
of people and goods from one location to another. Transport is performed by
modes, such as air, rail, road, water, cable, pipeline and space. The field can
be divided into infrastructure, vehicles, and operations.

Infrastructure consists of the fixed installations necessary for transport, and

may be roads, railways, airways, waterways, canals and pipelines, and
terminals such as airports, railway stations, bus stations, warehouses,
trucking terminals, refueling depots (including fueling docks and fuel
stations), and seaports. Terminals may both be used for interchange of
passengers and cargo, and for maintenance.

Vehicles traveling on these networks may include automobiles, bicycles,

buses, trains, trucks, people, helicopters, and aircraft. Operations deal with
the way the vehicles are operated, and the procedures set for this purpose
including financing, legalities and policies. In the transport industry,
operations and ownership of infrastructure can be either public or private,
depending on the country and mode.

Passenger transport may be public, where operators provide scheduled

services, or private. Freight transport has become focused on
containerization, although bulk transport is used for large volumes of
durable items. Transport plays an important part in economic growth and
globalization, but most types cause air pollution and use large amounts of
land. While it is heavily subsidized by governments, good planning of
transport is essential to make traffic flow, and restrain urban sprawl.

Communication is a process of transferring information from one entity to

another. Communication processes are sign-mediated interactions between
at least two agents which share a repertoire of signs and semiotic rules. It’s a
to-way process in which there is an exchange and progression of thoughts,
feelings or ideas (energy) towards a mutually accepted goal or direction
(information)

Cross-national cooperation and agreements

From Wikipedia, the free encyclopedia

Integration is a political and economic agreement among countries that gives

preference to member countries to the agreement [1]. General integration can
be achieved in three different approachable ways: through the World Trade
Organization (WTO), bilateral integration, and regional integration [2]. In
bilateral integration, only two countries economically cooperate with one
and other; whereas in regional integration, several countries within the same
geographic distance become joint to form organizations such as the
European Union (EU) and the North American Free Trade Agreement
(NAFTA). Indeed, factors of mobility like capital, technology and labour are
indicating strategies for cross-national integration along with those
mentioned above.

International Business in India

International Business in India looks really lucrative and every passing day,
it is coming up with only more possibilities. The growth in the international
business sector in India is more than 7% annually. There is scope for more
improvement if only the relations with the neighboring countries are
stabilized. The mind-blowing performance of the stock market in India has
gathered all the more attention (in comparison to the other international
bourses). India definitely stands as an opportune place to explore business
possibilities, with its high-skilled manpower and budding middle class
segment.

With the diverse cultural setup, it is advisable not to formulate a uniform

business strategy in India. Different parts of the country are well-known for
its different traits. The eastern part of India is known as the ‘Land of the
intellectuals’, whereas the southern part is known for its ‘technology
acumen’. On the other hand, the western part is known as the ‘commercial-
capital of the country’, with the northern part being the ‘hub of political
power’. With such diversities in all the four segments of the country,
international business opportunity in India is surely huge.

Sectors having potential for International business in India –

1. Information Technology and Electronics Hardware.

2. Telecommunication.
3. Pharmaceuticals and Biotechnology.
4. R&D.
5. Banking, Financial Institutions and Insurance & Pensions.
6. Capital Market.
7. Chemicals and Hydrocarbons.
8. Infrastructure.
9. Agriculture and Food Processing.
10.Retailing.
11.Logistics.
12.Manufacturing.
13.Power and Non-conventional Energy.

Sectors like Health, Education, Housing, Resource

Conservation & Management Group, Water Resources, Environment,
Rural Development, Small and Medium Enterprises (SME) and Urban
Development are still not tapped properly and thus the huge scope
should be exploited.

To foster the international business scenario in India, bodies like CII,

FICCI and the various Chambers of Commerce, have a host of
services like –

1. These bodies work closely with the Government and the

different business promotion organizations to infuse more
business development in India.
2. They help to build strong relationships with the different
international business organizations and the multinational
corporations.
3. These bodies help to identify the bilateral business co-operation
potential and thereafter make apt policy recommendations to
the different overseas Governments.
4. With opportunities huge, the International Business trend in
India is mind boggling. India International Business community
along with the domestic business community is striving towards
a steady path to be the Knowledge Capital of the world.

It was evident till a few years back that India had a marginal role in
the international affairs. The image was not bright enough to be the
cynosure among the shining stars. The credit rating agencies had
radically brought down the country's ratings. But, as of now, after
liberalization process and the concept of an open economy –
international business in India grew manifold. Future definitely has
more to offer to the entire world.
Talk is cheap when it comes to Indian
economy

A barrage of sometimes conflicting statements from government officials over

economic policy has fuelled concerns that excessive chatter causes unnecessary
market volatility in India and undermines Reserve Bank's independence.

The frequent talk is magnified by the rise of India's fiercely competitive 24-hour business
TV channels, hungry for sound bites from often elderly politicians and long-time civil
servants who occasionally seem oblivious to market impact.

At the heart of the matter may be the growing pains of an emerging giant of 1.2 billion
people. In two decades, India has transformed itself from a state-dominated economy to
an increasingly open market, with all the risks that entails.

Now as a rival to China, India's every move is in the spotlight as its growth helps drive a
world recovery.

But a tendency to over-promise, from targets for building roads and power plants to
keeping fiscal deficits in check, can erode the credibility of predictions.

"Everyone talking at the drop of a hat creates unnecessary volatility in the market," said
Nirav Dalal, head of debt capital markets at Mumbai-based Yes Bank.

This year, Farm Minister Sharad Pawar was criticised by both the ruling Congress party
and the opposition for pushing up local sugar prices after he said that India may need
large imports.

While India is not alone when it comes to assorted officials weighing in on monetary,
fiscal and economic matters, the frequency of statements from high-level sources sets it
apart.

"Relative to other East Asian economies, there is a lot more seemingly credible
commentary and analysis, some of which may be contradictory," said UBS economist
Philip Wyatt.

"I think that reflects India's size, India's need to upgrade its institutions in line with
markets, but at the same time the ability of senior officials in different arms of
government to have a mouthpiece," said Wyatt, who is based in Hong Kong.
TRENDS IN INTERNTIONAL BUSINESS
An in-depth understanding of international business is a requirement for any player in
today's business world. To excel, one must also possess the ability to understand respond
to, and use change effectively. Trends in International Business: Critical Perspectives is
designed to provide the right contexts for successful strategy development.

The text presents a leading-edge analysis of the central components of international

business strategy and their effects. Readers gain valuable exposure to the macro shifts
which are redefining the parameters of business, as well as insights into the strategies
which firms can adopt to respond to these changes.

To help readers improve their ability to analyze the key issues and concerns in the
international business field, the editors have adopted a unique approach. Issues are
explored from the vantage points of policy makers, business executives, and researchers
from the United States, Asia, and Europe.

The text's unique approach and emphasis on effective use makes Trends in International
Business: Critical Perspectives a valuable resource. Readers will be delighted by
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