Exam 1 Flashcards
Advantages of International Marketing for consumers
- Increases the standard of living
- Access to more goods and innovations
- more needs/wants satisfied
Disadvantages of International Marketing for consumers
- Impact on local culture
- Quality
- Difficult to enforce laws
(example: Chinese companies putting harmful chemicals in products)
Advantages of International Marketing for producers
- Expand into new markets
- Reduce risk through diversification
- Brand reputation: companies selling in multiple markets are perceived to sell higher quality goods
- Can achieve economies of scale (production and distribution)
Disadvantages of International Marketing for producers
- Uncertainty
- Different customer wants/needs/product usage
- Differences in consumer response to elements of marketing mix
- Sometimes difficult to adapt to language/cultural differences
Factors Contributing to the success of American companies during the 1950s
- US dominance after WWII (Market share and production increased as other countries recovered)
- Marshall Plan
- Rise of Europe
Rise of Europe
Rome Treaty/Agreement:
-Established the European Union
Stages of International Marketing Involvement
- No direct foreign marketing
- Infrequent foreign marketing
- Regular foreign Marketing
- International Marketing
- Global Marketing
Controllable elements
can be altered in the long run and usually in the short run to adjust to the changing market conditions, consumer tastes, or corporate objectives
Marketing Mix
Product, Price, Place, Promotion
Uncontrollable elements
uncertainties created by the domestic and foreign environments.
Uncontrollable variables in international marketing
Political stability, Economic climate, Class structure, Dramatic cultural change
How does self-reference criterion and ethnocentrism affect international marketing?
The key to successful international marketing is adaptation to the environmental differences from one market to another
Primary obstacles to success in international marketing
Self-reference criterion and associated ethnocentrism
Different methods of entering foreign markets
Exporting, licensing, joint venture, direct investment
Global Awareness
being objective and tolerant of cultural differences, and to be knowledgeable of cultures, history, world market potentials, & global economic, social, and political trends
Licensing
A contractual means by which a company grants patent rights, trademark rights, and the rights to use technology to another company, often in a foreign market
Franchising
a form of licensing in which a company (the franchiser) provides a standard package of products, systems, and management services to the franchisee, which in foreign markets has market knowledge. Permits flexibility in dealing with local market conditions while providing the parent firm with some degree of control.
Turnkey operations
A situation in which a firm’s high-level management plans and executes all business strategies to ensure that individuals can buy a franchise or business and only “turn the key” to begin operations.
co-production agreements
Different firms (often located in different countries) product different parts of the same end product
joint ventures
a partnership of two or more participating companies that join forces to create a separate legal entity
Outsourcing
the contracting out of a business process to a third-party, often to cheaper foreign markets
Marshall plan
The American initiative to aid Europe, in which the United States gave $17 billion in economic support to help rebuild European economies after the end of World War II in order to prevent the spread of Soviet Communism.
Method-of-Entry factors to consider
- risk factor
- resource availability
- control issues
- product characteristics
- economic & political factors
Impact of the Oil crisis of the 1970s
Bad relationship between Saudis/US lead to high oil prices
high price of oil=negative impact on macro-economy and market
Protests against global institutions, anti-capitalism, high oil prices for the US
Protectionism around the world
Protectionism
nations utilize legal barriers, exchange barriers, and psychological barriers to restrain the entry of unwanted goods
Reasons for Protectionism
domestic employment, national security, infant industry argument, power of special interest groups, tax revenue (revenue tariffs), trade deficits
Tariff barriers
- Specific: fixed amount of money that does not vary with the price of the good
- Ad valorem: percentage of the product being sold
Nontariff barriers
encourage development of domestic industry and protect existing industry, barriers to trade such as quotas, boycotts, monetary barriers, and market barriers are put into place
Types of nontariff barriers
- Limitations on trade
- Customs & administrative entry procedures
- Standards
- Governmental participation in trade
- Charges on imports
- Monetary barriers
Types of monetary barriers
- blocked currency
- differential exchange rates
- government approval
Monetary barrier: blocked currency
refusing to allow importers to exchange its national currency for the sellers’ currency
Monetary barrier: differential exchange rates
encourages the importation of goods the government deems desirable and discourages importation of goods the government does not want by adjusting the exchange rate
Monetary barrier: government approval
In countries where there is a severe shortage of foreign exchange, an exchange permit to import foreign goods is required from the govt
GATT
General agreement on tarriffs and trade:
- 22 countries signed after WWII
- Provided a process to reduce tariffs & created watchdog agency
3 elements of GATT
1) Trade shall be conducted on a nondiscriminatory basis
2) Protection shall be afforded domestic industries through custom tariffs, not through such commercial measures as import quotas
3) Consultation shall be the primary method used to solve global trade problems
balance of payments
includes 3 accounts: current account, capital account, official reserves account
current account
the primary interest, and a record of all merchandise exports, imports, and services plus unilateral transfers of funds
Capital account
a record of direct investment, portfolio investment, and short-term capital movements to and from countries
official reserves account
a record of exports and imports of gold, increases or decreases in foreign exchange, and increases or decreases in liabilities to foreign central banks
quota
a specific unit or dollar limit applied to a particular type of good, an absolute restriction on the quantity of a specific item that can be imported
voluntary export restraints
(a.k.a. Orderly Market Agreements (OMAs)) an agreement between the importing country and the exporting country for a restriction on the volume of exports
Standards
- standards to protect health
- standards to protect safety
- standards to protect product quality
specific standard to protect product quality
North American Free Trade Agreement (NAFTA) stipulates that at least 62.5% of all automobiles must have North American content to deter foreign car makers from using one member nation as the back door to another
dumping
an export practice, generally prohibited by laws and subject to penalties and fines, defined by some as the selling of products in foreign markets below the cost of production and by others as the selling of products at below the prices of the same goods in the home market
countervailing duty
a fee that may, under World Trade Organization rules, be imposed on foreign goods benefiting from subsidies, whether in production, export, or transportation.
WTO
World Trade Organization. The organization formed in 1994 that encompasses the GATT structure and extends it to new areas that had not been adequately covered previously. Adjudicates trade disputes. All member countries have equal representation
The International Monetary Fund
assist nations in becoming and remaining economically viable by helping maintain stability in the financial markets & by assisting countries that are seeking economic development and restructuring
The International Monetary Fund attempts to solve:
Inadequate monetary reserves
Unstable currencies
The World Bank Group
has as its goal the reduction of poverty and the improvement of living standards by promoting sustainable growth and investment in people
Provides loans, technical assistance, and policy guidance to developing country members
5 Institutions of the World Bank Group that perform these services
(1) Lending money to governments of developing countries to finance development projects in health, education, and infrastructure
(2) Providing assistance to governments for developmental projects to the poorest developing countries (per capita incomes of $925 or less)
(3) Lending directly to help strengthen the private sector in developing countries with long-term loans, equity investments, and other financial assistance
(4) Providing investors with investment guarantees against “noncommercial risk” (expropriation and war)
(5) Promoting increased flows of international investment by providing facilities for the conciliation and arbitration of disputes between governments and foreign investors
How do historical events affect the culture of a country?
consider:
- imperialism
- spread of cultures
Manifest destiny
Americans were a chosen people ordained by God to create a model society. It referred to the territorial expansion of the United States from the Atlantic to the Pacific
Monroe Doctrine’s 3 basic premises
no further European colonization in the New World
US doesn’t interfere with European political affairs
European nations don’t interfere with govts of the Western Hemisphere
depletion of natural resources
affects countries ability to be self-sufficient
Major issues related to global resource uses
Consider: climate & topography, nature, economic growth, social responsibility & environmental management, depletion of natural resources
major issues related to population growt
Consider: controlling population growth, rural/urban migration, population decline & aging, worker shortage & immigration
Impact of population decline and aging in selected countries
Consider: need for education, need for jobs, need for medical services, need for social security, & differential growth by different ethnic groups
Impact of population growth in selected countries
Consider chinese population policy: one child policy, parental preference for boys
Malthusian theory
- There will be a time where we will be not enough food to feed everyone
- People are undernourished/starve so population goes down
- Starving countries may invade other ones for their resources
Confucian philosophy
2,500 Chinese philosopher, Confucious, still highly impacts Easter culture today. Emphasizes respect for elders, rulers, husbands
confiscation
seizing a company’s assets w/o payment
sustainable development
An approach toward economic growth
cooperative effort among businesses, environmentalists, and others to seek economic growth with:
-wise resource management
-equitable distribution of benefits
-reduction of negative effects on people and the environment
rural/urban migration
As countries develop industry huge numbers of agricultural workers move to cities causing major difficulties in urban infrastructure capacity and big slums around the world
Manifest Destiny
The notion that Americans were a chosen people ordained by God to create a model society
What is culture?
the sum of values, rituals, symbols, beliefs, and thought processes that are learned, shared by a group of people, and transmitted from generation to generation
software of the mind, a problem-solving tool
An invisible barrier that organizes life, thinking, the underlying assumptions of the family/state/economy
What are the characteristics of culture?
Its components are: learned shared interrelated history & geography also factors
What are the elements of culture?
- Material Culture
- Social Institutions
- The Belief Systems
- Aesthetics
- Language
- Legal system
- Political System
Social institutions
family, religion, language, school, the media, government, and corporations all culture, society and behavior.
4 cultural dimensions of Hofstede
- Individualism/Collective Index (IDV)
- Power Distance Index (PDI)
- Uncertainty Avoidance Index (UAI)
- Masculinity/Femininity Index (MAS)
Individualism/Collective Index (IDV)
- Refers to the preference for behavior that promotes one’s self-interest
- High IDV cultures:“I” mentality and tend to reward and accept individual initiative
- Low IDV: “we” mentality and generally subjugate the individual to the group
Power Distance Index (PDI)
- Represents the extent of hierarchy in a society.
- High PDI cultures the those who hold power are entitled to privileges
- Cultures with low PDI scores value equality and reflect egalitarian views
Uncertainty Avoidance Index (UAI)
- Measures the tolerance of uncertainty and ambiguity among members of a society
- High UAI: highly intolerant of ambiguity, experience anxiety and stress, accord a high level of authority to rules as a means of avoiding risk
- Low UAI: associated with a low level of anxiety and stress, a tolerance of deviance and dissent, and a willingness to take risks
Planned Change through multinationals
Company may employ a strategy of planned change-deliberately set out to change those aspects of the culture offering resistance to predetermined marketing goals
Ways in which US culture has influenced management style
- Personnel selection and reward based on merit. Reward is based on merit and not group performance
- Decisions based on objective analysis.
Decisions are made objectively not subjectively - Wide sharing in decision making
- Never-ending quest for improvement
- Competition yielding efficiency
Three typical management style patterns
- top-level management decisions
- decentralized decisions
- committee or group decisions
Differences in Communication Styles
Consider:
- Face to face communication
- Internet communication
- High v. Low context cultures
M-time
- Monochronic time, typifies most North Americans, Swiss, Germans, and Scandinavians
- Most low-context cultures operate on M-time concentrating on one thing at a time
P-Time
- polychronic time, is more dominant in high-context cultures
- P-time is characterized by multi-tasking and by “a great involvement with people”
- High Context countries
High-context culture
depends heavily on the contextual (who says it, when it is said, how it is said) or nonverbal aspects of communication
Low-context culture
depends more on explicit, verbally expressed communications
Foreign Corrupt Practices Act 1977
Imprisonment for bribery, applies to all US companies and US subsidiaries
Bribery
Voluntarily offered payment by someone seeking unlawful advantage
Extortion
Payments are extracted under duress by someone in authority from a person seeking only what they are lawfully entitled
Lubrication
Involves a relatively small sum of cash, a gift, or a service given to a low-ranking official in a country where such offerings are not prohibited by law
Subornation
Involves giving large sums of money—frequently not properly accounted for—designed to entice an official to commit an illegal act on behalf of the one offering the bribe; involves breaking the law
International corruption perceptions index:
Measures degree of corruption by country, topic etc.
· Mission: stop corruption and promote transparency, accountability and integrity at all levels and across all sectors of society
American vs. Asian business Cultures
- Cultural Imperatives: trust, friendship, losing face, eye contact
- Cultural Adiaphora (elective): Bowing in Japan, accepting food & drink
- Cultural Exclusives: religious activities, joking about politics/politicians
Cultural Adiaphora (elective)
Optional Adaptation
Cultural Exclusives
reserved for locals
