MKT 330- Exam 1 Flashcards
the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value [for profit] in more than one nation
international marketing
The ratio between what customers get and what they give
__ = benefits / costs = functional + emotional benefits / monetary, time, energy, and psychic costs
Value
___ is a fundamentally a barrier
greater ___ –> more challenging international marketing
distance
Dimensions of Distance (CAGE) consists of what
- cultural distance
- administrative (institutional) distance
- geographic distance
- economic distance
language, religion, social norms, consumer preferences
What CAGE?
cultural distance
- legal political, economic, monetary
- e.g. colony, tariff barriers, corruption, social strife
what CAGE?
administrative (institutional) distance
- spatial separation, transport/ communication networks
-value-to-weight ratio
What CAGE?
geographic distance
- differences to wealth, income, living standards
What CAGE?
economic distance
- Culture - Often diverse and multicultural
- Markets - Widespread and sometimes fragmented
- Data - Difficult to obtain and often expensive
- Politics - Regimes vary in stability, political risk
- Governments - Influence regulating imports and business ventures
- Economics - Varying levels of development
- Finance - Differing finance systems and regulations
7 differences between international vs. domestic marketing
- inability to find right market niches
- unwilling to adapt and update products to local needs
- products not perceived as sufficiently unique
differences between international and domestic marketing: failure arises from
PESTLE analysis stands for ___
P- Political
E- Economic
S- social/cultural
T- Technological
L- Legal
E- Environmental/ sustainability
factors influencing international markets
PESTLE analysis
- falling global tariff rates; high tariffs mean the consumer pays the burden
- globalization of production (FDI) and consumption; FDI: foreign direct investment
- financial deregulation makes doing business easier
- growth of regional free trade areas: EU, NAFTA, ASEAN
- technology
5 Factors that led to the growth of international trade
- US w/ Canada and Mexico
- EU w/ Switzerland and the UK
- China w/ Japan, Hong Kong, and South Korea
3 main international trade flows
You do everything yourself; not beneficial
Autarky
A country has ____ in the production of a product when it is more efficient than any other country in producing it
Smith’s Theory of Absolute Advantage
Countries should specialize in the production of those goods they produce most efficiently and buy goods that they produce less efficiently from other countries
Ricardo’s Theory of Comparative Advantage
Porter’s diamond (Describes a nation’s competitive advantage at an international level)
Sustained investment/expertise in key areas/demand conditions/supporting industries
- explains the factors that can drive competitive advantage for one national market or economy over another
Heckscher-Ohlin Theory: Lower labor and proximity to raw materials
Countries in which capital is relatively plentiful and labour relatively scarce will tend to export capital-intensive products and import labour-intensive products, while countries in which labour is relatively plentiful and capital relatively scarce will tend to export labour-intensive products and import capital-intensive products
Resource endowments
Subsidies to help native industries
Infant Industry Theory
Economies of Scale
New Trade Theory
- tariffs
- quantitative restrictions
- restrictive practices
Barriers to international trade
taxes levied on imports that effectively raise the cost of imported products relative to domestic products
Why? Protects local companies and employment against imported competition
Result: Consumer bears burden
tariffs
levied as a fixed charge for each unit of a good imported
specific tariffs
levied as a proportion of the value of the imported good
Ad valorem tariffs
Market entry strategy when tariffs are present
Market entry strategy: produce your product in the country that you sell it in the avoid tariffs
Government payments to domestic producers
Encourages over-production, inefficiency, and reduce trade
subsidies
why have subsidies
Compete against low-cost foreign imports and gain export markets
result of subsidies
Result: Taxpayers bear the cost of subsidies
restrict the quantity of some goods that may be imported into a country
- limits consumer choice
import quotas
A hybrid of a quota and a tariff where a lower tariff is applied to imports within the quota than to those over the quota
tariff rate quota
demand that some specific fraction of a good be produced domestically
- Why? benefit domestic producers
- Result: consumers face higher prices
local content requirements
bureaucratic rules designed to make it difficult for imports to enter a country
1) customers entry procedures
2) product safety standards
3) can hurt consumers by limiting choices
result: can hurt consumers by limiting choice
administrative policies
agreements between countries in a geographic region to reduce tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other
trade agreements
Unconscious reference to one’s cultural values, experiences, symbols, behavior, and knowledge during the decision-making process
Self-reference criterion (SRC)
(global awareness)
Often leads to vanity, beliefs of one’s own group’s superiority, and contempt of outsiders - do not do international marketing if this is you!
Ethnocentrism
(global awareness)
Eliminates all barriers to the trade of goods and services among member countries
free trade area
(1st level)
examples of free trade area
Ex 1 - NAFTA: US, Canada, Mexico; superseded by USMAC
Ex 2 - CPTPP: Free trade agreement between 11 Asia-Pacific regions from Japan to Mexico
Eliminates trade barriers between member countries and adopts a common external trade policy
Customs union
(2nd level)
example of a Customs Union
Mercosur: Brazil, Argentina, Paraguay, Uruguay; May be diverting trade due to external tariffsStalled progress on reducing trade barriers
Eliminates trade barriers between member countries and adopts a common external trade policy and the freedom of movement of goods, services, capital and labor
common market
3rd level
Composed of a common market with a customs union and common policies across the region
economic union
4th level
example of an Economic Union
European Union
An economic union adopts a unifying currency and monetary policy
5th level
economic and monetary union
example of an Economic and Monetary Union
Eurozone
A central political apparatus that coordinates the economic, social, and foreign policy of member states
political union
*There is no international example of this
6th level
Free trade area
US, Canada, Mexico; superseded by USMAC
- No tariffs on 99% of goodsNo barriers on cross-border services
- Each country applies its own environmental standards
- Removed most foreign direct investment (FDI) restrictions
North American Free Trade Agreement (NAFTA)
46 Member States
European Union: 27 Member States; level 4: economic union
Eurozone: 20 Member States; level 5: economic and monetary union
Council of Europe
27 Member States; abolished boarder controls
23/27 EU states participate
Schengen Area
The sum of the values, norms, customs, symbols, beliefs, and through processes that are… learned, shared by a group of people, and transmitted from generation to generation
culture
A thing such as a sign or mark, a person, or an event, used to represent something else, often something immaterial
symbols
(element of culture)
Abstract ideas about what a group believes to be good, right, and desirable
values
(element of culture)
Social rules and guidelines that prescribe appropriate behavior in particular situations
norms
(element of culture)
______: The routine conventions of everyday life
______: Norms that are central to the function of society; serious standards of behavior: sex, family, religion
Folkways; Mores
A prescribed or established rite, ceremony, proceeding, or service, especially one characteristic of a particular religion
customs/rituals
(element of culture)
Assumptions, opinions, and convictions that are held to be true, by an individual or a group, regarding concepts, events, people, and things
beliefs
(element of culture)
A system of shared beliefs and rituals that are concerned with the realm of the sacred; four most prevalent religions: Christianity, Islam, Hinduism, Buddhism
Religion
Differences in thinking and reasoning
thought processes
(element of culture)
Relationships depend on trust, build up slowly, and are stable. One distinguishes between people inside and people outside one’s circle
High Context: association
(Hall’s Scale of Context, Communication, and Cultures)
- High use of nonverbal elements
- verbal message is implicit; context
- verbal message is indirect
High context: interaction
(Hall’s Scale of Context, Communication, and Cultures)
- avoid conflict
- disagreement is personalized
high context: communication
(Hall’s Scale of Context, Communication, and Cultures)
- relationships begin and end quickly
- Things get done by following procedures and paying attention to the goal
- One’s identity is rooted in oneself and one’s accomplishments
- individualistic
low context: association
(Hall’s Scale of Context, Communication, and Cultures)
- low use of nonverbal elements
- verbal message is explicit and direct
low context: interaction
(Hall’s Scale of Context, Communication, and Cultures)
- Seen as a way of exchanging information, ideas, and opinions.
- Disagreement is depersonalized
low context: communication
(Hall’s Scale of Context, Communication, and Cultures)
- things are scheduled to be done at particular times, one thing at a time
- predominantly low-context
- time is prompt and exact
Monochronic time or M-time
- everything has its own time
- time is slow and flexible
- predominantly high-context
polychronic time or P-time
- individualism/ collectivism
- power distance
- uncertainty avoidance
- masculinity vs. femininity
- time orientation
- gratification
Hofstede’s 6 dimensions culture
affects the way people live together
individualism/ collectivism
dealing with human inequality
power distance
managing future uncertainty and risk
uncertainty avoidance
long-term vs. short-term outlook
time orientation
wants and desires
gratification
- A payment: cash, gifts, etc.
- To a foreign official: elected, employee, etc.
- To obtain an improper advantage: obtaining information, preference, license, tax-breaks, etc.
Foreign corruption practices act
types of corruption
- bribery
- extortion
- lubrication
voluntary offered payment by
someone seeking unlawful advantage
bribery
takes place only if payments are extracted under duress by someone in authority from a person seeking only what he or she is lawfully entitled to
extortion
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
lubrication
Small and medium-sized enterprises
SME
- Attractive profit/growth opportunities
- Ability to easily modify products for export markets
- Public policy programs for export promotion
- Foreign country regulations
- Possession of unique products
- Economies from additional orders
Proactive stimuli
- Presence of export minded manager
- Opportunity to better utilize management talent and skills
- Management beliefs in value of exporting
Managerial elements
- adverse domestic market conditions
- opportunity to reduce inventories
- availability of production capacity
- favorable currency movements
- opportunity to increase the number of country markets and reduce market-related risk
- unsolicited orders from overseas customers
reactive stimuli
- Exporting
- Niche marketing
- Domestically delivered or developed niche services
- Direct marketing, including e-commerce
- International supply chain
SME international marketing strategies
Concerned with selling abroad domestically developed and produced goods and services
- Positive: Avoids costs of establishing local manufacturing operations; Helps the firm achieve experience curve and scale economies; Low risk
- Negative: May be lower-cost manufacturing locations; High transport costs and tariffs; Agents in foreign country may not act in exporter’s best interest
SME marketing strategies: Exporting
Concerned with marketing a differentiated product or service overseas, usually to a single segment, using the full range of market entry and marketing mix options
- Positive: Targets a large share of a smaller market
- Negative: Higher-than-normal risk
SME marketing strategies: Niche marketing
Can be marketed or delivered internationally to potential visitors
- Benefits obtained from the service provided must be unique and superior
- Must outweigh the benefits to the consumer of their locally available services
SME marketing strategies: Domestic delivered or developed niche services
Allows firms to market products and services globally from a domestic location
- Positive: Creating new opportunities; Erecting barriers to entry; Making cost savings; Providing inter-firm collaboration; Company website; Fast transmission of data
- Negative: Flooded with ‘spam’; Sales feast and famine may be a problem where production is inflexible; May require sophisticated technology to compete
SME marketing strategies: Direct marketing, including e-commerce
Involves either domestic production or establishing a facility close to where the MNEs new location are established in other countries
- Positive: Reducing capital requirements of business; Managing difficulty of developing quickly; Improving flexibility; Firms reluctant to take risks; Economies of scale of suppliers; Expertise of business support service providers
- Negative: Loss of know-how; Costs of managing outsources supplies
SME marketing strategies: International supply chain
- Developing a learning organization
- Developing effective relationships
- Having a clear competitive focus
3 Predictors for SME Success
- No competitive advantage
- Selling into markets with little information
- Managers lacking cultural empathy
- Competing with companies that have lower labor and prices
- Inefficiency and lack of creativity
- Overdependence on one product
- Ease with which competitors can copy idea
- Failure to effectively scan the international environment
- Failure to respond to changing consumer needs
- Failure to properly allocate financial resources
- Failure to plan for currency fluctuation
- Failure to manage and resource both market and operations expansion
- Failure to enforce patents and trademarks
Reasons for SME failure
___: The law is above everyone, no one is above the law
___: People can be above the law
Rule of law vs. rule of force
